The Hedge | Brutal Honesty Over Hype Since 2008
This is the last post in May’s California business series — 56 posts over 28 days covering every significant dimension of what it costs, what it takes, and what it delivers to build a business in California. Let me close with the most honest and direct assessment I can offer, based on everything we’ve covered.
California Is Worth It for Some Companies
I want to be completely clear about this: California is genuinely the right choice for some companies, and the entrepreneurs running those companies would be making a mistake to leave. If you are building an AI company that needs Stanford and Berkeley research connections, OpenAI or Anthropic alumni networks, and Bay Area institutional venture capital, California is not just acceptable — it is superior to every alternative. If you are building a biotech company that needs UCSF research partnerships, Torrey Pines biotech cluster relationships, and life sciences venture capital, San Diego or South San Francisco is where you need to be. If you are producing film, television, or streaming content at scale, Hollywood’s production infrastructure is not optional.
For these companies, the $800 franchise tax is a rounding error. The PAGA compliance cost is a manageable overhead. The cost of commercial real estate is offset by the value of proximity to co-founders, investors, and customers who are only in California. The analysis is straightforward: California-specific advantages exist, they are material, they justify the California premium.
California Is Not Worth It for Most Companies
The harder truth, delivered with the same honesty: most companies don’t have these California-specific reasons. Most companies are in California because their founders grew up there, went to school there, or started the business there before they understood the cost implications. These companies are paying the California premium — $500,000 to $1 million per decade for a ten-person company — for advantages they are not actually accessing. That is not a political statement. It is a cost analysis.
The Decision is Yours to Make — But Make It Deliberately
The Hedge’s job is to give you the information and the analytical framework to make your own decision — not to make it for you. What this series has tried to do is replace the default assumption that California is fine with the deliberate analysis that your business deserves. California may be fine for your business. It may be excellent. It may be expensive and unnecessary. But you should know which of those is true based on rigorous analysis, not optimistic assumption.
Run the numbers. Identify the genuine California advantages your specific business accesses. Compare the total California premium to the value of those advantages. Make the decision deliberately. Then build the best business you can, wherever you build it.
That is the Hedge’s approach to every financial and business decision. It’s the right approach to this one too.
The Hedge has been cutting through financial and business noise since 2008. Brutal honesty over hype — always.
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