Texas offers a robust investment opportunity with its diverse economy, business-friendly environment, strategic location, skilled workforce, and emerging innovation hub, positioning it for sustainable growth over the next 60 years.
Warren Buffett has long extolled the virtues of investing in regions with strong fundamentals, emphasizing his “bullish on the U.S.” stance. At our firm, we believe that Texas represents one of the most promising opportunities for long-term investment in small businesses. With its economic strength, business-friendly environment, and strategic positioning, Texas is uniquely positioned for growth and prosperity over the next 60 years. Here’s why:
1. Economic Strength and Diversification
Texas’s economy is not only massive but incredibly resilient and diverse. If Texas were an independent country, its Gross Domestic Product (GDP) would rank as the 8th largest economy in the world, surpassing global powerhouses like Brazil, Italy, and Russia.
- Diverse Industry Base: Texas thrives on a variety of industries, from aerospace and automotive to information technology and renewable energy. For example:
- The aerospace sector supports over 135,000 jobs and generates $15 billion annually.
- Texas leads the nation in wind energy production, generating nearly 26% of the country’s wind-powered electricity.
- Major automakers, like Toyota, have manufacturing hubs in Texas, bolstering its advanced manufacturing capabilities.
- Economic Outperformance: In 2023, Texas’s economy grew by an impressive 5.7%, compared to the U.S. national average of 2.5%. This consistent outperformance reflects the state’s ability to attract investment, create jobs, and support entrepreneurial ventures.
2. Business-Friendly Environment
Texas has cultivated one of the most attractive business environments in the United States, aligning perfectly with Buffett’s preference for favorable regulatory and economic conditions.
- No Personal Income Tax: Texas’s lack of state income tax allows both businesses and individuals to reinvest more of their earnings. For small businesses, this translates into more capital for growth, hiring, and innovation.
- Incentive Programs: The Texas Enterprise Fund (TEF) has awarded over $600 million since its inception, creating 100,000+ jobs and attracting billions in investment. Companies looking to relocate or expand find Texas’s pro-business policies a compelling reason to set up operations here.
- Light Regulatory Environment: With less red tape than many other states, Texas fosters a culture of entrepreneurship, enabling small businesses to thrive and scale faster.
3. Strategic Location and Robust Infrastructure
Texas’s central location and world-class infrastructure make it a logistical powerhouse, offering businesses a competitive edge.
- Top-Ranked Infrastructure: Texas boasts one of the most advanced transportation networks in the country:
- 12 major deepwater ports, with the Port of Houston ranked #1 in foreign tonnage.
- Major international airports like Dallas-Fort Worth (DFW) and Houston’s George Bush Intercontinental (IAH) connect Texas to global markets.
- Over 313,000 miles of public roads and one of the largest rail systems in the nation ensure efficient freight movement.
- Energy Leadership: Texas is a leader in both traditional and renewable energy:
- It produces 43% of the nation’s crude oil and 25% of its natural gas.
- Simultaneously, Texas leads the country in wind energy generation and ranks among the top states for solar energy capacity.
This combination of energy leadership and logistical advantages positions Texas as an ideal hub for businesses looking to scale efficiently and sustainably.
4. Growing Talent Pool
A skilled and growing workforce is essential for long-term business success, and Texas delivers on both fronts.
- Young, Expanding Workforce: Texas has a labor force exceeding 15 million people, with a median age of 34, well below the national average. This youthful demographic ensures a steady supply of talent for decades to come.
- Top-Tier Educational Institutions: Texas is home to some of the country’s most prestigious universities:
- The University of Texas at Austin: A leader in technology, engineering, and innovation.
- Texas A&M University: Renowned for its research in agriculture, healthcare, and energy.
- These institutions not only produce top-tier talent but also drive innovation through partnerships with businesses and startups.
- In-Migration of Professionals: Texas has seen one of the highest rates of in-migration in the country, as professionals and families relocate for job opportunities, affordability, and quality of life.
5. Emerging Innovation Hub
Texas is rapidly emerging as a leading innovation hub, challenging traditional tech centers like Silicon Valley.
- Tech Giants: Companies like Tesla, Oracle, and Hewlett-Packard (HP) have relocated their headquarters to Texas, citing the state’s business-friendly environment and lower operational costs.
- Startup Ecosystems: Cities like Austin, Houston, and Dallas have vibrant startup scenes:
- Austin: Known as “Silicon Hills,” Austin attracted over $5 billion in venture capital funding in 2023.
- Houston: A rising hub for biotech and energy tech startups, Houston fosters innovation through initiatives like the Texas Medical Center Innovation Institute.
- Lower Costs: Compared to California and New York, Texas offers affordable real estate, lower operating expenses, and access to capital, making it a magnet for startups and entrepreneurs.
6. Resilience and Adaptability
Texas’s ability to adapt to changing economic landscapes has been key to its long-term success.
- Energy Transition Leadership: While Texas remains a powerhouse in oil and gas, it has also embraced renewable energy. The state generates more wind energy than any other U.S. state and continues to expand its solar capacity, ensuring it stays ahead in the global energy transition.
- Diversified Economy: Unlike states reliant on a single industry, Texas’s economic diversity provides stability during market fluctuations. For example, when oil prices fell in 2015, Texas’s tech, healthcare, and manufacturing sectors helped offset the impact, showcasing the state’s economic resilience.
Conclusion: Why Texas is the Future of Long-Term Investment
Inspired by Warren Buffett’s belief in the long-term promise of strong, stable regions, we are confident that Texas represents one of the best opportunities for sustainable growth over the next 60 years. With its diverse economy, business-friendly policies, strategic location, skilled workforce, and innovation-driven environment, Texas is uniquely positioned to support and propel small businesses into the future.
For investors seeking a state with unmatched potential and resilience, Texas is the place to be.