Something I've wondered: for all its claims of business-friendliness, why does Texas insist on attracting the lowest-margin industries? All of the high-margin innovation-based industries continue to get started in California.

There was a huge Bitcoin push in Texas about 5ish years back. But the way they went about it was that they passed a bunch of tax breaks for Bitcoin miners - the most commodified, energy-intensive part of the value chain. Coinbase and Kraken and Ripple and Solana and Binance's U.S. operations are all based out of California.

The article mentions Exxon's reincorporation in Texas, and Chevron also recently moved their headquarters from California to Houston. But oil is a dying, commodified industry. The replacement is electrification, in terms of solar, batteries, EVs, inverters, and other parts of the value chain. Enphase is in California, SunPower was until its recent bankruptcy, Tesla R&D is still in Palo Alto, and other major companies like Rivian and Lucid also put all their R&D in the Bay Area.

The other major industry Texas is known for is construction, and cheap houses. But construction, if you read any of the construction-physics.com articles that frequently pop up here, is another famously low-margin industry. We know how to do it, and millions of people do.

My theory is that low-margin industries get located in Texas because they make it easy. By being business-friendly, low-regulation, and low-expenses, they become the only place that low-margin commodity businesses can survive. Thus, everyone who has no pricing power and struggles to cut costs moves to Texas, because they offer the lowest costs of everyone.

California is the opposite: by making business onerous, creating huge amounts of regulation, taxing the hell out of both people and businesses, and enshrining a pyramid scheme in their state constitution via Prop 13, they make sure that only the richest can survive there. And thus only the richest do survive. The state is filled with wealthy companies and wealthy individuals because everybody else got priced out and moved elsewhere. Selection effects dominate efficiency effects.

>> Something I've wondered: for all its claims of business-friendliness, why does Texas insist on attracting the lowest-margin industries?

Tech is one of the highest margin industries.