Nice, well written essay. Reminded me of Annie Dillard's writing. I'm not sure if it's the end of Silicon Valley, but if it is and that results in spreading the abundance around the country more evenly that wouldn't be a bad thing. Location in biology is important and limiting, however, location for our human endeavors is becoming less important due to technology.
Would you recommend anything in particular by Dillard? "How we spend our days is how we spend our days" struck me from the moment I read it (though once I learned the context, the meaning shifted. I haven't read anything by her, though.
"Pilgrim at Tinker Creek" is her signature book and for many (myself included) a spiritual experience to read.
"The Writing Life" is the best book about the process of creating that I have ever read, and I often suggest it to my design teams. (Designers like to read books about design, but you don't hire designers because they're good at words. You want to read about creating? Read books by writers.)
One of my favorite excerpts from The Writing Life:
> A well-known writer got collared by a university student who asked, “Do you think I could be a writer?”
“Well," the writer said, “I don’t know... Do you like sentences?"
The writer could see the student’s amazement. Sentences? Do I like sentences? I am 20 years old and do I like sentences? If he had liked sentences, of course, he could begin, like a joyful painter I knew. I asked him how he came to be a painter. He said, “I liked the smell of the paint."
>Why did Fairchild have to choose its epicenter as a one dimensional strip of land between mountains and bay with nowhere to physically expand to?
Possibly because the 8 engineers that formed Fairchild defected from Shockley Semiconductor. William Shockley chose that area to start a company partly because his ailing mother lived there.[1]
Another contributing reason was a Navy Research center was in the Bay area so the military was an eager buyer of the latest semiconductor technology.
The seeds of a few players starts a "business cluster".[2] Similar phenomenon as movie industry concentrated in Los Angeles. Country music in Nashville. Finance/fashion/publishing in New York.
I don't think COVID in combination with better telecommuting technology like Zoom will disperse business clusters as some think. It definitely will enable more remote collaboration but the concentration of business clusters will still remain.
It's very worth remembering that the abundance of Silicon Valley is fragile, and temporary. But I think many articles surmising that the peak is now have the timescale wrong.
I'd compare Silicon Valley to Detroit with a century time lag. The American automotive industry started in the 1890s, just like the Internet industry started in the 1990s. Like the Internet, it built off a constellation of related technologies that had been under development for 30-40 years. The automobile industry was built on the iron mines in Duluth, coal mines in Appalachia, petroleum industry in Ohio, steelworks in Pennsylvania, and Great Lakes transportation infrastructure that had been setup throughout the 19th century. The Internet was built on software from Boston; microcomputers from Albuquerque, Austin, and Houston; an OS from Redmond; semiconductors from Oregon; and so on.
In 1910, the population of Detroit was 465,000. It had nearly doubled from 285,000 in the previous decade, fueled both by international migrants looking for then-high wages and Black migration fleeing persecution in the rest of the U.S. (sound familiar?). The auto industry was well established, with Model-T production in its heyday. Supplier networks were already starting to grow up around the big-3 automakers.
But Detroit's population didn't peak until 1950, at quadruple its 1910 population. In between, Detroit would be key to winning two World Wars, and the automobile would fundamentally reshape society. Most of the growth happened between 1932-1960, and only after key government & societal infrastructure changed to be built around the automobile rather than the automobile serving as a luxury novelty for Gilded Age technorati.
Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood. But we've got a while to go. We haven't had our war yet, and the basic infrastructure of society - transportation, legal, military, government, etc - is still based on pre-electronic conceptions.
Or to use a popular phrasing: Economists have accurately predicted 5 of the last 3 recessions.
On the way up, it always looks like last year was peak. Then this year does even better. Continue for decades until one year, suddenly, the music stops.
I disagree. I think we need to put the paddle to the metal and take this baby for a spin. I do think the analogy needs a tune up. Web browsers are not the "automobiles of the information superhighway" because while they let you go forward or go back, they don't let you turn left or right. So clearly, web browsers must be the trains of the industrial revolution, riding on the coast-to-coast rail network which was built in Dot Com Boom and Bust fashion [1]. So I think Silicon Valley will chug along for many years to come. Of course, there's a chance this gravy train could be derailed. Owning all of the train stations has something to do with Monopoly. I'm running out of steam... need more analogies and puns to shovel into the furnace..
> Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood.
What if the secular demand for living in Silicon Valley is higher than Detroit? What if Detroit was desirable due to the economics and infrastructure constraints of that time, but what if people like the other aspects, such as location and weather,of living somewhere?
Not that it’s not possible for that to change either, but my point is different pieces of land may be more or less desirable than others outside of economic conditions.
Detroit was once one of America's finest cities, basically the embodiment of the American dream. Once the economy that floated all that ended, it ended too.
My point is what if that was due to the inertia of the eastern US having more population, being close to necessary waterways for transportation, and certain natural resource stores.
We have the internet and cheap transportation now, so people (with resources) can more easily move to where they want to live.
I can conceive a future where even if tech were somehow displaced, then other people with money would come to silicon valley, simply because they want to and they're not tied to another location, like richer people may have been during Detroit's heyday.
I relocated to Colorado a decade ago, swallowing the cost of living salary decreases, but I'm coming out better in terms of quality of life. If California, for a split second, achieved even close to the affordability for quality of life as CO, I would move back.
I haven't lived in Silicon Valley, but I've visited enough times to know the weather is a hell of a lot better than Detroit. Its access to natural beauty like the ocean and mountains is also considerably better.
If Detroit and San Francisco were equivelant cities (culturally, cost of living, etc.) I can't see why anyone would pick Detroit.
I've been to Greece and I think there are parts of Greece that I'd like to live in. Probably not practical if you need to work, but for retirement it seems like it could be very nice.
that's not quite a fair comparison. Greece is a bunch of islands with rough terrain in much of the mainland.
A better comparison to southern California would be the Iberian peninsula. Spain and Portugal have pleasant weather and are well connected to the industrial heart of Europe.
Many want to live in these countries but most can't make a living there.
> Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood.
This happened to Detroit because jobs were literally the only reason to live there. The Bay Area has amazing weather, unbelievable scenery, world-class recreation, and tons of music and culture. If the jobs of today leave, the jobs of tomorrow will replace them simply because the area itself is one of the best in the country. Detroit is a flatland nowhere in frozen tundra flyover state. "A bunch of lakes" is only going to keep an extremely small subset of people interested.
Yeah, it's like if LA was to lose the entertainment industry, the Mediterranean climate alone ensures it a highly desirable place to live. And both SF and LA are major ports.
> The Bay Area has amazing weather, unbelievable scenery, world-class recreation, and tons of music and culture. If the jobs of today leave, the jobs of tomorrow will replace them simply because the area itself is one of the best in the country.
That's not necessarily true. Maybe the jobs go and never return, but the recreational desirability leads it more in the direction of an Aspen: more of a place for recreation than business.
My job is the main reason I live in San Francisco. In my opinion Colorado is much more beautiful, Boulder has a lot of the advantages of living in a big city but also so many fewer disadvantages. Personally I’m not a big fan of the kind of nature of the bay area has to offer. I grew up in the Northeast and the southeast, and I miss the huge deciduous trees and the fall-time colors. The Bay Area is pretty, but doesn’t hold a candle to the beauty of Michigan or Colorado or Tahoe in my opinion. Obviously different people have different preferences, but for every person who believes the bay area is the perfect place to live regardless of their career, there’s at least another person who doesn’t particularly like it and has their own idea of a perfect place to live.
For what its worth, I'm not from the US but I have travelled a fair bit round the US and Colorado and Boulder were some of the few places that really appealed to me.
I agree regarding music & culture. Detroit used to have awesome music, e.g. Motown Records in its heyday, and even when in decline, it was considered one of the birthplaces of techno.
Unbelievable scenery and world-class recreation have nothing to do with being a "city with a large population." In fact, the presence of a large population center usually makes these things worse.
High living costs and living conditions will have the starving artists that make these things you consume flock somewhere else or never move out to the Bay in the first place. Consequently the next generation of these artists won't be coming out of the bay, ironically you'll start to see more culture and art come out of places like Detroit.
I think you're conflating avant-garde with world class.
Take restaurants for example - super easy to start a new inventive restaurant in Detroit (low rent, low labor costs, etc.), but it's nearly impossible to make a $500/head prix-fixe work there (and that is, for better of worse, the type of food that causes people to flock now-a-days). Even Portland sees most of it's 'starving artist' chefs decamp to NY / SF / LA once they gain a national brand.
does not sound like SV today. You're also missing the main reason, superior products from Japan and Germany. We don't really see that as of now. China and EU have a handful of competitive companies.
It's not that SV is union workers but that union workers have a higher labor cost. Kind of goes to why GM started Saturn in TN and why Saturn cars where cheap in the late 80s, no unions thus cheaper labor.
SV labor is expensive compared to other markets (see below). I have worked in SV and elsewhere and mostly elsewhere is 1/2 the pay as SV and without the things like free lunch / coffee bar / shuttle service.
SV doesn't need unions because the turnover rate is so high that the companies are basically providing what unions would negotiate just to compete (free lunch / coffee bar / shuttle service). It's still a buyers market from the employee standpoint.
I do think SV is not quite at the inflection point just yet, but it is moving in that direction.
The irony in this is actually that the cost of labor is high because the cost of living is high. The cost of living is high because of the NIMBY folks preventing multiunit housing. If the ballon collapses those NIMBY folks would see their precious house values decline.
Finally as to superior products most Japanese and German cars sold in the US are still built in the US, just not Detroit because of.... Wait for it.... Union Workers.
Every major tech company is grappling with the balance between their leadership and employee base right now. It may not look exactly like the UAW in Detroit, but that tension definitely echos into our time. It's quite a bit different than 5-10 years ago.
Ford and GM date from 1903 and 1908, respectively. Chrysler from 1925. There were plenty of other car makers (Packard, Studebaker, Duesenberg, AMC, Hudson, etc.), but most of them were started in the 1910s-1920s and then went defunct in the 1950s. There are plenty of other Silicon Valley tech companies (Stripe, AirBnB, Uber, Lyft, Dropbox, Coinbase, Roblox, etc.), and many of them are just starting their growth curve.
* They stopped building manufacturing plants in detroit itself and built them further afield to cut labor and land costs.
That is an antonym of the Silicon Valley situation - they tried numerous times to outsource and move to cheaper locations and failed. The closest to success were San Fransico and Palo Alto which effectively just sprawled the area that is effectively Silicon Valley outside the prior bounds. The attempts to go far afield failed and the physical manufacturing wasn't where the money was located resulting in a minor shake up.
There is a historical resemblance superficially in the first point but the second two are outright foils as every little highly publicized kerfluffle for what is effectively a relatively fringe cause like say not taking DoD contracts is nothing compared to a work stop or a gain of union claim to control.
Come to think of it the employee stock share benefits are a sort of weird foil to a union - not even trying for control or working conditions but giving some token stake to sufficiently valued workers. Not a replacement by any means but it is an ironic undermining of a company vs worker mentality.
SF's population has been fairly stable since the 50's. And it didn't really take part in the tech scene until the 00's. The population of SF isn't going anywhere. If tech transplants move out, there's plenty of people that will want to move back. They won't be as rich though so prices will probably drop a bit.
Detroit is flipping miserable to live in and the Bay Area has a natural air conditioner in the Pacific Ocean. Why do people keep overlooking this? I lived in a boom and bust steel and auto town in the midwest, people left because the only thing keeping us there was a paycheck and family. The Bay has much more to offer than Detroit. Not even comparable.
But that doesn't mean you're gonna have a great economy forever.
That means property will be expensive forever, because there will always be rich people looking to move or retire there, but will that turn into innovative or well-paying jobs for people?
It actually does because in Detroit the only reason to be there no longer exists in a meaningful capacity whereas The Bay Area will for the foreseeable future.
There are a LOT of rich towns full of money in Europe - where this sort of thing has been going on for a LOT longer than the 100 years or so of California-in-the-US history - where the rich folks live that don't feature booming innovation economies.
When even the current crop of tech workers get priced out of California by the continual influx of wealthy folks seeking out the climate you won't see SF turn into Detroit, but it's not gonna be the SF of the nineties->now.
The San Francisco Bay is one of the largest natural harbors in the world. The tech industry might become like Detroit, the cities themselves will be fine purely because of logistical importance alone.
> Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood.
This implies that there's a glut of housing that's been created to home Silicon Valley technologists, which couldn't be further from the truth.
There is absolutely zero chance of a housing glut in California. The regulatory environment is so violently opposed to housing that the vast majority of people who live there could never afford to move. When the end comes, I think it is more likely to be because some thing finally tips such that people leave the area and (because houses are priced at the margins) prices begin to actually drop. Once that happens there could easily be a rush for the exits, as nobody wants to be upside down on a $2 million loan.
That scenario has happened repeatedly - 91-94, 01-02, 08-11, and now from 2018-present. It usually plays out as a ~10-25% drop in housing prices over a few years as the market exhausts itself, followed by a resurgence as wages & demand starts catching up again.
The way I think a glut could arise is when a tipping point is reached and pro-housing renters outnumber NIMBY owners on city councils. This has happened already in Mountain View (which was notoriously anti-development until a group of young pro-housing Googlers packed the city council and voted out all the NIMBYs in 2014, and now green-lights nearly any housing development), Sunnyvale, Redwood City, and San Mateo, and may make its way down to San Jose and up the rest of the peninsula. At present a lot of Bay Area communities are starting to look more like Paris: dense ~4 story apartment buildings, public squares, outdoor dining on pedestrian thoroughfares, etc.
> Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood.
I'm certain this will never happen simply due to the superiority of California's climate.
I'm certain there are many pleasant and warm places the globe over that are poor and isolated. People go where the jobs are. Nice weather is secondary. If we all start working in VR and location becomes irrelevant, then all bets are off. But why even have cities then?
Nice weather really isn't secondary. It's the entire reason Southern California is what it is. Anywhere the weather's nice, people flock. If location becomes irrelevant, that will just make people flock even faster. Everywhere the weather sucks, ask around and you'll find the cheap place people go all the time for vacation, and wish they could live, if they could but afford it. For Atlanta where I live, it's nearby Destin, or Savannah. Nice weather is a primary determinant of where people choose to retire. It pumps land values up 10x or more.
I'll turn your argument around and say that the only truly location-dependent industries are extraction based. Everything else moves where the people are. And people will pay through the nose to live where it's nice.
> I'll turn your argument around and say that the only truly location-dependent industries are extraction based. Everything else moves where the people are.
I don't think I would call the transportation industry (as in: ports, trains, planes, and related infrastructure) "extraction based". But that is an example of something very clearly location-dependent.
Well, yeah, prior to Covid, Andalusia in Spain was a favorite tourist destination. It really is lovely sitting at 10pm with a sangria in hand on a historic staircase of a palace and watching the nightlife milling around.
But all this flocking is temporary. People do not move there to start businesses. (They do to Gibraltar, but that is a tax haven.) They just enjoy they stay, spend some money on recreation and fly back to gloomy-but-rich Amsterdam, London or Hamburg.
In Europe, much of the economic growth is concentrated in the countries with colder weather, while the pleasant weather countries (France, Spain, Italy etc.) struggle with high unemployment and economic stagnation.
"Nice weather implies good economy" does not seem to pass even the basic correlation test.
Maybe it doesn't imply good economy, but it at least implies desirability for people to live in. Retiree Florida doesn't have a booming economy but it certainly has a steady influx of people moving to there for the environment.
I am in tech and can live and work anywhere. I am staying in Bay Area because of climate/geography until taxes are too high to bear (very near that point now)
Taxes are lower in both those places (source: I moved from Brisbane AU to Austin TX). The idea that the US (and CA in particular) is a low tax place to live is a really successful urban myth.
I would try Auckland before you buy. It's cold compared to all your other places.
It's possible that in 30 years the climate in Detroit will be better than the climate in Northern California. Wildfires and drought could be the new norm.
California's climate has been wildfires and drought for millennia, and will continue for the foreseeable future. See the scrub oak (chaparro) plant as an example of an organism native to the area responding to evolutionary pressures of drought and wildfires:
You're ignoring over half of Silicon Valley's history in your narrative, including the population boom that gave the region its name and the vast majority of its growth.
Silicon Valley has been getting transplants since the 60s. The region has grown around 15-20% in the last 20 years. From 1960 to 1980 region roughly tripled its population. There's a reason why prop 13 came about in the 70s.
I'm not saying it will always be a tech mecca. But ignoring a majority of its history with tech just so you can compare it to Detroit seems disingenuous.
> There's a reason why prop 13 came about in the 70s.
Because vengeful homeowners wanted a "revolt" to punish the government for taxing them. It wasn't because of home prices, 1978 Prop 8 would have solved that, they wanted revenge. It's greed and hate right down to the roots.
Silicon Valley's been getting transplants since the 1860s. There's plenty of waves of immigrants before tech - the Gold Rush, Okies in the 1930s, WW2 GIs, the defense boom around Lockheed (which brought my father-in-law to the area; my wife is a Bay Area native), desktop software, and then finally the Internet. Just as Detroit had waves of migration from the 1700s - fur trading, Great Lakes trade, iron manufacturing, and then finally automobiles.
I'm specifically picking Detroit from ~1895-1970 vs. Silicon Valley from ~1995-future because there's a similar dynamic at root. A single globally-relevant industry that's remaking society, and everybody pouring in to capitalize on this. Given similar root causes, it seems likely that their futures will be similar as well.
There's a big difference between Detroit and SF (or California in general).
Weatherwise it's one of the best places to live in the USA. The smoke issue is new but it's unlikely to be this bad most years. Detroit is unfriendly a much greater portion of the year
It's likely the craziness in the Bay will subside but I would be extremely shocked if it began to resemble Ddetroit. Some of the more remote suburbs that haven't historically been places people would commute from might fare badly though.
> Every year, we think that this cannot possibly continue, and every year it does.
> Until now. As covid and wildfire smoke have atomized us all into whatever living space we can afford, and into a grid of separate video boxes on a screen, the place as it was no longer exists. The forces that kept people here are temporarily gone. Through cratering rents San Francisco is finally proving to opponents of growth that supply and demand apply to housing too.
Intelligent people will twist themselves in knots trying to disprove basic economics. I see long threads on HN all the time of brilliant people convinced that supply and demand is just "far too simple" or "totally disproved" etc. etc.
I’ve been trying to explain to YIMBY-type folks for years that while, yes, supply and demand are both important, it’s extremely rare that the price of an asset will crash due to increased supply. It’s almost always due to decreased demand. E.g. the price of taxicab medallions in New York did not fall because the government increased the number of medallions; it was because Uber and Lyft decreased the demand. People sometimes reply, “but that’s the same thing!” I don’t think it is though. Obviously if the number of available medallions went up, we might see a similar effect, but that’s not what actually happened: the political situation restricting the supply never went away.
What's the point? NYC could have issued more supply to reduce the price. The fact that they chose not to until the demand for them dropped has no bearing on the supply/demand relationship.
> NYC could have issued more supply to reduce the price.
Not really, taxi medallion owners are a powerful special interest group. Just like Bay Area homeowners.
My other favorite YIMBY argument is that the Bay Area would have super cheap housing if only it were more like New York. New York has (had?) some of the most expensive housing in the entire world. Sure, there are zoning laws and regulations that could be changed to build even more housing, but the primary issue is not that New York has less housing than other parts of the country. To the contrary, the cheapest places to live in the US tend to be have the least dense housing.
The issue is that there are not a fixed number of people who want to live in a given area; if there were, every new unit built would allow someone else in the area to either not be homeless or to live with fewer roommates. Really what happens in practice in a high-demand city (conceptually, at least) is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before. So it’s definitely getting more crowded, with the associated problems, but the effect on housing prices is fairly small in comparison.
The fact that housing prices in the Bay Area create such a concentration of people who work in tech by driving everyone else out contributes to the region’s culture in important ways, some positively and some negatively. My favorite theory (from Date-onomics) is that this causes the local gender ratio to skew predominantly male, which causes the single straight men in the area (while this certainly does not describe the entire labor force, it describes a substantial portion) to work harder (both because they’re trying to stand out to attract a partner and also because they’re less distracted by dating).
>is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before
This is a description of supply and demand, not some kind of trump card against it. Notice that more people are getting their preferences satisfied. That's the point.
> Not really, taxi medallion owners are a powerful special interest group. Just like Bay Area homeowners.
And YIMBY-type groups fight against these artificial restrictions on supply. That's not an argument that the fundamentals of supply and demand doesn't apply.
> is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before
That's the definition of demand: the number of people who would buy a good at a given price.
This is usually comes from a confusion of upfront costs and ongoing.
For example a printing press. To use old tech as an example. The press itself is wildly expensive. So I will have to divide that price across all things I sell using that press. However once the press is paid off my marginal costs are little more than cost of paper, shipping it around, and paying someone to run/fix the press. Computer chips are made of silicon one of the cheaper materials to buy out there. The up front costs of setting up a foundry is akin to buying a printing press. An older tech foundry can still make marginal money as the big cost is already been paid for. Everything after is marginal.
Books and computer chips aren’t really assets (unless they’re collectibles, I guess), they’re commercial products, so I’m not sure my argument really works.
A large company would most certainly consider a computer an asset would they not? Until it is paid off and/or can no longer provide value to them?
Your argument is with medallions is mostly correct. They had an artificial constraint on an environment. With the artificial constraint they act like assets and not permits. However once a good that was equivalent showed up the value of the asset value did fall. A market will tend towards MR=MC (marginal rev=marginal cost). However in the medallion case the supply was artificially constrained. So a floor was created. This moves the price people are willing to pay up the demand curve instead of lower near the usually lower mr=mc spot. In this case as the population grew but the number of allowed taxis did not the price went up because demand went up but supply did not. Once another good showed up that demand curve changed as less people were willing to pay that amount as well as more supply. This is the madness of economics. The demand curve always changes.
Chips are mostly worthless because there are so many of them and better fab equipment exists and the capex of the machines to make them was paid off decades ago. So their depreciation is very quick (much like cars). Rarity does play into price as well. As some people do like the idea of owning a rare thing.
You also have part of it with your comment here. Assets rarely 'hold' value for a long term. If you do not move the value around your total monetary value will depreciate. The medallion case was an artificial constraint so the value rose because demand remained high enough. Once a new supply came in the real price showed up. Housing can act like this too in artificially constrained environments. Rent control, poor tax structures, poor zoning, etc can all cause this. If you get a situation where the owners work with the gov (medallions and the taxi commission and the cities) they will write laws to artificially constrain growth to limit their asset depreciation. That is usually called regulatory capture.
For these sorts of arguments I like to say 'if everyone suddenly had 1 billion dollars what would you pay for a loaf of bread?'. Most people would say '1-2 dollars'. But what about next week when the company realizes people will pay 1000 dollars for one? Would you still buy it? Would your friends? It usually shows that the demand curve is not static and value is a moving market in and of itself.
Online music and movies: I think this basically all started with Napster which essentially allowed people to steal music instead of paying for it. That seems like a decrease in demand to me. I think an increase in supply in this context would be e.g. an increase in the amount of music and movies being produced.
Low-end smartphones: Apple’s charging record prices for its new iPhones so I don’t think the availability of low-end smartphones caused any sort of crash in the price of smartphones. Rather, it’s a new market category.
Operating system software: I’m not sure what you’re getting at here. The price of Windows has been relatively stable for decades despite the availability of free alternatives like GNU/Linux. Apple stopped charging separately for its OS and now essentially bundles a subscription into the cost of its hardware. I don’t think it’s ever been popular to charge separately for the operating system on mobile phones.
Sure, the prices of oil and natural gas go down sometimes, or grow more slowly, because of increased supply, but let’s look at the graph of oil prices post-WWII:
There was a temporary spike in 1990 after Iraq invaded Kuwait. I guess you could argue that the price went back down because the supply changed.
There was a crash in 1997–1998 that was partially due to increased supply but also due at least in part to the Asian financial crisis. The next big crash was from June 2008 to February 2009, again due to a large financial crisis. There was another crash in June 2015-February 2016 due to a stock market crash in China, and finally we get to the massive crash this year driving futures prices negative, which was of course due to COVID-19 reducing demand for travel.
The thing to keep in mind re: oil in particular is that a stable oil price is indicative of increases in supply to match the more or less continuous increase in demand over most of that period.
The big dislocations you cite obscure the fact that demand rose for most of the period, demand was rising. So another way to read the chart is that demand-weighted prices declined most of the time, with occasional spikes. Either way, you can see in the charts the increased supply effect of e.g. fracking being deployed widely in the price response.
One could also look back to 2008 to see the impact of increased supply on pricing of e.g. real estate.
2008 was, again, a demand crash: a lot of people could no longer afford to pay their mortgages and speculators stopped buying properties under the assumption that they would be guaranteed to be able to resell them at a profit after a relatively short period of time.
> I’ve been trying to explain to YIMBY-type folks for years that while, yes, supply and demand are both important, it’s extremely rare that the price of an asset will crash due to increased supply
I don't think anyone in the YIMBY movement (as far as I'm aware) believes there would be a crash in prices. I think the position is that increased supply with help stem the rapid growth in prices.
I’ve seen people do things like compare Seattle and SF housing prices and say, “see, they’re growing more slowly in Seattle because they’re building more!” Even if that’s the case (possible, but there might be other factors at play as well)…that doesn’t solve housing affordability for anyone. It was still getting more expensive, just more slowly.
I think this is a fair counterpoint, but the counter-counterpoint would be that decreased housing prices are just one of an array of benefits that increasing housing supply would bring about.
There are areas of economics where it's more complicated than simply 'supply and demand'. Positive network externalities, things like that, but by and large supply and demand are a good place to start. And it is very applicable to housing.
Definitely a good place to start. It's astounding how many people you can find yourself in a discussion with who haven't gotten as far in economic understanding as grokking supply and demand, but are adamantly proposing what amounts to complex economic policies with many effects.
While supply and demand is a good model, it is at the end of day, still just a model. Even as a model, it is not easy to apply to real-life situations. Measuring supply and demand is not easy. Constraints on supply and demand change all the time. Complements and supplements change all the time. Second and third order effects which take a long time to show, but have massive impact cannot be easily predicted and measured. Finally, the supply and demand logic requires a perfect market, which does not exist.
Developers or property owners will just wait out a recession/depression. They won't rent below a certain amount. They may just demolish their building.
It is common among the general population to believe that: "When developers build new things it makes my home value and property taxes go up."
It is VERY difficult to get them to understand that they have the cause-and-effect reversed : In fact, it was the increase in value that triggered the new development.
> there are people who don't believe that supply and demand exists in housing? What does that even mean?
The most good faith, steel-manned way that I can interpret these types of statements, is to interpret it as "Supply and demand in one area of the market have little effect on other areas of the market, especially those areas that are currently subject to existing government regulation and programs".
EX: If someone has been living in a rent controlled, or low income housing, for X number of years, it is correct to say that building a few more high end condos, is not going to reduce this person's rent (barring implausible situations, such as building hundreds of thousands of new housing units).
Yes, it might reduce the rent of people renting high end apartments, but it is not going to effect the rent of people who are, by definition, not paying market price for apartments, due to rent control.
Basic microeconomics teaches that demand is a schedule of what customers are willing to pay at various price points, and that businesses need to apply "marginal" analysis aka calculus to optimize profit. There is nothing about the basic building blocks of microeconomics that makes it incompatible for the analysis of luxury products.
Most product are not luxury products and a large portion of the world lives in poverty, so naturally most Econ 101 discussions of microeconomics will deal with commodity products e.g. bread.
Like anything worth learning, it is far more important to understand the basic principles of the subject than to learn details about specific applications. That is memorization over understanding.
Market alone is almost never the solution. I know an angel investor living in a rent controlled apartment in the most desirable neighbourhood in SF. Put a cap on income for rent control. Allow market to function.
Any property that follows planning rules, is in the right zone and follows rules for low income/below market rate housing, allow it to be built without delay.
Fix stupid zoning laws that make building anything over two stories illegal in a huge swath of the city.
(An example is using tradeable floor space index to regulate zones instead of fixed height based codes)
You can do all of this and build public transit options to keep the quality of life stable. It’s possible. It requires will to execute and a multi year or even multi decade plan.
There are 2 curves in any market. The demand curve and the supply curve. The supply curve is usually fairly easy to figure out (borderline trivial). The demand curve on the other hand does very odd things and tries to measure things there is no measurement for. Even economies where there is no real price and there is only a monopoly has to conform to the two curves. Most economic policies fail because of poor forecasting of external items on changes in the demand curve. For example maybe I had an egg for breakfast and that made me feel full for lunch. So I do not want to eat a hamburger at any price for the rest of the week. Yet the demand curve would predict I would buy it at a particular price.
Economics a lot of hand wavy predictions. It is good at saying what happened after the fact but usually makes poor predictions. Most sciences would say the model is broken.
The Veblen good that you mention is one of those examples. Where raising the price creates a desirability that should not be there. That is because pricing is a signal of scarcity. Some people desire the idea they have something scarce and others dont. Which makes demand curves hard as even the price you pick changes the curve!
A friend of mine once told me "Yes, the price of a house here is extremely expensive. But no matter what happens the prices might level off for a while, but they always resume and go up".
He told me that in 1994 and it has been true. Even with massive apple layoffs in 1995. And when the bubble burst in 2000. and the housing crisis.
I think people will move out of the bay area. But I think they will do it the way they always have - sell their house, cash out and retire elsewhere. The others will sit on their low prop 13 ponzi taxes and stay. And people will take their place because elsewhere winter sucks and humidity sucks and rain sucks and salaries suck and yes for some even their traffic sucks.
Winter, humidity and rain may be unappealing, but you know what's even worse: months on end of choking smoke & ash. If that's the new normal due to climate change, I think you'll see a lot of permanent displacement.
> Why did Fairchild have to choose its epicenter as a one dimensional strip of land between mountains and bay with nowhere to physically expand to? Why did every starry-eyed post-bubble founder plop their headquarters in a dinky suburb that would fight them for office space and housing forever after? Abundance is an accident
Silicon Valley is the result of deliberate industrial policy and state investment into institutions. I grew up in northern Virginia and watched a similar thing happen in Virginia from 1989 to today.
I also grew up in northern Virginia; what was the equivalent to Stanford there (There was the obvious pull of the federal government, but post 1989 the growth was almost entirely outside the beltway).
Additionally, around when Fairchild et al were created, California was a great place to live. High wages with average cost of living, cheap housing, great weather etc made the place a paradise for regular people to move into. It was not in any way resembling what it is right now.
I think that this was a really interesting parallel to the natural world. There are two really important questions to be asking when trying to figure out if the exodus of Silicon Valley is temporary or permanent.
1. Is the damage or outside stressors that are causing the exodus permanent? (I really hope not...)
2. Was there a natural cause (repeatable, will continue) for the previous abundance, or was it just momentum and luck that kept Silicon Valley as abundant as it has been.
Like many wildlife populations, Silicon Valley is cyclical, with a boom-and-bust cycle. 101 was quiet and San Francisco was a hipster haven rather than a tech-bro mecca during the dot-com bust, for example.
The fundamentals that make this a great place to live and venture will remain, though. The weather is great. The mixing pot of global languages and cultures stretches back to the gold rush. World class educational and 'big tech' institutions aren't going anywhere. Investors express difficulty in gauging personal rapport over a video call, and are still largely clustered in the Bay Area. The network effects around having a critical mass of brilliant technical minds are substantial.
I hope that this abundance can flow outward, to other cities, like Denver or Austin or Seattle or SLC, even if that makes my property values dip a little. I'll enjoy digging up sand crabs at the beach (nobody I know calls them mole crabs) long after the latest wave of tech migrants have left.
And on a city level, the history of San Francisco itself is filled with spectacular boom times followed by spectacular bust times. For me, a perspective shift was reading Season of the Witch by David Talbot, chronicling the boom/bust of the 1960s-1980s. Declaring the end of SF/Bay Area is a long-standing tradition, and yet the region always finds a way, in part because of the fundamentals you mentioned.
The author spends most of the article discussing how mysterious and unknowable the underlying causes of abundance are. And then closes out the article with “this time it’s different”. That seems inconsistent.
> The forces that kept people here are temporarily gone.
I wonder a lot about this and its effects. We're seeing big price increases here in Bend, Oregon and what seems like an influx of people from larger cities. Why live in a city if you can't do city things?
Bend was already trendy though. I wonder if this effect will indeed spread out even further. There are a bunch of former logging/ranching towns here in Oregon (and, indeed, throughout the west) that are not doing nearly so well. Roseburg, Pendleton, Baker City, Grants Pass come to mind. They have access to some nice outdoor spaces themselves. Will people start moving there, or will they constrain themselves to 'the beaten path' of towns that their peer group considers a 'nice place to live'?
I'd suppose it's a development similar to (or exactly) gentrification.
First a few pioneers come for the cheap housing, they make it cool, a few more people come for the coolness and eventually, if a critical mass is reached, it'll become an established desirable area (of course this can reverse as well).
Since people tend to accumulate I suppose that once the prices in Bend get too high people will indeed spread out, bit one of the nearby towns will win the "trendy" people.
Isn't there a risk of amnesic shellfish poisoning[0] in that area? Looking at the wikipedia page for domoic acid[1] Pismo Beach is even mentioned by name. Could that be part of the reason why there's an abundance of shellfish on that beach, i.e. because people leave them alone rather than risk permanent brain damage? I'd read it is a likely explanation for the incident that influenced Alfred Hitchcock's The Birds[2].
Don't want to spoil the article's analogy, although you could perhaps make a new one connecting abundance to toxicity.
Interesting. It seems the concerns are about restocking rather than poisoning, and the warning signs don't mention the risk of contamination, although it seems advisories are put out when there is elevated risk: https://wildlife.ca.gov/fishing/ocean/health-advisories
Really enjoyed your observations on Pismo clams and Moss Landing crabs. Silicon Valley has always been about abundance.
CC Morse used the fertile Santa Clara Valley to build the world’s largest seed company. His land gave birth to the original VC and investment in Fairchild semiconductor. As long as there is opportunity there will be abundance. https://twofeet.weebly.com/walking-blog/charles-copeland-mor...
Well-written, and a fascinating anecdote about the clams, but it lost me when it hoisted silicon valley up onto the same level as the wonders of nature itself. Really demonstrates the delusional sense of self-importance that the region is steeped in.
The author seems to be a good writer but it getting old hearing people wax poetic about their opinions on the valley - anyone got facts to support anything?
I'm kinda sick of these parallels being drawn between things that societies prioritize to the natural world. Economics isn't a study of the natural world. The ecosystems driving crabs to the beach has nothing to do with capitalism.
The fundamental design of the Internet was to be robust against various forms of damage to the network. I see Silicon Valley as a similar type of system. It is not difficult to look back 40 years and see how at each inflection point, The Valley's constituent technologies, and the companies they spawned, led the rest of the world and scaled The Valley up.
- In the 1980s, Silicon Valley's Intel lost it's dominance in DRAM production to Japan. The economic impact was dire, and yet
- In the early 1990s, networking and workstations emerged from the likes of SUN and Cisco. They carried through until global competition stole their wind, and it was on to
- The late 90s and the .COM boom. And what a boom it was, Amazon, Google, followed by another death knell for myriad .COM corpses. Promptly engendering
- The 2000s birth of social media. MySpace faltered, then LinkedIn, then Facebook, then Twitter, came up and are still going strong on the foundation of
- 2010s open source platforms. Still mind-blowing: At one point WhatsApp had 40 software engineers and 400,000,000 users. At 3 years old.
I've heard about the exodus from California, usually citing so many thousands or 10s of thousands of people leaving. But looking a the net population changes, Santa Clara County is down 5,000 from 2018-2019. Alameda, San Mateo, San Francisco are all up.
Silicon Valley is a system that regenerates from one generation to the next, and so far, always bigger and more influential than the last.
Silicon Valley survives because VCs with more money than they know what to do with like the local weather. It's like Hollywood, which has had many boom and bust cycles of its own, yet it's always there because the people with the money decide to stay, so that's where you go if you want your film project financed.
It's just that things tend to happen much more quickly, easily, and serendipitously if you live in the VCs' neighborhood. It's the same thing as why people advocate for being physically in the office, for face-to-face meetings and "passing in the hall" moments.
Lots of them do or at-least require the project to move here. It's not for a nefarious reason but rather to help them. If they need advice, more engineers, a CTO, some PR people, etc the VC has all their connections here so bringing the project here is more feasible.
Hollywood is an artificial monopoly. I just hope with the recent surge of more "indiehackers" and bootstrapped businesses, it means VCs arent held up as arbitrary gatekeepers to capital and starting a startup.
Hollywood is not a monopoly. There are thriving movie industries in other countries and even with the US (see NY and Georgia, for example). Hollywood is simply the biggest and most successful of the movie industry centers.
There is also an entire system of independent film studios and theaters in the US.
The difference between all those eras and today is the bandwidth of a home Internet connection. Virtually everywhere in America, and much of the world, now has cheap access to 100+ mbps connections. Even during the 2008 recession, ultra-clear high-definition video conferencing wasn't possible.
Add on top that the Covid quarantine has completely removed all social stigma or weirdness around remote work. You have a never before seen threat to high-cost/high-productivity powerhouse metros like SF, NYC and DC.
Yeah, I definitely disagree that it is "virtually everywhere" or "cheap", but I definitely agree with the parent's overall point that it is way more ubiquitous these days by orders of magnitude. To the point where it enables a lot of things that were pretty much impossible back then, both in technical aspects and societal/job market aspects.
85% of Americans have access to 250 mbps broadband in their local market.[1] Prices for Internet only packages are typically cheap in the US. For example I pay $40 a month for 100 mbps (and usually get 125+ mbps). This price is about typical for the major providers.[2]
> 85% of Americans have access to 250 mbps broadband in their local market.
It's meaningless if it's available “in your local market” but not at your address. I really can't imagine any real use for that stat except exaggerating broadband access.
What makes me despondent is back in the 1970's 1980's much of the commercial work in the valley was about creating new technologies to empower people. Since 2010 it seems it's now mostly about exploiting people.
1975: National Semi, our new audio amp allows people to buy cheap high quality stereo's.
2010: Ubber, our app that ratfucks the taxi industry.
Or Uber: the business that allows me to drastically reduce the probability of me being scammed by a taxi driver, as well as increase the quality of the cars themselves
Source: my numerous experiences with taxis in multiple cities in the US and around the world before and after Uber
Or Uber: A failed Randian play to use VC money to squelch out every independent taxi company in the United States and the world by subsidizing rides to well below their cost. To the tune of $1B per quarter. I suspect they thought they could drive them all out of business and then take over and raise prices. Unlike their patchwork of independent competitors, Uber didn't have to cover the cost of a ride from fares.
I guess now they deliver lunch so that's pretty cool.
If it was a physical product it would be considered dumping and be illegal.
Not to mention Uber and Lift don't pay for the roads their businesses depend on. And then Uber and Lift have dramatically increased congestion in a lot of cities. Which negatively impacts people that live in those cities. Finally both Uber and Lift are applying political pressure to eliminate mass transit.
No idea what ratfucking is, but the willful ignorance in your examples is almost comical.
Example 1: innovations in technology & clever business model put previously expensive thing in reach for an order of magnitude wider audience, leads to significant qualitative shift in behavior/capabilities for the average person.
Uber: Exactly the same thing.
Why are you so offended about the harm to the taxi industry, what about all the vacuum tube manufacturers put out of business by semiconductors? Innovation has always involved creative destruction, but for some reason there's a bigger than usual portion of society now that is completely unwilling to acknowledge utilitarian benefits and wants to make all change illegal. And the even greater tragedy is it's always the comfortable, well-off upper middle class making these arguments on behalf of the working class, with absolutely no skin in the game because they will never be the first ones affected by the negative consequences of their absolutist worldview.
Nope - only in the sense of your great grear grandfather's axe after your grandfather replaced the head three times and your father replaced the haft twice and the head is now a sledgehammer. Vacuum tube making is about metalworking essentially. Sure you can swap components between the wires but manufacturing of vacuum tubes is entirely different than silicon and even they needed new fab processes for nanometer changes.
Lightbulbs and would have been a better pivot (with or without a gas in the medium for neon lights or CFBs) at least until LEDs finished them off.
Posted it in an other thread [0] but do we really want to go back to the medallion system? Pre-Uber, either the driver rented the car to a middleman who rented the medallion from a rich owner, or said owner was selling and financing (most banks won't touch these medallions!) a medallion at a ridiculous interest rate to a driver that planned to use it as his retirement savings (an extremely volatile asset and not very liquid).
The more I spoke to cab drivers the more it seemed their industry was a pyramid scheme aimed at helping established rent-seeker take advantage of often poor new immigrants. Uber brought a breeze of fresh air: Someone could simply buy a car, calculate the depreciation and it's value on the market (since unlike medallions cars are relatively liquid assets!) do rideshare and calculate their profits or loss. They can get out of the game at anytime, and they know exactly how much they are going to get for the car they have should they sell it.
Also, the argument on Uber/Lyft drivers not being contractors since they can't set their own rates and decide which ride they take strikes me as weird since medallion drivers were contractors, had to charge the price set by the city and could only pick-up customers in the (arbitrary) zones covered by their medallions.
And I'm not even touching the usual pain points and often discriminatory practices of medallion drivers (refusing card payments, refusing rides to non-white passengers and to non-white neighborhoods...).
Maybe the cure can eventually become worse than the disease? Also, as terrible as the medallion system is, the taxi industry weren't uniformly as bad as SF's in every region, so ridesharing probably unintentionally wiped out some quality cab companies in the process.
Taxi industry had its karma coming. Prior to Uber, ratfuckers would sit behind the wheel and rip off the clients.
Maybe there was some place in the world where taxis were clean and taxi drivers honest, but in my corner of the world they were synonymous with low-key mafia.
Oh, yeah, I was 19 at that time and I avoided them, they were up to no good. This strange combination of sleazy and menacing at the same time. Precisely the type of people you do not want to join in their car.
Therefore they mostly preyed on international tourists at the airport.
It's a fair point. What's engaging is that typically, the nature of the next emerging cycle is not evident until you're well into it. I started to write a list of possible break-out technomarkets for the 2020s from The Valley, but I decided I'd rather not and be 'surprised'.
One aspect of the scale these companies are achieving is the political implications. Yes, the worry in DC over their manipulation of human nature, but it's also issues like the headbutting of the gig-labor lifestyle against tax policy right in California. Pushing technology forward eventually encounters politics and it's interesting to watch these firms gird up for that battle.
Wait what about smartphones, tablets, IoT, etc? I know that they started earlier than 2010 but I feel like the huge improvements and democratization of cloud computing, machine learning, etc (available via the "open source platforms" I believe the parent is referring to) made the 2010s the era of ubiquitous smart devices. Alexa, smart TVs, drones, misc tracking/monitoring technologies are the new normal, not to mention the sharing economy tech of the Ubers and AirBnBs, and digital payment tech like Square/Venmo + cryptocurrency in general.
No, you're entirely correct. People frequently mislead about the advancements Silicon Valley has made because it makes them feel good to bash it.
There are dozens of companies not named Uber or Airbnb that have come out of SV in the past 10-15 years that lead the world at what they do. You won't see the SV bashers talk about any of that, they go out of their way to avoid that point in fact.
Where is the Cloudflare of Europe? Doesn't exist.
Where is the ServiceNow of Europe? Doesn't exist.
Where is the WorkDay of Europe? Doesn't exist.
Where is the Palo Alto Networks of Europe? Doesn't exist.
Where is the Twilio of Europe? Doesn't exist.
Where is the Snowflake of Europe? Doesn't exist.
Where is the Splunk of Europe? Doesn't exist.
Where is the Okta of Europe? Doesn't exist.
Where is the Veeva Systems of Europe? Doesn't exist.
Where is the Zoom of Europe? Doesn't exist.
Where is the DataDog of Europe? Doesn't exist. (DataDog is NY, however they have an office in the SV area as well)
And on the list goes. These are massive, wild success stories. Most of them are already big companies and they're growing fast. With few exceptions meanwhile most of the rest of the world not named China is asleep, and SV keeps on conquering markets and building giant software companies.
Where is the global competition for these companies? It largely doesn't exist, they're going to keep on with the SV traditional of pushing out of the homogeneous US market and scaling up globally and building giant companies.
The comparison being made was of SV of today vs the SV of yesterday not SV vs Europe.
By the way, of all the companies you listed, only Zoom and Snowflake were actually founded after 2010. And that's the point. In the past 10 years, we haven't seen any Googles, Apples, or Microsofts emerge, despite eye-popping levels of venture investment -- which is a bit disappointing.
Isn't SAP the WorkDay of Europe? Some of the other companies you've mentioned are also in spaces that likely have European (or non-SV) players. Auth0 is based in Seattle, for instance.
>The 2010s seem to be a decade ... without any fundamentally new technological developments.
I wouldn't go that far. The cloud became a thing in 2010 and from that big data appeared allowing data science to appear.
The 2010s is the era of data science and ML, which is a larger leap than many give credit for. The 2010s are just like the '80s in that new technology appeared, but end consumers didn't see much of a difference until the late '90s. Just yesterday CA gave a license to GM to legally allow fully self driving cars.
I think one difference is the existing giants have smarted up to the fact that new competing startups can be existential threats to their business like they were to their former incumbents, and have started putting much more focus on gobbling them up with cash before they become fully fledged competitors instead of trying to out-compete them.
The problem here, innovation toxic venture capital, that outspend the old risk capital guard.
These new - "outsiders" usually spend huge sums on leveraging what is essentially just technology used for union busting and abstracting away wage slavery.
Its a capitalists idea of innovation, and it small dreams. You don't need to invent a alexa (the device), if you can drive down the wage of a person to near zero and own a alexa (the person).
They already had that back in ancient rome- and thus never developed the Greek steam engine.
To become really innovative at scale again, the valley needs to exorcise those tech external investors.
Smartphones? iPhone 3G came out in mid-2009 and Android brought smartphones (and computing in general) to hundreds of millions or billions more price sensitive users
Detroit was the Silicon Valley of its day (roughly from 1900 to 1960 or 1970). Center of the tech universe. Cranking out modern wonders on a seemingly weekly basis. Awash in cash.
Look at it now. Things go on as before, until suddenly they can't.
Certainly no city is recession-proof, but Detroit _was_ almost totally invested in a single economic industry: car manufacturing.
Silicon Valley's emphasis - digital computing devices and software - fuels multiple economic sectors. It seems far more diversified than the auto industry.
But tech can also pick up and leave much faster and required less reason to stay clustered (factories, transporting materials, supply chain etc). Add in the fact the world in general turns faster, I don't think SV can keep the tech industry for how long Auto Manufacturing remained in the Mid-West.
Doesn't SV also have a significant chunk of the biotech industry? Even if software departs doesn't mean other forms of high-tech, with talent and research funneled in by Stanford, Berkeley, etc. will follow suit.
I wonder how the tax burden is distributed. I know next to nothing about California system, but here in Europe it is typical that financial investment gains etc. fall into a low bracket (usually 10-20 pct), while highly paid professional employees pay through the nose, easily more than 50 pct of their gross wages.
Taxes are not the problem, the astronomical cost of housing is. The problem is arguably that property taxes are comically low, and thus there is no penalty for the older anti-growth population that has worked so hard to pull the ladder up behind them, and instead they become rich by destroying the poor and leeching off the tech industry via its workers rents.
I did the math on my taxes somewhat recently and between federal income taxes, social security, and medicare mine was about 27% on 221k income as a single person with no kids in washington state and I'm including the employer payroll costs and taxes as part of that because it's basically the same thing as income taxes. Long term cap gains is 15-23%. For California, you'd probably add like 10% to both income tax and cap gains as it is a high income tax state whereas washington has no income tax.
I get about 33% for that simple case (single, $221K W-2, WA, add the employer portion of payroll costs [same as employee contribution]). It's ~28%% without the addition of employer FICA.
You’re eventually going to pay ordinary income tax on the 401(k) money, so I think you need to either include it in both or exclude it from both rather than treat it as entirely non-taxable as you’ve done above.
The California state income tax rate is basically the same as for capital gains. But there is a difference federally. So in some states you would indeed pay a lower capital gains rate, and because the federal rates are lower on capital gains, Californians do pay lower overall taxes on capital gains than regular income (there are technical words differentiating capital gains from other income, don't remember it right now).
I think a rough rule of thumb is that very high earners will pay slightly more than 50% of income of wages on taxes (state and federal) in CA and about 24% of capital gains income on taxes, before various deductions.
But, the big difference in California is that if you inherited property or bought it a long time ago you pay much less property taxes than people who bought homes recently, due to Proposition 13. This means property taxes are not as strong a source of revenue in California compared to other states; making up that difference is partially why other taxes and fees are so much higher in California.
> But, the big difference in California is that if you inherited property or bought it a long time ago you pay much less property taxes than people who bought homes recently, due to Proposition 13. This means property taxes are not as strong a source of revenue in California compared to other states;
Well, the assessment rule is part of it, but prop 13 also limits the property tax rate as well as the assessments. Even with full-value assessment, California property taxes would be in the bottom half of states due to Prop 13 rate limits alone.
SV is also great for the non-compete (it's a California thing but shines especially bright in the Valley), formal mentoring with a strong presence from Stanford and incubators like YC and informal mentoring where the younger generations are inspired by what was built by the previous ones.
And the lack of stigma for failing plus having a world class city right at the door. Very few places can replicate that.
wasnt whatsapp built on 2000s technology (in fact much older, Erlang)? The 2010s were a net negative to technology, it's big corps sucking up everything to their "cloud" monopolies, and the deterioration is very visible in lots of older products (whatsapp would now need 4000 growth hackers and a gazillion dollars in AWS credits to boot). AI is keeping the hopes up though
A question on writing. Is this really good writing? The author spent the first 2/3 of the article talking about beaches, clams, crabs and what not. It's interesting read for readers who are interested in this kind of knowledge, but in general is slowly laying out an analogy a good writing practice?
I thought it was lovely writing. I like reading Annie Dillard and it reminded me of her writing. It did take a while to get to the point mentioned in the HackerNews title, however the title of the blog entry was simply "Abundance" so much less was promised.
That's actually what the title is, mostly I just wanted to write about clams and crabs. The person who submitted it changed the title in a way that got more attention than the original that I submitted it with. :)
>I want to live in the nice, beautiful, low-stress place
As long as whatever you consider nice is the same as whatever every other similarly paid white collar worker with a spouse and 1.75 kids considers nice you will never be able to get that. Those places always will be overprices and high stress.
Look at how Boston area money has shit up Cape Cod, southern Maine and NH. NYC money has shit up all of Long Island, large parts of PA, upstate and VT. CA money has shit up Colorado so bad that CO money shits all over Utah. Chicago money shits all over Wisconsin.
What you're really trying to get away from is the secondary effects of people like you (and me, and most everyone on HN). You're trying to get away from a service and tourism economy where everyone else is (somewhat rightfully) out to screw you for every dollar you're worth. Unless you have radically different tastes in what you want this will never be possible because all the other people of the same means will gravitate toward the same places.
>You're trying to get away from a service and tourism economy where everyone else is (somewhat rightfully) out to screw you for every dollar you're worth.
I wouldn't characterize this as someone trying to "screw" someone. It's just a consequence of demand outstripping supply, and hence the way society allocates the resources in low supply is by who can pay the highest prices.
If anyone comes up with a better way to allocate scarce resources, I'd love to know.
If another state had the IP and non compete protections of California, had some wealthy former startup employees to found VCs, a liberal culture that celebrates risk (and its own arrogance, perhaps) then Silicon Valley might be threatened.
And I can't be the only person that's tried to leave California only to realize that everything but the housing costs are worse elsewhere.
Beautiful writing! But "stacked into decrepit victorians" might be taking some poetic license; isn't a new arrival more likely to be stacked into a soulless condo tower or apartment complex, with the ambition of eventually moving into a little hillside box?
I do it maybe a dozen times a year. Most of the younger bay area people I know go at minimum once or twice every winter. It is definitely one of the perks of living here along with all the other cool nature.
Because flying to CO or somewhere like that for skiing is even more of a pain the arse than driving to Tahoe.
Tahoe is a nightmare of traffic, terrible winter-weather drivers and crowds. 20 years ago it used to be a decent getaway for the weekend. Now, not so much -- it's basically a guarantee that you're going to spend a full day driving to/from there, and gods help you if you leave friday afternoon and try to drive back on sunday -- everyone, their dog and grandma included, are going to be doing the same exact thing.
Once or twice a year is not implying accessible -- it's implying that it's inaccessible. It's somewhere that people do want to go, but the effort required to do so limits most. If it wasn't worth going, people wouldn't be trying to go every winter, and if it was reasonably easy to get to, perhaps people would go more than once or twice a winter.
That's the wonder of tiny percentages of huge numbers -- they're still big numbers!
If only .01% of 35,000,000 people go to Tahoe every week, that's still 3500 people a week that are visiting. Thats a lot of cars on the road, a lot of people waiting in lines, a lot of hotel rooms and vacation rentals taken up. I made up these numbers of course, but the point is with a state like California, even a tiny fraction of the population visiting at any given time, it's still an overwhelming number of people to deal with. And its not even just Californians that go to Tahoe -- plenty of folks from other states visit, and plenty of international visitors too.
So back to
> Nobody goes there anymore, it's too crowded
Yep, practically speaking, a tiny fraction of people that can go to Tahoe at any time actually go -- a rounding error -- 'nobody'. But it's still too damned crowded because Tahoe can't handle the rounding error anymore.
People that live in a place like Salt Lake City can hit the slopes a dozen times in 2 weeks without taking a day off of work. I know people that work at tech companies in Park City, about 3 miles from The Canyons resort. They can literally go skiing during their lunch break.
Thank you cyb_ for posting this. What a well-written, beautifully-worded article. This is what makes HN special: this piece of writing wouldn't show up anywhere else.
Speaking of HN and Silicon Valley, I see parallels. There are people who worked at creating the site and using it as a source of bright, idealistic young minds whom they could profit off of. They continue to work on keeping the site a good place to 'live in'. Did HN grow by happenstance and 'nature'? You bet. But you can't deny the unseen hands of the many people who keep HN habitable.
Likewise, Silicon Valley is also no accident, although it has benefited greatly from happenstance and nature. Before SV, there was Lockheed Martin, and NASA, and further down south, Douglas Aircraft. Even today, the benefactors of Lockheed and co. indirectly fund Stanford, Berkeley, and many other places that continue to draw people from all over the world.
But I strongly feel that if it takes hold, the current trend of (some) technology workers' activism will be the coup de grace that finishes SV off for good.
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[ 4.5 ms ] story [ 267 ms ] thread"The Writing Life" is the best book about the process of creating that I have ever read, and I often suggest it to my design teams. (Designers like to read books about design, but you don't hire designers because they're good at words. You want to read about creating? Read books by writers.)
One of my favorite excerpts from The Writing Life:
> A well-known writer got collared by a university student who asked, “Do you think I could be a writer?” “Well," the writer said, “I don’t know... Do you like sentences?" The writer could see the student’s amazement. Sentences? Do I like sentences? I am 20 years old and do I like sentences? If he had liked sentences, of course, he could begin, like a joyful painter I knew. I asked him how he came to be a painter. He said, “I liked the smell of the paint."
Possibly because the 8 engineers that formed Fairchild defected from Shockley Semiconductor. William Shockley chose that area to start a company partly because his ailing mother lived there.[1]
Another contributing reason was a Navy Research center was in the Bay area so the military was an eager buyer of the latest semiconductor technology.
The seeds of a few players starts a "business cluster".[2] Similar phenomenon as movie industry concentrated in Los Angeles. Country music in Nashville. Finance/fashion/publishing in New York.
I don't think COVID in combination with better telecommuting technology like Zoom will disperse business clusters as some think. It definitely will enable more remote collaboration but the concentration of business clusters will still remain.
[1] https://en.wikipedia.org/wiki/William_Shockley#Shockley_Semi...
[2] https://en.wikipedia.org/wiki/Business_cluster
I'd compare Silicon Valley to Detroit with a century time lag. The American automotive industry started in the 1890s, just like the Internet industry started in the 1990s. Like the Internet, it built off a constellation of related technologies that had been under development for 30-40 years. The automobile industry was built on the iron mines in Duluth, coal mines in Appalachia, petroleum industry in Ohio, steelworks in Pennsylvania, and Great Lakes transportation infrastructure that had been setup throughout the 19th century. The Internet was built on software from Boston; microcomputers from Albuquerque, Austin, and Houston; an OS from Redmond; semiconductors from Oregon; and so on.
In 1910, the population of Detroit was 465,000. It had nearly doubled from 285,000 in the previous decade, fueled both by international migrants looking for then-high wages and Black migration fleeing persecution in the rest of the U.S. (sound familiar?). The auto industry was well established, with Model-T production in its heyday. Supplier networks were already starting to grow up around the big-3 automakers.
But Detroit's population didn't peak until 1950, at quadruple its 1910 population. In between, Detroit would be key to winning two World Wars, and the automobile would fundamentally reshape society. Most of the growth happened between 1932-1960, and only after key government & societal infrastructure changed to be built around the automobile rather than the automobile serving as a luxury novelty for Gilded Age technorati.
Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood. But we've got a while to go. We haven't had our war yet, and the basic infrastructure of society - transportation, legal, military, government, etc - is still based on pre-electronic conceptions.
On the way up, it always looks like last year was peak. Then this year does even better. Continue for decades until one year, suddenly, the music stops.
[1] https://en.wikipedia.org/wiki/Railway_Mania
What if the secular demand for living in Silicon Valley is higher than Detroit? What if Detroit was desirable due to the economics and infrastructure constraints of that time, but what if people like the other aspects, such as location and weather,of living somewhere?
Not that it’s not possible for that to change either, but my point is different pieces of land may be more or less desirable than others outside of economic conditions.
We have the internet and cheap transportation now, so people (with resources) can more easily move to where they want to live.
I can conceive a future where even if tech were somehow displaced, then other people with money would come to silicon valley, simply because they want to and they're not tied to another location, like richer people may have been during Detroit's heyday.
I relocated to Colorado a decade ago, swallowing the cost of living salary decreases, but I'm coming out better in terms of quality of life. If California, for a split second, achieved even close to the affordability for quality of life as CO, I would move back.
If Detroit and San Francisco were equivelant cities (culturally, cost of living, etc.) I can't see why anyone would pick Detroit.
A better comparison to southern California would be the Iberian peninsula. Spain and Portugal have pleasant weather and are well connected to the industrial heart of Europe.
Many want to live in these countries but most can't make a living there.
This happened to Detroit because jobs were literally the only reason to live there. The Bay Area has amazing weather, unbelievable scenery, world-class recreation, and tons of music and culture. If the jobs of today leave, the jobs of tomorrow will replace them simply because the area itself is one of the best in the country. Detroit is a flatland nowhere in frozen tundra flyover state. "A bunch of lakes" is only going to keep an extremely small subset of people interested.
That's not necessarily true. Maybe the jobs go and never return, but the recreational desirability leads it more in the direction of an Aspen: more of a place for recreation than business.
The weather will persist, but the rest are qualities of cities with large populations who have lots of disposable income.
High living costs and living conditions will have the starving artists that make these things you consume flock somewhere else or never move out to the Bay in the first place. Consequently the next generation of these artists won't be coming out of the bay, ironically you'll start to see more culture and art come out of places like Detroit.
Take restaurants for example - super easy to start a new inventive restaurant in Detroit (low rent, low labor costs, etc.), but it's nearly impossible to make a $500/head prix-fixe work there (and that is, for better of worse, the type of food that causes people to flock now-a-days). Even Portland sees most of it's 'starving artist' chefs decamp to NY / SF / LA once they gain a national brand.
* Auto manufacturers consolidated to 3 big companies and started to more consistently put smaller startup automakers out of business.
* They got into protracted fights with unionizing workers.
* They stopped building manufacturing plants in detroit itself and built them further afield to cut labor and land costs.
I think we can see these trends being mirrored in the tech industry right now.
> unionizing workers
does not sound like SV today. You're also missing the main reason, superior products from Japan and Germany. We don't really see that as of now. China and EU have a handful of competitive companies.
SV labor is expensive compared to other markets (see below). I have worked in SV and elsewhere and mostly elsewhere is 1/2 the pay as SV and without the things like free lunch / coffee bar / shuttle service.
SV doesn't need unions because the turnover rate is so high that the companies are basically providing what unions would negotiate just to compete (free lunch / coffee bar / shuttle service). It's still a buyers market from the employee standpoint.
I do think SV is not quite at the inflection point just yet, but it is moving in that direction.
The irony in this is actually that the cost of labor is high because the cost of living is high. The cost of living is high because of the NIMBY folks preventing multiunit housing. If the ballon collapses those NIMBY folks would see their precious house values decline.
Finally as to superior products most Japanese and German cars sold in the US are still built in the US, just not Detroit because of.... Wait for it.... Union Workers.
That is an antonym of the Silicon Valley situation - they tried numerous times to outsource and move to cheaper locations and failed. The closest to success were San Fransico and Palo Alto which effectively just sprawled the area that is effectively Silicon Valley outside the prior bounds. The attempts to go far afield failed and the physical manufacturing wasn't where the money was located resulting in a minor shake up.
There is a historical resemblance superficially in the first point but the second two are outright foils as every little highly publicized kerfluffle for what is effectively a relatively fringe cause like say not taking DoD contracts is nothing compared to a work stop or a gain of union claim to control.
Come to think of it the employee stock share benefits are a sort of weird foil to a union - not even trying for control or working conditions but giving some token stake to sufficiently valued workers. Not a replacement by any means but it is an ironic undermining of a company vs worker mentality.
~400,000 in 1950. ~700,000 in 1960. ~1.2 million today.
I had this perspective for a brief moment but as Charlie Munger said "Show me the incentives and I'll know the outcome".
I think what many people are missing is that SV is heavily incentivized to be a place of big money. The real estate. The commercial climate. Etc.
That means property will be expensive forever, because there will always be rich people looking to move or retire there, but will that turn into innovative or well-paying jobs for people?
When even the current crop of tech workers get priced out of California by the continual influx of wealthy folks seeking out the climate you won't see SF turn into Detroit, but it's not gonna be the SF of the nineties->now.
People only put up with SV's downsides for the paycheck, most of them don't even have family there.
> Eventually Silicon Valley will end up like Detroit, with abandoned 4-over-1 condo complexes and empty office parks where the software industry once stood.
This implies that there's a glut of housing that's been created to home Silicon Valley technologists, which couldn't be further from the truth.
https://havengroupsf.com/wp-content/uploads/2017/12/30-years...
The way I think a glut could arise is when a tipping point is reached and pro-housing renters outnumber NIMBY owners on city councils. This has happened already in Mountain View (which was notoriously anti-development until a group of young pro-housing Googlers packed the city council and voted out all the NIMBYs in 2014, and now green-lights nearly any housing development), Sunnyvale, Redwood City, and San Mateo, and may make its way down to San Jose and up the rest of the peninsula. At present a lot of Bay Area communities are starting to look more like Paris: dense ~4 story apartment buildings, public squares, outdoor dining on pedestrian thoroughfares, etc.
I'm certain this will never happen simply due to the superiority of California's climate.
I'll turn your argument around and say that the only truly location-dependent industries are extraction based. Everything else moves where the people are. And people will pay through the nose to live where it's nice.
I don't think I would call the transportation industry (as in: ports, trains, planes, and related infrastructure) "extraction based". But that is an example of something very clearly location-dependent.
Well, yeah, prior to Covid, Andalusia in Spain was a favorite tourist destination. It really is lovely sitting at 10pm with a sangria in hand on a historic staircase of a palace and watching the nightlife milling around.
But all this flocking is temporary. People do not move there to start businesses. (They do to Gibraltar, but that is a tax haven.) They just enjoy they stay, spend some money on recreation and fly back to gloomy-but-rich Amsterdam, London or Hamburg.
"Nice weather implies good economy" does not seem to pass even the basic correlation test.
Outside US (taxes could be higher, but what I get in return could be a better deal than CA): Sydney, Australia or Auckland, New Zealand.
I would try Auckland before you buy. It's cold compared to all your other places.
https://en.wikipedia.org/wiki/Chaparral
Silicon Valley has been getting transplants since the 60s. The region has grown around 15-20% in the last 20 years. From 1960 to 1980 region roughly tripled its population. There's a reason why prop 13 came about in the 70s.
I'm not saying it will always be a tech mecca. But ignoring a majority of its history with tech just so you can compare it to Detroit seems disingenuous.
Because vengeful homeowners wanted a "revolt" to punish the government for taxing them. It wasn't because of home prices, 1978 Prop 8 would have solved that, they wanted revenge. It's greed and hate right down to the roots.
https://teachingmalinche.com/2018/08/26/the-summer-that-elvi...
I'm specifically picking Detroit from ~1895-1970 vs. Silicon Valley from ~1995-future because there's a similar dynamic at root. A single globally-relevant industry that's remaking society, and everybody pouring in to capitalize on this. Given similar root causes, it seems likely that their futures will be similar as well.
Weatherwise it's one of the best places to live in the USA. The smoke issue is new but it's unlikely to be this bad most years. Detroit is unfriendly a much greater portion of the year
It's likely the craziness in the Bay will subside but I would be extremely shocked if it began to resemble Ddetroit. Some of the more remote suburbs that haven't historically been places people would commute from might fare badly though.
> Until now. As covid and wildfire smoke have atomized us all into whatever living space we can afford, and into a grid of separate video boxes on a screen, the place as it was no longer exists. The forces that kept people here are temporarily gone. Through cratering rents San Francisco is finally proving to opponents of growth that supply and demand apply to housing too.
Intelligent people will twist themselves in knots trying to disprove basic economics. I see long threads on HN all the time of brilliant people convinced that supply and demand is just "far too simple" or "totally disproved" etc. etc.
This book is a classic https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...
Not really, taxi medallion owners are a powerful special interest group. Just like Bay Area homeowners.
My other favorite YIMBY argument is that the Bay Area would have super cheap housing if only it were more like New York. New York has (had?) some of the most expensive housing in the entire world. Sure, there are zoning laws and regulations that could be changed to build even more housing, but the primary issue is not that New York has less housing than other parts of the country. To the contrary, the cheapest places to live in the US tend to be have the least dense housing.
The issue is that there are not a fixed number of people who want to live in a given area; if there were, every new unit built would allow someone else in the area to either not be homeless or to live with fewer roommates. Really what happens in practice in a high-demand city (conceptually, at least) is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before. So it’s definitely getting more crowded, with the associated problems, but the effect on housing prices is fairly small in comparison.
The fact that housing prices in the Bay Area create such a concentration of people who work in tech by driving everyone else out contributes to the region’s culture in important ways, some positively and some negatively. My favorite theory (from Date-onomics) is that this causes the local gender ratio to skew predominantly male, which causes the single straight men in the area (while this certainly does not describe the entire labor force, it describes a substantial portion) to work harder (both because they’re trying to stand out to attract a partner and also because they’re less distracted by dating).
This is a description of supply and demand, not some kind of trump card against it. Notice that more people are getting their preferences satisfied. That's the point.
And YIMBY-type groups fight against these artificial restrictions on supply. That's not an argument that the fundamentals of supply and demand doesn't apply.
> is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before
That's the definition of demand: the number of people who would buy a good at a given price.
The history of commodities such as crude oil and natural gas are potent counterexamples. For that matter, semiconductors fit the bill as well.
Is it extremely rare for supply to crush prices? Or is it more that we stop thinking about valuable things once they become super cheap commodities?
For example a printing press. To use old tech as an example. The press itself is wildly expensive. So I will have to divide that price across all things I sell using that press. However once the press is paid off my marginal costs are little more than cost of paper, shipping it around, and paying someone to run/fix the press. Computer chips are made of silicon one of the cheaper materials to buy out there. The up front costs of setting up a foundry is akin to buying a printing press. An older tech foundry can still make marginal money as the big cost is already been paid for. Everything after is marginal.
Your argument is with medallions is mostly correct. They had an artificial constraint on an environment. With the artificial constraint they act like assets and not permits. However once a good that was equivalent showed up the value of the asset value did fall. A market will tend towards MR=MC (marginal rev=marginal cost). However in the medallion case the supply was artificially constrained. So a floor was created. This moves the price people are willing to pay up the demand curve instead of lower near the usually lower mr=mc spot. In this case as the population grew but the number of allowed taxis did not the price went up because demand went up but supply did not. Once another good showed up that demand curve changed as less people were willing to pay that amount as well as more supply. This is the madness of economics. The demand curve always changes.
Chips are mostly worthless because there are so many of them and better fab equipment exists and the capex of the machines to make them was paid off decades ago. So their depreciation is very quick (much like cars). Rarity does play into price as well. As some people do like the idea of owning a rare thing.
You also have part of it with your comment here. Assets rarely 'hold' value for a long term. If you do not move the value around your total monetary value will depreciate. The medallion case was an artificial constraint so the value rose because demand remained high enough. Once a new supply came in the real price showed up. Housing can act like this too in artificially constrained environments. Rent control, poor tax structures, poor zoning, etc can all cause this. If you get a situation where the owners work with the gov (medallions and the taxi commission and the cities) they will write laws to artificially constrain growth to limit their asset depreciation. That is usually called regulatory capture.
For these sorts of arguments I like to say 'if everyone suddenly had 1 billion dollars what would you pay for a loaf of bread?'. Most people would say '1-2 dollars'. But what about next week when the company realizes people will pay 1000 dollars for one? Would you still buy it? Would your friends? It usually shows that the demand curve is not static and value is a moving market in and of itself.
Low-end smartphones: Apple’s charging record prices for its new iPhones so I don’t think the availability of low-end smartphones caused any sort of crash in the price of smartphones. Rather, it’s a new market category.
Operating system software: I’m not sure what you’re getting at here. The price of Windows has been relatively stable for decades despite the availability of free alternatives like GNU/Linux. Apple stopped charging separately for its OS and now essentially bundles a subscription into the cost of its hardware. I don’t think it’s ever been popular to charge separately for the operating system on mobile phones.
https://www.macrotrends.net/1369/crude-oil-price-history-cha...
The first big crash was at the end of 1985/the beginning of 1986, which Wikipedia says was due to falling demand (e.g. people consuming energy):
https://en.wikipedia.org/wiki/1980s_oil_glut
There was a temporary spike in 1990 after Iraq invaded Kuwait. I guess you could argue that the price went back down because the supply changed.
There was a crash in 1997–1998 that was partially due to increased supply but also due at least in part to the Asian financial crisis. The next big crash was from June 2008 to February 2009, again due to a large financial crisis. There was another crash in June 2015-February 2016 due to a stock market crash in China, and finally we get to the massive crash this year driving futures prices negative, which was of course due to COVID-19 reducing demand for travel.
The big dislocations you cite obscure the fact that demand rose for most of the period, demand was rising. So another way to read the chart is that demand-weighted prices declined most of the time, with occasional spikes. Either way, you can see in the charts the increased supply effect of e.g. fracking being deployed widely in the price response.
One could also look back to 2008 to see the impact of increased supply on pricing of e.g. real estate.
I don't think anyone in the YIMBY movement (as far as I'm aware) believes there would be a crash in prices. I think the position is that increased supply with help stem the rapid growth in prices.
It is great model when you have perfect information. I would like to present the Economics Anti-Textbook - https://www.amazon.com/Economics-Anti-Textbook-Critical-Thin... for a more nuanced approach.
[Edited for missing a word]
Wait there are people who don't believe that supply and demand exists in housing? What does that even mean? This is easily provable...
It is VERY difficult to get them to understand that they have the cause-and-effect reversed : In fact, it was the increase in value that triggered the new development.
The most good faith, steel-manned way that I can interpret these types of statements, is to interpret it as "Supply and demand in one area of the market have little effect on other areas of the market, especially those areas that are currently subject to existing government regulation and programs".
EX: If someone has been living in a rent controlled, or low income housing, for X number of years, it is correct to say that building a few more high end condos, is not going to reduce this person's rent (barring implausible situations, such as building hundreds of thousands of new housing units).
Yes, it might reduce the rent of people renting high end apartments, but it is not going to effect the rent of people who are, by definition, not paying market price for apartments, due to rent control.
Then there are those who think econ 101 has all the answers.
https://en.wikipedia.org/wiki/Veblen_good
If they taught physics they wouldn't be teaching us the law of gravity. They'd be teaching us the law of "what goes up must come down".
Most product are not luxury products and a large portion of the world lives in poverty, so naturally most Econ 101 discussions of microeconomics will deal with commodity products e.g. bread.
Like anything worth learning, it is far more important to understand the basic principles of the subject than to learn details about specific applications. That is memorization over understanding.
Any property that follows planning rules, is in the right zone and follows rules for low income/below market rate housing, allow it to be built without delay.
Fix stupid zoning laws that make building anything over two stories illegal in a huge swath of the city.
(An example is using tradeable floor space index to regulate zones instead of fixed height based codes)
You can do all of this and build public transit options to keep the quality of life stable. It’s possible. It requires will to execute and a multi year or even multi decade plan.
Economics a lot of hand wavy predictions. It is good at saying what happened after the fact but usually makes poor predictions. Most sciences would say the model is broken.
The Veblen good that you mention is one of those examples. Where raising the price creates a desirability that should not be there. That is because pricing is a signal of scarcity. Some people desire the idea they have something scarce and others dont. Which makes demand curves hard as even the price you pick changes the curve!
These silly people - Keynes, Marx, few Noble laureates...
He told me that in 1994 and it has been true. Even with massive apple layoffs in 1995. And when the bubble burst in 2000. and the housing crisis.
I think people will move out of the bay area. But I think they will do it the way they always have - sell their house, cash out and retire elsewhere. The others will sit on their low prop 13 ponzi taxes and stay. And people will take their place because elsewhere winter sucks and humidity sucks and rain sucks and salaries suck and yes for some even their traffic sucks.
(which had a half-dozen fires PLUS they get winter and rain and... )
The Valley grew up around Stanford: https://interestingengineering.com/the-origin-story-of-silic....
Silicon Valley is the result of deliberate industrial policy and state investment into institutions. I grew up in northern Virginia and watched a similar thing happen in Virginia from 1989 to today.
1. Is the damage or outside stressors that are causing the exodus permanent? (I really hope not...)
2. Was there a natural cause (repeatable, will continue) for the previous abundance, or was it just momentum and luck that kept Silicon Valley as abundant as it has been.
Point number two I leave for discussion.
The fundamentals that make this a great place to live and venture will remain, though. The weather is great. The mixing pot of global languages and cultures stretches back to the gold rush. World class educational and 'big tech' institutions aren't going anywhere. Investors express difficulty in gauging personal rapport over a video call, and are still largely clustered in the Bay Area. The network effects around having a critical mass of brilliant technical minds are substantial.
I hope that this abundance can flow outward, to other cities, like Denver or Austin or Seattle or SLC, even if that makes my property values dip a little. I'll enjoy digging up sand crabs at the beach (nobody I know calls them mole crabs) long after the latest wave of tech migrants have left.
I wonder a lot about this and its effects. We're seeing big price increases here in Bend, Oregon and what seems like an influx of people from larger cities. Why live in a city if you can't do city things?
Bend was already trendy though. I wonder if this effect will indeed spread out even further. There are a bunch of former logging/ranching towns here in Oregon (and, indeed, throughout the west) that are not doing nearly so well. Roseburg, Pendleton, Baker City, Grants Pass come to mind. They have access to some nice outdoor spaces themselves. Will people start moving there, or will they constrain themselves to 'the beaten path' of towns that their peer group considers a 'nice place to live'?
First a few pioneers come for the cheap housing, they make it cool, a few more people come for the coolness and eventually, if a critical mass is reached, it'll become an established desirable area (of course this can reverse as well).
Since people tend to accumulate I suppose that once the prices in Bend get too high people will indeed spread out, bit one of the nearby towns will win the "trendy" people.
Don't want to spoil the article's analogy, although you could perhaps make a new one connecting abundance to toxicity.
[0] https://en.wikipedia.org/wiki/Amnesic_shellfish_poisoning
[1] https://en.wikipedia.org/wiki/Domoic_acid
[2] https://www.independent.co.uk/arts-entertainment/films/news/...
CC Morse used the fertile Santa Clara Valley to build the world’s largest seed company. His land gave birth to the original VC and investment in Fairchild semiconductor. As long as there is opportunity there will be abundance. https://twofeet.weebly.com/walking-blog/charles-copeland-mor...
- In the 1980s, Silicon Valley's Intel lost it's dominance in DRAM production to Japan. The economic impact was dire, and yet
- In the early 1990s, networking and workstations emerged from the likes of SUN and Cisco. They carried through until global competition stole their wind, and it was on to
- The late 90s and the .COM boom. And what a boom it was, Amazon, Google, followed by another death knell for myriad .COM corpses. Promptly engendering
- The 2000s birth of social media. MySpace faltered, then LinkedIn, then Facebook, then Twitter, came up and are still going strong on the foundation of
- 2010s open source platforms. Still mind-blowing: At one point WhatsApp had 40 software engineers and 400,000,000 users. At 3 years old.
I've heard about the exodus from California, usually citing so many thousands or 10s of thousands of people leaving. But looking a the net population changes, Santa Clara County is down 5,000 from 2018-2019. Alameda, San Mateo, San Francisco are all up.
Silicon Valley is a system that regenerates from one generation to the next, and so far, always bigger and more influential than the last.
There is also an entire system of independent film studios and theaters in the US.
Add on top that the Covid quarantine has completely removed all social stigma or weirdness around remote work. You have a never before seen threat to high-cost/high-productivity powerhouse metros like SF, NYC and DC.
Joking aside, globally available broadband from space would be a huge game changer.
[1] https://docs.fcc.gov/public/attachments/FCC-20-50A1.pdf [2] https://www.allconnect.com/blog/cost-of-high-speed-internet
It's meaningless if it's available “in your local market” but not at your address. I really can't imagine any real use for that stat except exaggerating broadband access.
The 2010s seem to be a decade where existing giants scaled, without any fundamentally new technological developments.
1975: National Semi, our new audio amp allows people to buy cheap high quality stereo's.
2010: Ubber, our app that ratfucks the taxi industry.
Source: my numerous experiences with taxis in multiple cities in the US and around the world before and after Uber
I guess now they deliver lunch so that's pretty cool.
I for one look forward to the movie.
Not to mention Uber and Lift don't pay for the roads their businesses depend on. And then Uber and Lift have dramatically increased congestion in a lot of cities. Which negatively impacts people that live in those cities. Finally both Uber and Lift are applying political pressure to eliminate mass transit.
Example 1: innovations in technology & clever business model put previously expensive thing in reach for an order of magnitude wider audience, leads to significant qualitative shift in behavior/capabilities for the average person.
Uber: Exactly the same thing.
Why are you so offended about the harm to the taxi industry, what about all the vacuum tube manufacturers put out of business by semiconductors? Innovation has always involved creative destruction, but for some reason there's a bigger than usual portion of society now that is completely unwilling to acknowledge utilitarian benefits and wants to make all change illegal. And the even greater tragedy is it's always the comfortable, well-off upper middle class making these arguments on behalf of the working class, with absolutely no skin in the game because they will never be the first ones affected by the negative consequences of their absolutist worldview.
Lightbulbs and would have been a better pivot (with or without a gas in the medium for neon lights or CFBs) at least until LEDs finished them off.
The more I spoke to cab drivers the more it seemed their industry was a pyramid scheme aimed at helping established rent-seeker take advantage of often poor new immigrants. Uber brought a breeze of fresh air: Someone could simply buy a car, calculate the depreciation and it's value on the market (since unlike medallions cars are relatively liquid assets!) do rideshare and calculate their profits or loss. They can get out of the game at anytime, and they know exactly how much they are going to get for the car they have should they sell it.
Also, the argument on Uber/Lyft drivers not being contractors since they can't set their own rates and decide which ride they take strikes me as weird since medallion drivers were contractors, had to charge the price set by the city and could only pick-up customers in the (arbitrary) zones covered by their medallions.
And I'm not even touching the usual pain points and often discriminatory practices of medallion drivers (refusing card payments, refusing rides to non-white passengers and to non-white neighborhoods...).
[0] https://news.ycombinator.com/item?id=24225648
Maybe there was some place in the world where taxis were clean and taxi drivers honest, but in my corner of the world they were synonymous with low-key mafia.
Therefore they mostly preyed on international tourists at the airport.
One aspect of the scale these companies are achieving is the political implications. Yes, the worry in DC over their manipulation of human nature, but it's also issues like the headbutting of the gig-labor lifestyle against tax policy right in California. Pushing technology forward eventually encounters politics and it's interesting to watch these firms gird up for that battle.
Altough, for example, the work Google did in the 2010's in machine learning does seem fundamental.
Am I, like, way off?
There are dozens of companies not named Uber or Airbnb that have come out of SV in the past 10-15 years that lead the world at what they do. You won't see the SV bashers talk about any of that, they go out of their way to avoid that point in fact.
Where is the Cloudflare of Europe? Doesn't exist.
Where is the ServiceNow of Europe? Doesn't exist.
Where is the WorkDay of Europe? Doesn't exist.
Where is the Palo Alto Networks of Europe? Doesn't exist.
Where is the Twilio of Europe? Doesn't exist.
Where is the Snowflake of Europe? Doesn't exist.
Where is the Splunk of Europe? Doesn't exist.
Where is the Okta of Europe? Doesn't exist.
Where is the Veeva Systems of Europe? Doesn't exist.
Where is the Zoom of Europe? Doesn't exist.
Where is the DataDog of Europe? Doesn't exist. (DataDog is NY, however they have an office in the SV area as well)
And on the list goes. These are massive, wild success stories. Most of them are already big companies and they're growing fast. With few exceptions meanwhile most of the rest of the world not named China is asleep, and SV keeps on conquering markets and building giant software companies.
Where is the global competition for these companies? It largely doesn't exist, they're going to keep on with the SV traditional of pushing out of the homogeneous US market and scaling up globally and building giant companies.
By the way, of all the companies you listed, only Zoom and Snowflake were actually founded after 2010. And that's the point. In the past 10 years, we haven't seen any Googles, Apples, or Microsofts emerge, despite eye-popping levels of venture investment -- which is a bit disappointing.
I wouldn't go that far. The cloud became a thing in 2010 and from that big data appeared allowing data science to appear.
The 2010s is the era of data science and ML, which is a larger leap than many give credit for. The 2010s are just like the '80s in that new technology appeared, but end consumers didn't see much of a difference until the late '90s. Just yesterday CA gave a license to GM to legally allow fully self driving cars.
These new - "outsiders" usually spend huge sums on leveraging what is essentially just technology used for union busting and abstracting away wage slavery.
Its a capitalists idea of innovation, and it small dreams. You don't need to invent a alexa (the device), if you can drive down the wage of a person to near zero and own a alexa (the person).
They already had that back in ancient rome- and thus never developed the Greek steam engine.
To become really innovative at scale again, the valley needs to exorcise those tech external investors.
Look at it now. Things go on as before, until suddenly they can't.
Silicon Valley's emphasis - digital computing devices and software - fuels multiple economic sectors. It seems far more diversified than the auto industry.
AFAIK California tends to bleed wealthy taxpayers, not population as a whole.
The federal government is a different story though.
I think a rough rule of thumb is that very high earners will pay slightly more than 50% of income of wages on taxes (state and federal) in CA and about 24% of capital gains income on taxes, before various deductions.
But, the big difference in California is that if you inherited property or bought it a long time ago you pay much less property taxes than people who bought homes recently, due to Proposition 13. This means property taxes are not as strong a source of revenue in California compared to other states; making up that difference is partially why other taxes and fees are so much higher in California.
Well, the assessment rule is part of it, but prop 13 also limits the property tax rate as well as the assessments. Even with full-value assessment, California property taxes would be in the bottom half of states due to Prop 13 rate limits alone.
And the lack of stigma for failing plus having a world class city right at the door. Very few places can replicate that.
As long as whatever you consider nice is the same as whatever every other similarly paid white collar worker with a spouse and 1.75 kids considers nice you will never be able to get that. Those places always will be overprices and high stress.
Look at how Boston area money has shit up Cape Cod, southern Maine and NH. NYC money has shit up all of Long Island, large parts of PA, upstate and VT. CA money has shit up Colorado so bad that CO money shits all over Utah. Chicago money shits all over Wisconsin.
What you're really trying to get away from is the secondary effects of people like you (and me, and most everyone on HN). You're trying to get away from a service and tourism economy where everyone else is (somewhat rightfully) out to screw you for every dollar you're worth. Unless you have radically different tastes in what you want this will never be possible because all the other people of the same means will gravitate toward the same places.
I wouldn't characterize this as someone trying to "screw" someone. It's just a consequence of demand outstripping supply, and hence the way society allocates the resources in low supply is by who can pay the highest prices.
If anyone comes up with a better way to allocate scarce resources, I'd love to know.
And I can't be the only person that's tried to leave California only to realize that everything but the housing costs are worse elsewhere.
Tahoe is a nightmare of traffic, terrible winter-weather drivers and crowds. 20 years ago it used to be a decent getaway for the weekend. Now, not so much -- it's basically a guarantee that you're going to spend a full day driving to/from there, and gods help you if you leave friday afternoon and try to drive back on sunday -- everyone, their dog and grandma included, are going to be doing the same exact thing.
Once or twice a year is not implying accessible -- it's implying that it's inaccessible. It's somewhere that people do want to go, but the effort required to do so limits most. If it wasn't worth going, people wouldn't be trying to go every winter, and if it was reasonably easy to get to, perhaps people would go more than once or twice a winter.
> Nobody goes there anymore, it's too crowded
If only .01% of 35,000,000 people go to Tahoe every week, that's still 3500 people a week that are visiting. Thats a lot of cars on the road, a lot of people waiting in lines, a lot of hotel rooms and vacation rentals taken up. I made up these numbers of course, but the point is with a state like California, even a tiny fraction of the population visiting at any given time, it's still an overwhelming number of people to deal with. And its not even just Californians that go to Tahoe -- plenty of folks from other states visit, and plenty of international visitors too.
So back to
> Nobody goes there anymore, it's too crowded
Yep, practically speaking, a tiny fraction of people that can go to Tahoe at any time actually go -- a rounding error -- 'nobody'. But it's still too damned crowded because Tahoe can't handle the rounding error anymore.
People that live in a place like Salt Lake City can hit the slopes a dozen times in 2 weeks without taking a day off of work. I know people that work at tech companies in Park City, about 3 miles from The Canyons resort. They can literally go skiing during their lunch break.
Speaking of HN and Silicon Valley, I see parallels. There are people who worked at creating the site and using it as a source of bright, idealistic young minds whom they could profit off of. They continue to work on keeping the site a good place to 'live in'. Did HN grow by happenstance and 'nature'? You bet. But you can't deny the unseen hands of the many people who keep HN habitable.
Likewise, Silicon Valley is also no accident, although it has benefited greatly from happenstance and nature. Before SV, there was Lockheed Martin, and NASA, and further down south, Douglas Aircraft. Even today, the benefactors of Lockheed and co. indirectly fund Stanford, Berkeley, and many other places that continue to draw people from all over the world.
But I strongly feel that if it takes hold, the current trend of (some) technology workers' activism will be the coup de grace that finishes SV off for good.