This seems to ignore cost of living. A lot of the reason salaries are high in San Francisco is because rent is high, and rent is high because salaries are high. Just because people can make "more money" in San Francisco doesn't mean they'll be better off.
Rent is high because housing is scarce. That does lead to higher salaries (because you can't attract employees if they can't afford housing) but the rent is not high just because salaries are high.
Rent is high because housing is scarce AND people can afford high rent. Like you say you can't get employees there if they can't afford it, but that also means that if no one could afford it there would be no demand at that price. Landlords will absolutely try to extract every last drop of economic surplus out of their properties.
Rent is not high just because of scarcity. It's high in North Virginia even there is plenty of new housing on the market - the problem is that developers are only building luxury apartments and trying to rent at above market prices. Most of these places are offering 3-4 months free up front because nobody is paying the obscene sticker prices for a 12 month lease.
It's not just a local phenomenon - public REIT's are buying up affordable units nationwide and renting them out at >20% above market...
Rent is high because home-buying credit is scarce. Banks are still gun-shy about lending, so only people with stellar credit or who are borrowing a small percentage of their earning power can get home loans right now. Which has caused REITs and other PE organizations to come in and buy up real estate to fill the gap -- and REITs are not interested in dealing with "affordable" rental units and the social problems that often come along with them. So they market their buildings as "luxury" and attach a high price tag.
This has led to a couple of side effects: a shortage of rental units (and the associated high rental prices), a shortage of qualified buyers (people aren't able to roll the equity from their starter house into a new home because they never bought the starter house), and an extreme shortage of new construction at the low end of the market (the only people who can even qualify to buy today are upper-middle class).
We're still not out of the subprime quagmire yet. The rental market in the US was sized for a world where subprime mortgages existed -- and now that they largely don't, those people have to live somewhere.
Regardless, "affordable" housing will not exist unless it is subsidized by the government. The private sector has no interest in renting to the low-income segment when the "up-market" segment is lower cost, higher margin and has significantly lower legal risk.
Well, if you assume everyone nationwide manages to save 10% of their income, and then everyone moves to Florida when they retire- San Franciscans will indeed be better off.
Expecting anyone to do anything in their self-interest but stay alive is abysmal public policy and shows little understanding of history or human nature.
"High cost of living" is a concept you get to use in personal decisionmaking, but it's not a concept you get to use in probing this causation, because it becomes tautological.
High cost of living, where cost of living is mostly housing, is associated with high economic productivity combined with low housing stock. It cannot be used to normalize high salaries to some other abstract concept that says useful things about economic productivity, because it only co-occurs with high salaries.
The article is asking why city A and city B became differently economically productive, not for excuses as to why one isn't technically rich or comparisons of disposable income. That's a different discussion.
Although it can be overstated, the real question (modulo the fact that, for geographic reasons, some cities and areas are better able to add housing stock than others) is why companies are willing to effectively channel large amounts of money to landlords and home sellers in certain areas of the country in order to be located there. I'm not sure the article makes an especially coherent argument on this particular point other than observing a trend toward more centralized industries.
I believe strongly that income increases have largely been to track to cost of living, in places where cost of living has remained flat, amazingly enough, incomes also remain flat.
I'm also dubious of the negative effects of deregulation of the airlines and rail/trucking industries - because of the machinations of the ICC Railroads broadly almost ceased to be a going concern.
Except that literally the next paragraph has a bunch of percentage comparisons (as does the preceding paragraph). These aren't cherrypicked stats; the article cites a range of comparisons to create a broad, meaningful picture of the situation.
But yes, by all means, dismiss a long and carefully researched article because it irks you the way a single figure is cited.
I cannot recommend the book Boomerang by Michael Lewis enough. He examines what several countries (Greece, Ireland, Iceland, Germany, the United States) did between 2000-2012 when they were allowed to barrow vast sums of money with little oversight. He's a great narrator and it's an overall insightful book.
Towards the end of the book he examines what a number of American cities did when they were allowed to barrow vast sums of money with little oversight. Thumming through it now he covers Vallejo and San Jose. TLDR would be they bankrupted themselves with pensions and tax cuts.
Oh and it's a light read too. And it has an Arnold Schwarzenegger interview.
The public sector unions across California circulated a letter in each municipality that they would only support candidates willing to approve 8% guaranteed annual pension returns.
And they got it. As a result, California cities are all bankrupt today.
FYI: San Jose is bad, but ironically wealthy Palo Alto has one of the worst budgets.
I dunno, when I look at migration data over the long term in the US, a few things stand out to me:
1. Weather is a huuuuuge factor. The large, growing population centers in the US are in warm or mild climates. Nobody wants to live in Buffalo or Minneapolis unless you're from there.
2. Location is far less important to the industries that generate the majority of value today. A lot of industrial jobs (and cities) sprung up in the midwest in the early part of the 20th century thanks to its proximity to raw materials (iron ore, coal, etc) and easily navigable waterways. That's not as important to the economy as a whole anymore, so companies have little reason to start (aka create jobs) in locations that are otherwise undesirable.
3. Given that there are fewer job opportunities that are reliant on proximity to natural resources, and that more of the new job opportunities will be located in cities with milder climates, it's no wonder that rust belt cities are bleeding people. Would you start a new business in Buffalo? Or would you just go to Chicago, New York or Philadelphia instead?
It doesn't take much capital to turn a 19th century mansion into an incubator/hacker house. Sure the weather and the Bills suck but inside you'll find a welcoming community spirit at a price you can start a business and raise a family at.
As for Upstate NY in general, I think it's a great place to start a business. At the end of the day, most businessss can be run anywhere (hence the boom in remote work), and, again, putting aside the biblically shitty weather, you have an affordable region with plenty of fresh water and local farms, and isn't at risk for rising tides (NY,FL,CA), earthquakes (Cascadia,CA), droughts (CA, southwest, Midwest when the aquifer runs dry), name it. This is a great region to start a family, and at the end of the day, your best employees are the ones tied to your office and location, not mercenary college grads shopping around every couple years for a raise.
In 100 years, Upstate NY can exist without desalinated/pumped life support. Not so sure about the rest...
Not everything can be made into a damn hacker house or incubator. That's not a business model for the economy as a whole. We're going to start seeing startups doing rollups of startups doing shared working spaces for startups making apps and productivity software for startups doing shared working spaces and online advertising.
That's actually a great mental model for a scalable business:
"Can I imagine Private Equity coming in and doing a regional rollup of this business model, slapping a slick marketing package on it and returning 10x the value?"
If the answer is "no", then it's probably a money-losing business, because that's the exit strategy for a lot of these local delivery businesses.
"If the answer is "no", then it's probably a money-losing business."
There a numerous businesses that make plenty of money that don't fit that scenario. They're just ones that are often dismissed as "lifestyle businesses".
The issue is the taxes and the brain drain. It's impossible to keep people there (I'm a native of upstate NY and have recruited developers). We kept losing people to NYC and West Coast based companies before we could even offer. Anyone we did get who wa sworthwhile moved west as well (I did too).
Upstate has a lot of advantages (its a great place to raise a family), but has some massive disadvantages as well (the weather is one of them). There isn't enough tech to keep developers, because they know if your company tanks or fires them, the market isn't very good.
> There isn't enough tech to keep developers, because they know if your company tanks or fires them, the market isn't very good.
That's the big one. I moved from a "small town" with a single tech employer to the SF Bay Area to reduce the risk of unemployment. It was not a financially great decision (+50% salary, +300% cost of living) but here, if things go south, I can more easily find another employer. This is not true for most of the country.
I'd gladly move back to small town America--I like backyards and big houses--but not if it means my life is at the whim of one or two local employers.
This is true in a lot of fields. I know someone who was doing international relations work for Walmart in Bentonville Arkansas which is basically a Walmart company town. They axed his group and he basically ended up living out of a suitcase and then moving to look for a new job. (Obviously a pretty specialized role and he needed to be somewhere he could physically network with a lot of folks.)
It's not, the issue is that the market is so small, that even if you are paying really well, no one else is. So if things go south, you're going to have to move.
...so you put another $20k in your emergency fund from your much-above-market-rate salary, right? I have a hard time seeing a developer making $200k in Buffalo getting excited about many NYC or SF offers.
On the one hand the stereotypical 20-something urbanite without local roots doesn't want to live in Buffalo (or Kansas City or wherever) even if it's an economically rational choice if they have options. On the other hand, if they have a family, it's not as simple as hopping on a plane and going somewhere else.
[Edit: I'd also argue that, if you can't imagine having a future in a particular locale, it may not make sense to take a job there unless it's with the explicit intent of having it be a limited time thing even if the pay is good. The networking associated with being physically in an area where job opportunities are good shouldn't be overlooked.]
There are exceptions. There are successful tech companies outside of the usual places. And certainly outside of Silicon Valley and NYC. But attracting talent for non-remote positions can be challenging.
That 20-something is very stereotypical. I'm sure some cities are more attractive than others, but there are many that would not be interested in NYC of SF. Many more young people happily live outside of NYC and SF than inside those cities.
As for families, NYC and SF are unattractive because of their extremely high cost of living, especially if home ownership is important. If long-term zip-code stability is important, the competition for Buffalo wouldn't be NYC or SF. Texas or North Carolina, maybe.
Oh, I agree with you. For tech, Raleigh and Austin have a lot of activity. Massachusetts of course--Boston/Cambridge housing costs are expensive but suburbs/exurbs are a lot cheaper than the Valley. Colorado.
There is a stereotype on HN that 20-somethings are all moving into a city without cars. There is a slight increase in college-educated millennials living in a handful of particularly dense urban areas but the overall trend is much exaggerated.
So I can speak from experience here, on both ends. I was recruited back to upstate NY after moving away for about 200k to run an engineering team, I make a bit north of that on the west coast. I turned it down without even thinking about it too much, one I would have to uproot my family, and if that company went sour, I wouldn't be able to provide for them the same way and we'd have to move again. I also couldn't take the winters anymore.
If you are recruiting top end college grads, forget it, they'll get snapped up by the bigger companies, even if you are offering them the same, it's about the name and moving out west. If you are recruiting senior engineers, none of them will move from the bigger cities, and there aren't really that many local if at all that can solve certain problems, they all move away.
I'm still not buying it. That may be true for you, but it certainly isn't true for me, at least not yet.
Plus, there are many people interested in Mr. Money Mustache (who espouses financial independence through low cost-of-living), rural activities (rock climbing, hunting, etc.), or any number of other things you can't find in NYC or SF.
Yeah, but unless you were from the area, you wouldn't start a new business there. Nor would you look for employment there if you weren't from the area.
> This is a great region to start a family, and at the end of the day, your best employees are the ones tied to your office and location, not mercenary college grads shopping around every couple years for a raise.
In other words, you take what you can get from the local hiring pool and hope your best people don't have better options. This is great if you're looking to bootstrap a small business, but once you get past that stage it can be difficult to recruit executives with the market savvy you need to a small town. I'm all for remote work arrangements, but when developing a product strategy, colocation is a huge help.
Don't get me wrong; I don't mean to shit all over Buffalo -- I only used it as an example because the weather is awful. But as a city to build a tech startup in 2016, it's not high on the list. Hell, the list pretty much stops after "Silicon Valley" and "New York City" -- which leads to its own problems (like how you can't really afford to live in either city on less than $125k/yr).
I can't speak for SF, but for a single person at least, $125k/yr is easily doable in NYC. Sure, you won't have a spacious loft all to yourself in SoHo perhaps, but you'll get by just fine on that salary.
Now if you're talking about raising a family on a single income of that much, that's a different story...
You were almost there, but your last sentence is ridiculous. The median household income for families with children in NYC was $50,800 in 2014. Even for Manhattan alone that figure is $99,000.
It is certainly "doable" to raise a family on $125,000 a year or less in NYC as evidenced by the fact that millions of people are doing so.
> It is certainly "doable" to raise a family on $125,000 a year or less in NYC as evidenced by the fact that millions of people are doing so.
Sure, living in NYC for less than $125k is doable under the following circumstances:
1. You have a rent controlled apartment.
2. You are on welfare or other government assistance programs (which often come with public housing).
3. You have other income (like a trust fund).
4. You live in New Jersey, Long Island or Yonkers and commute an hour each way.
5. You pay the high rent anyway, build no savings because you're spending $2,000/mo on a studio you split with a roommate, regret living in NYC - and move away a few years later.
At least among my friends, NYC is a revolving door of "Yeah, New York is awesome!" and "New York is awesome but I'm a successful 30-year-old professional can't afford more than a studio" to "Fuck this place, I'm moving to Austin."
The only reason there are any poor people left in Manhattan is because the city essentially subsidizes them living there. I have nothing against that, but Manhattan real estate is unaffordable for mere mortals otherwise.
One can live in e.g. Kew Gardens, have a 35 minute commute to midtown, and pay $2000 / month for a spacious two bedroom shared with spouse and child. No trust fund needed.
If your friends prefer Austin to Queens, more power to them. But they ought not to go around saying it is impossible to live/raise a family in NYC on less than $125k when it isn't true.
SF is complicated because the housing prices are so in flux, but as of a few years ago I was living in SF in a decent place with a single roommate for about ~$25k/yr (it's a couple K higher now). I'm still rent-controlled at that place but market rate on that same apartment is roughly double now, and that's far far more than any of my friends are paying (my location is pretty great). So even worst-case (i.e. if I was paying market and chose not to move into a cheaper place), I would be paying maybe $40k?
So the long and short of it is, $125k, even before tax, is far more than you need to live in SF for a single person. That isn't to say it's wonderful to have to spend so much on rent, but it's beyond hyperbole to say you need $125k+ to survive.
>your best employees are the ones tied to your office and location, not mercenary college grads shopping around every couple years for a raise.
My experience disagrees. In my experience, the best employees, by definition, will have other options. Worst case, Amazon, Google, Microsoft, Facebook, or whoever else will be willing to pay to relocate them to the Bay Area or Seattle. The ones that are tied to your company, the ones who can't get a job anywhere else, are more likely to be a drag on productivity than a boost.
I think you're both right: the best employees are the ones who have other options, but choose not to exercise them. Don't pine for the great employees you've lost to the Bay Area titans, seek out the great employees who could find jobs in those places but choose not to for one of the many good reasons.
1. New York City has less warm/mild weather than any coastal city southern to it along the East Coast. Yet it has the highest per-capita income of any of them. I don't know your location but this unfounded weather-as-a-migration-driver theory seems to be propagated by Californians and Coloradans.
2. Agreed, network effects are what drive these headquartering decisions now.
3. It's interesting that you're choosing Buffalo as an example. It's currently experiencing a resurgence [1] [2], as is Pittsburgh [3] [4].
There's a lot of history, even if sometimes accidental history, in why certain industries are so concentrated where they are. But there does seem to be a natural tendency to concentrate in many cases. For example, the Kendall Square area of Cambridge is pretty much non-stop pharma/biotech construction. MIT is part of the reason in that case but I'm sure it's not the only one.
Of course, there are often Tier 2 locales for a given industry that have less of a concentration but still have a reasonable hiring pool and/or people willing to relocate there (plus remotes). They may not be as in-demand as the center of the given industry, but they can be a lot cheaper or attractive in other ways. In tech, the housing pains of the Bay area are arguably the perfect storm of historical happenstance, a great climate for the most part, and constrained geography.
The pharma/biotech is driven by both the MIT/Harvard connection but also the local cluster of medical research institutions. You don't have to go back too far to get to a point where real estate in Kendall/Central/East Cambridge was relatively cheap. The confluence of these things is what started the feedback loop there.
Yeah, I remember when the area beyond Tech Square or so was basically "there be dragons here." There was a lot of, shall we say, underutilized land from Cambridge's day as an eastern Detroit a fair chunk of which MIT owned but hadn't developed.
I would walk to Kendall when I was an undergrad but I thought of that as being totally disconnected from where the long-gone Lechmere was.
Yeah, my memory goes back to the late 90s where there was kendall sq proper (area around the T stop), Cambridge Center, 1 Kendall and the Galleria and not a whole lot in between any of them. Tech Sq was there too although no one ever went there except if they had to go to tech square.
Even though the distances are all the same everything seems so much closer now just because it's almost a single contiguous entity now instead of 5 min walks through parking lots and empty space just to get to the next building.
Both those numbers seem to be accurate for the city limits. Wikipedia says the population of NYC was 8.5 million in 2014. City limits are, of course, a somewhat arbitrary concept and NYC's environs are more crowded than Houston's. I'm not sure what your point is however. There are a variety of historical and other reasons why the South doesn't have cities as large as the North and the West Coast.
Well, New York is a special case in that its climate is within a certain "sweet spot" (warm but not hot in the summer, not too far below freezing in the winter) and the fact that its emergence as a major financial center is a historical relic of the fact that it has been the "gateway to America" for over 150 years.
Buffalo and Pittsburgh are experiencing a resurgence only because when you fall as far as those cities have, there has to be a bottom somewhere. But residents of places like that are looking at a lot of problems in the future: they have less than half the population they did 50 years ago, so there is a lot of urban blight (and the other problems that come along with it) to clean up and a very small tax base to pay for it. So while they may see a resurgence, they're still not out of the woods yet.
Detroit may be an even more pronounced example. Apparently the core down by the river is actually gentrifying. But large portions of the city are seriously blighted.
That's exactly what happened to Pittsburgh as well. There are some areas near downtown and the university areas that are finally getting better, but not less than 2 miles from those areas are entire neighborhoods and small towns that have been abandoned for decades.
Pittsburgh's decline predates the fall of Detroit by a decade or two (most of the steel mills shut down in the early 70s) but the parallels are striking.
The counterexample to that theory is that cities with warm climates and good economies, like Houston and Atlanta, are falling behind in terms of average income relative to places like New York.
> The counterexample to that theory is that cities with warm climates and good economies, like Houston and Atlanta, are falling behind in terms of average income relative to places like New York.
I would actually attribute the income disparity to the powerful political opposition to labor unions in both Georgia and Texas. Unions have far more protection under New York law than in either of those states.
Can I get a citation on that? Houston has both a low cost of living and a high immigration rate (including undocumented immigrants), neither of which are really germane to the conversation. I'd like to see if those numbers take those things into account and, if not, how everything looks when taken together.
This was an excellent, thought-provoking piece. Anyone have some book recommendations for further examinations of how the rise of the corporation has affected America?
› Today, the commuter-rail system that once made it comparatively easy to live in suburban New Jersey and work in Manhattan is falling apart, and commutes from other New York suburbs, whether by road or rail, are also becoming unworkable. Increasingly, this means that only the very rich can still afford to work in Manhattan, much less live there
I don't find this to be true. New York City subways are better now than they were in the 1970s. Public transportation into Manhattan has not changed much in the past decades, although the prices have risen. There are plenty of places to live for working class people with decent commutes to Manhattan. I know plenty of people at startups who lived in Manhattan - engineers could live by themselves, others needed roommates. You're not going to live on 5th Avenue, of course. I live in the suburbs so my apartment has some space, not due to expense - I could rent a smaller Manhattan apartment for the same price.
> They did so primarily by making the tech industry much less about engineering and much more about lawyering and deal making.
This is my take home for everything. Lawyers are the ones in congress. Who ultimately benefits from the arrangements we have now? Lawyers and pretty much no one else.
Simplistic? Yes. However, if you play the 'follow the money' game I'm not sure who else benefits, because I'm fairly certain it isn't the landlords.
What really stood out to me was the idea that the current climate of shooting for an acquisition as a primary exit strategy is due to the threat of the entrenched goliaths of the industry and the concentration of power they have in terms of markets and patents. I had never linked that trend to anti-competitiveness in the market because the market looks so competitive based on how many companies are starting and getting funded.
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[ 3.0 ms ] story [ 117 ms ] threadIt's not just a local phenomenon - public REIT's are buying up affordable units nationwide and renting them out at >20% above market...
http://www.multifamilyexecutive.com/business-finance/luxury-...
This has led to a couple of side effects: a shortage of rental units (and the associated high rental prices), a shortage of qualified buyers (people aren't able to roll the equity from their starter house into a new home because they never bought the starter house), and an extreme shortage of new construction at the low end of the market (the only people who can even qualify to buy today are upper-middle class).
We're still not out of the subprime quagmire yet. The rental market in the US was sized for a world where subprime mortgages existed -- and now that they largely don't, those people have to live somewhere.
Regardless, "affordable" housing will not exist unless it is subsidized by the government. The private sector has no interest in renting to the low-income segment when the "up-market" segment is lower cost, higher margin and has significantly lower legal risk.
High cost of living, where cost of living is mostly housing, is associated with high economic productivity combined with low housing stock. It cannot be used to normalize high salaries to some other abstract concept that says useful things about economic productivity, because it only co-occurs with high salaries.
The article is asking why city A and city B became differently economically productive, not for excuses as to why one isn't technically rich or comparisons of disposable income. That's a different discussion.
I'm also dubious of the negative effects of deregulation of the airlines and rail/trucking industries - because of the machinations of the ICC Railroads broadly almost ceased to be a going concern.
And that is a 5% difference? 25% difference? 55%? Is that number inflation adjusted?
I hate stats like this. When they show up they make me really assume the rest of the article is junk as well.
1966 average income:
$3,962 - New York City area
$3,875 - Cedar Rapids area
So, 2% less.
But yes, by all means, dismiss a long and carefully researched article because it irks you the way a single figure is cited.
But my point was about articles in general that do these sort of absolute value comparisons without providing any context, which is what I wrote.
Sounds like you stopped reading at the first page and didn't bother to check the rest.
Towards the end of the book he examines what a number of American cities did when they were allowed to barrow vast sums of money with little oversight. Thumming through it now he covers Vallejo and San Jose. TLDR would be they bankrupted themselves with pensions and tax cuts.
Oh and it's a light read too. And it has an Arnold Schwarzenegger interview.
The public sector unions across California circulated a letter in each municipality that they would only support candidates willing to approve 8% guaranteed annual pension returns.
And they got it. As a result, California cities are all bankrupt today.
FYI: San Jose is bad, but ironically wealthy Palo Alto has one of the worst budgets.
1. Weather is a huuuuuge factor. The large, growing population centers in the US are in warm or mild climates. Nobody wants to live in Buffalo or Minneapolis unless you're from there.
2. Location is far less important to the industries that generate the majority of value today. A lot of industrial jobs (and cities) sprung up in the midwest in the early part of the 20th century thanks to its proximity to raw materials (iron ore, coal, etc) and easily navigable waterways. That's not as important to the economy as a whole anymore, so companies have little reason to start (aka create jobs) in locations that are otherwise undesirable.
3. Given that there are fewer job opportunities that are reliant on proximity to natural resources, and that more of the new job opportunities will be located in cities with milder climates, it's no wonder that rust belt cities are bleeding people. Would you start a new business in Buffalo? Or would you just go to Chicago, New York or Philadelphia instead?
It doesn't take much capital to turn a 19th century mansion into an incubator/hacker house. Sure the weather and the Bills suck but inside you'll find a welcoming community spirit at a price you can start a business and raise a family at.
Buffalo has also been experiencing a boom in green tech investment (http://mobile.buffalonews.com/?articleRedirect=1&url=http%3A...)
As for Upstate NY in general, I think it's a great place to start a business. At the end of the day, most businessss can be run anywhere (hence the boom in remote work), and, again, putting aside the biblically shitty weather, you have an affordable region with plenty of fresh water and local farms, and isn't at risk for rising tides (NY,FL,CA), earthquakes (Cascadia,CA), droughts (CA, southwest, Midwest when the aquifer runs dry), name it. This is a great region to start a family, and at the end of the day, your best employees are the ones tied to your office and location, not mercenary college grads shopping around every couple years for a raise.
In 100 years, Upstate NY can exist without desalinated/pumped life support. Not so sure about the rest...
"Can I imagine Private Equity coming in and doing a regional rollup of this business model, slapping a slick marketing package on it and returning 10x the value?"
If the answer is "no", then it's probably a money-losing business, because that's the exit strategy for a lot of these local delivery businesses.
There a numerous businesses that make plenty of money that don't fit that scenario. They're just ones that are often dismissed as "lifestyle businesses".
Upstate has a lot of advantages (its a great place to raise a family), but has some massive disadvantages as well (the weather is one of them). There isn't enough tech to keep developers, because they know if your company tanks or fires them, the market isn't very good.
That's the big one. I moved from a "small town" with a single tech employer to the SF Bay Area to reduce the risk of unemployment. It was not a financially great decision (+50% salary, +300% cost of living) but here, if things go south, I can more easily find another employer. This is not true for most of the country.
I'd gladly move back to small town America--I like backyards and big houses--but not if it means my life is at the whim of one or two local employers.
Seems like that's a problem that could be solved with a big enough compensation package, right?
[Edit: I'd also argue that, if you can't imagine having a future in a particular locale, it may not make sense to take a job there unless it's with the explicit intent of having it be a limited time thing even if the pay is good. The networking associated with being physically in an area where job opportunities are good shouldn't be overlooked.]
There are exceptions. There are successful tech companies outside of the usual places. And certainly outside of Silicon Valley and NYC. But attracting talent for non-remote positions can be challenging.
As for families, NYC and SF are unattractive because of their extremely high cost of living, especially if home ownership is important. If long-term zip-code stability is important, the competition for Buffalo wouldn't be NYC or SF. Texas or North Carolina, maybe.
There is a stereotype on HN that 20-somethings are all moving into a city without cars. There is a slight increase in college-educated millennials living in a handful of particularly dense urban areas but the overall trend is much exaggerated.
If you are recruiting top end college grads, forget it, they'll get snapped up by the bigger companies, even if you are offering them the same, it's about the name and moving out west. If you are recruiting senior engineers, none of them will move from the bigger cities, and there aren't really that many local if at all that can solve certain problems, they all move away.
Plus, there are many people interested in Mr. Money Mustache (who espouses financial independence through low cost-of-living), rural activities (rock climbing, hunting, etc.), or any number of other things you can't find in NYC or SF.
> This is a great region to start a family, and at the end of the day, your best employees are the ones tied to your office and location, not mercenary college grads shopping around every couple years for a raise.
In other words, you take what you can get from the local hiring pool and hope your best people don't have better options. This is great if you're looking to bootstrap a small business, but once you get past that stage it can be difficult to recruit executives with the market savvy you need to a small town. I'm all for remote work arrangements, but when developing a product strategy, colocation is a huge help.
Don't get me wrong; I don't mean to shit all over Buffalo -- I only used it as an example because the weather is awful. But as a city to build a tech startup in 2016, it's not high on the list. Hell, the list pretty much stops after "Silicon Valley" and "New York City" -- which leads to its own problems (like how you can't really afford to live in either city on less than $125k/yr).
Now if you're talking about raising a family on a single income of that much, that's a different story...
It is certainly "doable" to raise a family on $125,000 a year or less in NYC as evidenced by the fact that millions of people are doing so.
Sure, living in NYC for less than $125k is doable under the following circumstances:
1. You have a rent controlled apartment.
2. You are on welfare or other government assistance programs (which often come with public housing).
3. You have other income (like a trust fund).
4. You live in New Jersey, Long Island or Yonkers and commute an hour each way.
5. You pay the high rent anyway, build no savings because you're spending $2,000/mo on a studio you split with a roommate, regret living in NYC - and move away a few years later.
At least among my friends, NYC is a revolving door of "Yeah, New York is awesome!" and "New York is awesome but I'm a successful 30-year-old professional can't afford more than a studio" to "Fuck this place, I'm moving to Austin."
The only reason there are any poor people left in Manhattan is because the city essentially subsidizes them living there. I have nothing against that, but Manhattan real estate is unaffordable for mere mortals otherwise.
One can live in e.g. Kew Gardens, have a 35 minute commute to midtown, and pay $2000 / month for a spacious two bedroom shared with spouse and child. No trust fund needed.
If your friends prefer Austin to Queens, more power to them. But they ought not to go around saying it is impossible to live/raise a family in NYC on less than $125k when it isn't true.
So the long and short of it is, $125k, even before tax, is far more than you need to live in SF for a single person. That isn't to say it's wonderful to have to spend so much on rent, but it's beyond hyperbole to say you need $125k+ to survive.
My experience disagrees. In my experience, the best employees, by definition, will have other options. Worst case, Amazon, Google, Microsoft, Facebook, or whoever else will be willing to pay to relocate them to the Bay Area or Seattle. The ones that are tied to your company, the ones who can't get a job anywhere else, are more likely to be a drag on productivity than a boost.
2. Agreed, network effects are what drive these headquartering decisions now.
3. It's interesting that you're choosing Buffalo as an example. It's currently experiencing a resurgence [1] [2], as is Pittsburgh [3] [4].
[1] http://www.nytimes.com/2015/07/21/business/energy-environmen...
[2] http://www.ci.buffalo.ny.us/Home/Leadership/City_Comptroller...
[3] http://www.usnews.com/news/articles/2014/09/02/an-urban-revi...
[4] http://www.economist.com/node/14460542
Of course, there are often Tier 2 locales for a given industry that have less of a concentration but still have a reasonable hiring pool and/or people willing to relocate there (plus remotes). They may not be as in-demand as the center of the given industry, but they can be a lot cheaper or attractive in other ways. In tech, the housing pains of the Bay area are arguably the perfect storm of historical happenstance, a great climate for the most part, and constrained geography.
Yeah, I remember when the area beyond Tech Square or so was basically "there be dragons here." There was a lot of, shall we say, underutilized land from Cambridge's day as an eastern Detroit a fair chunk of which MIT owned but hadn't developed.
I would walk to Kendall when I was an undergrad but I thought of that as being totally disconnected from where the long-gone Lechmere was.
Even though the distances are all the same everything seems so much closer now just because it's almost a single contiguous entity now instead of 5 min walks through parking lots and empty space just to get to the next building.
NYC population in 1950: 7,891,957, vs 8,175,133 in 2010.
Houston, Tex. population in 1950: 596,163 vs 2,016,582 in 2010.
PS: Without AC, even NYC get's unpleasantly hot in the summer so there are clear tradeoffs on the east coast.
Buffalo and Pittsburgh are experiencing a resurgence only because when you fall as far as those cities have, there has to be a bottom somewhere. But residents of places like that are looking at a lot of problems in the future: they have less than half the population they did 50 years ago, so there is a lot of urban blight (and the other problems that come along with it) to clean up and a very small tax base to pay for it. So while they may see a resurgence, they're still not out of the woods yet.
http://www.theguardian.com/cities/2015/feb/05/detroit-city-c...
Pittsburgh's decline predates the fall of Detroit by a decade or two (most of the steel mills shut down in the early 70s) but the parallels are striking.
I would actually attribute the income disparity to the powerful political opposition to labor unions in both Georgia and Texas. Unions have far more protection under New York law than in either of those states.
I don't find this to be true. New York City subways are better now than they were in the 1970s. Public transportation into Manhattan has not changed much in the past decades, although the prices have risen. There are plenty of places to live for working class people with decent commutes to Manhattan. I know plenty of people at startups who lived in Manhattan - engineers could live by themselves, others needed roommates. You're not going to live on 5th Avenue, of course. I live in the suburbs so my apartment has some space, not due to expense - I could rent a smaller Manhattan apartment for the same price.
This is my take home for everything. Lawyers are the ones in congress. Who ultimately benefits from the arrangements we have now? Lawyers and pretty much no one else.
Simplistic? Yes. However, if you play the 'follow the money' game I'm not sure who else benefits, because I'm fairly certain it isn't the landlords.