Why house prices in Silicon Valley will always soar - NERDS LOVE IT!
Here’s some weekend reading - it’s a piece by the famed Paul Graham on why Silicon Valley rocks, and why no other place can possibly beat it. And as a result, rich nerds will always flood into the Valley, snapping up houses no matter what the salary/income ratio is.
Here are some key snippets:
I think you only need two kinds of people to create a technology hub: rich people and nerds. They’re the limiting reagents in the reaction that produces startups, because they’re the only ones present when startups get started. Everyone else will move.
Observation bears this out: within the US, towns have become startup hubs if and only if they have both rich people and nerds. Few startups happen in Miami, for example, because although it’s full of rich people, it has few nerds. It’s not the kind of place nerds like.
That’s right. Nerds hate Miami. I bet you didn’t know that!
Bureaucrats by their nature are the exact opposite sort of people from startup investors. The idea of them making startup investments is comic. It would be like mathematicians running Vogue– or perhaps more accurately, Vogue editors running a math journal. [2]
Though indeed, most things bureaucrats do, they do badly. We just don’t notice usually, because they only have to compete against other bureaucrats. But as startup investors they’d have to compete against pros with a great deal more experience and motivation.
And I can’t think of any place more government free and apolitical than the Bay Area. Everyone in the private or public sector is strictly there to move mankind forwards - never to squabble for their own career. Silicon Valley is also a place where you will be rewarded for doing great work, not for knowing the sister of the nanny of the VC’s child. No way. Never!
A lot of nerd tastes they share with the creative class in general. For example, they like well-preserved old neighborhoods instead of cookie-cutter suburbs, and locally-owned shops and restaurants instead of national chains. Like the rest of the creative class, they want to live somewhere with personality.
[snip]
Most towns with personality are old, but they don’t have to be. Old towns have two advantages: they’re denser, because they were laid out before cars, and they’re more varied, because they were built one building at a time. You could have both now. Just have building codes that ensure density, and ban large scale developments.
And nothing describes this like our famed Cupertino! Sure Stephen Levy once called it an overgrown strip mall, but hey - check out all the locally-owned shops like [tbd] and [tbd], and amazing architecture. And how can we forget world famous Rivermark!
Most nerds like quieter pleasures. They like cafes instead of clubs; used bookshops instead of fashionable clothing shops; hiking instead of dancing; sunlight instead of tall buildings. A nerds idea of paradise is Berkeley or Boulder.
That’s right. Nerds love to go hiking. They just bring along their laptops, a portable generator, a giant thick hood to block out the sun - that way they can continue to add value to the world by Twittering, writing Java/C++ code, installing patches on their LAMP site. (BTW, I actually saw someone once take a Dell XPS
M2010 out of a bag and put it on a restaurant table.) Note that hiking spots are chosen by access to 3G networks. Also, who knew that nerds loved Boulder so much, or that tall buildings mean no sunlight!
What nerds like is the kind of town where people walk around smiling. This excludes LA, where no one walks at all, and also New York, where people walk, but not smiling. When I was in grad school in Boston, a friend came to visit from New York. On the subway back from the airport she asked “Why is everyone smiling?” I looked and they weren’t smiling. They just looked like they were compared to the facial expressions she was used to.
I can’t think of any place as walkable as Silicon Valley. All the time I’m walking around on El Camino Real, or Lawrence Expressway. I’m always bumping into friendly smiling people on Stevens Creek, especially near Agilent. That guy sure smiles a lot as he asks me for change. That guy loves nerds for some reason!
To attract the young, a town must have an intact center. In most American cities the center has been abandoned, and the growth, if any, is in the suburbs. Most American cities have been turned inside out. But none of the startup hubs has: not San Francisco, or Boston, or Seattle. They all have intact centers. [7] My guess is that no city with a dead center could be turned into a startup hub. Young people don’t want to live in the suburbs.
Uh. Um. Something something something Sunnyvale Town Center 2012 something something something! Nerds will love it!
For all its power, Silicon Valley has a great weakness: the paradise Shockley found in 1956 is now one giant parking lot. San Francisco and Berkeley are great, but they’re forty miles away. Silicon Valley proper is soul-crushing suburban sprawl. It has fabulous weather, which makes it significantly better than the soul-crushing sprawl of most other American cities. But a competitor that managed to avoid sprawl would have real leverage. All a city needs is to be the kind of place the next traitorous eight look at and say “I want to stay here,” and that would be enough to get the chain reaction started.
A friend of a friend once arrived in San Jose airport after a long trip from Asia. As he walked down the ladder (this was Terminal C, of course) on the phone he said to my friend “This is Silicon Valley? Are you kidding me?”
If that wasn’t lust at first sight, I don’t know what is.
Why do you think of Paul’s piece?
September 20th, 2008 at 7:13 am
Paul Graham has drunk the Richard Florida Kool-aid. And he must have a very weak mind if one obviously wrong book can vitiate the input from his own eyes.
He gets it right at the start “money + engineers = new businesses” but then loses the plot entirely. Old buildings? Walking streets? Town centers? Most ridiculously — he claims San Francisco is a tech center, when really it is an amusement park for the rich + bums.
He should stick to reality: money + engineers. People come to Silicon Valley because tech jobs are here.
As for this fabled “creative class” (who is somehow different from the people who build Google, Yahoo! etc. — just what did they create anyway) it’s probably more accurate to call them “the excel spreadsheet class” as this describes their activities much more closely. As Wall Street implodes, the excel-spread sheet crowd are leaving for the suburban hell that is Greenwich CT, and leaving NYC to the green shirted, turtleneck wearing “creatives”. We’ll see just how much they will actually Create. It will need to be a lot, because beer costs $15.
-zanon
September 20th, 2008 at 10:12 am
richard florida?
September 20th, 2008 at 10:17 am
Yeah, Richard Florida:
http://en.wikipedia.org/wiki/Richard_Florida
Total hack, but has a mesmerizing effect on the weak minded who go for verbal gimmicks. Like Malcolm Gladwell, but his writing is worse, and he writes about things people know about, so his hackery is very obvious. He coined the term “creative class”, as in:
“A lot of nerd tastes they share with the creative class in general”
and then claims that it is these yahoos who create winning businesses. instead of engineers, financiers, and guys who spend a lot of time with excel
-zanon
September 20th, 2008 at 12:32 pm
I wouldn’t throw out everything Florida has to say based on how this article misses the mark. Yes Cupertino is a soulless burb, yet the jobs are there and so are the schools. Florida’s view explains why Palo Alto costs more for a Rancho Rinconada type house. PA schools aren’t that much better than Cupertino’s.
September 20th, 2008 at 11:20 pm
MADHAUS: Florida says having more gay people makes a city more economically successful. This could be true if the gay people are VCs, engineers, or excel-jockies, but if so, their value comes from their money and skill, not their sexual orientation.
This joker also claims that San Francisco powers Silicon Valley.
Anyone with eyes can see why Palo Alto has higher house prices than Cupertino even though Cupertino has (marginally) better schools — Palo Alto is a nicer place to live. But human beings know what makes for a nice place to live.
What a charlatan.
-zanon
September 20th, 2008 at 11:48 pm
>>Anyone with eyes can see why Palo Alto has higher house prices than Cupertino even though Cupertino has (marginally) better schools — Palo Alto is a nicer place to live.
I would caution against judging schools purely based on API scores, thus concluding Cupertino has marginally better schools than Palo Alto. There are many intangible factors that make up a good school environment. Good academics is important, but it’s actually more important to nurture a kid’s EQ than IQ.
September 21st, 2008 at 2:04 am
zanon, I read Florida and actually agree with him. He sees gays as coalmine canaries; areas that are homophobic tend to also be intolerant of other creative types (artists, musicians, actors, writers, etc), and Florida claims creative class people would thus be unwilling to live there. Having lived in several states this strongly matches my experience.
It’s today’s article that I’m laughing at; complete misapplication of Florida’s premise.
I loved the book Suburban Nation by Andres Duany, Elizabeth Plater-Zyberk and Jeff Speck. These three were able to explain clearly why certain areas are nice to live in and others suck. In particular, most new suburban development is just awful. But instead of just condemning it all, they explain what works and what doesn’t.
Anyway, I found Florida reminded me of a lot of stuff in this book, not because it was the same thing, it’s like Florida did for sociology what these guys did for city planning.
September 21st, 2008 at 11:08 am
MADHAUS: You’re welcome to your own opinion, of course, but we’ll see what happens to NYC when the money, excel-jockies, and IT guys relocate to “happening” Greenwich, CT if the investment banking industry decides to pack up shop.
Maybe you are right, maybe Chelsea will somehow keep it “happening” through their “creativity”. Although who will actually take that “creativity” and use it to make something that makes money — maybe it’s Florida’s “artists, musicians, actors, writers, etc.” (after they learn excel, get some money, and figure out how to code).
My point is that if you’re a city on the way down, and you want to improve, you don’t need “artists, musicians, actors, writers, etc.” You need $, excel-jockies, and engineers.
Florida is all icing and no cake, for a man who actually needs a main course. This meets my definition of intellectual fraud. YMMV.
-zanon
September 21st, 2008 at 2:26 pm
Creative Class communities require boom and bust, so the rich folks can abandon it, and the starving artists can then afford move back into the lofts and warehouses that went co-op on them.
Your characterization of a boom town as due to spreadsheet jockeys as opposed to visionaries and inventors is intriguing but, in my view, a little off the mark. The green eyeshaders don’t move in until the industry has already attracted the capital. And accountants and financiers aren’t the nerds whose brilliant ideas are what’s put out for bid.
NYC could very well implode as a financial center, but Silicon Valley? Too many people live here because too many other brilliant nerds who get business, people like them, live here. That’s called critical mass, and it’s why attempts to recreate Silicon Valley knock-offs haven’t been as successful as hoped. Trying to set one up in a homophobic or at least socially homogenous environment will fail for that reason, and that was what Florida was talking about.
September 22nd, 2008 at 9:47 am
LOL! I wish you the best with your startup, staffed entirely with “artists, musicians, actors, writers, etc.” I hope that the “etc.” actually knows how to contribute to making something that people may want to buy.
Remember — nerds != “artists, musicians, actors, writers, etc.” They may want to claim to be so they can get more chicks, but it just ain’t so. Both Florida and Paul get this wrong time and again.
http://www.idlewords.com/2005/04/dabblers_and_blowhards.htm
Finally, if you know money guys who dole out cash BEFORE a business has someone who can actually add, please send them my way.
And thank you for explaining what critical mass means
-zanon
September 22nd, 2008 at 10:19 am
madhaus (@9) - I don’t get your argument. On the one hand, you say that Silicon Valley is hot because it’s diverse (i.e. - “Trying to set [another Silicon Valley] up in a homophobic or at least socially homogenous environment will fail”). On the other hand, just a few sentences up, you claim that people want to live here so that they can be near others just like them (i.e. - “Too many people live here because too many other brilliant nerds who get business, people like them, live here.”).
So, which is it? Is Silicon Valley hot because its homogeneous, or because it’s diverse?
September 22nd, 2008 at 10:24 am
#11: Yes.
September 24th, 2008 at 2:35 pm
“when I was a grad student in Boston…”
That is faux-modesty speak for “I WENT TO HARVARD. HARVARD. YES THAT HARVARD. IT’S KIND OF A BIG DEAL.”
B. F. D.
By the way, the paradise Shockley found in 1956 is now contaminated by heavy metals in the ground water, and nobody can decide whose problem it is to solve. But that doesn’t stop people from building houses on it!
September 24th, 2008 at 2:44 pm
By the way, the paradise Shockley found in 1956 is now contaminated by heavy metals in the ground water, and nobody can decide whose problem it is to solve. But that doesn’t stop people from building houses on it!
Heavy metal? Excellent! Got my amp turned up to 11! Plays riff, starts banging head to beat, ignores requests to turn it down.