As Silicon Valley Gets ‘Crazy,’ Midwest Beckons Tech Investors
nytimes.com
nytimes.com
If the Bay Area can't get its act together and start permitting new housing in proportion with its economic and population growth, it will go down in the books as one of the largest and most obviously foreseeable squandered opportunities in modern history.
The supply elasticity of buildings in San Francisco is 0.1, which is almost nothing. If you built 3,000 units today, rents would only go down 30U$S in average. And the elasticity of demand is 0.7 in comparison. That means that lower rents will attract lots more people.
San Francisco could triple its population in a few years if it could tear down the mission to build huge appt buildings.
SoMa was built by razing the houses of black people in the 80s; see Janet Delaney's work at the SFMOMA (https://www.sfmoma.org/artwork/2010.70) to see what it used to look like.
If you want to talk about replacing detached houses with condos, then you should include Noe Valley, Hayes Valley, Sunset, and the Richmond. And you need to have a plan for where the displaced families and people of color will go (it's not like you can move them to the burbs like in NYC or LA).
I think they should build new apartment complexes in the Mission, including the one at 16th and Mission. I also understand that there is pushback from community groups to any development in the area.
However, I don't think it makes sense or is possible to increase the population of the district by 32 times over in the next few years. There are plenty of other sites through out the Bay Area where we appropriate transit orient development can and should occur.
I think you have to name names when making claims like this. I'm open to the suggestion that we should "build somewhere else", but it's pretty disingenuous to say that without specifics. It seems to me everywhere in the bay is pretty closed to new housing development, and every city is pointing fingers at every city saying "why don't you build there instead"? Where exactly can we put all these new buildings? Personally I think the answer is "everywhere". Every single neighborhood should accept some level of increased density.
Leave aside that there are lots of people in San Francisco, including the Mission, who might not be keen on that Robert Moses-esque plan. How are all those people going to get to their jobs--the vast bulk of which probably won't be walking/biking distance from these huge apartment blocks?
If only there were a transit system designed for the masses.
My point was that you can't just plop down a bunch of large apartment/condo towers--even if it were otherwise desirable to do so--unless you also add infrastructure to move all those people around. Certainly it can be done but you're probably looking at a decades-long project.
New York City; San Francisco; Washington, D.C.; Paris; London. All these cities grew by plopping down buildings and then sorting out the resulting mess. Is this ideal? No. But it's (a) cheaper to build and (b) easier to finance, with private capital, buildings than mass transit. Population first.
If land is expensive, the only route to cheap housing is to (a) increase density or (b) limit immigration (e.g. Beijing's hukou [1]).
> There are more options than just 'buy a house' and 'rent in a huge apartment building'
This is a false dichotomy. Nobody is arguing for buying versus renting. The debate is about density. Apartment buildings are tremendously more land efficient than the two- and three-story condos San Francisco seems to prefer.
I'm working on a little side project (a SaaS - there's a link in my profile), started as more of a creative outlet, but it would be cool if it turned into a second income stream for me. One obstacle is a complete lack of any sort of dev/tech culture around here, much less a 'startup' scene.
Other factors: Finding potential co-founders (I've met very few software engineers around here I would consider good enough, and I haven't met a single person who knows anything about bizdev and/or sales for a B2B SaaS), and of course no possibility of getting any funding around here (not that I'm wasting any energy thinking about it as noone would invest in a 37-year old first-timer in any case :) )
Also, many commenters are decrying the cost of living and housing. But the BA also has a vibrant job market and a comparatively 'liberal' culture against homophobia/racism/sexism. Places like Omaha do not (largely, though exceptions very much exist), and so finding a first/new job is difficult and 'fitting in' may also be hard for some 'less-traditional' people. It's not just the money, it's the value people are chasing.
If Amazon does choose Chicago, I think it could really cause a bigger shift in the industry.
It will be interesting to see how this plays out and I expect that financial incentives will play no small role.
That said, it will be interesting to see if Amazon picks someplace that seems a logical fit for "tech" in a West Coast-style vein or does more of a if-you-build-it-they-will-come sort of thing. Even if it's perceived as somewhere typical SV techies wouldn't want to live today.
1. It's about financial incentives mostly, they have a few cities in mind and they are going to pick the best one of those options.
2. They already picked their city and they are hoping the competition gets them a better tax deal via competitive incentives.
I live in Boston right now and there is a lot of talk right now about #2. I sure as hell hope they don't come here and am sad to see that while our major originally said they wouldn't play the incentives game, they made a very snazzy proposal for them. Boston housing is getting near NYC and SF - this would destroy minority communities and flood the city.
One of the reasons I am hoping for Chicago is that it is a city that could use the revitalization and there is space to make the effect it would have on minority communities minimal, though frankly this will likely have big negatives no matter where it goes. But I suspect that it never had a chance.
Boston metro housing is constrained and traffic coming in, even off-peak, has gotten sufficiently worse that I come in less than I used to. And when I do come in via commuter rail I see that it often is standing room only even from fairly far-out stations.
An excerpt:
>And as California becomes populous rich, let us not forget that the character of a people counts for more than their numbers; that the distribution of wealth is even a more important matter than its production. Let us not imagine ourselves in a fools' paradise, where the golden apples will drop into our mouths; let us not think that after the stormy seas and head gales of all the ages, our ship has at last struck the trade winds of time. The future of our State, of our nation, of our race, looks fair and bright; perhaps the future looked so to the philosophers who once sat in the porches of Athens-to the unremembered men who-raised the cities whose ruins lie south of us. Our modern civilization strikes broad and deep and looks high. So did the tower which men once built almost unto heaven.
A practical understanding of whats going on in California is that the incredible gains of the tech sector, that above the median worker gains, are all going to the landlords and to the State.
To roughly paraphrase another section of the essay, robbery was less highway and more high-interest.
Might be a bit too late.
They are businesses driven by people with objectives, financial or otherwise. For better or worse, San Francisco attracts talent in a way the mid-west doesnt. By not cleaning up its act,its turning away people that would otherwise go there.
California loses, so California has a huge incentive to change things for that. The mid-west can do their own policies to compete for the interests of businesses and people.
Holy cow, it's like night and day. Compare how willing people are to...not even talk with, but just acknowledge you in somewhere like SF or Seattle, to somewhere like St. Paul or St. Louis or Detroit.
The juxtaposition is staggering. On an individual level there's like this universal basic assumption that everyone is a person who has merit, which is totally lacking on the West Coast. Kind of ironic, considering the political differences. But hey, you can go somewhere your vote counts, right?
That might be a controversial opinion, but I've experienced both as a liberal techie, and I call a spade a spade.
Where did you grow up? I wonder if this is that thing where we see the ugly under-belly of our homes with a clear eye, but see new places with rose-tinted glasses.
The phrase that gets to my nerves is "bless his/her heart", which I translate to "I <insert long string of expletives> you, but I'm going to pretend to be nice because I have to keep up this stupid facade that society has created"
There are assholes everywhere, but in the Midwest at least you could tell the difference fairly quickly; people sort of wore their hearts on their sleeves, I guess.
I realise this might sound negative or naive-for-the-sake-of-political-commentary, but it isn't. I legitimately do not understand what the parent says.
I mean, I understand it literally, but the statement seems to me to convey some meaning that I am unable to decipher.
Perhaps it's because I'm not from the US?
Imagine random people coming up to you and asking you "where you're from" and "what's your homeland like" and so on, just on the basis of your appearance.
Especially if you're "from" Seattle and your "homeland" is just like here but with less weirdos treating you like a fucking zoo exhibit.
It's supposed to come across as a polite curiosity, but for many people, it comes across as a "midwestern nice" way of reminding you you're different and don't belong. Or, in the best case, simply annoying and vaguely insulting.
FWIW both intentions and perceptions matter in human communication, so neither side of this possibly miscommunicated hostility is necessarily "right" or "wrong". But swolchok's point stands none-the-less.
That's what I am unable to do based on what he wrote. I am unable to infer anything from it.
Where I'm from, that type of question is never a negative, and everyone is subjected to it in the starting phases of all social interactions.
That's probably why I'm having problems inferring anything from the comment, because it's supposed to convey a negative about something I view as exclusively positive.
Plenty of countries deal with xenophobia and racism, but it always feels a little different in the US because as endemic as it is, people do ostensibly agree that it is wrong and strive to call out and condemn it.
At least, I've always thought they did...
It's hard to tell if that's a big part of it, but I suspect that it is.
But there also isn't really anywhere that I've found which seems both implicitly tolerant and kind/friendly/open-armed, so...jeez, I don't know. Maybe it still wouldn't be so bad to go somewhere where I'm not the implicit enemy, bad guy, danger, what-have-you. I mean, it hurts; after some point, you just break down when it comes to thinking things that far through.
Fixed that for you
I'm not going to argue that the institutional and structural problems are better there, but individual people treated each other like people for the most part.
I've heard the opposite from friends who have moved to the West coast; they found it extremely easy to make friends outside of work because most people who live there are transplants themselves.
I can see that folks on HN are taking this a bit personally, but in my experience the warmth, authenticity and friendliness in the Midwest is night and day a different world to the west coast.
Low salaries are an incentive for companies to move to Ohio, but are a disincentive for employees to move there.
https://www.indeed.com/jobs?q=software+developer&l=Columbus%...
Which is the general problem with the midwest tech scene.
"Woe are we, we can't attract talent". Well, when Google's annual bonus is larger than your entire compensation offer... yeah, no shit.
It was great growing up there. It still catches me off guard when I have to pay admission to walk into another city's zoo/art museum/science center.
The thing about saving for retirement is that you can contribute huge amounts of absolute dollars in a high COL place and then move to a low COL place to spend it when you retire.
The other part thats virtually impossible to account for is quality of life. Hard winters and big houses in Omaha vs Great weather and 1 bedroom with other people in SF, etc.
I don't know of strict rule of percentage or nominal dollars that works except for using annual expenses as the measuring stick.
But snark aside, this is a good point. If you keep all your budget percentages the same, then living in a high COL area you can save/invest more and still also have more spending money left over for hobbies or travel.
Even those who bought post-2010 are still up by varying amounts, although those amounts are all likely 6 figures given the median home prices and recent increases.
One doesn't need to pay off house. Upon retirement, just sell it and cash out and move to a cheaper area.
1) Your chances of becoming a millionaire through stock options are likely higher in silicon valley. Evaluating the optionality value of stock options at various companies isn't something a journalist can do. 2) If you are able to save 20% of your salary in Omaha, but only 15% in San Francisco, you are likely to save much more in San Francisco.
Then there is all the questions of quality of life, where it's easier to find new jobs in your field, where you are more likely to meet and work with the best in your field, etc.
And your odds of winning the lottery are better if you play Ohio Lotto rather than California Lotto. However, we're kind of ignoring the big elephant in the room...
Evaluating the optionality value of stock options at various companies isn't something a journalist can do.
A journalist can probably do a better job of investigating that than your average tech employee.
If you are able to save 20% of your salary in Omaha, but only 15% in San Francisco, you are likely to save much more in San Francisco.
And if a frog had wings, it wouldn't bump its ass when it hops. From what I'm hearing, having never lived there but having investigate the possibility, saving anything at all while paying SF housing prices can be difficult. Sure, you can save a few bucks renting with six house mates, but then we're back to QOL. Because I don't know if you've ever played the "what could we get somewhere else for what our current house is supposed worth?" game. In our case we could exchange the 1200 sq. ft. house in Redmond, WA for a 5400 sq. ft. house on a couple acres in a swank suburb of Indianapolis. I don't think we'd have any problem making the payment on Indianapolis wages, either. The difference is that you'll probably be working for an insurance company doing LOB apps. But, hey, it's a living and you get to go home to a 5400 sq.ft. house.
Now, despite all my contrariness, I'm in full agreement that it's hard to quantify beyond a gut feeling. For instance, we used to live in the Indianapolis of my example above. Notice that we don't live there anymore. Some of it is subjective, because some like the hussle and bussle of a big city like SF, others (like me) would do it only because that's where the money is at. But if the money is getting eaten up by housing costs, but OTOH what about the opportunity cost of living in Ohio and not SF...argggh, you could drive yourself crazy.
I think at the end of the day, live where you want to be at the moment. A software techy isn't going to starve no matter where in the U. S. they live.
On the contrary, employees are far better suited to value options than journalists. Journalists can’t value options because these companies are private, they can’t know average option grant, vesting period, strike value, total share count, company fair market value, etc, etc. They have no way of comparing the typical option value in silicon valley to other businesses, they can only compare cash comp.
Employees can know what their companies last valuation was, what about yay means per share, and reasonably estimate it’s future value if it succeeds, and roughly estimate how likely that is.
If you think you need $150K in silicon valley to match the $85K you make in the heartland, if some silicon valley company offers you $150K plus 1% of the company you don’t know exactly how much the stock is worth, just that its a lot.
For example a simple calculation goeslike this. Let’s say you think it’s a 1 in 10 shot get company succeeds, and it will be worth on average $400M if it does. That’s means $4M for you if it does or $1M a year, assuming vesting over 4 years. The 10% chance of success says you be zero most of the time, but your options value still works out to be worth an average value of $100K/year.
So when a journalist says engineers who make $150K in SV would have a higher standard of living in the heartland making $85K, that’s because they don’t have a clue what those options are worth.
I've done the math on this and I've never been able to figure a way that $100k in <generic midwestern city> gets me to retirement quicker than $200k in Seattle or even SF.
I just don't buy it.
As far as I'm concerned, it's a bullshit excuse midwestern companies use to under-pay their engineers.
No, but you answer the question of what that's still a fair comparison yourself:
> What you have to include is weather, cultural opportunities, etc.
Turns out that a small apartment feels a lot less like a jail when the weather's bearable almost the entire year and there's world-class hiking 30 minutes away.
> And the marginal tax rate is higher.
1. Which I include. In the worst case, this merely wipes out the delta between the real bonuses you get on the coast and the (conspicuously tiny) bonuses you get in the mid-west. The difference in tax is gone before you even start comparing salaries!
2. And that's not even fair to the coasts, because higher taxes do, in fact, buy some differences in quality of life.
Adjusted for Cost of Living, you might make more in savings, even if you earn less. This isn't something I've looked into personally, but great school systems are easier and more affordable too.
In particular: I do not understand the benefit of designating a block (or any geographic area in the city) and then incentivizing tech companies to move there. What's the benefit? Moral support?
One of the greatest advantages cities in the midwest have over NYC and SFBA is that it's inexpensive to set up an office. That comes in part from having a whole city's worth of open spaces to pick from. What's the advantage to trying to centralize them? I've seen this tried in Chicago at places like 1871 and I just don't get it: it seems like weirdly expensive, constrained, noisy space whose only benefit is proximity to the kinds of companies that would also take on expensive, constrained, noisy spaces.
Meanwhile, isn't the biggest disadvantage to the midwest the limited funding options? I'm a fan of the kinds of companies that don't have this problem because they "fund" from customer revenue. But if we're talking about replicating the SFBA startup market in Green Bay, we should probably start by engaging with the fact that investors will not fund the same companies in Green Bay that they will in Mountain View or SOMA.
Serendipity. One of the advantages of SF, is the high density, which results in more fortuitous chance meetings.
it seems like weirdly expensive, constrained, noisy space whose only benefit is proximity to the kinds of companies that would also take on expensive, constrained, noisy spaces.
Expensive, crowded, and noisy don't necessarily contribute to serendipity.
Meanwhile, isn't the biggest disadvantage to the midwest the limited funding options?
I think the idea is that another startup hub somewhere else can show a degree of success and start attracting early funding, perhaps in some kind of niche.
But as for the rest of your message, you're basically asking the same question I am. Why try to cram all the startups into some weird "startup block"?
Later
Put it this way: to believe that cities should start centralized startup districts, don't you have to believe that distance is so unimportant to startups that it's fine to be in a locale that has 1/1000th the number of startups as SFBA, but also so important that you prescribe what cross streets they set up on in your own town?
One would have to believe that networks and modern infrastructure can make certain factors of distance unimportant, while one can still encourage enough beneficial interactions in a smaller community outside of SFBA. This is why I brought up the idea of a particular niche. It seems very unlikely one could compete in all areas, while there have been many historical precedents for explosions in rates of creative realization and/or production resulting from concentrations of specialists in a particular craft.
The real problem with distance being unimportant in tech, is that any such bloom could be quickly drawn to SFBA and relocated there. For such a thing to work, there would need to be something else keeping the group of specialists in the outlying community.
You won't get start-ups until someone brings money. Instead of setting aside a city block, they should charter three round trip flights a week from San Jose Jet Center to the Green Bay airport and subsidize the tickets.
That being said, I have noticed quite a few specialist technical/consulting firms popping up all over my native Upstate New York. Those firms don’t need the armies of employees the way a Google or an Uber does, so I think that they can offer a higher pay to cost of living ratio and attract strong talent, kind of like Tom Cruise in The Firm, accepting a lower salary to work in Memphis but taking home more net income than if he had gone to New York.
There seems to be this attitude in the Midwest that lower CoL justifies lower salaries, as if there's no need to compensate for lower QoL with money.
Given equal salary, hordes of people will choose Midwestern winters over SF rent. But this attitude of "I don't have to pay you as much because land is dirt cheap, never mind that it's on a flat prairie in -20F weather" needs to be reversed. Especially since most of that land isn't ever appreciating, so I'm just paying rent to the bank instead of to a landlord anyways.
Midwestern companies: don't do CoL adjustments if you aren't also willing to do QoL adjustments.
As a local Midwesterner, they don't do this because many people here don't want to think their QoL is lower and some will even feign offense that you implied their QoL is any lower than anywhere else.
Ironically, this bites them in the ass in wages.
Companies don't pay people fairly out here because they don't have to. Most of the locals have convinced themselves that their QoL isn't any lower. Their own employees proudly display their own below-market wages as evidence of why their home is a great place to live, they are essentially negotiating their own wages downward. It's a pure win-win for most companies, why would they want to disrupt that process?
The other problem is at acquisition time. EVP of Google don't want to hire a team in BFE, Wisconsin or Lancaster, PA. They know those people aren't moving to SV and the EVP isn't taking two flights and an hour train/car to visit that remote office. Tech startups in these areas have to be more focused on revenue and not IPO and Acquihire.
Don't get me wrong though I definitely see the QOL that can be had with smaller incomes in such places and intend to move out of the Bay Area etc. eventually.
I don't know about companies, but developers who can pick their location might consider "not Silicon Valley or New York".
Just saying.
It's a chicken and egg thing. There's no reason why you couldn't do something there, but it's harder because there's just not the critical mass of talent and capital. Outside of Chicago[3], there's a paucity of jobs. See Louisville[0], St Louis[1], Columbus[2]. Even the quality of jobs in Chicago feels pretty meh compared to SF / SV, but that's just my opinion.
[0] https://whoishiring.io/search/38.2527/-85.7585/11?category=p...
[1] https://whoishiring.io/search/38.6270/-90.1994/12?category=p...
[2] https://whoishiring.io/search/39.9612/-82.9988/11?category=p...
[3] https://whoishiring.io/search/41.8781/-87.6298/11?category=p...
It seems to me the places that are depressed rural areas will remain so indefinitely. It's great if we can create more evenly-distributed jobs, but the brain drain to the 'elite' areas will still be in effect, there will just be more of them to go to.
FWIW, I spent a week in Columbus (at a BigCorp datacenter) and absolutely loved the town. That said, brand new condos right in the heart of downtown are far from cheap. Desirable areas are desirable areas no matter where they are. I was shocked that a condo (the nicest of the nice, mind you) would be over $1M.
I can't do the humidity, but loved the city.
Depending on the stipend amount, such communes may only be affordable in lower cost areas, including the Midwest. In large enough numbers, I could see this become a kind of movement that brings a different kind of resurgence to the deflated economies of the Midwestern States.
Do you want a liberal/progressive-style government? Do you want a conservative/libertarian one? Do you want transit? Walkability? Large lots and houses? Small ones? A particular type of weather?
It's a lot to consider and articles like these don't provide a lot of detail to go on...
I highly recommend both, if you can weather the weather. ;)
I'd be happy to answer any questions you might have about it.
Why not Portland?
VC doesn't work like that. In order to survive (and prosper) as a VC it takes picking and investing in Apples, Googles, Facebooks, Amazons, Airbnbs, etc.
I could be wrong, but this feels like there's too much money chasing too few good companies.
That seems to be true even in Silicon Valley itself.
I’ll believe these regions are really building a tech center when the companies there seem to actually be looking for senior tech talent.
it costs WAY to much to live there and the social/political landscape gives off the impression of being some kind of authoritarian dystopia falsely touting itself as some kind of social utopia.
not really interested in all that noise.
I don't think people quite get how engineering centric SF/The Valley is. There is a meetup for everything and every third person you run into is an engineer. It's truly a programmers paradise.
And no where else do you have the salary leverage that you do in SV. If you have an amazing background with a couple of niche languages, and the right startup comes along that needs engineers with your skillset yesterday, you can manage a homerun salary deal.
The engineer is king in SF. I lived there for five years. And will never regret that time.
P.S. You can still manage good deals on housing in less trendy areas.
Hire a professional relocation assistant. Monica McGee does freelance and corporate relocation. Money well spent and she helped my wife and I land a great deals on a couple of locations.
"hire someone to find you a place that you can afford because there are no affordable places"
"if you luckily have the specific skill some random startup wants, you can make a "homerun salary deal", which you will need because living expenses are terrible, otherwise you are shit out of luck"