What does it look like if a rent bubble pops? Can such a thing even happen? Rents tend to be difficult to change without moving. I guess rents can fall if demand considerably outstrips supply and the landlords get desperate, but most landlords I've seen are pretty stubborn and will hold out until the last second before they lower the rent a single penny.
I wouldn't expect rent to have fallen in 2008. Thousands of people were losing the homes they owned and becoming renters, sky-rocketing the demand for rental property.
That's right. At the start of the crisis, I had landlords offer crazy incentives - 2 months rent free on a 13 month lease. They just wanted to lock people in. In a few months, when it was clear that people abandoning houses were moving into apartments, these deals disappeared and rents actually started to increase!
That wasn't my experience. I knew several renters who renegotiated their rent down around 2008. We're taking knocking off 10%+. With rent control in SF that's locked in inperpetuity.
This is a pretty crazy macroeconomic view to take, that you've known some stubborn landlords therefore rents across a city will never come down.
Look at the numbers of how many jobs have been created vs housing units created in a place like SF over the past decade. It's not some mystical force driving up rents, if you build enough housing it will become more affordable. There's no evidence that housing operates outside the principles of supply and demand, despite what some Nimby politicians will try to tell you.
Not literally forever, of course, but I think it's naive to say people's inability to have the lifestyle they want will deter increasing rents. Empirically, society on balance doesn't care one tiny bit how much hardship people endure, and people will endure the hardship. I'm not seeing what mechanism is assumed to counter that.
It's also difficult for the more fundamental reason that space is one of the harder goods to 'manufacture'.
We're not running out of land, obviously, but for standards like "land within 3 miles of the city center and -100 to 500 feet of the surface", that's much tougher. Not full, but crowded and with exponentially-rising development costs (since construction gets more difficult and annoys more people).
Of course, that's a problem I associate with NYC, LA, etc. SF (and probably London?) get blocked politically before they ever reach that point.
1. Repeal prop 13.
2. Apply local or state taxes and penalties against empty lots and housing/retail units without real tenets.
3. Reevaluate property tax annually and apply land tax for dense urban cores to encourage mixed development and high density units.
Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world. Let's concentrate on the US for a moment. Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines? Talented people already move from one coast to the other, so they could as well move to any other place. The rest of the country's infrastructure is so good that you could connect venture capitalists, founders and customers in any arbitrary way.
I also say to the main point of the articles: rents have a lot of room to grow under the current logic. City centers simply get voided of average earning people and replaced by high earning ones. As soon as they are the average earners, even more wealthy people move in. Also with the rents, salaries go up, so people have the possibility to pay for their accommodation again. While in Berlin you could easily live with 40.000 Dollar/year, you'll probably have to add another 60.000 so people are at least somehow able to move to work for your new shiny SV company.
There are certainly a lot of factors. People want to live in trendy cities. There's a lot to consider besides rent - culture, nightlife, etc. San Francisco sure does have some of the best food in the country (and with tech consuming most of spare time the way it is, eating out is really a huge part of culture). Rent definitely ends up being the deal breaker for many, but for others isn't.
It's a lot harder for a company to hire top tech talent if they're in Miami / Des Moines, because the Bay Area has a much higher concentration of tech workers. Convincing people to move is hard, especially so for more experienced tech workers who have a life/family somewhere. You need to be getting an insane deal for it to be worth abandoning your friends and family/forcing your partner to find a new job (and I've yet to see tech companies trying to compete on comp vs SF/SV outside of them). Can't run off middle-road new grads alone (Edit: Good point below that top grad talent wants to hit the big cities too).
Exactly. As I watch Downtown Brooklyn seemingly magically transform itself overnight from a collection of third-tier forgotten university offerings to a genuine nexus of tech and engineering education[0] I'm reminded that this dynamic does indeed work in both directions.
Exactly, people in certain circles have this somewhat self-referential definition of tech that means "what they do a lot of in Silicon Valley." And ignore things like the oil industry or pharma/biotech which are very much tech but just don't happen to have much presence in SV.
This whole thread, unfortunately, is conflating "tech" with "information tech". When talking about "big picture" stuff like national real estate trends and macro-economics, the HN bubble is limiting.
The Dallas area had several universities before UTD was founded: the University of North Texas, Southern Methodist University, and the University of Texas at Arlington (though UNT had a different name at that time). These existing universities were not STEM schools.
What made UTD different was that it was founded by the same people who founded the largest technology company in the area, and they specifically founded it in order to do something about the low number of STEM graduates in the Dallas area. The TI founders went out of their way to engineer a STEM culture in a city that didn't have one just to grow some more talent for their company.
From Wikipedia [0]:
> Qualified personnel required by TI were not readily available in the Dallas-Fort Worth area because the region's universities did not provide enough graduates with advanced training in engineering and physical sciences. TI was forced to recruit talent from other states during its expansion and the founders observed in 1959 that "To grow industrially, the region must grow academically; it must provide the intellectual atmosphere, which will allow it to compete in the new industries dependent on highly trained and creative minds".[12] To compensate for this shortage they established the Graduate Research Center of the Southwest in 1961. The institute initially was housed in the Fondren Science Library at Southern Methodist University. Land for the center was acquired by Jonsson, McDermott, and Green in Richardson in 1962 and the first facility, the Laboratory of Earth and Planetary Science (later named the Founders Building), opened on the grounds of the present-day UTD campus in 1964. The Graduate Research Center of the Southwest was renamed the Southwest Center for Advanced Studies (SCAS) in 1967 and in 1969 the founders transferred the land and assets of SCAS to the State of Texas. On June 13, 1969 Governor Preston Smith signed the bill adding the institution to the University of Texas System and creating the University of Texas at Dallas.
It's true that not everybody needs it, that's a separate argument probably. Companies that feel they don't are often outsourcing though, no? There's definitely the argument of "talent pays for itself (in multiples)" to think about.
I mean sure, if you want to build a lifestyle company, and by the way there's no shame in that.
But the dream, and the reason all the coastal co's are in it, is to be the next Google or Facebook, or Twitter or Snapchat.
You could say an app to get people to come over to your house won't change the world, but people think hey maybe it will grow, or we'll just pivot, and wind up with the next Flickr or Slack, and that's certainly good enough.
Why does every company in this industry need to be either a "lifestyle business" or a Google wannabe? What ever happened to growing a business organically over time, or with non-VC investments?
Because if you're growing organically some VC funded competitor is going to try to grow exponentially, and swallow you up or put you out of business. There's no middle ground because all that looks like to people trying to get a return on their investment is that you aren't trying hard enough. That either means they push you harder, or they fund a competitor if you aren't beholden to them.
Not all niches will attract VC funded competitors. There are plenty tech companies that are profitable, well-capitalized, have moderate organic growth, and compete with similarly sized companies. There certainly is a middle ground.
> There are plenty tech companies that are profitable, well-capitalized, have moderate organic growth, and compete with similarly sized companies.
Sure, but that just means that they and their competitors have already grown to the point where the market is saturated, and any further growth they are experiencing is because the market is growing or to the detriment to their competitors. They probably already had an exponential growth period, although it could have been short-lived if the market is small (and if the market is really small, may not have looked like exponential growth at all, and may have just looked like becoming profitable and leveling out).
You're right that not all niches will attract VC funded competitors, but I think the number niches that meet that criteria are actually very small, in this industry. There's always someone that thinks they can disrupt it somehow, or market it better to show people the market is actually much bigger than it appears. Keep in mind, the VC funded competitor doesn't have to succeed in it's task of taking over or changing the market to have extremely detrimental effects on companies that aren't working with the same paradigm.
Having a market large enough to support a few small companies but not large enough to warrant VC funded competitors that stays that way seems a rarity.
This exact thing happened at my last company, the boss grew it organically, but then some group in NY decided they were going to buy everything, so they bought 10ish companies (including us) and cobbled together a large industry player, which will out compete the small guys.
Theory says you'll be run over by the next VC-funded Facebook in your market, and will have to subsist by being a niche business (better service or catering to certain segments).
So, either the next Facebook or lifestyle. Of course, real world is not perfect so there's space for medium-sized businesses, but they're not an economic optimum (they're leaving money on the table either way).
> What if most startups only need "good" developers to develop their mostly CRUD apps and don't need "the best" developers?
There are some exceptions, but most any successful technology product needs at least a few great technical leaders, if only to say no to net-negative ideas, provide mentoring to those who need it, and to make strategic technical decisions (architecture, tech stack, technical hiring strategy, etc.).
It doesn't require being in the top 10% of a top 10 school to be able to recognize bad ideas though. The standard you are describing is what I would call "qualified" or "competent" not "elite" or "top".
There are highly competent people in both the lower 90% of the top 10 schools as well as in non-top tier schools
And as for competence, there's an order or two difference between a developer that can add some more CRUD to a service and one that can say no to doing the exact same thing when it is a net negative to the system and/or organization. It's one of those things that sounds simple, but it takes a lot to even know which technical battles are the top priority.
They must have a different definition of "top" talent. I'm thinking of people like Daniel Bernstein and Fabrice Bellard. The list is really very short.
But of course that definition is useless to a VC fueled, exponentially growing trainwreck/unicorn that wants to hire hundreds or thousands of "engineers".
Exactly right. Young people today would rather be poor in a "trendy" city, than rich in a not so trendy one. It has almost become a badge of honor of how much you can rough it to stay afloat in X trendy city. I am guessing it was not like this for previous generations, and I think it leads to too much homogeneity of culture. I think we should start to encouraging people to go to a uncool city and help build it up and make it cool.
I was speaking with a friend about this recently. I do think we'll see growth in smaller cities, kind of like how Austin exploded. I think an interesting aspect of this is the job problem. Jobs are getting more scarce outside cities as industries change it seems, and I wonder how that might affect population movement.
> I think we should start to encouraging people to go to a uncool city and help build it up and make it cool.
While this is a laudable project and it works in some places, many rural citys are very conservative and against anything new the youth might be interested in.
This is the issue I face in the area where I grew up and still reside in rural New York. If you read the newspaper editorials it's a constant string of racist and homophobic garbage. I'm approaching 30 and it's very hard to find like minded people here, much less single women with ambitions and who aren't just looking for a baby daddy.
So why haven't I moved? Frankly I'm scared that I can't cut it elsewhere. My job is secure and pays very well for the area (as a single person I make about 160% of the median family income). I could move and work remotely for the same amount which would result in a drastic decrease in quality of life, or try to get another job that I'm probably not qualified for. I've been trying to figure it out for the better part of a decade now.
Where in upstate? You should look up Duncan Crary, who lives in Troy, NY. He did a ton of podcasts with James Howard Kunstler, and has a newer one called a Small American City. It is about this very topic of revitalizing small American cities. There is also Ithaca, NY.
It was definitely like this for previous generations. Young people have been moving to big cities they could barely afford for at least 100 years, and probably since Roman times.
It wasn't really that true in the US for about the 50 years after WW II. Yes, NYC and maybe a few other places. My cohort from undergrad and grad school in the 80s or so did not widely live in cities (again, with the totable exception of people I knew in finance many of whom lived in Manhattan). And, at least in Boston/Cambridge, there was very little "tech" in the city. After Teradyne moved out, there may have still been some consulting but not a single product company of any size.
That's somewhat different today but it's really a very recent change.
> People want to live in trendy cities. There's a lot to consider besides rent - culture, nightlife, etc. San Francisco sure does have some of the best food in the country
We're talking about tech workers though. I don't know about you, but my whole life as a tech worker, I've gotten up at the crack of dawn, worked all day, come home late at night exhausted and passed out sleeping until the next day. I don't even know what city I live in because I NEVER SEE IT. Culture? Nightlife? What the hell are they? It doesn't make sense that tech workers would care about these things because we never get to take advantage of them.
Because I legitimately find work more stimulating and enjoyable than most other things. Which isn't to say I don't do other things I find enjoyable, but I have no qualms about working 10+ hours a day.
Why would you get paid six figures as a tech worker unless you're a workaholic? If you're not putting those hours in at work, surely you're putting in those hours in for both fun and personal growth at home, right? You're passionate about code, aren't you?
...no, I'm not honestly asking that, but those are the questions I'd expect to fend off.
> Why would you get paid six figures as a tech worker unless you're a workaholic?
Because a tech worker can easily create $300-500+K per year in economic value for the company. Taking home 1/3 of that value seems perfectly reasonable.
Nothing in the above says anything about hours-in-seat.
My counter-anecdote - it seems to have been very hard to hire a Consulting Engineer in the Bay Area for my team. We've had plenty of candidates (some very good) from other cities, but haven't yet found anyone in SF or the surrounding areas.
Could be issues with our sourcing, perhaps, but it seems surprisingly difficult.
You are right. But still I don't quite understand why there are not more smaller dynamic centers popping up. Of course it is NOT only SV and NYC any more. But there would be many other places that are nice enough to attract IT in a substantial way.
It seems riskier to employees if that were the case - if you get laid off or tired of one company in one of these small regional centers and there's only say 5 companies total to choose from, chances are you'll have to uproot your life and move to a new city for your next job which is a big inconvenience.
I think some part of the network effect of big tech hubs is the option value. If you're in the Bay Area you can have the best of both worlds - stay in one place as long as you want for your personal life/family, and still have the possibility of working at any of thousands of the best companies of all sizes and switching between them if you need to.
I work in the world of enterprise consulting where offshoring and remote work are a daily part of the job.
Yet many companies don't allow remote working to their own employees, even though all contractors (including freelancers) are doing it mostly remotely.
> Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places.
Startups are built on young talent. Young people are obsessed with living in "the big city" and to hear them tell it, living in a suburb and driving a car is about the worst thing imaginable.
So if you want young talent, you better set up shop in SF.
That's a bit silly to say, considering SF and SV are about as suburbanized as can be. If you wanted "the big city", you'd go to New York, London, Paris, Tokyo, or some other place with actual urban density.
SV is very suburban, yes, but SF is densely-populated. "Big city" in this case doesn't necessarily imply that the city proper is 10M+ in population.
And the lengths to which this insanity will go is that (e.g.) Google workers will live in SF and commute into SV. Talk about turning the "live in the suburbs, work in the city" paradigm on its head!
I also think it's something of a SV/SF anomaly. I've lived and worked mostly west of Boston/Cambridge (which until quite recently is where basically all the tech was located) for a very long time and I've known relatively few people who commuted out from the the city.
As a young person that grew up in the suburbs and deeply influenced by the "automobile life"; can confirm you'd have to quadruple my salary before I even considered moving back to the suburbs and sitting through a driving commute.
The false American dream of the oversized house, piles of kids, and picket fence just isn't appealing anymore to a growing population of young people. Life is too short to spend your prime someplace boring.
As a young-ish person (technically a Millennial, born in 1984) who also grew up in the suburbs, you literally couldn't pay me enough to leave the suburbs. I don't care if you're offering me seven figures; I won't live in the city.
I detest noise, grime, and crowds. I like having lots and lots of space all to myself. I worked in the city once; I got sick to death of hobos on the streets shouting at me and demanding I give them money (and then having to listen to them calling me a liar when I say I don't carry cash, which is 100% true), and I got sick to death of working in a tall building where the elevators would break down all the time. Working in the city also had me constantly on edge and worrying that I was going to get gang-raped, and I'm glad I don't have to deal with that anymore.
It's not just me, either. Most of the people I went to college with and still keep in touch with now have houses in the suburbs, and those who don't have houses per se live in two-story suburban apartment complexes. I only know one guy who lives in a more urbanized area (and even then, he's in a mixed-use master-planned development in a suburb), and that's only because he's legally blind and can't drive. A good way to make him angry is to say "you're so lucky you don't have to deal with the hassle of driving"; he will remind people at the top of his lungs that he would love to drive everywhere if he had fully-functional retinas.
My friends and I are the kind of people who make fun of hipsters and mock people who are pro-homeopathy, anti-vaccine, anti-GMO, anti-gluten, vegan, Bernie bros, etc. Trust me when I say that an urban lifestyle isn't for us.
I think there are a lot more culturally conservative young people than you think. Not conservative in the political sense ("liberal but not leftist" and "Clinton Democrats" apply to me and most of my friends), but conservative in the sense that they want to live a traditional lifestyle.
Honestly it's probably that half decade or so making the switch. Different strokes for different folks for sure; but Im fairly sure the cities you describe don't exist in the US anymore, at least on the east coast. You're more likely to die in a car accident than be killed by a stranger in nyc (and the heart disease brought on by the sedentary car shaped life is a far bigger risk factor).
Live fast, die young, make bank; that's the counter culture philosophy. A slow death as we watch our homes devalue in the burbs worked for our parents, but there's a growing wave of nihilism attracted to the other life urban living offers.
"Bros & Brittanys" is, at 32%, by far and above the largest group and described as "enthusiastic consumers".
I'd imagine many other "Lone Wolves" (a group I consider myself part of) enjoy the peace and quiet of a suburban environment; I don't like being surrounded by people. I enjoy living an atomized life where most of my social interaction is online.
I've actually met some New Traditionalists, too... actually, my legally-blind friend I mentioned before is one of the only people from college I know who's an outspoken political conservative, and his wife is even more conservative than he is. Every Sunday, his wife drives him to church in his rural hometown, and they spend the day with his family. Since he got married, he's only become more and more of an extreme religious conservative.
And to be honest, I don't think the urban hipster Millennials are any different from Gen-Xers who identified as slackers and Baby Boomers who joined the hippie movement. As they get older, the majority of them are going to walk away from their countercultures and return to more traditional lives.
If you believe in Strauss-Howe generational theory, then once the current Crisis runs its course, Millennials are going to have the same role in the new status quo that the GI Generation had in the 1950s.
You might be right, (I certainly hope not) but the changing demographics of the US[0], decline in marriage rates[1], and shift in the economy requiring increasing education to remain competitive will leave this generation as a whole better equipped to drive culture in a positive direction.
Last I saw, Canada is a much more urban country with a far greater proportion of its population living in an urban area than America. I don't know whether or not that's a cause of "bros and brittanys" or the other way around (or they are equivalent) but just thought I'd point that out. I think there are a lot more traditionalist Americans than Canadians.
Some of it may be the previous generation's "American Dream" (I won't call it false, because it wasn't for them or for many of us whose parents lived it).
A lot may also be attributed to getting older and wanting to slow down, start a family, etc. Just ask any parent how much they enjoy SF's school lottery, or inability to let their kids play unsupervised outside for safety reasons, or lack of a back yard.
Having lived in a city most of my life, lived somewhere in walking distance of Mountain View, and now live somewhere in the Peninsula that I need to drive from if I want to get anywhere of note, there are definitely tradeoffs. It isn't always black and white. I miss the walkability, but I also love some of the other features of being more removed from the congestion and city centers.
>Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world. Let's concentrate on the US for a moment. Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines?
Because the real commodity being sold with the apartments and offices isn't net access or even land. It's proximity to rich people. It's not an open market economy; it's a feudal system in which you need to stick close to your patrons.
I don't mean to have this come across as snarky, at all, but really the reference for this is the whole of human history.
Wealth is basically self-concentrating. Our political systems tend to end up with a few capital (and often Capitol) cities where the spoils from the plundering, both metaphorical and literal, end up.
The original article does present some interesting and relevant examples of countervailing forces at work as well, and is insightful. But the elephant in the room, as always, is that returns to capital and rent extraction are the primary drivers of wealth, and that the winners tend to keep winning and vice versa.
But even if things seem "really obvious" and we can tell "just by looking at the facts", I feel better if someone has looked at the data and shown that to be the case.
We aren't living in the feudal era, and a lot of people like to think that the reason people move to the cities is because of (for instance) bars and restaurants, museums and the opera, high-paying jobs and so on.
This proximity to wealth may be a symptom of some third factor or it may be the driving factor.
That's why I appreciate it when smart, hard-working people take their time to figure it out for me.
The problem is, as often in economics, defining the terms and building a model that approximates life. It's not as trivial as a sorting algorithm or a simple 1 parameter regression.
How do you define wealth concentration, for example? If your definition is flawed, you can throw out the entire model.
I was just contrasting two different types of reasons for why people cluster in those cities.
Type I, the optimistic theory
Information is more efficient and trust is better when people meet in person. Industries need to co-ordinate trust and information flow through lots of people, so they have to be in the same place. They produce a lot of value, which produces wealth and increases productivity. That wealth pays for all these great things.
This causes a happy cycle of smart and educated people being attracted to the "good" things in life coming to the cities, and providing labor for the companies and so on.
Type II, the pessimistic theory
In order to get industries going (tech startups, new Oil and gas company etc) you need capital, and the capital exists in these enormous clusters. So the people who want to fund the industry has to go to these clusters of existing capital and convince them to invest them. The returns from the success of the industry go back to the same place and so on.
The existence of the bars, restaurants and museums are compatible with both, but only have causal power in the first type of theory.
It's not all that complicated. People go to where resources are.
Sometimes resources are grasslands with plentiful wild animals that you can spear and eat. Sometimes it's gems or petroleum buried underneath the rocks. And yes, resources are things like museums or pretty views or available five star restaurant meals. But the dynamic throughout human history is reasonably understandable, you can observe the same basic concept in a Petri dish.
The biggest resource of all in modern society is financial wealth. So people go to places that have it. Unlike the grassland, where new arrivals quickly deplete the available resource, in this modern scenario the result tends to be the creation of more wealth, and the cycle reinforces itself.
How is a bar owner rent seeking? They are providing a good and charging market prices for it. If bars in the city got together and introduced a bar-density limit within the city so as to limit the number of bars that can exist and thus allow them to raise prices, that would be rent seeking. If a bar hired a bunch of people to attend town hall meetings preventing new bars from opening up and allowing itself to raise prices - that would be rent-seeking.
If prices of drinks are going up naturally because people are making more money, "rent" for real estate is going up, etc. that is not "rent-seeking".
Not sure if I'm missing a sarcasm tag in your comment but most places in the US restrict the number of places selling hard alcohol by having a restricted number of liquor licenses that trade on the open market like taxi medallions. In San Francisco for a restaurant this will set you back a cool 1/4 million[1] and the type 48 license you need to open a bar seem be sold so rarely in San Francisco I can't find any price reference online.
It takes relatively wealthy people (or at least big spenders) to make trendy upscale bars and restaurants work.
Museums, opera, symphony, most theater, etc. are kept alive by the philanthropy of the local rich.
High salaries are paid by rich VCs looking for return, or companies with more cash than they know how to handle commissioning prestige projects. (How many people at Google actually work on revenue generation? That doesn't happen at Joe's Computers in Nowheresville).
Concentrated wealth is the reason cities can have these things.
I'd argue that what you're identifying as those businesses in the majority were at one time, startups themselves. Without the previous generation of concentrated wealth those businesses would not be in the position they are.
I do, however, also agree with your counter-point to the previous comment.
If you've ever played city building games like Rome, Anno, The Settlers, Banished this will be familiar. They encoded the dynamic of number of people, increasing needs and critical mass well imho.
A large share of units in Boston rent to mostly college students who's parents pay the ever increasing rent. Harvard, MIT, BU, etc aren't going anywhere...
> Wealth is basically self-concentrating. Our political systems tend to end up with a few capital (and often Capitol) cities where the spoils from the plundering, both metaphorical and literal, end up.
Plundering, seriously? Isn't HN supposed to be a community of entrepreneurs?
Just because we believe there are people who accrue wealth by adding value doesn't mean there aren't people who do the opposite. If you recall Atlas Shrugged, James Taggart makes an awful lot of money and can't understand why Dagny still doesn't approve.
To further complicate matters, both behaviours can be exhibited by the same person.
A huge missing part of this discussion is Tech is not that concentrated in 'The Bay Area' people are. More people live in 'The Bay Area' than Maine, Montana, Delaware, North Dakota, South Dakota, Alaska, Vermont, and Wyoming combined.
The Bay Area plus NYC metro area are 8.5% of the total US population so yes they are a significantly larger chunk of GDP and wealth. But, they are large enough that the differences are smaller than you might think.
It also provides a place with interesting signals. You could tell shale oil was going to take off when Minot ND suddenly had direct, daily flights from Houston.
Are you serious? That's Students choose to attend "good schools" because of the networks and resources. Immigrants flock to the US because of our resources. Increasing your chances of prosperity is the reason why anyone moves anywhere (unless a family member is in need).
A good resource that is still in use today by many urban planners is a book called "The Death and Life of Great American Cities" by Jane Jacobs. She explores among other things the growth, decline and renewal of urban centers.
Even though this was written in the 60's most of her ideas are still considered when city urban planners make decisions.
In industrial industries like Oil & Gas, there are also a lot of advantages to having clusters of suppliers and service industries together. When I worked in the drilling business (not in Houston but in another city fairly nearby), pretty much all the overhaul, fabrication, part suppliers, etc. were all in the general area and we could visit them to review plans, oversee tests, etc.
Remember that you have consolidation happening too!
Places like Albany, NY were regional banking centers as recently as 30 years ago. In Albany's case, that was an artifact of the city's role as a transportation hub for canals and railroads.
As the role of banking has changed and the market has consolidated from a highly distributed model, its harder and harder to do business outside of large areas. If you're a midsize business, it's hard to get lines of credit simply because nobody wants to travel to talk to you.
Even within large organizations like government and Fortune 50 companies, consolidation drives centralization. Big places used to have regional administrative services (HR, Finance, etc). You could make a career working in some regional field office.
Now, centralized functions mean that you work at HQ, a regional center, or you're a task worker in the provinces.
I think that capital aggregates in trade centres, where materials can be exchanged and deals can be made extremely swiftly. People closer to the trade can get information more quickly, and quickly react to it too.
Individual capital is very liquid, but the herd is not. Consider San Francisco: it has capital because of tech, because of the need for electronics & power for running a port, because of the trade in the Bay, because of the gold miners in 1849. That capital hasn't moved significantly to (say) Bakersfield.
While there's certainly some true to that statement, I think you're being overly cynical. People congregate in cities to be near _people_. For sure with a good internet connection I could do all my work from small town america living in a mcmansion at a quarter of my rent; instead I live in nyc. Access to artistic communities, robust public transit, diverse food and culture, and a fluid job market makes the value add for me a no brainer. Im sure for different people the economics don't work out so cleanly, but online I feel like discussions on rent and technology tend to gloss over the things you're actually paying for.
A successful startup isn't going to be in the cities you mentioned because you have to convince people that they find the non-work related amenities they've gone to SF, Seattle, NYC, etc to find. Or go full remote, which has its own set of challenges (though I'd posit a full remote company really isn't in any one city so it doesn't really matter where the founders live).
I have to disagree strongly. I live in NYC for work. I actually hate living here and I don't like the people I'm around. I am desperately looking for a way out of this city but my family lives on Long Island, so it's hard to justify going to another city.
NYC doesn't have a monopoly on bad commutes, but isolating yourself even more with an even longer commute doesn't solve culture mismatch issues. Besides, it's not a great lifestyle anyway.
If I live near my family on Long Island it would be a 2.5 hour commute to my job each way. If I live halfway between them and my job then I'm neither close to them nor my job. So living near my job is the least bad option, and that seems to be the option most people take.
> Access to artistic communities, robust public transit, diverse food and culture, and a fluid job market makes the value add for me a no brainer.
Other than the public transit, all of the above are available in any number of towns and cities in the U.S.
A half a century ago maybe you had to go to NYC to hear great live music and eat Cambodian food, find specialty ingredients, or get access to off-beat books. But that's not the case any longer. I just googled and apparently there are Cambodian restaurants in Des Moines, Iowa. The internet can get you all the ingredients, music, and books you'll want.
Honestly, I think the coastal cities just have better marketing and more hipster appeal.
I've lived in NYC and Buffalo, a reasonably large city 8 hours north of NYC. The two experiences are not at all comparable, particularly with food and diversity in culture. Although a large Chinese population exists as international students in Buffalo, you can't get anywhere near the close-as-authentic-as-you-get-in-the-states Chinese food in Buffalo that is available in spades in NYC area(particularly Flushing,Queens). this applies equally to Indian, Ethiopian, etc. cuisine. Many particular specialties that I enjoy aren't available in Buffalo at all.
Fair enough. But I just ate arugula at a Panera. Fifty years ago Italian was considered "ethnic" food in the American Midwest. It's also worth pointing out that Flushing isn't just down the street for most new Yorkers. Commutes within NYC can be well over an hour and/or two expensive can rides away.
I'm just saying the "no culture in the flyover states" meme is long overdue for an update.
Not every Cambodian restaurant is the same. I promise you the best Cambodian restaurant in Des Moines is nowhere nearly as good as any half-decent Cambodian restaurant in New York. Same goes with Italian and Japanese and Spanish and Thai and Korean. Are you really equating the food scene in Des Moines with that of New York by the availability of cultural cuisines?
There are many good reasons the bay area is the hub of tech development. It all started with proximity to two very good computer science schools; Stanford and UC Berkeley. At this point, there are more tech-savvy investors here than anywhere else.
Ongoing development of technology is an iterative process and by necessity, must be a productive one to get to market more quickly. The VCs and the talent pool are here in the bay area. If a startup wants to get to market quickly, that startup will need money and talent, both of which are people issues.
Maybe it was related to the proximity to silicon valley which wasn't due to the computer science departments of Stanford and UC Berkeley, although Stanford did likely place a role.
And that's just the employee point of view. Access to capital, to useful investors, to founder networks and to decision makers of your prospects are all important factors in where to set up shop.
We're located in Cebu, Philippines, the 2nd biggest city in the country, and our CEO spends a good deal of time in Manila, the capital, because decision makers want to meet someone. Starting there, would have been easier for many of the above mentioned aspects.
In my field we service the financial industry and this couldn't be more true. It's a requirement to be in physical proximity to midtown and Wall Street. However phrasing it like you do doesn't make me feel all that good :(
Don't feel bad, you have a real reason to be close by because light speed is only so fast. I remember reading recently somewhere that some firm had microwave relay systems in place so they could get data faster. High frequency trading only works with the best data!
CEOs are wealthy enough to live in the places and apparently desire to. This creates jobs in those cities and people will pay to live in them. Some people end up working remotely and live in cheaper places but not everyone has this option.
I'm pretty sure you have this backwards. The company doesn't locate itself where the CEO wants to be. The company is just located somewhere.... and the CEO will usually move to wherever that is upon hiring, unless they already live there.
You have to be a lot more specific. There is an immense number of rich people in Los Angeles and it has historically had a mediocre tech scene for example (especially compared to SF, but it also lags Seattle and NY currently).
It's proximity to large numbers of very specific rich people.
I wouldn't have any interest in living in many of those cities you listed, and as a result wouldn't be willing to move and work there. I'm sure there are many out there who feel the same.
I think more than anything else, this problem is caused by a old mindset. Some managers really believe that "if he ain't in the office, he ain't working". Especially when working with external consultants, even if that means paying them to commute a total of 5+ hours daily.
> Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines?
I agree in general, and I think it's likely that the future of growth is in sprawling inland metro areas like Dallas-Fort Worth, Kansas City-Overland Park, and Minneapolis-St. Paul.
Well, in the case of Dallas, this is largely going to depend on whether or not the Texas state legislature can ever get their heads out of their asses. If SB6 passes, expect Texas's economy to crater.
On the other hand, I'm not sure if your exact list of cities is feasible. Amarillo is too small to really become a hub for anything in the near future (it would take a dedicated effort, like how Bugsy Siegel transformed Las Vegas). And Miami is limited in its ability to sprawl because it's on a coast. Des Moines is a distinct possibility, though.
The suburbs have room to sprawl out forever. The city centers can become high-rent places for the rich, and everyone else can live in the suburbs and exurbs. Furthermore, the inner ring suburbs can become "edge cities" where businesses prefer to locate themselves (this is already how Dallas is laid out) so people from both the exurbs and the city center can have short commutes.
Pretty much it is a networking effect issue. The same reason why you are posting this on hackernews instead of reddit. Physical proximity matters a lot, even when work is digital.
My understanding is it's largely demands of VC. They want to be able to check in on their investments, and having to hop on a plane to do that isn't convenient. That has always struck me as odd, since the invested money would go further in a cheaper market, but that's the explanation I've heard many times.
I live in Chicago. I love it here because of everything else it has to offer. I have everything almost everything I need available to me within walking distance from home. That includes grocery store, dive bars, cheap restaurants, high end restaurants, clubs.
For anything else I may want to do (concerts, sports games, plays, comedy), there are dozens of world class options within a ten minute cab drive / 30 minutes on public transportation.
It's gotten to the point, where if there's a band I want to see, but they're in the suburbs, I'll just wait til they're back in the city.
I grew up and went to college two different small beach towns. There wasn't much of anything to do besides drink. If you wanted culture, you'd have to get in your car and drive at least an hour.
I have no desire to live outside of a big city, unless it is in the middle of nowhere, but in that case, I will still have a home in a city.
My guess is a lot of other people feel the same way.
I've heard this pitch for Chicago many times, and it seems reasonable if you are in the one of the industries, Tyler mentions, that are more diffuse.
The main problem with Chicago is it lacks an anchor industry. Is it the best place to be for finance? No, that's NYC. Is it healthcare? Boston, Baltimore, Cleveland or Rochester. Energy? Houston. Technology? SF. Entertainment? LA or NYC. Politics? DC.
What exactly is Chicago good at? They have Wilco, so that's cool.
I think you're a bit misinformed. Chicago has two large keystone industries that serve the global economy: (1) Industrial large scale manufacturing (Boeing, John Deere, Caterpillar), (2) Insurance (all of them); not to mention a ton of Food and Agriculture HQs are based there as well.
No they did not leave Washington, that's ridiculous. Their executive HQ is in Chicago but that doesn't mean much. Many executive HQ are in Chicago but that's not many jobs.
Slightly less so nowadays. I left that area and moved to a megacity so I could get into software dev without having to work at an insurance company (or ESPN). But there's a little bit more going on with CT nowadays, and I think the insurance companies are starting to spread out. They had a ton of leverage in the area and got away with a lot (not paying taxes, etc) but the well started to run dry and people started to push back. Before I left, the mere suggestion that we demand more from these huge companies always turned into highly publicized threats to take XX,000 jobs elsewhere.
The whole situation is dumb, overall I'd avoid living in CT for a ton of reasons. CT had a lot of industry going for it (Stanley Tools in New Britain, for example, and Hartford was the center of the gun industry 100 years ago) but those of course moved overseas. The insurance industry provided a safety net so it didn't go the way of the rust belt but, late capitalism y'know, so that was just a band-aid that's being slowly ripped off. This is happening everywhere but the systematic denial isn't as ingrained as in CT, it's weird.
I don't know the city well enough to be sure, but traditionally it's transportation - back in the day as a link between the Mississippi and Great Lakes systems, then as a huge rail hub (cattle from the west would get repackaged and shipped on to the East), and most recently O'Hare (busiest airport in the world).
NYC is more the equity side of finance, Wall St. and all that. Chicago is home to the largest futures exchange in the world, the CME and the largest options exchange, the CBOE.
Until recently, bond trading was dominated by NYC (and back in the day, almost one firm; Salomon). It may still be, but I've been out of the industry for a while so am not sure about modernities of it.
> The main problem with Chicago is it lacks an anchor industry. Is it the best place to be for finance? ...
This is a weird expectation. Why does a city have to be "the best" at something? Seattle isn't the best place for software but I'd still choose it over SF any day. Chicago has plenty of industry.
The nice thing about not having one dominant industry is that the entire local economy is more stable and better able to take shocks to the system. (I've lived in NYC and Silicon Valley and both felt like boom/bust kind of places to live. I now live in Chicago.)
Chicago has finance, it just doesn't have Wall Street. If you want to trade options or commodities Chicago is arguably a better place to be. New York is undoubtedly the better place to be for stock trading.
As far as entertainment goes, it's no accident that a huge number of comedians get their start in Chicago.
Chicago has tons of anchor industries, the real problem is that they don't translate well to the unicorn strategy of most start-ups.
Chicago is the center for futures and options trading, especially commodities. Proprietary trading is generally based in Chicago, while banks and hedge funds are usually in NYC.
There are a massive number of other companies headquartered here, like Boening, CNA, Kraft Foods, Walgreens, State Farm.
While NYC might be known for its comedy, it recruits directly
from Second City in Chicago, and the numerous small comedy clubs and schools here feed into Second City. It has its own caliber of theatre it puts out as well, regardless of whether it matches NYC on notoriety.
Lastly, while having the benefits of a large city, Chicago also does not have the stupidly high rents of NYC or SF. It is a very livable city, even for those on modest incomes. Public transportation is excellent (though not as good as NYC).
And if you are doing well enough to have a six-figure salary, you can live very well here as opposed to how you would live even on an cost-of-living adjusted salary in SF and NYC.
The primary downside to this city is the weather. In my opinion, the secondary downside is how far it is from outdoor activities, but, then again, you can easily fly elsewhere via O'Hare/Midway.
A few more winters like this one and it'll be hard to complain too much about the weather (although, in mid December, when I got back from Antarctica, it was much colder in Chicago than Antarctica).
All those exchanges are moving to the east coast. CBOE and CFE did a number of years ago. CMK is not the data center it used to be although it is still very large.
I grew up and lived in Chicago for most of my adult life. I moved to the Bay Area in 2013. My main reasons were weather, crime, and jobs.
For some people, living with gray skies half the year with not-infrequent temperatures below zero or above 100 takes its toll. Also, the violent crime rate has gone through the roof in recent years, even in generally good neighborhoods.
On the jobs front, I'm in marketing and a more technical marketer at that. The job options in Chicago were largely unappealing, but more importantly was the major difference in culture. There are obviously exceptions, but Chicago seems to have a much more "conservative" corporate culture on the average. This means less competitive pay, 2 weeks of PTO, 2 weeks paternity (if that), stricter 8 or 9am start times, less free on-premise food, fewer perks overall, less competitive benefits, etc. Again, you can find exceptions, and large tech companies tend to have offices there as it is a hub (particularly for media companies like Google). But on the balance, due to the extreme concentration out here, it seems many Bay Area companies are forced to up their game and be much more in favor of the employee with regards to comp, perks, culture and benefits if they want to be competitive with the local giants.
I get very sad when I think about the cost of housing out here, but TBH, I'm not sure I could go back. Whenever I get off the return flight from a trip home and step out the doors at SFO, all of the color, sunshine etc. makes things look like technicolor compared to the ugly red brick, gray skies and black slush of Chicago.
Don't get me wrong--it will always have a place in my heart and I dearly love many things there. But depending on your priorities, in some cases there is no competition if you can afford enough to make it manageable.
Chicago is the "second city" in a lot of things. These are the top public companies in the city:
Aerospace/Defense: Boeing
Agribusiness/Foodservice: ADM, Mondelez, McDonald's, US Foods, Ingredion
Communications: Anixter, Motorola, TDS
Energy: Exelon
Finance: Discover, JLL
Healthcare: Walgreens, AbbVie, Abbott, Baxter, Baxalta
Industrial/Manufacturing/B2B: ITW, CDW, Navistar, Grainger, Univar, Tenneco, LKQ, Dover, Packaging Corp., Essendant
Insurance: State Farm, Allstate, Old Republic, AJG
Publishing: RR Donnelley
Retail: Sears
Transport: United
Apparently, Chicago excels in insurance, food, and manufacturing support.
If you intend to create technology for supporting businesses in those sectors, having a Chicago office would not be a bad idea. SV unicorns tend not to even want to solve problems like how to more efficiently route a single gigantic monolithic I-beam from the foundry to a building site without destroying buildings, bridges, and roads along the way. It isn't sexy, and doesn't attract money or eager and idealistic employees.
>Chicago and its suburbs, which together comprise the Chicago Metropolitan Area, is home to 29 Fortune 500 companies and is a transportation and distribution center. Manufacturing, printing, publishing, insurance and food processing also play major roles in the city's economy. The total economic output of Chicago in GMP totaled US$547B in 2012[1] making Chicago the 21st largest economy in the world[2] just surpassing the total economic output of Switzerland.
>The city houses one of the Federal Reserve Banks, established in 1914. There is also the Federal Home Loan Bank of Chicago. The largest banks in the Chicago region (by % of deposits) are: JPMorgan Chase, Bank of America (through its acquisition of LaSalle Bank), BMO Harris Bank (a BMO subsidiary), and Northern Trust. The largest banks headquartered in Chicago are: Northern Trust, Chase, BMO Harris Bank, Wintrust Financial, and First Midwest Bank. Many financial institutions are in the Loop.
>Chicago has five major financial exchanges, including the Chicago Stock Exchange (CHX), the Chicago Board Options Exchange (CBOE), the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), and NYSE Arca. While the city of Chicago houses most of the major brokerage firms, many insurance companies are in the city or suburbs, such as Allstate Corporation.
I have family in Rochester and it isn't known, at least to me, for healthcare in particular. The biggest Rochester companies are Xerox and Kodak neither of which are healthcare companies.
Chicago's the primary water connection between the Great Lakes (which communicate with the Hudson and St. Lawrence Rivers) and the Mississippi River; that's the historic origin of its central role in commodities trading.
I have to imagine I'm somewhere on the opposite end of the spectrum. I could care less about attractions, since even when I lived in the city I was spending a lot of evenings just playing video games anyway.
I think the broad adoption of mobile gaming and the Millennial adoption rate on video games and the successor generation (whatever we are calling them now) basically being raised on them will break down the reliance on physically proximate entertainment for enough of a subset of these generations that businesses will have to adapt to remote more than they already are.
Plenty of people are going to be satisfied with what is available through technology, rather than just what they can commute to. This is on top of being able to do work remotely, its the value in being entertained remotely that truly separates them from the city centralization problem.
I pretty much think the expansion of drugs and crime due to boredom in rural America proves you wrong.
On top of the fact that many people are different than you (in fact the 100s of millions who live in cities) are not satisfied just playing video games all day long.
Absolutely agreed there! The drug problem in the countryside is new -- really new, 20 years old at the most -- so it must be due to something that's happened really recently.
And alcohol can be coexisted with more easily than hard drugs can. "Meth: Not Even Once" is no exaggeration, but no one in the West except recovering alcoholics has that slogan for drinking.
> If you wanted culture, you'd have to get in your car and drive at least an hour.
Everywhere has culture. You just didn't like the one you were in.
In tiny towns, the culture looks more like running around in the woods, country music, 4-H club, and church potlucks. That's a culture, even if you don't like it. And, besides, in the internet age there are plenty of farmers' daughters that get really into oil painting or Korean TV or opera. Producing great culture is harder without a local community, but it's not like there's no access to culture in small towns. They're binge watching Iron Fist just like all the other geeks.
With fewer people in a place there will be fewer people that match OP's cultural interests. Even moving from a medium city to a larger city has a noticeable increase in organizations of people doing cool things I'm interested in.
People tend to use "culture" to refer, more often than not, to the local availability of global culture-production top-dogs. For example, New York has "fashion culture", because it's a place where you can expect to run into people who aren't just into fashion, but who lead and dictate the world's fashion.
In other words, people want access to socially-dominant individuals. It's probably some sort of backwards instinct that doesn't serve us very well these days, given that for each of the top 100 people in anything, there are a million people who want that "access", and obviously only an infinitestimal fraction of them are going to get it—and living closer to those top 100 people (or even going to events they hold) won't really increase their chances of doing so, any more than living in the capitol city of a monarchy means you'll get to meet the monarch.
It's about self-perfection: figuring out the best way to live, getting closer to that ideal, and exploring and trying to resolve its internal contradictions.
But the best way to live differs from culture to culture -- and I'm not convinced that the rural South has the same kind of ideal as the North, which means I came on too strong earlier. What does the Celtic or Celticized world's high culture look like...?
Its not elitism at all. There is just a lack of what people commonly call culture in less populated areas. Greater concentration of people leads to greater specialization and a greater diversity of interests. For example, when Id return to my Midwestern hometown during college break and Id be dissapointed by the local "Mexican"(Cheese, nacho cheese, doritos, and jalaoenos) pizza.
It just stands to reason that the more oeople you have in an area, the greater the diversity and intensity of interests, which we call cultyre. My hometown definitely doesnt have a Bat'leth martial arts class, but you can find it in a big city. Thats why you get such an influx of artsy types to places like NYC because no one ia into their art where they are from
I love urban high culture, so I'm a cheerleader for what I think you're trying to champion here, but I think most of what you just described is precisely cultural elitism.
It's quite possible to square traditional urbanism's affection for multiculturalism and an affection for artistic and culinary excellence, but it takes some nuanced language to express why those aren't in conflict.
Embracing cultural elitism while denying it linguistically doesn't really help make the argument.
That wasn't the best response, but I think it's indicative of how urban high culture often becomes conflated with elitism. As I reread it, it appears that I was being dismissive of my hometown while trying not to be.
First, let's be clear with our terms here. "Multiculturalism" is a heavily loaded term. Despite its Judeo-Christian heritage I would argue that the United States does not operate as a multicultural nation-state. Rather, it is more of a ethnically diverse unicultural society in that the population to a broad degree does share a common language, certain American beliefs and values, and have a unique optimistic view of the future that I've found rare in my travels...the so-called "melting-pot". A good example of a multicultural state is Iraq where multiculturalism is clearly established in policy at the federal level as the Kurds, Shia, and Sunni live in an uneasy alliance, separate into ethnic ghetto-states/territories with relatively little inter-mixing, and have vastly different agendas for the future of their country (Kurds wanting to create their own state, etc.)
After rethinking it, I believe that population density is only correlated to the amount of culture, not the cause of it. Cities like Taos, Santa Fe, and Santa Cruz have a high degree of appreciation for the arts despite being outside dense, metro city centers. I believe that openness and tolerance to unfamiliar ideas is the driver behind culture. It is also a necessary requirement for diverse urban centers, which is why you find a large amount of culture there, including the small town cultures that emigrants bring with them.
The easiest way for me to put it is this: No matter how small where you come from is or no matter how esoteric your interests are, there is some sort of meetup for all the things in a LA or NYC.
> ...there is some sort of meetup for all the things in a LA or NYC.
For your kind of things. In NYC, it's harder to find great snowboarding clubs, demolition derbies, Baptist churches, bass fishing, tacos, and BBQ places. I've been to a mule rodeo before. Haven't heard of something like that in LA.
Not all of those things are my bag of chips, but they're all "culture". Some "culture" either requires less population density or hasn't found a foothold in the coastal mega-cities for whatever reason.
>harder to find great snowboarding clubs, demolition derbies, Baptist churches, bass fishing, tacos, and BBQ places
Harder to find than where? A number of the things you mention are limited simply by geography (snowboarding, bass fishing, etc.) I'd wager that you'll also find a decent amount of taco and bbq places compared, to say, Utica. There appears to be a number of Baptist churches in NYC according to google.
When I talk about LA, I'm speaking more generally about the county and its surrounding areas...There are mule rodeos around a half day's drive from LA. You are right that some culture typically requires lower population density, but you usually find some form of it in mega-cities due to emigration.
> Point taken that you like small town culture, though.
I don't especially. I appreciate it. And I appreciate urban culture. I just find the "everyone knows cities are better" meme is really inaccurate.
It's weirdly dismissive of other cultures as well, which is weird considering how much urban centers want to value diversity. People will read 30 page New Yorker pieces about Botswana or listen to an hour or pan flute music before way before they'll take time to acknowledge that there's culture in Tennessee that's worthwhile, even if it's not their cup of tea (which should be obvious because Nashville, but not everyone's as well-heeled as they think they are).
> Everywhere has culture. You just didn't like the one you were in.
I remember reading a conservative/neocon author who tore into this relativizing of culture, insisting on the old definition that "culture" didn't just mean "whatever junk's growing in a petri dish", but I can't remember who it was -- Barzun, Goldman ("Spengler"), or Dalrymple.
The point's valid regardless. "Culture" means "culture", not just "whatever the local savages are doing" -- and it's particularly silly to use cultural relativism to defend Republicans.
>"Culture" means "culture", not just "whatever the local savages are doing"
People are "savage" because they like different things to you such as country music? If so, you're an incredibly narrow minded and shitty person. If not, please elaborate.
Culture in Matthew Arnold's definition is the pursuit of human perfection.
Different cultures have different norms of human perfection, and pursue different things; this fits Spengler's (the real one's) idea that a culture has a core proposition. Within a civilization, high culture is a culture's full expression of itself; it seeks out and engages with the contradictory or self-defeating parts of its values, and tries to advance the culture's understanding of what perfection is and how it can be attained. (What the postmodernists call deconstruction, and Gardiner called "high parody," is a fundamental part of this process.) Low culture is mindless entertainment; it doesn't try to shape its consumers in any positive way, and certainly doesn't advance the society's understanding of its ideals. Middlebrow/bourgeois culture tries to be high culture and fails -- but typically fails intentionally. (To be at the forefront of understanding is prestigious but uncomfortable, and the middle class wants prestige but not discomfort.) Mass culture is typically low, since low culture sells, but can rise to middle or high. Low culture, and occasionally middlebrow or mass culture, can produce things that high culture finds interesting and takes up -- and high culture can similarly cross-fertilize downwards. See Popular Culture in Early Modern Europe for some very interesting discussion of this, which was more common then than it is today.
"Culture" historically means "high culture": the thrust towards self-improvement, plus the continued refinement of what exactly you're trying to self-improve towards. This sounds uniquely Western (especially modern Western -- "Faustian" in Spengler's terminology), but you see the same process in other parts of the world, especially in East Asia.
The catch is that you can't engage in high culture without access to high culture -- so perhaps it's unreasonable of me to condemn poor rural areas for not participating in it. Or perhaps not? It's not just mass culture that the Internet makes available.
Regardless, it's high culture -- or at least middlebrow culture, which is regrettably easy to mistake for it -- that reverend_gonzo was lamenting lack of access to.
> It's not just mass culture that the Internet makes available.
That whole discourse assumes things about actualized humanity that cannot be taken as granted. Who's to say that earning a simple living, caring for a family well, and being virtuous isn't perfect in itself? Who's to say that seeking pleasure and avoiding pain isn't a form of perfection? Who's to say that the human perfection isn't a distraction from the commands of a perfect deity?
> The catch is that you can't engage in high culture without access to high culture
That presumes that "high culture" can't be simple, commonly available, or digitally transmitted. It also presumes a one-size-fits-everyone kind of culture and not a more atomized, long-tail description of how cultures are formed, evolved, and maintained.
In more concrete terminology, why should large orchestral pieces be high musical culture? Maybe perfection is really about inclusion, peace, and affection. In that case, a receptive crowd, a guy with a guitar, and some lively tunes is all you need. Or even just a good playlist.
And that's why I push back against all the "life is clearly better in mega-cities" attitude. It's a zero-sum game to only evaluate culture in relative terms. I don't think we're doomed to live in a world the poorest and least connected wallow in cultural poverty and the wealthiest and best connected are privileged with cultural riches. I think life is simpler and better than that.
> That whole discourse assumes things about actualized humanity that cannot be taken as granted. Who's to say that earning a simple living, caring for a family well, and being virtuous isn't perfect in itself? Who's to say that seeking pleasure and avoiding pain isn't a form of perfection? Who's to say that the human perfection isn't a distraction from the commands of a perfect deity?
I'd say that the high-low-middle-mass divide is universal, but the goals that a given high culture aims for are different from civilization to civilization. This includes West European (including New England) versus Celtic (more or less including the South, descended mostly from the Anglo-Scottish Borderers and the West Country).
In the particular areas you're asking about, though, I see contradictions. Being virtuous doesn't have much of a history of being compatible with seeking pleasure and avoiding pain; but being virtuous is a form of human perfection, in fact the one that Aristotle would endorse most readily, and I fail to see how following God becomes easier if you're less able to follow Him. As for earning a simple living, well, look at the website you're on and its long history of destroying the ability to earn them...
On the second point, though, I feel misrepresented. I explicitly said that "it's not just mass culture that the Internet makes available" -- although if you don't share the goals of a given high culture, there's no point in participating it. What does a Celtic high culture look like? Such a culture definitely existed in the Middle Ages, especially in Ireland, but it's been on ice for centuries...
In music, an orchestra can just plain produce sounds that a guy with a guitar can't. There's also more of a filtering effect, which tends to weed out junk... but bigger and/or more formal music don't always mean better music. Music theory can become a burden, and the pentatonic scale is extremely expressive for something that has half the notes of twelve-tone scales; the Irish session is a different sort of thing from a Western quartet or band, with a different set of objectives. And music is something it's good to participate in, which is something in the guy with guitar's favor.
Still, whatever a Celtic (or Quaker? or who knows what else) high culture might look like, there's not much participation in it in the US countryside, certainly not in any organized and visible form (although a lot of cultural activity of all sorts is on the Web these days). I feel like Western high culture leaves a few things out, but I'd rather be around someone else's culture than around cultural passivity -- although Western culture has a horrible case of the middlebrows here in the US. (Has it always? I wouldn't rule it out.)
But if you want to specifically say that life isn't better in the mega-cities: I like urban living, especially walking to work. Of course, that gets challenging and expensive even in the mega-cities; the US needs more walkable areas, more narrow streets, and more trains, subways, and commuter rail. Rents low enough to raise families in the cities wouldn't hurt, either...
> In the particular areas you're asking about, though, I see contradictions.
I was listing various philosophical ideals, not optimizing humanity myself.
> I'd rather be around someone else's culture than around cultural passivity
You say that, but much (most?) cultural optimization has a religious component. The countryside in America is very culturally active, especially on Sunday mornings. And the "cultural ideal" of Protestants necessarily requires accessibility and even imperfection.
Taken to an extreme, but still an American example, there are the Amish. Their cultural ideal is, more or less, rural simplicity. To the extent that they need to iterate or collectively think about their culture, they do. They just don't need patronage to achieve their more straightforward cultural goals.
So to circle back to my original point, can we say they are uncultured? Or lacking or failing at "high culture"? I don't think that's accurate or fair. At least not objectively.
same logic that makes off-shoring (okay, near-shoring in this case) to not work, or be at least occasionally painful experience.
to quote one client - I'll rather have a mediocre dev sitting right here so we can discuss/plan/design behind one single desk/board rather than having a star 500 (or 5000) km away. even if there wouldn't be time difference, in person contact has high value.
Software Companies only have two real requirements on their location... skilled programmers, and money. Both are easier to come by in megacities, so that's how it ends up working most of the time.
A lot of people don't want to live in boring, conservative places like Amarillo and Des Moines. More importantly, tech company executives and managers really don't want to live there. The workers have to work on-site with managers, so the workers obviously can't live there either. Everyone has to be co-located in the same place.
Have you ever been to Des Moines? Not picking on you specifically, but boring and conservative aren't the adjectives I'd use for it. It's possibly slightly more conservative than Ann Arbor or Madison, but the area around Drake feels like a college town to me when I visit.
> Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines?
Some of the burden is on you to prove what has failed so far. If it is possible to build a successful large scale startup in Amarillo, why hasn't it happened?
I'll point out the theory of agglomerative clustering also includes the contrary point: a city that is great at something tends to exclude other activities, for any given amount of population. A city like Amarillo, which plays a role in the oil industry, is less likely to be great at software, because it plays a role in the oil industry. It's population would have to grow before it could be good at both.
Also, if two 20-somethings build a successful startup in Amarillo, they may want to move to San Francisco as soon as they have money. The "this startup can be anywhere" argument works both ways: yes it could be Amarillo, but if it can be anywhere then it doesn't need to stay in Amarillo.
And the startup can also move to Poland, or Romania, or India. If you believe the startup can be anywhere, then you basically believe that a startup would only be in Amarillo by random chance. If there are 100,000 great cities in the world, and all of them equally good for a software startup, then the chance of a startup being in Amarillo is 1 in 100,000.
But in fact, there are good reasons why startups tend to cluster into certain cities. You should read "Why tiny Stockholm has the most stunning startup ecosystem since Tel Aviv" :
Zoho's CEO feels that good software products can be developed not only in silicon valley or even big cities like Chennai and Bangalore, it can be developed in non-descript towns like Tenkasi too.
I think with more accessibility to digital media, and expansion of skills through internet education, skills can be diffused across geography, atleast in our field.
>Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places. As long as there is a good net connection, it could be anywhere in the world.
Because face to face is high bandwidth. You can have everyone work from home but it will reduce your ability to collaborate effectively. Teams worry about being in separate buildings or even just split across floors because the friction introduced reduces impromptu face to face conversations significantly.
Now, if you're asking why an entire company can't move, that's because the talent pool is where it is and many engineers will not be willing to relocate. Moving is disruptive and for married couples where both work at different locations, it may be effectively impossible.
I think it's mostly just because the concentration of the industry is convenient.
In the UK, there are tech jobs all over the country. But there are probably more in London than everywhere else combined, especially if you're looking for the start-up unicorn types. I lived in a smaller city for a while after university, but there were very few jobs to choose from that interested me.
I moved to London for one job in particular at the time, but also safe in the knowledge that it would be easy to find another job. I've had 4 different jobs in London since then, and it's never been very hard for me to find something else that's suitable and interesting for me.
The same holds true for most of my friends from university - many of the moved to London because it was the most obvious option for finding a tech job. So it has a further concentrating effect, that people are more likely to know others who are working in the capital city than elsewhere in the country.
If I was seeking a new job and open to moving anywhere in the country, I could find one somewhere outside of London. But if I was already living in another city, it might be harder to find a job without moving. It might not be quite the same in US, where there are a number of cities around the country that are a similar size to London, but in the UK there are maybe only 2-4 other cities that are large enough to have a wide selection of jobs in one industry, and none besides London with a population of over 1 million.
SV companies are not price sensitive. They'll pay alot, even just for the benefit of having them in the office. Software companies either win big or lose big. If they win big, they can easily cover whatever cost of salary in SV and there's still a plethora of talent out here in the bay area, for a well funded company.
I think you're describing a certain type of software company - one that doesn't have to answer to shareholders (Google, Facebook, Snap, etc) and thus behave according to what their leader and employees want. Most of the tech industry (including for example Apple and Amazon) isn't like this.
Why do you think Amazon and Apple aren't like this?
All of the big software houses compete for the same engineers, and they're all paying their incremental new engineers +/- 10% the same total comp across the experience spectrum.
I would agree with pascalxus, the big tech companies aren't price sensitive.
That doesn't mean the average engineer can easily finagle a drastically out-of-band salary, but the bands are already exceptionally high and grow faster than inflation in the aggregate.
> City centers simply get voided of average earning people and replaced by high earning ones. As soon as they are the average earners, even more wealthy people move
okay but how do you run a city like San Francisco once all of the service industry workers get priced out? Do you start paying people 6 figures to clerk a convenience store?
Except it doesn't work that way. Instead 7-11 simply decides that it can't run a convenience store profitably in that location. For other types of service workers, wages/fees may well go up but it probably also just gets harder to find people.
Of course it works that way. If almost all the stores close then the remaining ones can raise prices. If All the stores close, the quality of life goes down and rents go down until it equalizes with a few stores open.
Where do the rich people get their groceries then. Its clear that service jobs pay a lot more in SF that they do in other places, for the very reasons you mention before.
It's not talent that's concentrated. It's capital. The SF bay is the undisputed headquarters for smart technology investment capital, both angel and venture.
"Especially for information technology, I don't understand the rationale why it has to be concentrated at certain places."
It's concentrated _because_ it doesn't have to be at certain places. Your post office that had to be close to you is now run by a couple of thousand people at Google.
"Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines?"
Again, without being to annoying, why does it have to be in Dallas? It doesn't, so it mostly isn't.
As far as I know that only tells you why it might have had to be Dallas at some point when regional centers made sense. Which changed somewhere around Paypal if not earlier.
I'm not saying that Dallas (or any other city) can't have some, even quite successful, startups. Just that you can't really compete being say "the third to fifth best choice for startups". At that point you're competing with too(!) many different cities. You have to be the obvious choice in a few, preferably large, categories; capture a lot of local talent (which is harder in the US), and most likely both.
Clustering effects are real, even for software. The ability to meet with clients by taking a (relatively) quick trip from SOHO to Chelsea (to initiate, pitch, or close deals) or the ability to meet with the developers of company that created a service with an API you're going to integrate with is actually helpful (
"warm currents" of communication).
Software technology ecosystems could certainly succeed in other places if one could bootstrap them in the first place; the clustering (and self-reinforcing network) effects mean that people gravitate to where the action is already happening. Getting started in a new location is challenging, so only those willing to shoulder additional risk (beyond the often-high risk of starting and running a startup) are going to try.
Companies and people that are sitting pretty in SV will tell you that you absolutely need to be there to get anything of importance done. It's job security and protects them from most outside competition.
Freedom of speech and expression will suffer as long as all Western world's social media is controlled by a few city blocks in SF.
You're absolutely right! It could be anywhere in the world! Talented people can easily move anywhere! Startups can be successful in San Antonio, Phoenix, or Ithaca! So why do so many smart people insist on concentrating themselves so?
Is it possible that perhaps there may be reasons for people to choose such an obviously irrational thing? What do they think they're getting out of it?
Many companies have found that they benefit significantly from physically proximate workers. There are distinct benefits to putting people in offices in person. On top of that, having many such companies in one place is beneficial to the specialist worker. It mitigates risks of unemployment, and enables workers to take greater risks.
Myself, I've done what you suggest. I took a job in a cheap place. It was great in some ways, and terrible in others. When I decided I was done with the job, I had to leave that city. There just weren't many options for me there. I understand why a businessperson would like it - you get more leverage over cheaper employees - but it's not the best choice for me.
> Talented people already move from one coast to the other, so they could as well move to any other place.
But any-town, USA has nothing else to offer them in terms of entertainment, arts, food. I live in the 77th largest city in the US and this place is dead.
To put it another way, the cost of real estate in a given area is proportional to the rate of money flowing through that area. Will ever larger flows go through New York and San Francisco, increasing without end? History suggests that is unlikely.
Well the frothiness of the tech bubbles are purely a factor of a lack of liquidity of meaningful services to create.
VC capital focused on tech is a tiny sliver of available capital given the sources VCs get their funding from, and an entire order of magnitude of greater flows could come through.
So if you were using that as an excuse not to buy that costly condo on the island or peninsula, its not a great excuse.
Yes, much much longer or macroeconomic events can spook a few relatively large funds and dry up funding.
Keep building! There's a very large ecosystem and a lot of continually generated capital that merely needs to be convinced that the tech sector is the place to park it.
Market growth is showing that you are not correct. Market is going up all time, S&P 500 even if bubble burst around 2008 and 2000, now we have prices almost twice as high. So it is true that more and more money will flow to those places.
Yes it can, College Tuition is a great example. Instead of finding the cause and treating it, we just increase the amount of aid people have access to.
But college is not a necessity, whereas living somewhere is, and you can somewhat easily get money from the government (at least in the US) to support your degree, whereas you can't really get that for your housing.
Ehhh, that isn't the narrative we've been pushing for the last 20+ years.
> whereas living somewhere is
I think the fact that it's a necessity only benefits the idea of providing people aid for housing.
> you can't really get that for your housing.
I mean, you absolutely can depending on your level of income. It won't make up for being poor, but that's what section 8 housing is.
Even on the more middle-class scale, the government provides tax breaks for home owners (and especially for first-time home buyers) which is basically money from the government.
Compare the statements "not everyone needs to live in an expensive city" and "not everyone needs to go to a private out-of-state college" to "not everyone needs to be able to live" to see the silliness of that comparison.
I think one of us has misunderstood something in this thread.
I assume that everyone wants healthcare for everyone. I mean, who would want even a stranger to suffer from disease?
The question is what is the best mechanism to make it affordable for everyone.
One answer is: give everyone more money to spend on it. The problem with that is that it drives up the cost for everyone and you may be no better off. You might be worse off.
Another solution might be to spend money on the supply (build more hospitals and train more doctors). I pick this example because it doesn't imply things like lowering taxes or spending less, so it doesn't get caught up in the budget discussion.
The criticism here is just in regards to the first solution, not in regards to providing healthcare.
No, college tuition will rise with middle-class incomes.
This is a cultural phenomenon. We're "supposed" to get our children the best education we can possibly afford, otherwise we are bad parents. Since colleges don't have price discrimination, this essentially means tuition is set at the absolute maximum that the middle class can afford - squeeze every penny out of them. This is why aid won't reduce the burden of tuition on the middle class (tuition will just rise to meet the aid amount). It's also why tax breaks won't help the middle class either (same idea), although the tax breaks can help those above the middle class (since they have a higher tax rate, and the tuition rises to match exactly the effective aid for the middle class).
College tuition has been going up much faster than incomes. When I went, the only people I knew getting student loans were those getting professional degrees: medical doctors and lawyers.
Tuition used to be very low. When we adopted a culture of "college is everything" that's when tuitions rose rapidly to meet what could be maximally extracted from the middle class. We've now reached that point so they will rise slowly now - only to meet increases in government aid (direct and indirect aid) and increases in middle class incomes.
Huh? Parents buy their kids crap fast food all the time. We have no cultural push to buy whatever food our kid has access to no matter how high the cost.
Contrast this with college acceptances and tuition. As soon as they get accepted, the tuition can be however high it is it doesn't matter. You still pay it. This culture of spending all and everything on tuition has allowed tuition to rise to maximally extract from the middle class.
Maybe i can clarify: there are many things people would pay through their teeth to keep or get, but not all of those has raised prices like tuition. First of all, tuition around the world hasnt increased like in the us, and the same cultural effect has to be present in the west.
My explanation for it is the debt conditions: if students were able to default on their debts, colleges would not charge what they do for majors that dont provide the value to students: if a student spends 80k for poli-sci but his job cant pay for it, he would default, and the college would lose that money , and hence have an ineterest in pricing accordingly to the value it can provide to its students.
But since the debt is federal and permanent, the college's incentives is to increase the price as much as possible since it doesn't have a sustainability problem: the students and the government do.
Just make the loans defaultable, you would have a default crisis by next month, and prices would crash quickly.
Yes, someone pointed out it isn't rising with incomes but instead access to debt. I agree that's more accurate - tuitions have risen to maximally extract the middle class's access to debt.
If you made student loans defaultable, suddenly they would lose much access to this debt, and tuition would fall.
My points about aid and tax breaks on tuition not working still apply.
College tuition has been rising more than incomes for a long time. It's very rare for someone to be able to go to college without a loan.
> According to the College Board, the average cost of tuition and fees for the 2016–2017 school year was $33,480 at private colleges, $9,650 for state residents at public colleges, and $24,930 for out-of-state residents attending public universities. [1]
I remember hearing a variation of this claim by rationalizers for the dot-com stock market bubble in the 90's and the housing bubble in the 00's.
I recognize you're not trying to rationalize this, but you've identified the common factor to each bubble: a new and unsophisticated source of investors being aided by the financial industry.
With the dot-com bubble, it was daytraders and online traders generally (including me). With housing bubble, new untraditional homebuyers who bought homes with exotic mortgages. With education, student who traditionally would not have gone to college going to college.
These could have all been positive examples of American upward mobility at work. But as was especially evident with the housing bubble, the financial industry turned people looking to improve their lives into consumers and, in many cases, exploited them.
With rents in metropolitan areas, it seems to be driven by wealthy investors (institutional investors and wealthy foreigners) pricing marginal middle class homebuyers (e.g. yuppie millennials) out of the market and then turning around to rent to them. Renters, like tech workers and young white-collar professionals generally, can stretch to afford these rents. But they definitely have a ceiling and all of this has been fueled by a growing economy. As soon as the economy falters, aid will dry up and the roof will cave in.
Thats not the case here. The financial industry is not driving up rents and costs in San Francisco. The pure amount of private wealth pouring into the area is.
Thats the dramatic shift this time around -- this isn't a bubble propped up by lending -- this is a bubble due to the fact that we are living in a time where the rich _have so much money they dont know what to do with it._
Well, true, I suppose. Demand directly is driving up rents. And San Francisco is a special case because of its geographic constraints. It is almost like a literal geographic bubble that formed on the bay there. My conclusions reflect more generally I'm seeing and experience in Southern California, which isn't quite so geographically constrained.
I agree it's not the same kind of bubble we saw when strippers (to borrow the example from The Big Short) were carrying 5 mortgages in Florida. And it explains why housing prices never fell there or really here in Southern California to the extent I was expecting (and really hoping) back after the crash.
Still, I imagine most of that private wealth that is pouring in there and here is either connected with the financial industry directly or indirectly. At one end, you've got the financial industry financing everything, from mattresses to cars to college education, which spurs demand and price inflation.
On the other end, you've got a global wealthy elite for whom all real estate is local. They are small proportionally but still large enough in aggregate to quickly exhaust limited edition luxury items like residential property offerings in San Francisco, Vancouver, London, etc.
Anyway, that's the simplified model I've been operating on for the last few years. A weird combination of the super rich shopping where they please and local middle class Americans, hopped up on credit, trying to compete with them in select desirable areas.
The fallacy of rent control, which only treats the symptom and fails to address the root problem of inadequate supply and restrictions to adding additional supply to the market.
Another option is improving commutes from the outer boroughs and New Jersey - the Bronx has many affordable areas, but the 456 is a shitshow, and I'd rather move back to Texas than put up with the slow peristalsis that would become my commute. Buses aren't great, either, and suffer from a lot of the same problems that regular street traffic does. My coworkers who come from Jersey typically have a bus ride of an hour, assuming there aren't any traffic problems.
Grow vertically. I saw this regularly when I was living in Hong Kong - 50 year old 5-15 story apartment buildings being bought out by developers, demolished, and replaced with something 30-40 stories tall.
High speed rail into the city (see tokyo). You can travel enormous distances in 40 minutes on HSR.
Replacing 4 story Brownstones with high-rise apartments. Simply removing the politically induced scarcity of zoning density restrictions would achieve that or something similar.
Doesn't ubranization drive urbanization? I mean, people (myself included) treat living in cities as end in itself. People pay more of their income in rent just for the access and experience of urban life. So yeah, I think Cowen's justification is off.
There is a second layer where I agree with Cowen more, which is that urban cash flows need some 'engine'. People can only pay based on their salaries, and some fraction of spending in a city flows out (to food, industry, etc). So yeah, having a major economic driver raises your price cap, but it doesn't have to be creative. It just has to be something you can effectively do in a city and get money from elsewhere. I don't know what it would be for Tokyo, but in my home town it was urban-friendly manufacturing not creativity.
I think all almost industries cluster in the sense they are talking about in the article. The corporations responsible for creating and distributing are clustered.
For instance, Oil and Gas in Houston, Pharma in New Jersey and so on.
I don't think the economic value of clustering will stop anytime soon.
The trend may stop because people find better solutions to housing than simply building more of the same.
(And software should not be thought of as an industry, but a tool that enables other industries, but this is not the place for that.)
From Toronto. We have it worse. We are actually thinking of moving to Vancouver and renting :-p The rents in both places seem the same, except Toronto has shitty traffic, very limited tech opportunities, bad weather, and bugs. I looked around at jobs in Vancouver and it seemed a bit surprising how many tech employers there were.
Can you shed light on why you are fed up with V? Where else are you considering?
They didn't bother listing Vancouver because the salary here is so painfully low with entry level software engineering positions regularly listing $40,000 CAD /year or $30,000 USD /year, which is what a Starbucks barista in Seattle clears.
As your experience goes up, so should your salary right? Not in Vancouver. It's around a couple hundred dollars per month in after-tax pay bump provided you've slaved at a company for 5 years minimum.
Pretty fucking hard to build a competitive tech company in Vancouver, when people are unmotivated due to depressed wage, high cost of living with no upward mobility. Almost everybody I talk to, housing is a big issue. Everyone is working, commuting on congested public transit, house poor but the image of living in Monaco, coupled with good ol' Canadian Ohwellism, people really don't give a shit about career mobility as long as they have a regular job that will let them sustain a roof over their heads.
There is a large brain drain happening here, in 15 years, this city is going to be a very different place. I don't know what the impact of losing long time middle class residents who comprise of the economy.
You will be poor but working in Vancouver, and that alone serves as a novelty for newcomers. There's really nothing special in Vancouver, to justify a 100%~300% pay cut (factoring in exchange rate and low Vancouver salary).
Vancouver might be multicultural but it's also a ethnically silo'd and very tough to meet people in general as they are very cliquey and stick with their own skin color.
Lot of broken dreams and disappointed Canadians/Americans from other provinces/states who tell me these things, which is why I'm writing this long comment to warn those who have a romantic attachment to Vancouver.
Your point is 100% correct, but IMO that link understates Seattle earnings potential. Probably doesn't include equity/cash bonus, which will happen a lot in Seattle and not so much in Vancouver.
Big tech company jobs in Seattle are extremely common, and a big tech company job in Seattle will pay you much more than $126k/year USD when you include stock/cash bonus.
Especially a few years into your career. If you're willing/able to be a dev at a big tech company, $200k-$300k/year is absolutely normal 10 years into your career (often much sooner). If you're great, $300k-$400k is completely possible.
I don't think such salaries are sustainable but you are absolutely right in that Vancouverites are taking not a pay cut but a reduction in quality of life overall.
The difference is there's a huge tech bubble in the US which has blown up salaries for software professionals far ahead of anywhere else in the world. Think about all the flimsy startups funded by free flowing VC cash who will never make money. Once they burn through the cash they are done. When you have millions / billions thrown at you, who cares about paying developers $140k? The money almost means nothing.
It's the $150k that software engineers make in the US that's abnormal, not the $50k in Canada or EU. That is where salaries in the US will go once the funny money moves on.
Engineer shortage? Not really. This is something that can be learned by studying books, you do not even need a license. Yes, it's hard, technical stuff, but so is Mechanical Engineering yet they don't make these kinds of salaries and they have more barriers to entry.
It's funny to see the bias here: high house prices are certainly a bubble, but high software salaries are definitely 100% earned due to amazing abilities to generate wealth and market fundamentals.
Not OP, but Toronto at least has high-ish wages to go with the high rents. In Vancouver, you make less than $100k per year as a dev. And that's CAD, not USD, so under $75k USD.
No wonder Amazon, Microsoft and others are expanding in Vancouver like crazy, same timezone as Seattle and San Francisco, an english-speaking population and salary levels 50% lower.
Obviously not forever -- eventually the sun will become a red giant and consume San Francisco, at which point all rents there fall to $0 -- but I heard "forever" in that article as "the foreseeable future and its foreseeable future". Maybe 100-200 years; maybe longer than that... How do you read it?
The author of the article is a professor of economics but doesn't state the true cause of rising housing costs: Market inefficiencies (or market failures) caused by politically induced market scarcity restrictions called "rent-seeking" which benefits landowners such as President Trump over people who rent or are purchasing housing.
Rent-seeking was first illustrated by David Ricardo in the mid-19th century (IIRC) and surprising that the author did not cite the true reasons for the rising housing costs.
Harvard Economist Edward Glaeser and Economist and Financial Times writer Tim Harford among many others writes about this.
Remember, rising prices come from scarcity. Eliminate the scarcity and your eliminate the high prices. Reverse the zoning density restrictions and you get lower prices.
I love how many of the very people who claim to be critical of Trump and his wealth are the very people who help support zoning density restrictions that have made him far, far wealthier than he would otherwise be. If they started caring for regular people instead of wealthy people like President Trump then there would be more, affordable housing, and President Trump would not benefit from "rent-seeking".
> "It's one thing to support laws and regulations that happen to benefit Trump,"
But these left-leaning people claim they want to help the working class and others and are worried about inequality, yet they are the major cause of the inequality by making housing unaffordable through rent-seeking which benefits President Trump instead. In other words, they say one thing that they are for addressing the ills of inequality and instead support a policy that creates more inequality and benefits the very wealthy whom, in words only but not in deeds, criticize.
If they truly cared about inequality as they claim, they would reverse the unfair rent-seeking zoning density restriction laws.
There are laws and regulation that protect people from harm, e.g. product safety, physician licensing, FDA drug approvals, food inspections, etc.
Then there are regulations that help special interests get an unearned portion of wealth. That would include these landowners benefiting from zoning density restrictions or in NYC before Uber/Lyft came along, the artificial restriction of 13,000 taxi medallions for a population of 8.5 million.
Gotta agree with you there. Market failures refer to failure in a free market, or some problem caused by some market being too free.
Regulation failures are problems caused by bad/too much/too little regulation. In this sense, regulation failure can sometimes overlap with market failures.
You call them rent seekers, but the vast majority of the anti-builders I see around the Bay Area are home owners who worry about traffic or some such. It's not some big conspiracy to increase profits. It's incumbent nimbyism.
Attend a town hall meeting where they're discussing a new apartment building and you'll meet them.
> "You call them rent seekers, but the vast majority of the anti-builders"
Many people have the vast majority of their wealth in their homes and as such want laws that increase the value and not laws that decrease the value by increasing supply. Regardless of the stated reason, the scarcity and rising prices thus market inefficiency are politically induced.
Many people have advocated for "Green Belts" parks with the true intent of decreasing available land to increase scarcity.
Even a lot of bay area renters are anti-development. "They're just going to build luxury condos and destroy the neighborhood character" is the go-to phrase.
> "Even a lot of bay area renters are anti-development."
They might be receiving some sort of rent control so that their rent is far below the market price. I know there are a number of people in NYC that live in rent-controlled, rent-regulated apartments.
>Remember, rising prices come from scarcity. Eliminate the scarcity and your eliminate the high prices. Reverse the zoning density restrictions and you get lower prices.
Yes, but why would you want to do this? Or more accurately, why would the powers-that-be in a given area want to do this? They already have their real estate, and they're profiting by the rising prices. Why would they want to bring prices down?
> Or more accurately, why would the powers-that-be in a given area want to do this?
Well, they generally would not. Except there are firms that must pay salaries that are not in real estate that have to pay their employees higher salaries in order to pay for the "rent-seeking" of landowners. It would benefit them to lobby and influence city council.
Also, powers that be love monopoly pricing but there are laws to stop monopolies.
Still, author Cowen is an Economist, yet doesn't state the true reason for rising housing prices, a discovery made two centuries ago by an extremely famous economist, David Ricardo.
>It would benefit them to lobby and influence city council.
Why would city council want to bring down rents? They and their cronies are profiting off the high real estate prices. The city council is, after all, composed of wealthy people who own land in the city. You can't have a city council composed of people who don't even live in the city.
>Also, powers that be love monopoly pricing but there are laws to stop monopolies.
Those laws only apply to corporations; they have nothing to do with real estate, and this isn't a monopoly situation. There isn't a single company that owns all the land, or all the apartments, in these high-priced cities. There's merely a shortage of usable land, because of geography and physics.
Basically, to fix this problem, we would need new laws at the State or Federal level, along with enforcement which would absolutely work against the wishes of these city councils. But there isn't much demand for such laws, because it's a local issue, and national-level politicians aren't going to do well trying to make it a campaign issue. Voters in rural areas just don't care about high rents in cities; they'll tell you that you just need to move out where they are and bring the high-paying jobs to their rural communities.
> "The city council is, after all, composed of wealthy people who own land in the city."
I can't speak for your city but in NYC, I'm not certain if any member of the city council is wealthy. I know my representative is not.
My point regarding anti-trust busting of monopolies is that federal legislation has been enacted before to combat deliberate attempts at market inefficiency and it could be done in the case of zoning density restrictions. In 2002, Japan enacted a federal law that overruled local land-use restrictions and as a result in 2014, Tokyo built 7 times the number of housing units as NYC (140,000 vs. 20,000).
We should do the same in the US as they did in Japan and you'll see more affordable housing.
We can't do that; we don't have the culture they have in Japan. These things are a product of culture. Japan has a culture in which street crime basically never happens; the US does not. The US has a culture where the politicians are thoroughly corrupt, especially at the local level, and the voters like it and re-elect them happily. You can't just will culture to change.
Tyler Cowen knows about rent seeking and Ricardo. He's not writing an encyclopedia article on the topic of rising housing costs though, he's writing a short piece for a broad audience about the demand side factors that might stabilize the price of housing in the long run, given (what we all take for granted) a more or less fixed supply.
I realize that he knows about rent seeking and Ricardo. He was addressing the issue of high housing costs and the question to ask is, why didn't he address the solution which is to reverse the rent-seeking that benefits wealthy landowners like President Trump over regular citizen renters and home buyers.
He should have written about this (article link was provided by another comment above) about how Japan solved the problem in Tokyo. We need a similar federal law in the US.
An article by Cowen that solves the problem by showing how successfully implemented the law was in Japan for Tokyo would have been far, far more interesting and implementable.
"The federal [Japanese] government recognized that these regulations were the problem, so in 2002, it passed the Urban Renaissance Law. The law stripped municipalities of the ability to control private property."
Tokyo is a good case study for how effective selective deregulation and zoning policy can lead to more efficient housing construction.
In Minato ward — a desirable 20 sq km slice of central
Tokyo — the population is up 66 per cent over the past 20
years, from 145,000 to 241,000, an increase of about
100,000 residents. In the 121 sq km of San Francisco, the
population grew by about the same number over 20 years,
from 746,000 to 865,000 — a rise of 16 per cent. Yet
whereas the price of a home in San Francisco and London
has increased 231 per cent and 441 per cent respectively,
Minato ward has absorbed its population boom with price
rises of just 45 per cent.
Thank you. This is a great read and this is the suggestion Economist Cowan should have offered.
"Harding wrote in the article, the city had 142,417 housing starts in 2014, which was “more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m)." Compare this, also, with the roughly 20,000 new residential units approved annually in New York City, the 23,500 units started in Los Angeles County, and the measly 5,000 homes constructed in 2015 throughout the entire Bay Area."
And the true solution is to pass a law using Japan as an example:
"The [Japanese] federal government recognized that these regulations were the problem, so in 2002, it passed the Urban Renaissance Law. The law stripped municipalities of the ability to control private property."
Ricardo's law of rent shows that indeed, even without artificial scarcities imposed by regulation, rent can go up forever as long as productivity is rising.
While we want housing to be affordable, arbitrarily trying to reduce rental costs is futile. Rent exists. It is a reflection of the intrinsic desirability of the location. The only way to reduce the rent is if the location becomes less desirable and less productive.
So, really, it is a question of political economy... of who should own the rising value of land, since that value is not a return for the effort of the owners.
> "Ricardo's law of rent shows that indeed, even without artificial scarcities imposed by regulation, rent can go up forever as long as productivity is rising."
The rent-seeking that he established states that political regulation can artificially create a situation of scarcity thus resulting in high lands costs that benefit landowners.
Specifically, he illustrated this regarding the "Corn Laws" of Britain which were a politically induced import duty on grains of all sorts making the cost of bread more expensive for consumers. Famers could charge more for the grain they grew because of less competition but the landowners would simply charge the famers more money. Thus, the import duties raised the cost of food for consumers while indirectly directing that wealth to landowners.
The "Corn Laws" created the market inefficiency, market failure which interfered with wealth creation and David Ricardo even joined British Parliament to combat the "Corn Laws." He eventually succeeded in the repeal.
While the values might continue to increase with rising productivity, the overriding factor at least for today's environment is the "rent-seeking" and we need to reverse the local control of land which benefits wealthy landowners like President Trump over normal working people.
Rising prices are due to scarcity. The scarcity is politically induced in order to in this case benefit landowners. Reverse the scarcity, politically induced or otherwise, and prices fall.
The price of gold has risen considerably over the years. There's no particular reason to suspect that this trend will stop, since it is tied in with rising levels of production.
It is quite possible to create an artificial scarcity of gold, and thus gold would be higher than it should be. But it would be ridiculous to claim "gold can't go up forever" and that to achieve affordable gold we only need to remove the artificial scarcity.
It may be desirable that we remove the artificial scarcity, but it is also a distraction from the core question at hand.
It is ignoring the natural scarcity and the general rising level of productivity. Prime locations are prime locations. A port, for instance, only becomes more desirable as total production levels increase.
> "It may be desirable that we remove the artificial scarcity, but it is also a distraction from the core question at hand."
I respectfully disagree and so does Harvard Economist Edward Glaeser who has written extensively about this as does FT columnist and economist Tim Harford (as explained in his book, "The Undercover Economist" as does Steve Beyer who has written about this in the NYT and Forbes as well as other places.
Japan passed a federal law that overruled local restrictions and in 2014 Tokyo built 140,000 residences compared with a total of 20,000 in NYC and about 90,000 in the entire state of California.
I'm speaking pragmatically.
> "A port, for instance..."
A port is a much greater and natural scarcity compared with, say Manhattan which is huge as well as London which is not an island, but made "an artificial one" because of the Green Belt that circles London.
Japanese people tear down old houses and rebuild new houses to their specifications to a much greater degree than Americans, so it's hard to compare those numbers easily.
Scarcity is a term that is relative to demand. If you have a trillion widgets, but a quadrillion customers desperately want them, you still have a major scarcity.
Not all of the land in cities is desirable. Parts of Manhattan are clearly far more desirable than others. And the people who want these prime locations far outnumber the availability of them. Not everyone can own a lot in Times Square, etc.
This article crystalizes a point that was vague in my mind: "megacities have a problem making it affordable to raise large or even medium-size families. How many of us could live in San Francisco, London or New York City and bring up three children in a decent neighborhood with good schools? Only the already well-to-do can manage such a feat.".
As a mid-30s person with a new baby, I don't see how the numbers work for new entrants to the housing market - unless you were a gambler. Your gamble would be that (a) you don't ever take a hit on your income, and (b) property prices continue to rise. We've been unable to take that gamble .. and homes have increase 40% in the blink of an eye.
In Canada, we have a lot of family in the GTA. We're basically priced out of areas as far away as Mississauga and Milton (Milton went up 20% since Nov 2016). An option we are considering is to move to BC and just rent for a few years in Vancouver. At least we get a better city out of it. For any Canucks, are there any other decent places with tech jobs, and somewhat affordable housing?
>How many of us could live in San Francisco, London or New York City and bring up three children in a decent neighborhood with good schools?
The simple solution is to not have any children. Leave that to extremely rich people and very poor people. Society obviously does not support child-rearing, given the cost of housing and the lack of support from employers, so why fight it?
That is a logical but dystopian conclusion to make.
It disturbs me deeply and I wonder why.
Maybe it was your matter of fact, emotionless delivery of it that caught my attention.
I can't really dispute what you have said other than it is not an inevitability. Societies can choose to change this, Sweden being a current example, Finland too. But people need to organise and want it enough, maybe they don't. Time will tell.
I'm very glad about this; it means I must have gotten something right. :-)
>I can't really dispute what you have said other than it is not an inevitability. Societies can choose to change this,
Exactly, but that's the problem: societies can choose to change this, but will they? As a pessimist, I say no, other than a few very small countries like those you cite (and even there those are just attempts at change so far; the birthrates in those nations are extremely low). Humans are remarkably bad at seeing impending large problems and collectively working together to change things to avoid them.
We had two children and the cost isn't remotely an issue. However, we're a dual-income dual-engineer family who moved to Austin and bought in 2012. Our house value has doubled in price since we bought it though.
It's very possible with perfect decisions, lots of sacrifices, and freakishly good luck.
You are missing the point. The problem is prices have doubled since 2012. People who didn't time it right are hosed. And there was no obvious reason why prices should go up so much so fast.
There actually was/is an obvious. Jobs are bouncing back in several urban markets, and Quantitative Easing has been continually making it cheaper and cheaper to borrow larger amounts of cash. As it becomes cheaper, people borrow more, bid more, and house prices go up.
The question is how well they will sustain, and whether a future market shake up (quite possibly Trump-related) would reset things to more sane levels, and for how long.
Or you move out to the suburbs when you have kids. It's not uncommon for young 20-somethings to live in the city and then move out when they start having children.
Case in point, my cousin in NYC just had her third kid. She'd been considering moving to the suburbs for a while, because there was barely any room in their tiny apartment in Battery Park City for her, her husband, and the twins. Now that they've got another kid and the twins aren't babies anymore, they've gone from simply considering moving to the suburbs to actively house-hunting (and they're putting such a priority on it that she had her parents go house-hunting for them while she was in labor). I'd be surprised if they were still living in the city by the beginning of the second half of this year.
Another example: my parents. Both of them lived in Manhattan when they were in their 20s, and immediately after they got married, they moved to Texas and bought a nice cheap house in a suburb that had just been developed.
Right, but now you're forced to get a new job in a new place, or at the very least have a very lengthy commute. What's the point of having a family and kids if you're spending 3-4 hours a day just commuting to work? Or worse, having to live in Texas? This of course assumes that there's even jobs for you in TX or other low-cost locations.
Basically, if you want to be a decently-paid professional and have a rewarding career, location is going to be very important to you, and you're not going to have time or money for kids. If you really want kids, you should make that your priority, and forget about education and career, and just work on having a stable job in a low-cost place, perhaps working in fast food and trying to work your way into managing a McDonald's where you might be able to get $40k. With kids and working at McD's as a cook in your younger years, you should qualify for tax benefits and probably some social programs like SNAP to help make ends meet.
I'm typing this from work -- I work at a B2B telecom in an inner-ring suburb of Dallas -- and all I have to do is look around the office and see lots and lots of white-collar professionals who live and work in the suburbs and have spouses and children, including everyone on my team (well, one guy on my team doesn't have kids, but he's married and owns a house in a conservative suburb). I remember when I used to sit next to the sales department, and some of them would talk about their kids all the time. Very few people live in the city, and some people in the more business-y departments have given me some very strange looks when I tell them I live in an inner-ring suburb that's only 15 minutes away; most of them live in distant exurbs and have fairly long commutes.
This is what the corporate world is like all across the country.
To answer specific points:
> Right, but now you're forced to get a new job in a new place, or at the very least have a very lengthy commute.
People change jobs all the time, and they typically get raises and promotions out of it
Oh, and having a long commute and spending lots of time at work is considered a bonus to many people who have kids. Work is the best way to get a breather from the screaming babies at home. You know the guy who's always super-excited and happy to be in the office at 8:00 Monday morning? He's obviously a father.
> Or worse, having to live in Texas?
I actually love living in Texas. I've lived here my entire life, and the only reason I'm even considering moving later this year is because of SB6, and even then I'm going out of my way to move to a suburban environment that reminds me of home (I've pretty much decided on Torrance, CA, though Orange County is still a backup).
> This of course assumes that there's even jobs for you in TX or other low-cost locations.
Dallas-Fort Worth-Arlington is the fourth largest metro area in the country, and Houston-The Woodlands-Sugar Land is the fifth-largest [0]. It's patently absurd to say there are no jobs here. Both metro areas individually (Dallas: 7.1M; Houston: 6.7M) are more populous than San Francisco-Oakland-Hayward (#11) and San Jose-Sunnyvale-Santa Clara (#35) combined (6.6M).
>Oh, and having a long commute and spending lots of time at work is considered a bonus to many people who have kids. Work is the best way to get a breather from the screaming babies at home. You know the guy who's always super-excited and happy to be in the office at 8:00 Monday morning? He's obviously a father.
So it all falls on the wife to do the vast majority of the child-rearing and domestic duties (in addition to their employee job), as supported by many current studies. No wonder so many women are opting out.
Anyway, I think the population figures speak for themselves and support my arguments. The US is at either ZPG or probably even NPG except for immigration, and statistics show a huge portion of children are born into poverty.
Toronto housing has to come back to reality at some point. Rent and ride it out if you can, consider Montreal if you can find a good job and are OK with French, otherwise if you can stomach being away from home you're much better off financially as a dev in the US.
I'm contemplating just putting my Toronto condo on the market for an outrageous price, like 2-3 times what I paid for it 18 months ago. If anyone accepts that price, it's a sign that something is terribly wrong, and that I need to get the hell out of this city.
> An option we are considering is to move to BC and just rent for a few years in Vancouver.
I'm not really sure how moving to Vancouver helps solve any of your problems. If you're priced out of Milton you're likely priced out of the entire Metro Vancouver area.
Is rent in Vancouver that much cheaper than the GTA that you're saving money and it's worth moving? I don't think it is.
I don't think the U.S. has quite the same problem Canada (or the U.K.) does of people/jobs concentrating in only a handful of mega-expensive cities. It may seem on a forum like this one that "everybody" is moving to NYC or SF, but If you look at the population change statistics from the census, the NYC and SF metro areas are growing relatively slowly. People are mostly moving elsewhere, for a variety of reasons, but cost of living probably being a factor.
These are the the 10 fastest-growing large (>1m population) metropolitan areas in the U.S. in the period 2010-2015:
Sure they can. That there is a natural bound relative to other fundamentals in no way means that the absolute price cannot unboundedly increase. Any in any case, the most thorough spatial equilibrium analysis suggests that there is natural agglomeration of high skill/wage (locally positive feedback). The reference is Diamond (AER 2016), but the working version of her job market paper is a bit more complete: http://web.stanford.edu/~diamondr/jmp_final_all_files.pdf
The author is of course strictly correct, and practically wrong. Eventually our civilization will collapse, and the sun will go supernova. But for the foreseeable future, fiscal policy will be managed by inflation, and economic policy will be managed by economies of scale. The surprising thing is the author, doesn't mention either inflation or scalability once.
When information technology no longer scales, and we achieve full saturation for jobs that support scaled services, the prices will plateau. Until then, I expect them to rise at a rate faster than the rest of world. I don't expect that trend to end in my lifetime.
Supply and demand. So long as people want a limited resource enough to pay $X+1 for it, prices will rise. There's a limit to the inherent value of living in a megacity (adjusting for floorspace, quality, etc), so once insufficient customers are found, prices will flatten or drop.
Being able to work from anywhere, there's no reason for me to stay anywhere near a megacity (which I find expensive and distasteful). As employers discover the cost savings of telecommuting, employees will discover the cost savings of moving out of megacities ... and prices will slow, flatten, and perhaps even drop.
I agree. The only challenge for me is the lack of dining table economics on the part of employers outside of places like NYC and the Bay Area.
What I mean is that they almost exclusively look at local market prices for developers. They don't generally factor in what developers can make in the big cities. Now, some do, but generally they just apply the inverse of a cost-of-living multiplier and make that offer. That's problematic because then our savings rate, something that should be measured in absolute terms, is being reduced.
Anyway, point being, if I add up my benefits, savings rate, and cost-of-living adjusted expenses, I end up with a big number for most non-coastal-U.S. employers. I then have the risk of branding myself as an overpriced prima donna, especially if I'm seen as a cost center instead of as a strategic resource.
> there's no reason for me to stay anywhere near a megacity (which I find expensive and distasteful)
Yes! I lived in SF for a year, but then moved back home to Ohio and went back to working remotely. I occasionally travel to bigger cities to work with colleagues (maybe 3-5 trips a year), and this feels like a much nicer balance.
I also earn enough that I could live like a king around here... or live on a more "normal" income, save the extra, and retire at ~45.
I work for a tech company in San Francisco and would gladly relocate to a cheaper city if the company allowed us to work remotely or had other satellite offices. Unfortunately, the satellite offices we do have seem to be dedicated towards specific departments, which doesn't help me.
I work in fintech and not in an engineering role, so the jobs that are available are mostly located in other high cost of living areas. I would definitely consider Austin if given the option to move there. The income taxes and housing costs make me salivate.
The article is mistaken about one thing: the size of the financial sector is not limited by the total wealth of the world. Eg: there could be derivative contracts (insurance or derived bets) for cumulative values much more than the value of the underlying asset (arbitrarily high, in principle). This is a big factor in what makes the global financial system so fragile.
If the finance industry keeps skimming a fraction of all the money flowing through it then financial hubs like New York city and London could keep becoming more expensive.
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[ 2.6 ms ] story [ 319 ms ] threadLook at the numbers of how many jobs have been created vs housing units created in a place like SF over the past decade. It's not some mystical force driving up rents, if you build enough housing it will become more affordable. There's no evidence that housing operates outside the principles of supply and demand, despite what some Nimby politicians will try to tell you.
Occupancy is a make-or-break issue in real estate. Dropping your rent by 7% is better than having a single month of non-occupancy.
But this isn't a rental bubble. The rents aren't really too high, they just can't keep growing above inflation rates forever.
Increasing supply. Which in this case is difficult due to the alliance of existing property owners and useful idiot "anti-gentrification" protestors.
We're not running out of land, obviously, but for standards like "land within 3 miles of the city center and -100 to 500 feet of the surface", that's much tougher. Not full, but crowded and with exponentially-rising development costs (since construction gets more difficult and annoys more people).
Of course, that's a problem I associate with NYC, LA, etc. SF (and probably London?) get blocked politically before they ever reach that point.
I also say to the main point of the articles: rents have a lot of room to grow under the current logic. City centers simply get voided of average earning people and replaced by high earning ones. As soon as they are the average earners, even more wealthy people move in. Also with the rents, salaries go up, so people have the possibility to pay for their accommodation again. While in Berlin you could easily live with 40.000 Dollar/year, you'll probably have to add another 60.000 so people are at least somehow able to move to work for your new shiny SV company.
It's a lot harder for a company to hire top tech talent if they're in Miami / Des Moines, because the Bay Area has a much higher concentration of tech workers. Convincing people to move is hard, especially so for more experienced tech workers who have a life/family somewhere. You need to be getting an insane deal for it to be worth abandoning your friends and family/forcing your partner to find a new job (and I've yet to see tech companies trying to compete on comp vs SF/SV outside of them). Can't run off middle-road new grads alone (Edit: Good point below that top grad talent wants to hit the big cities too).
The University of Texas at Dallas, established explicitly for this reason, is probably the reason why Dallas is a tech hub.
Why is it that Austin is a tech hub (UT) but Houston is not (U of H, Rice)?
One theory: it is not the school, but the kinds of jobs people get after. Austinites went to work for Dell, and Houstonians went to work for Exxon.
[0] https://thebridgebk.com/engineering-hub-downtown-brooklyn/
What made UTD different was that it was founded by the same people who founded the largest technology company in the area, and they specifically founded it in order to do something about the low number of STEM graduates in the Dallas area. The TI founders went out of their way to engineer a STEM culture in a city that didn't have one just to grow some more talent for their company.
From Wikipedia [0]:
> Qualified personnel required by TI were not readily available in the Dallas-Fort Worth area because the region's universities did not provide enough graduates with advanced training in engineering and physical sciences. TI was forced to recruit talent from other states during its expansion and the founders observed in 1959 that "To grow industrially, the region must grow academically; it must provide the intellectual atmosphere, which will allow it to compete in the new industries dependent on highly trained and creative minds".[12] To compensate for this shortage they established the Graduate Research Center of the Southwest in 1961. The institute initially was housed in the Fondren Science Library at Southern Methodist University. Land for the center was acquired by Jonsson, McDermott, and Green in Richardson in 1962 and the first facility, the Laboratory of Earth and Planetary Science (later named the Founders Building), opened on the grounds of the present-day UTD campus in 1964. The Graduate Research Center of the Southwest was renamed the Southwest Center for Advanced Studies (SCAS) in 1967 and in 1969 the founders transferred the land and assets of SCAS to the State of Texas. On June 13, 1969 Governor Preston Smith signed the bill adding the institution to the University of Texas System and creating the University of Texas at Dallas.
[0] https://en.wikipedia.org/wiki/University_of_Texas_at_Dallas
What if most startups only need "good" developers to develop their mostly CRUD apps and don't need "the best" developers?
But the dream, and the reason all the coastal co's are in it, is to be the next Google or Facebook, or Twitter or Snapchat.
You could say an app to get people to come over to your house won't change the world, but people think hey maybe it will grow, or we'll just pivot, and wind up with the next Flickr or Slack, and that's certainly good enough.
Sure, but that just means that they and their competitors have already grown to the point where the market is saturated, and any further growth they are experiencing is because the market is growing or to the detriment to their competitors. They probably already had an exponential growth period, although it could have been short-lived if the market is small (and if the market is really small, may not have looked like exponential growth at all, and may have just looked like becoming profitable and leveling out).
You're right that not all niches will attract VC funded competitors, but I think the number niches that meet that criteria are actually very small, in this industry. There's always someone that thinks they can disrupt it somehow, or market it better to show people the market is actually much bigger than it appears. Keep in mind, the VC funded competitor doesn't have to succeed in it's task of taking over or changing the market to have extremely detrimental effects on companies that aren't working with the same paradigm.
Having a market large enough to support a few small companies but not large enough to warrant VC funded competitors that stays that way seems a rarity.
So, either the next Facebook or lifestyle. Of course, real world is not perfect so there's space for medium-sized businesses, but they're not an economic optimum (they're leaving money on the table either way).
We're on the smaller side in SF, and I'm having a terrible time finding good ops people.
There are some exceptions, but most any successful technology product needs at least a few great technical leaders, if only to say no to net-negative ideas, provide mentoring to those who need it, and to make strategic technical decisions (architecture, tech stack, technical hiring strategy, etc.).
There are highly competent people in both the lower 90% of the top 10 schools as well as in non-top tier schools
And as for competence, there's an order or two difference between a developer that can add some more CRUD to a service and one that can say no to doing the exact same thing when it is a net negative to the system and/or organization. It's one of those things that sounds simple, but it takes a lot to even know which technical battles are the top priority.
But of course that definition is useless to a VC fueled, exponentially growing trainwreck/unicorn that wants to hire hundreds or thousands of "engineers".
While this is a laudable project and it works in some places, many rural citys are very conservative and against anything new the youth might be interested in.
So why haven't I moved? Frankly I'm scared that I can't cut it elsewhere. My job is secure and pays very well for the area (as a single person I make about 160% of the median family income). I could move and work remotely for the same amount which would result in a drastic decrease in quality of life, or try to get another job that I'm probably not qualified for. I've been trying to figure it out for the better part of a decade now.
That's somewhat different today but it's really a very recent change.
This basically describes the prevailing attitude in Minneapolis. Minneapolis is super cheap and has all the fancy cocktail bars you will ever need.
We're talking about tech workers though. I don't know about you, but my whole life as a tech worker, I've gotten up at the crack of dawn, worked all day, come home late at night exhausted and passed out sleeping until the next day. I don't even know what city I live in because I NEVER SEE IT. Culture? Nightlife? What the hell are they? It doesn't make sense that tech workers would care about these things because we never get to take advantage of them.
Not all tech workers are 12-hour-a-day workaholics.
Why are you killing yourself at work?
...no, I'm not honestly asking that, but those are the questions I'd expect to fend off.
I've literally never run into anything of the sort in my life, and I'm making a six figure salary.
But then again, HN is a startup crowd. Things might be different when you're obligated to keep flapping or die(1).
1: http://i.imgur.com/aNTvfaE.jpg
Because a tech worker can easily create $300-500+K per year in economic value for the company. Taking home 1/3 of that value seems perfectly reasonable.
Nothing in the above says anything about hours-in-seat.
Could be issues with our sourcing, perhaps, but it seems surprisingly difficult.
(PM me if you'd like to be a counter-example)
Hipsters, microbreweries, and fancy lattes will continue to spread I am sure!
I think some part of the network effect of big tech hubs is the option value. If you're in the Bay Area you can have the best of both worlds - stay in one place as long as you want for your personal life/family, and still have the possibility of working at any of thousands of the best companies of all sizes and switching between them if you need to.
Yet many companies don't allow remote working to their own employees, even though all contractors (including freelancers) are doing it mostly remotely.
Startups are built on young talent. Young people are obsessed with living in "the big city" and to hear them tell it, living in a suburb and driving a car is about the worst thing imaginable.
So if you want young talent, you better set up shop in SF.
And the lengths to which this insanity will go is that (e.g.) Google workers will live in SF and commute into SV. Talk about turning the "live in the suburbs, work in the city" paradigm on its head!
Motor vehicle accidents are the largest cause of death for people in the US under the age of 24 so it is, arguably, the worst thing imaginable ;)
https://www.cdc.gov/injury/wisqars/leadingcauses.html
The false American dream of the oversized house, piles of kids, and picket fence just isn't appealing anymore to a growing population of young people. Life is too short to spend your prime someplace boring.
I detest noise, grime, and crowds. I like having lots and lots of space all to myself. I worked in the city once; I got sick to death of hobos on the streets shouting at me and demanding I give them money (and then having to listen to them calling me a liar when I say I don't carry cash, which is 100% true), and I got sick to death of working in a tall building where the elevators would break down all the time. Working in the city also had me constantly on edge and worrying that I was going to get gang-raped, and I'm glad I don't have to deal with that anymore.
It's not just me, either. Most of the people I went to college with and still keep in touch with now have houses in the suburbs, and those who don't have houses per se live in two-story suburban apartment complexes. I only know one guy who lives in a more urbanized area (and even then, he's in a mixed-use master-planned development in a suburb), and that's only because he's legally blind and can't drive. A good way to make him angry is to say "you're so lucky you don't have to deal with the hassle of driving"; he will remind people at the top of his lungs that he would love to drive everywhere if he had fully-functional retinas.
My friends and I are the kind of people who make fun of hipsters and mock people who are pro-homeopathy, anti-vaccine, anti-GMO, anti-gluten, vegan, Bernie bros, etc. Trust me when I say that an urban lifestyle isn't for us.
I think there are a lot more culturally conservative young people than you think. Not conservative in the political sense ("liberal but not leftist" and "Clinton Democrats" apply to me and most of my friends), but conservative in the sense that they want to live a traditional lifestyle.
Live fast, die young, make bank; that's the counter culture philosophy. A slow death as we watch our homes devalue in the burbs worked for our parents, but there's a growing wave of nihilism attracted to the other life urban living offers.
"Bros & Brittanys" is, at 32%, by far and above the largest group and described as "enthusiastic consumers".
I'd imagine many other "Lone Wolves" (a group I consider myself part of) enjoy the peace and quiet of a suburban environment; I don't like being surrounded by people. I enjoy living an atomized life where most of my social interaction is online.
I've actually met some New Traditionalists, too... actually, my legally-blind friend I mentioned before is one of the only people from college I know who's an outspoken political conservative, and his wife is even more conservative than he is. Every Sunday, his wife drives him to church in his rural hometown, and they spend the day with his family. Since he got married, he's only become more and more of an extreme religious conservative.
There is also some more evidence showing that younger Millennials are more conservative than a lot of people think: https://www.ketchum.com/pt-br/news/break-ranks-among-millenn...
And to be honest, I don't think the urban hipster Millennials are any different from Gen-Xers who identified as slackers and Baby Boomers who joined the hippie movement. As they get older, the majority of them are going to walk away from their countercultures and return to more traditional lives.
If you believe in Strauss-Howe generational theory, then once the current Crisis runs its course, Millennials are going to have the same role in the new status quo that the GI Generation had in the 1950s.
Either way Im sure I'll be dead by some preventable disease not covered by "new traditional" health insurance long before it becomes an issue. [0]https://en.wikipedia.org/wiki/Demography_of_the_United_State... [1]https://en.wikipedia.org/wiki/Marriage_in_the_United_States#...
A lot may also be attributed to getting older and wanting to slow down, start a family, etc. Just ask any parent how much they enjoy SF's school lottery, or inability to let their kids play unsupervised outside for safety reasons, or lack of a back yard.
Having lived in a city most of my life, lived somewhere in walking distance of Mountain View, and now live somewhere in the Peninsula that I need to drive from if I want to get anywhere of note, there are definitely tradeoffs. It isn't always black and white. I miss the walkability, but I also love some of the other features of being more removed from the congestion and city centers.
https://www.nytimes.com/2017/03/18/world/europe/berlin-rent-...
Because the real commodity being sold with the apartments and offices isn't net access or even land. It's proximity to rich people. It's not an open market economy; it's a feudal system in which you need to stick close to your patrons.
It would also explain clustering in other areas (finance in NYC, Oil and gas in Houston etc).
Do you have any links or references exploring that idea in greater detail?
Wealth is basically self-concentrating. Our political systems tend to end up with a few capital (and often Capitol) cities where the spoils from the plundering, both metaphorical and literal, end up.
The original article does present some interesting and relevant examples of countervailing forces at work as well, and is insightful. But the elephant in the room, as always, is that returns to capital and rent extraction are the primary drivers of wealth, and that the winners tend to keep winning and vice versa.
But even if things seem "really obvious" and we can tell "just by looking at the facts", I feel better if someone has looked at the data and shown that to be the case.
We aren't living in the feudal era, and a lot of people like to think that the reason people move to the cities is because of (for instance) bars and restaurants, museums and the opera, high-paying jobs and so on.
This proximity to wealth may be a symptom of some third factor or it may be the driving factor.
That's why I appreciate it when smart, hard-working people take their time to figure it out for me.
How do you define wealth concentration, for example? If your definition is flawed, you can throw out the entire model.
And these would actually be rent seeking activities? Is that the idea?
I was just contrasting two different types of reasons for why people cluster in those cities.
Type I, the optimistic theory
Information is more efficient and trust is better when people meet in person. Industries need to co-ordinate trust and information flow through lots of people, so they have to be in the same place. They produce a lot of value, which produces wealth and increases productivity. That wealth pays for all these great things.
This causes a happy cycle of smart and educated people being attracted to the "good" things in life coming to the cities, and providing labor for the companies and so on.
Type II, the pessimistic theory
In order to get industries going (tech startups, new Oil and gas company etc) you need capital, and the capital exists in these enormous clusters. So the people who want to fund the industry has to go to these clusters of existing capital and convince them to invest them. The returns from the success of the industry go back to the same place and so on.
The existence of the bars, restaurants and museums are compatible with both, but only have causal power in the first type of theory.
Sometimes resources are grasslands with plentiful wild animals that you can spear and eat. Sometimes it's gems or petroleum buried underneath the rocks. And yes, resources are things like museums or pretty views or available five star restaurant meals. But the dynamic throughout human history is reasonably understandable, you can observe the same basic concept in a Petri dish.
The biggest resource of all in modern society is financial wealth. So people go to places that have it. Unlike the grassland, where new arrivals quickly deplete the available resource, in this modern scenario the result tends to be the creation of more wealth, and the cycle reinforces itself.
https://en.m.wikipedia.org/wiki/Rent-seeking
If prices of drinks are going up naturally because people are making more money, "rent" for real estate is going up, etc. that is not "rent-seeking".
[1]http://www.mercerrestaurantgroup.com/how-to-open-a-restauran...
Museums, opera, symphony, most theater, etc. are kept alive by the philanthropy of the local rich.
High salaries are paid by rich VCs looking for return, or companies with more cash than they know how to handle commissioning prestige projects. (How many people at Google actually work on revenue generation? That doesn't happen at Joe's Computers in Nowheresville).
Concentrated wealth is the reason cities can have these things.
I do, however, also agree with your counter-point to the previous comment.
Plundering, seriously? Isn't HN supposed to be a community of entrepreneurs?
To further complicate matters, both behaviours can be exhibited by the same person.
The Bay Area plus NYC metro area are 8.5% of the total US population so yes they are a significantly larger chunk of GDP and wealth. But, they are large enough that the differences are smaller than you might think.
[1]: http://www.paulgraham.com/siliconvalley.html
Places like Albany, NY were regional banking centers as recently as 30 years ago. In Albany's case, that was an artifact of the city's role as a transportation hub for canals and railroads.
As the role of banking has changed and the market has consolidated from a highly distributed model, its harder and harder to do business outside of large areas. If you're a midsize business, it's hard to get lines of credit simply because nobody wants to travel to talk to you.
Even within large organizations like government and Fortune 50 companies, consolidation drives centralization. Big places used to have regional administrative services (HR, Finance, etc). You could make a career working in some regional field office.
Now, centralized functions mean that you work at HQ, a regional center, or you're a task worker in the provinces.
You can code and create a product anywhere; you can meet VCs by flying into SFO (VCs might fly to you if you are extremely successful already).
Individual capital is very liquid, but the herd is not. Consider San Francisco: it has capital because of tech, because of the need for electronics & power for running a port, because of the trade in the Bay, because of the gold miners in 1849. That capital hasn't moved significantly to (say) Bakersfield.
A successful startup isn't going to be in the cities you mentioned because you have to convince people that they find the non-work related amenities they've gone to SF, Seattle, NYC, etc to find. Or go full remote, which has its own set of challenges (though I'd posit a full remote company really isn't in any one city so it doesn't really matter where the founders live).
Other than the public transit, all of the above are available in any number of towns and cities in the U.S.
A half a century ago maybe you had to go to NYC to hear great live music and eat Cambodian food, find specialty ingredients, or get access to off-beat books. But that's not the case any longer. I just googled and apparently there are Cambodian restaurants in Des Moines, Iowa. The internet can get you all the ingredients, music, and books you'll want.
Honestly, I think the coastal cities just have better marketing and more hipster appeal.
I'm just saying the "no culture in the flyover states" meme is long overdue for an update.
There are many good reasons the bay area is the hub of tech development. It all started with proximity to two very good computer science schools; Stanford and UC Berkeley. At this point, there are more tech-savvy investors here than anywhere else.
Ongoing development of technology is an iterative process and by necessity, must be a productive one to get to market more quickly. The VCs and the talent pool are here in the bay area. If a startup wants to get to market quickly, that startup will need money and talent, both of which are people issues.
We're located in Cebu, Philippines, the 2nd biggest city in the country, and our CEO spends a good deal of time in Manila, the capital, because decision makers want to meet someone. Starting there, would have been easier for many of the above mentioned aspects.
The walled City of London, a separate sovereign maritime nation situated within London is another historic example...
https://www.ft.com/content/7c8f24fa-3aa5-11e4-bd08-00144feab...
You have to be a lot more specific. There is an immense number of rich people in Los Angeles and it has historically had a mediocre tech scene for example (especially compared to SF, but it also lags Seattle and NY currently).
It's proximity to large numbers of very specific rich people.
> Talented people already move from one coast to the other, so they could as well move to any other place.
I agree in general, and I think it's likely that the future of growth is in sprawling inland metro areas like Dallas-Fort Worth, Kansas City-Overland Park, and Minneapolis-St. Paul.
Well, in the case of Dallas, this is largely going to depend on whether or not the Texas state legislature can ever get their heads out of their asses. If SB6 passes, expect Texas's economy to crater.
On the other hand, I'm not sure if your exact list of cities is feasible. Amarillo is too small to really become a hub for anything in the near future (it would take a dedicated effort, like how Bugsy Siegel transformed Las Vegas). And Miami is limited in its ability to sprawl because it's on a coast. Des Moines is a distinct possibility, though.
The suburbs have room to sprawl out forever. The city centers can become high-rent places for the rich, and everyone else can live in the suburbs and exurbs. Furthermore, the inner ring suburbs can become "edge cities" where businesses prefer to locate themselves (this is already how Dallas is laid out) so people from both the exurbs and the city center can have short commutes.
Pretty much it is a networking effect issue. The same reason why you are posting this on hackernews instead of reddit. Physical proximity matters a lot, even when work is digital.
For anything else I may want to do (concerts, sports games, plays, comedy), there are dozens of world class options within a ten minute cab drive / 30 minutes on public transportation.
It's gotten to the point, where if there's a band I want to see, but they're in the suburbs, I'll just wait til they're back in the city.
I grew up and went to college two different small beach towns. There wasn't much of anything to do besides drink. If you wanted culture, you'd have to get in your car and drive at least an hour.
I have no desire to live outside of a big city, unless it is in the middle of nowhere, but in that case, I will still have a home in a city.
My guess is a lot of other people feel the same way.
The main problem with Chicago is it lacks an anchor industry. Is it the best place to be for finance? No, that's NYC. Is it healthcare? Boston, Baltimore, Cleveland or Rochester. Energy? Houston. Technology? SF. Entertainment? LA or NYC. Politics? DC.
What exactly is Chicago good at? They have Wilco, so that's cool.
Also, not too many people aspire to be in insurance. I don't think you can put it on the same level as finance, arts, software, fashion, film, etc.
Do people aspire to work in health, energy or finance, or even software aside from the money? If so, what difference does it make?
https://en.wikipedia.org/wiki/Boeing_Renton_Factorye
The whole situation is dumb, overall I'd avoid living in CT for a ton of reasons. CT had a lot of industry going for it (Stanley Tools in New Britain, for example, and Hartford was the center of the gun industry 100 years ago) but those of course moved overseas. The insurance industry provided a safety net so it didn't go the way of the rust belt but, late capitalism y'know, so that was just a band-aid that's being slowly ripped off. This is happening everywhere but the systematic denial isn't as ingrained as in CT, it's weird.
Corruption.
This is a weird expectation. Why does a city have to be "the best" at something? Seattle isn't the best place for software but I'd still choose it over SF any day. Chicago has plenty of industry.
As far as entertainment goes, it's no accident that a huge number of comedians get their start in Chicago.
Chicago has tons of anchor industries, the real problem is that they don't translate well to the unicorn strategy of most start-ups.
There are a massive number of other companies headquartered here, like Boening, CNA, Kraft Foods, Walgreens, State Farm.
While NYC might be known for its comedy, it recruits directly from Second City in Chicago, and the numerous small comedy clubs and schools here feed into Second City. It has its own caliber of theatre it puts out as well, regardless of whether it matches NYC on notoriety.
Lastly, while having the benefits of a large city, Chicago also does not have the stupidly high rents of NYC or SF. It is a very livable city, even for those on modest incomes. Public transportation is excellent (though not as good as NYC).
And if you are doing well enough to have a six-figure salary, you can live very well here as opposed to how you would live even on an cost-of-living adjusted salary in SF and NYC.
The primary downside to this city is the weather. In my opinion, the secondary downside is how far it is from outdoor activities, but, then again, you can easily fly elsewhere via O'Hare/Midway.
I grew up and lived in Chicago for most of my adult life. I moved to the Bay Area in 2013. My main reasons were weather, crime, and jobs.
For some people, living with gray skies half the year with not-infrequent temperatures below zero or above 100 takes its toll. Also, the violent crime rate has gone through the roof in recent years, even in generally good neighborhoods.
On the jobs front, I'm in marketing and a more technical marketer at that. The job options in Chicago were largely unappealing, but more importantly was the major difference in culture. There are obviously exceptions, but Chicago seems to have a much more "conservative" corporate culture on the average. This means less competitive pay, 2 weeks of PTO, 2 weeks paternity (if that), stricter 8 or 9am start times, less free on-premise food, fewer perks overall, less competitive benefits, etc. Again, you can find exceptions, and large tech companies tend to have offices there as it is a hub (particularly for media companies like Google). But on the balance, due to the extreme concentration out here, it seems many Bay Area companies are forced to up their game and be much more in favor of the employee with regards to comp, perks, culture and benefits if they want to be competitive with the local giants.
I get very sad when I think about the cost of housing out here, but TBH, I'm not sure I could go back. Whenever I get off the return flight from a trip home and step out the doors at SFO, all of the color, sunshine etc. makes things look like technicolor compared to the ugly red brick, gray skies and black slush of Chicago.
Don't get me wrong--it will always have a place in my heart and I dearly love many things there. But depending on your priorities, in some cases there is no competition if you can afford enough to make it manageable.
If you intend to create technology for supporting businesses in those sectors, having a Chicago office would not be a bad idea. SV unicorns tend not to even want to solve problems like how to more efficiently route a single gigantic monolithic I-beam from the foundry to a building site without destroying buildings, bridges, and roads along the way. It isn't sexy, and doesn't attract money or eager and idealistic employees.
https://en.wikipedia.org/wiki/Economy_of_Chicago
>Chicago and its suburbs, which together comprise the Chicago Metropolitan Area, is home to 29 Fortune 500 companies and is a transportation and distribution center. Manufacturing, printing, publishing, insurance and food processing also play major roles in the city's economy. The total economic output of Chicago in GMP totaled US$547B in 2012[1] making Chicago the 21st largest economy in the world[2] just surpassing the total economic output of Switzerland.
>The city houses one of the Federal Reserve Banks, established in 1914. There is also the Federal Home Loan Bank of Chicago. The largest banks in the Chicago region (by % of deposits) are: JPMorgan Chase, Bank of America (through its acquisition of LaSalle Bank), BMO Harris Bank (a BMO subsidiary), and Northern Trust. The largest banks headquartered in Chicago are: Northern Trust, Chase, BMO Harris Bank, Wintrust Financial, and First Midwest Bank. Many financial institutions are in the Loop.
>Chicago has five major financial exchanges, including the Chicago Stock Exchange (CHX), the Chicago Board Options Exchange (CBOE), the Chicago Mercantile Exchange (CME), the Chicago Board of Trade (CBOT), and NYSE Arca. While the city of Chicago houses most of the major brokerage firms, many insurance companies are in the city or suburbs, such as Allstate Corporation.
I have family in Rochester and it isn't known, at least to me, for healthcare in particular. The biggest Rochester companies are Xerox and Kodak neither of which are healthcare companies.
Geography.
Chicago's the primary water connection between the Great Lakes (which communicate with the Hudson and St. Lawrence Rivers) and the Mississippi River; that's the historic origin of its central role in commodities trading.
I think the broad adoption of mobile gaming and the Millennial adoption rate on video games and the successor generation (whatever we are calling them now) basically being raised on them will break down the reliance on physically proximate entertainment for enough of a subset of these generations that businesses will have to adapt to remote more than they already are.
Plenty of people are going to be satisfied with what is available through technology, rather than just what they can commute to. This is on top of being able to do work remotely, its the value in being entertained remotely that truly separates them from the city centralization problem.
On top of the fact that many people are different than you (in fact the 100s of millions who live in cities) are not satisfied just playing video games all day long.
And alcohol can be coexisted with more easily than hard drugs can. "Meth: Not Even Once" is no exaggeration, but no one in the West except recovering alcoholics has that slogan for drinking.
That means you still care.
I'll show myself out.
Everywhere has culture. You just didn't like the one you were in.
In tiny towns, the culture looks more like running around in the woods, country music, 4-H club, and church potlucks. That's a culture, even if you don't like it. And, besides, in the internet age there are plenty of farmers' daughters that get really into oil painting or Korean TV or opera. Producing great culture is harder without a local community, but it's not like there's no access to culture in small towns. They're binge watching Iron Fist just like all the other geeks.
Having lived in small towns, big cities, and desert planets.
In other words, people want access to socially-dominant individuals. It's probably some sort of backwards instinct that doesn't serve us very well these days, given that for each of the top 100 people in anything, there are a million people who want that "access", and obviously only an infinitestimal fraction of them are going to get it—and living closer to those top 100 people (or even going to events they hold) won't really increase their chances of doing so, any more than living in the capitol city of a monarchy means you'll get to meet the monarch.
But the best way to live differs from culture to culture -- and I'm not convinced that the rural South has the same kind of ideal as the North, which means I came on too strong earlier. What does the Celtic or Celticized world's high culture look like...?
It just stands to reason that the more oeople you have in an area, the greater the diversity and intensity of interests, which we call cultyre. My hometown definitely doesnt have a Bat'leth martial arts class, but you can find it in a big city. Thats why you get such an influx of artsy types to places like NYC because no one ia into their art where they are from
It's quite possible to square traditional urbanism's affection for multiculturalism and an affection for artistic and culinary excellence, but it takes some nuanced language to express why those aren't in conflict.
Embracing cultural elitism while denying it linguistically doesn't really help make the argument.
First, let's be clear with our terms here. "Multiculturalism" is a heavily loaded term. Despite its Judeo-Christian heritage I would argue that the United States does not operate as a multicultural nation-state. Rather, it is more of a ethnically diverse unicultural society in that the population to a broad degree does share a common language, certain American beliefs and values, and have a unique optimistic view of the future that I've found rare in my travels...the so-called "melting-pot". A good example of a multicultural state is Iraq where multiculturalism is clearly established in policy at the federal level as the Kurds, Shia, and Sunni live in an uneasy alliance, separate into ethnic ghetto-states/territories with relatively little inter-mixing, and have vastly different agendas for the future of their country (Kurds wanting to create their own state, etc.)
After rethinking it, I believe that population density is only correlated to the amount of culture, not the cause of it. Cities like Taos, Santa Fe, and Santa Cruz have a high degree of appreciation for the arts despite being outside dense, metro city centers. I believe that openness and tolerance to unfamiliar ideas is the driver behind culture. It is also a necessary requirement for diverse urban centers, which is why you find a large amount of culture there, including the small town cultures that emigrants bring with them.
The easiest way for me to put it is this: No matter how small where you come from is or no matter how esoteric your interests are, there is some sort of meetup for all the things in a LA or NYC.
For your kind of things. In NYC, it's harder to find great snowboarding clubs, demolition derbies, Baptist churches, bass fishing, tacos, and BBQ places. I've been to a mule rodeo before. Haven't heard of something like that in LA.
Not all of those things are my bag of chips, but they're all "culture". Some "culture" either requires less population density or hasn't found a foothold in the coastal mega-cities for whatever reason.
Harder to find than where? A number of the things you mention are limited simply by geography (snowboarding, bass fishing, etc.) I'd wager that you'll also find a decent amount of taco and bbq places compared, to say, Utica. There appears to be a number of Baptist churches in NYC according to google.
When I talk about LA, I'm speaking more generally about the county and its surrounding areas...There are mule rodeos around a half day's drive from LA. You are right that some culture typically requires lower population density, but you usually find some form of it in mega-cities due to emigration.
Point taken that you like small town culture, though.
I don't especially. I appreciate it. And I appreciate urban culture. I just find the "everyone knows cities are better" meme is really inaccurate.
It's weirdly dismissive of other cultures as well, which is weird considering how much urban centers want to value diversity. People will read 30 page New Yorker pieces about Botswana or listen to an hour or pan flute music before way before they'll take time to acknowledge that there's culture in Tennessee that's worthwhile, even if it's not their cup of tea (which should be obvious because Nashville, but not everyone's as well-heeled as they think they are).
I remember reading a conservative/neocon author who tore into this relativizing of culture, insisting on the old definition that "culture" didn't just mean "whatever junk's growing in a petri dish", but I can't remember who it was -- Barzun, Goldman ("Spengler"), or Dalrymple.
The point's valid regardless. "Culture" means "culture", not just "whatever the local savages are doing" -- and it's particularly silly to use cultural relativism to defend Republicans.
People are "savage" because they like different things to you such as country music? If so, you're an incredibly narrow minded and shitty person. If not, please elaborate.
Different cultures have different norms of human perfection, and pursue different things; this fits Spengler's (the real one's) idea that a culture has a core proposition. Within a civilization, high culture is a culture's full expression of itself; it seeks out and engages with the contradictory or self-defeating parts of its values, and tries to advance the culture's understanding of what perfection is and how it can be attained. (What the postmodernists call deconstruction, and Gardiner called "high parody," is a fundamental part of this process.) Low culture is mindless entertainment; it doesn't try to shape its consumers in any positive way, and certainly doesn't advance the society's understanding of its ideals. Middlebrow/bourgeois culture tries to be high culture and fails -- but typically fails intentionally. (To be at the forefront of understanding is prestigious but uncomfortable, and the middle class wants prestige but not discomfort.) Mass culture is typically low, since low culture sells, but can rise to middle or high. Low culture, and occasionally middlebrow or mass culture, can produce things that high culture finds interesting and takes up -- and high culture can similarly cross-fertilize downwards. See Popular Culture in Early Modern Europe for some very interesting discussion of this, which was more common then than it is today.
"Culture" historically means "high culture": the thrust towards self-improvement, plus the continued refinement of what exactly you're trying to self-improve towards. This sounds uniquely Western (especially modern Western -- "Faustian" in Spengler's terminology), but you see the same process in other parts of the world, especially in East Asia.
The catch is that you can't engage in high culture without access to high culture -- so perhaps it's unreasonable of me to condemn poor rural areas for not participating in it. Or perhaps not? It's not just mass culture that the Internet makes available.
Regardless, it's high culture -- or at least middlebrow culture, which is regrettably easy to mistake for it -- that reverend_gonzo was lamenting lack of access to.
That whole discourse assumes things about actualized humanity that cannot be taken as granted. Who's to say that earning a simple living, caring for a family well, and being virtuous isn't perfect in itself? Who's to say that seeking pleasure and avoiding pain isn't a form of perfection? Who's to say that the human perfection isn't a distraction from the commands of a perfect deity?
> The catch is that you can't engage in high culture without access to high culture
That presumes that "high culture" can't be simple, commonly available, or digitally transmitted. It also presumes a one-size-fits-everyone kind of culture and not a more atomized, long-tail description of how cultures are formed, evolved, and maintained.
In more concrete terminology, why should large orchestral pieces be high musical culture? Maybe perfection is really about inclusion, peace, and affection. In that case, a receptive crowd, a guy with a guitar, and some lively tunes is all you need. Or even just a good playlist.
And that's why I push back against all the "life is clearly better in mega-cities" attitude. It's a zero-sum game to only evaluate culture in relative terms. I don't think we're doomed to live in a world the poorest and least connected wallow in cultural poverty and the wealthiest and best connected are privileged with cultural riches. I think life is simpler and better than that.
I'd say that the high-low-middle-mass divide is universal, but the goals that a given high culture aims for are different from civilization to civilization. This includes West European (including New England) versus Celtic (more or less including the South, descended mostly from the Anglo-Scottish Borderers and the West Country).
In the particular areas you're asking about, though, I see contradictions. Being virtuous doesn't have much of a history of being compatible with seeking pleasure and avoiding pain; but being virtuous is a form of human perfection, in fact the one that Aristotle would endorse most readily, and I fail to see how following God becomes easier if you're less able to follow Him. As for earning a simple living, well, look at the website you're on and its long history of destroying the ability to earn them...
On the second point, though, I feel misrepresented. I explicitly said that "it's not just mass culture that the Internet makes available" -- although if you don't share the goals of a given high culture, there's no point in participating it. What does a Celtic high culture look like? Such a culture definitely existed in the Middle Ages, especially in Ireland, but it's been on ice for centuries...
In music, an orchestra can just plain produce sounds that a guy with a guitar can't. There's also more of a filtering effect, which tends to weed out junk... but bigger and/or more formal music don't always mean better music. Music theory can become a burden, and the pentatonic scale is extremely expressive for something that has half the notes of twelve-tone scales; the Irish session is a different sort of thing from a Western quartet or band, with a different set of objectives. And music is something it's good to participate in, which is something in the guy with guitar's favor.
Still, whatever a Celtic (or Quaker? or who knows what else) high culture might look like, there's not much participation in it in the US countryside, certainly not in any organized and visible form (although a lot of cultural activity of all sorts is on the Web these days). I feel like Western high culture leaves a few things out, but I'd rather be around someone else's culture than around cultural passivity -- although Western culture has a horrible case of the middlebrows here in the US. (Has it always? I wouldn't rule it out.)
But if you want to specifically say that life isn't better in the mega-cities: I like urban living, especially walking to work. Of course, that gets challenging and expensive even in the mega-cities; the US needs more walkable areas, more narrow streets, and more trains, subways, and commuter rail. Rents low enough to raise families in the cities wouldn't hurt, either...
I was listing various philosophical ideals, not optimizing humanity myself.
> I'd rather be around someone else's culture than around cultural passivity
You say that, but much (most?) cultural optimization has a religious component. The countryside in America is very culturally active, especially on Sunday mornings. And the "cultural ideal" of Protestants necessarily requires accessibility and even imperfection.
Taken to an extreme, but still an American example, there are the Amish. Their cultural ideal is, more or less, rural simplicity. To the extent that they need to iterate or collectively think about their culture, they do. They just don't need patronage to achieve their more straightforward cultural goals.
So to circle back to my original point, can we say they are uncultured? Or lacking or failing at "high culture"? I don't think that's accurate or fair. At least not objectively.
to quote one client - I'll rather have a mediocre dev sitting right here so we can discuss/plan/design behind one single desk/board rather than having a star 500 (or 5000) km away. even if there wouldn't be time difference, in person contact has high value.
and seeing this daily, cannot agree more.
Why?
Executives and managers are the priests and offices are their temples. Amen.
Some of the burden is on you to prove what has failed so far. If it is possible to build a successful large scale startup in Amarillo, why hasn't it happened?
I'll point out the theory of agglomerative clustering also includes the contrary point: a city that is great at something tends to exclude other activities, for any given amount of population. A city like Amarillo, which plays a role in the oil industry, is less likely to be great at software, because it plays a role in the oil industry. It's population would have to grow before it could be good at both.
Also, if two 20-somethings build a successful startup in Amarillo, they may want to move to San Francisco as soon as they have money. The "this startup can be anywhere" argument works both ways: yes it could be Amarillo, but if it can be anywhere then it doesn't need to stay in Amarillo.
And the startup can also move to Poland, or Romania, or India. If you believe the startup can be anywhere, then you basically believe that a startup would only be in Amarillo by random chance. If there are 100,000 great cities in the world, and all of them equally good for a software startup, then the chance of a startup being in Amarillo is 1 in 100,000.
But in fact, there are good reasons why startups tend to cluster into certain cities. You should read "Why tiny Stockholm has the most stunning startup ecosystem since Tel Aviv" :
https://pando.com/2012/11/20/why-tiny-stockholm-has-the-most...
The Dept. Of Energy, Southwest Airlines, Texas Instruments, and Principal Financial Group need not apply.
This cities work because there is a high concentration of wealth, talent and resources for them to produce big wins over and over.
Google and Facebook couldn't have been this successful anywhere else.
Pg had a nice article on how other places can become sv like hubs.
https://www.youtube.com/watch?v=lyHgMNuftL0
Zoho's CEO feels that good software products can be developed not only in silicon valley or even big cities like Chennai and Bangalore, it can be developed in non-descript towns like Tenkasi too.
I think with more accessibility to digital media, and expansion of skills through internet education, skills can be diffused across geography, atleast in our field.
Because face to face is high bandwidth. You can have everyone work from home but it will reduce your ability to collaborate effectively. Teams worry about being in separate buildings or even just split across floors because the friction introduced reduces impromptu face to face conversations significantly.
Now, if you're asking why an entire company can't move, that's because the talent pool is where it is and many engineers will not be willing to relocate. Moving is disruptive and for married couples where both work at different locations, it may be effectively impossible.
In the UK, there are tech jobs all over the country. But there are probably more in London than everywhere else combined, especially if you're looking for the start-up unicorn types. I lived in a smaller city for a while after university, but there were very few jobs to choose from that interested me.
I moved to London for one job in particular at the time, but also safe in the knowledge that it would be easy to find another job. I've had 4 different jobs in London since then, and it's never been very hard for me to find something else that's suitable and interesting for me.
The same holds true for most of my friends from university - many of the moved to London because it was the most obvious option for finding a tech job. So it has a further concentrating effect, that people are more likely to know others who are working in the capital city than elsewhere in the country.
If I was seeking a new job and open to moving anywhere in the country, I could find one somewhere outside of London. But if I was already living in another city, it might be harder to find a job without moving. It might not be quite the same in US, where there are a number of cities around the country that are a similar size to London, but in the UK there are maybe only 2-4 other cities that are large enough to have a wide selection of jobs in one industry, and none besides London with a population of over 1 million.
All of the big software houses compete for the same engineers, and they're all paying their incremental new engineers +/- 10% the same total comp across the experience spectrum.
I would agree with pascalxus, the big tech companies aren't price sensitive.
That doesn't mean the average engineer can easily finagle a drastically out-of-band salary, but the bands are already exceptionally high and grow faster than inflation in the aggregate.
okay but how do you run a city like San Francisco once all of the service industry workers get priced out? Do you start paying people 6 figures to clerk a convenience store?
There is less risk in moving to a place with more options when the current one falls through.
It's concentrated _because_ it doesn't have to be at certain places. Your post office that had to be close to you is now run by a couple of thousand people at Google.
"Why can't a successful startup not be in Dallas, Amarillo, Miami or Des Moines?"
Again, without being to annoying, why does it have to be in Dallas? It doesn't, so it mostly isn't.
Actually, the answer is that Dallas is already a tech hub.
https://en.wikipedia.org/wiki/Silicon_Prairie
https://en.wikipedia.org/wiki/Telecom_Corridor
I'm not saying that Dallas (or any other city) can't have some, even quite successful, startups. Just that you can't really compete being say "the third to fifth best choice for startups". At that point you're competing with too(!) many different cities. You have to be the obvious choice in a few, preferably large, categories; capture a lot of local talent (which is harder in the US), and most likely both.
Software technology ecosystems could certainly succeed in other places if one could bootstrap them in the first place; the clustering (and self-reinforcing network) effects mean that people gravitate to where the action is already happening. Getting started in a new location is challenging, so only those willing to shoulder additional risk (beyond the often-high risk of starting and running a startup) are going to try.
Freedom of speech and expression will suffer as long as all Western world's social media is controlled by a few city blocks in SF.
Is it possible that perhaps there may be reasons for people to choose such an obviously irrational thing? What do they think they're getting out of it?
Many companies have found that they benefit significantly from physically proximate workers. There are distinct benefits to putting people in offices in person. On top of that, having many such companies in one place is beneficial to the specialist worker. It mitigates risks of unemployment, and enables workers to take greater risks.
Myself, I've done what you suggest. I took a job in a cheap place. It was great in some ways, and terrible in others. When I decided I was done with the job, I had to leave that city. There just weren't many options for me there. I understand why a businessperson would like it - you get more leverage over cheaper employees - but it's not the best choice for me.
But any-town, USA has nothing else to offer them in terms of entertainment, arts, food. I live in the 77th largest city in the US and this place is dead.
VC capital focused on tech is a tiny sliver of available capital given the sources VCs get their funding from, and an entire order of magnitude of greater flows could come through.
So if you were using that as an excuse not to buy that costly condo on the island or peninsula, its not a great excuse.
Keep building! There's a very large ecosystem and a lot of continually generated capital that merely needs to be convinced that the tech sector is the place to park it.
Yes it can, College Tuition is a great example. Instead of finding the cause and treating it, we just increase the amount of aid people have access to.
Ehhh, that isn't the narrative we've been pushing for the last 20+ years.
> whereas living somewhere is
I think the fact that it's a necessity only benefits the idea of providing people aid for housing.
> you can't really get that for your housing.
I mean, you absolutely can depending on your level of income. It won't make up for being poor, but that's what section 8 housing is.
Even on the more middle-class scale, the government provides tax breaks for home owners (and especially for first-time home buyers) which is basically money from the government.
I assume that everyone wants healthcare for everyone. I mean, who would want even a stranger to suffer from disease?
The question is what is the best mechanism to make it affordable for everyone.
One answer is: give everyone more money to spend on it. The problem with that is that it drives up the cost for everyone and you may be no better off. You might be worse off.
Another solution might be to spend money on the supply (build more hospitals and train more doctors). I pick this example because it doesn't imply things like lowering taxes or spending less, so it doesn't get caught up in the budget discussion.
The criticism here is just in regards to the first solution, not in regards to providing healthcare.
This is a cultural phenomenon. We're "supposed" to get our children the best education we can possibly afford, otherwise we are bad parents. Since colleges don't have price discrimination, this essentially means tuition is set at the absolute maximum that the middle class can afford - squeeze every penny out of them. This is why aid won't reduce the burden of tuition on the middle class (tuition will just rise to meet the aid amount). It's also why tax breaks won't help the middle class either (same idea), although the tax breaks can help those above the middle class (since they have a higher tax rate, and the tuition rises to match exactly the effective aid for the middle class).
Contrast this with college acceptances and tuition. As soon as they get accepted, the tuition can be however high it is it doesn't matter. You still pay it. This culture of spending all and everything on tuition has allowed tuition to rise to maximally extract from the middle class.
My explanation for it is the debt conditions: if students were able to default on their debts, colleges would not charge what they do for majors that dont provide the value to students: if a student spends 80k for poli-sci but his job cant pay for it, he would default, and the college would lose that money , and hence have an ineterest in pricing accordingly to the value it can provide to its students.
But since the debt is federal and permanent, the college's incentives is to increase the price as much as possible since it doesn't have a sustainability problem: the students and the government do.
Just make the loans defaultable, you would have a default crisis by next month, and prices would crash quickly.
If you made student loans defaultable, suddenly they would lose much access to this debt, and tuition would fall.
My points about aid and tax breaks on tuition not working still apply.
> According to the College Board, the average cost of tuition and fees for the 2016–2017 school year was $33,480 at private colleges, $9,650 for state residents at public colleges, and $24,930 for out-of-state residents attending public universities. [1]
1: http://www.collegedata.com/cs/content/content_payarticle_tmp...
I recognize you're not trying to rationalize this, but you've identified the common factor to each bubble: a new and unsophisticated source of investors being aided by the financial industry.
With the dot-com bubble, it was daytraders and online traders generally (including me). With housing bubble, new untraditional homebuyers who bought homes with exotic mortgages. With education, student who traditionally would not have gone to college going to college.
These could have all been positive examples of American upward mobility at work. But as was especially evident with the housing bubble, the financial industry turned people looking to improve their lives into consumers and, in many cases, exploited them.
With rents in metropolitan areas, it seems to be driven by wealthy investors (institutional investors and wealthy foreigners) pricing marginal middle class homebuyers (e.g. yuppie millennials) out of the market and then turning around to rent to them. Renters, like tech workers and young white-collar professionals generally, can stretch to afford these rents. But they definitely have a ceiling and all of this has been fueled by a growing economy. As soon as the economy falters, aid will dry up and the roof will cave in.
Thats the dramatic shift this time around -- this isn't a bubble propped up by lending -- this is a bubble due to the fact that we are living in a time where the rich _have so much money they dont know what to do with it._
I agree it's not the same kind of bubble we saw when strippers (to borrow the example from The Big Short) were carrying 5 mortgages in Florida. And it explains why housing prices never fell there or really here in Southern California to the extent I was expecting (and really hoping) back after the crash.
Still, I imagine most of that private wealth that is pouring in there and here is either connected with the financial industry directly or indirectly. At one end, you've got the financial industry financing everything, from mattresses to cars to college education, which spurs demand and price inflation.
On the other end, you've got a global wealthy elite for whom all real estate is local. They are small proportionally but still large enough in aggregate to quickly exhaust limited edition luxury items like residential property offerings in San Francisco, Vancouver, London, etc.
Anyway, that's the simplified model I've been operating on for the last few years. A weird combination of the super rich shopping where they please and local middle class Americans, hopped up on credit, trying to compete with them in select desirable areas.
Another option is improving commutes from the outer boroughs and New Jersey - the Bronx has many affordable areas, but the 456 is a shitshow, and I'd rather move back to Texas than put up with the slow peristalsis that would become my commute. Buses aren't great, either, and suffer from a lot of the same problems that regular street traffic does. My coworkers who come from Jersey typically have a bus ride of an hour, assuming there aren't any traffic problems.
High speed rail into the city (see tokyo). You can travel enormous distances in 40 minutes on HSR.
See my earlier comment to this post: https://news.ycombinator.com/item?id=13940272
For example, this doesn't explain Tokyo. Japan's capital of creativity is Osaka; Tokyo doesn't even come close.
There is a second layer where I agree with Cowen more, which is that urban cash flows need some 'engine'. People can only pay based on their salaries, and some fraction of spending in a city flows out (to food, industry, etc). So yeah, having a major economic driver raises your price cap, but it doesn't have to be creative. It just has to be something you can effectively do in a city and get money from elsewhere. I don't know what it would be for Tokyo, but in my home town it was urban-friendly manufacturing not creativity.
The needs of business are independent of people's desire to be with other people.
Virtualization need to improve a lot before the experience of "group" is as good as real life.
This is not true, see e.g. http://observationsandnotes.blogspot.com/2011/07/housing-pri..., http://marginalrevolution.com/marginalrevolution/2016/02/676..., and http://marginalrevolution.com/marginalrevolution/2016/08/lai... . The housing sector is excellent at providing housing services but has not over long periods of time and a wide array of places shown supernormal investment returns, adjusting for inflation.
Robert Schiller has written extensively on this. Here is on pop article on his work: http://www.usatoday.com/story/money/personalfinance/2014/05/...
For instance, Oil and Gas in Houston, Pharma in New Jersey and so on.
I don't think the economic value of clustering will stop anytime soon.
The trend may stop because people find better solutions to housing than simply building more of the same.
(And software should not be thought of as an industry, but a tool that enables other industries, but this is not the place for that.)
It's unbelievable how relatively expensive rent is to income.
I'm beginning to wonder why I'm putting up with Vancouver.
I'm thinking I will take the first train out of here but that doesn't seem to be coming.
Can you shed light on why you are fed up with V? Where else are you considering?
- Very expensive with relatively low wages (Vancouver has the lowest median income for someone with a bachelor degree among major Canadian cities)
- Near zero possibility to afford to buy anything other than an extremely overpriced shoebox condo.
They didn't bother listing Vancouver because the salary here is so painfully low with entry level software engineering positions regularly listing $40,000 CAD /year or $30,000 USD /year, which is what a Starbucks barista in Seattle clears.
As your experience goes up, so should your salary right? Not in Vancouver. It's around a couple hundred dollars per month in after-tax pay bump provided you've slaved at a company for 5 years minimum.
Pretty fucking hard to build a competitive tech company in Vancouver, when people are unmotivated due to depressed wage, high cost of living with no upward mobility. Almost everybody I talk to, housing is a big issue. Everyone is working, commuting on congested public transit, house poor but the image of living in Monaco, coupled with good ol' Canadian Ohwellism, people really don't give a shit about career mobility as long as they have a regular job that will let them sustain a roof over their heads.
There is a large brain drain happening here, in 15 years, this city is going to be a very different place. I don't know what the impact of losing long time middle class residents who comprise of the economy.
You will be poor but working in Vancouver, and that alone serves as a novelty for newcomers. There's really nothing special in Vancouver, to justify a 100%~300% pay cut (factoring in exchange rate and low Vancouver salary).
Vancouver might be multicultural but it's also a ethnically silo'd and very tough to meet people in general as they are very cliquey and stick with their own skin color.
Lot of broken dreams and disappointed Canadians/Americans from other provinces/states who tell me these things, which is why I'm writing this long comment to warn those who have a romantic attachment to Vancouver.
Fuck Vancouver.
[1] : http://wonderfulengineering.com/much-software-engineers-arou...
Big tech company jobs in Seattle are extremely common, and a big tech company job in Seattle will pay you much more than $126k/year USD when you include stock/cash bonus.
Especially a few years into your career. If you're willing/able to be a dev at a big tech company, $200k-$300k/year is absolutely normal 10 years into your career (often much sooner). If you're great, $300k-$400k is completely possible.
It's the $150k that software engineers make in the US that's abnormal, not the $50k in Canada or EU. That is where salaries in the US will go once the funny money moves on.
Engineer shortage? Not really. This is something that can be learned by studying books, you do not even need a license. Yes, it's hard, technical stuff, but so is Mechanical Engineering yet they don't make these kinds of salaries and they have more barriers to entry.
It's funny to see the bias here: high house prices are certainly a bubble, but high software salaries are definitely 100% earned due to amazing abilities to generate wealth and market fundamentals.
No wonder Amazon, Microsoft and others are expanding in Vancouver like crazy, same timezone as Seattle and San Francisco, an english-speaking population and salary levels 50% lower.
https://en.wikipedia.org/wiki/Georgism
Georgism was wildly popular in the United States, but was memory holed after WW2 (along with distributism and Texas-style populist banking).
Rent-seeking was first illustrated by David Ricardo in the mid-19th century (IIRC) and surprising that the author did not cite the true reasons for the rising housing costs.
Harvard Economist Edward Glaeser and Economist and Financial Times writer Tim Harford among many others writes about this.
Remember, rising prices come from scarcity. Eliminate the scarcity and your eliminate the high prices. Reverse the zoning density restrictions and you get lower prices.
But these left-leaning people claim they want to help the working class and others and are worried about inequality, yet they are the major cause of the inequality by making housing unaffordable through rent-seeking which benefits President Trump instead. In other words, they say one thing that they are for addressing the ills of inequality and instead support a policy that creates more inequality and benefits the very wealthy whom, in words only but not in deeds, criticize.
If they truly cared about inequality as they claim, they would reverse the unfair rent-seeking zoning density restriction laws.
Then there are regulations that help special interests get an unearned portion of wealth. That would include these landowners benefiting from zoning density restrictions or in NYC before Uber/Lyft came along, the artificial restriction of 13,000 taxi medallions for a population of 8.5 million.
Regulation failures are problems caused by bad/too much/too little regulation. In this sense, regulation failure can sometimes overlap with market failures.
Attend a town hall meeting where they're discussing a new apartment building and you'll meet them.
Many people have the vast majority of their wealth in their homes and as such want laws that increase the value and not laws that decrease the value by increasing supply. Regardless of the stated reason, the scarcity and rising prices thus market inefficiency are politically induced.
Many people have advocated for "Green Belts" parks with the true intent of decreasing available land to increase scarcity.
They might be receiving some sort of rent control so that their rent is far below the market price. I know there are a number of people in NYC that live in rent-controlled, rent-regulated apartments.
Yes, but why would you want to do this? Or more accurately, why would the powers-that-be in a given area want to do this? They already have their real estate, and they're profiting by the rising prices. Why would they want to bring prices down?
Well, they generally would not. Except there are firms that must pay salaries that are not in real estate that have to pay their employees higher salaries in order to pay for the "rent-seeking" of landowners. It would benefit them to lobby and influence city council.
Also, powers that be love monopoly pricing but there are laws to stop monopolies.
Still, author Cowen is an Economist, yet doesn't state the true reason for rising housing prices, a discovery made two centuries ago by an extremely famous economist, David Ricardo.
Why would city council want to bring down rents? They and their cronies are profiting off the high real estate prices. The city council is, after all, composed of wealthy people who own land in the city. You can't have a city council composed of people who don't even live in the city.
>Also, powers that be love monopoly pricing but there are laws to stop monopolies.
Those laws only apply to corporations; they have nothing to do with real estate, and this isn't a monopoly situation. There isn't a single company that owns all the land, or all the apartments, in these high-priced cities. There's merely a shortage of usable land, because of geography and physics.
Basically, to fix this problem, we would need new laws at the State or Federal level, along with enforcement which would absolutely work against the wishes of these city councils. But there isn't much demand for such laws, because it's a local issue, and national-level politicians aren't going to do well trying to make it a campaign issue. Voters in rural areas just don't care about high rents in cities; they'll tell you that you just need to move out where they are and bring the high-paying jobs to their rural communities.
I can't speak for your city but in NYC, I'm not certain if any member of the city council is wealthy. I know my representative is not.
My point regarding anti-trust busting of monopolies is that federal legislation has been enacted before to combat deliberate attempts at market inefficiency and it could be done in the case of zoning density restrictions. In 2002, Japan enacted a federal law that overruled local land-use restrictions and as a result in 2014, Tokyo built 7 times the number of housing units as NYC (140,000 vs. 20,000).
We should do the same in the US as they did in Japan and you'll see more affordable housing.
He should have written about this (article link was provided by another comment above) about how Japan solved the problem in Tokyo. We need a similar federal law in the US.
An article by Cowen that solves the problem by showing how successfully implemented the law was in Japan for Tokyo would have been far, far more interesting and implementable.
"The federal [Japanese] government recognized that these regulations were the problem, so in 2002, it passed the Urban Renaissance Law. The law stripped municipalities of the ability to control private property."
https://www.forbes.com/sites/scottbeyer/2016/08/12/tokyos-af...
It also helps that Japan has a brilliant zoning system:
http://urbankchoze.blogspot.com/2014/04/japanese-zoning.html
"Harding wrote in the article, the city had 142,417 housing starts in 2014, which was “more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m)." Compare this, also, with the roughly 20,000 new residential units approved annually in New York City, the 23,500 units started in Los Angeles County, and the measly 5,000 homes constructed in 2015 throughout the entire Bay Area."
And the true solution is to pass a law using Japan as an example: "The [Japanese] federal government recognized that these regulations were the problem, so in 2002, it passed the Urban Renaissance Law. The law stripped municipalities of the ability to control private property."
Here is another interesting article from the same author, Scott Beyer pointed to by this article. https://www.forbes.com/sites/scottbeyer/2016/05/25/modern-zo...
I can only dream. As someone who must post a permit and involve the city in order to remove a tree in my own back yard
Our homes are micromanaged here. It's like the city has created a city-wide HOA.
While we want housing to be affordable, arbitrarily trying to reduce rental costs is futile. Rent exists. It is a reflection of the intrinsic desirability of the location. The only way to reduce the rent is if the location becomes less desirable and less productive.
So, really, it is a question of political economy... of who should own the rising value of land, since that value is not a return for the effort of the owners.
The rent-seeking that he established states that political regulation can artificially create a situation of scarcity thus resulting in high lands costs that benefit landowners.
Specifically, he illustrated this regarding the "Corn Laws" of Britain which were a politically induced import duty on grains of all sorts making the cost of bread more expensive for consumers. Famers could charge more for the grain they grew because of less competition but the landowners would simply charge the famers more money. Thus, the import duties raised the cost of food for consumers while indirectly directing that wealth to landowners.
The "Corn Laws" created the market inefficiency, market failure which interfered with wealth creation and David Ricardo even joined British Parliament to combat the "Corn Laws." He eventually succeeded in the repeal.
While the values might continue to increase with rising productivity, the overriding factor at least for today's environment is the "rent-seeking" and we need to reverse the local control of land which benefits wealthy landowners like President Trump over normal working people.
Rising prices are due to scarcity. The scarcity is politically induced in order to in this case benefit landowners. Reverse the scarcity, politically induced or otherwise, and prices fall.
It is quite possible to create an artificial scarcity of gold, and thus gold would be higher than it should be. But it would be ridiculous to claim "gold can't go up forever" and that to achieve affordable gold we only need to remove the artificial scarcity.
It may be desirable that we remove the artificial scarcity, but it is also a distraction from the core question at hand.
It is ignoring the natural scarcity and the general rising level of productivity. Prime locations are prime locations. A port, for instance, only becomes more desirable as total production levels increase.
I respectfully disagree and so does Harvard Economist Edward Glaeser who has written extensively about this as does FT columnist and economist Tim Harford (as explained in his book, "The Undercover Economist" as does Steve Beyer who has written about this in the NYT and Forbes as well as other places.
Japan passed a federal law that overruled local restrictions and in 2014 Tokyo built 140,000 residences compared with a total of 20,000 in NYC and about 90,000 in the entire state of California.
I'm speaking pragmatically.
> "A port, for instance..."
A port is a much greater and natural scarcity compared with, say Manhattan which is huge as well as London which is not an island, but made "an artificial one" because of the Green Belt that circles London.
Not all of the land in cities is desirable. Parts of Manhattan are clearly far more desirable than others. And the people who want these prime locations far outnumber the availability of them. Not everyone can own a lot in Times Square, etc.
As a mid-30s person with a new baby, I don't see how the numbers work for new entrants to the housing market - unless you were a gambler. Your gamble would be that (a) you don't ever take a hit on your income, and (b) property prices continue to rise. We've been unable to take that gamble .. and homes have increase 40% in the blink of an eye.
In Canada, we have a lot of family in the GTA. We're basically priced out of areas as far away as Mississauga and Milton (Milton went up 20% since Nov 2016). An option we are considering is to move to BC and just rent for a few years in Vancouver. At least we get a better city out of it. For any Canucks, are there any other decent places with tech jobs, and somewhat affordable housing?
The simple solution is to not have any children. Leave that to extremely rich people and very poor people. Society obviously does not support child-rearing, given the cost of housing and the lack of support from employers, so why fight it?
It disturbs me deeply and I wonder why.
Maybe it was your matter of fact, emotionless delivery of it that caught my attention.
I can't really dispute what you have said other than it is not an inevitability. Societies can choose to change this, Sweden being a current example, Finland too. But people need to organise and want it enough, maybe they don't. Time will tell.
I'm very glad about this; it means I must have gotten something right. :-)
>I can't really dispute what you have said other than it is not an inevitability. Societies can choose to change this,
Exactly, but that's the problem: societies can choose to change this, but will they? As a pessimist, I say no, other than a few very small countries like those you cite (and even there those are just attempts at change so far; the birthrates in those nations are extremely low). Humans are remarkably bad at seeing impending large problems and collectively working together to change things to avoid them.
It's very possible with perfect decisions, lots of sacrifices, and freakishly good luck.
The question is how well they will sustain, and whether a future market shake up (quite possibly Trump-related) would reset things to more sane levels, and for how long.
Case in point, my cousin in NYC just had her third kid. She'd been considering moving to the suburbs for a while, because there was barely any room in their tiny apartment in Battery Park City for her, her husband, and the twins. Now that they've got another kid and the twins aren't babies anymore, they've gone from simply considering moving to the suburbs to actively house-hunting (and they're putting such a priority on it that she had her parents go house-hunting for them while she was in labor). I'd be surprised if they were still living in the city by the beginning of the second half of this year.
Another example: my parents. Both of them lived in Manhattan when they were in their 20s, and immediately after they got married, they moved to Texas and bought a nice cheap house in a suburb that had just been developed.
Basically, if you want to be a decently-paid professional and have a rewarding career, location is going to be very important to you, and you're not going to have time or money for kids. If you really want kids, you should make that your priority, and forget about education and career, and just work on having a stable job in a low-cost place, perhaps working in fast food and trying to work your way into managing a McDonald's where you might be able to get $40k. With kids and working at McD's as a cook in your younger years, you should qualify for tax benefits and probably some social programs like SNAP to help make ends meet.
This is what the corporate world is like all across the country.
To answer specific points:
> Right, but now you're forced to get a new job in a new place, or at the very least have a very lengthy commute.
People change jobs all the time, and they typically get raises and promotions out of it
Oh, and having a long commute and spending lots of time at work is considered a bonus to many people who have kids. Work is the best way to get a breather from the screaming babies at home. You know the guy who's always super-excited and happy to be in the office at 8:00 Monday morning? He's obviously a father.
> Or worse, having to live in Texas?
I actually love living in Texas. I've lived here my entire life, and the only reason I'm even considering moving later this year is because of SB6, and even then I'm going out of my way to move to a suburban environment that reminds me of home (I've pretty much decided on Torrance, CA, though Orange County is still a backup).
> This of course assumes that there's even jobs for you in TX or other low-cost locations.
And it's not like Dallas doesn't have any tech industry. We're even called the Silicon Prairie: https://en.wikipedia.org/wiki/Silicon_Prairie
Dallas-Fort Worth-Arlington is the fourth largest metro area in the country, and Houston-The Woodlands-Sugar Land is the fifth-largest [0]. It's patently absurd to say there are no jobs here. Both metro areas individually (Dallas: 7.1M; Houston: 6.7M) are more populous than San Francisco-Oakland-Hayward (#11) and San Jose-Sunnyvale-Santa Clara (#35) combined (6.6M).
[0] https://en.wikipedia.org/wiki/List_of_Metropolitan_Statistic...
So it all falls on the wife to do the vast majority of the child-rearing and domestic duties (in addition to their employee job), as supported by many current studies. No wonder so many women are opting out.
Anyway, I think the population figures speak for themselves and support my arguments. The US is at either ZPG or probably even NPG except for immigration, and statistics show a huge portion of children are born into poverty.
I'm not really sure how moving to Vancouver helps solve any of your problems. If you're priced out of Milton you're likely priced out of the entire Metro Vancouver area.
Is rent in Vancouver that much cheaper than the GTA that you're saving money and it's worth moving? I don't think it is.
>At least we get a better city out of it.
With the train of logic going like this:
1. We're priced out of big cities in Canada, so we have to rent
2. If we have to rent, then we are flexible with the location
3. If we are flexible with the location, then might as well move somewhere with nicer weather
I'm not sure if Ottawa is a "decent place", but Kanata has lots of jobs and affordable housing (in walking distance).
Still want to move to the US, though.
These are the the 10 fastest-growing large (>1m population) metropolitan areas in the U.S. in the period 2010-2015:
1. Austin, 2. Raleigh, 3. Houston, 4. Orlando, 5. San Antonio, 6. Denver, 7. Dallas, 8. Nashville, 9. Charlotte, 10. Phoenix.
Plenty of pretty affordable options in there.
When information technology no longer scales, and we achieve full saturation for jobs that support scaled services, the prices will plateau. Until then, I expect them to rise at a rate faster than the rest of world. I don't expect that trend to end in my lifetime.
Nope. Not massive enough.
Being able to work from anywhere, there's no reason for me to stay anywhere near a megacity (which I find expensive and distasteful). As employers discover the cost savings of telecommuting, employees will discover the cost savings of moving out of megacities ... and prices will slow, flatten, and perhaps even drop.
What I mean is that they almost exclusively look at local market prices for developers. They don't generally factor in what developers can make in the big cities. Now, some do, but generally they just apply the inverse of a cost-of-living multiplier and make that offer. That's problematic because then our savings rate, something that should be measured in absolute terms, is being reduced.
Anyway, point being, if I add up my benefits, savings rate, and cost-of-living adjusted expenses, I end up with a big number for most non-coastal-U.S. employers. I then have the risk of branding myself as an overpriced prima donna, especially if I'm seen as a cost center instead of as a strategic resource.
Yes! I lived in SF for a year, but then moved back home to Ohio and went back to working remotely. I occasionally travel to bigger cities to work with colleagues (maybe 3-5 trips a year), and this feels like a much nicer balance.
I also earn enough that I could live like a king around here... or live on a more "normal" income, save the extra, and retire at ~45.
If the finance industry keeps skimming a fraction of all the money flowing through it then financial hubs like New York city and London could keep becoming more expensive.