The Abundance of Silicon Valley
moultano.wordpress.com
moultano.wordpress.com
I'd compare Silicon Valley to Detroit with a century time lag. The American automotive industry started in the 1890s, just like the Internet industry started in the 1990s. Like the Internet, it built off a constellation of related technologies that had been under development for 30-40 years. The automobile industry was built on the iron mines in Duluth, coal mines in Appalachia, petroleum industry in Ohio, steelworks in Pennsylvania, and Great Lakes transportation infrastructure that had been setup throughout the 19th century. The Internet was built on software from Boston; microcomputers from Albuquerque, Austin, and Houston; an OS from Redmond; semiconductors from Oregon; and so on.
In 1910, the population of Detroit was 465,000. It had nearly doubled from 285,000 in the previous decade, fueled both by international migrants looking for then-high wages and Black migration fleeing persecution in the rest of the U.S. (sound familiar?). The auto industry was well established, with Model-T production in its heyday. Supplier networks were already starting to grow up around the big-3 automakers.
But Detroit's population didn't peak until 1950, at quadruple its 1910 population. In between, Detroit would be key to winning two World Wars, and the automobile would fundamentally reshape society. Most of the growth happened between 1932-1960, and only after key government & societal infrastructure changed to be built around the automobile rather than the automobile serving as a luxury novelty for Gilded Age technorati.
Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood. But we've got a while to go. We haven't had our war yet, and the basic infrastructure of society - transportation, legal, military, government, etc - is still based on pre-electronic conceptions.
On the way up, it always looks like last year was peak. Then this year does even better. Continue for decades until one year, suddenly, the music stops.
What if the secular demand for living in Silicon Valley is higher than Detroit? What if Detroit was desirable due to the economics and infrastructure constraints of that time, but what if people like the other aspects, such as location and weather,of living somewhere?
Not that it’s not possible for that to change either, but my point is different pieces of land may be more or less desirable than others outside of economic conditions.
We have the internet and cheap transportation now, so people (with resources) can more easily move to where they want to live.
I can conceive a future where even if tech were somehow displaced, then other people with money would come to silicon valley, simply because they want to and they're not tied to another location, like richer people may have been during Detroit's heyday.
I relocated to Colorado a decade ago, swallowing the cost of living salary decreases, but I'm coming out better in terms of quality of life. If California, for a split second, achieved even close to the affordability for quality of life as CO, I would move back.
If Detroit and San Francisco were equivelant cities (culturally, cost of living, etc.) I can't see why anyone would pick Detroit.
A better comparison to southern California would be the Iberian peninsula. Spain and Portugal have pleasant weather and are well connected to the industrial heart of Europe.
Many want to live in these countries but most can't make a living there.
This happened to Detroit because jobs were literally the only reason to live there. The Bay Area has amazing weather, unbelievable scenery, world-class recreation, and tons of music and culture. If the jobs of today leave, the jobs of tomorrow will replace them simply because the area itself is one of the best in the country. Detroit is a flatland nowhere in frozen tundra flyover state. "A bunch of lakes" is only going to keep an extremely small subset of people interested.
That's not necessarily true. Maybe the jobs go and never return, but the recreational desirability leads it more in the direction of an Aspen: more of a place for recreation than business.
But again, it seems to be a very personal preference. Maybe for some people having the ability to drive 4 hours to get somewhere amazing is a good balance to the things they love about living in San Francisco. I don’t consider it close enough to be a factor in my opinion of SF though.
Edit: I’m not trying to get into an argument about how amazing or horrible the Bay Area is. I’m just saying that some people find it amazing but other people actually would prefer to live in (the suburbs of) Detroit or elsewhere. I have no idea the percent of people in each group, but I don’t think we should take for a given than if all big industry leaves the Bay Area, that it will still be as popular as it is today. Not everyone loves it that much.
As long as whatever you consider nice is the same as whatever every other similarly paid white collar worker with a spouse and 1.75 kids considers nice you will never be able to get that. Those places always will be overprices and high stress.
Look at how Boston area money has shit up Cape Cod, southern Maine and NH. NYC money has shit up all of Long Island, large parts of PA, upstate and VT. CA money has shit up Colorado so bad that CO money shits all over Utah. Chicago money shits all over Wisconsin.
What you're really trying to get away from is the secondary effects of people like you (and me, and most everyone on HN). You're trying to get away from a service and tourism economy where everyone else is (somewhat rightfully) out to screw you for every dollar you're worth. Unless you have radically different tastes in what you want this will never be possible because all the other people of the same means will gravitate toward the same places.
I wouldn't characterize this as someone trying to "screw" someone. It's just a consequence of demand outstripping supply, and hence the way society allocates the resources in low supply is by who can pay the highest prices.
If anyone comes up with a better way to allocate scarce resources, I'd love to know.
Tahoe is a nightmare of traffic, terrible winter-weather drivers and crowds. 20 years ago it used to be a decent getaway for the weekend. Now, not so much -- it's basically a guarantee that you're going to spend a full day driving to/from there, and gods help you if you leave friday afternoon and try to drive back on sunday -- everyone, their dog and grandma included, are going to be doing the same exact thing.
Once or twice a year is not implying accessible -- it's implying that it's inaccessible. It's somewhere that people do want to go, but the effort required to do so limits most. If it wasn't worth going, people wouldn't be trying to go every winter, and if it was reasonably easy to get to, perhaps people would go more than once or twice a winter.
> Nobody goes there anymore, it's too crowded
If only .01% of 35,000,000 people go to Tahoe every week, that's still 3500 people a week that are visiting. Thats a lot of cars on the road, a lot of people waiting in lines, a lot of hotel rooms and vacation rentals taken up. I made up these numbers of course, but the point is with a state like California, even a tiny fraction of the population visiting at any given time, it's still an overwhelming number of people to deal with. And its not even just Californians that go to Tahoe -- plenty of folks from other states visit, and plenty of international visitors too.
So back to
> Nobody goes there anymore, it's too crowded
Yep, practically speaking, a tiny fraction of people that can go to Tahoe at any time actually go -- a rounding error -- 'nobody'. But it's still too damned crowded because Tahoe can't handle the rounding error anymore.
People that live in a place like Salt Lake City can hit the slopes a dozen times in 2 weeks without taking a day off of work. I know people that work at tech companies in Park City, about 3 miles from The Canyons resort. They can literally go skiing during their lunch break.
The weather will persist, but the rest are qualities of cities with large populations who have lots of disposable income.
High living costs and living conditions will have the starving artists that make these things you consume flock somewhere else or never move out to the Bay in the first place. Consequently the next generation of these artists won't be coming out of the bay, ironically you'll start to see more culture and art come out of places like Detroit.
Take restaurants for example - super easy to start a new inventive restaurant in Detroit (low rent, low labor costs, etc.), but it's nearly impossible to make a $500/head prix-fixe work there (and that is, for better of worse, the type of food that causes people to flock now-a-days). Even Portland sees most of it's 'starving artist' chefs decamp to NY / SF / LA once they gain a national brand.
* Auto manufacturers consolidated to 3 big companies and started to more consistently put smaller startup automakers out of business.
* They got into protracted fights with unionizing workers.
* They stopped building manufacturing plants in detroit itself and built them further afield to cut labor and land costs.
I think we can see these trends being mirrored in the tech industry right now.
> unionizing workers
does not sound like SV today. You're also missing the main reason, superior products from Japan and Germany. We don't really see that as of now. China and EU have a handful of competitive companies.
SV labor is expensive compared to other markets (see below). I have worked in SV and elsewhere and mostly elsewhere is 1/2 the pay as SV and without the things like free lunch / coffee bar / shuttle service.
SV doesn't need unions because the turnover rate is so high that the companies are basically providing what unions would negotiate just to compete (free lunch / coffee bar / shuttle service). It's still a buyers market from the employee standpoint.
I do think SV is not quite at the inflection point just yet, but it is moving in that direction.
The irony in this is actually that the cost of labor is high because the cost of living is high. The cost of living is high because of the NIMBY folks preventing multiunit housing. If the ballon collapses those NIMBY folks would see their precious house values decline.
Finally as to superior products most Japanese and German cars sold in the US are still built in the US, just not Detroit because of.... Wait for it.... Union Workers.
That is an antonym of the Silicon Valley situation - they tried numerous times to outsource and move to cheaper locations and failed. The closest to success were San Fransico and Palo Alto which effectively just sprawled the area that is effectively Silicon Valley outside the prior bounds. The attempts to go far afield failed and the physical manufacturing wasn't where the money was located resulting in a minor shake up.
There is a historical resemblance superficially in the first point but the second two are outright foils as every little highly publicized kerfluffle for what is effectively a relatively fringe cause like say not taking DoD contracts is nothing compared to a work stop or a gain of union claim to control.
Come to think of it the employee stock share benefits are a sort of weird foil to a union - not even trying for control or working conditions but giving some token stake to sufficiently valued workers. Not a replacement by any means but it is an ironic undermining of a company vs worker mentality.
~400,000 in 1950. ~700,000 in 1960. ~1.2 million today.
I had this perspective for a brief moment but as Charlie Munger said "Show me the incentives and I'll know the outcome".
I think what many people are missing is that SV is heavily incentivized to be a place of big money. The real estate. The commercial climate. Etc.
That means property will be expensive forever, because there will always be rich people looking to move or retire there, but will that turn into innovative or well-paying jobs for people?
When even the current crop of tech workers get priced out of California by the continual influx of wealthy folks seeking out the climate you won't see SF turn into Detroit, but it's not gonna be the SF of the nineties->now.
People only put up with SV's downsides for the paycheck, most of them don't even have family there.
> Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood.
This implies that there's a glut of housing that's been created to home Silicon Valley technologists, which couldn't be further from the truth.
https://havengroupsf.com/wp-content/uploads/2017/12/30-years...
The way I think a glut could arise is when a tipping point is reached and pro-housing renters outnumber NIMBY owners on city councils. This has happened already in Mountain View (which was notoriously anti-development until a group of young pro-housing Googlers packed the city council and voted out all the NIMBYs in 2014, and now green-lights nearly any housing development), Sunnyvale, Redwood City, and San Mateo, and may make its way down to San Jose and up the rest of the peninsula. At present a lot of Bay Area communities are starting to look more like Paris: dense ~4 story apartment buildings, public squares, outdoor dining on pedestrian thoroughfares, etc.
I'm certain this will never happen simply due to the superiority of California's climate.
I'll turn your argument around and say that the only truly location-dependent industries are extraction based. Everything else moves where the people are. And people will pay through the nose to live where it's nice.
I don't think I would call the transportation industry (as in: ports, trains, planes, and related infrastructure) "extraction based". But that is an example of something very clearly location-dependent.
Well, yeah, prior to Covid, Andalusia in Spain was a favorite tourist destination. It really is lovely sitting at 10pm with a sangria in hand on a historic staircase of a palace and watching the nightlife milling around.
But all this flocking is temporary. People do not move there to start businesses. (They do to Gibraltar, but that is a tax haven.) They just enjoy they stay, spend some money on recreation and fly back to gloomy-but-rich Amsterdam, London or Hamburg.
"Nice weather implies good economy" does not seem to pass even the basic correlation test.
Outside US (taxes could be higher, but what I get in return could be a better deal than CA): Sydney, Australia or Auckland, New Zealand.
I would try Auckland before you buy. It's cold compared to all your other places.
Silicon Valley has been getting transplants since the 60s. The region has grown around 15-20% in the last 20 years. From 1960 to 1980 region roughly tripled its population. There's a reason why prop 13 came about in the 70s.
I'm not saying it will always be a tech mecca. But ignoring a majority of its history with tech just so you can compare it to Detroit seems disingenuous.
Because vengeful homeowners wanted a "revolt" to punish the government for taxing them. It wasn't because of home prices, 1978 Prop 8 would have solved that, they wanted revenge. It's greed and hate right down to the roots.
https://teachingmalinche.com/2018/08/26/the-summer-that-elvi...
I'm specifically picking Detroit from ~1895-1970 vs. Silicon Valley from ~1995-future because there's a similar dynamic at root. A single globally-relevant industry that's remaking society, and everybody pouring in to capitalize on this. Given similar root causes, it seems likely that their futures will be similar as well.
Weatherwise it's one of the best places to live in the USA. The smoke issue is new but it's unlikely to be this bad most years. Detroit is unfriendly a much greater portion of the year
It's likely the craziness in the Bay will subside but I would be extremely shocked if it began to resemble Ddetroit. Some of the more remote suburbs that haven't historically been places people would commute from might fare badly though.
- In the 1980s, Silicon Valley's Intel lost it's dominance in DRAM production to Japan. The economic impact was dire, and yet
- In the early 1990s, networking and workstations emerged from the likes of SUN and Cisco. They carried through until global competition stole their wind, and it was on to
- The late 90s and the .COM boom. And what a boom it was, Amazon, Google, followed by another death knell for myriad .COM corpses. Promptly engendering
- The 2000s birth of social media. MySpace faltered, then LinkedIn, then Facebook, then Twitter, came up and are still going strong on the foundation of
- 2010s open source platforms. Still mind-blowing: At one point WhatsApp had 40 software engineers and 400,000,000 users. At 3 years old.
I've heard about the exodus from California, usually citing so many thousands or 10s of thousands of people leaving. But looking a the net population changes, Santa Clara County is down 5,000 from 2018-2019. Alameda, San Mateo, San Francisco are all up.
Silicon Valley is a system that regenerates from one generation to the next, and so far, always bigger and more influential than the last.
There is also an entire system of independent film studios and theaters in the US.
Add on top that the Covid quarantine has completely removed all social stigma or weirdness around remote work. You have a never before seen threat to high-cost/high-productivity powerhouse metros like SF, NYC and DC.
Joking aside, globally available broadband from space would be a huge game changer.
[1] https://docs.fcc.gov/public/attachments/FCC-20-50A1.pdf [2] https://www.allconnect.com/blog/cost-of-high-speed-internet
It's meaningless if it's available “in your local market” but not at your address. I really can't imagine any real use for that stat except exaggerating broadband access.
The 2010s seem to be a decade where existing giants scaled, without any fundamentally new technological developments.
1975: National Semi, our new audio amp allows people to buy cheap high quality stereo's.
2010: Ubber, our app that ratfucks the taxi industry.
Source: my numerous experiences with taxis in multiple cities in the US and around the world before and after Uber
I guess now they deliver lunch so that's pretty cool.
I for one look forward to the movie.
Not to mention Uber and Lift don't pay for the roads their businesses depend on. And then Uber and Lift have dramatically increased congestion in a lot of cities. Which negatively impacts people that live in those cities. Finally both Uber and Lift are applying political pressure to eliminate mass transit.
Example 1: innovations in technology & clever business model put previously expensive thing in reach for an order of magnitude wider audience, leads to significant qualitative shift in behavior/capabilities for the average person.
Uber: Exactly the same thing.
Why are you so offended about the harm to the taxi industry, what about all the vacuum tube manufacturers put out of business by semiconductors? Innovation has always involved creative destruction, but for some reason there's a bigger than usual portion of society now that is completely unwilling to acknowledge utilitarian benefits and wants to make all change illegal. And the even greater tragedy is it's always the comfortable, well-off upper middle class making these arguments on behalf of the working class, with absolutely no skin in the game because they will never be the first ones affected by the negative consequences of their absolutist worldview.
Lightbulbs and would have been a better pivot (with or without a gas in the medium for neon lights or CFBs) at least until LEDs finished them off.
The more I spoke to cab drivers the more it seemed their industry was a pyramid scheme aimed at helping established rent-seeker take advantage of often poor new immigrants. Uber brought a breeze of fresh air: Someone could simply buy a car, calculate the depreciation and it's value on the market (since unlike medallions cars are relatively liquid assets!) do rideshare and calculate their profits or loss. They can get out of the game at anytime, and they know exactly how much they are going to get for the car they have should they sell it.
Also, the argument on Uber/Lyft drivers not being contractors since they can't set their own rates and decide which ride they take strikes me as weird since medallion drivers were contractors, had to charge the price set by the city and could only pick-up customers in the (arbitrary) zones covered by their medallions.
And I'm not even touching the usual pain points and often discriminatory practices of medallion drivers (refusing card payments, refusing rides to non-white passengers and to non-white neighborhoods...).
Maybe there was some place in the world where taxis were clean and taxi drivers honest, but in my corner of the world they were synonymous with low-key mafia.
Therefore they mostly preyed on international tourists at the airport.
One aspect of the scale these companies are achieving is the political implications. Yes, the worry in DC over their manipulation of human nature, but it's also issues like the headbutting of the gig-labor lifestyle against tax policy right in California. Pushing technology forward eventually encounters politics and it's interesting to watch these firms gird up for that battle.
Altough, for example, the work Google did in the 2010's in machine learning does seem fundamental.
Am I, like, way off?
There are dozens of companies not named Uber or Airbnb that have come out of SV in the past 10-15 years that lead the world at what they do. You won't see the SV bashers talk about any of that, they go out of their way to avoid that point in fact.
Where is the Cloudflare of Europe? Doesn't exist.
Where is the ServiceNow of Europe? Doesn't exist.
Where is the WorkDay of Europe? Doesn't exist.
Where is the Palo Alto Networks of Europe? Doesn't exist.
Where is the Twilio of Europe? Doesn't exist.
Where is the Snowflake of Europe? Doesn't exist.
Where is the Splunk of Europe? Doesn't exist.
Where is the Okta of Europe? Doesn't exist.
Where is the Veeva Systems of Europe? Doesn't exist.
Where is the Zoom of Europe? Doesn't exist.
Where is the DataDog of Europe? Doesn't exist. (DataDog is NY, however they have an office in the SV area as well)
And on the list goes. These are massive, wild success stories. Most of them are already big companies and they're growing fast. With few exceptions meanwhile most of the rest of the world not named China is asleep, and SV keeps on conquering markets and building giant software companies.
Where is the global competition for these companies? It largely doesn't exist, they're going to keep on with the SV traditional of pushing out of the homogeneous US market and scaling up globally and building giant companies.
By the way, of all the companies you listed, only Zoom and Snowflake were actually founded after 2010. And that's the point. In the past 10 years, we haven't seen any Googles, Apples, or Microsofts emerge, despite eye-popping levels of venture investment -- which is a bit disappointing.
I wouldn't go that far. The cloud became a thing in 2010 and from that big data appeared allowing data science to appear.
The 2010s is the era of data science and ML, which is a larger leap than many give credit for. The 2010s are just like the '80s in that new technology appeared, but end consumers didn't see much of a difference until the late '90s. Just yesterday CA gave a license to GM to legally allow fully self driving cars.
These new - "outsiders" usually spend huge sums on leveraging what is essentially just technology used for union busting and abstracting away wage slavery.
Its a capitalists idea of innovation, and it small dreams. You don't need to invent a alexa (the device), if you can drive down the wage of a person to near zero and own a alexa (the person).
They already had that back in ancient rome- and thus never developed the Greek steam engine.
To become really innovative at scale again, the valley needs to exorcise those tech external investors.
Look at it now. Things go on as before, until suddenly they can't.
Silicon Valley's emphasis - digital computing devices and software - fuels multiple economic sectors. It seems far more diversified than the auto industry.
AFAIK California tends to bleed wealthy taxpayers, not population as a whole.
The federal government is a different story though.
I think a rough rule of thumb is that very high earners will pay slightly more than 50% of income of wages on taxes (state and federal) in CA and about 24% of capital gains income on taxes, before various deductions.
But, the big difference in California is that if you inherited property or bought it a long time ago you pay much less property taxes than people who bought homes recently, due to Proposition 13. This means property taxes are not as strong a source of revenue in California compared to other states; making up that difference is partially why other taxes and fees are so much higher in California.
Well, the assessment rule is part of it, but prop 13 also limits the property tax rate as well as the assessments. Even with full-value assessment, California property taxes would be in the bottom half of states due to Prop 13 rate limits alone.
And the lack of stigma for failing plus having a world class city right at the door. Very few places can replicate that.
Possibly because the 8 engineers that formed Fairchild defected from Shockley Semiconductor. William Shockley chose that area to start a company partly because his ailing mother lived there.[1]
Another contributing reason was a Navy Research center was in the Bay area so the military was an eager buyer of the latest semiconductor technology.
The seeds of a few players starts a "business cluster".[2] Similar phenomenon as movie industry concentrated in Los Angeles. Country music in Nashville. Finance/fashion/publishing in New York.
I don't think COVID in combination with better telecommuting technology like Zoom will disperse business clusters as some think. It definitely will enable more remote collaboration but the concentration of business clusters will still remain.
[1] https://en.wikipedia.org/wiki/William_Shockley#Shockley_Semi...
> Until now. As covid and wildfire smoke have atomized us all into whatever living space we can afford, and into a grid of separate video boxes on a screen, the place as it was no longer exists. The forces that kept people here are temporarily gone. Through cratering rents San Francisco is finally proving to opponents of growth that supply and demand apply to housing too.
Intelligent people will twist themselves in knots trying to disprove basic economics. I see long threads on HN all the time of brilliant people convinced that supply and demand is just "far too simple" or "totally disproved" etc. etc.
This book is a classic https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...
Not really, taxi medallion owners are a powerful special interest group. Just like Bay Area homeowners.
My other favorite YIMBY argument is that the Bay Area would have super cheap housing if only it were more like New York. New York has (had?) some of the most expensive housing in the entire world. Sure, there are zoning laws and regulations that could be changed to build even more housing, but the primary issue is not that New York has less housing than other parts of the country. To the contrary, the cheapest places to live in the US tend to be have the least dense housing.
The issue is that there are not a fixed number of people who want to live in a given area; if there were, every new unit built would allow someone else in the area to either not be homeless or to live with fewer roommates. Really what happens in practice in a high-demand city (conceptually, at least) is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before. So it’s definitely getting more crowded, with the associated problems, but the effect on housing prices is fairly small in comparison.
The fact that housing prices in the Bay Area create such a concentration of people who work in tech by driving everyone else out contributes to the region’s culture in important ways, some positively and some negatively. My favorite theory (from Date-onomics) is that this causes the local gender ratio to skew predominantly male, which causes the single straight men in the area (while this certainly does not describe the entire labor force, it describes a substantial portion) to work harder (both because they’re trying to stand out to attract a partner and also because they’re less distracted by dating).
This is a description of supply and demand, not some kind of trump card against it. Notice that more people are getting their preferences satisfied. That's the point.
And YIMBY-type groups fight against these artificial restrictions on supply. That's not an argument that the fundamentals of supply and demand doesn't apply.
> is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before
That's the definition of demand: the number of people who would buy a good at a given price.
The history of commodities such as crude oil and natural gas are potent counterexamples. For that matter, semiconductors fit the bill as well.
Is it extremely rare for supply to crush prices? Or is it more that we stop thinking about valuable things once they become super cheap commodities?
For example a printing press. To use old tech as an example. The press itself is wildly expensive. So I will have to divide that price across all things I sell using that press. However once the press is paid off my marginal costs are little more than cost of paper, shipping it around, and paying someone to run/fix the press. Computer chips are made of silicon one of the cheaper materials to buy out there. The up front costs of setting up a foundry is akin to buying a printing press. An older tech foundry can still make marginal money as the big cost is already been paid for. Everything after is marginal.
Your argument is with medallions is mostly correct. They had an artificial constraint on an environment. With the artificial constraint they act like assets and not permits. However once a good that was equivalent showed up the value of the asset value did fall. A market will tend towards MR=MC (marginal rev=marginal cost). However in the medallion case the supply was artificially constrained. So a floor was created. This moves the price people are willing to pay up the demand curve instead of lower near the usually lower mr=mc spot. In this case as the population grew but the number of allowed taxis did not the price went up because demand went up but supply did not. Once another good showed up that demand curve changed as less people were willing to pay that amount as well as more supply. This is the madness of economics. The demand curve always changes.
Chips are mostly worthless because there are so many of them and better fab equipment exists and the capex of the machines to make them was paid off decades ago. So their depreciation is very quick (much like cars). Rarity does play into price as well. As some people do like the idea of owning a rare thing.
You also have part of it with your comment here. Assets rarely 'hold' value for a long term. If you do not move the value around your total monetary value will depreciate. The medallion case was an artificial constraint so the value rose because demand remained high enough. Once a new supply came in the real price showed up. Housing can act like this too in artificially constrained environments. Rent control, poor tax structures, poor zoning, etc can all cause this. If you get a situation where the owners work with the gov (medallions and the taxi commission and the cities) they will write laws to artificially constrain growth to limit their asset depreciation. That is usually called regulatory capture.
For these sorts of arguments I like to say 'if everyone suddenly had 1 billion dollars what would you pay for a loaf of bread?'. Most people would say '1-2 dollars'. But what about next week when the company realizes people will pay 1000 dollars for one? Would you still buy it? Would your friends? It usually shows that the demand curve is not static and value is a moving market in and of itself.
Low-end smartphones: Apple’s charging record prices for its new iPhones so I don’t think the availability of low-end smartphones caused any sort of crash in the price of smartphones. Rather, it’s a new market category.
Operating system software: I’m not sure what you’re getting at here. The price of Windows has been relatively stable for decades despite the availability of free alternatives like GNU/Linux. Apple stopped charging separately for its OS and now essentially bundles a subscription into the cost of its hardware. I don’t think it’s ever been popular to charge separately for the operating system on mobile phones.
https://www.macrotrends.net/1369/crude-oil-price-history-cha...
The first big crash was at the end of 1985/the beginning of 1986, which Wikipedia says was due to falling demand (e.g. people consuming energy):
https://en.wikipedia.org/wiki/1980s_oil_glut
There was a temporary spike in 1990 after Iraq invaded Kuwait. I guess you could argue that the price went back down because the supply changed.
There was a crash in 1997–1998 that was partially due to increased supply but also due at least in part to the Asian financial crisis. The next big crash was from June 2008 to February 2009, again due to a large financial crisis. There was another crash in June 2015-February 2016 due to a stock market crash in China, and finally we get to the massive crash this year driving futures prices negative, which was of course due to COVID-19 reducing demand for travel.
The big dislocations you cite obscure the fact that demand rose for most of the period, demand was rising. So another way to read the chart is that demand-weighted prices declined most of the time, with occasional spikes. Either way, you can see in the charts the increased supply effect of e.g. fracking being deployed widely in the price response.
One could also look back to 2008 to see the impact of increased supply on pricing of e.g. real estate.
I don't think anyone in the YIMBY movement (as far as I'm aware) believes there would be a crash in prices. I think the position is that increased supply with help stem the rapid growth in prices.
It is great model when you have perfect information. I would like to present the Economics Anti-Textbook - https://www.amazon.com/Economics-Anti-Textbook-Critical-Thin... for a more nuanced approach.
[Edited for missing a word]
Wait there are people who don't believe that supply and demand exists in housing? What does that even mean? This is easily provable...
It is VERY difficult to get them to understand that they have the cause-and-effect reversed : In fact, it was the increase in value that triggered the new development.
The most good faith, steel-manned way that I can interpret these types of statements, is to interpret it as "Supply and demand in one area of the market have little effect on other areas of the market, especially those areas that are currently subject to existing government regulation and programs".
EX: If someone has been living in a rent controlled, or low income housing, for X number of years, it is correct to say that building a few more high end condos, is not going to reduce this person's rent (barring implausible situations, such as building hundreds of thousands of new housing units).
Yes, it might reduce the rent of people renting high end apartments, but it is not going to effect the rent of people who are, by definition, not paying market price for apartments, due to rent control.
Then there are those who think econ 101 has all the answers.
https://en.wikipedia.org/wiki/Veblen_good
If they taught physics they wouldn't be teaching us the law of gravity. They'd be teaching us the law of "what goes up must come down".
Most product are not luxury products and a large portion of the world lives in poverty, so naturally most Econ 101 discussions of microeconomics will deal with commodity products e.g. bread.
Like anything worth learning, it is far more important to understand the basic principles of the subject than to learn details about specific applications. That is memorization over understanding.
Any property that follows planning rules, is in the right zone and follows rules for low income/below market rate housing, allow it to be built without delay.
Fix stupid zoning laws that make building anything over two stories illegal in a huge swath of the city.
(An example is using tradeable floor space index to regulate zones instead of fixed height based codes)
You can do all of this and build public transit options to keep the quality of life stable. It’s possible. It requires will to execute and a multi year or even multi decade plan.
Economics a lot of hand wavy predictions. It is good at saying what happened after the fact but usually makes poor predictions. Most sciences would say the model is broken.
The Veblen good that you mention is one of those examples. Where raising the price creates a desirability that should not be there. That is because pricing is a signal of scarcity. Some people desire the idea they have something scarce and others dont. Which makes demand curves hard as even the price you pick changes the curve!
These silly people - Keynes, Marx, few Noble laureates...
He told me that in 1994 and it has been true. Even with massive apple layoffs in 1995. And when the bubble burst in 2000. and the housing crisis.
I think people will move out of the bay area. But I think they will do it the way they always have - sell their house, cash out and retire elsewhere. The others will sit on their low prop 13 ponzi taxes and stay. And people will take their place because elsewhere winter sucks and humidity sucks and rain sucks and salaries suck and yes for some even their traffic sucks.
The Valley grew up around Stanford: https://interestingengineering.com/the-origin-story-of-silic....
Silicon Valley is the result of deliberate industrial policy and state investment into institutions. I grew up in northern Virginia and watched a similar thing happen in Virginia from 1989 to today.
- I attended TJ; when my dad got job-offers out-of-town the fact that my parents felt that I would need to attend a private school to get similar education quality was factored into budget decisions.
- My dad and my aunt got their PhDs from GMU
- My dad worked for MITRE
- My aunt works for SAIC
- I would have stayed there if I got even a single job offer (my college GPA was poor, and that immediately disqualified me from most positions; the telecom company I interned at was a casualty of the dot-com bust).
What I'd like to dig more into is what caused so many telecom companies to end up in that area (maybe the large amount of low-productivity farm-land waiting t be turned into data centers?). It was a telecom company in Herndon, not MITRE that was my dad's first job in the area, and the reason why my family originally moved there.
The fundamentals that make this a great place to live and venture will remain, though. The weather is great. The mixing pot of global languages and cultures stretches back to the gold rush. World class educational and 'big tech' institutions aren't going anywhere. Investors express difficulty in gauging personal rapport over a video call, and are still largely clustered in the Bay Area. The network effects around having a critical mass of brilliant technical minds are substantial.
I hope that this abundance can flow outward, to other cities, like Denver or Austin or Seattle or SLC, even if that makes my property values dip a little. I'll enjoy digging up sand crabs at the beach (nobody I know calls them mole crabs) long after the latest wave of tech migrants have left.
And I can't be the only person that's tried to leave California only to realize that everything but the housing costs are worse elsewhere.
Speaking of HN and Silicon Valley, I see parallels. There are people who worked at creating the site and using it as a source of bright, idealistic young minds whom they could profit off of. They continue to work on keeping the site a good place to 'live in'. Did HN grow by happenstance and 'nature'? You bet. But you can't deny the unseen hands of the many people who keep HN habitable.
Likewise, Silicon Valley is also no accident, although it has benefited greatly from happenstance and nature. Before SV, there was Lockheed Martin, and NASA, and further down south, Douglas Aircraft. Even today, the benefactors of Lockheed and co. indirectly fund Stanford, Berkeley, and many other places that continue to draw people from all over the world.
But I strongly feel that if it takes hold, the current trend of (some) technology workers' activism will be the coup de grace that finishes SV off for good.
CC Morse used the fertile Santa Clara Valley to build the world’s largest seed company. His land gave birth to the original VC and investment in Fairchild semiconductor. As long as there is opportunity there will be abundance. https://twofeet.weebly.com/walking-blog/charles-copeland-mor...
1. Is the damage or outside stressors that are causing the exodus permanent? (I really hope not...)
2. Was there a natural cause (repeatable, will continue) for the previous abundance, or was it just momentum and luck that kept Silicon Valley as abundant as it has been.
Point number two I leave for discussion.
Don't want to spoil the article's analogy, although you could perhaps make a new one connecting abundance to toxicity.
[0] https://en.wikipedia.org/wiki/Amnesic_shellfish_poisoning
[1] https://en.wikipedia.org/wiki/Domoic_acid
[2] https://www.independent.co.uk/arts-entertainment/films/news/...
"The Writing Life" is the best book about the process of creating that I have ever read, and I often suggest it to my design teams. (Designers like to read books about design, but you don't hire designers because they're good at words. You want to read about creating? Read books by writers.)
One of my favorite excerpts from The Writing Life:
> A well-known writer got collared by a university student who asked, “Do you think I could be a writer?” “Well," the writer said, “I don’t know... Do you like sentences?" The writer could see the student’s amazement. Sentences? Do I like sentences? I am 20 years old and do I like sentences? If he had liked sentences, of course, he could begin, like a joyful painter I knew. I asked him how he came to be a painter. He said, “I liked the smell of the paint."
I wonder a lot about this and its effects. We're seeing big price increases here in Bend, Oregon and what seems like an influx of people from larger cities. Why live in a city if you can't do city things?
Bend was already trendy though. I wonder if this effect will indeed spread out even further. There are a bunch of former logging/ranching towns here in Oregon (and, indeed, throughout the west) that are not doing nearly so well. Roseburg, Pendleton, Baker City, Grants Pass come to mind. They have access to some nice outdoor spaces themselves. Will people start moving there, or will they constrain themselves to 'the beaten path' of towns that their peer group considers a 'nice place to live'?
First a few pioneers come for the cheap housing, they make it cool, a few more people come for the coolness and eventually, if a critical mass is reached, it'll become an established desirable area (of course this can reverse as well).
Since people tend to accumulate I suppose that once the prices in Bend get too high people will indeed spread out, bit one of the nearby towns will win the "trendy" people.