California vs. Lagos: Why Businesses Are Saying "No" to Top-Tier Markets

A recent, blunt statement from CEO Marcus Lemonis of BedBath sent ripples through the business community: “California’s system makes it nearly impossible for businesses to succeed, and I won’t put our company, our employees, or our customers in that position.”

This sentiment, once a whispered complaint in founder circles, is now a driving force behind a well-documented corporate exodus from the Golden State. But what’s truly fascinating is that this exact same rationale is now being applied to a very different, yet equally formidable, economic landscape: Lagos, Nigeria.

While separated by vast geographic and developmental divides, California and Lagos are both magnetic, world-class hubs of innovation and talent. Yet, a growing number of entrepreneurs and corporate leaders are starting to see them through the same lens: as markets where the immense opportunity is increasingly overshadowed by systemic friction that threatens operational viability.

This article explores the surprising parallels between these two economic powerhouses and why businesses are making the tough choice to vote with their feet.

Part 1: Deconstructing the California “Impossible” Equation

For decades, California was the undisputed dream—the home of Silicon Valley, Hollywood, and perfect weather. But the high cost of achieving that dream is now prompting a reckoning. The “system” that the CEO referenced is a complex web of challenges:

1. Regulatory Overload and Litigation Environment

California is known for its consumer and employee-friendly regulations, which can create a labyrinthine compliance burden for businesses. The Private Attorneys General Act (PAGA) allows employees to sue employers for labor code violations on behalf of the state, leading to a barrage of often-frivolous lawsuits that are costly to settle. This creates a constant litigation risk that smaller businesses, in particular, can scarcely afford.

2. Soaring Costs of Operation

• Extremely High Taxation: California boasts some of the highest state income and corporate taxes in the U.S., directly eating into profitability and investment capital.
• Sky-High Real Estate: Leasing office or industrial space in major Californian metros is astronomically expensive, a fixed cost that cripples cash flow.
• High Cost of Living: The exorbitant cost of housing and living forces businesses to pay premium salaries for employees to survive, increasing payroll overhead significantly.

3. Infrastructural and Logistical Strains

While not a developing world issue, California faces its own infrastructure crises—chronic homelessness affecting street-level commerce, rising crime rates impacting retail, and an energy grid that can be unreliable, all adding hidden costs and complexities to daily operations.

The result? A steady stream of major companies like Tesla, Oracle, and Hewlett Packard Enterprise relocating their headquarters to more business-friendly states like Texas and Tennessee.

Part 2: The Lagos Conundrum – A Different Shade of the Same Struggle

Now, apply the same CEO’s logic to Lagos, Nigeria's commercial nerve center. The specific challenges are different, but the net effect on a business's ability to thrive is strikingly similar.

1. Regulatory Hurdles and Bureaucratic Inefficiency

While aiming for reform, Lagos State’s system can still be characterized by bureaucratic red tape. Navigating multiple agencies for permits, licenses, and approvals (LASEPA, LIRS, LAWMA, etc.) can be a slow, opaque, and frustrating process. This "time tax" delays market entry, increases startup costs, and diverts focus from core business activities to bureaucratic navigation.

2. The Crippling Cost of Self-Provisioning

This is Lagos's equivalent of California's high costs, but in a more extreme form. Businesses cannot rely on public infrastructure and must privately provide for their most basic needs:

• Power: The number one operational cost and headache. Companies must run diesel generators for hours each day, facing soaring fuel prices, maintenance costs, and environmental noise. This makes Nigerian manufacturing and retail inherently less competitive.
• Security: Businesses must invest heavily in private security firms, gates, and fences to protect assets, a significant overhead that businesses in stable climates do not face.
• Water & Logistics: The lack of constant running water and traffic-congested roads add further layers of cost and inefficiency to the supply chain.

3. Foreign Exchange (FX) Volatility and Economic Policy

For businesses dealing with imports or relying on foreign capital, Nigeria's volatile currency and complex FX liquidity issues create immense financial uncertainty. The difficulty in accessing dollars at stable rates to import raw materials, equipment, or software can bring operations to a halt, making financial forecasting a nightmare.

The Common Denominator: The Erosion of Predictability

The core issue linking California and Lagos is not that they are “bad” places for business, but that they introduce a high degree of unpredictability and uncontrollable overhead.

A business model is a carefully balanced equation. In both locations, external, systemic factors—be it a surprise PAGA lawsuit, a sudden diesel price hike, or a months-long delay for a critical permit—throw that equation into disarray. This makes it "nearly impossible" to plan for sustainable, long-term growth with confidence.

The Rising Alternative: A Shift in Corporate Strategy

The CEO’s statement reflects a broader strategic pivot. Companies are no longer blindly chasing market size. They are now prioritizing operational stability and total cost of ownership.

This means:

• Choosing "Second-Tier" Markets: Places like Austin, Texas, or Ibadan, Nigeria, may offer less glamour but provide a more stable regulatory environment, lower costs, and easier logistics, leading to a higher chance of profitability and sustainability.
• Remote-First Operations: The pandemic proved that talent clusters don't need to be physical. Companies can tap into Californian or Lagosian talent without subjecting their entire operation to the local systemic friction.
• Demanding Change: Such public statements are a powerful form of advocacy. They signal to policymakers that if they want to retain and attract businesses, the business climate must be addressed.

A Warning to World-Class Hubs

The parallel between California and Lagos serves as a crucial lesson for economic hubs worldwide: resting on your laurels is a dangerous game.

A vibrant culture, a large talent pool, and a history of innovation are not enough. If the daily cost of doing business—whether measured in dollars, diesel, or delays—outstrips the benefits, businesses will make the rational choice to leave.

The CEO’s refusal to “put our company, our employees, or our customers in that position” is the ultimate accountability. It’s a demand for systems that work not just for the market, but for the businesses that operate within it. The future belongs to cities and states that listen.

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