Why startups are leaving Silicon Valley

https://www.economist.com/leaders/2018/08/30/why-startups-are-leaving-silicon-valley

by nopinsight • 8 years ago

145 190 8 years ago

api2• 8 years ago

From the conversations I've had and from my own experience I think the ludicrous real estate cost is a larger factor than this article implies.

It's tolerable if you're a just out of college bachelor/ette, but if you want to have a bit more space (let alone a family) you pretty much have to leave unless you've gotten rich. Even for young people if you do the math your big Bay Area salary actually doesn't get you ahead as much as a slightly lower salary in a much lower cost of living city. Your whole paycheck goes to the landlord.

A secondary factor caused by real estate hyperinflation is that all the stuff that once made the SF Bay Area so interesting has been priced out. I remember the Bay Area in the 1990s. It was a hub not just of tech but of art, music, and culture. It was a magical in a way that's hard to explain today, and I say this as someone who only visited. My main experience of it was from the culture and "vibe" it exported. All that is gone now. It's a glorified office park. Why spend so much to live there if it's no different from any other city?

JumpCrisscross4• 8 years ago

* ludicrous real estate cost is a larger factor than this article implies*

California's housing problem, particularly the Bay Area's, is a symptom of its political dysfunction. The Bay Area's elite consistently optimize for the short term.

api2• 8 years ago

The housing policy of the entire state seems geared toward boomers who bought property here in the 60s-90s cashing out on the backs of the young and newcomers.

rahimnathwani3• 8 years ago

"Even for young people if you do the math your big Bay Area salary actually doesn't get you ahead as much as a slightly lower salary in a much lower cost of living city."

But that's the point: the difference in rent is much smaller than the difference in market salaries.

"Your whole paycheck goes to the landlord."

If you're an engineer with a $150k salary, which is at the low end for most companies you've heard of that have offices in the Bay Area, then it's very unlikely you spend anything close to your whole paycheck on rent.

CaptainZapp• 8 years ago

Average rent in SF is $3,442. If you want it a bit fancier we're talking about $4,377 for a two bedroom appartment. [1]

In your 150k example you're using 1/3rd of your salary just for rent (assuming you get 150k, net).

[1] https://www.rentcafe.com/average-rent-market-trends/us/ca/sa...

selimthegrim4• 8 years ago

There’s a magical place like that today - it’s called Montréal.

g4nt1• 8 years ago

I agree for the vibe. But it's not even close to the number of startups or VC funding.

60654• 8 years ago

A secondary factor caused by real estate hyperinflation is that all the stuff that once made the SF Bay Area so interesting has been priced out. I remember the Bay Area in the 1990s. It was a hub not just of tech but of art, music, and culture. It was a magical in a way that's hard to explain today, and I say this as someone who only visited. My main experience of it was from the culture and "vibe" it exported. All that is gone now.

That recapitulates my experience as well from living in SF. There was a feel of the city that has since disappeared. For me the breaking point was in the early 2010s, when I noticed all my nontech friends disappearing - they were getting priced out and moving, mostly out of state. And the conversations in tech changed too, from doing interesting and weird and exploratory things, to conversations about money, getting vc funding, and working on things that will make even more money.

The vibe was turning into a 90s wall street, and not the old city where everybody was a misfit and did their own weird thing. That's probably the part I miss the most.

JumpCrisscross4• 8 years ago

The number one thing Silicon Valley had and lost is the narrative thrust of playing the good guy. The inequality, sexism, racial monoculture, NIMBYism, political indifference, disregard for civil liberties and shift from technological exuberance to something much shallower has large fractions of the country and world hoping some smug faces smack hard into the mud. That's not healthy, and out of all the possible solutions, diluting away the Valley's power seems like the best outcome.

village-idiot3• 8 years ago

SV is starting to become a pejorative.

gowld• 8 years ago

None of that is unique to SV, it's what money looks like everywhere. All this means that financil success makes people ugly, just as it did for finance, law, and big business in all industries.

selimthegrim4• 8 years ago

What racial monoculture?

ethbro• 8 years ago

Duoculture might be more accurate. It's pretty white + Asian there in tech.

https://diversity.google/annual-report/

"In terms of race and ethnicity (U.S. data only) 2.5% of Google’s workforce is Black; 3.6% is Hispanic/Latinx; 36.3% is Asian; 4.2% is multiracial (two or more races); 0.3% are Native American,Alaska Native, Native Hawaiian or Pacific Islander; and, 53.1% is White."

lucozade• 8 years ago

I hope they aren't suggesting that it's all white.

It's not unusual, particularly when discussing race in the US, for people of Indian, Chinese or Korean descent to, somehow, not count. I used to consider it borderline racist. I've since removed the borderline bit.

spacehome• 8 years ago

He's probably referring to Indians. But thinking all Indians are the same ethnicity is just betraying his own biases.

ur-whale4• 8 years ago

An article on startups leaving the Valley, and not a single mention of California having one of the highest income tax rate and highest real estate priced market in the US?

I think they're missing the point.

JumpCrisscross4• 8 years ago

not a single mention of California having one of the highest income tax rate and highest real estate priced market in the US?

From the article:

"The reasons for this shift are manifold, but chief among them is the sheer expense of the Valley...the cost of living is among the highest in the world..."

buboard• 8 years ago

among the highest in the world

but its not in the top 10

https://www.economist.com/graphic-detail/2018/03/15/asian-an...

ur-whale4• 8 years ago

Thanks, missed that.

moorhosj• 8 years ago

Are any of those things new to the equation?

ur-whale4• 8 years ago

Real estate costs is a relatively recent phenomenon.

And the tax situation has - to say the least - been getting worse for quite a while.

village-idiot3• 8 years ago

Of course, the California tech scene is doing quite well outside of SV, which undermines your point a bit.

anon08142018• 8 years ago

If I'm some generic tech employee and my net income ( and job prospects ) is higher in a highly desirable location than it would be in the generic suburb I moved from than taxes aren't really as big of a concern as some make them out to be.

If you only focus on taxes above all else, then I don't think you will ever be able to enjoy any city.

ur-whale4• 8 years ago

If you only focus on taxes above all else, then I don't think you will ever be able to enjoy any city.

I don't focus on taxes above all else, but there's a threshold (around ~15%) beyond which I consider taxes to essentially be armed robbery. Cali has long passed that stage.

As to the second part of your statement, while trying to sound the least possible arrogant, I would suggest you do your research. The world is a very big place.

blakesterz• 8 years ago

The article says three things:

"The reasons for this shift are manifold, but chief among them is the sheer expense of the Valley. The cost of living is among the highest in the world.... The problem is that the wider playing-field for innovation is also being levelled down. One issue is the dominance of the tech giants."

And third, government policies on immigration and education.

circles_for-day2• 8 years ago

People love to point out the problems in that area and say SV will evaporate. I just moved from sf to a city that’s in the top 3 for venture capital.

The job opportunities, talent, networks, and standards of code here are so much lower I wouldn’t have believed it if somebody had told me.

Maybe some startups are leaving but I’d move back if I had a startup. It’s a lot of small ponds out here

hamburglar1• 8 years ago

What city? How are you measuring standards of code?

circles_for-day2• 8 years ago

The city is mentioned in the above list. It’s much more livable.

I’m measuring code quality by asking questions to interview candidates for a variety of positions. I ask about how their current and past jobs work, what they’d change, and how they’d architect X.

My coworkers’ opinions and previous code are another indicator.

Disclaimers- I’m not any kind of prodigy or in the upper echelons of engineering, but the standards here are so low even I can tell. This is also a fairly high profile company for the area.

JumpCrisscross4• 8 years ago

Power structures shift in recessions. The political and economic seeds of a shift are being planted, by outgoing migration, investment and political support. These things have a habit of slowly drifting before coming to a loud succession of socioeconomic bangs within the months following a recession.

joering2• 8 years ago

Interesting. Can u elaborate further? What will be end result??

nervousvarun• 8 years ago

Assuming you stayed in the US, the top 5 cities are: SF, San Jose, NYC, Boston, and LA.

https://www.citylab.com/life/2017/10/venture-capital-concent...

Gotta think there's more than small ponds in those cities.

aninteger• 8 years ago

Replace LA with Seattle.

Finnucane• 8 years ago

No one is saying SV is going to evaporate. It's just kind of absurd, really, to think that it can contain the whole industry, or that it should even try. There's still plenty of underutilized space in the country. We don't all have to crowd into the same few cities.

edited for: typing before coffee.

MrEfficiency2• 8 years ago

standards of code here are so much lower

What do you mean?

redisman2• 8 years ago

Extrapolating from a tiny data set?

raverbashing2• 8 years ago

Because people "in the forefront of technology" realized they don't need to be all cramped in the same overcrowded area?

wrecursion3• 8 years ago

The real question is why haven't they been leaving sooner? With the power of telecommunications and the cost of doing business/living there.... it just doesn't make sense to me for a startup to try and grow there.

westpfelia• 8 years ago

They have. A ton of start ups started going to Austin and Denver/Boulder. Plus start up communities are happening in every major city.

mbesto• 8 years ago

it just doesn't make sense to me for a startup to try and grow there.

When you have access to limitless amounts of capital that prefers to deploy that capital in it's backyard, then yes it does make sense.

sanderjd• 8 years ago

That's the part I'm always surprised by: the capital seems to continue preferring to pour a bunch of excess money into landlords' pockets rather than open little offices in other cities, fly to meetings a bit more often, or do more business by video conference.

wrecursion3• 8 years ago

Ah... limitless amounts of capital. Yes.. this is definitely something I have no grasp of. :)

codingdave• 8 years ago

Although not mentioned, I'm also seeing a split between startups as defined by YC: VC-funded fast-growth vs. startups who are comfortable with a slower, smaller path resulting in a bootstrapped lifestyle company. If you don't want VC money, then the downsides of SV simply aren't worth the trouble.

ghaff5• 8 years ago

It also depends on your definition of "tech." SV tends to self-referentially define tech as "what we do a lot of in SV" (i.e. web/social/mobile--plus infrastructure tech that comes out of that). There are a lot of other areas like biotech, fintech and even automotive (Tesla, Waymo notwithstanding) that are concentrated elsewhere.

rimher• 8 years ago

The reason they didn't leave sooner? The "Beehive Effect".

Paul Graham said it in one of his essays, Steve Jobs in an interview.

Essay: http://www.paulgraham.com/siliconvalley.html Interview: https://youtu.be/PinOL79U2bg

liftbigweights• 8 years ago

Since at least the early 2000s, every few years, we get the "why companies are leaving SV" or "SV is dying" or "tech center is moving to X, Y, Z". Northern virginia was supposed to depose a while ago. Then it was Austin. And yet, SV is still SV. And the same reasons are given. High cost of living, income tax, etc as if SV hasn't been expensive for a while now and they recently boosted taxes.

You can almost set your clock to SV's downfall and of course the monthly "collapse of china" stories.

As long as tech's most valuable asset is human capital and as long as stanford and the universities in california, oregon, washington, etc produce top talent, SV doesn't have much to worry about. As long as california and its natural wonders and the magnificent pacific ocean is around, it'll keep drawing top talent from around the country.

ghaff5• 8 years ago

I don't especially see it as declining or it necessarily being a big "cause for concern" in spite of a lot of the dysfunction. As you say, northern California is attractive for a lot of reasons only some of which have to do with the concentration of VC money and companies flowing from it.

That said, I actually think it's healthy that there's an increasing dispersion of tech whether new startups or outposts of existing large tech companies. Even if you don't believe in remote work, once a company gets past a certain level of scale it really doesn't matter if the group focused on X is colocated with the rest of the company.

Speaking personally, I'll also say that among people I know I've never run across so many who have left, are leaving, or are thinking of leaving the Bay area as I have over the past year or so.

rhplus• 8 years ago

I'll also say that among people I know I've never run across so many who have left, are leaving, or are thinking of leaving the Bay area as I have over the past year or so.

You’ve also never before been the age you are now. Your peer/acquaintence group is growing in number and age, and naturally will expose you to more people who are ready to move on.

tim333• 8 years ago

Reminds me of "Nobody goes there anymore. It’s too crowded."

46% of respondents say they plan to leave the Bay Area in the next few years

But they are not leaving empty houses - they are selling them for millions as the world's would be movers and shakers move in.

wgerard4• 8 years ago

But they are not leaving empty houses - they are selling them for millions as the world's would be movers and shakers move in.

Er, not necessarily:

Last year more Americans left the county of San Francisco than arrived.

Now, granted, that could be a very specific piece of datum and either of the following could still be true:

1) When you include more than just "Americans" the net influx is still positive

2) Even if they're moving out of SF county, maybe they're just moving to, say, Alameda county

But nonetheless that is an interesting tidbit.

claydavisss2• 8 years ago

"Movers and shakers" are not buying these houses - big company types with very high salaries and good savings habits are buying them.

paulie_a• 8 years ago

Or they are more likely leaving because of insane rents. I've met quite a few people in that circumstance. And I highly doubt that "movers and shakers" are that prevelant.

MrEfficiency2• 8 years ago

In the early 2000s, we didnt have trillion dollar companies.

Its been a decade from the last economic recession.

Past performance doesnt indicate future performance.

I wont deny that top talent is located in Cali and washington, but the situation has changed an incredible amount.

CSMastermind• 8 years ago

I've noticed more and more tech startups moving south out of San Fran and towards Los Angeles. They also have California's universities, magnificent ocean, and a much lower cost of living.

the_watcher4• 8 years ago

I live in the Bay Area, but grew up in southern California and went to college in LA. I fled LA when I graduated for all the typical reasons. That's all changed in the past 5 years or so. Right now, I'm very professionally satisfied and my partner isn't interested in moving, but going back to LA is on my mind for the first time in a very long time.

One note: the cost of living isn't that much lower. It's definitely below the Bay Area, but it's above Seattle (although maybe not for long, but no state income tax is an advantage).

awucs5• 8 years ago

What people mean is usually not Silicon Valley, or the Bay Area, as a city but as a phenomenon. The technology industry is likely going to be there for a long time. There is just to much inertia, if not substance, for it to disappear overnight. But the "anomaly" of leaving so much value on the table that companies could quickly grow from nothing to world leading is likely gone. Today you are paying for every such opportunity.

For some reason people tend to think that this means that this will happen somewhere else. Like the opportunities somehow transfers somewhere else. That isn't really what happens. We might never have this sort of situation in our lifetimes, or it might show up somewhere outside of our reach. It is very likely that China has been outperforming the west in this regard over the last 10 years. They might continue to do that or not. It isn't really predictable as far as I know.

Addition: Why do people even visit a discussion forum if a simple opinion is going to offend them? The Internet is full of agreeable material you can read instead. And you can close those tabs without suppressing someone else's opinion. But I guess that is really the point of Hacker News these days.

EthanHeilman• 8 years ago

Living in Massachusetts and working in the tech scene from about 2005 to present I've noticed changes.

It used to be when someone graduated from a university in the area and wanted to work at a big tech company or startup it was a foregone conclusion they would immediately leave for the west coast. Dropbox founders were from Cambridge but moved west. Facebook was founded in Cambridge, moved west and didn't have an office in Cambridge for many years.

This is definitely not the case anymore. If facebook was founded in 2018 there is a good chance it would stay in Cambridge. The startup scene in Boston/Cambridge has grown immensely especially after the success of Hubspot. Additionally Google, Facebook and Microsoft all have campuses in Cambridge/Boston.

Its not a zero sum game, but real change has certainly occurred.

segmondy2• 8 years ago

if Facebook had stayed in Cambridge, there's also a great chance that it won't be the Facebook that you know today. I firmly believe it's possible to succeed outside of SV, but I also believe it's harder.

claydavisss2• 8 years ago

Silicon Valley obviously won't "go broke", but more and more talent and money is being consumed by a few large companies.

The social standing and mobility for those working at large SV companies isn't much to envy. Regardless of absolute pay (which is high by any standard), most are left renting apartments and suffering terrible commutes.

If people measured their compensation in "years of reasonable savings until you can buy a house", they would probably see that their relative compensation isn't so great. Inside SV I would put this number at 10-15 years....elsewhere somewhere around 5.

But the absolute compensation is high so people think they are better off.

bstar77• 8 years ago

This all may be true, but more opportunities that only existed on the West coast/bay area are presenting themselves all around the US. I was established in the Seattle area, loved it for all of the reasons you describe, but decided to leave because cost of living has reached absurd levels. I moved to the Atlanta/Alpharetta market and live like a king here. It's not the Cascades or the Pacific ocean, but it's got its own charm that I love, cost of living is low and housing is surprisingly cheap. Well paid software engineers didn't exist in this region that long ago, so that's where I see all of this shifting- we now have more regional options if we want to do cutting-edge work where it used to just be the Bay area or NYC.

j45• 8 years ago

Perhaps, as startups begin to solve average business problems in the current startup landgrab, those businesses exist everywhere and such startups can exist regionally.

danhilltech• 8 years ago

Recently left Airbnb to start a new company in Washington DC. I'm reminded of my previous experience starting a company in London. As soon as we had success (exit) we moved to SF. All that's changed for me is that the $ threshold has gone up, but the principle is probably still true.

rakman• 8 years ago

I'm curious if the cost of living is starting to take its toll on the risk taking that SV is famous for. IE: I can't quit my high paid FB job to start a new venture due to mortgage/rent etc.

dasil003• 8 years ago

No because of FU money and steady influx of young blood. More likely reason is salary costs are just too high for a lot of potentially viable businesses, but VC masks/distorts that.

salimmadjd• 8 years ago

Many of us from early on argued that SV had no vision. Yes, there are a lot of people who think they are some kind of "visionaries", and perhaps on some narrow areas of focus they are. But, if it had a real vision it would have foreseen the growth problems and it would have united to solve it.

There is a lot of money sitting at Apple, Google, and the rest. They could have easily use their weight, reach and influence to envision and build an entire tech city community. It's not that hard.

If a few lobbyist in DC can send the country into all kinds of wars, why can't SV companies use their weight to do something that can resolve this problem. It makes perfect business sense to me.

Instead, we get apartments build adjacent to CalTrain to act as sound insulation or they would not get approved. This is ridiculous.

To have a habitable area with a decent quality of life, you need all types of workforce. Teachers, restaurant workers, gardeners, etc. Where are these people going to live? When you see some houses filled with 7-8 occupant because they can't afford rent, you know this is not sustainable.

I've lived in the Bay Area since 1991. These days, for my work, I spend a lot of time working with our remote team in Minsk, Belarus. The thought of coming back each time to SV is distressful if it wasn't for the loved ones back home. There are many tech guys here in Belarus who dream of coming to SV. I remind them their quality of life is far far better than what they would get in SV.

So unless we get some true leadership in SV, that has a vision of making the Bay Are more habitable instead of trying to think about how to colonize Mars, this is going to get worse. The once almost utopian Bay Area is becoming rather dystopian.

mathattack4• 8 years ago

They could have easily use their weight, reach and influence to envision and build an entire tech city community. It's not that hard.

It’s actually very hard. Most available land has already been built up. Cities are very strict about zoning and not allowing additional development. Tech companies can’t just steamroll the local governments. It’s very much a poor governance situation.

I agree with your conclusion, I just don’t believe Big Tech can fix it so easily.

rednerrus• 8 years ago

Local governments are typically very easy to influence. Especially when you are the largest tax provider.

jgust• 8 years ago

If Big Tech wanted to fix it, they could. They have the capital to purchase new governance in California & the Bay to effectively change the laws to foster growth.

onemoresoop3• 8 years ago

How about to diversify geographically??

briffle• 8 years ago

Our next campus needs to handle buildings up to 8 stories high, plus apartment buildings the same height for all our jobs were bringing.. I guess we can't come to your town.

Repeat that 2 or 3 times, and the problem goes away quickly..

cpursley• 8 years ago

Yep, I haven't been to Belarus yet. But I'm living in the south of Russia and working remotely for a US company. My quality of life is several times better than the Valley (or even Atlanta, where I am from). And this is in a country considered "inferior" to the US.

Maybe there's not much in terms of a startup community or VC funding, but I can walk to the grocery store, to the craft beer pub, to the beach (or take a cheap bus/taxi). Plus, I have a nice new apartment for less than the cost of utilities back in the US.

duxup• 8 years ago

I'm not disagreeing in a general sense, but I suspect you could very roughly get the same thing in some rural areasb(of course not all rural areas) in many nation's, including the US where you would have more access to remote US jobs.

davidzweig3• 8 years ago

I spent a couple of years studying in Belarus at the Minsk State Linguistic University, I had a good time there. I visit Ukraine often to visit friends who work in software. I might be back in Minsk later in the year. If you like, send me an email, I'll take you for a plov and milkshake at the central market. I guess you know the spot. :-)

awucs5• 8 years ago

I think a lot of people misjudge Silicon Valley. They aren't where they are because of vision. They are there because they managed to control much of technology. They aren't going to give away any opportunities regardless if it is housing or smart phones. They of course have to keep up appearances, some might even believe it, but the reality is that if housing became cheap people would lose hundreds of thousands, if not millions, of dollars. And if they let go of control of the technology market they would lose a lot of market share, if not their jobs.

I personally don't think there has ever been any real indication that the Bay Area would become utopian. It is just that there used to be a "flaw" (relative to US society) where technology was undervalued, so opportunities were cheap. That has now been corrected, so you are paying for those opportunities.

ctvo• 8 years ago

> It's not that hard.

Please elaborate. I'm sure everyone looking to turn their little Silicon Alley, Meadows, Walkway into a thriving techno metropolis is all ears.

awucs5• 8 years ago

I really don't think they do. Most, if not all, of these "the next Silicon Valley" is about self-promotion. More often than not there isn't any good way to get an apartment, visa or any sort of unique thing to suggest that it would be a good idea to actually go there. If anything they put up a lot of artificial barriers to pretend that there is something going on while in reality technology projects, startups and talent already have to and should compete in the market.

What people are lacking isn't some phony experts but time, space and motivation. Give people that in ample supply and the rest will sort itself out.

CalChris2• 8 years ago

The only person in Silicon Valley who I think had a vision for Silicon Valley was John Arrillaga. Someone like a Steve Jobs or a Larry Page wasn't thinking of Silicon Valley. These people stuck to their knitting.

dionidium7• 8 years ago

For all I know, Belarus is an amazing place to live, but there are real economic factors. The GDP of Belarus is ~$47 billion ($4,989 per capita). That's about the same total economic output as Albuquerque, NM or Knoxville, TN (each of which achieve their numbers with about 10 times fewer people than Belarus (meaning, of course, that the per capita GDP in those cities is also about 10x)).

Americans wildly underestimate the economic power of the United States. There are dozens of "small" U.S. metros that match the productivity of Belarus.

And those are the small metros. There are dozens more totally ignored "flyover dumps" -- think Cleveland, St. Louis, Kansas City, Columbus, etc -- with GDPs 3 or 4 or 5 times that of Belarus.

And only then do you get to an "irrelevant, dying" place like Detroit, whose GDP is ~$280 billion (about 6x that of Belarus).

Most of these comparisons shouldn't ever leave the gate.

JohnJamesRambo• 8 years ago

But he is talking about the quality of life, not the GDP. Things I assume are much cheaper in Belarus and he or she estimates that people's quality of life there is better. I've never been both places like they have so I will take their word for it.

jakobegger• 8 years ago

What good is a high GDP though? It just means that you pay more for a crappier appartment.

wrong_variable• 8 years ago

Many places in both the US / UK are overvalued relative to their economical value.

Some developer in Glasgow tried selling us a parking lot - we did the math and there was no way it would generate enough income to collect on its price. We were better off directing our investment where the math worked (emerging markets, etc).

The parking lot had a higher price then an entire chemical plant in Kenya that had a monopoly on supplying life saving generic drugs to 3 countries in Eastern Africa.

A lot of valuation in the US / UK is based on the dollar having reverse currency status, so don't get on your high horse about the US being more 'productive'.

It didn't stop the glasgow parking lot gaining it value afterwards, but as the saying goes - "The market can stay irrational longer than you can stay solvent".

davidzweig3• 8 years ago

"Tractor production is up 7% this year! Milk production is up 4%! We don't need your frivolous Apple gadgets!"

Just joking. [In every joke there is a portion of joke..]

scottlocklin• 8 years ago

I hate comparisons like this; purchasing power parity GDP is much different and much more useful for comparisons than raw GDP. "National purchasing power parity income" is the old timey comparison that actually measures what you want to measure. Otherwise you're mostly just comparing how cheap the rent is in Belarus.

dunpeal• 8 years ago

Many of us from early on argued that SV had no vision.

I don't know what it means for a geographic region to "have vision". Either way, SV was the birthplace of an incredibly large portion of the ventures and entrepreneurs that created what we refer to as "modern technology".

And I'm saying that as someone who is often very critical of current SV and NorCal policies in general.

When you see some houses filled with 7-8 occupant because they can't afford rent, you know this is not sustainable.

Sure, but what does that have to do with "vision"?

The area experienced an enormous, extraordinary amount of success, which had some undesirable effects, particularly for low-income residents. It should be addressed, and there are many issues in SV current, some of which are mentioned in the article.

Still can't take away from the incredible breakthroughs that happened in the area.

awucs5• 8 years ago

Vision means that you do things in a way that isn't the default. Because if you just do the default you end up like everywhere else (which of course can be a good thing in some cases). The problems in the Bay Area isn't unique by any means. But not dealing with them means that they more and more lose their competitive advantage. Overall they become more like somewhere like e.g. New York.

msiyer• 8 years ago

Vision without wisdom is always myopic. People have a tendency to mistake smartness for wisdom. A grave error. Why is it that everything we touch gets ruined?

jhowell2• 8 years ago

The Bay Area was utopian before tech. The tech is just a peripheral. It can be argued, though obviously not in this article, that tech ruined utopia. Should it leave, which it won't due to the high desirability of culture and universities, whatever should replace will only be more important to people's lives.

CalChris2• 8 years ago

The Bay Area was defense industry before it was tech. Moreover, it was dotted with bases before the realignment commissions of the 90s closed pretty much all of them.

onemoresoop3• 8 years ago

Leadership cares about their immediate bottomline > > > Profit

twtw• 8 years ago

Yup, it's awful here, everyone please leave.

I hear Seattle is the place to be, go there.

marssaxman• 8 years ago

Seattle is terrible, it rains all the time. You don't want to move here. Try Portland.

nostrademons2• 8 years ago

SV has never been about quality of life. Since at least WW2, it's a region that eats its old, a place that welcomes new waves of migrants all hoping to strike it rich in the next gold rush.

From the literal gold rush in the 1850s to the Gilded Age inventions of the 1880s-1910s to the agricultural migration of the 20s and 30s to the WW2 construction boom to the post-war nukes & ballistic missile boom to the hippies & beatniks of the 60s to the integrated circuit to the microcomputer to the Internet to the mobile phone, the Bay Area's always been defined by its ability to impoverish the folks who found paradise in the last wave in favor of fully capitalizing on the next wave. It does this largely by attracting young immigrants from all over the world who are willing to put up with shitty conditions and work themselves to the bone for a few years so that they can sock away a few dollars. Those that succeed in this usually go elsewhere to retire or raise a family.

There's no evidence that this conveyor belt has stopped or slowed down - 2 of the 3 largest Bitcoin exchanges in the U.S. (Coinbase and Kraken) are in SF, I still meet plenty of starry-eyed 20-somethings who are working long hours thinking they're going to get rich, and I also know plenty of people who've made their low-millions working for a big tech company and are now moving to an area where that will let them retire at 35 rather than barely afford a small house.

News articles always seem to point out that the quality of life is shitty in San Francisco and the economic drivers are unsustainable. That's always been the case. The Bay Area's specialty is in making an industry out of unsustainability; the culture here has gotten very good at finding the next exploitable resource and exploiting it before the rest of the world realizes it's important, and then encouraging people to move on once it's no longer profitable.

dustingetz2• 8 years ago

We need a killer app for collaboration. I think VR tech could solve this by building a shared IDE-space for pair programming.

strig• 8 years ago

And wear VR goggles all day at work?

wilsonnb3• 8 years ago

VR might provide more communication bandwidth than a phone call or a video chat, but it's still nowhere near close enough to actually collaborating in person.

ghaff5• 8 years ago

The far more relevant collaboration problem is being together with other people in a room and sketch out ideas, etc. on a whiteboard, have interactive conversations, read body language, etc. There have been so many attempts to solve this over the years and there's never been close to a "killer app."

I do believe that remote work can work in many cases but it needs to be complemented with a decent dose of F2F to complement our only somewhat successful video conferencing systems, chat, shared documents and other tools that exist today. I suspect at the end of the day we'll just keep iterating on the various tools we have and they'll get better but still will lag everyone being in the same room.

cardiffspaceman• 8 years ago

There is a no-true-Scotsman position here. If you extrapolate from science fiction, there is a level of VR implementation that we can imagine, if not implement, that would enable distant collaboration with out the defects that are mentioned in the siblings of this comment. I feel that VR today cannot deliver enough to resemble Holodeck fidelity, more like .1 H, and maybe at least .5 H is needed.

Maybe pair programming needs less to be fluid enough to be beneficial.

dustingetz2• 8 years ago

It actually doesn't need to be, like, flashy 3D game stuff! It can just be a 360-degree screen-space that lets me have every file in the system open at once. The problem with pairing in 2D is there is only one cursor, and even if there were two cursors like google docs, there is not nearly enough screen real estate for us both to work at the same time. These are mostly 2D problems, but VR still solves them.

cletus• 8 years ago

In the last few months I've come to appreciate Amazon's vision here. Amazon, as I'm sure we all know, is conducting a search for their HQ2 location. I, like many others, suspect they always knew where they wanted to put it but they're playing this game to see what concessions and tax breaks they can extract from state and local governments. Perhaps an offer other than their intended location will be so good they'll change their mind but honestly I'd be surprised.

I've come to realize this is genius for two reasons:

1. Amazon is pitting governments against each other. This sort of thing is a well-known and well-trodden path so it's nothing new but the real genius part is:

2. Once Amazon has two headquarters they're no longer at the mercy of the city of Seattle and the state of Washington.

Let me elaborate: take Google, which is heavily invested in Mountain View. Essentially the Mountain View City Council has them where they want them. Google wants to stay in MTV (and, more importantly, expand in MTV) so whatever taxes and conditions the council wants to put on them, well they kind of have to suck it up.

The latest of these is MTV forbidding free food in new campuses because it hurts local business.

Now Google has obviously expanded well beyond MTV at this point (Redwood City, San Antonio Boulevard, Sunnyvale, San Jose, San Francisco). But these are less than ideal solutions. Move a team from MTV to Sunnyvale and you've added 10-20 minutes to the commute of everyone living in SF. Getting around "campus" requires a transit system all of its own.

Compare this to Amazon's future position: if Seattle decides to put an onerous (from Amazon's position) tax or set of conditions on them they can simply say "we'll expand our other campus instead". So they're not beholden to one town or city like the SV giants are (specifically Mountain View, Cupertino and Menlo Park).

I really wish the SV giants would take this approach.

Also, as others have mentioned, the cost of living for those not fortunate enough to be in tech is horrendous in SV. You can blame small-minded NIMBYist towns and voters for this if you like but (IMHO) that's shortsighted. By continuing to exist there and expand there the giants are supporting those anti-progressive positions.

At some point you're either part of the solution or part of the problem and (IMHO) continuing to expand in SV makes you part of the problem.

seanmcdirmid5• 8 years ago

The contrast is Redmond. Microsoft has a great relationship with the city, and so tend to concentrate its development there and a few nearby satallites.

xaranke2• 8 years ago

Right, but that's because Microsoft hasn't seen the kind of explosive growth that Amazon has so it's easier to plan. Also they've been around a lot longer.

e15ctr0n• 8 years ago

The latest of these is MTV forbidding free food in new campuses because it hurts local business.

Mountain View passed this law as part of a project-specific requirement in 2014, the project being The Village at San Antonio. Facebook is planning to lease office space there but no specific timeline.

Earlier discussion: Bay Area cities are cracking down on free food at tech companies | http://news.ycombinator.com/item?id=17619658

jaequery• 8 years ago

also dont forget that startups have started embracing remote development culture

wgerard4• 8 years ago

I think the "shift" that's most interesting is this one:

Alphabet and Facebook pay their employees so generously that startups can struggle to attract talent

I've heard anecdotally from quite a few people that this has made hiring incredibly difficult - as those comp packages continue to increase the math just doesn't work out for a startup employee even if there's a generous exit for the employees.

Not that the comp at FAANG was ever bad, just that it's gotten so much better over the past few years (undoubtedly helped by a huge bull market) that golden handcuffs have really put a drain on the startup hiring scene - mostly in cities where those companies have large offices or are growing considerably.

Further, supposedly anyway, as those companies become larger and larger and need more people it's become less difficult to get in the door there.

vonmoltke2• 8 years ago

FANG can only hire, what, 10% of all currently-employed engineers. Additionally, their hiring processes are notoriously capricious. Unless startups are exclusively targeting the same 10%, I don't see how that has a significant impact.

wgerard4• 8 years ago

FANG can only hire, what, 10% of all currently-employed engineers

That number is probably growing over time (as the article alludes to).

I mean, just take a look at how many positions Netflix alone is hiring for:

https://jobs.netflix.com/teams/engineering

Additionally, their hiring processes are notoriously capricious.

Supposedly, this is also changing as their demands are growing and they've had to "lower the bar", so-to-speak.

zuhayeer• 8 years ago

Super true, check out http://levels.fyi for some of the comp packages at FAANG / other tech companies. Gives some clarity on how much better it has gotten

meanmartine• 8 years ago

Well, this is isn't surprising to be honest.

jandrewrogers• 8 years ago

The reality on the ground is more nuanced then this, and one should be careful not to treat either tech or startups as uniform categories. I would frame the situation as some broad classes of both tech and startups have migrated to other cities and established critical masses elsewhere, but not tech and startups as a whole. If you work in one of those areas of tech, the action may not be in Silicon Valley. A prominent example of this is Seattle and cloud tech. Other areas of tech, like AI, are regionally diffuse currently.

I do think the gravity of Silicon Valley, while immense, has weakened over time but being expensive is a marginal factor. Most of the oft-touted alternatives like Seattle are also expensive. As the scale of the tech industry has increased, random concentrations in the distribution of tech development has simply created critical masses in other cities in some key domains, giving them a sustained competitive advantage. These are not engineered outcomes but the organic confluence of conditions and events. No one planned to turn Seattle into Cloud City but it happened anyway, and you can see this dynamic becoming more prominent in the US tech scene at large. Most stuff still happens in Silicon Valley but the likelihood of diverse tech randomly achieving critical mass elsewhere has increased.

lafay• 8 years ago

The long-standing prohibition of non-compete agreements in California is really the X factor in why it continues to be the innovation juggernaut. So many startups here are the result of founders capitalizing on some element of their experience at prior employers. And the ability to hire top talent away from direct competitors also provides a significant advantage for rising startups.

Even if other states pass legislation to end non-competes (as MA has tried to do a few times), it will take time for regional business culture to adapt. I've worked for a few East coast tech firms where company loyalty is taken very seriously, and defectors were semi-publicly shamed even if not outright sued for violating a non-compete.

Eire_Banshee• 8 years ago

I dont buy this.

Nobody Ive ever met gives a shit about non-competes. They aren't really enforceable unless you blatantly steal or copy work.

raverbashing2• 8 years ago

Still, California is big, people don't have to keep to SV

commandlinefan• 8 years ago

Come on down to Texas! We have no state taxes, a business-friendly government, and we even have an ocean (well, a gulf anyway).

thrav• 8 years ago

But it’s hot as fuck...

I grew up there. Every single person I’m blood related to lives there. I could never move back. If I ever leave SF, it’ll only be to go somewhere equally temperate.

the_watcher4• 8 years ago

I live in the Bay Area, so maybe it's only outside that it's used, but I have never heard anything like the term "Off Silicon Valleying". Googling it only turns up results about TJ Miller leaving the HBO show. Has anyone ever heard it?

the_watcher4• 8 years ago

Phoenix and Pittsburgh have become hubs for autonomous vehicles

Aren't the main players in those cities just AV offices of Bay Area headquartered companies?

vfc1• 8 years ago

There is not one single mention in the article of one of the probable causes, which is the rise of remote work.

And much of the technical cloud infrastructure that allows companies to operate remotely has been built in Silicon Valley itself, so in a sense, they are one of the main contributors to solving the problem of urban overpopulation, in the Valley or elsewhere.

the_watcher4• 8 years ago

Am I missing something, or does this article entirely lack any substantiation of the claim made by its title beyond noting that Miami is ranked first in startup activity and Peter Thiel is moving to LA? The only stat about anything actually leaving the Valley is a survey about people intending to move out of the Bay Area that doesn't elaborate on the demographics of the respondents (are they tech workers or non-tech workers trying to escape costs?).

I think the thesis is roughly accurate - tech companies are less dependent on being in SV for success than any time in a reasonably long time, I just don't see much hard evidence backing it up in this particular piece.

luddaite• 8 years ago

If we assume that the premise here is correct (there is some amount of exodus of technical talent from SV), isn't it still a good thing? My impression is that the result of having all the major tech companies located in one region is the development of a tech cultural bubble. The current tech industry has a hard time understanding and relating to the rest of the country/world. Wouldn't we all be better off if they spread out a bit such that they could better represent the entirety of the world?

downandout3• 8 years ago

I have always found it ironic that many of the very people who created the modern Internet, and have sold the world on the transformational possibilities of connecting with each other through it, also believe that one must physically be in Silicon Valley to succeed in their own industry. A founder’s desire to start a company that could reasonably be run from anywhere in one of the world’s most expensive areas should turn off investors, not attract them - and this is happening with more frequency as Bay Area costs escalate. If those within the Valley bubble want to remain relevant to the startup scene in the coming decades, they would be wise to leverage some of their own tools to provide those outside the bubble with greater access to the resources within it.

dman• 8 years ago

Do you have any specific people in mind?

downandout3• 8 years ago

I was referring to the general sentiment that if you're a serious tech startup, you should be in SV. You can see this sentiment throughout this comment thread, in an essay someone linked to below written by Paul Graham, and in any number of articles extolling the virtues of the Valley.

As for specific people, I’d start with Mark Zuckerberg - a champion of connecting the world through technology - who seems to have believed that a SV presence was necessary for Facebook to succeed. He had to believe that, or he wouldn’t have moved the company there as soon as he had the funding to do it.

dhnsmakala• 8 years ago

Salaries high in SV. Talent goes to SV for high salary. Companies go to SV to seek talent.

downandout3• 8 years ago

When cost of living for a quality of life that is equivalent to almost any other area (e.g. not having 8 roommates on a $150k salary) is taken into consideration, SV salaries actually pale in comparison to those in other areas.

checkyoursudo• 8 years ago

Salaries aren't that great, in my personal experience. My spouse was offered about $200,000 for a job in Foster City, and $190,000 in a city in the Midwest. My spouse's friend took one of those $200,000 jobs and for about 1.4 mil bought a house smaller than our starter house. We bought a 3300 sqft house for less than 400k.

wenc• 8 years ago

In my mind, it is not ironic. While the Internet has made great progress in solving human connectivity and distance problems--and indeed for many people (e.g. remote workers who happily work from home) it has solved it them for all practical purposes--in reality it has not solved it to the point that renders physical presence unnecessary.

We've gotten to a point where remote interactions are OK-ish (pareto), so incremental improvements now have diminishing returns with decreasing payoff. Nobody's really working on making things a lot better than they are now.

To me, there's still great benefit in clustering human beings of like mind in the same physical space because it creates a creative buzz than somehow cannot be replicated with telepresence. Being able to have serendipitous side conversations (without having a video conference camera on all the time), going to meetups in physical spaces (as opposed to watching streaming videos), and the ability to make random real-life human connections with people working in the same area all contribute to this buzz. This buzz is purely psychological but tremendously powerful [1], and I don't know of any instances where it can be created through technology alone.

Some say it is a question of bandwidth -- maybe some day we'll have augmented/virtual reality, very high-resolution video, etc. that will render all of this moot. Perhaps... but it would also need to be able hack our neuroscience and psychology in some way...

[1] Cities and Ambition http://www.paulgraham.com/cities.html

sixdimensional• 8 years ago

I know of a large, well established corporation that just decided to open an office in Silicon Valley. I was shocked and could not fathom why they would go to that expense to do so, when they could have just as easily done this in one of their established metropolitan or other less expensive areas.

Silicon Valley is special without a doubt, but does anyone here think it still makes sense to do such a thing? These days people with the skills needed are much more distributed and many are willing to move from Silicon Valley or other places for the right job and quality of life, at least what I have seen.

I suspect that company is going to spend a fortune for not much benefit.

mnm1• 8 years ago

Who cares outside of the valley? The average tech worker can find a good job in just about any city in the world nowadays. Startups are some of the worst places to work but tech penetration is so deep, established companies that need tech work and have decent working conditions are everywhere. Why pay the insane costs in the valley when so many other options are available? As far as innovation, that's just a small percentage of companies and often it happens at established companies. Given the cost of living (sky high) and quality of life (mediocre at best) in the valley, I'd say it's one of the worst places to be a tech worker. It is a good place to start one's career for a few years as it really makes one appreciate working at a decent company rather than the startup insanity culture in the valley. There are decent companies in the area, but they are hard to find due to the sheer number of mismanaged startups and scams. The valley falling out of prominence is great news for the rest of the country and the rest of the world, if it's true.

onemoresoop3• 8 years ago

I think the title should be "Why aren't more startups leaving Silicon Valley"

Why startups are leaving Silicon Valley

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