Monday, February 9, 2015

Any Bay Area Readers?

Do I have any Bay Area readers that are on the ground for and can shine some light on the last remaining bubble: the app/social media/VC bubble?


Now that oil has blown up, this is the last one.

I want to see it in person, it would be like going to an oil industry conference in December 2013. Anybody have access to an opulent tech campus cafeteria? Leave a note in the comments.


CP said...


ctx_coverage (at) yahoo (dot) com

Unknown said...

It's Santa Monica, not the Bay Area, but you will love this:

Anonymous said...

Listen to the millennial voice of the cornerstone chick! Vocal fry!

Anonymous said...

Unknown said...

Listen to the millennial voice of the cornerstone chick! Vocal fry!

Yeah her voice is annoying

AllanF said...

FWIW, the company I now work for is not having any problems recruiting employees from the Bay Area to move to Portland.

Granted we are not in the bubble-licious social media space, but we are a tech company hiring sw engineers.

Anonymous said...

I live and work in Mountain View, though I don't claim any profound insights into the tech bubble :)

I wouldn't get too fixated on the superficial excesses of tech campuses / cafeterias since there are rational explanations for the practice.
- It's tax-free compensation and marginal tax rates are 30-50% for most tech workers in CA.
- Facility costs are probably lower than "old school" companies like MSFT or IBM because workplace density is about double. It's the difference between being a grad student (communal office) and university professor (exclusive office with a door).
- Employers need to retain a non-trivial number of independently wealthy people, so work needs to be a place they want to go.
- Labor costs are high enough that the effective subsidy of free meals is paid for by time savings (e.g. $20 subsidy is 12 minutes @ $100/hr).
- Consumer-facing tech companies need to cultivate a certain reputation for people to trust them with their private data. Lavish, playful campuses say "trust us, we're youthful and idealistic". It's not uncommon to see tourists snapping pictures around tech campuses.
Having said that, there is definitely some cargo cultism at work among startups. However, for large, established tech companies I think it's a deliberate and rational practice.

Most people who work around here are true believers, but mostly by virtue of being young or immigrating from China / India. Marginal housing costs are driven by a number of factors
- Newly-minted CS graduates who suddenly earn six-figures and don't know what's appropriate to spend on rent. Millennials really value "experiences" and telling friends back home that you live in SF is attractive at any price.
- Immigrants from China / India whose primary life aspiration is to establish a US beachhead for their family. For these people the fact that their (often dual) wages are consumed by the cost of housing is immaterial - they get to live in a politically-stable democracy, with clean water, low crime and (in certain ZIP codes) great public schools. Having said that, you can find many $700/sq. ft. houses in terrible school districts.
- Members of subcultures for whom SF is a cultural Mecca. Many of these people forgo progeny to pay the rent.
Non-believers are comparably scarce. In my experience, people who perceive SF to be a bad value save their money and eventually leave the area.
- Prop 13 / rent control severely restrict the supply of market-rate housing.

Anonymous said...


I think tech compensation is part real and part bubble. On the one hand, there are actual businesses within tech companies that have unprecedented levels of productivity. Paying these people 2x or 3x what they might earn in a different kind of business doesn't matter - it's a small fraction of the per-engineer revenue.

OTOH there are bunch of completely bogus startups and businesses within established companies which pay comparable wages. Among the potential drivers are
- Fear of missing out on the "next Facebook".
- Many poorly-intentioned and failed startups will be "acqui-hired" by an established company. Right now this practice serves as a put option for founders, investors and startup employees. If you're a recent CS PhD from Stanford you might as well take a swing at the fences because the worst case scenario is you get acqui-hired a few years later with a package that negates the opportunity cost.
- It's possible that established players are intentionally driving up labor costs because it starves competitors of warm bodies. This is particularly true of people with expertise in "hot" areas like machine learning.
- Older tech companies (e.g. semiconductors) can't pay Bay Area on wages anymore, so they shift operations to places like OR, TX or NC.

Anyway, I hesitate to call the Bay Area a bubble - it's something bigger than that. It's definitely irrational and completely unsustainable, but I don't see any near-term catalyst for significant change. Maybe social media stocks will take a beating in the near future, but AFAICT the institutions and cultural mindset that created this particular bubble will remain as strong as ever.

eah said...

"university professor (exclusive office with a door)"

What % of grunt engineers at "old school companies like MSFT or IBM" do you imagine have their own office? Ever heard of cubicles? Ever read Dilbert?

If I was the kind of person who wrote "LOL", I would do that now. But I'm not.

jHurt said...

^great post by anonymous. thank you

Unknown said...

Anonymous said...
I live and work in Mountain View, though I don't claim any profound insights into the tech bubble :)

Great post, thank you for the local color. I hadn't thought of that, but it makes sense that they would want to make as much compensation tax-free as possible.