Tech companies leaving San Fran for Midwest

[Azem.Ocram]

https://nyti.ms/2Fgdcdp
(Soft Paywall)

Citing multiple issues, investors and tech companies are looking into funding startups and opening campuses in the Midwest. Reasons provided included the following: high rents (San Francisco has the highest rents in the world), traffic congestion, unused infrastructure in the midwest, more favorable opinions in midwest (1/2 of Californians mistrust social media companies), more diverse and moderate opinions and politics in the midwest (San Francisco said to have toxic atmosphere counterproductive to innovation), more space to grow in midwest, and lower costs across the board in the midwest (besides, no droughts, massive fires, or earthquakes). Even Amazon, with its huge HQ in Seattle, is going to build a 2nd HQ in the Midwest (or possibly Eastern Seaboard).

There are many startups in the Midwest and everyone knows the rust belt could use more investment after the manufacturing jobs went away. Besides, spreading out to cities that used to be bigger not only invigorates them but also puts less strain on San Francisco and LA. It’s a win-win situation to expand into the midwest.

 

[civvver]

Makes sense to me. My sister is a graphic designed who lived 5 years in san francisco. In that time span she worked for three companies, two startups and citrix was the third one. The whole job culture there just seems entirely wonky. People will have a singular idea which might seem like it has no chance of ever generating revenue like hey we're gonna make a better version of yelp! Um ok? Then somehow they get a bunch of money, hire 5 developers for astronomical salaries and in one or two years either they all jump ship to another job or the company goes belly up without accomplishing anything. It's really weird but it's like in their dna to jump from startup to startup. If you're actually trying to push revolutionary ideas and have 9 failures before 1 huge success ok, but most of these startups seem to do the exact same thing just in different packaging and none of them really do it better. It shocks me that they keep getting funded.

And then the salary issue. Even accounting for high rents and taxes, which everyone touts as the reason people make so much in the bay area, they still make like 2-3 times what engineers in the mid west do. Dunno why companies would choose to continue to pay that when they can just build facilities in other less demanding areas.

 

[Lexicus]

*cue midwestern governments at the state and local level lining up to perform favors for their new corporate overlords*

 

[Perfection]

Minneapolis-St. Paul is already a tech powerhouse.

 

[rah]

Yeah, it's picked up considerably in Chicago the last 5 years. Imagine how much more it would have if the state wasn't so screwed up.

 

[Lexicus]

AFAIK Chicago went as far as promising Amazon it could keep its workers' income taxes. @Olleus, that's a nice bit of ancient Roman political economy for you.

 

[Timsup2nothin]

*cue midwestern governments at the state and local level lining up to perform favors for their new corporate overlords*

These companies better be careful. We've already seen that red state governments can turn on their corporate overlords with just a single phone call from the NRA. Hard to tell what other deplorable PACs might wield such control.

 

[dutchfire]

If they're just opening new additional campuses (campi?) in different locations, can you really say that they are leaving SF?

 

[GoodEnoughForMe]

please don't do this to us, can't they see detroit has suffered enough at the hands of colonizers

 

[Zkribbler]

The OP is based entirely on one (1) opinion piece. The only hard stats I recall seeing were in people (not companies) leaving town. This doesn't impress me--I moved out of town, from LA to the Philippines. But it wasn't for the job opportunities.

If I were a young, bright computer engineer, I'd rather be rubbing shoulders with the High Lords of Silicon Valley than rusting away on the banks of Lake Erie. There's a reason that rents are murderously high in SF and LA. They are the Land of Opportunity.

 

[Azem.Ocram]

The Great Lakes area/Rust Belt and Colorado (thanks to shale oil) are experiencing rapid growth now. The Greater Seattle Area (King County and Snohomish County) are also experiencing rapid growth. NYC is mostly at max density, San Francisco’s zoning laws prevent much more growth, but LA can densify suburbs and improve mass transit (though traffic is currently horrible).

Feel free to provide articles/sources backing or refuting my point.

 

[warpus]

Dunno why companies would choose to continue to pay that when they can just build facilities in other less demanding areas.

Some of these companies will want the best possible talent in their field. And that can be found in the silicon valley. Not always, but that's where people who are good at that stuff go to make the big bucks.

 

[Timsup2nothin]

The Great Lakes area/Rust Belt and Colorado (thanks to shale oil) are experiencing rapid growth now. The Greater Seattle Area (King County and Snohomish County) are also experiencing rapid growth. NYC is mostly at max density, San Francisco’s zoning laws prevent much more growth, but LA can densify suburbs and improve mass transit (though traffic is currently horrible).

Feel free to provide articles/sources backing or refuting my point.

This is one of those "burden of proof lies on the claimant" things. You brought an interesting article, so props for that. What I'm not satisfied with is the somewhat clickbaity thread title. Your article doesn't support it. Heck, your OP doesn't support it.

Yes, the bay area is a tough place for starting up, or expanding an existing business. Whether it is the commercial space for the business or what you have to pay employees so they can afford residence the property values are cutting hard against you. So, sure, expand elsewhere. Startups elsewhere. Great! Spread the wealth!

But there's no indication that anyone is leaving.

Which makes all the "leaving because <bash of choice>" bits in your OP badly off base.

Particularly the whole "perception of the tech industries" part. Yes, I am sure that a higher percentage of Californians distrust the tech industry...because a higher percentage of Californians work in the tech industry. The tech industry is like any other...the more you see it the less there is to like about it.

As to the "diverse and moderate opinions" part, that's frankly laughable. California has the same diversity of opinions that Illinois has, but you won't see it any better from Chicago than you do from San Fransisco. Same for Washington state. It also has that diversity, but it doesn't show up in Seattle, which is where tech companies talk about expanding. They aren't talking about rubbing shoulders with the Trumpists of Spokane County.

 

[innonimatu]

It shocks me that they keep getting funded.

And then the salary issue. Even accounting for high rents and taxes, which everyone touts as the reason people make so much in the bay area, they still make like 2-3 times what engineers in the mid west do. Dunno why companies would choose to continue to pay that when they can just build facilities in other less demanding areas.

You already answered yourself. Because all that money is easy money.

If you want the mid-western version, why do companies keep drilling for oil and gas when prices are low and their debt keeps increasing? Because they have easy financing to keep doing it.

Some of these companies will want the best possible talent in their field. And that can be found in the silicon valley. Not always, but that's where people who are good at that stuff go to make the big bucks.

The best possible talent has been producing preciously little of value recently. Name me one big useful tool or technology that came out of there in the last 5 years.

 

[sophie]

The infrastructure is the main reason tech is in the Bay: Stanford and Berkeley are top-10 worldwide STEM universities. UCSF is an elite med school. UCSC, San Jose State, SF State, and Davis are all also well-regarded schools within an hour's drive from SF/SJ. The Bay is the heart of tech because the universities ensure a smooth and rapid talent delivery pipeline.

It's the same reason why, although Vancouver and Atlanta have become increasingly important nexuses of the film industry, Hollywood/LA is still the place at the end of the day where movies get made. Two of THE three film schools are there. All the film production companies are there. All the talent moves there because of the first two things, and the first two things stay there because of the last thing.

 

[Hygro]

https://nyti.ms/2Fgdcdp
(Soft Paywall)

Citing multiple issues, investors and tech companies are looking into funding startups and opening campuses in the Midwest. Reasons provided included the following: high rents (San Francisco has the highest rents in the world), traffic congestion, unused infrastructure in the midwest, more favorable opinions in midwest (1/2 of Californians mistrust social media companies), more diverse and moderate opinions and politics in the midwest (San Francisco said to have toxic atmosphere counterproductive to innovation), more space to grow in midwest, and lower costs across the board in the midwest (besides, no droughts, massive fires, or earthquakes). Even Amazon, with its huge HQ in Seattle, is going to build a 2nd HQ in the Midwest (or possibly Eastern Seaboard).

There are many startups in the Midwest and everyone knows the rust belt could use more investment after the manufacturing jobs went away. Besides, spreading out to cities that used to be bigger not only invigorates them but also puts less strain on San Francisco and LA. It’s a win-win situation to expand into the midwest.

It's hard to describe what's happening here. Basically we reached a plateau in the current investment cycle but we did it so big the excess is spilling. That can look like The Thing is leaving but it's not, The Thing is here to stay.

The increasing returns to scale from growing a population (and particularly, a trained labor force of programmers and investors) outweigh cost reduction until you've literally run out of physical space, which with traffic right now we've basically done. Once you run out of room, you can't spend money to avoid lost time. Time is core resource.

 

[dutchfire]

The best possible talent has been producing preciously little of value recently. Name me one big useful tool or technology that came out of there in the last 5 years.

Grumpy old people have been saying this for decades, and they've been wrong for decades.

First of all, you're presenting a Civilization-like vision of discrete technological development where we discovered Flight in 1903 and then progress stood still for a few decades until we discovered Advanced Flight in the 40s/50s. That's not what happened in reality. The same holds for current developments. Computer technology has been getting faster, safer, more efficient and generally better of the last 5 years.

Second, even if you'd want to look at a Great Man Theory of the history of technology, 5 years to get a useful tool is rather ridiculous. Getting back to Flight, 5 years after the Wright brothers had made their first flight the Netherlands hadn't even seen its first aircraft. If you'd asked "Name me one big useful tool or technology that came out of there in the last 5 years." in 1908 and someone answered flight, your predecessors would surely nitpick that flight was not useful. The CCD was invented in 1969, the first commerical digital camera was made in 1975 (already more than 5 years!) but it took until the '90s and '00s for the digital camera revolution to happen.

Third, even given these silly criteria, it is easy to think of a few:

Cargo rockets that can land safely and be re-used
HTML5
Self-driving road cars
Commercially viable electric cars
Chromecast
Near Field Communication equipped bank cards for contactless payment (introduced in NL in 2013, I know other places might have had it earlier)

 

[Hygro]

All of these companies are building in-house skynet, but inno, what should these talented people be doing?

 

[Lexicus]

All of these companies are building in-house skynet, but inno, what should these talented people be doing?

Figuring out how to distribute food so that zero people go hungry instead of hundreds of millions
Inventing things to reduce carbon emissions

There's lots of things they could be doing instead

 

[GoodEnoughForMe]

The Great Lakes area/Rust Belt and Colorado (thanks to shale oil) are experiencing rapid growth now. The Greater Seattle Area (King County and Snohomish County) are also experiencing rapid growth. NYC is mostly at max density, San Francisco’s zoning laws prevent much more growth, but LA can densify suburbs and improve mass transit (though traffic is currently horrible).

Feel free to provide articles/sources backing or refuting my point.

Depends on what you mean by growth.

Spoiler :

The rust belt/great lakes region continues to be a population 'drag' relative to all other areas of the country. Michigan was the only state in the 2010 to have lost population, although it looks like that will not be true for 2020.

Economic growth is not as 'bad' but the region is still far from the top. The best areas by that measure are the mountain west and parts of the southeast.