The Shifting Economics of California

This is California, the Golden state and one of the largest economies in the world in it’s own right.. If California was counted as a sovereign nation, it would be the fifth largest in the world by GDP, with a 3.

2 trillion dollar gross state product, putting it just behind Germany and just ahead of India.. The state has a lot going for it from the largest movie and technology centers in the world all the way to a surprisingly strong agricultural sector.

. All of this has meant that the residents of California are on average, doing very well for themselves, and one look around the wealthy enclaves of las Angeles and san Francisco would back this up.. Despite all of this, however, the state is going through a period of economic turbulence.

. The economic fallout of the coronavirus has hit the state’s economy, particularly hard.. Major industries, like tourism and media creation, have ground to a complete halt, having widespread knock-on implications throughout the economy, hitting smaller vendors who were once reliant on these industries.

. This bump in the road, however, was by no means the total undoing of the state. California’s metrics before 2020, looked very strong with low unemployment, solid growth and booming industries, but there were still cracks forming.

. The state is home to the largest population in the US, but the industries that were truly driving wealth creation are famously bad at actually employing people.. This had led to a sharp increase in social issues like homelessness and crime.

. All of these problems that were bubbling away under the surface have now been massively accelerated, so much so that many economists have predicted that the sun might be setting on the setting on the sunshine state.

. It may sound like absurdist alarmism, but it is a reality that shouldn’t be dismissed. Remember in previous decades there was another economic region in the US riding high on the new growth industry of the age.

, but these days Detroit is not exactly seen as the bastion of Prosperity it once was. So could the same grim reality be in store for California. Well, to answer this, we need to look at a few key areas.

. What made the state so prosperous before the 2020 downturn? What were the underlying issues impacting the economy? How will these issues be impacted by this decline? And, finally, while we are here, we may aswell give it an EE national Economy score and put it on our leaderboard.

. I know it’s state, but with a GDP in the trillions of dollars it deserves an entry.. Intro. Add Now this year has certainly been one for doom and gloom, and it is still important to address what is working well.

Any economy that can grow to the level that California has and provide so much wealth and prosperity to it’s. Citizens is probably doing something right.. So what was the driver of the California Dream? California is both really lucky and really unlucky in terms of its geography.

. The state had a big headstart over other states in the union when it was getting established because it had access to decent farmland, a good year-round climate, oh and an ocean for fishing and trade.

. On the flip side of that same coin, it was literally about as far away from the economic centers of the US, as one could reasonably be, while still in the US.. None the less. The state grew well as a distant outpost that attracted farmers, gold diggers and or people that would rather be a little bit removed from all of that pesky law and order in the east.

. The first big boon for the state in the modern era was its film industry, which was curiously also at least partially thanks to its geography and position in the world., You see, early film technology relied heavily on lots of light and good weather.

. That’S one thing that California has in abundance: I mean its right there in the name. What’s more is that a lot of this new cinema was filmed using technologies that had patents on them., Primarily patents owned by thomas edison and his businesses that were headquartered in new York.

, By conducting business in Las angeles up and coming film companies felt more comfortable, not been found out for using much cheaper film equipment that was not paying royalties back to eddison for his patents.

. Now this all meant two things for starters. It hopefully makes you feel less guilty about watching a cheeky movie for free online., But, more importantly, it established LA as the center of the movie business.

. We actually plan to do an entire video on the economics of hollywood, but for now just know that eventually, of course, camera technology got to a point where film locations were not as important and modern studios do pay what they owe to their suppliers.

. But once these studios were established, they got comfortable. Support Industries sprung up, film-related unions were founded and it almost got to a point where it was really hard to film anywhere but LA.

, So through nothing but being in the right place and looking the right way. Sume 100 years ago, california is now the epicentre of one of the largest industries in the world.. This would go on to be a common theme.

. The tech revolution that started silicone valley was mostly formed around stanford university, which was one of the first universities in the nation to offer computer science as a course.. Once a few tech companies got going, other tech companies were attracted to the same area and, along with them, came the people with the expertise to create new technology.

. Once this moden gold rush hit a critical mass silicone valley, just became the logical place to conduct tech business because it naturally ticked all the boxes. Access to suppliers, access to investors and access to skilled people.

. Given that technical development by its nature can be virtually rolled out, anywhere.. being in an amongst a huge pool of competitors, is not as much of an issue as it would be in customer-facing industries like retail hospitality or even manufacturing.

. In fact, having this ecosystem actually makes everything much easier., You need a part that only one niche tech manufacturer in the world makes Good chance that will be in silicone. Valley. You need to consult with the world.

Leader is some type of technical infrastructure. Chances are silicone. Valley is the best place to find them.. This whole process is called agglomeration, which is a fancy word. The inherent benefit industry receives by being geographically close to its industry, partners and peers.

Being lucky enough to just happen to have the nucleia around which the largest industry in the world formed became par for the course for california.. Of course, a lot of it was good planning and the state did a lot of things right to nurture the growth of these industries.

But luck did play an undoubtedly huge part. All the same, even if north dakota happened to be an early centre for technical innovation, it is hard to see it having the same appeal to tech companies and their staff as the blue skies and sandy beaches of California.

. Now so far, this all sounds great. California has a diverse portfolio of wealth-creating industries that are not dependant on limited resources to sustain., But suffering from success does start to become an issue in it’s own right, especially when California is home to a lot of people that don’t call it home.

For lack of A better way of putting it welcome to the Hotel, California, Gold rushes throughout history were not good for local economies. Long term., They see a massive spike in new workers, all desperately seeking their riches, and this does create some big short term.

Wins businesses catering to this foot traffic can be built and maybe even some taxes can be levied on the wealth that is extracted, but once the gold is dug, everything goes right back to where it was.

. Now the californian gold rush is but a distant memory. These days, however, the state is not immune to a lot of the same effects. Moving to LA to try and make it in the film industry or San Fransisco to earn fat stacks as a developer are pretty common endevours.

. The issue is that these types of employment don’t actually give too much back to the economy.. An influx of computer. Programmers getting paid 6 figures for graduate positions means that things like real estate become unaffordable to long term.

Residents that moved into other industries. Real estate also drives up rents for commercial buildings which gets passed along to consumers as higher costs of living.. It would be next to impossible for a worker earning the national average wage to move to the bay area and expect to live a comfortable lifestyle, even as a single adult, not to mention a with a family.

. So people either make sacrifices like living with roommates or parents or they move away.. Now, if you are particularly cold-hearted, you might argue that trading in some average income earning local residents for some exceptionally skilled and well-compensated computer nerds is probably a good trade to make.

, But it isn’t.. For starters, you can’t run a city on computer code…. Yet…. Someone needs to be there to stock the whole foods and, unless produce packer is a job role that starts to attract a six-figure salary.

These people need to be accommodated in some way or else demand-pull inflation can get to dangerous levels fast., But the real issue is that these people don’t stay for long.. San fransicso has the highest level of internal migration withing the USA.

. That means lots of people are moving in, and lots of people are moving out. that ‘s, because people working in silicone valley don’t tend to do it for very long.. A few years in the industry gets people great experience and a nice big pile of cash.

To take back to their hometowns. During this time, most of thse workers will live below. There means and focus pretty heavily on work.. They won’t be living family lives that give back to local industries because well it’s too expensive.

Even these well-compensated employees would struggle to raise a family in southern California, given the general cost of living. Its a pretty common industry, gameplan. Graduate university get a job at a FAANG company.

Stick it out for 5 years, save up some cash live in a tiny apartment and then move back to your home city and live like a kind doing consultation, work. People paying alot of money for a short stay in modest comfort.

I guess the Hotel, California is open for business, but you can actually leave. To try and make the best of a bad situation. The Californian government levies, the highest state income taxes in the nation.

. The general idea is that sure these outside workers can come and make their millions, but at least it will generate lots of revenue for the government that they can then use to address some of the issues caused by said workers.

. Now, in theory this is fine and it actually worked well for some time., But it was a precarious balancing act. The slightest breeze could throw if off course., Which is exactly where the hurricane that was 2020 came, in.

The state first, the first time ever is starting to see Mass vacancies.. The economic fallout of the coronavirus has been a major hit to Everybody, but the consequences have been especially severe in the united states and especially severe in california.

. For starters, nobody is making a movie going on a beach holiday or attending Disneyland at the moment, so that has been a major direct blow.. But what might end up being more severe is a consequence that is a little bit harder to notice.

. People are starting to leave.. The push to work from home means that the aforementioned tech workers no longer need to live in a cramped, 1 bedroom apartment in the bay area. They can instead just do exactly the same thing in a nice family home anywhere in the nation, while enjoying a much better quality of life and paying much less in tax.

The same income tax designed to make the most of high-income earners while they were working in The state is now pushing people away in droves.. The issue of capital flight is an argument that is often brought up to dissuade governments for passing taxes on high-income earners.

To speak candidly. Most of the time these arguments are weak at best.. Most people will not move their families to a new nation to save a few thousand dollars on taxes, but a single worker moving to a new city in the same country.

Well, that is a far more compelling prospect. Infact. While I was in the process of writing this script, Graeham Stephan, a personal finance YouTuber posted a breakdown of why he was leaving California and moving to Las Vegas to live.

. Now, Graham, does not work in the tech industry, but he is still indicative of those types of workers. Young, very well off with a business that he can do from anywhere.. Of course, one mans experience does not a trend make.

, but his reasons for leaving were very in line with the research that we conducted so go and check that video out. He is a good e gg that graham. Ranking.. Ok, I know California is not a country and this say’s national leaderboard, but it is still interesting.

Nonetheless, and I mean Hong Kong gets a spot, so why not right Size is simply phenomenal.. California would make for a huge national economy in its own right. But the fact that it is just one part of the US gives you and idea of just how influential the economies of the worlds super powers are.

. It gets a 9/10 of course, falling short of the 14 figure GDP club, but still one of the largest most influential economies in the world. GDP per capita is very high, as temperamental as they may be. The nation is still home to alot of very skilled, very industrious workers and with a GSP per capita of 72,000 in 2019, it gets a 9/10.

Curiously enough. The state or territory in the US with the highest GDP per capita is the Disctrict of Columbia with a whopping $ 162,000 as of 2018, which puts it in line with places like Monaco. Stability and confidence.

. This is really subjective and had it been asked 12 months ago, it would have been a clear 10/10., But flying so high means it has a long way to fall and it has historically felt the impacts of downturns more heavily than the national average.

So it gets an 8/10 which is, of course, still very well deserved for a state with such a diverse portfolio of world-leading industries. Growth is pretty stable.. The economy is large and reflects a developed nation in its own right and the growth figures reflect this.

Outside of 2020. It has averaged 2-3 % annual growth, so it gets a 6/10. Finally industry, well cmon. What else could it be. If anything, could get an 11/10? It would be California., But in the meantime it will need to make do with a nice round 10/10.

Altogether. This gives the sunshine state and average score of 8.4 out of 10, just falling short of the top spot., Of course, with the same big asterisk as hong kong that this is not actually a nation.

Final thoughts. California would be a remarkable economy if it was it’s own nation, but in a way it is even more so as just a very productive piece of the grander american puzzle., But that does not mean it is without concern.

. Yes has been fortunate enough to attract alot of very profitable industries and the very skilled people that come with them.. Yes, its loverly beaches and attractions will continue to attract more tourists and businesses alike, but it can’t rest on it’s laurels.

. Many economies have thought they were. The epicenter of industries that would last forever became overly reliant on them and then suffered as those same industries faded into obscurity. There is no such thing as an unsinkable ship and when all of the smart people start heading for the life rafts, it might be time to look out for icebergs ahead.

. Who would have thought that the golden child of American industry would have been hit so hard in so many unusual ways in such a short amount of time? It’S? One of those events you don’t see happening until it’s too late.

, Unless you have some fantastic insights like the ones you can get… On trends. This is california, the golden state and one of the largest economies in the world in its own right. If california was counted as a sovereign nation, it would be the fifth largest by gdp, with a 3.

2 trillion dollar gross state product, putting it just behind germany and just ahead of india. Of course, the state has a lot going for it from the largest movie and technology centers in the world all the way to a surprisingly strong agricultural sector.

All of this has meant that the residents of california are on average, doing very well for themselves, and one look around the wealthy enclaves of los angeles and san francisco would back this assumption up.

Despite all of this, however, the state is going through a period of economic turbulence. The fallout of the coronavirus has hit the state's economy particularly hard. Major industries, like tourism and media creation, have ground to a complete halt, having widespread knock-on implications and hitting a lot of smaller vendors who were once reliant on these industries.

This bump in the road, however, was by no means the total undoing of the state. California's metrics before 2020, looked very strong with low unemployment, solid growth and booming industries, but there were still cracks forming.

The state is home to the largest population in the us, but the industries that were truly driving wealth creation are famously bad at actually employing people. This had led to a sharp increase in social issues like homelessness and crime.

All of these problems that were once bubbling away under the surface have now been massively accelerated so much so that many economists have predicted that the sun might be sitting on the sunshine state.

Now that may sound like absurdist alarmism, but it's, a reality that shouldn't be totally dismissed. Remember in previous decades, there was another economic region in the us riding the high of a new growth industry, but these days detroit is not exactly seen as the bastion of prosperity it once was so could the same grim reality be in store for california.

Well, to answer this: we need to look at a few key areas. What made the state so prosperous before the 2020 downturn? What were the underlying issues impacting the economy? How will these issues be impacted by the wider economic decline? And finally, while we are at it, we may as well give it an ee national economy score and put it on the leaderboard.

I know i know it's a state, but with a gdp in the trillions of dollars. It certainly deserves an entry. This video was brought to you by trends. What's trends? Ah, i'm glad you asked trends. Is the internet's, ultimate knowledge hub for entrepreneurs, investors and startup ceos? It's? The brainchild of the hustle, the free to read, email newsletter, read by over a million people every morning, stay tuned until the end to learn more or pause the video and go to trends.

co, slash ee, where you can try trends for two weeks. All for just one dollar now that's, a deal trends, dot, co, slash ee. The link is on the screen now and in the video description below now. This year has certainly been one for doom and gloom, but it is still important to address what is working well, any economy that can grow to the level that california has and provides so much wealth and prosperity to its citizens is probably doing something right.

So what was the driver of the californian dream? California is both really lucky and really unlucky in terms of its geography. The state had a big head start over other states in the union when it was getting started because it had access to decent farmland.

A good year-round climate, oh and an ocean for fishing and trade. On the flip side of that coin, it was literally about as far away from the economic centers in the u.s as one could reasonably get, while still within the u.

s. Nonetheless, the state grew well as a distant outpost that attracted farmers, gold diggers and or people that would rather be a little bit removed from all of that pesky law and order in the east. The first big win for the state in the modern era was its film industry, which was curiously also at least partially thanks to its geography and position in the world.

You see early film technology relied heavily on lots of light and good weather. That's. One thing that california has in abundance. I mean it's right there in the name. What's more? Is that a lot of this new cinema was filmed using technologies that had patents on them.

Primarily, patents owned by thomas edison and his businesses that were headquartered in new york by conducting business in los angeles, up-and-coming film companies felt more comfortable not being found out for using much cheaper film equipment that was not paying royalties back to edison for his patterns.

Now this all meant two things. For starters. It hopefully makes you feel a little bit less guilty about watching a cheeky movie for free online, but, more importantly, it established la as the center of the movie business.

We actually plan to do an entire video on the economics of hollywood, but for now just know that eventually, of course, camera technology got to a point where film locations were not as important and modern studios do pay what they owe to their suppliers.

But once these studios were established, they got comfortable support industries sprung up, film-related unions were founded and it almost got to a point where it was really hard to film anywhere, but la so through nothing but being in the right place at the right time and turning A blind eye some 100 years ago, california, is now the epicenter of one of the largest industries in the world.

This would go on to become a common theme. The tech revolution that has started silicon valley was mostly formed around stanford university, which was one of the first universities in the nation to offer computer science as a course.

Once a few companies got going, other tech companies were attracted to the same area and, along with them, came people with expertise to create new technology. Once this modern gold rush hit a critical mass silicon valley, just became the logical place to conduct tech business because it naturally ticked all the boxes, access to suppliers, access to investors and access to skilled workers, given that technical development by its very nature can be virtually Rolled out anywhere, being in and amongst, a huge pool of competitors is not as much of an issue as it would be for customer facing industries like retail hospitality or even manufacturing.

In fact, having this ecosystem actually makes everything much easier. You need a part that only a niche tech manufacturer in the world makes good chance. It will be in silicon valley. You need to consult with the world leader in some type of technical infrastructure.

Chances are silicon valley is the place to find them. This whole process is called agglomeration, which is a fancy word for the benefits an industry receives by being geographically close to its industry, partners and peers being lucky enough to just happen.

To have the nuclei around which the largest industry in the world formed became par. For the course for california now, a lot of this was good planning and the state did a lot of things right to nurture the growth of these industries.

But luck did play an undoubtedly huge part all the same, even if north dakota happened to be the early center for technical innovation, it's hard to see it having the same appeal to tech companies and their staff as the blue skies and sandy Beaches of california now so far, this all sounds great.

California has a diverse portfolio of wealth, creating industries that are not dependent on limited resources to sustain, but suffering from success does start to become an issue in its own right, especially when california is home to a lot of people that don't call.

It home for a lack of better way of putting it welcome to the hotel. California, gold rushers throughout history were not good for local economies long term. They see a massive spike in new workers, all desperately seeking their riches, and this does create some short-term wins.

Businesses. Catering to this foot, traffic can be built and maybe even some taxes can be levied, but once the gold is dug, everything goes right back to where it was now. The california gold rush is a distant memory.

These days, however, state is not immune to the same effects on a larger scale, moving to la to try and make it in the film industry or san francisco to earn fat stacks as a developer are pretty common endeavors.

The issue is that these types of employment, don't actually give too much back to the economy. An influx of computer programmers getting paid six figures for graduate positions means that things like real estate become unaffordable to long-term residents that moved into other industries.

Real estate also drives up rents for commercial buildings which get passed along to consumers as higher costs of living. It would be next to impossible for a worker earning the national average wage to move to the bay area and expect to live a comfortable lifestyle, even as a single adult, not to mention with a family.

So people either make sacrifices like living with roommates or parents, or they move away. Now, particularly cold-hearted viewers might say that trading in some average income earning local residents for some exceptionally skilled and well-compensated computer nerds is probably a good trade to make, but it isn't.

For starters, you can't run a city on computer code, yet someone needs to be there to stock the whole foods for all of these guys and unless produce packer is a job role that starts to attract a six figure salary.

These people need to be accommodated in some way or else demand pull inflation can get dangerous very fast, but the real issue is that these people, don't stay for long. San francisco has the highest level of internal migration within the usa.

That means lots of people are moving in, and lots of people are moving out. That's, because people working in silicon valley, don't tend to do it for very long. A few years in the industry gets people great experience and a nice big pile of cash to take back to their home towns.

During this time, most of these workers will live below their means and focus pretty heavily on work. They won't, be living family lives that give back to local industries because well it's too expensive.

Even these well-compensated tech employees would struggle to raise a family in southern california, given the cost of living it's. A pretty common industry game plan graduate university, get a job in a fang company.

Stick it out for five years, save up some cash live in a tiny apartment and then move back to your home city and live like a king. Doing consultation work so people paying a lot of money for a short-term stay in modest comfort.

I guess the hotel, california is open for business, but you can actually leave to try and make the best of this bad situation. The california government levies, the highest state income taxes in the nation, the general idea is that sure these outside workers can come and make their millions.

But at least it will generate lots of revenue for the government that they can then use to address some of the issues caused by said workers now in theory. This is fine and it actually worked well for some time, but it was a precarious balancing act.

The slightest breeze could throw it off course, which is exactly where the hurricane that is 2020 came in the hotel. California, for the first time ever, was starting to see mass vacancies. The economic fallout of the coronavirus has been a major hit to everybody, but the consequences have been especially severe in the united states and especially severe in california.

For starters, nobody is making a movie or going on a beach holiday or attending disneyland at the moment, so that has been a major direct blow. But what might end up being more severe is the consequences that are a little bit harder to notice.

People are starting to leave. The push to work from home means that the aforementioned tech workers no longer need to live in a cramped, one-bedroom apartment in the bay area. They can instead just do exactly the same thing in a nice family home anywhere in the nation, while enjoying a much better quality of life and paying much less in tax that same income tax designed to make the most of those high-income earners while they were.

There is now pushing more and more people away. The issue of capital flight is an argument that is often brought up to dissuade governments from passing laws on high-income earners to speak candidly. Most of the time these arguments are weak.

At best, most people will not move their families to a new nation to save a few thousand dollars on taxes, but a single worker moving to a new city in the same country. Well, that's, a far more compelling prospect.

In fact, while i was in the process of writing this script, graeme steffen, a personal finance youtuber posted a breakdown of exactly why he is leaving california and moving to las vegas to live now. Graham does not work in the tech industry, but he is still indicative of those types of workers, young well-off with a business that he can do from anywhere without a family.

Of course, one man's. Experience does not a trend make, but this reason for leaving was very in line with the research that we conducted so anyway go and check out that video here's, a good egg, that graham okay, i know california, is not a country, and this Says national leaderboard, but it's still interesting.

Nonetheless, and i mean hong kong gets a spot, so why not right size is simply phenomenal. California would make for a huge national economy in its own right, but the fact that it's - just one part of the us - gives you an idea of just how influential economies like the world's.

Superpowers really are. It gets a 9 out of 10, of course, falling short of the 14 figure gdp club, but still one of the largest most influential economies in the world. Gdp per capita is also very high, as temperamental as they may be.

The state is still home to a lot of very skilled, very industrious workers and with that a gsp per capita of 72 000 in 2019 gets it a 9 out of 10.. Curiously enough, the state or territory within the us with the highest gdp per capita is the district of columbia with a whopping 162 000 as of 2008, which actually puts it in line with places like monaco stability and confidence.

This is really subjective and had it been asked 12 months ago, it would have been a clear 10 out of 10, but flying so high means that it has a long way to fall and it has historically felt the impacts of downturns more heavily than the national Average, which is, of course, still very well deserved for a state with such a diverse portfolio of world-leading industries, growth is pretty stable.

The economy is large and reflects a developed nation in its own right, and the growth figures reflect this as well outside of 2020. It has averaged a two to three percent growth rate over the past few decades, so it gets a six out of ten.

Finally, industry well come on. What else could it be? If anything could get an 11 out of 10? It would be california for its industry, but in the meantime, it will need to make do with a nice round 10 out of 10.

all together. This gives the sunshine state an average score of 8.4 out of 10, just falling short of the top spot. Of course, with the same big asterisks as hong kong, that this is not actually a nation, california would be a remarkable economy if it was its own nation, but in a way it's, even more so as just a very productive piece of a Grander american puzzle, but that does not mean it's, not without concern.

Yes, it has been fortunate enough to attract a lot of very profitable businesses and very skilled people that come with them. Yes, it's, lovely beaches and attractions will continue to bring in tourists and businesses alike, but it can't rest on its laurels.

Many economies throughout history have thought they were the epicenter of industries that would last forever became overly reliant on them and then suffered as those same industries faded into obscurity.

There is no such thing as an unsinkable ship and when all the smart people start heading for the life rafts, it might be time to look out for icebergs ahead. Who would have thought the golden child of american industry would have been hit so hard in? So many unusual ways in such a short amount of time it's.

One of those events that you don't see happening until it's too late. Unless you have some fantastic insights like the ones provided by trends. The internet's, definitive knowledge hub for entrepreneurs and aspiring ones alike, which reminds me question for you.

Have you ever wondered what internet millionaires and gazillionaires all have in common hint? They're smart, like really smart and with a subscription to trends you can be too trends gives you exclusive access to the same information that was previously only available to hedge fund managers and high achieving ceos.

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You can also attend the live q, a sessions hosted by industry-leading entrepreneurs as well as connect with other high achievers, both in real life and digitally. As warren buffett once said, the best investment you can ever make is in yourself.

Try it out for two weeks. All for just one dollar at trends.co ee, the link is on the screen now and in the video description below, thanks for watching guys, bye,


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