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About this blog: I grew up in Los Angeles and moved to the area in 1963 when I started graduate school at Stanford. Nancy and I were married in 1977 and we lived for nearly 30 years in the Duveneck school area. Our children went to Paly. We moved ...  (More)

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Why Don’t More Companies Move or Expand Outside the Bay Area

Uploaded: Jul 11, 2016
Some companies have moved or expanded elsewhere. And some residents have moved away to escape the high housing costs. But this has not stopped the region and peninsula from outpacing the state and nation in job and population growth. The Bay Area has led the state in regional population growth as a result of these trends for the first time since the Gold Rush days.

Some posters have suggested incentives for firms to move. Besides the political issues (what public official would propose losing jobs), there are ongoing incentives from other states. The news regularly reports visits from governors from Texas and Florida and other states. Recently Nevada offered very large incentives to Tesla to locate there.
And California has made efforts to jump start job growth in the Central Valley and North Coast. So there already are incentives for moving.

But the news is also filled with plans for Facebook expansion in Menlo Park, efforts by Google and LinkedIn to expand in the Mountain View, recent moves by Apple and Google to acquire sites in San Jose and moves by Uber and Ford to establish facilities in Palo Alto.

With the high housing costs and difficult commutes, why don’t more firms take the incentives to move?

There are good reasons why they want to be here but I think the first step is to acknowledge that despite the high costs and incentives to move, these companies and their workers really do want to be here.

The two pretty obvious reasons are 1) access to the country’s deepest high skill labor pool and 2) being where the action is. The third big reason is related to the first—many highly skilled workers want to live in the Bay Area.

I know these reasons from my work on the Silicon Valley workforce board. Our labor market works for individuals and companies as workers can find jobs and companies can find workers at least in highly skilled occupations because the labor force is so deep and information flows are well organized.

It is a hard combination to beat despite the high costs and traffic. The actions of companies and individuals are giving us a strong message. There are no develops in this exchange—just people and companies in the innovation capital of the world.

Wishful thinking will not stop these trends which is why it is necessary in my opinion to tackle the housing and transportation challenges that growth brings.

Comments

 +   24 people like this
Posted by Bart Anderson, a resident of Mayfield,
on Jul 11, 2016 at 6:53 pm

I understand what Steve Levy is saying. We do have to deal with housing here - which probably means finding better ways to get around than cars. But I think it also means making it attractive for corporations to set up branches elsewhere. The Rustbelt is full of cities with affordable housing and a great need for jobs.

It is unhealthy for society to have hyperactive economies like ours, and depressed areas in the rest of the country.


 +   14 people like this
Posted by Edward Syrett, a resident of Menlo Park: The Willows,
on Jul 11, 2016 at 6:54 pm

Edward Syrett is a registered user.

I agree. No need to overthink this. The signs spanning Broadway in Redwood City make the point: "Climate Best by Government Test". Stanford University is the pearl at the heart of this oyster. And San Francisco has charms not to be duplicated even in New York City. The coast, the bay, the parks, the foothills, all kinds of cultural opportunities for those allergic to sunshine; pardon me while I count my blessings. I, too, arrived here in 1963 and never left.


 +   11 people like this
Posted by Edward Syrett, a resident of Menlo Park: The Willows,
on Jul 11, 2016 at 7:20 pm

Edward Syrett is a registered user.

In reply to Bart Anderson, I say that the problems of the Rust Belt need to be addressed at the national level, and I doubt that they will be any time soon because conservatives are running the show. Concentration of wealth in the hands of owners at the expense of workers and the despoilation of natural resources have always been characteristic of laissez-faire capitalism. Picketty is no longer flavor-of-the-month, but his lengthy tome made a simple and valid point: r > g, where “r” is the rate of return on capital and “g” is the rate of growth in the economy. In the kind of businesses that flourish hereabouts, the rate of return on capital is phenomenal; that's why VCs love Silicon Valley startups. Facebook became huge, in terms of market cap, while investing only enough in infrastructure (data centers and such) to cope with its phenomenal online success. Now it's finally getting around to buying and building offices. I'm not in a position to crunch the numbers (maybe Steve Levy could?), but it's clear that even Walmart must have had a lower rate of return on capital during its high-growth years.
My point is that our rate of growth in the Bay Area's economy, while much greater than the growth rate in other local economies around the country, is still much lower than what it could be without violating Picketty's formula. The only way the resources are going to shift to those other localities is by government mandate, and the track record of government in battling market forces is pretty poor. I say that as a social democrat, BTW, not as a libertarian or small-government advocate. The best government can do is tax away some of our entrepreneurs' and financiers' excess earnings and use them to rebuild decaying infrastructure in the Rust Belt (and our own Central Valley, and Appalachia, etc.)


 +   22 people like this
Posted by Peter Carpenter, a resident of Atherton,
on Jul 11, 2016 at 8:49 pm

Peter Carpenter is a registered user.

Given the continued attractiveness of our area to both employers and employees we have to make significant investments in both our physical infrastructure ( roads, transportation, school, etc.) and our social infrastructure (inclusiveness, diversity and opportunity).

It will be a test of both our wisdom and our moral character if we are able to rise to this challenge.

The "I've got mine" mentality is not the path to a meaningful future for our community. We must invest in the future and we must create a more inclusive community. The alternative would be moral decay and class warfare.


 +   9 people like this
Posted by Marc, a resident of Midtown,
on Jul 11, 2016 at 9:38 pm

I agree, People want to live here because this is where all the jobs are. Companies want to be here because this is where all the employees are.

People don't want to live where there are NOT a lot of job opportunities. Companies don't want to locate where there are NOT a lot of potential employees.

I find it interesting that the people that complain the most are not volunteering to move. The could start by moving to a desolate urban area in the midwest and see what type of employment they find. Then they could try to entice others to join them. Give them 5 years and see how successful they are.

/marc


 +   28 people like this
Posted by Srihari Yamanoor, a resident of Old Mountain View,
on Jul 12, 2016 at 12:03 am

Interesting that no one wants to talk about the HUGE bubble we are in, worse than the last one. Almost none of this construction of both commercial space or residential space is tenable.

At some point, we should stop this collective lying and talk about how we are going to handle miles of empty or near empty buildings of all kind. Anyone here in 2001 would know how that looks.


 +   18 people like this
Posted by Reader, a resident of another community,
on Jul 12, 2016 at 12:44 am

One thing that rather not being recognized here is that these large companies have growing offices and subsidiaries around the world. Places like Hyderabad, India; Dublin, Ireland; Austin, Texas; Tel Aviv, Israel.

Who are Facebook's neighbors in Hyderabad for example? They include Google, Microsoft, Oracle, Dell, IBM, Apple, Amazon, Yahoo and others.

Mountain View-headquartered LinkedIn? Well, they have a lot of employees up in San Francisco, but here's what their Wikipedia entry lists as offices worldwide: Omaha, Chicago, Los Angeles, New York, San Francisco, Washington, Sao Paulo, London, Dublin, Amsterdam, Milan, Paris, Munich, Madrid, Stockholm, Singapore, Hong Kong, China, Japan, Australia, Canada, India and Dubai.

Same deal with Google. They're not just expanding in Mountain View or Sunnyvale. They're in cities like Sydney, Australia.

Even though these companies are growing their SF Bay Area employee ranks, they are also opening locations around the world. The growth is not just limited to the SF Bay Area.

There is one thing that definitely drives start-ups to the SF Bay Area: venture capital. This is where the money is.


 +   21 people like this
Posted by Jake, a resident of Old Mountain View,
on Jul 12, 2016 at 6:38 am

The reason companies are here and stay here is simple: the venture capitalists, early employees of companies like Facebook, Google, Twitter, academics at Stanford and Berkeley, and other movers and shakers like it here. Not only are they wealthy, they also bought their homes when they were much cheaper and their property tax bill is low as well. And even though many companies have satellites in other places, if you want to have a career, you need to be near corporate headquarters.

Newer arrivals like myself are faced with staggering housing costs and huge inequality. Despite having a nominally high income, I feel poor in the Bay Area. On top of that, the general progressive population of the region compounds the problem with wasting tax dollars on boondoggles like rent control and high speed rail, on the mistaken belief that they help.

I loathe the Bay Area and have no interest in its long term future. I'm here because it's the only place I can do my job. And I'm not optimistic about the long term future of the area: between fiscal mismanagement, bad politics, changing demographics, and a massive housing bubble, the California dream is going to implode sooner or later, and even real estate in the area doesn't look like a good investment anymore.


 +   3 people like this
Posted by Resident, a resident of Another Palo Alto neighborhood,
on Jul 12, 2016 at 8:41 am

What we have to remember is that like draws like.

One of the attractions for people with high tech qualifications to live here is the availability of jobs and the fact that both members of a couple can change jobs several times in their career without having to move house. Moving house can cause all sorts of disruptions even within the same area, but when you start thinking of the disruptions a major move makes to a family it is understandable to think of that as something that should be avoided.

I know of a couple who are presently in a situation where this is causing them great difficulty. Both work and need to work to afford to stay where they are living but one member of the couple is being relocated to Sacramento. The couple are in an understandable quandary about what to do. If they sell their home here and move to Sacramento it is unlikely that they would be able to return to live here in the future in a similar home. If they as a couple both relocate to Sacramento it is possible that the spouse may not be able to find a similar job in that area. If they do relocate because of the job it would mean that a career move in the future will not be possible.

Their options as they see it are for the one to weekly commute to Sacramento and find a small apartment to live in during the week or for the relocating spouse to quit and find another job here. Neither of these options appears to be a good move for their family, so yes, quandary indeed.


 +   17 people like this
Posted by Allen Akin, a resident of Professorville,
on Jul 12, 2016 at 9:12 am

Sorry, I've got plumbing problems this morning, so I can't take the time to be as thoughtful about this discussion as I usually try to be.

My friends at Facebook in Dallas, or Intel in Portland and Sacramento, or NVIDIA and Google in Austin, and so on, would point out that Silicon Valley companies ARE expanding elsewhere, by both growth and acquisition, and have been doing so for years.

My friends at Microsoft and Amazon would point out that major tech company successes are not limited to Silicon Valley. Then there are Samsung, or Siemens, or hundreds of other companies, whose employees would point out that major tech successes are not limited to the US.

Silicon Valley Exceptionalism probably seems a bit quaint to these people.

Companies here continue to grow here because it's been fairly easy up to now. We had land and infrastructure with enough excess capacity to support high rates of growth affordably, as well as all the positive attributes that have been mentioned above.

That may no longer be the case. Land is limited and expensive. Infrastructure is tapping out, so further expansion will require large capital investments. Social justice, cultural, and environmental issues that affected too few people to be significant in the past now affect large enough numbers of people that they may become roadblocks. Many problems have grown beyond the ability of local entities to manage, and creating effective political structure for regional management is extremely challenging.

Now, so long as local people are willing to subsidize unconstrained corporate growth (primarily by providing capital for infrastructure and housing, but also taxing everyone for the ongoing expenses of new schools, services, and so on that new employees require, and absorbing the cost of environmental degradation), companies here will continue to grow here. If local people are unwilling to commit to this for the long term, then companies will gradually move toward greater expansion outside the Bay Area.

It's important to emphasize that this involves value judgements that are beyond simple economics. I see unbounded densification of the Bay Area as a bad thing, not because it's economically unjustifiable, but because I suspect it's environmentally unsustainable, it destroys lifestyle diversity, and hoards opportunity that (on social and ethical grounds) might better be spread around, among other things. I don't expect everyone to agree with those judgements, but I do expect people in positions of influence to make a good-faith attempt to understand and explain all the consequences of greater urbanization so that everyone can make their own judgements.

I'll leave you with two indicators of change in the wind.

Sergey Brin suggests starting businesses elsewhere: Web Link

The majority of tech workers consider that working in Silicon Valley is not important, and searches for jobs outside it are increasing: Web Link


 +   6 people like this
Posted by Jake, a resident of Old Mountain View,
on Jul 12, 2016 at 10:47 am

The other major tech hubs, Seattle, NYC, and LA, are just as bad. Furthermore, popularity or rapid growth aren't the root cause of the problems that the Bay Area is experiencing, it's the policies that tech workers favor; many of them come out of academic environments and work for corporations; many of them are immigrants from Europe. As such, they favor socieities with strong government, high taxation, high government spending, and hierarchical organizations.

Furthermore, as people recognize the Bay Area as less desirable, housing prices are going to plateau or drop, and there will be more belly-aching and calls for bailouts and government help.


 +   3 people like this
Posted by stephen levy, a resident of University South,
on Jul 12, 2016 at 10:50 am

stephen levy is a registered user.

Thanks for all the comments and the respectful tone.

I agree that some companies have active expansion programs outside the region just as they do within the region.

I agree that housing costs exert a hardship on residents who find their best job opportunities here.

I agree that couples who find their jobs in different adjacent regions face challenges.

But despite all this agreement, it remains true that companies are expanding here, new residents are moving in, our population growth rates leads the state and talk of a bubble for now is just talk.

I think we could be in for office overbuilding down the road and will write more later but office space is pretty much self correcting.

We face in some ways a no win choice. I do not see it this way but others might.

If we do not address transportation and housing challenges, most of us suffer. the people who do not come don't suffer, they just don't come. the burdens of inaction fall on existing residents.

On the other hand if we aggressively expand transportation and housing choices, that will make the region even more attractive.

In terms of incentives to move Nevada laid out more than $1 billion to entice Tesla. Unless posters have a few $ billion in loose change lying around I do not see the likelihood of us paying firms to leave--even putting the politics aside.


 +   2 people like this
Posted by mauricio, a resident of Embarcadero Oaks/Leland,
on Jul 12, 2016 at 11:03 am

mauricio is a registered user.

deleted.

This is a blog about why companies and workers move or stay.

It is not a blog about Palo Alto housing issues or telling companies what they " should " do.

Mauricio, you have plenty of blogs on these topics on TS where you can post.


 +   5 people like this
Posted by Curmudgeon, a resident of Downtown North,
on Jul 12, 2016 at 12:09 pm

"Why Don’t More Companies Move or Expand Outside the Bay Area"

Ego at the top. They want the mystique of a Silicon Valley address. All else is subordinate.

It's that simple.


 +   9 people like this
Posted by JG, a resident of another community,
on Jul 12, 2016 at 1:33 pm

Many company are leaving, have left or are no longer being founded here.

They have primarily been hardware and manufacturing based businesses so they are not "sexy" or "inspiring" or "big news" companies. But WE are the bread and butter than enables the software business to exist and it's our innovation that enables software. They don't get VC money despite having rational business plans and better financials and time-to-profitability. These things no longer matter in the US!

I recently helped move my last company to Asia. I'd worked there for about 5+ years and we did manufacturing for semiconductor manufacturing applications. It didn't make sense to remain in Silicon Valley any more because most semiconductors are long gone from "Silicon" Valley. The center of the entire supply chain that used to be in the US is now over there instead.

I'm starting a new company - it has NOT be founded in Silicon Valley or even in California. It is hardware related. But Silicon Valley no longer has any advantages or leverage for that kind of business now and in my case most of my upstream and downstream supply chain partners are ALSO in Asia like that last one.

Why the hell would you locate here? What advantage could possibly exist by "jerking the supply chain from Asian, to the US and then back again? Would supply chain partners prefer that or prefer to keep it all in Asia? It's pretty damn obvious! And when you need custom components developed or made, which is easier: having partners across the street or across an ocean?

And then there's your employees to worry about. Living in the Bay Area is both expensive to startups (especially those who aren't in the "sexy categories" that VCs like to fund), and expensive to employees. I've lived in the Bay Area since the early 1970s (I grew up here) and honestly the Bay Area is now a crappy place to live compared to back in the day. The costs are insane. The quality of life isn't there. Healthcare is inferior for the price you have to pay. The expendable income for employees is non-existent as it's eaten up by worthless, no-value rentier consumption.

I care about my employees and frankly the Bay Area is a millstone around the neck of employers and employees now. In no moral world can I inflict the horror that is now Bay Area living onto my employees any more. Not when I can get all the other benefits of better quality of business fundamentals combined with better quality of life but keep more money in both my pocket but also in my employees' pockets as well.

That's what we shut down my last company and sent it to Asia. We also sent most of the employees over as well. A few didn't go but most wanted to leave the Bay Area either with or without us. Living in Asia is cheaper for everyone and far better for a engineering-centric business today. My new company is currently based in the US (in an insanely cheap part) for some final R&D and proof of MVP but then we are relocating everyone to Asia as well.

The 20th century was the American Century. The 21st is the Asian Century. Americans can live in denial about that but it will not change the reality.


 +  Like this comment
Posted by frs, a resident of another community,
on Jul 12, 2016 at 3:22 pm

deleted, the post this comment refersx to has been deleted,


 +   1 person likes this
Posted by mauricio, a resident of Embarcadero Oaks/Leland,
on Jul 12, 2016 at 4:21 pm

mauricio is a registered user.

deleted. The comments this refers to have been deleted.


 +   5 people like this
Posted by BlatherBuss, a resident of Barron Park,
on Jul 12, 2016 at 11:33 pm

They do.

Ever hear of Austin, RTP or Bangalore? There is a life cycle to all companies. Once they stop growing they start the inevitable search for lower costs. The social media companies will start to hit that phase soon.


 +   7 people like this
Posted by Big Picture, a resident of Another Palo Alto neighborhood,
on Jul 13, 2016 at 12:02 am

To the extent that the excess of workers, and the jobs/housing imbalance is being used as the primary justification for what many consider unwise overbuilding, destruction of quality of life, and overtaxing of resources, reducing that imbalance by reducing the corporate job density has to be considered alongside other proposals. Especially since reducing corporate overcrowding is an easier proposition than any other. I don't think anyone has to worry about loss of jobs, as you suggested, because we have too many jobs. That's what's driving this whole conflict. Given that companies are moving in despite the negatives, as you say, it would be easy enough if necessary to get jobs back so long as we didn't permanently destroy the attractions of this place.

I definitely agree with Allen Akin. And the poster above who moved his company away. It's easier and better for this region and the nation in the long run if we look at the bigger picture and not only actively look at how to move some companies, but also consider reducing office capacity in tandem and encouraging real retail for residents again. It's too bad we don't have a billionaire quality of life investment company like Los Altos has, because that would facilitate exactly that conversion (less offfice more resident-friendly retail) to create balance in our city again.

Rather than forcing any companies out, which would just be wrong, or relying on incentives from other states, the best thing is to actively work to improve the attractiveness of other places that are already pretty attractive so that they are viable choices. Increasing the number of comparable choices would more naturally help reduce the overcrowding/overbuilding push.

Given the example of Portugal, which was the world's superpower and lost that status following a major earthquake in Lisbon (from which they had difficulty rebuilding and recovering), it seems a cautionary tale for earthquake-prone CA. This is a great nation that should have more balanced distribution of job centers.

Creating incentives for companies to move to other states by those states is not the same as more holistic planning in which the Bay Area contributes to solving its problems by contributing to improving the beauty and attractiveness of other places to live as part of the equation. (Such a move would increase the number of attractive places for retirement - sign me up first). Just moving a company or two is not going to make any place attractive. For large global companies, it does make sense to distribute operations to increase resilience (for the company and nation).

Nevada only had to pay Tesla $1B because Nevada has nothing but money to attract Tesla - it's a big dry state with a lot of mining, gambling establishments, and prisons. Not much else. (Except for Tahoe, but even the Caliornia side of the town is so much better than the Nevada side.) On the other hand, of the top cities in the US losing population, many are in temperate, beautiful places like North Carolina, and one in California. Memphis could be a jewel of this nation. Have you seen Nashville? You can get free world class music just going out for a bite of ice cream. The city is crawling with people of immense talent trying to make it in music. It would be so easy to increae the attractiveness for some high tech industries, though Nashville is having its own growing pains at the moment (it already is pretty attractive).

It should be easier to rattle off a few dozen alternatives to the Bay Area, especially since this is such a vast nation, much of it temperate and getting more temperate with global warming. Making more attractive city centers around the nation that attract companies (without requiring incentives) would do a lot more for solving any overcrowding problems here. We could afford to sponsor a few cities just on what we would save by reducing the negative civic consequences of the jobs housing imbalance. Moving out the excess jobs is a lot easier than the alternatives.


 +  Like this comment
Posted by mauricio, a resident of Embarcadero Oaks/Leland,
on Jul 13, 2016 at 7:22 am

mauricio is a registered user.

deleted.

Hey Mauricio, try writing on the blog topic. If anyone made a non topic personal comment about you it would be deleted.

Your positions are pretty well known on Town Square so I would not worry too mich if one of your inappropriatel off topic personal attacks get deleted,

This and TS are moderated blogs and deletions are made all the time,

Chill.


 +   16 people like this
Posted by telecommuting?, a resident of Charleston Meadows,
on Jul 13, 2016 at 10:08 am

I find it hard to understand why so many companies choose to have their employees work on-site in Silicon Valley or SF when they could much more easily telecommute. Yes, they'd like to encourage spontaneous interaction between collaborators, but it seems that this could be easily done over the web. Having coders telecommute would make a huge difference in the problems of traffic and housing shortages.


 +   6 people like this
Posted by Demand Telecommuting, a resident of Another Mountain View Neighborhood,
on Jul 13, 2016 at 2:10 pm

There was a reason traffic was at least manageable during the .com boom: Flexible work hours. People could work 1/2 the day at home, 1/2 the day in the office, or variations of that. 1 or 2 days wfh or flexing in office hours would be a HUUUUGE benefit.

***We need to start demanding this of our local companies. They used to give great tax credits to companies that participated. The technology for us to work better exists. We don't all have to be mired in traffic for hours each day doing nothing.


 +   5 people like this
Posted by MPer, a resident of Menlo Park: Central Menlo Park,
on Jul 13, 2016 at 2:21 pm

Why are companies now responsible for the bay area's lack of planning over the past 50 years? Why do workers need to stay at home or move? The bay area is way less dense than most large cities, we have room to grow. This problem was not created by Stanford or Tech Companies, it was created by the short sighted city councils and special interest that have not addressed growth in the bay area for decades.

maybe all the retiree should sell and move away. before you attack, that is same thing you are all telling tech workers.


 +   3 people like this
Posted by Robert, a resident of another community,
on Jul 13, 2016 at 4:25 pm

@MPer

The title of this post is analogous to that person sitting in traffic, asking why don't all these other people and companies "move outside the Bay Area" so they can get to work faster.


 +   5 people like this
Posted by Another Thought, a resident of another community,
on Jul 13, 2016 at 4:43 pm

There has NOT been a lack of residential planning in Palo Alto, Mountain View
and Sunnyvale. There are many new units in the pipeline.

The recent expansion of tech offices is notable. There is a bubble expanding.
We've seen it before. Much of the easy money from Fed low interest rates was
channeled into building. But the problem was the easy buck is on the tech offices,
as opposed to housing. But you can't long term have one without the other. It's
happened before. A lot of these new offices will end up sitting empty at some point. There's also the issue of where the office construction has been located. A lot of
the motivation has been cities vying for 'jobs' which they don't particularly need. 'jobs' should not be a universal goal without limit. When the interest rates
come back up (if ever?) we'll finally see a cessation to the flow of the easy money
into construction which earns profit on paper but doesn't fill a real need.


 +   5 people like this
Posted by George Drysdale, a resident of Professorville,
on Jul 13, 2016 at 7:18 pm

Look to the younger more mathematically capable to look for new areas to establish themselves. You can't buy a house in Silicon Valley if you have kids. Then there's the water problem and global warming. There will be a shift.

George Drysdale


 +   3 people like this
Posted by Investment Wisdom, a resident of another community,
on Jul 13, 2016 at 7:43 pm

It's the old "Past results do not guarantee future performance." situation. Developers flock to Silicon Valley because history has given huge returns to land and building investments. But the wind will shift. It's only a question of when. Even then, it won't be forever. But meanwhile we have over investment in one area of the country due to investors trying to do the "safe" thing with their real estate investment. But at some point, we'll have over-capacity.


 +   6 people like this
Posted by Peter Carpenter, a resident of Atherton,
on Jul 14, 2016 at 9:22 am

Peter Carpenter is a registered user.

Annual Reviews (located in Palo Alto) and on whose Board I sit, has 74 total employees. 25 of those telecommute on a full time basis and some of the others telecommute on a PT basis. That is a huge contribution to reducing traffic congestion.


 +  Like this comment
Posted by ee cycle, a resident of Another Palo Alto neighborhood,
on Jul 14, 2016 at 12:46 pm

The big tech companies ARE growing more outside the bay area than inside. Huge employment centers have been rapidly growing in India and other countries for years, working for a tiny fraction of silicon valley salaries.

Is that what everyone wants? It's already the reality.
Mgmt positions in the US, large teams "off-shore".

Why move to the midwest when you can hire 4-5 for the price of 1 in other states, or 10+ for the price of one employee in silicon valley.

Then tens of thousands apply for any of the US visa programs and move here.


 +   7 people like this
Posted by lane mason, a resident of Another Mountain View Neighborhood,
on Jul 14, 2016 at 12:57 pm

By the 1980s, the SV chip companies of the '70s and '80s could no longer bring in manufacturing employees to the valley (too costly to be able to compete with Japan), so they expanded in Folsom, New Mexico, AZ, and OR. When I was at Dataquest (nee Gartner) , we did many siting studies for such companies which were deciding where to grow. Basic Rules: Close to good college/university, max 2 hours plane ride from SIlVal HQ, do not be the 'pioneer' into the area, ensure presence of your critical infrastructure (who will maintain your production equipment?).

Many Intel-ers whined when they were moved to Intel Folsom...at first. The they saw that their family could prosper with only one parent working, the kids could bike to school, and their house was half the price and 50% larger than in The Valley. Quality of life improved.

Cities can slow or stop growth by vetoing development that exceeds the ability of the transit (or other infrastructure) to support those additional employees. No developer pays for even a fraction of the additional social-cost burden his building or company puts on the existing community. ..incl Linked In, Google, Facebook, all those SilVal companies we worship daily...

Why do 100K people drive across the bay from Fremont and east bay every day to work in the valley? Mostly, because the companies they work for did not want to locate in Fremont.


 +   1 person likes this
Posted by Randy Soccer Mom, a resident of Greenmeadow,
on Jul 14, 2016 at 2:54 pm

Hi Steve and thanks for this topic.I hope whatI have to add is not too much "off"topic. I live in Palo Alto (for past 35 years) and I (still) rent. I work in schools in East Palo Alto and Sequoia district. Most recently, I've spent several weeks in Fairfield Iowa (!), population 10,000, and currently in Cranston, RI for a few weeks. I'll be in central Georgia (!) again en route to an island nation in the Caribbean. The point of this listing of places not on most bucket lists is: We live in an amazingly wonderful bubble in Palo Alto which I well-appreciate being now in the trenches with young minority families, immigrant families, midwestern woe-be-gones and others struggling and juggling, 2-parent families with 3 jobs between them. Every top needs a bottom - and the majority of our nation are bottom dwellers - are we still planning to count on them to float the retirement boats, social security, Medicare? Because if so, I feel we need to look out (as you are?) for ABAG and other supports for the 99% - in our area at least. My high school students work in Palo Alto restaurants after school - they are paying rent, helping their parents and supporting the consumerism that passes for our economy.
No point suggesting these populations move: it's THEIR home too. Perhaps you Steve might be in a position to find something to make their world, and ours, a shared world and a little bit better? I'm just sayin'...


 +   3 people like this
Posted by Edward Syrett, a resident of Menlo Park: The Willows,
on Jul 14, 2016 at 2:57 pm

Edward Syrett is a registered user.

My son made a good comment about the tech companies with offices in San Francisco. We were discussing an article about the struggles of restaurants that have recently opened in the area south of Market St. between 9th and 10th. He pointed out that these companies recruit the cream of the tech crop from colleges and try to provide them with a continuation of their dorm experience: game rooms, weight rooms and the company cafeteria with really good grub either subsidized or free. As one disgruntled restauranteur said, "It's hard to compete with free."

Lest this comment be deleted as off-topic, I must point out that this speaks against telecommuting. Employers want their software superstars to bounce ideas off each other in the "dorm". And that's who they recruit to SV. Straight-ahead programming can be done at much cheaper rates per line of code offshore, or even by people telecommuting from Modoc, Arkansas. But as with music, so with software design. You have to get the superstars together in a room and have them co-create. Later on, the cover bands will make the tunes available at local clubs for those who can't afford $400 stadium seats.


 +   3 people like this
Posted by Curmudgeon, a resident of Downtown North,
on Jul 14, 2016 at 4:04 pm

"Annual Reviews (located in Palo Alto) and on whose Board I sit, has 74 total employees. 25 of those telecommute on a full time basis and some of the others telecommute on a PT basis. That is a huge contribution to reducing traffic congestion."

And perhaps to the Bottom Line. Any job that can be telecommuted can very easily be offshored.

Personally, I am grateful my plumber does not telecommute, likewise my roofers, gardeners, and housepainters. Hopefully the same with police and fire services if they are ever needed.


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Posted by stephen levy, a resident of University South,
on Jul 14, 2016 at 5:08 pm

stephen levy is a registered user.

Thanks for the comments. There are a lot of good ideas in the comments but some posters are making points that actually support what I wrote--that there are strong continuing reasons for firms and workers to locate in the Bay Area, while thinking they are contradicting that point.

It is both true that tech firms are expanding elsewhere AND that the Bay Area is a compelling location. Just yesterday the Mercury News reported that tech job growth in the region exceeded 5% last year and 6% on the peninsula.

These trends are occurring not as a result of ego as one poster asserted but because there is a deep and skilled workforce and, despite the complaints of some posters, most people like the area.

In a Filed Poll today Bay Area residents posted the highest favorable rating for where they live among California residents.

And yesterday Google and LinkedIn agreed to a land swap that will both allow them to grow more than they could in North Bayshore (LinkedIn will expand in Sunnyvale) and help the North Bayshore traffic planning.

And during this period of high housing prices, expansion in Austin, India and elsewhere the Bay Area led the state in Population growth and Santa Clara County was the fastest growing county in California since 2010.

Job growth will slow here and elsewhere as boomers leave the workforce but the Bay Area remains an attractive place to many firms and workers. Denying it does not make it less so.


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Posted by stephen levy, a resident of University South,
on Jul 14, 2016 at 5:11 pm

stephen levy is a registered user.

The telecommuting point is interesting and I am not an expert on these trends. Telecommuting has been going on for a while and could certainly partially relieve traffic pressures.

I do not see any problem if it is voluntary, even aided by incentives.

But more telecommuting will make the region more attractive and does not address the major housing challenges.


 +   6 people like this
Posted by Peter Carpenter, a resident of Atherton,
on Jul 14, 2016 at 5:27 pm

Peter Carpenter is a registered user.

All of Annual Review's telecommuters are valued employees who began their employment while based in Palo Alto. When each of those individuals moved to a new location, usually for family/spouse employment relocation reasons, Annual Reviews offered them the opportunity to "remain in the family".

This has been a win-win situation for Annual Reviews and for these valued employees. It has also reduced the impact of Annual Reviews' Palo Alto operations on local traffic congestion.


 +   2 people like this
Posted by stephen levy, a resident of University South,
on Jul 14, 2016 at 5:33 pm

stephen levy is a registered user.

The office over development point is interesting and there may soon be a short term excess of spec office space.

But i would not make too much of this.

Spec office space is a pretty self correcting market and not a long term threat to the Bay Area economy.

If you think about office space does not create jobs, the tenants create the jobs.

Moreover, many of the recent planned expansions--FB, Google, Apple, LinkedIn are from companies that can build space themselves and do not depend of spec office developments.

We are talking long term trends here not the ups and downs of office markets.


 +   1 person likes this
Posted by Harry Merkin, a resident of Ventura,
on Jul 15, 2016 at 6:02 pm

"All of Annual Review's telecommuters are valued employees who began their employment while based in Palo Alto. When each of those individuals moved to a new location, usually for family/spouse employment relocation reasons, Annual Reviews offered them the opportunity to "remain in the family". "

That begs a question of some interest to me, Mr. Carpenter. If your employees who move elsewhere can freely choose to telecommute, then why don't All your employees telecommute in the first place?


 +   4 people like this
Posted by Peter Carpenter, a resident of Atherton,
on Jul 15, 2016 at 6:10 pm

Peter Carpenter is a registered user.

" then why don't All your employees telecommute in the first place? "

Simply because Annual Reviews requires new employees to work at the Palo Alto site for a significant length of time before they are eligible to telecommute.
Experience at other organizations has shown that individuals cannot be properly integrated into an organization's culture without first working with other employees on a face-to-face basis.

Equally telling is that 2/3 of Annual Reviews employees prefer to live locally including one employee who has been with Annual Reviews for 50 years.


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Posted by HelloHanalei, a resident of Menlo Park: Suburban Park/Lorelei Manor/Flood Park Triangle,
on Jul 17, 2016 at 11:06 pm

HelloHanalei is a registered user.

Speaking as a 5th-generation native Californian, I think the only logical solution is for everyone who came here post-1800 to move somewhere else.

I kid ... or do I??? ;)


 +  Like this comment
Posted by Harry Merkin, a resident of Ventura,
on Jul 18, 2016 at 12:20 pm

@Steve Levy

If you feel it necessary to delete postings, please have the common courtesy and courage to explain why, as your fellow blogger Doug Moran does.


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Posted by stephen levy, a resident of University South,
on Jul 18, 2016 at 12:27 pm

stephen levy is a registered user.

Sure Harry

One, inappropriate inflamatory language not related to my blog topic.

Two, this blog is not the place for a back and forth about immigration policy with another poster.

I thought Peter answered your question already and I wanted to stop the back and forth.

And I deleted the whole back and forth not just your posts.


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Posted by Mark Weiss, a resident of Downtown North,
on Jul 18, 2016 at 3:56 pm

Mark Weiss is a registered user.

This might be tangential to the topic and subject to the cold hard knife of the document enforcer, which would be both fitting and ironic, but here goes:

"Happy bottom quarter" is a theoretical construct that claims that Harvard admits not the 2,000 best students for the class but 1,500 real students and 500 "happy bottom quarters" -- because otherwise the 500 additional real students with be upset with always finishing behind their betters. The "HBQ" is just happy to play hockey, run the newspaper, hand out towels in the locker room, whatever.

Meanwhile, as Silicon Valley grows, and computers proliferate, money is upshifted to the one-percent (or one-tenth of a percent).

What I'm saying is maybe if you are not in Silicon Valley to the level of company founder or VC -- Masters of the Universe, as Tom Wolfe used to say -- you are not really in Silicon Valley. If you are at a "Unicorn" but playing for $250k yearly but not the $10m to $2B exit, you are just a functionary and presumably or so far, "happy". Your likely a renter, maybe in a garage or in bunk beds. You are not really a voter, or you are a tool of the builders (who are somewhere between the VCs and the HBQ).

I'm not sure who it is pouring or pulling our lattes. Even at $15 per hour (or stock option if their disruptive, our founder sits courtside at Warriors games is employer is that shrewd, or that cruel).

People like me who are divested but not completely disinterested in the changes here -- I'm more like Steve I guess -- despite my posing, and posting -- are basically going the way of the Ohlone circa 1769. I can rent here barely, but can only buy with inherited wealth. (Or buy in...which to me means sell out).

I feel more in common with the middle class anywhere -- any country, any ethnicity, any religion -- that the 1 percent here or there.

This is a good column, lots of views, some good comments. Glad to chip in. My .25/cents worth.

Excuse the digression: would love to see a rigorous comparison between Palo Alto as a company town under Ned Porter mayor / HP honcho and Palantir influence today.

Generally this website and media outlet does a disservice by deleting dissent, and its strong pro-development (maybe pro-computer) bias. Similarly, the decline of the Fourth Estate means: we have no idea why people take to the streets, are at war, seem angry. There are billions of people who are not "happy bottom quarter."

Palo Altans have the right to try to self-govern. Rent control, for instance.

When they came for the off-topic blog-commenter, I did not object because I was not an off-topic blog-commenter.

Be kind, rewind.

(yeah, yeah, yeah, i read more poetry in college than I wrote BASIC)


 +  Like this comment
Posted by Mark Weiss, a resident of Downtown North,
on Jul 18, 2016 at 4:30 pm

Mark Weiss is a registered user.

Take two:
"the innovation capital of the world" your term I read as not "greatest creation of wealth ever" but more like biggest fraud since somebody's book "man has dominion over earth and animals". (they left out earth going round sun, universe expanding, et cetera).

Case in point: the interactive mobile Pokemon game features a technology whose creator is now a Unicorn -- valued at $1 Billion pre-IPO, although a year ago it raised only $20 milion and now, partially due to local news reports about game players so enthralled that they are being robbed while playing this game, another $100 M, institutional investors at that new valuation.

The smart guys throw $120 million at something because they know they will get back billions, and the cycle continues.

The Pokemon Go is, if you excuse the mixed metaphor, jumping the shark.

(Meanwhile, Stanford recently added a video game unicorn to its former Stanford Industrial Park or Stanford Research Park --in the long time home of a device maker. And Palo Alto gave the developer a million dollar tax break in the form of permits for more office space than exists now)

No one says this out loud but a corrolary to Moore's Law is the increasing ability of the finance people to profit from this hype. Your gold rush analogy Dr. L, is appropriate. Now its Pokemon Go Rush.

So which bubble pops first: technology, office space or housing?

Yeah, I see a lot of white male elites sitting around lavish offices, built over displaced amenities, self-correcting.



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