The Not-So-Golden State of California

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It has been saddening that California, my home for most of my business life, has become so economically dysfunctional. Having created companies here and watched others do the same for the past 35 years, I am in a position to contrast what it was like to be an entrepreneur in California back then, compared with what it has become. And I regret to say that California is today a terrible place to do business.

To be fair, the state does have many legacy assets: We have some great universities with many bright and capable people. We have perhaps the most livable climate in the country, and great recreation, be it related to the sea or in the mountains. The culture fosters creativity and forward-thinking. Venture capital is available and innovative. And yet these things are not enough.

California's government is the problem. The state is business-hostile. It is merit-hostile. It has the highest tax rates and returns less in services to its average citizens. Massive pension abuses are not dealt with.

Worst of all, the state's crazy regulation structure creates uncertainty, cost, and risk in doing business here. The system is chilling to investment and innovation. This is true for businesses of all types, from technology companies to basic franchises.

Many businesses founded elsewhere now try to avoid for as long as possible doing business in California. Meanwhile, I have watched company after company leave the state. And, as you might imagine, it is much harder to get businesses back than to keep them from leaving. I have several friends who are planning to move their headquarters elsewhere as soon as their current lease ends. I have other friends who are starting their new companies in Texas, Florida, and Washington. Some see more opportunity in these places, while others are simply leaving the state to escape the personal tax burden. Even one of the businesses I founded here, Chuck E. Cheese, has moved its headquarters to Dallas. (I can't blame the company's management: I would not have franchised Chuck E. Cheese here under the current regulations.)

It is often said that as goes California, so goes the nation. The passage of Sarbanes-Oxley--which has not brought to justice any new bad guys, but has cost American business billions of dollars and kept many of them from going public in the U.S.--is a sign to me that California-style regulation may be taking root at the federal level. When the laws governing business become nothing more than wasteful harassment, and companies are punished simply for doing business, everyone becomes poorer. Government, whether at the local, state, or federal level, must provide the framework for the best life for its people. To my great sorrow, my once-Golden state is bankrupt and cannot be fixed with anything short of a total overhaul.

Last updated: Jun 5, 2009




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