50% of all this money is being captured by Bay Area landowners.
Companies spend the the majority of their costs on office space, then employees spend the majority of their salaries on a home.
I was thinking 100k-200k for some reason :/
Some people commute an hour and get roommates and can pay < $1000
That's when they moved to a high quality office in a prime location on a rooftop. With a lot of free space, to accommodate hiring 1 person per week for the next year.
Have my doubts about this. Would love to see your sources
The math: most companies are doing roughly 150 ft2/employee. You can get good office space for $60 ft2; quite nice office space for $80 ft2. On the lower end, that will come out (+ services) to $5.50-$6 ft2/mo. So maybe $800 - $1200/emp/month.
Note you can do much better than that $60 if you don't want to be close to caltrain. I looked at stuff in the $40 range that was your standard peninsula office park.
As for housing costs... the bay area is fucking stupid. Next round (I'm a founder) we're going to be opening an engineering office anywhere else. Candidates are probably Chicago (ugh that flight), Oregon, Seattle, maybe Reno. The difference is is $150k barely making it or a pretty decent salary.
It's not just housing either. A founder friend bought health insurance for employees in Oregon. She thought her broker screwed up the price was so low.
Don't even get me started on the fuckwits in our government and the commute situation.
Office cost savings are $0. We can't incrementally buy office space. Plus a week of travel to sfbay costs order $4k each time.
You'd have to actually know what people are spending on housing, after accounting for spouses/roommates.
It could end more being more or less than 23 million, easily.
e.g. I spend ~22%
Also, some people will own their home or live at a family owned home.
One could save money by living in Manhattan and flying to San Francisco for work. If time zones and transit were unrealistically fast and permitted such an exercise.
But that's a much shorter flight. It wouldn't surprise me if it worked for, say, Las Vegas to San Francisco.
Specifically, I was in Washington DC and the startup I wanted to work for was in San Jose. My then-girlfriend (now fiancé) has the kind of job that can only be done in DC. I agreed to fly out for a week every month or so and work remotely the rest of the time. I did it for a little over a year but the travel wore me out and I struggled to find a healthy routine working from home.
I see threads like this and think that the solution to this problem has to be more remote work. I just wish I could be one of the people for whom it works as well in practice as it does in theory.
At least in this case, the decision to be located in the valley was rational at the individual level, even if it may be irrational collectively.
I think Seattle, Boston, LA, and NYC also have critical masses of talent that make them acceptable for starting a tech company, but unfortunately those places aren't really affordable either. The decrease in proximity to talent and capital probably isn't worth the marginal savings in cost of living.
If anyone is going to break the chicken vs. egg cycle and set up shop somewhere truly affordable, I think it will have to be one of the big companies, opening up a satellite office and offering employees the ability to choose where they want to work. They're all so profitable that they don't seem to mind the money that's going to Bay Area landowners. I wonder how expensive things will have to get before they start to get creative.
The startup ecosystem feeds off of that and California's outlawing of noncompetes. Employees get bored at working at a big company and have an idea for some way to employ the technology they've learned towards another industry. There's ample angel investors & VC floating around because of the profitability of previous companies. Oftentimes they have a spouse at one of the big companies who can continue to provide stability & health insurance.
The list of famous companies out here that can trace their ancestry back to one of [Shockley, Ampex, Stanford, IBM, HP] includes Fairchild, Intel, AMD, NVidia, Kleiner Perkins, Sequoia Capital, Atari, Dolby, Oracle, Salesforce, Memorex, Seagate, Apple, General Magic, Radius, Claris, E-Bay, StumbleUpon, Uber, Danger, Android, Nest, Be, NeXT, SGI, Cisco, Sun, Tandem, Siri, Yahoo, Google, Odeo, Twitter, Square, YCombinator, Netgear, Netscape, LoudCloud, Ning, a16z, Instagram, Whatsapp, Paypal, Slide, Yelp, Palantir, YouTube, LinkedIn, and likely many others. That's using a definition of "trace their ancestry back" as "a founder previously was an employee of or student at one of the other organizations in the set." Pretty much the only major Silicon Valley companies that are not included are the various YC companies (Reddit, AirBnB, Dropbox, Stripe, etc.) and Facebook, all of which would be if you extend the definition of "ancestry" to include "seed funder was in the set". (YC is in the set via Stanford => Yahoo => YC, Facebook's first investor was Peter Thiel, who got his BA and JD from Stanford.)