Why startups are leaving Silicon Valley
economist.com
economist.com
There is a lot of money sitting at Apple, Google, and the rest. They could have easily use their weight, reach and influence to envision and build an entire tech city community. It's not that hard.
If a few lobbyist in DC can send the country into all kinds of wars, why can't SV companies use their weight to do something that can resolve this problem. It makes perfect business sense to me.
Instead, we get apartments build adjacent to CalTrain to act as sound insulation or they would not get approved. This is ridiculous.
To have a habitable area with a decent quality of life, you need all types of workforce. Teachers, restaurant workers, gardeners, etc. Where are these people going to live? When you see some houses filled with 7-8 occupant because they can't afford rent, you know this is not sustainable.
I've lived in the Bay Area since 1991. These days, for my work, I spend a lot of time working with our remote team in Minsk, Belarus. The thought of coming back each time to SV is distressful if it wasn't for the loved ones back home. There are many tech guys here in Belarus who dream of coming to SV. I remind them their quality of life is far far better than what they would get in SV.
So unless we get some true leadership in SV, that has a vision of making the Bay Are more habitable instead of trying to think about how to colonize Mars, this is going to get worse. The once almost utopian Bay Area is becoming rather dystopian.
It’s actually very hard. Most available land has already been built up. Cities are very strict about zoning and not allowing additional development. Tech companies can’t just steamroll the local governments. It’s very much a poor governance situation.
I agree with your conclusion, I just don’t believe Big Tech can fix it so easily.
Palo Alto has blocked new housing for the last decade. They enforce strict zoning that has curtailed commercial development too.
Not quite. The rule is that for offices in the Village at San Antonio Center project meals within an office cannot be subsidized more than 50% on a regular basis. Meals that are in restaurants that are open to the public can be subsidized as often and as much as the office wants to.
That development includes several restaurants. I expect Facebook will make arrangements to use them to provide Facebook's free meal benefit at that development.
That's not exactly a good thing. One day it's sponsoring cheap apartments, the next it's dissolving labor laws.
Leadership is saying “I’m willing to lose some of my home price appreciation in the short term to keep the ecosystem thriving”
Repeat that 2 or 3 times, and the problem goes away quickly..
Maybe there's not much in terms of a startup community or VC funding, but I can walk to the grocery store, to the craft beer pub, to the beach (or take a cheap bus/taxi). Plus, I have a nice new apartment for less than the cost of utilities back in the US.
I personally don't think there has ever been any real indication that the Bay Area would become utopian. It is just that there used to be a "flaw" (relative to US society) where technology was undervalued, so opportunities were cheap. That has now been corrected, so you are paying for those opportunities.
Please elaborate. I'm sure everyone looking to turn their little Silicon Alley, Meadows, Walkway into a thriving techno metropolis is all ears.
What people are lacking isn't some phony experts but time, space and motivation. Give people that in ample supply and the rest will sort itself out.
Americans wildly underestimate the economic power of the United States. There are dozens of "small" U.S. metros that match the productivity of Belarus.
And those are the small metros. There are dozens more totally ignored "flyover dumps" -- think Cleveland, St. Louis, Kansas City, Columbus, etc -- with GDPs 3 or 4 or 5 times that of Belarus.
And only then do you get to an "irrelevant, dying" place like Detroit, whose GDP is ~$280 billion (about 6x that of Belarus).
Most of these comparisons shouldn't ever leave the gate.
The suggestion that these two things aren't related is an extraordinary claim.
Some developer in Glasgow tried selling us a parking lot - we did the math and there was no way it would generate enough income to collect on its price. We were better off directing our investment where the math worked (emerging markets, etc).
The parking lot had a higher price then an entire chemical plant in Kenya that had a monopoly on supplying life saving generic drugs to 3 countries in Eastern Africa.
A lot of valuation in the US / UK is based on the dollar having reverse currency status, so don't get on your high horse about the US being more 'productive'.
It didn't stop the glasgow parking lot gaining it value afterwards, but as the saying goes - "The market can stay irrational longer than you can stay solvent".
I'm not on a horse of any size.
Just joking. [In every joke there is a portion of joke..]
It's more difficult to find PPP data for cities than it is states, but here's the latter:
https://en.wikipedia.org/wiki/Comparison_between_U.S._states...
And for Belarus:
https://tradingeconomics.com/belarus/gdp-per-capita-ppp
You're right to notice that it's a better measure, but it still favors the spirit of my argument.
I don't know what it means for a geographic region to "have vision". Either way, SV was the birthplace of an incredibly large portion of the ventures and entrepreneurs that created what we refer to as "modern technology".
And I'm saying that as someone who is often very critical of current SV and NorCal policies in general.
> When you see some houses filled with 7-8 occupant because they can't afford rent, you know this is not sustainable.
Sure, but what does that have to do with "vision"?
The area experienced an enormous, extraordinary amount of success, which had some undesirable effects, particularly for low-income residents. It should be addressed, and there are many issues in SV current, some of which are mentioned in the article.
Still can't take away from the incredible breakthroughs that happened in the area.
I hear Seattle is the place to be, go there.
From the literal gold rush in the 1850s to the Gilded Age inventions of the 1880s-1910s to the agricultural migration of the 20s and 30s to the WW2 construction boom to the post-war nukes & ballistic missile boom to the hippies & beatniks of the 60s to the integrated circuit to the microcomputer to the Internet to the mobile phone, the Bay Area's always been defined by its ability to impoverish the folks who found paradise in the last wave in favor of fully capitalizing on the next wave. It does this largely by attracting young immigrants from all over the world who are willing to put up with shitty conditions and work themselves to the bone for a few years so that they can sock away a few dollars. Those that succeed in this usually go elsewhere to retire or raise a family.
There's no evidence that this conveyor belt has stopped or slowed down - 2 of the 3 largest Bitcoin exchanges in the U.S. (Coinbase and Kraken) are in SF, I still meet plenty of starry-eyed 20-somethings who are working long hours thinking they're going to get rich, and I also know plenty of people who've made their low-millions working for a big tech company and are now moving to an area where that will let them retire at 35 rather than barely afford a small house.
News articles always seem to point out that the quality of life is shitty in San Francisco and the economic drivers are unsustainable. That's always been the case. The Bay Area's specialty is in making an industry out of unsustainability; the culture here has gotten very good at finding the next exploitable resource and exploiting it before the rest of the world realizes it's important, and then encouraging people to move on once it's no longer profitable.
You can almost set your clock to SV's downfall and of course the monthly "collapse of china" stories.
As long as tech's most valuable asset is human capital and as long as stanford and the universities in california, oregon, washington, etc produce top talent, SV doesn't have much to worry about. As long as california and its natural wonders and the magnificent pacific ocean is around, it'll keep drawing top talent from around the country.
That said, I actually think it's healthy that there's an increasing dispersion of tech whether new startups or outposts of existing large tech companies. Even if you don't believe in remote work, once a company gets past a certain level of scale it really doesn't matter if the group focused on X is colocated with the rest of the company.
Speaking personally, I'll also say that among people I know I've never run across so many who have left, are leaving, or are thinking of leaving the Bay area as I have over the past year or so.
You’ve also never before been the age you are now. Your peer/acquaintence group is growing in number and age, and naturally will expose you to more people who are ready to move on.
> 46% of respondents say they plan to leave the Bay Area in the next few years
But they are not leaving empty houses - they are selling them for millions as the world's would be movers and shakers move in.
Er, not necessarily:
> Last year more Americans left the county of San Francisco than arrived.
Now, granted, that could be a very specific piece of datum and either of the following could still be true:
1) When you include more than just "Americans" the net influx is still positive
2) Even if they're moving out of SF county, maybe they're just moving to, say, Alameda county
But nonetheless that is an interesting tidbit.
Its been a decade from the last economic recession.
Past performance doesnt indicate future performance.
I wont deny that top talent is located in Cali and washington, but the situation has changed an incredible amount.
One note: the cost of living isn't that much lower. It's definitely below the Bay Area, but it's above Seattle (although maybe not for long, but no state income tax is an advantage).
For some reason people tend to think that this means that this will happen somewhere else. Like the opportunities somehow transfers somewhere else. That isn't really what happens. We might never have this sort of situation in our lifetimes, or it might show up somewhere outside of our reach. It is very likely that China has been outperforming the west in this regard over the last 10 years. They might continue to do that or not. It isn't really predictable as far as I know.
Addition: Why do people even visit a discussion forum if a simple opinion is going to offend them? The Internet is full of agreeable material you can read instead. And you can close those tabs without suppressing someone else's opinion. But I guess that is really the point of Hacker News these days.
It used to be when someone graduated from a university in the area and wanted to work at a big tech company or startup it was a foregone conclusion they would immediately leave for the west coast. Dropbox founders were from Cambridge but moved west. Facebook was founded in Cambridge, moved west and didn't have an office in Cambridge for many years.
This is definitely not the case anymore. If facebook was founded in 2018 there is a good chance it would stay in Cambridge. The startup scene in Boston/Cambridge has grown immensely especially after the success of Hubspot. Additionally Google, Facebook and Microsoft all have campuses in Cambridge/Boston.
Its not a zero sum game, but real change has certainly occurred.
It's legitimately hit the point where the cost of living is a true obstacle, as opposed to a priority.
The social standing and mobility for those working at large SV companies isn't much to envy. Regardless of absolute pay (which is high by any standard), most are left renting apartments and suffering terrible commutes.
If people measured their compensation in "years of reasonable savings until you can buy a house", they would probably see that their relative compensation isn't so great. Inside SV I would put this number at 10-15 years....elsewhere somewhere around 5.
But the absolute compensation is high so people think they are better off.
As for specific people, I’d start with Mark Zuckerberg - a champion of connecting the world through technology - who seems to have believed that a SV presence was necessary for Facebook to succeed. He had to believe that, or he wouldn’t have moved the company there as soon as he had the funding to do it.
We've gotten to a point where remote interactions are OK-ish (pareto), so incremental improvements now have diminishing returns with decreasing payoff. Nobody's really working on making things a lot better than they are now.
To me, there's still great benefit in clustering human beings of like mind in the same physical space because it creates a creative buzz than somehow cannot be replicated with telepresence. Being able to have serendipitous side conversations (without having a video conference camera on all the time), going to meetups in physical spaces (as opposed to watching streaming videos), and the ability to make random real-life human connections with people working in the same area all contribute to this buzz. This buzz is purely psychological but tremendously powerful [1], and I don't know of any instances where it can be created through technology alone.
Some say it is a question of bandwidth -- maybe some day we'll have augmented/virtual reality, very high-resolution video, etc. that will render all of this moot. Perhaps... but it would also need to be able hack our neuroscience and psychology in some way...
[1] Cities and Ambition http://www.paulgraham.com/cities.html
The job opportunities, talent, networks, and standards of code here are so much lower I wouldn’t have believed it if somebody had told me.
Maybe some startups are leaving but I’d move back if I had a startup. It’s a lot of small ponds out here
I’m measuring code quality by asking questions to interview candidates for a variety of positions. I ask about how their current and past jobs work, what they’d change, and how they’d architect X.
My coworkers’ opinions and previous code are another indicator.
Disclaimers- I’m not any kind of prodigy or in the upper echelons of engineering, but the standards here are so low even I can tell. This is also a fairly high profile company for the area.
https://www.citylab.com/life/2017/10/venture-capital-concent...
Gotta think there's more than small ponds in those cities.
https://www.wsj.com/articles/as-wildfires-burn-miles-away-sm...
wonder what specifically downvoters are not liking about this factual comment. It's relevant for quality of life. It's likely that quality of life in Seattle will get worse over time due to increased wildfires causing unhealthy air. All things being equal, fewer people should want to move there because of that.
2-3 years of worst air quality ever? why would I want to live in a place like that? why would anyone? my argument is, forecasts related to climate science is that these issues are likely to get worse over time
You're framing it as if we're living within a constant choking haze of smoke. The air quality really has only been that bad for 1-2 days per year in the last 2 years. People might want to live there because the other 363 days of the year, the weather is pretty great - our high salaries and unparalleled access to mountains, sea, and desert notwithstanding. If you're earnestly interested in learning about the air quality here, you can check out this blog post: http://wasmoke.blogspot.com/2018/08/too-many-apples-to-orang...
But I digress as I don't really want to convince anyone, let alone someone who already doesn't want to live here to move here.
Due to climate change, forest fires are likely to get worse over time on average, which should impact Seattle air quality over time. Is this certain ? No, but there is a substantial probability it’s happening.
edited for: typing before coffee.
What do you mean?
When you have access to limitless amounts of capital that prefers to deploy that capital in it's backyard, then yes it does make sense.
Even if other states pass legislation to end non-competes (as MA has tried to do a few times), it will take time for regional business culture to adapt. I've worked for a few East coast tech firms where company loyalty is taken very seriously, and defectors were semi-publicly shamed even if not outright sued for violating a non-compete.
Nobody Ive ever met gives a shit about non-competes. They aren't really enforceable unless you blatantly steal or copy work.
It's tolerable if you're a just out of college bachelor/ette, but if you want to have a bit more space (let alone a family) you pretty much have to leave unless you've gotten rich. Even for young people if you do the math your big Bay Area salary actually doesn't get you ahead as much as a slightly lower salary in a much lower cost of living city. Your whole paycheck goes to the landlord.
A secondary factor caused by real estate hyperinflation is that all the stuff that once made the SF Bay Area so interesting has been priced out. I remember the Bay Area in the 1990s. It was a hub not just of tech but of art, music, and culture. It was a magical in a way that's hard to explain today, and I say this as someone who only visited. My main experience of it was from the culture and "vibe" it exported. All that is gone now. It's a glorified office park. Why spend so much to live there if it's no different from any other city?
California's housing problem, particularly the Bay Area's, is a symptom of its political dysfunction. The Bay Area's elite consistently optimize for the short term.
But that's the point: the difference in rent is much smaller than the difference in market salaries.
"Your whole paycheck goes to the landlord."
If you're an engineer with a $150k salary, which is at the low end for most companies you've heard of that have offices in the Bay Area, then it's very unlikely you spend anything close to your whole paycheck on rent.
In your 150k example you're using 1/3rd of your salary just for rent (assuming you get 150k, net).
[1] https://www.rentcafe.com/average-rent-market-trends/us/ca/sa...
That's a saving of $30k/year, or maybe $40k/year before tax.
From what I understand from reading comments here, salaries in places with lower cost of living are not just $40k/year less, but much much less.
And for those earning more than $150k, the math works out even more in favour of the Bay Area, as the % drop in salary goes up with salary, whereas the $40k rent difference doesn't.
If you don't mind living in a rented room or commuting >1hr a day and shop exclusively at amazon and costco, the bay area is a great opportunity to save money.
If you're a software your aim is to buy a decent home in $US_CITY at some point, the easiest way to come up with large downpayment is to work in the Bay Area for a few years. You don't have to live in the Bay Area forever.
https://sfbay.craigslist.org/pen/apa/d/old-mountain-view/667...
https://sfbay.craigslist.org/pen/apa/d/pet-friendly-house-nr...
Sounds good enough to start a family to me.
And of course, once you become a little bit more senior and your salary goes over $200K, you won't mind spending so much on rent and will start saving significantly more than elsewhere.
It's possible that there is a natural filter in play here, with the people whose salary is not increasing significantly basically forced to leave.
That recapitulates my experience as well from living in SF. There was a feel of the city that has since disappeared. For me the breaking point was in the early 2010s, when I noticed all my nontech friends disappearing - they were getting priced out and moving, mostly out of state. And the conversations in tech changed too, from doing interesting and weird and exploratory things, to conversations about money, getting vc funding, and working on things that will make even more money.
The vibe was turning into a 90s wall street, and not the old city where everybody was a misfit and did their own weird thing. That's probably the part I miss the most.
> Alphabet and Facebook pay their employees so generously that startups can struggle to attract talent
I've heard anecdotally from quite a few people that this has made hiring incredibly difficult - as those comp packages continue to increase the math just doesn't work out for a startup employee even if there's a generous exit for the employees.
Not that the comp at FAANG was ever bad, just that it's gotten so much better over the past few years (undoubtedly helped by a huge bull market) that golden handcuffs have really put a drain on the startup hiring scene - mostly in cities where those companies have large offices or are growing considerably.
Further, supposedly anyway, as those companies become larger and larger and need more people it's become less difficult to get in the door there.
That number is probably growing over time (as the article alludes to).
I mean, just take a look at how many positions Netflix alone is hiring for:
https://jobs.netflix.com/teams/engineering
> Additionally, their hiring processes are notoriously capricious.
Supposedly, this is also changing as their demands are growing and they've had to "lower the bar", so-to-speak.
I don't see them growing that fast, nor do I see all that growth being in the US. Companies can only grow so fast or they end up hurting themselves.
Additionally, I have been seeing an increasing nber of online anecdotes about Google and Facebook rejecting candidates who passed the interviews because there was no head count at their level.
> I mean, just take a look at how many positions Netflix alone is hiring for:
112 is less than a rounding error when there are well over a million people currently employed in some sort of software development position.
> Supposedly, this is also changing as their demands are growing and they've had to "lower the bar", so-to-speak.
I haven't personally seen any evidence of this, and every time their processes come up for discussion here there seems to be no end of defenders of these practices.
But there aren't over a million people employed in software development in the bay area (where those jobs are located) - that number is closer to 60-90K [1]. Not to mention that those are 112 job postings, not positions. It's likely that many of those roles have more than 1 headcount allocated (e.g. "Senior Video Engineer").
Regardless, ultimately the question isn't "what % of software jobs are at FAANG companies?" it's "For every 100 software developer hires in the bay area, what % are at FAANG companies and is that % increasing over time?"
It may be true that the answer to the first question is "a minority", but it can also be true that the answer to the second question is "yes, at an appreciable rate".
> I haven't personally seen any evidence of this, and every time their processes come up for discussion here there seems to be no end of defenders of these practices.
As a minor-but-concrete example: I've heard that Google is starting to de-emphasize whiteboards and giving candidates Chromebooks to code on instead.
As a more gossip-y example: I've definitely heard that a few of the larger tech companies, as they've started to acquire more and more, have allowed the acquired teams to maintain control of their hiring process with some token changes. The result I've heard is that the interview process with some of these acquired teams is... less rigorous, and largely ignored by the parent company (even if they say otherwise).
I'm hesitant to draw a trend from some anecdotes, but I can say for certain that I interviewed for a position with one of those acquired companies a couple years back and the interview process was much easier than I anticipated (though I ultimately didn't take the position).
1: https://www.quora.com/How-many-software-engineers-work-in-Si...
From my experience, they only care that you can recall individual lectures from a sophomore-level college class. More rigorous, yes, but I'm not sure about harder. You can memorize CTCI and ace the interview, because that's the only thing they do during the onsite.
Paul Graham said it in one of his essays, Steve Jobs in an interview.
Essay: http://www.paulgraham.com/siliconvalley.html Interview: https://youtu.be/PinOL79U2bg
I've come to realize this is genius for two reasons:
1. Amazon is pitting governments against each other. This sort of thing is a well-known and well-trodden path so it's nothing new but the real genius part is:
2. Once Amazon has two headquarters they're no longer at the mercy of the city of Seattle and the state of Washington.
Let me elaborate: take Google, which is heavily invested in Mountain View. Essentially the Mountain View City Council has them where they want them. Google wants to stay in MTV (and, more importantly, expand in MTV) so whatever taxes and conditions the council wants to put on them, well they kind of have to suck it up.
The latest of these is MTV forbidding free food in new campuses because it hurts local business.
Now Google has obviously expanded well beyond MTV at this point (Redwood City, San Antonio Boulevard, Sunnyvale, San Jose, San Francisco). But these are less than ideal solutions. Move a team from MTV to Sunnyvale and you've added 10-20 minutes to the commute of everyone living in SF. Getting around "campus" requires a transit system all of its own.
Compare this to Amazon's future position: if Seattle decides to put an onerous (from Amazon's position) tax or set of conditions on them they can simply say "we'll expand our other campus instead". So they're not beholden to one town or city like the SV giants are (specifically Mountain View, Cupertino and Menlo Park).
I really wish the SV giants would take this approach.
Also, as others have mentioned, the cost of living for those not fortunate enough to be in tech is horrendous in SV. You can blame small-minded NIMBYist towns and voters for this if you like but (IMHO) that's shortsighted. By continuing to exist there and expand there the giants are supporting those anti-progressive positions.
At some point you're either part of the solution or part of the problem and (IMHO) continuing to expand in SV makes you part of the problem.
The difference between 1998 and 2008 alone is incredible.
Mountain View passed this law as part of a project-specific requirement in 2014, the project being The Village at San Antonio. Facebook is planning to lease office space there but no specific timeline.
Earlier discussion: Bay Area cities are cracking down on free food at tech companies | http://news.ycombinator.com/item?id=17619658
I think the thesis is roughly accurate - tech companies are less dependent on being in SV for success than any time in a reasonably long time, I just don't see much hard evidence backing it up in this particular piece.
"The reasons for this shift are manifold, but chief among them is the sheer expense of the Valley. The cost of living is among the highest in the world.... The problem is that the wider playing-field for innovation is also being levelled down. One issue is the dominance of the tech giants."
And third, government policies on immigration and education.
https://diversity.google/annual-report/
"In terms of race and ethnicity (U.S. data only) 2.5% of Google’s workforce is Black; 3.6% is Hispanic/Latinx; 36.3% is Asian; 4.2% is multiracial (two or more races); 0.3% are Native American,Alaska Native, Native Hawaiian or Pacific Islander; and, 53.1% is White."
I wouldn't even categorize "white" as one culture, nor Indian nor Chinese. Perhaps it would more accurate to group people by socioeconomic status or education status?
It's not unusual, particularly when discussing race in the US, for people of Indian, Chinese or Korean descent to, somehow, not count. I used to consider it borderline racist. I've since removed the borderline bit.
I think they're missing the point.
From the article:
"The reasons for this shift are manifold, but chief among them is the sheer expense of the Valley...the cost of living is among the highest in the world..."
but its not in the top 10
https://www.economist.com/graphic-detail/2018/03/15/asian-an...
There are a whole lot of cities out there, few of them are more expensive than the bay area.
1. It said American cities had fallen because of dollar weakness, which means it sounds like they're comparing based on exchange rates instead of purchasing power parity. Obviously for people paid in dollars in those cities, a weaker dollar doesn't make anything cheaper.
2. A lot of those expensive cities, especially in Europe, have much better social services. So Oslo may be very expensive and taxes sky high, but families there aren't worried about how to put their kids through college or how to pay for medical expenses.
And the tax situation has - to say the least - been getting worse for quite a while.
If you only focus on taxes above all else, then I don't think you will ever be able to enjoy any city.
I don't focus on taxes above all else, but there's a threshold (around ~15%) beyond which I consider taxes to essentially be armed robbery. Cali has long passed that stage.
As to the second part of your statement, while trying to sound the least possible arrogant, I would suggest you do your research. The world is a very big place.
I do think the gravity of Silicon Valley, while immense, has weakened over time but being expensive is a marginal factor. Most of the oft-touted alternatives like Seattle are also expensive. As the scale of the tech industry has increased, random concentrations in the distribution of tech development has simply created critical masses in other cities in some key domains, giving them a sustained competitive advantage. These are not engineered outcomes but the organic confluence of conditions and events. No one planned to turn Seattle into Cloud City but it happened anyway, and you can see this dynamic becoming more prominent in the US tech scene at large. Most stuff still happens in Silicon Valley but the likelihood of diverse tech randomly achieving critical mass elsewhere has increased.
And much of the technical cloud infrastructure that allows companies to operate remotely has been built in Silicon Valley itself, so in a sense, they are one of the main contributors to solving the problem of urban overpopulation, in the Valley or elsewhere.
I grew up there. Every single person I’m blood related to lives there. I could never move back. If I ever leave SF, it’ll only be to go somewhere equally temperate.
Silicon Valley is special without a doubt, but does anyone here think it still makes sense to do such a thing? These days people with the skills needed are much more distributed and many are willing to move from Silicon Valley or other places for the right job and quality of life, at least what I have seen.
I suspect that company is going to spend a fortune for not much benefit.
Aren't the main players in those cities just AV offices of Bay Area headquartered companies?
I do believe that remote work can work in many cases but it needs to be complemented with a decent dose of F2F to complement our only somewhat successful video conferencing systems, chat, shared documents and other tools that exist today. I suspect at the end of the day we'll just keep iterating on the various tools we have and they'll get better but still will lag everyone being in the same room.
Maybe pair programming needs less to be fluid enough to be beneficial.