Hacker News Reader

Comment by joefranklinsrs | Hacker News Reader

Ignoring all the risk-tolerant VCs and angels, with billions (trillion?) of capital in the silicon valley ecosystem for a sec. If one simply looks at the big non-US tech companies development offices and hiring activities

Rakuten: San Mateo having most job openings outside Japan, next closest is Toronto

samsung: US having 1100 opening, next is india with 26. in US, there's 114 jobs in california, next is texas with 81

Tencent: only offices outside China is Palo Alto and Seattle

It's clear that most tech companies are aware that all the talents are in Silicon Valley - and because of chicken and egg effects, all the talents come to and stay in Silicon Valley. And when one forms a network in silicon valley, she would be bombarded with job requests with silicon valley companies every day, and if she chooses a better job, it would be still in silicon valley.

View on HN

Maybe true if you’re targeting the senior talent who got in early enough to buy houses and have kids, but all the 20-somethings I know (myself included) plan to get out within 5 years, barring a drastic increase in compensation. I suspect there is a large, untapped market of disaffected young engineers who moved here to start their careers but would move to a second-tier city for the right job.

There are still alot of cheap real estates along the BART and caltrain stops

https://www.estately.com/bay-area-home-affordability-transit...

Pittsburg/Bay Point $430,000

Blossom Hill $657,000

San Jose $680,000

And the largest job growth recently has been East Bay, around Pleasanton.

If you are young and starting out, making $110-140k, try living in east bay or san jose and rent a room for $1k - 1.5k, you should be able to save enough money for a down payment for a house soon enough. The stories I've heard for people that couldn't afford their rent, are people living in $3k apartments in SF.

Sure, you can always trade off privacy and commute time to make the numbers work out. But not having to do that is an incredibly compelling form of compensation that companies can provide at minimal cost by offering work elsewhere. This is not a thing for white collar workers almost anywhere else in the US.

Let me try and complicate this :)

First, I submit that $430,000 is still expensive. Instead of buying the median home in Pittsburg and commuting 60+ minutes on BART to downtown SF, I could add an h and buy a huge home in my favorite neighborhood in Pittsburgh PA for about the same price and have a chill bicycle commute: https://www.zillow.com/homes/for_sale/Pittsburgh-PA/pmf,pf_p... (Obvious and legitimate objections: fewer job options, snow.) This is just me trying to say, $430k for that arrangement does not strike me as "cheap" given alternatives in other metros.

I agree that with a tech salary it's possible to save up for a down payment and buy in the Bay Area. But the risk seems unacceptable to me. Paying ~$1M for a house is a big bet that the Bay Area housing market stays hot. I don't want my wealth to be so tied up in a hyperlocal bet like that. I see things going one of two ways (and this is probably over-simplistic).

Option 1: A $1M starter home is the new normal. Prices stay flat or keep rising over the long haul. In that case my investment is sound. But I don't want to live in that kind of place. Where will my kids' teachers live? How will I cope with the moral ickiness of living in a place where housing costs create extreme spatial segregation of the professional class from the service class?

Option 2: The vision painted above is unsustainable. Something has to give (maybe a big financial crash; maybe just state-mandated upzoning that quickly increases housing supply) and the value of my investment drops by a lot.

Either way, I'm planning to save up on the West Coast and use my nest egg back in the Rust Belt.

You make compelling arguments. For me, a house isn't an investment but it's a place where I house my family. (sure, houses in silicon valley have gone up 1.5-2X in a few years. However, stocks have gone up 2-10X). If you're young, there's no point of getting a house. If you are close to have a family, one of the most important thing is KEEPING your job. If you are remote in Pittsburg, and you have to get a new job, it might take a few months of interviewing and flying in for interviews to find a remote job that pays your old salary. Do you want to risk that even to your family? most likely you wouldn't. You have 18 years of mortgage and college tuitions to pay for.

Agreed on most of what you're saying here.

> For me, a house isn't an investment but it's a place where I house my family.

I really want to view the world this way :) I wish housing were a boring commodity that depreciates in value over time like a car. With prices being what they are, I am _forced_ to think of housing as an investment because of how much of my net worth will be tied up in it.

Exactly this.

A house _is_ an investment, regardless of how someone wants to think about it.

Buying a house involves a significant opportunity cost over renting since it requires locking up capital (a down payment, or the entire value of the house if buying in cash) in an illiquid asset that could have been invested in liquid assets like stocks (that have historically performed better than real estate over longer time horizons for most housing markets, and often more than makes up for the fixed costs of renting once maintenance costs, taxes, and mortgage interest rates are taken into account, but that's only tangential to the point I'm trying to make).

Also, most people buy their houses on mortgages, so they're investing with 5-10x leverage over the down payment and paying interest for that leverage. This level of leverage would be considered outright insane for any other long term investment, but most people won't even think twice before locking a large majority of their net worth behind a down payment. This puts their financial well-being at the mercy of the whims of the local real estate market due to the 5-10x amplified gains/losses, and practically removes their ability to meaningfully diversify and de-risk their portfolio.

Now of course I'm not saying buying a house can never make sense financially or otherwise, just that refusing to think of it as an investment can be dangerous because it can blind you to the nuanced risk/reward calculations involved in one of the most impactful financial decisions you can make in your lifetime.

For myself, the right time to buy a house would likely have to be when I've saved up enough money that the upfront investment for the purchase of the house is about 30% of my net worth if I'm buying with cash, or less than 10% of my net worth if I'm buying with a mortgage, to counteract the extra exposure to real-estate from the 5-10x leverage. That may mean that the time to buy a house in the Bay Area may never come for me, but I'm perfectly fine with that because the alternative would compromise my ability to keep my investments reasonably liquid and diversified, which could prove to be disastrous in these uncertain financial times ahead of us.

Small point: the risk calculus changes a bit if you buy after housing market deleveraging (e.g. 2009).

You can never know when things are over-valued, but you can get a good sense when things are undervalued.

And since the housing market has both momentum (nearby sales affect comps, more inventory than sales, some substitutability) and adjusts slowly, there's time to buy after it bottoms.

Stock market timing doesn't work for many reasons, but a lot of those don't hold for the real estate market.

Liquidity also plummets during a deleveraging. Homeowners wait for the recovery to sell; lenders wait for the recovery to underwrite. Home values crossing into your price range doesn't mean you can actually buy one, unless it's for cash at a foreclosure auction.

+1. Between unicorn RSUs and salary, I have more than enough long exposure to the Bay Area tech industry’s fortunes. I’m not sure that my anxiety about homeownership even makes sense.

Your view on this broadly aligns with mine (33-year old, live in Oakland).

We bought a cheap (for the area, about 670k) condo just off of BART. It's a pure consumption expense in that I expect to get 1-2% appreciation/year while carrying a manageable debt load. It might go up a bit but that's not the point. We're right off a train line, not paying too much in interest, and building equity. Plus it's a great place to live, lots of young people moving in and we're doing a lot to improve it (lots of deferred maintenance we're working through). Worst-case scenario, we'll rent it our or sell if we move somewhere else; there will always be demand as it's a small, convenient unit in a renter-friendly building, just off of transit.

I share your negative view of the Option 1 dystopia. I have absolutely zero interest in living somewhere on the peninsula like Belmont, Atherton, or even most of San Mateo at this point, where you're basically walled off from anyone of lower socioeconomic class who's your age. Not sure "moral ickiness" is the world I'd choose (maybe just bland? do you really want all your neighbors to have the same job as you?) but it does indeed suck.

I think people who are banking on tons of appreciation buying today in the SFBA really need a reality check. There's just not much higher these prices can go. The common perception is that everyone in tech makes like $300k, which is so far from reality to be laughable.

Depends what is driving the housing appreciation. You can end up like Toronto & Vancouver where it keeps on going up anyway despite local incomes being far far away from those purchase prices, for a decade+

Yea, even if the local working population can’t afford them, the bay area can still be viewed as a hot spot to be causing housing to go up because they represent scarce investments/stores-of-value. Pressure could then push salaries higher into a positive feedback loop.

This might only apply to white collar jobs in tech. People in the service industries and public servants don't receive the same sort of rising pay bumps that engineers and managers do.

Don’t bart janitors make $200k?

I was thinking of teachers.

Another feedback loop in action: SV & SF unaffordability pushes out service workers and causes the area to become a prime location for the deployment of service work automation technology, which may result in better chances for the startups in this field starting out here.

It is still unclear how economical this sort of automation will be in other parts of the world though. If it does turn out big, Silicon Valley will have a first shot at it.

I think people dramatically overstate the case for automation.

It may be that certain jobs get automated. But look at what Tesla is going through; they're using more people, not less, and basically admitted they screwed up trying to automate so much assembly work from day 1.

On the other hand, the electorate here (SF) seems to want to push minimum wages to $20/hr, so maybe you'll end up right.

I think there's some truth to this, but the big story is simpler.

Prices have doubled in the past 5 years. Because of Prop 13, if you've been an owner through this, you just stay where you are.

Then the whole question becomes making sure things don't change. I think it's just a bunch of lucky owners who bought here 20-30 years ago with no intention or ability to sell, and not much interest in building new stuff.

As far as stores of value, housing is a pretty bad one. It falls apart, is heavily taxed, and is relatively illiquid. I think you'd do a lot better with stocks, or bars of gold.

> there will always be demand as it's a small, convenient unit in a renter-friendly building, just off of transit.

I hope you're right, but those are famous last words! Look at a city like Chicago, with huge sections that are just like you described, but where even well-maintained properties command a fraction of their peak value, and others are almost unsellable at any price. Oakland hasn't exactly experienced uninterrupted prosperity, so it's not an unreasonable risk to consider.

That's true.

I think Oakland has something going for it, though. SF increasingly feels like a museum: the whole place is so preservation-focused and static. Whereas Oakland has always seen itself as a place where anyone can live and doesn't have its nose quite as high in the air about "preserving the character of the city".

I live in west oakland right next to the BART and the transformation of the city is pretty cool to watch. Tons of vacant lots are being built out into usable real estate and places with broken windows are getting rehabbed into usable commercial space. It's neat to watch this on-the-ground transformation take place. And I'm happy we're building because, as I keep saying, if you want affordable housing, "just build luxury units today and wait 20 years". The BA's problem is that there's been all but zero development and now such a huge surge of people moving here, it's pushing the lower income tiers further and further out as Googlers making $250k are competing with teachers to live in whatever they can find.

I don't buy into the "let's blame everything on tech" narrative though. Between prop 13, rent control, zoning, and a lot of other regulatory action, the SFBA has made this problem more extreme than it is in other areas. There are plenty of regions--DC comes to mind--that went through huge waves of gentrification without nearly the price swings we're seeing here in SF.

P.S. I'm from Chicago.

>I live in west oakland right next to the BART and the transformation of the city is pretty cool to watch. Tons of vacant lots are being built out into usable real estate and places with broken windows are getting rehabbed into usable commercial space. It's neat to watch this on-the-ground transformation take place

I'm as YIMBY as they come, but I have to bristle at these words coming from tech people - to the marginalized communities on the ground, it's a human tragedy. We can at least recognize that, even if it's the best available option, this kind of transformation is not without downside.

Read this: https://www.economist.com/united-states/2018/06/21/in-praise...

And this: http://www.jchs.harvard.edu/research-areas/affordability

There's a lot of conflation going on here. For one, cost-burdened households are up everywhere in the country, not just here -- housing being unaffordable is a national phenomenon, not just due to "techies". Second, the Bay Area does this to itself: developer impact fees, "preserve everything at all costs" mentality, insistence on using union labor for everything, aggressive rent control, height limits, etc.

I'm not just making this up. Both of the above are rigorously-researched publications backed up by extensive study and review, not just random bullshit someone made up. My wife is an architect who deals with this stuff daily. Housing affordability is nowhere near being a priority in this region. If it was, prop 13 would be repealed, it wouldn't take 2-3 years to get an ADU permitted, the review process would be easier, environmental restrictions would be looser, and we wouldn't use union labor for everything.

Bottom line: time to get honest about where the priorities are. Affordability is nowhere close to the top.

From a policy perspective I agree. The regulations that Bay Area homeowners institute to ensure that this remains an exclusive and premium place are effective and ought to be reversed.

We can still talk about the issue in a way that empathizes with the tragedy of poor communities losing their homes, and avoids framing gentrification as an unmitigated good.

Very true. I'm just tired of being called the bad guy.

We might not see eye-to-eye on this issue. I think it's about 90% the fault of those who've lived here for decades and 10% the fault of new people like me (7 years here so far).

I think this is reflective of a more general problem with policymaking in the Bay Area, namely, people do what feels good, and ignore what actually works. I'm somewhere in the middle politically but this puts me way right of most bay area people. And what upsets me is that people just think they can make up their own outcomes here. There are certain issues like rent control, where every mainstream economist agrees it makes the problem worse (stifles development and divides an area into a two-tiered systems of "haves" and "have nots" for the controlled units) and yet we just ignore them here, preferring to vote with our hearts, or as you put it "empathize".

I'm trying to empathize but I'm also trying to solve the problem, you know?

Socioeconomic integration sounded great from afar, but I don't know how how much more sidewalk urine/feces I can take. I'm learning that I'd much rather deal with traffic and drab suburbia than in-your-face extreme poverty every time I try to take advantage of walkability and transit.

So it's a binary choice between walling yourself off in an affluent gated community and slogging through human waste in a dystopian urban slum.

Really no middle ground here, huh?

If you find one in the Bay Area, please let me know.

Have you ever tried commuting from Pittsburg/Bay Point?

Have you seen what $680k will buy you in San Jose?

These are not at all practical suggestions. The outlook for a 20 something engineer in the Bay Area is absolutely brutal. The people who got in 10 years ago are doing ok so long as the housing market keeps up. But there's nothing left here for anyone trying to start a life.

> commuting from Pittsburg/Bay Point?

As I mentioned, the biggest job growth recently have been in east bay. You'll likely have good chances finding jobs closeby.

> $680k will buy you in San Jose

Google is heavily investing in downtown San Jose, buying up lands. There's also the transbay joinup of BART and caltrain.

The current optimistic estimate for Caltrain Downtown Extension (and we know what happens to estimates for transit-related projects in SF) is 2027.

The Bart commute from Pittsburgh to Pleasanton isn’t a short hop.

A similar property near downtown Salt Lake City is $250k. For the right job, I would absolutely prefer that.

Would you have any source for the largest job growth being around Pleasanton. Would love to read up more on it.

FWIW, Purchasing a house and having children are no longer desirable goals for a substantial number of people.

Looking at trendlines and extrapolating is a pretty good way to see the future.

The goal is shifting from “large suburban house” to “central urban condo,” I suppose, but is there evidence for decline in desire to have kids? Actual both rate can be explained by people delaying gratification for economic reasons.

This was the same "millennials don't want to do X" argument you heard a few years ago. That started to stop once millennials got enough cash to do X.

A major, major confounding issue is simply not having the money. Of course you'll see a trend of fewer people buying homes if home prices are so high that fewer people can afford them.

I think some smart companies in "third tier" cities are tapping this. There are some hilarious targeted ads I see for an Austin company (HomeAway) that prominently shows the median home price in Austin and a link to their open jobs. Similarly, Duolingo (Pittsburgh-based) put up a billboard in SF advertising the prospect of working in tech AND owning a home: https://venturebeat.com/2018/03/23/duolingo-to-silicon-valle...

The problem with second-tier cities, as I see them, is that you have to move every time you get a new job, if you are maximizing your income/career. (I mean, not doing that is totally valid, but it's important to factor in the "I took a worse job because it was closer to the house that it would be expensive for me to abandon" thing into your expense/utility calculations. keep in mind that reduced job choice can mean increased stress and unpleasantness as much or more than it can mean simply getting less money.)

I think if you work in tech, silicon valley is pretty unique in that there are so many really desirable employers within a short distance. I'd be comfortable buying a house here even if it meant that it makes it really expensive if I want a job more than 15 miles out.

The novelty of eye-popping direct deposits has worn off; the rate at which I shovel money from venture capital to real estate brings me no particular joy. Maximizing income can only inch me closer to the quality of living situation I'd have elsewhere. The point at which I'd be done increasing housing budget, and actually free to increase other investments or luxury consumption, does not appear attainable. (Consider savings for a down payment as part of housing budget here. And if I could buy a starter home, my next priority would be fixing either the commute time or neighborhood safety compromise that made it a starter home).

I'm not sure why maximizing income in the Bay Area is worthwhile. The pay here, while much higher in nominal terms, seems to level off well below my level of comfort for standard of living (and my parents who got me accustomed to it were in much less lucrative fields).

I stay becuase I like the work and the company, because why not take this opportunity while I'm young? But it's an indulgent youthful adventure, not a sustainable long-term plan.

>I'm not sure why maximizing income in the Bay Area is worthwhile. The pay here, while much higher in nominal terms, seems to level off well below my level of comfort for standard of living

so, assuming you are a medium density type and can stomach an apartment with reasonable soundproofing, you are spending $3000/month on rent here, for a reasonably okay 1 bedroom apartment. (if you are willing to take a hit in quality, you can get more bedrooms or even a bad single family home for about that price)

So you move to a second-tier city and you get the same thing for $1500/month. Now, I don't make twice here what I would in a second-tier city, but I do make rather more than an extra $1500 a month.

Yep, that's about what I'm doing, and it's fine. Good, even.

But a similar unit in condo form would require a $200k downpayment (save $2000/mo for 9 years) and then $5500/mo through the 30-year mortgage term. That's assuming prices stay flat for 9 years, which would be extraordinary. I don't see any part of my company's SWE job ladder supporting those numbers. But if I want to try, I can't allow my lifestyle to inflate at all under future raises. They all need to be shoveled into that gaping hole.

Paysa claims the median SWE in mountain view makes around $190K total comp, with like $65K of that being bonus and stock. (that's lower than I would think from talking with people, but a lot of my friends are mid to late career and working at the more desirable companies, so I guess that makes sense.)

Note, a lot of companies pay more. according to paysa, the mean Facebook SWE makes like $230k in Sunnyvale (the closest location to mountain view that paysa has information on facebook for.)

Trulia claims that the median 1 bedroom in mountain view is $860K, which is higher than I thought; (santa clara, where I live, it's $622K) 20% of that is $172K... so four and a half years of living off your base salary would be required (three and a half if you commute in from santa clara) I mean, depending on your tax bracket, of course.

And all this is looking at the median, and in the comment I'm responding to, you were talking about the best SWE jobs at your company. I can tell you that it's not at all unusual for individual contributors who are pretty good but not famous or anything to do rather better than the paysa numbers, salary wise.

All that said, I personally don't plan on buying at these prices; (and I'm a sysadmin and have no degree; I'm gonna make maybe 15-20% less than a SWE with a degree at my level) I think right now, landlords are willing to lose money on the actual rent in order to make money on the appreciation. I dunno if this is a good idea long-term, just 'cause if this is the new normal, if housing prices keep rising, I might actually price myself out of desirable metros, and be forced to move to a second-tier city, which I would find unpleasant... but I see no reason to hurry to those second tier cities. Certainly, rent seems to be limited by what people can pay, and as someone SWE-ajacent, I make more than most people, even here in the bay area, so something would have to go wrong with my career to the point where I wasn't making more money than most people locally for me to get priced out of the local rental market.

I mean, if there were smaller, cheaper places available, I'd drop a quarter-million on a "plan b" just so I could continue to live around here if my own career went south... but I probably have much stronger social reasons to stay than you do.

Some of my friends and I have been considering investing in real-estate in a second tier city, just to hedge against the case where real-estate continues to climb globally, but paying half what a house costs here seems high for that. A buddy of mine has been talking about Cleveland (one of his value functions is functional public transit) Cleveland is a lot more than half cheaper than the bay area... but I don't think I'd want to live there.

Bonus and stock are inherently volatile. It's totally reasonable to use them towards initial savings, but seems crazy to rely on them for ongoing housing costs. If you're relying on bonus + equity and we enter a downturn, even if you manage to stay employed, you're screwed: employer stock will be worth far less, and bonuses tend to get curtailed when things are tight.

While there's definitely a lot of wiggle room in negotiating equity compensation or earning bonus, the base salary range feels pretty narrow.

That's why I was suggesting that you live on (pay rent from) your base salary, which is quite doable, and invest or save for a down payment out of your bonus and stock.

Well-known corporations like Samsung and Tencent should be able to recruit most junior talent they need from their own country or a lower-cost location. The major reason they set up offices in the US is to recruit top talent who are not willing to move and sometimes more senior than those they can recruit from elsewhere.

In other words, they have little incentives to set up offices in other US locations which are not lower cost than their home base and have too few talent at the level they cannot get elsewhere.

The needs of many startups could be different from them.

I've lived in numerous locations outside SV. They all have talent, they all have recruiters bombarding you, and when you take a new job, is would be still wherever you live. I'm not denying that SV has a strong presence in this industry -- to do so would be silly. But denying that other places also have talent and jobs is equally silly.

I have lived in LA, New York, and Tokyo. They all have talents. However, it isn't created equal. The companies outside silicon valley aren't using the best technologies, don't have the best processes, don't use the best softwares, which in turn affects the talents. The talents aren't attending the latest tech meetups in SV, aren't using the best tools, aren't doing the best coding practices, using the best frameworks, etc.

IMO, there's a 10X difference currently between tech startups in SF and tech startups in LA or New York; I've worked with teams inside and outside silicon valley. The calibur of talent/progress difference is just insane.

And Google uses Java and Facebook uses PHP. The idea that SF startups are so much more advanced from a tech standpoint than other cities is just ridiculous

It's not ridiculous at all. I've worked outside the Bay Area and in it the last several years. There is a huge difference in culture and approach to solving problems. Lots of startups are boring CRUD trying to look more advanced, but plenty are actually trying new things and exploring tech in ways that most other places just can't or won't support.

There is a difference between trying to do new things and needing to use the latest and hottest webscale technology to try said new things...

Most likely some bias on both ends here

I've worked outside the valley more than I have in it.

I think you would find the way they use both to be orders of magnitude more interesting than how they are normally used.

Facebook isnt a user facing CRUD app with business analytics for advertisers?

In the same way that your browser and "hello, world!" are both just some compiled code.

And yet, at the end of the day, it's not just the technical principle but how the business models work are the same.

Given what comes out of the majority of those startups, SV ones included, it's not a very compelling argument that the people that brought us such glorious advanced technologies as Theranos, Juicero, or MongoDB are somehow better at technology than people who get stuff done somewhere in the middle of the Corn Belt.

Yea there is a huge network effect here. I just recently wrapped up a job search after moving back here from Chicago, and the difference in depth was night and day. I kept my marketing job pipeline full and I did not come close to bottoming out all relevant opportunities. In Chicago, there were maybe 10 relevant opportunities for me at a tech startup.

Reply on news.ycombinator.com