Places Where the Silicon Valley Bubble Could Pop

waderoush writes: "If Silicon Valley is in a bubble — which it is – how will it finally burst? Where is the bubble's membrane being stretched so thin that it's in danger of tearing open and letting the real world rush in? This commentary from Xconomy picks real places around the San Francisco Bay Area embodying tensions, imbalances, injustices, or dangers that could escalate into a show-stopping crisis for the technology economy. One is Bank of America's former headquarters in the heart of San Francisco's Financial District; another is an elementary school in Oakland that happens to sit on the Hayward Fault. 'If we can identify the fractures that threaten to destroy the innovation machine, we might be able to patch them up and keep the system going for a while longer — and maybe even point it in a smarter direction,' the piece argues."

Comments

I Read TFA...

[NotSanguine]

It was disjointed and didn't really seem to have any sort of point or theme. Now I can't get that time back. :(

Re:I Read TFA...

[curunir]

Read the linked TechCrunch article...it's really a great explanation of everything that's going on. One good example was Mountain View working on a commercial development that would bring 42,550 jobs to the city while only creating additional housing for 7000 people. This in a city where already far more people work than live. To Mountain View, it's simple...residents require more services like schools, fire departments and police than do office complexes. But those workers have to live somewhere and cities like Mountain View that are acting selfishly are pushing rents up in nearby cities.

Two of those cities are San Francisco and Oakland. Both cities have a lot of housing when you ignore one minor detail...the current residents that would need to be displaced. But since all those jobs in Mountain View pay way more than the current residents make, developers and landlords are only too happy profiteer off the well-compensated tech workers by pricing the current residents out of the market.

But, as the piece lays out, it's not tech workers that are to blame and, for the most part, not tech companies either. It's mostly local and state government's 30+ years of stupidity that's led to this. Starting with prop 13 in 1978 and the backlash that led to rent control laws, government created an environment where homeowners fight tooth and nail against new housing and rent control drives rent up by distorting the market. The ensuing difference between controlled and uncontrolled rents causes conflict between tenants and landlords who see how much money they're losing each month. So the city adds even more idiotic regulations that ensure a certain amount of housing is sold/rented below market rates, which has income restrictions that just about guarantee that poor people won't be able to afford them...but zero-income children of parents willing to cosign qualify quite easily.

Meanwhile, companies keep growing/starting up and more and more high-paying jobs keep coming to the area. But thanks to all those "I got mine, screw the rest of you" homeowners who keep new developments from being built, those jobs come without the corresponding increase in necessary housing. So what are current landlords to do...every form of meddling is forcing prices through the roof to the point where only highly-paid professionals can afford them? You could either sit by and allow your tenant to pay you a small fraction of what the place is worth (and sometimes rent it out for full price on AirBnB...no rent control there) or you could use some sleazy tactic to evict the long-time tenant and let the boom dollars roll in. Also, notice I didn't say tech professionals...we make up less than a quarter of the well-to-do SF population...there's more finance than tech.

As per usual, the ones most hurt by this are the working poor. The abject poor are doing the same as ever...when you make zero and live off city-provided social programs, rent prices really don't affect you all that much. But the people trying to be productive members of society are basically forced to move away and commute back to the city. And this has some really nasty side effects...like police officers who have no real attachment to the community they serve because they've been priced out of living there.

Protesting the Google bus makes for a great shot on the 11pm news, but is otherwise counter-productive. If we want to fix the issue, we should:
a) Repeal prop 13, rent control, the below-market-rate program and all the other government meddling.
b) Tell homeowners to go fuck themselves and start building new housing as fast as we can.
c) Add significant tax incentives for people who live close to work. This would have the dual effect of being "green" by reducing commutes and making it unattractive to work in cities that do not provide enough housing to support the businesses there.

Alternatively, we could just accept that poor people will need to move and let it happen. It's heartless, but given how bungling government is, it's pretty much inevitable. The unfortunate part is that what's considered poor is almost ridiculous. Someone making $100k/yr will basically never be able to afford to buy a home in SF.

See...SF and Oakland have a lot to do with Silicon Valley :-)

Re:I Read TFA...

[NotSanguine]

Thank you. You should have written the article. :)

The housing issues are nothing new. I don't live in the bay area now, but back in 2000 I did live in Santa Clara for about six months. I recall reading an article in the San Jose Mercury News back then about full-time public school teachers in San Jose who were living in homeless shelters because they couldn't afford to rent or buy in the area. I also recall at least a couple of colleagues commuted 2.5-3 hours each way because they couldn't afford to house their families any closer to the bay area.

What about the other economic worries

[Anonymous Coward]

Honestly, I don't even take these kind of posts seriously anymore. At least the tech industry in general puts out products(as meaningless as some of them are). How about the real estate market, where houses are overvalued tremendously in most cities and real estate agents are making a living from something that can be done more efficiently by yourself online?
How about the stock market in general, where it's basically reduced to trying to make money from micro trades instead of long term investment? How about when that bubble pops?
How about any number of other sections of our economy(the over-regulated medical industry, the government protected entertainment industry, etc) that are propped up by things that are seemingly fragile and unstable?

Don't get me wrong, I'm worried about the tech industry(and silicon valley at it's heart), but not nearly as much as the many sections of our economy which are less productive.

Re:Facebook.

[Anonymous Coward]

Markets can remain irrational longer than you can remain solvent

- Keynes

Re:What does he mean by his stated premise?

[NotSanguine]

The author states that Silicon Valley is a bubble. What does he mean by that? Does he mean that real estate prices in Silicon Valley are over-valued? Does he mean that the tech companies in Silicon Valley are over-valued? Does he mean that the advantages for a tech company, or a technology professional to be located in Silicon Valley are over-valued? Or does he mean something else? I did not read the article because the summary made me think that the author never defined what he meant by that statement. Without that meaning being defined there is no way to evaluate the soundness of his arguments about it (well, actually, there is. One concludes that the reason it is left poorly defined is to hide how unsound his arguments are).

He means, "please visit my site. I want more ad revenue. I don't have anything approaching interesting, coherent, relevant or even moderately useful to say, so I'll just string a bunch of random crap about the SF bay area together and see if I can get slashdotted.

California has spending problem, not revenue prob

[perpenso]

California has had surpluses before, it does not have a revenue problem. What California has is a spending problem. When surpluses occur the legislature usually goes wild with spending, and some of the governors join in. They act as if the current peak in the economic cycle is the new normal and spend accordingly.

Gov Gray Davis saw revenue increase by about 10% but he and the legislature increased spending by about 30%. Things were so out of control Davis was recalled and Schwarzenegger was voted in.

So seeing a budget surplus in California may simply be a precursor to the next budget disaster.