Why Silicon Valley Works
blog.samaltman.com
blog.samaltman.com
If you mean creating artificial wealth for a small group of already-rich folk, yes, it works. If you mean transforming one of the most naturally advantaged landscapes on earth into a traffic-choked sea of concrete where people do little more than work at creating new ways to buy and sell stuff, yes, it works. If you mean polluting what was once the most democratic communications vehicle available with social drivel and advertising, it works.
If you mean creating innovations that truly improve humanity, the Valley extremely inefficient. If you mean demonstrating that humans don't need a pleasant natural environment to survive, the Valley is on the right track.
The one thing the Valley works very well at is self-congratulation, especially among the wealthy.
Yup, this is why everything that comes out of the Y Combinator's mouth should be inherently suspect: they have an incentive in romanticizing Silicon Valley because they profit off of your drinking the kool-aid.
I think Intel, Google and Facebook have improved humanity though your tastes may vary and I enjoy Apple's shiny stuff. Those have a market cap of $1.4 tr and it's hard to think of anywhere else with similar output. Maybe like democracy it's the worse possible system apart from all the other ones?
My experience is at least somewhat similar for at least a half billion to billion other people, so I'd say their impact on humanity is "pretty large".
It's not like we wouldn't have basically the same world without Google, Facebook, or virtually any other SV company.
People are just so full of themselves here.
The Valley works well at convincing people that fake money is equal to the quality of real life. Market caps have nothing to do with happiness, health, and interpersonal relationships.
My experience with family life is that happiness, health, and interpersonal relationships are generally much harder to sustain without some wealth. Not impossible, but harder.
Have an Indignation. You earned it. https://www.youtube.com/watch?v=EtCiP8B2xpc#t=7s
And keep the faith. Technology is important and what we value and can do will outlive the Silly Cons of the Valley.
"One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network. Remarkably, you don’t. "
If Sam had said "you need them in Silicon Valley much less than anywhere else" it would be a true statement. But in an article I strongly agree with, this sort of thing... I'm not even sure what to call it, misinformation? Makes the rest ring hollow.
The networks here have vastly lower costs of entry and way fewer secret handshakes. But they still have them, and for many groups of people those costs are much higher than the median. It would have been easy to acknowledge that without diminishing the core point.
> Our network works because it has very strong connections. Founders are generally closer to their earliest investors and less close to their later investors. They are closest of all to the peers they were around when struggling to get their start. Therefore, YC founders are typically willing to do anything they can to help another YC founder. ...
> I often ask founders what surprised them most about going through YC, and a common answer is the degree to which YC is a "meta-company". ... the connection is so strong that alumni companies get significant benefits from each other. Most YC founders tell us they get more help from other YC founders than all other friends of the company, advisors and investors put together.
A grand vision alone won't get someone nearly as far as it may have in the late 90s. A prototype that is nearing that vision with each quickly released new iteration seems to be the entry barrier for someone with no pre-existing connections.
That said, New York is only oriented culturally around finance from the perspective of a tiny subgroup of self-important people. The overwhelming majority of people living, working, and creating in NYC do not feel that "finance" dominates the culture, the connections, or the emphasis.
New York is the dominant hub (or close to it) for several genres of music, for television, for fashion, for theater, for many counter-culture political movements, textiles ... the list goes on and on and it will be boring if I continue to explain.
Basically, it's the kind of thing you can say if you really know nothing about New York.
Its much harder to find good statistics on the Bay Area because its comprised of so many different municipalities, but I would bet the Tech industry employs way more than 12.5% of private sector employees there. There's also no real "runner-up" in the region; Finance is one of the industries here, Tech is the industry in the Bay Area.
So... yeah. There is actual life outside of SV.
http://www.avc.com/a_vc/2013/02/venture-capital-returns.html...
at least on average, there is some serious question if Silicon Valley "works" at all well.
For
> One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network. Remarkably, you don’t.
Well, as I recall, Sam, from one of your lectures in your current course at Stanford, both Marc Andreesseen and Ron Conway made it quite clear that they no longer take proposals from "over the transom" and, instead, learn about new investments only from their "network". Sounds quite closed and not very "open" and, instead, like an echo chamber from the past with not a very good view of the future.
Or, NSF, NIH, and DARPA will take proposals from strangers, but not Sand Hill Road.
Looking at valuations or even market caps is much less useful, because that tells you more about what's going on in investors' minds than in reality.
I did mention NSF, etc.: There, Ike wanted pictures. The U-2 was not getting it done. So, one day Lockheed's Kelly Johnson walked in with a pile of papers and proposed a new plane, fly at 80,000+ feet, at Mach 3+, for 2000+ miles without refueling, and essentially impossible to shoot down. The project was approved; the plane flew as planned; and we got the pictures.
So, Kelly had a very ambitious start-up, and delivered as planned, with the project approved from work essentially just on paper.
Such work can be done. Other cases include the F-117, GPS, passive sonar, Keyhole (essentially a Hubble but before Hubble and aimed at earth instead of space).
It really is possible to do accurate evaluations of ambitious projects just on paper and, then, go forward with a quite high batting average. And this fact does partly respond to your point.
Well, NSF, NIH, DARPA, CIA, DoE, etc. can work this way, but Silicon Valley just flatly refuses to. Instead, they want another SnapChat with traction and f'get about anything more, and that means that they can't do the really valuable projects. And that's why, on average, they don't make the big bucks.
I wonder what YC could do about this problem for it's companies. I think it would be interesting for YC to build a few high-rise live-work spaces for smaller YC companies to foster and grow the tightly-knit community. Maybe like a high-tech college campus?
The dominant political view in the area is that building high-rise anything anywhere is something that should be stopped at all costs
In Palo Alto, there's a similar organization called Palo Alto Forward, which I know some Palantir employees are involved with. www.paloaltoforward.com
https://news.ycombinator.com/item?id=8549454
Basically, people need to vote if they want to see any changes.
There's some truth to this, but it's not entirely accurate. The spectrum of who, what, when, where, why and how is very broad here. The top of the food chain in Silicon Valley is just as insular as Wall Street, Hollywood, etc.
> Yes, the approximately 700 YC companies are all totally independent legal entities – but the connection is so strong that alumni companies get significant benefits from each other.
Not often discussed: some of those benefits are benefits until they're not. A lot of accelerator-backed startups count other startups from the same accelerator as their largest customer segment and a source of early sales traction. When the business cycle turns and "other startups" is no longer a viable customer segment, however, a lot of startups are going to see their sales decimated because they have little to no diversification.
> Unlike other cities where people are mostly focused on cash compensation for this year, in Silicon Valley more people talk about equity than salaries (assuming, of course, that they can afford the wildly-out-of-control housing costs, which is probably the biggest weakness here right now).
This is simply not true. Most angel and venture-backed startups in the Bay Area today offer early employees miniscule amounts of equity, and engineers demand market rate compensation (where market rate compensation equals "what Google or Facebook would pay me if I could get a job there").
If you're a startup offering higher equity in lieu of salary, you will have a very difficult time hiring in the Bay Area. Most engineers are hip to the fact that this isn't likely to work out in their favor.
In an increasingly digital world, how long will physical proximity be an advantage?
The notion that a region could somehow have its own brand of patriotism centered around startup success merely due to density is somewhat difficult to rationalize. You can't deny SV's success relative to other technology hubs, but I'm wondering how far in the future physical proximity will continue to carry such a steep advantage
There is a number of articles and research papers on the subject. In short, distance matters even within the same building.
The reason why Silicon Valley works is because of the intense greed that it provokes amongst everyone that comes here. Maybe "greed" is too strong of a word, because people aren't necessarily selfish, maybe "money-focused" is probably more accurate. And because anyone can come here and become a millionaire/billionaire, it draws in an immense number of hard-working people which just generally increase the level of competence, and unfortunately competitiveness, which has a positive feedback loop which causes these smart people to want to work even harder over time.
Outside Silicon Valley, all you hear about is billionaires being made day-after-day, and smart people they look at this nonsense and think "I can do that". Once the come to Silicon Valley, they get sucked into a vortex of work and money-focus that is so strong that the only way to get ahead is by working long hours and taking risks.
Think about it this way: a person who makes 120k/yr with 2 kids and a spouse who stays at home will be considered the "working poor" here. I feel sorry for anyone who tells me they have a spouse, 2 kids and a house in any place other than NYC, and are contemplating moving to the Bay Area. Everything is priced perfectly to the point where no one can afford to live in a good neighborhood with a good commute with good schools. It's like the CAP theorum, except it's more like "Good Job, Good Neighborhood, Good commute: pick one" (unless you're rich).
So, in order to get ahead, both spouses need to work, and they need to work very good jobs with long hours in order to "make it well". If you have Dual Income No Kids, it's a bit easier, but you still need to deal with oppressive traffic and high rent. It's so expensive, that all you do is think about money. And you fall into fallacies where if both spouses make #120k/yr, for a total of basically $250k/yr, you start thinking "why don't I feel rich?" or "why am I working so hard with nothing to show for it?" It's because you work 10 hr days, and then you're spending 2 hrs a day commuting, and you get into a zone where all you do is think about work, and how to buy the next iPhone because at least you have something to show for your money. Meanwhile, none of my friends outside of SV have iPhone 6's let along iPhone 5S's, many are still using iPhone 4's which are perfectly good but a bit slow, but you wouldn't be caught dead in SV with one of those relics.
So all of this money-focus necessarily squeezes out as much productivity from the best and smartest in Silicon Valley, which is why you have so much success here. If you compare SV to place like Japan or China, where the population is generally better educated, you don't get anywhere near the same level of productivity. In Japan you get high prices and long work, but there's no payoff like there is with Silicon Valley because of the social impedances, so you'll never have a Silicon Valley in Japan. In other places that purport to be another SV, even places like Austin, there just isn't the same level of greed/money focus like you have here, so I don't think you'll be able to get as much productivity. It's the sky-high prices, work-life imbalance, the startup-millionaire stories that create this unique pressure cooker environment that can't be duplicated.
Mind you, they live next to my folks who pay about 120.00/month for the house since my Dad was a GI and got the house for 70k in the 70's. Same Levit-town style house, 40 fold cost difference. Neighbors with completely different lives.
And they say there isn't a bubble?
For perspective, the S&P 500 was at 68.56 in 1975 and began 2014 at 1848.36, a 27 fold gain. You also wouldn't be paying ongoing real estate taxes, etc. So the house bought in the 70's wasn't that great of an investment, long term.
BTW, when I work under my car, I put two sets of jack stands under it, and don't work alone. When I was a kid I jacked up my car and put cement blocks under it to hold it up. Before I slipped under it, the blocks crumbled and the car collapsed onto the ground. Yikes! Glad I was able to learn that lesson the easy way. Best regards to your pop!
I think the parent commenter paints a gloomy but somewhat realistic picture - it 'works' because there's a high volume of people looking for success, but it can be very stifling for some (such as myself).
I've worked here in SF as a Rails consultant for the past four years. It's quite obvious that the work force skews younger. My best friend just became a CTO and his bosses are both 20. He's 41. :-0
When you look to start a family, the pressures of working in the valley are going to bubble to the surface. You can either endure a 60 minute drive (that should really only be 20 based on distance) to a child's dr. appt for which you endure wall-to-wall traffic with a screaming child, you try to ride bart with a child in stroller and packed cars, or you shuttle a car seat to and from an Uber.
Or, you pay 30-60K for a nanny and let them handle those headaches.
It's hard to live in SF with a family. Really hard.
Hmm, seems like a business opportunity here, for Uber/Lfyt etc. to offer a car seat as an extra (in which case the car arrives with seat all set up and ready).
1) lots of other stuff rocks, so you don't want to leave and you can downgrade your living space to something smaller that is more "affordable" to get most of what you want
2) people are leaving, but at a slower rate than they are coming. Basically, come here, work hard, burn out, and go somewhere else. Or maybe you get a job on the periphery, like say san jose, and then you live way out in Morgan hill or gilroy or in the cheaper parts of san jose. Or you get a job in Dublin/Pleasanton and then live in like antioch/pittsburgh/tracy.
Anecdotally, it seems like they are moving out of there and moving in here. (Disclaimer: there's an alarming number of people here that are opposed to that. I'm not one of them.)
Thing to consider, though. There still isn't nearly the concentration of VCs (and thus networks) here as there are there. Depending on where you're at with your project/startup/company, that's got to be a sizable consideration when thinking about moving to/moving from the valley.
Also anecdotally, I moved to the Bay Area, my parents moved (back) to SoCal after 40 years in the Northwest grey. Plus, I have 4 dot-com era friends who have moved from the Seattle tech boom to the Bay Area tech boom, all in their late 20s/early 30s (so not just-out-of-college types), and I know a few others who are considering the same. And I don't know a soul from here who moved north, except for people who came down here for college and then returned home.
I guess it's like they say, "the plural of anecdote is not 'data'".
There'll always be new blood that offsets people leaving. I think the housing shortage is so bad that even if people were leaving it wouldn't decrease pressure right away.
If there is any constant to the Valley over the decades it's the old fashioned American pioneer success story; strike it rich and take the money home.
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Why live in a terrible city and state (CA has atrocious taxes)
I remember back in '06, places in MTV were cheaper than Santa Clara. Should have bought back then! I remember thinking Google couldn't get any bigger, it was already a huge company. Guess I couldn't have been much more wrong.
For 1.2M you can get a decent-sized 3/2 or 4/2 of maybe 1800sqft. Not in Mountain View, obviously.
I remember going out of Stanford in 2003 - at the time a job at Oracle for a CS MS grad was awesome - and yet, people went on to create Facebook, LinkedIn, and all these Companies, and rent were OK, salaries were good, and you had this mindset of "I am going to give this a shot" everywhere that is at the heart of Silicon Valley.
Extreme greed as you describe is a new thing. It may have been there in 99-01 but I can tell you none of that was there in 01-04 and it was much less profound in 06-09.
The reality is that all things work in cycles. People who genuinely love tech will stay, others will go back to Wall Street or Consulting.
Having lived through the dot com crash of the late 90's I have thought a lot about what went into that event. It is easy to be dismissive and "blame the suits" or the "bankers" but the reality is much more nuanced than that.
I have come to conclude that it depends on what goal is driving the bulk of the community. During a 'non-boom' the driving force is often engineers and designers who are spending all of their capital on solving a problem, or changing the efficiencies of an existing system to favor a different part of the value chain. You get a lot of folks thinking like that and eventually you get a couple of winners. That winning inspires other engineers to either work around similar spaces to see if they can replicate the success. A "wave" is started, whether it is "microprocessors", "the web", or "social media" or any other technology, it generates some success for people who get the value and can plug it into the bigger economy.
As that happens it starts generating economic value which gets translated into cash (the thing everyone thinks they understand).
That cash then attracts a different kind of person. Someone who can use cash to make more cash, they are meta-engineers if you will, playing off the second derivative of innovation, the change in cash flow over time. Their secret sauce is that they perceive the forces that are changing the cash flow and they speak to non-technically inclined folks about tapping that flow to send some cash their way. Imagine everyone in the world had gone wild for buying tulips, these people come in and find the folks who see people getting rich on buying and selling tulips, but don't understand tulips, or the attraction in tulips, and whisper that they know a farm that is growing outstanding tulips and will be harvesting soon.
What this other set of people have done, is to start influencing capital toward the 'new thing' but through their fingers. And they take a cut of course.
The truth is though that there has always been (and perhaps always will be) more capital than Silicon Valley can successfully convert into improvements into systems or new solutions to problems. And so this capital sits on the sideline until the third actor in our play arrives.
That is the person who is going to "get rich" in Silicon Valley. These people spin stories, stories that sound enticing and world changing. Stories about frictionless sharing or paradigm shifting. Stories about turning opportunity into massive shifts of economic power, political power, or both. They spin the story of changing the world, if only there was someone with the courage and the vision to back them in their quest. And at some point, that capital that is sitting on the sidelines "missing" this opportunity, sets aside the common sense its managers had and starts to make some big bets. Because everyone knows you need a lot of money to make a lot of money.
And that is where things have gone off the rails, at least twice before and perhaps now for a third time. Money begins to flow in, it goes to some great people, it sometimes knocks good projects off course, and it goes to some folks who are just good at talking. The the number of 'good' things that are happening with it, goes down quickly. When the diligence drops below the minimum sustainable level, the game board is set for some spectacular failures. And those failures are unavoidable, like a train engineer seeing a car on the tracks half a mile away, knowing it takes over a mile to stop the train, even with all wheels locked.
While I feel like I've analyzed the dot com crash enough to understand the mechanisms in play, I have yet to figure out any scheme or system which could prevent it from happening. That makes me sad.
You don't know because you came out of school at essentially the nadir of the dot-com bust, you only know how things went from shit to great to bubblicious in the last 10 years. Sure, rents have gone insane in the last 2-3 years, but rents have always been high. From 2001 to 2004/5, rents were low, traffic was great, etc, because of the sheer number of jobs lost. Per capita, the number of jobs lost in SV from the bust was worse than Detroit.
But during the dot com bubble, it was definitely like this, and the one thing you also don't realize is that the house prices were not affected by the bust, money moved from the stock market into real estate in the Bay Area. House prices went nuts during this time, until the housing bust and only now have prices surpassed 2007 prices.
But SV has always been about greed and making money.
I'm inclined to agree that it's about the money.
I'm not sure that it's a good thing but it's certainly an engine that's spinning hard.
Take a look at a modern SV company now: Apple. It creates lots of jobs in SV, but far more in China.
SV succeeds in spite of the costs, not because of them.
It's funny you mention Intel here -- since the 70s/80s they've continued to expand in Hillsboro, Oregon (a suburb of Portland), where they bought a lot of cheap farmland. It's worked really well for them and the ~16k people they employ in the state. The only downside is a sort of "employer lock-in" for the employees, especially the more specialized ones.
That downside is not a downside for Intel. Having employer lock-in keeps costs down and turnover low.
You're absolutely right. High COL is good for well-connected people who get funding easily for stupid startups, because it makes the labor pool more captive. It's bad for the quality of startups.
Take a look at a modern SV company now: Apple. It creates lots of jobs in SV, but far more in China.
And then the murderous, unionbusting thugs who run the sweatshops buy real estate in California, pricing the locals out of their own housing. It's the circle of life... ?
It's a really radical transition, but I really, really dislike the city-centric focus of software engineering. I hate the idea of being a contractor (I just want stable, life-long work), and I can't tell you how tired I am of crippling traffic causing me not to even want to drop by the grocery store until it's almost time for it to close. I'm not in the Bay Area, but am in one of the five largest cities in the US. I went to college not giving a shit about money or how much of it I would make, and now I find myself thinking about it most days because I have to confront the fact that I can't afford any housing near where I work. I wouldn't be so upset about it if it weren't for the traffic which makes commuting from far out an absolute nightmare.
In terms of raw numbers, it's a transition that doesn't really make sense, not for a relatively skilled developer anyway. The salaries aren't that much higher outside of surgery and a few ultra-competitive specialties, and the time and debt involved in the training are immense. Depending on any number of factors, it could be better or worse than a life in technology. The two things that are for sure are that you're not going to have financial difficulties and you're not going to be subjected to ageism (quite the opposite). If you want to be rich, medicine's probably a pretty bad choice; but if you want stable, well-paid, life-long, rewarding employment wherever you want in the country, it's among the very best options.
The most amazing part of it is that you get to directly help people every day (so you don't have to wonder if your crazy ass startup is actually "changing the world" or not), there's more demand for doctors in rural areas (not less), and most non-surgical specialties can easily work comfortably into their mid-60s (or even later, health permitting). You're also surrounded by people who, at least in the beginning, were motivated out of passion and not money- and status-seeking. (Of course, some people will change as they age and grow more successful, but not all.)
On your individual points: 1) City-focus of software engineering. Have you considered trying to work remotely? That isn't for everyone (I couldn't do it), but it would probably solve your problem
2) Salary wise, I would worry too much unless your first priority is to really help people (more on that below). I've interacted with a lot of doctors and frankly if you are smart developer you'll most likely have a leg up intelligence wise on all but the most in demand specialities.
3) I wouldn't necessarily count on being able to directly help people every day. It depends on your speciality and where you work. A lot of private pratice places often push unnecessary procedures to make money. If you are in a non-procedure speciality or at an academic center you probably won't have those pressures. That being said, if you want a comfortable life where you can actually help people, a job at an academic center outside of a major city sounds like a great fit. I doubt you'd make much more than a software engineer though.
4) I'm not sure how to parse your statement about status-seeking. A lot of people who go into medicine are status seeking.
My point, I suppose, is that spending an extra 7+ years in school/residency and taking out a ton of debt is not a very efficient way to get money and status unless you plan on being among those who get into a hyper-competitive residency.
I agree that working remotely would solve my problem, but I have serious concerns over (1) long-term stability; (2) being totally isolated from coworkers.
In any case, good luck to you.
With some extra effort, you can earn an SV salary but live in an area that has a very un-SV cost of living.
Traffic isn't an issue either.
You can network remotely. You can build companies remotely. You can even find investors remotely.
A few people are doing this already. More and more will in future.
(Are we really supposed to believe it's always better to build Internet companies in meatspace? Hmmm.)
I know there are downsides to remote working. Guess what? There are epic, catastrophic downsides to working in SV meatspace too.
I'm looking forward to the day a few decades from now when what's left of SV gets turned into a museum, while the rest of the planet gets on with doing cool fun stuff... elsewhere.
I'm also not confident at all on the longevity of most software companies. Part of me does not feel comfortable growing roots somewhere while working for a company that I don't expect to survive the course of even my own career, with very few other local options to fall back on.
Also, for what it's worth, I really do enjoy physically being around coworkers and interacting with people. The lack of interaction is one of the things that bothers me with software development. I think, if I worked remotely, I'd have to start a family just to keep myself feeling connected to the world.
Pretty cool.
A doctor who isn't interested in any of the benefits of the career that I listed may indeed end up resenting their choice to take on a lot of debt (and study for at least seven additional years) just to end up in a big city alongside programmers with no debt making a similar amount of money.
Like I wrote, if you're motivated by money, medicine is a fairly bad choice. How many doctors are neurosurgeons? About half a percent. Of those, how many are department chairs? Just a handful.
If you want few working hours, medicine is probably a bad choice. How many doctors are radiologists who co-own a business and take half the year off? I don't have a percentage for this one, but very few. Most will work 50-60 hours a week.
How many programmers know that their startup is still going to be around in 40 years? Very few. How many programmers have the option of working where they want without taking a pay cut or working as a contractor? Very few.
The grass certainly isn't always greener. If it were, then I might have picked law, or architecture, or construction, or any of a vast number of other options. But none of those fits the list of criteria that I now know are important to me in life (but may not be important to you).
The e-commerce recently IPO'd but I didn't like the culture and lifestyle for all the reasons you've already stated in your post.
Funny enough I also applied for a software position for a hospital but I didn't take it as I consulted many of my friends who are in residency and EMR software field where they said that hospitals are onerous with regulations. So coding can be frustrating experience and turn-arounds are slow with specialists/business analysts ensuring compliance with patient privacy and clinical data accuracy.
If you're looking for a place where there's a lot of smart people who are not motivated for money, there are many software opportunities in NGOs, life sciences research where lifestyle is much more relaxed, pays actually pretty well (because people won't accept the fake carrot of big equity payout) and you get more job satisfaction IMHO. Best of luck to you.
YMMV, but I found living in the country pretty unpleasant, particularly as a relatively shy single person with less-mainstream hobbies; you have to drive everywhere, you have to plan a lot more in advance (just trivial things like doing your grocery shopping ahead of time), and there aren't the kind of entertainment options you get in a city.
In other words, this may be the HNest comment I've ever seen.
Yeah, right.
A $4,000/month apartment in Silicon Valley gets you a good school. A $5,000/month apartment in NYC gets you a public school where 90% of the kids fail the state exams.
- Plenty of 4k/month San Francisco apartments get you into terrible public schools.
- Inverting your point, at least people in NYC / finance are generally honest and upfront about their desire to make lots of money for its own sake; many in the SF area go around preaching nonstop about how their only motivation is to reshape society with their paradigm-shifting value-adding "wearable social network for dogs app" that will end all hunger and global poverty, and pick up your drycleaning, too.
After the wildly successful IPO, they still rehash this line; only now it's from the deck of their custom yacht moored on a private dock by their much nicer house.
That said, you really should investigate SF public schools a bit more. There are a large number of very high performing public schools, as well as some terrible ones. That's actually no different from the 'burbs, it's that if you live in the Gunn district in Palo Alto, you get to go to Gunn. If you live in a particular school district in SF, you aren't guaranteed a slot in that school.
So even though I disagree with you that the odds of a bad placement is "large" (I'd say it is non-trivial rather than large, but I don't have numbers either) this process appeals more to poor or middle income people than wealthy ones. If you're poor or middle income, you're choosing between no chance of a good school (you can't afford the top districts in the burbs) and a decent chance (SF). For a rich person, you're choosing between a guarantee (burbs) and a decent change (SF). Again, we disagree about "large".
One thing - have you looked at greatschools.net and checked out the number of elementary schools in SF with high test scores? SFUSD a very high performing urban district. It's fine to disagree, but if you haven't done this yet, I really do urge you to review the data before forming your opinion. I think the notion that SF schools are mainly bad is an incorrect myth. There are problems, but the notion that good elementary schools are few and far between is false.
High schools aren't quite as good, but they aren't nearly as bad as people make them out to be (it's not just Lowell - check out the data. Balboa high, in a relatively low income southern part of SF, scores as high as many reasonably good suburban districts).
Middle schools seem to be the weak link right now, though again, please review the data before forming your opinion - the conventional wisdom is almost always more dire than the reality where it comes to sfusd. Middle school is a tricky one - you may notice that the private model rarely splits out 6-8 grades, going with the k-8 model, so the entire approach may be flawed here...
The school I was zoned for had ~90% of the kids failing the state math and reading exams, with ~50% getting the poorest scores possible. When I publicly questioned the education department officials, they said, "The tests might not be measuring the learning that's occurring." I applied to 20 non-charter public schools, and we didn't get into any. I applied to 20 gifted and talented programs, and 40 charter schools as well. It's insanity.
To the point of SF... There is a very high switching cost whether you buy or rent. If you move somewhere and don't get into the right school, there are costs ($ and hassle) for changing your mind a year later. This is why people lock in.
And I'll throw out the question - why shouldn't the majority of the schools in large cities be good? It's not easy making it happen, but the awful quality is a societal failure.
Farther but cheaper: Ozone Park, Forest hills, elmhurst, kew gardens
cheapest but farthest: glen oaks, floral park, douglaston
At least New York is honest.
The difference is that Silicon Valley has a lot of jobs, and is the area of the original story. If you're in the NYC suburbs, you are likely commuting into NYC for a good job.
There are probably >10k jobs in that commute footprint I could have within a week at $150k base plus $100-300k/yr in equity. If I were a competent 5-10y experience frontend developer, maybe 50k jobs in the same range. That's without even touching Silicon Valley itself, or remote-but-through-SF-connections.
This is the advantage of SV as an employee. You can work for a startup knowing that you'd literally have a new job before the day is out if your company imploded in the morning.
While the bubble is still going, yes. Once it pops, not so much.
I don't know if others agree (and it's no doubt an over-generalization), but my intuition is that commercial failure lacks the stigma in Silicon Valley that it does in most other places. Much ink has been spilled on the topic and some have even suggested that Silicon Valley has a "Failure Fetish".[1]
It seems popular to trace the roots of this and other cultural features of Northern California (e.g., 60s counterculture) to the Gold Rush of 1849. But perhaps it simply another artifact of startup density that Sam suggests is so critical?
[1] A sampling from various forums: http://nymag.com/daily/intelligencer/2014/03/silicon-valley-... http://www.npr.org/2012/06/19/155005546/failure-the-f-word-s... http://www.inc.com/eric-markowitz/brilliant-failures/why-sil... http://www.entrepreneur.com/article/225202 http://blogs.berkeley.edu/2010/10/18/silicon-valleys-greates... http://paw.princeton.edu/issues/2013/03/06/pages/1054/ http://techcrunch.com/2010/10/17/japan-to-fix-your-economy-h... http://www.bizjournals.com/sanjose/blog/2012/12/does-silicon... http://www.quora.com/How-has-Silicon-Valley-developed-and-su...
Also, I totally agree with your comment on Japan. I think start-ups have a very tough time sustainably generating value through innovation in Japan. Taking the national psyche and tendency for risk aversion into consideration, most likely, it needs to come from either big companies or government programs (like in the 60s-80s).
From the financial perspective of a developer if you want to bank a couple of million dollars over 10-15 years then you should go work for a bank. If you want to bank ten million dollars you should start a startup, but it comes with a higher risk.
If you're a good developer, with reasonable people skills and a willingness to learn the business side, then becoming a millionaire in banking is pretty straightforward with a decent saving strategy. It's just a matter of time.
The risk level is pretty low, if you work for a hedge fund the risk is higher but you can earn more money faster and if the fund fails you can get a job at a bank pretty easily. The banking industry has a problem with hiring good devs just like everyone else does.
The financial reason for starting a startup is that you have the potential to make lots more money more quickly. But that also comes at a higher risk.
Traders who top out at $500,000 per year are considered failures. Quants and programmers often get to (and, sometimes, past) that level, but more slowly (maybe 35-45 on average; obviously, there are outliers who get there faster).
For a contrast, the mediocre engineer gets such a small amount of equity that it's less than a finance bonus at liquidity. Then there's dilution and cliffing. Sometimes engineers (usually, ones who joined early and were later judged to have "too much" equity) are pressured into non-exercise of options on reputation threats (i.e. "you're fired, but if you don't exercise your options on that 2%, I won't have to give you a bad reference.")
Finance is harder to get into, but once you're in, you have a certain status that Silicon Valley just doesn't give to engineers except for a couple hundred with international reputations.
There's also much better career planning in finance. Don't make any obvious wrong moves and you will move forward. It might not happen as fast as you'd like, and you probably won't get to the $50M net worth level, but you can make a decent life for yourself and you won't be tossed out like yesterday's garbage at age 40.
Finance does have a lot of job volatility. The business is cyclical and layoffs happen. That said, so do startups. Finance compensates you for this risk by (a) compensating you well, and (b) being professional about it when layoffs happen, so your reputation is intact. The slimy tech companies, on the other hand, don't compensate your risk except with platitudes about "changing the world" and, when times are bad for them, hide layoffs with stack ranking and dishonest PIPs.
I will probably try to go back into finance in a year or so, honestly. (I'm already putting out feelers.) Tech is a nice idea, but the software industry, as it actually is with the "agile" micromanagement and the stupid startups and the general incompetence of its upper management (I won't call them "leadership" because they're not) is basically a waste of time for talent. At banks, I know that many of the MDs are at or above my talent level, and that almost all of them worked really hard to get there. Non-techs (including executives) in tech companies are basically 95% morons because the capable non-techs generally have better options in other industries.
It's hard to go back to finance, from startups, because the typical startup CV has a high jobs-to-years ratio and finance is still pretty bigoted about "job hoppers". (Finance is meritocratic once you're in, if you get a good job, but getting in can be a hassle.) In startups, one job per 2 years is normal; in finance, it fucks you in the ass if you change jobs that often.
Regardless, that's a small subset of finance jobs, no? What I've read about the investment banker side is that the job is absolutely dreadful; if you get into private equity, it gets better, but you're still working like a dog generally. Also, sans trading, the jobs tend to require a very different type of person than your typical software engineer. As you move up, your sales/pitch skills become more and more important, as your ability to win clients/deals for the firm is what brings in revenue, not your ability to use excel.
I remember reading that even for people coming out of Harvard Business School only a few make it into trading.
Business school is about connections, but you need smarts to be a quant or a trader, and I'm still smarter than 99% of the people at HBS. I don't have the connections to get a Partner job at Sequoia, but I have the raw ability that most of those people don't have.
What I've read about the investment banker side is that the job is absolutely dreadful
Entry-level (analyst) jobs are pretty awful, and the hours are inhuman. It gets better as you move up the ranks. MDs work 9-to-6. VPs and EDs work 8-to-7, and there's enough status to the job (and the work is usually interesting, at that level) that it isn't so bad.
As you move up, your sales/pitch skills become more and more important, as your ability to win clients/deals for the firm is what brings in revenue, not your ability to use excel.
There's some of that everywhere. We failed at keeping politics out, at high levels, in the Valley. It's just hard to make merit matter more than being well-liked no matter what industry you're in. I don't know of any industry that has figured that problem out.
Investment banking is also far from homogenous, the requirements for being in sales at a mid-tier commodity fund in Chicago are vastly different from being in M&A at Goldman in New York. You can be pretty far down the pecking ladder in banking and still easily bank $1m+.
Now on to compensation: comparing apples to oranges, a Goldman Sachs VP's total compensation is about 240k, or roughly what a senior software engineer at Google makes. If I were a brilliant developer, I would rather work at Google and make the same amount than going through the meat grinder than is your IB to become a GS VP.
Of course, if you're willing to persevere through all that, and have very good people and/or sales skills, then sure, you might be able to join the ultra elite who own their private jets and have an island in Thailand. You'll need some luck for that too, though.
I think the only people that will 'make it' in finance are those that are genuinely passionate enough to endure the horrible work conditions and lifestyle while possessing the people/sales skills to be successful. Remember, to make it to the top in finance firms, you need to bring in revenue. With the exclusion of trading, this generally involves sales skills. Same goes for management consulting and probably law as well.
I don't think there's a "too late", but there's a different skill set you need, especially to get a good job in finance.
'cause I hear you. Living in Paris, France, I could complain about the same thing. How you end up consumed by your lifestyle with nothing to show up for in your late thirties despite your top 10% career.
Still, my preffered theory about why SV works is that European middleage adventurers went west, up to California. And that the hippie movement with drug-induced introspection moved some people enough to motivate others to build their dreams, which is currently happening under our eyes.
That's just another narrative. You have to pick your facts. Both may well be true. Or simplistic as well.
Lévi-Strauss taught me I shall not pretend being an observer of the world I live in so we might ultimately never know why SV "works". Let's focus on the how, and dream of the why.
Interesting take though, you argue that the issues generally considered the biggest problems of SV, are the cause of its success.
I lived in Mountain View 2007 to mid-2008 for my job at Google. We were renting a house close to campus at the time and contemplated what it would cost to put down roots and stay -- most likely buying a condo or house. Every time we ran the numbers, it made no sense, so we voted with our feet and moved back to Chicago. I would love to live in the Bay Area again (there's a soft spot in my heart for the running trails of Marin County, in particular), but it still makes no financial sense. The lower cost of living in Chicago adds directly to my personal financial runway and allows me to work on what I want, when I want.
Right now I'm reasonably confident that I can go from being dumped out of my contract to having an equal (or higher) paying contract in a matter of a 2-3 weeks. If (when) that changes, I'll pack my family up and move, probably to Chicago. It's easier and less stressful to save a few months' worth of runway earning $120k in Chicago than it is earning $150k-$180k here. If other personal issues weren't impeding it, I'd already have done so, but circumstances are more likely to keep me here for at least a few years. The hot market here won't last, and it seems to me the hottest parts of the job market now are becoming even more narrowly focused on a segment of the labor market I'm simply not a part of (young, willing to work 50-60 hours a week for no overtime, below-market compensation + an equity lottery ticket and kitschy foosball-table nonsense).
And the same is true for virtually everyone here currently playing the software game.
Many very good job markets exist in the US.
I'd also add that there is something to be said for diversification of industry. Anecdotally at least, it seems like the last time the tech bubble burst, the bay area was hit the hardest. Other cities had more to fall back on in other industries that need tech (finance, insurance, medical etc). The real advantage to SV is 1) access to VC and 2) it comes back faster after a down cycle.
Dude. If you feel purpose in your work, live in Silicon Valley. If you are driven by creature comforts, go live in a place where that's easy to afford.
trying to keep up with the joneses, on the other hand, can warp your sense of relative privilege. top 15% in the US is among the top few percent in the world. keep that in mind, and that'll help assuage the negative feelings that can arise from comparing yourself to those you otherwise consider your peers.
The 80th percentile for household income in 2012 was $160,000. This does really crazy things to a relatively static housing supply:
http://www.sfgate.com/bayarea/article/In-growth-of-wealth-ga...
This isn't just about "keeping up with the Joneses." Most families want a) a decent home, and b) a good education for their children. I had to pay an obscene amount for a) in SF, and I was holding my breath while figuring out how to pull off b). My quality of life otherwise was relatively ordinary: I drove a Toyota and didn't go out all that much due to the newborn.
I made a princely sum compared to the average American. Had I lived in average America, I would have lived like a prince (you could literally buy a mansion for the price of my 3BR home in most places in the US). But since I lived in SF, I could only barely afford the basics. This has nothing to do with skewed expectations on quality of life — it's about the skewed economics of the city.
$240k married filing jointly w/ 2 kids means $5900 hits your bank account twice a month. Essentially all of one of those paychecks will go to housing in sf, or a mortgage + taxes on the peninsula. That leaves $6k per month to live off -- which is certainly doable, but between childcare (at least after school w/ both parents working, possibly more), utilities, telecomm, cars, savings, groceries, and all the miscellaneous costs of life such as clothes, doctors visits, etc -- you aren't saving much money.
ps -- it's stupid to look at national statistics for income when this is the #1 most expensive housing market in the US. At least nyc has good transport options between Manhattan and Brooklyn / Queens. Here we have caltrain or the 580.
I mean, here's a home right here [1] -- 4 bedrooms for $315k! Of course, it's in Madison, WI -- but that shows housing prices are just fine in sfbay :rolleyes:
[1] http://madison.craigslist.org/reo/4668467650.html
@smtddr: we're not discussing what most people have; we're discussing what you can get in the bay area on $240k. Otoh, if you're now claiming that keeping up with the joneses == a middle class life, ie wanting a modest house, cars, kids, and retirement savings, then the plutocrats have won.
I'm going to go out on a limb here and say most people in USA don't even have all those things.
The "kill my neighbor's cow so everything is even" is an even more toxic thought pattern than the Prisoner's Dilemma that constitutes our mainstream.
Think big, man.
The salient fact of American politics is that there are fifty to seventy
million voters each of who will volunteer to live, with his family, in a
cardboard box under an overpass, and cook sparrows on an old curtain rod, if
someone would only guarantee that the black, gay, Hispanic, liberal,
whatever, in the next box over doesn’t even have a curtain rod, or a sparrow
to put on it. - Davis X. Machina, balloon-juice.com
1. http://i.imgur.com/LTZOFlC.png
...and I've talked about this before: https://news.ycombinator.com/item?id=8154909
Silicon Valley, at its best, is doing exactly that. And sure as hell isn't anyone else trying.
First, $5900/month is a huge amount to spend on housing. Large houses on the peninsula rent for around the $4500 range; you only hit $5900/month for 4 bedrooms in the hottest neighborhoods of SF.
Paying $5900 (after tax deductions, including property taxes) for owning a house implies a $1.3M mortgage, so maybe a $1.5M house(?) which is high-end. Houses that cost over $1000/sq foot are very rare; most are in the $600 range looking at Zillow on mid-peninsula.
Also, note that owning a $1.1M house is a form of retirement savings, so you can adjust accordingly.
And housing costs differences of $800k over 30 years (your Madison link vs. a $1.1M Bay Area house) is about $3300/month. You need to earn maybe $70k (before taxes) more in the Bay Area to have equal non-house income. I find it hard to believe that earning $180k in Madison combined (top 8%) is struggling.
Finally, there's always the Easy Bay: great houses in great neighborhoods for $800k.
Using a house for retirement savings is for idiots; that's an enormous gamble on the future of CA 35 years from now.
The Madison house, btw, is in a location walkable from many offices; Madison is more competent than the bay area, so while buses aren't great, the roads are very drivable in many directions. Someone with even an hour long round trip commute has a very long commute there (except, perhaps, after snowfall.) So you could probably use one car, or one commuter car and one beater car for a couple. Not two cars as you need on the peninsula or sf for a couple with kids.
Not to mention that $70k doesn't capture all the other things significantly cheaper in Madison: food, daycare, and education (many Madison schools are quite good) being the most important. Many peninsula schools are quite good, but not in sf.
If you view it as plausible your house value will collapse, you shouldn't buy a house. If so, you'd rent and you'd be looking at much lower housing costs.
With regards to cost of living: some things are much more expensive in Madison; e.g. utilities (no A/C needed in Bay Area; heating rarely needed).
Anecdotally, I know a gainfully employed senior engineer who was literally couch surfing with his wife and daughter for a month after losing their house. The excessive price of living caused by the housing shortage in the bay cannot be understated.
http://www.rightmove.co.uk/property-to-rent/Hackney.html#/pr...
This flat in hackney is £675 per week and is 1700 square feet. (That's £2925 per month, or $4678 per month).
That price does not include council tax or utilities. Council tax at the lowest but full rate is £864.96 per month. That's roughly $1385 per month.
Also, please note the /sf (per square foot) of his price quote. I also thought it was way too cheap even for the Mission in SF, until I noticed the /sf.
http://sfbay.craigslist.org/search/sfc/apa?sort=priceasc&max...
know that competition is tight enough that if the apartments are decent, they will be rented on the spot during the showings, and often for much more than the asking price. An acquaintance was looking for months and finally got an apartment because he and his roommate offered $250/mo over asking.
http://sfbay.craigslist.org/search/eby/apa?sort=priceasc&max...
Yes, it's a cooker. So what? You want the cooker, sign up... You don't want it, then pass, and start counting your already-existing chickens...
I can't get over this. This is like a used car salesman telling you not to worry about the cost of the car, just to remember that there are free weather mats included!
I feel that there is a connection here as to "why Silicon Valley" works from the perspective of VC's in a position to influence founders. However I'm not feeling particularly eloquent today and haven't fully formed these ideas.
Granted, it is a necessary distraction for many of these companies, since they require VC funding in order to expand operations.
Instead, they talk about how healthy they are, their diets, or the climbing gym.
Being healthy is great! Keep it up! :)
In my experience (not Silicon Valley), status symbols in the form of material possessions have taken a back seat to status symbols in the form of fitness and "experiential materialism" (frequent travelling, exotic and varied experiences).
Describing physical fitness as "the new status-symbol" seems pretty bizarre to me, though. As a status symbol it probably predates humanity.
A ridiculous recent example is the Trulia co-founder rowing to Hawaii with his wife for the cause of...
wait for it....
the fight against sugar.
http://www.fatchancerow.org/blog/2014/8/4/zero-miles-to-go-d...
Is there bad about owning a Ferrari?
1. Good IT infrastructure
2. Plurality of high tech companies' headquarters
3. Proximity to major technology focused academic institutions
4. Legal infrastructure that enables innovation
All discussed previously here:
http://www.enterpriseirregulars.com/25271/silicon-valley%E2%...
and here:
If you try to bootstrap a startup without using SV's media outlets (as would be the case for people who don't have connections to these folks), you're going to have a much harder time.
The main advantage of tech news sites is that they're read by potential investors, partners, employees, etc. rather than because they get you users.
You really need to get your early users through graft, tech news coverage won't really help you except in exceptional circumstances.
As one of those developers working in DC I can tell without a doubt that the majority of us do it because we get paid a large amount of money.
I make more here than I ever could in Silicon Valley. Plus the cost of living is around half. Last I checked a one bedroom in SF was around $4k per month. I pay just over $2.5k here in DC (with a parking spot!).
> "Silicon Valley works because there is such a high density of people working on start-ups and they are inclined to help each other"
Bull shit. With all due respect to Sam--who no doubt knows what he's doing and saying and has become very successful--he is undoubtedly living in a bubble of his own. While I've found people generally open to the idea of chatting over a coffee, I've run across very few people that go out of their way to help. In fact, I more often find people who will either offer to help, and don't, or are so self-absorbed that they can't stop talking about how great/impressive they or their startup is without bothering to ask about you or what you're doing. I've even asked for a meeting with and gotten the following response: "I'm very busy. Let me know how you think you can help me and I'll think about it."
I've been trying to tell myself that it's just my luck: That it's not socio-economic or pedigree based (race or school) or that some people here don't have basic people skills and don't know how to carry on a conversation. That maybe it's just the luck of the draw that I run into more people that I'd classify as "ass holes" than not, but I'm coming--very late--to a sad reality: it is about socio-economic status--even more than that, it is about pedigree (yes, both race and the school you went to). It is about manners--most people don't have them. AND, it's about gender as well! I'm not a woman, but I'm willing to bet that if I was a woman, things would be a shit ton harder for me than they already are. I'm not a 20-something white male that went to Stanford and it's impossible for me to imagine how hard things would be if I had a vagina [0].
These are things we don't want to talk about. Thank god a conversation about gender is taking place, but there's another conversation about elitism and race that hasn't even started yet.
> "One of the biggest misconceptions about us is that you need to have pre-existing connections to get value from the network."
Complete and utter bull. Maybe in Sam's world, sure! White? 20-something? No-kids? Harvard/Stanford? B2C? Let’s chat!
Early-40's/Late-30's? Not-white? Married w/ kids? Not-Harvard/Stanford? B2B? Nope. (Don't bother to apply to YC either).
The reason Silicon Valley works is because there's a new-boys network that helps out those that check most of the right boxes. But here’s the good news: There are other networks. Networks of people in their 40’s. Networks of people that are from a specific ethnic group. Networks of people that went to the same (non-Harvard/Stanford) business school as you that are willing to help out. Are most of these networks as big and powerful as the circles Sam roles in? Absolutely not. But are they out there? Yes. One of the marvels of Silicon Valley is that because there are so many people out here, there’s a semi-decent chance you might find someone in one of these networks that will meet you for a coffee, offer to help, and try to make something happen for you. Is it likely? No, but possible, yes? And that—the possibility of something working out despite the odds—is what entrepreneurship is about. [0] - What It's Like Raising Money As A Woman In Silicon Valley (http://www.forbes.com/sites/jeffbercovici/2014/08/07/what-it...)
When someone gets coffee with a stranger they are "going out of their way to help". What more are you asking for in these conversations? Agreed, nobody's going to fund some random biz guy with no track record and "an idea" (my guess from your post, sorry if I'm wrong). Reading that as racism/elitism is counterproductive and most likely inaccurate.
Build something people want (get users) and the investor types you sound like you're pursuing will want to talk to you. Sure, a good resume can get you in the door, but the best resume isn't a list of stodgy institutions, it's a list of successful projects.
EDIT: FWIW, I agree that the deck is completely stacked against the poor. It is much easier to build something when you can borrow $20k from a rich uncle to live on for a while. It's much easier to talk to investor types if you're familiar with their world. But what I'm getting at above is that those things stop mattering the minute you've built a product people are using.
Now that's delusional. Clearly you wish that to be the case. It is not. SV is all about the gate-keepers, and they are all about profiling, which they call "signaling". If you don't fit into that mold, you are not going to receive a warm welcome; I don't care how good you are.
Read Peter Thiel's Stanford class CS183 notes. Peter explicitly says this, "It's like getting a degree at Berkeley. Okay. It's not Stanford. You can [have] a complicated story about how you had to do it because your parents had a big mortgage or something. But it's a hard negative signal to get past."
If you are a white male, in your early 20's and went to Stanford, go for it. If you're not, don't even try to play the game; it's rigged to use you, not help you.
Understanding that line is the only true gate.
YC does not discriminate in this way. We fund lots of people working on B2B and enterprise ideas, who are married with kids, who are in their 30's, 40's and yes older too. This claim is just plain false.
And while you or other YC partners may defend that fact with the fallacy that it's just a numbers game, as in those are the majority of applicants, I can't help but remind you that age discrimination and class warfare is rampant in the valley.
In "Why not to start a startup"
http://paulgraham.com/notnot.html
"9. Family to support"
"This one is real. I wouldn't advise anyone with a family to start a startup. I'm not saying it's a bad idea, just that I don't want to take responsibility for advising it. I'm willing to take responsibility for telling 22 year olds to start startups. So what if they fail? They'll learn a lot, and that job at Microsoft will still be waiting for them if they need it. But I'm not prepared to cross moms."
Can you see how a statement like this might make people with kids more reluctant to apply to YC?
Would YC be open to sharing anonymized data on the sitribution of YC-ers (at time of entry) by age, married (binary), # of kids and race?
I'm not saying SV isn't biased, it is flawed like anywhere else, but I think this whole "startups helping other startups" thing is a bit fluffy in the first place.
That's probably why there's been a geographic shift to SF.
99.9% sure I saw Sam pulling out of De Anza College at SUS 2014 in a Lotus Elise.
Well legally it's either ok and the contract (written or otherwise) allows you to post a copy or it doesn't.
This could also work against YC (Or many startups in the valley) very easily. I mean all these companies are being created in a time of easy money, what happens when the money dries out? Will they all fail? Since they are so correlated with each other's success.
Not all of them, no, but a lot will.
... A focus on making a lot of money in the long term at the expense of short-term opportunities is essential to building companies that have a huge impact – they take a long time."
Sounds like a good advice for CEOs and politicians in DC. Focusing on the long term goals...
[1] I grew up there. Never going back.
If the FT paid you to write it, I feel like it's probably not ok to post it where you'd like.
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