New Geography

Tag: Silicon Valley

  • How the Visa Ban Will Hurt US Innovation

    A key reason for the prosperity found in the United States is the ability of universities and companies to attract the best and brightest people from abroad. Shutting out skilled individuals from entire countries could have grave consequences for America’s intellectual institutions as well as knowledge-intensive businesses. The obstacles put in place following the 2001 terrorist attack did reduce the position of the US in the global competition for talent, yet the regulations were about increasing security and allowed those that had been screened to enter. The new visa ban sends a message to talent from majority-Muslim countries: you are not wanted here, even individuals posing no threat. It is hard to imagine that this will not hurt America’s goodwill significantly, particularly in the European tech-sector where people from countries such as Iran play an important role.

    To illustrate the importance of talent attraction one only needs to look at Silicon Valley, the world’s greatest hub for new technologies and entrepreneurship. It is no coincidence that Silicon Valley has grown in close connection to Stanford University, one of the leading global institutions for learning and research in engineering and sciences. Without the brains attracted to Stanford and other similar universities, innovative American businesses such as Cisco, eBay and Netflix would not be able to dominate the global marketplace. Top entrepreneurs in Silicon Valley and other tech-hubs are understandably concerned about the visa ban. Facebook CEO Mark Zuckerberg was among the first to address the ban publicly, writing on Facebook: “We need to keep this country safe, but we should do that by focusing on people who actually pose a threat”. Since then numerous other CEOs spanning from the Automotive sector to the Pharma industry have made their voices heard against the travel ban.

    Much of the talent that fuels America’s universities and tech hubs comes from abroad. Between 1990 and 2014 for example, the college-educated immigrant population increased 339 per cent from 3.1 to 10.5 million. A group of particular importance is graduate students in fields such as science, engineering and health. It is these individuals whose knowledge and innovative ideas fuel the technologically advanced businesses on which US exports rely. Among the graduate students in these fields, one third are not US citizens or permanent residents, but rather foreign visitors. In some fields, international students make up the majority. An analysis of the latest data shows that 61 per cent of full-time graduate students in computer science are international. In the field of Electrical Engineering the share is even higher, 72 per cent.

    Where do these students come from? China and Korea are countries often associated with global talent influx into the US. But, we should not forget that several Muslim-majority countries, such as Pakistan and Iran, are also of importance, along with Muslim groups from India and Bangladesh. An illustrative example is Maryam Mirzakhani, born in Iran in 1977. Showing an early gift for mathematics, she received a degree from Sharif University of Technology in Tehran. After moving to the US, Maryam earned her PhD from Harvard before becoming a young professor at Stanford. In 2014 she was awarded the International Medal for Outstanding Discoveries in Mathematics. Maryam was the first women to win the medal, unofficially referred to as the “Nobel Prize of mathematics”. Since it was established in 1936, all previous winners have been male.

    Her story is not unique. In 2003, administrators at Stanford University’s Electrical Engineering Department were reportedly startled when the notoriously difficult entrance exam for PhD studies had been aced by a group of foreign students. The majority originated from one place – the same Sharif University where Maryam had studied. Stanford is not an isolated example. Iranian top students are doing well in the International Science Olympiads and flourishing in foreign universities.

    The Trump administration’s visa ban is affecting graduate students from Stanford. The Stanford Daily reported that Mostafa Afkhamizadeh, a Stanford PhD student born in Iran, was visiting his family when the presidential order was unexpectedly announced. The prospects for the fifth-year PhD student remain unclear. Will he be able to travel back to the US to finish his research studies in management science and engineering? Another example is that of Nisrin Omer, a Sudanese Harvard University graduate who is a graduate student in anthropology at Stanford. Although Omer is a legal U.S. resident and has lived in the country since 1993, she was briefly handcuffed and detained at JFK airport. There are more examples to be found amongst Stanford PhD students alone, such as Khashayar Khosravi and his fiancée whose wedding plans have been disrupted by the visa ban simply since they both happened to be born in Iran. We should keep in mind that the next wave of graduate students seeking to apply to foreign universities are taking note of the new risks associated with applying to the US. It helps putting oneself in someone else’s shoes: if you were a talented young Pakistani student, would you apply to a university in the US next year?

    Not long ago, the US was the unchallenged destination of choice for global talents. Following the 2001 terrorist attacks, the Bush administration introduced background checks that made it time consuming for international students from certain countries to enter the US. Some of the brightest international students could not gain entry into Stanford and other top US institutions, which led them to universities in Canada, the UK, and Germany. Suddenly, academic institutions outside the US realized that they could better compete. Universities which have attracted some international talent are more likely to attract additional international talent – since top students from abroad follow in the footsteps of previous top students, and because universities that have learned to attract some talents will have an easier time attracting others.

    The position of the US as the unchallenged destination of global talent has shifted since the policies of the Bush administration. Today, the best American universities are often but not always the top choice. While the US takes the influx of international brains as a given, governments in other countries are keenly aware that we live in a world where competitiveness is increasingly about knowledge. A study presented for Global Affairs Canada last year estimates that after accounting for Canadian scholarships and bursaries, the total annual expenditure of international students, their families, and friends contributed $9.3 billion in GDP to the Canadian economy. The long-term benefit of attracting this human capital from abroad will likely be many times higher. The Canadian government is actively signaling to global talent: we embrace you. This is, to say the least, not quite the positive message sent out by the US.

    The visa ban’s repercussions matter for international exchange between technology firms. Talent from majority-Muslim countries plays a key role in the technology sector not only in the US, but also in a range of other countries. For example, a study found Stockholm, the capital city of Sweden, “is the second most prolific tech hub globally, with 6.3 billion-dollar companies per million people (compared to [Silicon] Valley with 6.9)”. The innovative companies in Stockholm grow in close connection with those in the US, not least in Silicon Valley. In the Stockholm tech sector, people born in Iran and other parts of the Middle East make up a significant share of the engineers, researchers and entrepreneurs. Creating barriers for these individuals to travel to the US – as the visa requirement introduced last year by congressional Republicans did and the Trump ban reinforced – makes it difficult for Silicon Valley to grow along with tech hubs worldwide. The unicorn factory of Stockholm is a single example, many more can be found across Europe. Highly educated people from countries such as Pakistan and Iran play an important role in the European tech sector. They, and their colleagues, are anything but happy with the visa ban.

    While the direct effect of the visa ban is bad news for the US in an increasingly talent driven environment, the message it sends to the world is even worse: the Trump administration is willing to shut people out simply due to their place of birth. A comparison to the tighter rules introduced after the terrorist attack in 2001 is useful to illustrate this point. While certainly causing problems for many individuals, those affected then could sympathize with the effort to increase US security. The policy was about increasing security, not excluding those born in the “wrong countries”. The ban says to educated people from majority-Muslim countries, you are not wanted in the US. In a global knowledge economy, where the obstacle for growth is increasingly a lack of talent rather than a lack of financial capital, this form of policy is not wise. It will certainly hurt the promise of the Trump administration to boost US competitiveness. Republicans in favor of sound economic policies should advocate that the ban be replaced with more nuanced measures focused on security, not exclusion based on nationality.

    Atta Tarki is the CEO of Ex-Consultants Agency, an executive search firm helping Fortune 500 companies solve their most pressing talent needs across the world.

    Dr. Nima Sanandaji is the president of the European Centre for Policy Reform and Entrepreneurship. A number of his books, such as “Debunking Utopia”, “The Nordic Gender Equality Paradox”, “Renaissance for Reforms” and “SuperEntrepreneurs” have gained widespread international attention.

    Photo: Fibonacci Blue from Minnesota, USA (Protest against Donald Trump’s Muslim ban) [CC BY 2.0], via Wikimedia Commons

  • Globalization’s Winner-Take-All Economy

    “If you are a very talented person, you have a choice: You either go to New York or you go to Silicon Valley.”

    This statement by Peter Thiel, the PayPal founder and venture capitalist, unsurprisingly caused a stir, given that he made it in Chicago. Simon Kuper had made a similar observation in the Financial Times when he described how young Dutch up-and-comers had their sights set on London, not Amsterdam. “Many ambitious Dutch people no longer want to join the Dutch elite,” Kuper wrote. “They want to join the global elite.”

    Populist movements in Europe and the United States have fueled talk of social and economic division, of a small class of winners at the top and a far larger group of increasingly disaffected lower-skilled workers at the bottom. This attitude seems to flow through to places as well, with global city winners like London and post-industrial losers like Flint, Mich.

    Because these divides cleave along social class, educational and cultural lines, they are clear and easy to see. But there’s another — less visible — divide cutting across the seemingly monolithic group of the successful. This one separates those who are indisputably winners from those whose success is ambiguous, more qualified and more contingent. This difference is the one between the hedge fund principal, raking in wealth seemingly effortlessly, and the young adult struggling to pay urban rent despite possessing an excellent degree and professional employment. It’s the difference between New York and Cincinnati — or even Chicago.

    The same forces of globalization that  have pulled top Midwest talent into Chicago from below are also acting on the city from above, drawing its talent further up the global city hierarchy. The knowledge economy favors the college degreed over the less educated, but those with the highest and most differentiated skills are most favored, while those whose skills are second tier — less perfectly in tune with the emerging economy — are more vulnerable to competitive pressures.

    It’s easy to see that the Flints of this world have struggled. Less visible are the stresses put on second-tier cities — the Chicagos and Cincinnatis — from a system that is disproportionately giving the greatest rewards to those at the very top of the hierarchy while threatening even the seemingly successful cities with being left behind.

    Economist Richard Florida calls this phenomenon “winner-take-all urbanism.” It’s the superstar athlete or celebrity effect transposed into the urban world. Just as A-list stars earn far more than the merely famous, the top business talent and the top cities are reaping disproportionate riches over the merely prosperous.

    This divide is harder to spot because the people and places involved are often superficially similar. The people in both possess university degrees. They share similar cultural norms, aspirations and politics. The places they live in all have their farm-to-table restaurants, tech startups, artisanal coffee roasters and bicycle commuter infrastructure. As with a sports team, they all wear the same uniform. But some are all-stars while others are role players who are more easily replaced.

    When young workers or artists struggle to find an affordable apartment in a global capital, this isn’t just proof of a failure to deregulate housing development. It’s also a marketplace sending a powerful signal that their position among the winners of society is much more precarious than they might imagine. Most would agree that there are some businesses and people who shouldn’t be in New York or San Francisco. We shouldn’t expect a peanut butter spread of talent and economic activity across the country. The nature of the industries concentrated in these places produces a higher-end specialization. So there will be some economic value line below which it isn’t viable to be there.

    There’s an argument to be made that building more housing to reduce rents can draw the line lower. But that still presumes a line. When aspirational millennials — or even older people like me — can’t afford the current rent, that’s a signal that they are near or below that line. In a time in which rewards seem to be skewed to the top, that should be worrisome to them personally, not just to the poor or working classes.

    Similarly, cities that remain a notch below the top tier should be worried. Chicago’s financial crisis, population loss, violent crime spike and other problems suggest fundamental structural challenges facing the city. And if even Chicago is not fully achieving the global-city status it craves, shouldn’t other cities be worried?

    Yet the leaders of these cities, and the ambiguously successful people who live in them, have tended to identify themselves as among the winners. They haven’t really grappled with the fact that the global economy puts them at risk. It’s not just people in Flint or Youngstown, Ohio, who are being buffeted by globalization. If these people and cities ever came to view themselves as at risk, they could become a powerful voice for reforming the system to be more equitable while retaining its fundamentally open character. They are the exact potential champions for change in a system that badly needs it so that we can broaden the pool of success.

    Unfortunately, those among the ranks of the second-tier successful have instead sided with the global capitals and the global elite to defend the economic status quo, leaving the reform fight to the populists who prefer an overly closed system. They may yet discover to their chagrin that the very system they so vigorously supported will ultimately become their own undoing.

    This piece originally appeared in Governing Magazine.

    Aaron M. Renn is a senior fellow at the Manhattan Institute, a contributing editor of City Journal, and an economic development columnist for Governing magazine. He focuses on ways to help America’s cities thrive in an ever more complex, competitive, globalized, and diverse twenty-first century. During Renn’s 15-year career in management and technology consulting, he was a partner at Accenture and held several technology strategy roles and directed multimillion-dollar global technology implementations. He has contributed to The Guardian, Forbes.com, and numerous other publications. Renn holds a B.S. from Indiana University, where he coauthored an early social-networking platform in 1991.

    Photo: Kevin D. Hartnell (Own work) [CC BY-SA 3.0 or GFDL], via Wikimedia Commons

  • The Demographics of Poverty in Santa Clara County

    Tucked away in the bottom corner of the San Francisco Bay, tech royalty make themselves at home in their silicon castles. Santa Clara County is the wealthiest county in California, and 14th in the nation, boasting an average median household income of $96,310. However, where there are kings, there must be subjects. Despite its affluence, Santa Clara remains one of the most unequal counties in the United States. The combined forces of enormous wage gaps, exorbitant housing prices, and shifts in the regional economy have compounded over recent years, resulting in a shrunken middle class and increased poverty levels.

    Santa Clara County contains just over 1.9 million people and is home to much of the Silicon Valley. The relatively recent explosion of growth in the high-wage technology industry has generated a new rank of upper-middle class to fabulously wealthy individuals. But, even in the economic miracle that is Silicon Valley, poverty remains a prevalent force and affects a disturbing number of lives in the region. Although, according to the Census Bureau, only 8.3% of Santa Clara County residents live at or below the Federal Poverty Level (FPL), this number drastically underestimates the true number of people that are experiencing financial hardship in the region. In a study conducted by United Way, it was found that the real cost budget for a family of four residing in Santa Clara County stands at $65,380 per year, or 281% of the FPL.

    High regional housing costs account for much of the discrepancy in poverty levels between the county and the nation. A study out of the California Budget and Policy Center calculated that the poverty rate in Santa Clara County soars to 18% when factoring in housing costs, meaning nearly one in five residents live in poverty.

    It is for this reason that the region has one of the largest homelessness populations in the nation, with around 7,600 homeless individuals residing within Santa Clara County. When local homeless individuals were surveyed regarding obstacles to securing housing, the top four answers were as follows: No job/income, no money for moving costs, bad credit, and lack of available housing. Of course, poverty is cyclical, and these answers affect one another to some extent: a lack of income means no money for moving costs, which may lead to bad credit and which could then lead to an inability to secure permanent housing. Around 56% of survey respondents also reported being homeless for over a year, up significantly from 47% just two years prior, indicating that the homeless in Santa Clara County continue to face significant obstacles to securing housing. High homelessness rates are symptoms of a greater trend: the fact that gross income inequalities in Santa Clara County have created a society of have’s and have not’s, separated by an income gap that shows no sign of closing.

    Housing Trends

    The most significant impediment to financial security in the county is the volatile housing market and the exorbitant cost of owning a home. According to a report conducted by the U.S. Department of Housing and Urban Development on the South Bay Area, the average price of houses sold in 2014 stood at $788,500 for an existing home and $828,000 for a new home. This is over four times the median value of homes nationally, which stands at $178,600. The disparity is even more prevalent in the areas of the region closer to large technology firms, such as Palo Alto, where the average home costs $2.43 million. San Jose also has the 7th largest share of renters in major U.S. cities, 56 percent, a rate that only continues to increase as housing costs do the same. The median gross rent in Santa Clara County stands at $1705 per month, nearly double the national average.

    Current trends indicate that the increasing housing costs show no signs of reversing, which does not bode well for residents that are already struggling financially. A study from the California Budget and Policy Center found that, in 2013, over 50% of households classified as low-income were at risk of moving out of the area due to increased housing costs.

    Net domestic migration in Santa Clara County is overwhelmingly negative.

    The result of high housing costs? Net domestic migration has been negative every year since 1996, except 2011, and appears to be dipping further, despite the fact that the population of Silicon Valley has grown continually in recent years. This can be attributed to a combination of natural births and massive foreign immigration rather than domestic migration. Therefore, negative net domestic migration suggests that a large portion of residents are leaving the area due to a lack of an income that cannot keep up with rising costs of living.

    However, for those who stay, high housing prices lead to a plethora of other disadvantages, creating a cycle of poverty that decreases social mobility in the region. A search for cheaper housing has led many to seek living arrangements in the southern and eastern parts of San Jose, where housing is cheaper, but comes at the cost of higher crime rates and worse school districts. Additionally, job growth has been concentrated in the western parts of the county. The search for cheap housing has led to an increase in overcrowded households, as residents move in with one another in order to share the costs of rent. The Santa Clara County Department of Public Health concluded in 2014 that 14% of residents were living in overcrowded households, with 5% living in severely overcrowded households. Latinos in the region are disproportionately affected, with 31% living in overcrowded households and 12% living in severely overcrowded households.

    The combination of these factors limits social mobility by undermining each individual’s access to economic opportunity. Moving into an overcrowded house in an underfunded public school district limits potential to obtain a quality education that may provide access to high-skilled, high-wage jobs.

    The Income Gap

    Inequality in the region is perpetuated by a growing income gap, and the ardent hunt for afford-able housing may be explained by the gross income disparities among residents. As housing prices have skyrocketed over recent years, incomes simply have not kept up with costs of living, particularly at the lower end of the spectrum.

    Santa Clara County’s income gap has widened considerably since 1989.

    Economic gains in the region have flowed overwhelmingly to the top quintile of income-earners, who have seen their wages increase by over 25% over the past 25 years. In a shocking comparison, income levels have declined for low-income households since 1989, a clear sign of a widening wealth gap in the region. Those at the bottom also find themselves working harder for less money: the average income for those living above the previously described real cost of living in Santa Clara County stands around $27 per hour, whereas the average income for those living below the real cost of living comes in at a bit over $10, around the current California minimum wage.

    To make matters worse, government efforts have proven relatively ineffective in remedying regional inequality. A recent study has shown that even when a family is a recipient of CalWORKS and CalFresh benefits, government-funded initiatives to provide benefits to needy families, an average family of four is still tens of thousands of dollars away from comfortably subsisting in Santa Clara County. Additionally, government benefits are not reaching populations that would benefit from them the most: a United Way study found that less than 19% of single mothers and less than 5% of immigrants statewide subscribe to these programs.

    Shifts in the Regional Economy

    Efforts to increase wages of low-paying jobs may alleviate financial hardship to a certain degree, but these actions fail to consider an underlying trend in Santa Clara County: low-skilled, blue collar jobs are disappearing. Wage increases in industries heavily populated by lower income earners matter little if those jobs do not exist. Historically, Santa Clara County was a manufacturing hub, famous for producing semi-conductors along with other components vital to the burgeoning technology industry. However, recent years have seen manufacturing jobs leaving the area in droves, either to other parts of the country or abroad.

    Sector growth in the region, percentage change, 2000-2014.

    The chart above shows that job growth in Santa Clara County has only been observed in a few sectors of the local economy. Despite this growth, total nonfarm payroll employment has decreased in the past 15 years, and the impact of this job loss may be observed across the economy. The most significant reductions of the workforce have occurred in sectors referred to as “blue-collar,” typically middle income jobs that may or may not require higher education. These types of jobs cover many of those within the goods-producing sectors, comprised here of the mining, logging, construction, and manufacturing industries.

    The rapid decline of “blue collar” jobs in the region may be attributed at least in part to the explosive growth of Silicon Valley. As the region attracts more skilled workers, increases the region’s desirability, and pays workers competitive wages capable of keeping up with costs of living, those very expenses will continue to drive upwards. As a result, workers across all economic sectors have demanded higher wages, a sentiment exemplified in the recent minimum wage hikes. Unfortunately, this drives lower-paying blue-collar industries to relocate, often out of the state, so they can lower their input costs, creating a polarized society of high-wage earners in the information sector along with low-wage earners in a service sector dedicated to the needs of the technocrats.

    Santa Clara County is a place of immense, but heavily-concentrated wealth. Multi-billion-dollar technology campuses dot the landscape like behemoths, yet the wealth and progress that accompanied the growth of the Silicon Valley has also left a significant proportion of its population behind. The environment is increasingly hostile to social mobility, the manufacturing sector has skipped town, and government efforts to mitigate the effects of these changes have proven relatively unsuccessful. Trends have shown that the region’s poor are increasingly confined to specific industries and geographies, and their freedoms restricted as they are subject to a degree of economic violence that shows no immediate signs of relenting. Significant shifts in local policy are needed to reverse the current social and economic trends and ameliorate the situation in an increasingly polarized Santa Clara County.

    Alex Thomas is currently a sophomore at Chapman University pursuing a major in Political Science. He is originally from San Jose, California, and has worked extensively within the city and surrounding areas. He hopes to further his interest in local politics through continued study and community involvement in the upcoming years.

    Photo: Coolcaesar [CC BY-SA 3.0], via Wikimedia Commons

  • How Silicon Valley’s Oligarchs Are Learning to Stop Worrying and Love Trump

    The oligarchs’ ball at Trump Tower revealed one not-so-well-kept secret about the tech moguls: They are more like the new president than they are like you or me.

    In what devolved into something of a love fest, Trump embraced the tech elite for their “incredible innovation” and pledged to help them achieve their goals—one of which, of course, is to become even richer. And for all their proud talk about “disruption,” they also know that they will have to accommodate, to some extent, our newly elected disrupter in chief for at least the next four years.

    Few tech executives—Peter Thiel being the main exception—backed Trump’s White House bid. But now many who were adamantly against the real-estate mogul, such as Clinton fundraiser Elon Musk, who has built his company on subsidies from progressive politicians, have joined the president-elect’s Strategic and Policy Forum. Joining Musk will be Uber’s Travis Kalanick, who half-jokingly threatened to “move to China” if Trump was elected.

    These are companies, of course, with experience making huge promises, and then changing those promises to match new circumstances. Uber, for instance, touted itself as a better deal than a cab for both riders and drivers before it prepared to tout a better deal for riders by replacing its own soon-to-be obsolete drivers with self-driving cars.

    Silicon Valley and its leading mini-me, the Seattle area, did very well under Barack Obama, and expected the good times to continue under Hillary Clinton. Tech leaders were able to emerge as progressive icons even as they built vast fortunes, largely by adopting predictably politically correct issues such as gay rights and climate change, which doubled as a perfect opportunity to cash in on Obama’s renewable-energy subsidies. Increasingly tied to the ephemeral economy of software and media, they felt little impact from policies that might boost energy costs or force long environmental reviews for new projects.

    No wonder Silicon Valley gave heavily to Obama and then Clinton. In 2016, Google was the No. 1 private-sector source of donations to Clinton, while Stanford was fifth. Overall the electronics and communications sector gave Democrats more than $100 million in 2016, twice what they offered the GOP. In terms of the presidential race, they handed $23 million to Hillary, compared to barely $1 million to Trump.

    Yet, there is one issue on which the Valley has not been “left,” and that is, predictably, wealth. It may have liked Obama’s creased pants and intellectually poised manner, but it did not want to see the Democrats become, God forbid, a real populist party. That is one reason why virtually all the oligarchs favored Clinton over Sanders, who had little use for their precious “gig economy,” the H-1B high-tech indentured-servants program, or their vast and little-taxed wealth.

    Jeff Bezos, the Amazon founder with a net worth close to $70 billion, used his outlet, The Washington Post, to help bring down Bernie, before being unable, despite all efforts, to stop Trump. So now Bezos sits by Trump’s side, hoping perhaps that the president-elect’s threats to unleash antitrust actions against Amazon will be conveniently forgotten as an artful “deal” is struck.

    For these and other reasons, there’s little doubt that the tech elite would have been better off under Clinton, who likely would have, like Obama, disdained antitrust actions and let them keep hiding untaxed fortunes offshore. Now, they will have to share the head table with the energy executives they’d hoped to replace with their own climate-change-oriented activities.

    The tech oligarchs have long had a problem with what many would consider social justice. Although the tech economy itself has expanded in the current period, its overall impact on the economy has been less than stellar. For all of its revolutionary hype, it’s done little to create a wide range of employment gains or boost worker productivity.

    To be sure, there have been large surges of employment in the Bay Area, Seattle, and a handful of other places. California alone has more billionaires than any country in the world except China, and nearly half of America’s richest counties.

    But for much of the country, notably those areas that embraced Trump, the tech “disruption” has been anything but welcome news. This includes heavily Latino interior sections, home to many of America’s highest employment rates. Overall, the “booming” high-wage California economy celebrated by progressive ideologues like Robert Reich does not extend much beyond the Valley. In most of California, job gains have been concentrated in low-wage professions.

    Despite its vast wealth, California has the highest cost-adjusted poverty rate in the country, with a huge percentage of the state’s Latinos and African Americans barely able to make ends meet. California metropolitan areas, including the largest, Los Angeles, account for six of the 15 metro areas with the worst living standards, according to a recent report from demographer Wendell Cox. Meanwhile, the middle and working class, particularly young families, continue to leave, with more people exiting the state for other ones than arriving to it from the, in 22 of the past 25 years.

    Even in Silicon Valley itself the boom has done little for working-class people, or for Latinos and African Americans—who continue to be badly underrepresented at the top tech firms as many of those same firms aggressively promote diversity. A study out of the California Budget and Policy Center (PDF) concluded that with housing costs factored in, the poverty rate in Santa Clara County soars to 18 percent, covering nearly one in every five residents, and almost one-and-a half times the national poverty rate. Since 2007, amidst an enormous boon, adjusted incomes for Latinos and African Americans in the area actually dropped (PDF).

    Much of this has to do with change in the Valley’s industrial structure, which has shifted from manufacturing to software and media. The result has been a kind of tech alt-dystopia, with massive levels of homelessness, and housing costs that are prohibitive to all but a small sliver of the local population.

    With a president whose base is outside the Bay Area, and dependent on support in areas where jobs are the biggest issue, the tech moguls will need to find ways to fit into the new agenda. The old order of relentless globalization, offshoring, and keeping profits abroad may prove unsustainable under a Trump regime that has promised to reverse these trends. In some senses the Trump constituency is made up of people who are the target of Silicon Valley’s “war on stupid people.” Inside the Valley, such people are seen as an obstacle to progress, who should be shut up with income supports and subsidies.

    So can Silicon Valley make peace with Donald Trump, the self-appointed tribune of the “poorly educated”? There are two key areas where there could be a meeting of minds. One is around regulation. One of the great ironies of the tech revolution is that the very places that are home to many techies—notably blue cities such as San Francisco, Austin, and New York—also tend to be the very places most concerned with the economic impacts of the industry.

    Opposition to disruptive market makers in the so-called sharing economy like Uber, Lyft, and Airbnb is greatest in these dense, heavily Democratic cities. What’s left of the private-sector union movement and much of the progressive intelligentsia is ambivalent if not downright hostile to the “gig” economy. Ultimately, resistance to regulations relating to this tsunami of part-time employment could be something that Trump’s big business advisers might share in common with the techies.

    More important will be the issue of jobs. It may not work anymore for firms to lower tech wages by offshoring jobs or importing lots of foreign workers under the H-1B visa program, since Trump has denounced it. IBM’s Ginni Rometty, who had been busily replacing U.S. workers with ones in India, Brazil, and Costa Rica, has now agreed to create 25,000 domestic jobs. Other tech companies—including Apple—have also been making noises shifting employment to the United States from other countries. Trump may well feel what “worked” with Carrier can now be expanded to the most dynamic part of the U.S. economy.

    If the tech industry adjusts to the new reality, they may find the Trump regime, however crude, to be more to their liking than they might expect. Companies like Google may never again have the influence they had under Obama, but many techies may be able to adjust. As long as the new president “deals” them in, the techies may be able to stop worrying about Trump and begin to embrace, if not love, him.

    This article first appeared on The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Photo by Gage Skidmore from Peoria, AZ, United States of America (Donald Trump) [CC BY-SA 2.0], via Wikimedia Commons

    Photo: MCR World

  • Opportunity Urbanism: The Tech Edition

    This essay is part of a new report from the Center for Opportunity Urbanism titled “The Texas Way of Urbanism“. Download the entire report here.

    Any observer of urbanism in America knows that Austin tops numerous rankings of urban dynamism. Austin — defined as a metropolitan area, not just the city — is consistently atop Forbes’ annual list of Best Cities for Jobs in America over the past five years, which is why so many people move there in the first place.

    In other surveys Austin has been ranked the number one city for young entrepreneurs, small businesses, jobs, millennial homebuyers, singles, dog owners, and food trucks. Its central downtown ZIP code has more bars per capita than any other ZIP code in the country by a long shot. Last year, Savills ranked Austin over San Francisco as the nation’s best technology city, and college information aggregator Niche ranked the University of Texas, situated on the north end of downtown, as the top public university in America. And, of course, Austin has long claimed the title of “live music capital of the world.”

    No surprise then that a visitor to a gathering of technology entrepreneurs in any mid-size to large American city will hear someone talking about how we need to be more like Austin. And Austin is indeed a success story, but one that on examination does not look exactly how outsiders may expect.

    Our conclusion here is that although Austin’s urban vibe is critical, its success has more to do with some distinctly Texan features, including development on the periphery, low taxes, affordable housing (particularly in comparison with coastal California) and less stringent regulation. It is the culture of opportunity, as much as anything else, that defines the Texas capital, and makes it so distinct from its other “hip and cool” rivals.

    The New Dynamism

    When George W. Bush was watching the 2000 presidential election results from the governor’s residence in Austin, Texas, he was sitting in a city of 1.2 million people. Since then, Austin has grown 60 percent to over 2 million residents. Only Raleigh, NC, has come close to matching that rate of growth over 15 years. Austin and Raleigh are 20 percentage points ahead of fifth place Houston. Perhaps most remarkable, however, is Austin’s growth since 2010, the worst financial meltdown since the Great Depression. The city grew by 16.6 percent, while Raleigh grew 12.7 percent. Austin has largely defied gravity since the economic collapse.

    Among the nation’s 53 metro areas with populations over 1 million, the fifteen that have experienced double-digit growth since 2000 are all located in the south and west, including Texas’s four largest metros. And of the top 25 fastest-growing cities since 2010, the only city not in the south, west, or northwest is Columbus, Ohio, in 24th position. Columbus is the only city east of the Mississippi River and north of the Mason-Dixon line growing at a rate above six percent.

    Weather is a factor but America’s fast-growing cities attract aspiring workers and business owners through a blend of favorable economic conditions, new infrastructure, and increasingly, proximity to talent. Political sclerosis and economic elitism in coastal and northern cities have served as a helping hand, pushing workers away from a toxic blend of rising expenses and falling quality of life. Using a mix of Census data, cross-metro moving requests on moving.com, and cross-metro searches on realtor.com, a recent Realtors study found New York, Chicago, San Jose, and Los Angeles are among the top five cities losing the most domestic migrants to mostly smaller, newer Sun Belt cities. In the same study the top ten gainers are Sun Belt cities, with the exception of Portland, Oregon, all who offer newer, more affordable housing stock than in the prime metro areas of New York, Illinois, and California.

    Arguably no city in the country has taken advantage of these conditions more than Austin. Since 2009, the low point of the Great Recession, its metro area GDP has grown 31 percent. By comparison, San Francisco and Boston each grew by 13 percent during the same period. The national average for U.S. metro areas was 11 percent.

    Demographically, domestic migration drives Austin’s economy. Austin has had to innovate and import a lot of talent. Austin has become a quintessential knowledge economy that thrives not so much by cultivating natural and historical resources, but by absorbing ideas, innovation and talent from elsewhere and selling them as products back to the world.

    Anyone who has spent any time in Austin understands the tension that exists in the city between the defenders of its erstwhile charm as an unconventional music and college town and boosters of its high-growth technology cosmopolitanism. Whatever the community’s gatekeepers contend, however, Austinites themselves think that the massive influx of people is inextricably bound to its economic growth.

    An annual survey of Austin residents casts this phenomenon in clear relief. When asked what they think Austin has gained by its population growth over the past five years, residents cite a stronger economy as their top pick. Compared to the 22 percent of Austinites who cite “more diversity” and 7 percent who say “more creativity,” 42 percent say Austin’s explosive population growth has been a boon to the city’s economy. Even those who have lived in Austin for more than 20 years believe the economy has benefited from great migration to the city.

    An openness to newness, strangers, and change are hallmarks of Austin’s economic culture. Perhaps rooted in the city’s past as a music-centric, indie-friendly college town, these hallmarks have translated well economically for the city.

    The Great Migration Game

    Austin’s migration story can perhaps be understood best in contrast with Silicon Valley. No metro area in America can compare to the Bay Area in terms of the sheer size and force of its technology community, Austin’s attractiveness has grown, in large part , unlike in San Francisco and San Jose, tech workers in Austin are able to afford housing close to the office, raise kids close to good school options, and enjoy a variety of cultural amenities in close proximity.

    Between 1991 and 2013, people moved between Austin and 304 MSAs. Of these, Austin only experienced a net loss to eleven. Compare that to San Francisco. The gem of the Bay Area lost population to 133 of the 242 MSAs with which it “traded” population. For San Jose, the figures are 127 out of 253. In other words, while the Bay Area lost population to well over half of the MSAs it has traded with across the country, Austin’s loss was just 3.6 percent.

    Figures 5 and 6 show clearly how the Bay Area has dispatched population to a number of western and southern boomtowns, whereas Austin has pulled in workers and families from every population centers all across the country.

    Silicon Valley is renowned for its high-level talent pool. It attracts the best and the brightest from around the world to work in the most vibrant technology ecosystem in the world. However, when one looks at where U.S. cities export most of their talent, the numbers tell a slightly different story.

    First, Austin is more of a regional talent destination than Silicon Valley. Since 1991, Austin has seen a net population increase of more than 33,000 people from Houston and 21,000 from Dallas. San Jose has lost thousands of people to both Texas cities over the same period of time. So has San Francisco. Perhaps that is expected, given Austin’s proximity to its fellow Texan metropolitan areas.

    But the pull is much greater from California than one would suspect. During the same period, Austin attracted nearly 20,000 migrants from the Los Angeles metropolitan area, which sent only 15,000 to San Jose. Austin also saw thousands of arrivals from San Diego during the same period.

    The other tech-heavy, talent-centric cities in the Northwest also prefer Austin. Net migration from Seattle to Austin has been positive since 1991, while San Francisco and San Jose have lost a combined 25,500 people to Seattle in the same time period. Portland tells an even more dramatic story. A city frequently compared to Austin, Oregon’s commercial capital has lost more people to its Texas peer than it has gained, while Silicon Valley has lost tens of thousands of residents to their northern neighbor. In contrast, since 1991, San Jose and San Francisco have exported nearly 51,000 people to Portland and Austin combined.

    Second, looking at talent centers nationwide, Austin outperforms the Bay Area quite decisively as cities with a high proportion of college-educated residents have consistently chosen the Texas capital as an ultimate destination over Silicon Valley. Raleigh, for example, the only other American city to come close to matching Austin’s rate of growth over the past five years, has lost more people to Austin than it has gained since 1991, but both San Francisco and San Jose have lost population to Raleigh over the same period. In other words, plenty of people are choosing to leave the Bay Area for North Carolina, but the talent base in North Carolina has a fonder eye for Austin.

    Other talent centers display a bias for Austin as well. The three largest cities on Wallet Hub’s 2015 list of the educated cities in America — New York, Los Angeles, and Chicago — have all sent more people to Austin than to the Bay Area, despite an enormous tech-led boom in the area. Washington, D.C. has become a talent boomtown in its own right, owing to the stability of employment for the knowledge workers the federal industrial complex increasingly needs and rewards. Yet it has exported more workers to Austin than to San Jose and San Francisco combined over the past twenty years. Provo and Colorado Springs, the mountain West’s talent hubs, have also lost people to Austin but gained people from San Jose and San
    Francisco.

    Opportunity Cities Win

    For cities aspiring to grow as Austin has grown, the first order of business is to understand Austin as an opportunity city, not just a technology center or music capital. So what are the hallmarks of an opportunity city?

    First, Austin, like other Texas cities, is friendly to those who want to start and grow a business. These are cities in which small businesses not only participate in, but also drive economic growth. A recent study conducted by the American City Business Journals ranked cities with 500,000 or more residents according to 16 indicators constructed to measure the vitality of the small business sectors in American cities. Austin ranked number one on the list because of the relationship between small business job growth and overall economic growth. San Francisco and San Jose ranked sixth and ninth, respectively, bested by nimbler hot spots such as Miami and Provo. Austin has also made other high-level appearances over the past few years on similar rankings, such as CNBC’s “Friendliest Cities for Small Business” list.

    Small businesses are woven into the fabric of Austin’s economic ecosystem. Austin’s small businesses are ahead of the national average and a significant source of the tireless job creation engine for which Austin has earned a national reputation. Companies in Austin with fewer than 100 workers account for 35 percent of the area’s workforce, and yet they created enough jobs in 2009-2011 to offset the job losses caused by Austin’s largest employers after the Great Recession.

    Second, an opportunity city is a jobs city. Small businesses by themselves do not necessarily guarantee that a city will have a healthy jobs environment, but a critical mass of new small companies typically does, especially if a significant minority grow into larger companies.

    Austin reflects the growing body of academic literature on the impact of new firms on the labor market. Startups and other young companies generate the vast majority of net new jobs in America and spur income growth, especially for younger workers. New companies in Austin are the fuel that powers the creation of new jobs at a rate impressively above the national average.

    New firm formation in Austin tracks with general national trends, but it does so at a consistently higher rate. As figure 7 shows, Austin has produced a significantly greater share of new firms per capita compared to the rest of country over the past 20 years, and it rebounded faster post-recession than the nation as a whole. The tech centers of Raleigh, San Francisco, and San Jose have all had lower startup rates than Austin since 2010.

    Austin is the only major metro in Texas creating as many or more new firms than it was pre-recession. Just three years after the nation’s economic nadir, Austin created more new firms in absolute terms than it ever had. It also produces a disproportionately high number of startups for its size. In the Kauffman Foundation’s Index of Startup Activity, Austin has been in the top two spots for a few years running.

    In addition to its startup culture, Austin is a premier relocation destination, especially for companies looking to expand operations in a business-friendly atmosphere with an abundance of talent. Since 2004, nearly one-third of all high-tech company relocations and expansions to Austin from elsewhere have come from California. Among these are household name giants such as Apple, Google, eBay, Oracle, PayPal, and Facebook.

    A churning startup culture drives a dynamic job-creation ecosystem. Austinites work more hours per week than the national average, enjoy the lowest unemployment rate among the nation’s top 50 metro areas and experienced non-farm payroll growth at the 3rd fastest rate last year.

    This has a lot to do with a healthy balance between job growth in all sectors of the economy with particularly strong performances in higher-growth sectors of the economy. Between 2014 and 2016, every sector of Austin’s economy added jobs, except manufacturing, which only declined by less than a percentage point. Since 2010, job growth in professional business services has grown 42 percent and information jobs by 34 percent, and over the past two years Austin has outperformed growth rates nationally in sectors diverse as wholesale trade, construction, leisure and hospitality, and retail.

    Third, an opportunity city attracts professionals on the front end of their careers. One of the best ways to test the dynamism of a region is to look at the degree to which young professionals in their 30s are moving there. Immediately after college, 20-somethings will often move to big cities to get their professional footing and enjoy the fruits of cosmopolitan living. As they approach their thirties, they begin to think about affordability more seriously and consider other opportunity-related factors such as the quality of neighborhoods and schools if they are in the marriage and-kids market. Looked at this way, Austin is the preferred destination for upwardly mobile, aspirational 30-somethings looking to make a life for themselves.

    A recent Niche.com ranking of the 25 best cities for millennials used as its key metric the percentage of 25-34 year olds living in each city. Austin, which ranked second overall on the list, had the highest percentage of 25-34 year olds among the top 25 cities.

    When we compare 25-34 year olds moving to the Bay Area versus Austin, we see several sharp contrasts. Between 2000 and 2014, this group grew by 49 percent in Austin but declined by nearly 4 percent in Silicon Valley. There are now more 25-34 year olds living in Austin than in the San Jose metro area.

    A greater share of 25-34 year-olds in Silicon Valley have a bachelors degree than in Austin, but Austin has been growing its educated young population at a much faster rate. The 25-34 year-old population with at least a bachelors degree has grown in Austin by nearly 61 percent since 2000, compared to 18 percent in San Jose.

    Balancing the Basics: Why Austin Works

    Austin’s success as an opportunity city differs from what has occurred in the Bay Area’s anchor metros, San Francisco and San Jose. These places have led the nation in job creation and startups in recent years and are growing their share of highly-educated young professionals. Yet they are losing population — and company relocations — to Austin. Why is Austin succeeding where San Francisco and San Jose, at some level, are not?

    The answer lies somewhere in the answers provided by those who have made the move from the Bay Area to Austin.

    Vasili Triant, CEO of LiveOps, moved his company from Silicon Valley to Austin after concluding that quality of life and cost issues would keep his company from achieving its growth objectives. Before assuming the helm of LiveOps, Triant moved to the company’s Austin office to direct sales. He and his family were able to buy a home and attend schools in the kind of district that would be utterly uaffordable in the Bay Area. The easy-going yet ambitious nature of Austin’s workforce provided a solid talent pool.

    Meanwhile, back in Silicon Valley, employees at Triant’s company were constantly pushing for pay raises to accommodate the cost of housing, complaining about the multiple hours a day they spent commuting, and worrying about the schools their kids would have to attend. Employees earning over $200,000 were in debt and not contributing to their 401ks.

    Once he was elevated to CEO, Triant confronted his board with the built-in costs of doing business in the Bay Area. He proposed moving the company to Austin, to which the board agreed after reviewing the numbers. Triant likens the difference between the Bay Area and Austin to a difference in premise about what makes a good life worth living in each place. In Silicon Valley one gambles that he or she will make it big, has family money, or just wants to be near the ocean and the mountains. “If your premise about a good life involves saving money for the future and having a good community and school for your kids, then Austin is for you – and the Bay Area won’t be unless you’re phenomenally wealthy,” Triant says.

    Pradeep Vancheeswaran, a Senior Vice President of Global Business Operations at VMWare, lived in California for his entire U.S. professional career, including seven years in the Bay Area, before moving to Austin. The cost of living and the rat-race culture of the Bay Area prompted him and his wife to reconsider whether it was the best place to raise their kids and make a life. On a scouting trip to Austin he saw the kind of home his money could buy, the kind of neighborhood he could live in, and the quality of the schools, and the decision was made. Friends said he was committing career suicide. The opposite has happened, and the family is flourishing in Austin. “Texas gets a bad rap in the Bay Area,” he says. “But the truth is Austin is an inclusive place. We have great neighbors, people are friendly, and I have been able to hire talent here with no problems. In fact, Austin ranks at the top of our global talent assessment and has been a great place to hire for our company.”

    Triant’s and Vancheeswaran’s stories are not uncommon in Austin and exemplify the fundamental pillars supporting Austin’s sustained growth.

    More for Your Money

    Underneath the vibrant regional economy, Austin’s bedrock, not often mentioned in the hype about the city, has been its affordability.

    As Triant and Vancheeswaran’s personal accounts attest, Austin’s diverse and affordable housing stock is a key lure for upwardly mobile professionals. Housing in Austin is growing more expensive but still remains a reasonably good deal, particularly in comparison with the Bay Area, Los Angeles and San Diego, where housing costs more than double that of Austin, adjusted for income.

    The key to maintaining housing affordability is to allow supply to keep up with demand. This requires avoiding the restrictions on suburban housing development that have been adopted in places like California, Portland and Seattle, and avoiding the high development charges typical of more restrictively regulated markets. As Figure 8 shows, affordability was nearly identical in Austin, Portland, and Denver in 1990. Since then, unaffordability has grown faster in the latter two markets, which place more restrictions on housing than Austin does. And in the Bay Area, of course, California’s notorious penchant for restricting housing is breaking records for unaffordability.

    Using Demographia’s International Housing Affordability Survey, we find that single-family homes in Austin remain more affordable than rival talent centers such as Portland, Denver, Seattle, and Washington, DC. When compared to San Jose, which is the United States’ most unaffordable housing market, it is not hard to see the appeal for Bay Area technology transplants. The median house price in San Jose and San Francisco is nearly ten times the area’s median income, compared to four times in Austin. Technology executives in the Bay Area cite housing costs as the biggest threat to their continued success.

    Still, at four times median income, Austin is facing the beginning of affordability problems. It has grown from an affordable to moderately unaffordable housing market since 2000 and is presently on the cusp of becoming severely unaffordable according to Demographia’s calculations. Trulia’s chief economist agrees, arguing that Austin is on the verge of denting its continued growth trajectory should housing prices climb much farther relative to income.

    When it comes to total cost of living advantages, though, the story improves somewhat for Austin. According to BEA data, between 2008 and 2013 the overall cost of living actually decreased slightly in Austin even as it rose in New York and Washington, DC. Austin’s workforce enjoys a 20 percent cost advantage over residents of New York, who labor under the highest cost of living standards in the nation. Austin costs about the same as Phoenix or Orlando. The Bay Area, by contrast, is an indistinguishable percentage point more affordable than New York. Therefore, it is not surprising that San Francisco and San Jose have seen positive net migration from New York in recent years. If life must cost an unbearable amount, the weather and scenery might as well be better.

    Follow the Money

    Austin’s real median income is the highest of Texas’s four largest metros and even surpasses the New York metro area. Of the nation’s 53 cities with more than one million residents, Austin’s median household income is the tenth highest adjusted for cost of living. African American and Asian median incomes in Austin are fourth and fifth respectively among the largest U.S. cities, and salaries in Austin typically track slightly above the national average for most job categories.

    Given Austin’s emergence as a technology center , the region now has twice as many high-tech jobs as a percentage of all jobs than the national average. Nearly one-quarter of all payrolls in Austin are in the high-tech sector, with an average salary greater than $100,000, nearly double the average salary for all other industries. Though high tech salary growth has slowed in Austin in the past few years compared to the rest of the nation, the average high tech worker in Austin still earns more than the national average. Before the Great Recession, there were more high-tech manufacturing than IT jobs in Austin, but the past five years have seen an explosion of information and other IT-related high tech jobs. The number of IT jobs in Austin has nearly doubled in the past ten years, totaling more than 56,000.

    High-tech manufacturing jobs remain the highest-paying, though, with an average annual salary fetching $122,000. Income growth outside of high tech jobs has grown at a faster rate than tech jobs. Between 2010 and 2015, Austin had the second-highest annual job growth across all industries at 3.7 percent, just a click behind San Francisco’s 3.8 percent growth rate. Austin’s high tech job growth rate of 5.7 percent was also the second-highest nationally, once again behind San Francisco’s peerless 10.7 percent growth rate. These rates of growth have been matched by healthy income growth that makes Austin a premier opportunity city.

    Good Place for the Kids

    Austin’s relative affordability and earning power is buttressed by two additional factors that are especially important to families and young people planning to have children: safety and schools. As Austin has grown, the sheer influx of families with children has placed a premium on the availability of strong educational options and a safe environment.

    Between 2000 and 2014, the number of households in Austin with children under the age of 18 grew 35 percent. By contrast, such households grew 4 percent in San Jose. This does not mean that Austin is necessarily more pro-family or pro-marriage in the sense of cultural norms. The percentage of married adults in Austin has declined just as it has across most urban areas in the past 15 years, as has the percentage of young couples with children.

    But, as sheer volume of families with children moving to Austin in absolute terms shows, the overall environment is very family-friendly. Austin’s schools fare better on most assessments of public school quality than Texas’s other large cities, and families have public school options all across the metro area. For instance, consumer-oriented data analysis sites such as FindtheHome.com rate Austin’s city schools ten points or more ahead of Dallas, Houston, and San Antonio, and the State of Texas’s overall rankings show a substantial percentage of high-performing schools in the metro area. Whether a family chooses to live downtown or the suburbs, there are strong public school options unlike ones one would normally find in large urban areas.

    An annual survey of residents shows that Austinites value choices in education as well. A majority of adults believe the public schools in Austin are a good value for their tax dollars. Yet 59 percent of 18-34-year-olds support school vouchers, as do 50 percent of adults over 35. Fifty-nine percent of all adults either send their kids to charter schools or would consider doing so. Sixty percent of respondents say they chose where to live based on school options.

    Austin is also one of the safest cities in Texas. According to the FBI’s Uniform Crime Reports, Austin ranks 21 out of Texas’s 24 metro areas in the report in crime incidents, well below the other larger metros.106 As a state capital and university town Austin’s growth has “skipped over” the debasements that accompany deindustrialization and largescale losses within working-class economies. But Austin’s growth patterns, variegated and multi-nodal as they are across the metro area, have also created diverse economic centers that have prevented large swaths of the city from falling into decline.

    Option Urbanism: Austin’s Polycentric Character

    The thing that ultimately makes Austin’s population and economic growth work is the multi-nodal quality of the metro area’s growth. Despite its reputation as a “hip” and dense urban area, in reality Austin is a city of districts that balances and disperses urban-style amenities across its urban and suburban landscape.

    Austin’s reputation as an urban hotspot is well-deserved. The Austin City Limits concert venue and annual festival are in or immediately across the Colorado River from downtown. South By Southwest, the global technology, film, and music festival, occurs mostly in venues spread across Austin’s urban core. The heart of the Austin music scene along 6th Street downtown is only a short walk from the Texas state capitol and a mere 13 blocks from the University of Texas at Austin, the state’s flagship university whose iconic tower is a fixture along the Austin skyline. Visitors to Austin over the past decade are always greeted by construction cranes that dot the downtown landscape, as high rises compete with one another to make a new mark on the skyline.

    Suburban Austin

    Demand for downtown living has never been higher in Austin, and yet the cranes and construction zones tend to hide the true locus of Austin’s dynamism—the area’s lively suburbs. This is where the vast majority of the region’s population growth in the past 15 years has occurred. Not merely appendages to downtown, Austin’s suburban communities have done a notable job of incorporating elements of the city’s urban identity into the quality of life its suburban residents experience. One can find food trucks, coffee shops, new restaurants, indie shops of various kinds, music, and festivals dispersed across the metro area. The Barton Creek Greenbelt that stretches southwest off the Colorado River downtown spreads outdoor recreational opportunities, for which Austin is also well-known, across multiple access points through a variety of neighborhoods.

    In 1990, when Austin metro’s population was less than one million, 45 percent of residents lived in the suburbs. Today, 53 percent of Austinites live in the suburbs. The city grew 47 percent between 1990 and 2000, and then another 37 percent between 2000 and 2010. The vast majority of this growth has been suburban in nature.

    Using Demographia’s City Sector Model, we see the urban core and urban core’s ring, defined as the central business district and original downtown ring pre-dating World War II, experienced healthy rates of growth but added little in absolute terms between 2000 and 2012. What most people think of as today’s booming downtown Austin only accounted for 1.6 percent to the metro area’s entire growth during this period. Of the 588,000 new residents to Austin during this period, 564,700 of them moved into suburban neighborhoods.

    Figure 11 shows how this growth looks geographically. Central Austin grew very little between 2000 and 2014. The fastest growth, depicted by the grey and blue areas, is largely suburban.

    Homeownership in Austin follows this suburban trajectory. Compared to 30 percent among the nation’s 52 largest metro areas, 62 percent of the owned housing stock in Austin can be found in suburbs in which the median home construction year was after 1980. That figure is less than 10 percent in Silicon Valley. By contrast, 77 percent of owned housing in Silicon Valley is in older suburbs with a median home construction year before 1980, compared to 14 percent in Austin and 41 percent nationally. Another 23 percent of Austin’s owned housing is located in exurban communities, compared to 19 percent nationally and 13 percent in Silicon Valley.

    Austin’s success as an urban model is closely tied to its ability to meet population demand with new housing in new communities. The increasing difficulty to build and afford housing in the Bay Area is effectively making homeownership a phenomenon of aging suburban communities, as greater shares of aspiring homeowners leave the area altogether, as seen earlier.

    Multi-Nodal Tech City

    Austin’s suburban expansion also dominates much of the economy. Nearly half – 43 percent – of tech jobs are in the suburbs and much of the rest in areas outside downtown. Local markets for urban-style amenities such as bars, cafes, and events have arose to meet the demand of a highly-educated, relatively young workforce that nonetheless prefers lower-density suburban living. This creates a district effect that has worked relatively well with Austin’s zoning codes and allowed for either mixed-use, or regional mixes of uses, in various points across the metro area.

    Figure 12, an Austin Chamber of Commerce map of the city’s 100 largest high-tech companies, paints a picture of a multi-nodal tech community that is both urban and suburban. Since 2014, 37 percent of high-tech companies that have moved to Austin have relocated downtown, while the rest are dispersed across the various hubs.

    The heavily concentrated hub downtown and the corridor stretching southwest of downtown offer a diverse array of living options. South Austin interweaves leafy residential neighborhoods around its three north-south district roadways: South Congress, South First, and South Lamar. To the west are rolling, leafy suburban-style communities that offer proximity to downtown. Downtown increasingly offers dense, high-rise living with ample amenities. The Bartin Creek Greenbelt and trails around Lady Bird Lake (created by two dams in the Colorado River) are the centerpieces of Austin’s esteemed outdoor fitness culture.

    Between downtown and the concentration of tech firms along and north of route 183 are patchworks of neighborhoods and districts that blend homes, apartments, restaurants, shops and bars, once again creating options for families and single workers. The Domain, the mixed use complex near the intersection of Routes 1 (Mopac) and 183, is beginning to serve as a kind of “city center” north of downtown. Suburban neighborhoods west, north, and east of the northern tech hub offer an array of suburban options for families and workers. Apple is completing its second-largest campus outside of its California headquarters in the community, and other tech giants such as Google and Oracle have nearby offices.

    Dell anchors the tech community in Round Rock to the north, which effectively functions as a separate city center. Round Rock, with a population of more than 100,000, has more than tripled in size since 1990. Dell employs more than 13,000.

    Austin’s rapid growth, coupled with lagging investments in transportation infrastructure, accounts for why Austinites frequently rank traffic congestion as the biggest problem facing the city. Viewed comparatively, however, average work commute times in Austin match the national average at 25.5 minutes one way, compared to 31.2 minutes in San Francisco and 28.1 minutes in San Jose. Atlanta’s car commute times take a full five minutes longer than Austin’s, and in Washington, DC, an extra ten. Overall, Austin’s average commute times – whether by car, transit, bike or foot – is on part with Indianapolis or Charlotte. For transplants from New York or the Bay Area, commutes are likely to contribute to Austin’s appeal rather than the other way around. Car commute times are lower in Austin than either of those areas, as one might expect, but so are walk-to-work times.

    Despite this relatively good performance, over time traffic congestion along with housing affordability could begin to chip away at the city’s magnetic appeal. But for now, despite the frequent grousing one hears from locals about the traffic, Austinites on average are not worse off than other Americans living in cities larger than 1 million people.

    Austin’s still reasonable commute times reflect the polycentric quality of its economic geography. With commercial and cultural locations spread across the metro area, together with an array of single- and multi-family housing options nearby, Austin offers choices. If a young professional couple wants a single family home with a yard, proximity to restaurants and shops and good schools, they have options. If they want to live in more of a mixed-use apartment community close to work, they have options. Downtown living is increasingly becoming harder for people not commanding top salaries, but it still remains an option for young workers that other cities do not offer.

    Conclusion

    Austin is well-known as a talent center, but students of urbanism would do well to study the geographic nature of the talent economy in Texas’s capital. It is a dispersed talent pool, spread across a relatively affordable metro area with proximity to urban-style amenities.

    Austin has managed to encourage and allow the concurrent development of its central core and inner and outer rings in a way that has made variety a central feature of the Austin model. People, young and old, have options in Austin. Good schools can be found across the metro area meaning people rarely have to sacrifice amenity preferences in order to live close to a good school, which is a conventional understanding of what “moving to the ‘burbs” often entails in most cities.

    Austinites have work options, too, in two ways. The diverse economy, with a high proportion of high tech and other educated workers, offers opportunities in the job market for workers who decide what they are doing is not the right fit for them. Workers also have choices where they work. The polycentric nature of Austin’s commercial hubs makes this possible.

    And even as affordability problems present unprecedented challenges to Austin, the city still offers alternatives for where people want to live. Because of the timing and trajectory of Austin’s population growth, a lot of new housing is available, as well.

    The key to the Austin model’s continued success will be to preserve its core features as an opportunity city and the fundamentals that have made it work until now. Over-planning or limiting growth, concentrating economic strength in too few places, allowing school quality to erode – these are precisely the things that have done significant damage to other previously successful cities in America. Austin’s strength has been in going in the other direction. Its continued success depends upon continuing along the same path it has traveled until now, but with a vision to accommodate what seems as inevitable greater growth.

    Ryan Streeter is the Executive Director of the Center for Politics and Governance at the University of Texas at Austin and Clinical Professor of Public Policy at the LBJ School of Public Affairs. Streeter has conducted policy research projects for think tanks, institutional nonprofits, and public agencies at the federal, state, and local levels. He served as a Special Assistant for Domestic Policy to President George W. Bush, Deputy Chief of Staff for Policy and Strategy to Indiana Governor Mike Pence, and Policy Advisor to Indianapolis Mayor Stephen Goldsmith. He was a Senior Fellow at the Legatum Institute in London, has served as a Transatlantic Fellow with the German Marshall Fund, and was a Research Fellow at the Hudson Institute.

    Top photo: Photo by jdeeringdavis, Licensed under CC License

  • Can California Transition to Next Tech Wave?

    The consumer technology boom, largely responsible for a resurgence in California’s economy after the tech wreck of 2001, seems to be coming to an end. The signs are widespread: slowing employment, layoffs from bell-weather social media companies, the almost embarrassing difficulty of finding buyers for Twitter, the absorption of Yahoo by Verizon and the acquisition by Microsoft of LinkedIn.

    This is not to minimize the great things which have been accomplished over 15 years of massive investment in these technologies. Mark Zuckerberg founded Facebook in 2004, and is now worth some $55 billion, up $15 billion from last year. In 2015, more than 1 billion people globally used Facebook applications every single day. The “app economy” created by Steve Jobs and Apple is equally impressive. What would we have done with our free time if it were not for Farmville, Angry Birds and Pokemon Go?

    The tech boom has changed the face of wealth in America. Tech oligarchs, mostly clustered in the Bay Area, which dominates some 40 percent of employment in search and web publishing, now account for one quarter of the wealth of the Forbes 400 richest Americans. This tilting of wealth is not going away, and may shape the business world for a generation.

    Concentration and contraction

    Overall though, the economic impact of these technologies has been limited. Google’s Alphabet Inc. and Facebook Inc. together employ fewer than 75,000 people, one-third fewer than Microsoft, worth only a fraction its value. Snapchat, the star of Silicon Beach, employs several hundred people, hardly enough to reverse a long-term decline in Southern California tech employment.

    More troubling still are changes in the Bay Area tech culture. In its 1980s heyday, Silicon Valley was a Wild West of start-ups, new companies and ideas, and lots of jobs. Today, it resembles increasingly the cozy and fundamentally uncompetitive world of Detroit’s Big Three — Ford, Chrysler and General Motors. The Valley is increasingly dominated by a handful of companies — Google, Facebook and Apple — while conditions for startups, even well-funded ones, have deteriorated markedly.

    Read the entire piece at The Orange County Register.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Marshall Toplansky is Senior Advisor to Chapman University in the area of Data & Analytics, as well as adjunct faculty member at the Argyros School of Business and Economics. Formerly Managing Director of KPMG’s national center of excellence in Data & Analytics, Marshall co-founded big data company Wise Window, a pioneer in analyzing social media, blogs and news stories to track and predict business and political trends. Marshall is Chairman of the Cicero Institute, a strategy and research institution in Salt Lake City, Utah. He is past Managing Director of the Harvard Business School Association of Orange County, and was elected to the Computing Industry Hall of Fame for his role in creating the industry’s largest technical service certification program, A+, which has certified more than 3 million computer technicians worldwide.

  • Palo Alto and the Tech Shop of Horrors

    This piece by Zelda Bronstein (original to 48hills.org) goes behind the story of the Peninsula planning commissioner who made national news by saying she had to leave town to buy a house for her family.

    On August 10, Kate Vershov Downing, a 31-year-old intellectual-property lawyer, set the media aflutter when she posted on Medium a letter to the Palo Alto City Council stating that she was resigning from the city’s Planning Commission because she was moving to Santa Cruz. The reason for her move: She and her 33-year-old husband Steven, a software engineer, couldn’t find a house they could afford to buy in Palo Alto. Downing said that they currently rented a place with another couple for $6,200 a month, and that if they “wanted to buy the same house and share it with children and not roommates, it would cost $2M.”

    She reasoned that “if professionals like me cannot raise a family here, then all of our teachers, first responders, and service workers are in dire straits.” The fault, Downing wrote, lies with the Palo Alto council, which “ignores the majority of residents,” who have asked that housing be the city’s “top priority.” Instead, the council approves “more offices” and “a nominal amount of housing,” while paying “lip service to preserving retail that simply has no reason to keep serving the average Joe when the city is affordable only to Joe Millionaires.”

    The upshot is a place “where young families have no hope of ever putting down roots” and civic culture is on the decline, thanks to the onslaught of “middle-aged jet-setting executives and investors who are hardly the sort to be personally volunteering for neighborhood block parties, earthquake preparedness responsibilities, and neighborhood watch.”

    Downing’s post went viral. Within a week, her story had been picked up by media ranging from the San Francisco Business Times, the Huffington Post, and Curbed to the Washington Post, the L.A. Times, and the Guardian (UK). Thomas Fuller, the San Francisco bureau chief of the New York Times, did an extensive video interview of the Downings in front of their about-to-be-former Palo Alto residence followed by a driving tour of the town. Last week she appeared live on Bloomberg News.

    I’d hoped to talk to Kate Downing myself. We’d exchanged emails in February 2015, when I was working on a story about the inaugural forum of SFBARF (San Francisco Bay Area Renters Federation), in which she’d participated as a panelist representing Palo Alto Forward, the pro-development, smart-growth group she co-founded in August 2014.

    This time Downing she failed to respond to my repeated requests for an interview. I wonder if her reticence indicated an expectation that I would ask some hard questions.

    If so, she was right. Her statements to a generally credulous press and her posts on Medium contain a few good points buried in a jumble of obfuscation, neoliberal dogma, and startling ignorance.

    Far more troubling is the generally credulous reception she’s gotten from the media. Only Curbed, the Stanford Political Journal, and the New York Times bothered to interview a member of the Palo Alto council, Mayor Pat Burt. With the Times’ Fuller, Burt rated only a two-sentence quote (no driving tour). Bloomberg News displayed a quotation from Burt stating that the city was “looking to increase the rate of housing growth but decrease the rate of job growth” and then asked Downing if that was “reasonable.” None of her interviewers contacted members of the community who hold opposing views, in particular representatives of the slow-growth group Palo Altans for Sensible Zoning.

    Given that Downing appears to have become a prominent spokesperson for millenial market fundamentalism, her ideas and her actions deserve scrutiny. Here’s a start.

    Are four bedrooms and two-plus baths necessary to raise a family?

    Citing the price of housing, Downing asserted that “professionals like me cannot raise a family” in Palo Alto.

    Curbed reporter Adam Brinklow asked: “Why not buy a cheaper place? There are some cheaper places.”

    Downing dodged the question. “Sure,” she said, “we could move half an hour away. But if I can afford to move half an hour away to San Mateo, what happens to the people who have to move out of San Mateo?”

    Brinklow tried again: “I don’t mean half an hour away, I mean right in Palo Alto. There are cheaper homes. Not very cheap, but not $2.7 million either?

    Another dodge: “Well, that comment about the price of the house was really just an anchor for reference. But even if I found a cheaper home, even $2 million is more than I have to spend, and anything less is usually a project. Remember, you can’t take out a loan for construction.”

    Okay, but there are non-fixer-uppers with two bedrooms in Palo Alto, presumably large enough for a budding family, that the Downings could afford—which is to say, places selling for what they paid for their new home in Santa Cruz: $1,550,000. The difference is that those places are condos and townhouses.

    What Downing didn’t tell Brinklow (and he didn’t ask) is that she and her husband wanted the same kind of house that they were renting in Palo Alto: a 4-bedroom, 3-bath detached house measuring 2,338 square feet.

    That’s what she got in Santa Cruz: a 2,751-square-foot, detached, single-family home with four bedrooms, two-and-a-half baths, and a two-car garage. In Palo Alto, that kind of house is indeed selling for over $2 million dollars. (Zillow suggests that it’s selling for the same price in Santa Cruz: the listing for the Downings’ new place said it was “$700-845k below active comparables.” Apparently they got a deal.)

    The irony is that Downing disparages Palo Altans who, she says, want to maintain the city’s suburban character, while she’s chosen to move to a suburb and to a house whose Walkscore is a “car-dependent” 39 out of 100.

    When a commenter on the Palo Alto Forward blog questioned her purchase of the Santa Cruz house, Downing dodged his question, too: “I’m making choices and trade-offs for my family, that I’m very privileged to be able to make,” she bristled. “The fact that we can afford to buy anything at all and that we have jobs that allow us flexibility is a giant privilege most working class people don’t have.”

    Nobody is questioning Downing’s privilege. It’s the discrepancy between her stated and evident motives for leaving Palo Alto that rankles.

    “Abusive” cities

    Downing’s disconnect aside, housing prices in Palo Alto really are insane. In July theaverage rent for a two-bedroom apartment was $3,806. The median home value is $2.486 million.

    Downing blames the eye-popping prices on the city’s gross jobs-housing imbalance, which she in turn attributes to the council’s having approved tons of office development but not the housing for all the people who would be working in those offices. As of 2014, Palo Alto had almost three times as many jobs (95,460) as employed residents (31,165).

    The upshot, she writes, is “the bizarre reverse commute in the Bay Area where more people live in San Francisco but work in Palo Alto or Mountain View.” In her view, the fault isn’t the companies that came to Silicon Valley.

    [T]hey were invited with open arms. Part of the reason it happened that way is that in the 70s [sic] San Francisco created a stringent cap on office expansion, and it’s one of the reasons why it’s the Peninsula that became Silicon Valley and not the city of San Francisco until maybe the last 7 years or so. Companies went to where they were wanted. It’s the cities which are abusive because they take all that tax revenue from those companies but then don’t shoulder any of the burden of housing the people that work there—claiming…that other cities should bear that burden instead.

    A good point (local jobs-housing imbalances stink)…

    Yes, Silicon Valley cities have been encouraging massive development without permitting housing commensurate with the number of new workers.

    The latest poster child for this sort of reckless behavior is not Palo Alto but rather the city of Santa Clara, which on June 29 approved Related Companies’ $6.5 billion, 9.7 million square-feet CityPlace project. To be built just north of Levi’s Stadium on 240 acres of city-owned land (a former landfill), CityPlace will include up to 5.7 million square feet of offices, 1.1 million square feet of retail, 700 hotel rooms, a 35-acre park, and up to a paltry 1,360 apartment units. It will create 25,000 new jobs.

    As reported in the Silicon Valley Business Journal by Nathan Donato-Weinstein:

    “This project, looking at the real estate side of it, and the fact that we own it, it’s whipped cream with a cherry on top,” said Mayor Lisa Gillmor prior to the vote. “Not only will we get the development that services our community, but also we’ll reap the financial benefits of having a cash flow into our general fund for generations to come.”

    On July 29 San Jose, where housing far outnumbers jobs, sued Santa Clara over the project, alleging that the huge gap between the number of new jobs City would generate and the housing it would provide contradicted Santa Clara’s General Plan and would have profound and unnecessary environmental impacts in the region. Land use anarchy, anyone?

    …and bad history (letting Stanford off the hook)

    San Francisco voters passed the city’s office cap in the mid-80s, not the 70s, a good two decades after the Peninsula became Silicon Valley. And the impetus for the Peninsula’s transformation did not come just from local governments but from the ambitions of a giant private landowner and developer: Stanford University.

    “Palo Alto city government,” Downing avers,

    openly and decisively created and embraced the Stanford Research Park which now houses many of the biggest technology companies in the world (VMware, Tesla, SAP, HP, etc.) and more than 100,000 workers. Stanford Research Park LONG predates the likes of Google and Facebook and Page and Zuckerberg — it was created in 1951.The city had to re-zone that space and specifically entice tech companies to come there.

    Palo Alto did not create the Stanford Research Park; Stanford did.

    University of Washington history professor Margaret O’Mara tells the story in her fascinating 2005 book Cities of Knowledge: Cold War Science and the Search for the Next Silicon Valley. Originally called Stanford Industrial Park, the project was the postwar brainchild of Stanford administrators, notably Provost Frederick Terman and President Wallace Sterling. They remade their rich but undistinguished school into a scientific research powerhouse and a vehicle of regional economic development by leveraging federal R&D monies, shrewdly exploiting Stanford’s extraordinary land holdings, and capitalizing on the area’s beauty and fine climate and California’s booming militarized economy. It was Stanford that enticed high-tech companies to come to the park, and the park’s 1960 expansion “grew out of the demands of its tenants for more space.”

    Nor, as Downing indicates, did the city of Palo Alto and its residents view Stanford’s development of its land with unconditional enthusiasm. Though encouraging high-tech industrial production was the major thrust of the university’s economic agenda, its to-do list also included building a mall, the Stanford Shopping Center. Palo Alto elected officials initially opposed the mall, fearing that it would drain revenue from the city’s downtown retail, and threatened “not to provide sewer service to the site.”

    They soon dropped their opposition. “Palo Alto readily agreed to incoporate the land developments into the city, thereby providing Stanford with public utilities and road upkeep (and providing the city with tax revenues.” Stanford doesn’t pay taxes, but the companies at Stanford Research Park and the Stanford Shopping Center do. The city “made no further efforts to control the path of development.”

    The city’s residents were not so easily pacified. When Stanford announced in 1960 that the Industrial Park would be expanded into the foothills, “neighborhood opposition…led to a fiercely fought ballot referendum campaign that President Sterling called ‘the Battle of the Hills.’” The university won that battle and proceeded with the expansion. In a public relations gesture, it replaced “Industrial” in the park’s name with “Research.”

    What Stanford did not do is change its suburban model of land use.

    A 1962 survey showed that the majority of the Park’s 10,500 employees did not live in the immediate area but commuted from communities south of Palo Alto (56 percent). Seven percent lived outside the ‘regional area’ of the Peninsula altogether. Palo Alto residents made up 21 percent of the workforce. Employees overwhelmingly depended on cars to get to work.

    And, O’Mara writes, Stanford came to be regarded as a “model city,” a prototype for regional economic development around the world—and on the Peninsula.

    [B]ecause of developments like the Industrial Park, the Peninsula was on the leading edge of the trend toward living in one suburb and working in another. The residential and commuting patterns seen in the Park in 1962 also presaged the later housing shortages that would face the Bay Area, particularly Palo Alto, where by the end of the twentieth century few professionals could find available and affordable places to live.

    In a post-resignation-announcement interview, Stanford Political Journal reporter Andrew Granato asked Downing, “What do you see as Stanford’s role in housing politics, and do you think it can or should do anything?”

    Downing equivocated, praising the university for “trying to add a certain amount of housing for its employees or students or faculty,” but subtly criticizing the school for not doing more:

    I think that Stanford has always tried very hard to be a good neighbor to Palo Alto. They’ve tried to be very friendly and supportive….[A]t the same time, Stanford has been relatively quiet about what’s going on in Palo Alto and the Bay Area in general with respect to housing.

    Far from being a good neighbor, Stanford has long been a major source of the jobs-housing imbalance that Downing deplores. Now, in its largest-ever off-campus expansion, the university is planning to build a $568 million office park that will accommodate 2,400 university employees on a 35-acre site in Redwood City. Stanford considered putting the project in Palo Alto but couldn’t find enough space.

    To be sure, as per Downing’s argument, like Palo Alto, Redwood City has given Stanford a go-ahead. The university got it in 2013, when Redwood City approved Stanford’s plan for the property in return for more than $15 million in public benefits, including bike lanes, a business boot camp for Redwood City residents, a free speakers series from the Graduate School of Business, and a free shuttle for its employees and members of the public from the Redwood City Caltrain station to the offices. In keeping with Stanford’s suburban commuter model, the complex will include a gym with a pool, cafes and a small park—but no new housing.

    “After the construction is completed,” wrote Chronicle reporter Wendy Lee, “Stanford is expected to become one of Redwood City’s largest employers.” Redwood City Economic Development Manager Catherine Ralston enthused: “ ‘It’s a really great opportunity for Redwood City. It’s going to bring a lots of jobs to the area.’”

    Redwood City Councilmember Jeff Gee told Chronicle reporter Wendy Lee that a Stanford survey found only 8 percent of its employees living in or near Redwood City. “The Redwood City council considered and rejected allowing housing on the site,” wrote Lee, stoking some residents’ fears that an influx of Stanford employees would further inflate already high rents.

    The Prop. 13 factor

    Why do cities pursue jobs and not housing? One reason is that new housing, especially housing for families with school-age children, requires many more municipal services than commercial development.

    Another is that Prop. 13 severely constrains property taxes by limiting annual increases to 2%; only when a parcel is sold or new construction occurs can a property’s value be re-assessed. The law favors parties that hold on to their property for a long time, above all big corporate landholders. It disproportionately burdens most homeowners, especially new ones, and new businesses. One study found that enacting a split-roll initiative that taxed corporations on the market value of their property would generate $8.2 to $10.2 billion in annual revenues for California.

    Downing’s position is confusing. She stands with the Evolve campaign to maintain current Prop. 13 protections for all residential property, provide an exemption for small businesses, and establish a regular, yearly reassessment of all non-residential property in California. “Corporations used to pay the bulk of property taxes, she writes, “but now 75% are paid by residential properties, and places like Disney literally pay as much in property taxes as a reasonably sized single-family home.”

    But she also embraces the argument that eliminating Prop.13 and allowing all property to be assessed every year would discourage Nimbyism and encourage development. As one of her correspondents on Medium, Eric Kingsburgy, wrote:

    NIMBYism is able to take hold in places like Palo Alto because [in a system where property taxes don’t change,] more development provides absolutely no benefit to incumbent property owners….More people only means more traffic, busier parks, and more crowded schools….

    A California without Proposition 13 would still face hurdles to development, and the abuse of land use regulations—no one likes crowded parks or traffic—but to a much lesser extent….Residential that bought $100,000 homes in Palo alto in the 1980s would have seen their property taxes skyrocket along with their property values, leaving them with two options: move to a lower cost area or push for measures that would make their property less valuable.

    Downing responds: “Agree with everything you’ve written!” And then she refers “folks who are interested in Prop. 13 reform” to the Evolve campaign. Go figure.

    The numbers game: how much of Palo Alto is zoned for single-family homes?

    By contrast, when it comes to property values, the housing crisis, and zoning, Downing is unequivocal: the way to lower housing prices is to loosen zoning laws that restrict development by imposing “an artificial constraint on supply.”

    Her reiterated example is Palo Alto’s zoning. “Only something like three percent of the city,” she told Brinklow, “is zoned for any sort of multi-family use. For most places it’s illegal to build a duplex.”

    Brinklow asked Mayor Burt: “Is it true that 97 percent of the city is zoned R-1?”

    Burt: “That is a misrepresentation.”

    Correct. According to the city’s Comprehensive Plan, 4% of Palo Alto’s 26 square miles is zoned for multiple-family dwellings, and 25% is zoned for single-family dwellings. (Forty percent of the city is zoned for parks and preserves, another fifteen percent is dedicated to agriculture and other open space.)

    But zoning doesn’t tell the entire story. The Plan also says that 38% of the housing stock is multiple-family units, and 62% is single-family. So single-family predominates, but not to the extent that Downing has implied.

    Downing supported Jerry Brown’s anti-democratic giveaway to the real estate industry

    In an interview with Los Angeles Times reporter Michael Hiltzik, Downing praised Jerry Brown’s controversial by-right housing legislation, Trailer Bill 707, declaring that it “does everything that needs to happen.”

    It’s a curious endorsement, because one thing Brown’s proposal doesn’t, or more precisely, didn’t—since it just died in the Legislature—do is the thing that, Downing thinks, needs to happen: relax residential zoning standards in Palo Alto or anywhere else in California.

    Trailer Bill 707 specified that if a project conformed to local zoning and contained 5-20% affordable housing, it would be permitted by right, meaning without any environmental or other public review. A draconian giveaway to the real estate industry, the measure was defeated by a statewide coalition of affordable housing advocates, environmentalists, and labor organizations.

    Given her concern about the lack of civic engagement in Palo Alto—in her words: “there’s maybe one thousand people who pay attention to city government….A minority of wealthy homeowners can create a network to get candidates elected very easily”—you might think Downing would have been put off by Trailer Bill 707’s hostility to local democracy.

    Instead, Downing shares that hostility. She favors a strong, centralized state. “Countries like Germany and Japan,” she writes,

    do not make planning decisions at the local level. They make them at the national level….They do what’s best for all the people, not just the people in one small city[,] and they do what’s best for the country’s economy as a whole…

    In good neoliberal fashion, she thinks planning is all about economics, and that what’s best for the economy is a state that vigorously intervenes in behalf of market freedom. At her last Planning Commission meeting, on July 27, she voted against raising the affordable housing development impact fee from $20.37 per square foot to $60, stating that the “massive and aggressive” increase would discourage the construction of affordable housing.

    I’m guessing, then, that Brown’s bill appealed to Downing because it drastically curtailed local say in development, to the fulsome benefit of property capital. “Capitalism and property ownership,” she writes,

    are enshrined in literally hundreds of thousands of laws on [sic] this country, including our constitution. For so long as the U.S. constitution still stands, this is the only system that we have and understanding its rules remains a critical element of making policy for the future.

    Perhaps Downing skipped constitutional law class; the U.S. constitution says nothing about capitalism.

    Given Downing’s outrage at the “astronomical” cost of housing in Palo Alto’s and her professed solicitude for “the average Joe,” you might also think that she would have deplored a bill that greased the permit process for projects with as much as 95% market-rate housing.

    Market-rate housing, however, is all that Downing wants to see built. Responding on Medium to a correspondent who doubted the superiority of “national zoning decision-making” and “centrally created affordable housing,” Downing wrote:

    I’m only talking about lifting zoning restrictions so that more market-rate housing is legally allowed to be built in the city. So I’m most definitely not talking about “centrally created affordable housing.” My goal and belief is that housing growth (market-rate) must keep up with job growth.

    She points to “places like Texas which have far fewer zoning restrictions (none at all in Houston).”

    [E]ven though they’re experiencing an unprecedented population boom, their prices aren’t soaring like California’s. And it’s because they have something much closer to a free market where people can supply enough housing to actually meet demand.

    Ahem. Prices in Texas, including Houston, have been soaring—not to the Bay Area’s catastrophic levels, but soaring (50% leap in 2010-15) nonetheless.

    But let’s talk about California, and specifically our region. Here the textbook theory of supply-and-demand—prices fall as supply increases—doesn’t apply. As I wrote in 48 hills last December:

    What’s making home prices soar in our region is the simultaneous incursion of hundreds of thousands of highly-paid tech workers and a flood of foreign investment. In June the Contra Costa Times reported that “[h]igh-tech employees make a yearly average of $124,000 in Santa Clara County, $107,000 in the San Francisco-San Mateo area, and $101,000 in the East Bay.” By contrast, wrote George Avalos, tech workers nationwide average about $84,000 a year. “This is a very, very hot area to live and work,” [demographer] Steve Levy told Avalos, “and the wage growth is pushing up housing prices.”

    (Levy, by the way, sits on the board of Downing’s Palo Alto Forward.)

    Downing presumably thinks that if enough market-rate housing were produced, housing prices would fall to affordable levels. I always like to ask someone who holds that view:  how much housing would it take? So far, the answer has been: I don’t really know. That’s what former Trulia Chief Economist Jed Kolko told me. Ditto for George Mason University Law Professor Ilya Somin, who wrote a Washington Post op-edpraising Downing’s attack on “restrictive land use regulations.” I bet Downing has no idea, either.

    In her case, further questions seem to be in order: how much and what kind of new housing would it take to lower the price of four-bedroom, two-plus bath single-family homes in Palo Alto from $2.6 to $1.55 million dollars?

    The Palantirization of downtown Palo Alto

    In Palo Alto, the tech tsunami hasn’t just driven up housing prices; it’s also decimated the city’s retail sector, which has been colonized by tech offices. Things got so bad that in May 2015 the council passed a 45-day urgency interim ordinance that prohibited the conversion of existing ground-floor retail to offices. A month later it extended the ban to April 30, 2017.

    As an employee of Peter Thiel’s Palantir Technologies who works in downtown Palo Alto, Downing’s husband Steven is implicated in the tech displacement of the city’s retail businesses.

    Palantir, wrote San Jose Mercury reporter Marisa Kendall in April, is “taking over” downtown Palo Alto. The secretive company rents at least nineteen properties comprising 250,000 square feet, or about 12 percent of all downtown’s commercial space downtown. Office rents have climbed accordingly. Now tech start-ups are having a hard time finding space that they can afford.

    Can a city have too many (tech) jobs?

    To Downing, only a maniac would entertain this question. Responding on Medium to an unnamed correspondent who apparently asked whether Palo Alto would try to shed some tech businesses, Downing wrote:

    I don’t think Palo Alto is going to choose to get rid of the companies. If they do, their tax base will shrivel and they’ll have a hard time paying city employees and paying off all the pensions they’re already obligated to fulfill…

    And…what kind of insanity is it to be trying to kill high paying jobs and forcing companies out of town when the rest of America is bending over backwards trying to attract those companies?….Everyone else in the world is looking at Palo Alto and scratching their heads at the thought of a city that thinks its grand solution is to slaughter the golden goose.

    Actually, the golden goose metaphor doesn’t work for the tech industry in the Bay Area today. As depicted by Aesop and other fabulists, that bird was killed by the greed of its owners, who forced it to lay more than its customary single egg a day.

    A better analogy is Audrey II, the man-and-woman-eating plant in film The Little Shop of Horrors, whose exponential growth drew customers to the shop but whose insatiable appetite threatened to destroy everything around it. When its owner, the unprepossessing Seymour, realizes that it cannot be appeased or controlled—indeed, that it’s about to eat him—he kills it.

    Like all metaphors, this one has its limitations. Unlike Audrey II (but like zoning), the tech industry is a human artifact and thus susceptible to human control. Accordingly, some Palo Altans are contemplating additional curbs on tech’s growth in their city—for example, Mayor Burt.

    “Palo Alto’s greatest problem right now,” the mayor told Brinklow,

    is the Bay Area’s massive job growth. Cities are still embracing huge commercial development with millions of square feet of office space they can’t support….[W]e have to do away with this notion that Silicon Valley must capture every job available to it….We’re looking to increase the rate of housing growth, but decrease the rate of job growth.

    Brinklow was incredulous: “You want fewer jobs?” [italics in original]

    Burt: “I know, it’s a strange idea to contend with. But this doesn’t mean we want no job growth….We want metered job growth and metered housing growth, in places where it will have the least impact on things like our transit infrastructure.”

    For a city official to espouse less job growth in his town is beyond strange; it’s unheard-of. As a challenge to the prevailing growth ideology, it’s on par with 48 hills editor Tim Redmond’s recent piece welcoming the drop in San Francisco land values that, according to the city’s Controller, would result from requiring twenty percent of the units in new apartment buildings to be below-market-rate. But you expect such radical pronouncements from Redmond, not from a mayor, especially the mayor of a Silicon Valley city who’s a tech executive to boot.

    Burt’s stated goal is to accommodate some growth and still maintain Palo Alto’s distinctive character. That means going slow, because, he contends, the rate of the region’s job growth

    is just not sustainable, if we’re going to keep [Palo Alto] similar to what it’s been historically. Of course we know that the community is going to evolve. But we don’t want it to be a radical departure….[W]e balance things….[W]e’re looking at increasing our developer fees and investing more in affordable housing. We have 2,500 units of BMR [below-market-rate] housing over the last decades, and a lot of hard work went into that.

    Improving transit, said Burt, is key: “The community would be more willing to embrace new development, even commercial development, if we could solve the transit problem….[J]ust in the last year, for the first time ever, I’ve become really confident that things will get better.”

    Brinklow: “Why?”

    Burt: “The single biggest thing is probably electrifying Caltrain.” He’s also encouraged by the extension of BART to San Jose, Palo Alto’s rideshare app, Scoop; the Palo Alto Transportation Management Association; and the advent of  “shared, autonomous vehicles powered by carbon-free electricity.”

    The real culprit: baby boomers “aging in place”

    To Downing, Burt epitomizes the chief culprit in the affordability crisis—not the “middle-aged, jet-setting executives and investors” named in her resignation letter but rather “older homeowners,” boomers who got into the housing market when the middle class could still buy a house in Palo Alto, and who are now, in her indelicate phrase, “aging in place.” She attributes their slow- or in her view, no-growth agenda—“they just plain don’t want to see more people in the city”—to two motives: maintaining or, better yet, increasing the values of their property; and preserving Palo Alto’s suburban character.

    What’s worse, she says, they’re elitist hypocrites. When Brinklow noted that the slow-growthers argue that the city’s transit infrastructure and water use should be limiting factors in development, Downing interjected:

    The exact same people who complain about infill housing will show up to complain when you want to expand transit….These people will say anything, but they don’t really care about congestion or water use. They care about keeping the town looking exactly the way it is….They think public transit is for the poor and apartments are for people on welfare.

    Brinklow: “You allege that all of these policy objections are just a cover for a personal agenda?”

    Downing: “Well, we know that.”

    Slow growth vs. smart growth

    I emailed Cheryl Lilienstein, the president of Palo Altans for Sensible Zoning, and another “older homeowner,” asking if her group opposed expanding transit in town. Lilienstein replied that it depended on the kind of transit.

    “For years and years,” Lilienstein emailed, “we’ve been asking for cross-town shuttles to take us to schools, large job centers, hospitals, and community services nowhere near El Camino.”

    Regarding high-density development around mass transit—for example, at the Caltrain stations, being pushed by Palo Alto Forward, the Santa Clara Valley Transportation Authority (VTA), the Silicon Valley Leadership Group, and ABAG—she wrote:

    We oppose it. VERY few residents now living in high density housing near transit use it. They live there because they want to live in Palo Alto, and they still use cars to get where they need to go, so it’s unrealistic to assert new high density development will be car-free. It won’t.

    By common consent, traffic congestion in Palo Alto is horrendous, due to the huge number of commuters driving into town. The question is, what to do about it? The issue is front and center in the current public process to update the Comprehensive Plan.

    PASZ’s basic position, set forth in its comments on the Draft EIR for the update, is that before increasing population, the city needs to do what it can to decrease traffic and the associated air pollution in accordance with “a set goal.” Only then, should the city “proceed with a slow housing program that prioritizes housing for those whose presence would provide diversity for an economy that serves all residents”—specifically:

    • People who under present conditions will never be able to buy here, typically defined as the middle class: clerical workers, city staff, middle management, tradespeople, low income workers, service workers, small business owners
    • Seniors living here who don’t own their houses or still have mortgages and want to retire
    • The homeless

    TKPASZ wants to maintain Palo Alto’s suburban character and still build housing that’s affordable to low-income people. From their Platform:

    Reduce the maximum development volume in certain zoning districts so that when state-mandated density bonuses are applied, the resulting volume matches what current zoning maximums would allow. In other words, state density bonuses for low income housing should not be used to produce buildings that are massive and out of scale with the surrounding neighborhoods.

    ….

    Development should be compatible with existing neighborhoods and take into account school impacts.

    I also asked Lilienstein what she thought of the transportation innovations that give the mayor hope.

    Burt,” she replied, ‘is overly confident, in my view, yet I wish his vision was possible.” Her top priority is “increas[ing] ease of movement INSIDE the city.” To that end, she wrote,

    I don’t see how electrifying CalTrain and increasing the ridership (both are good things) will do anything but increase crosstown gridlock for Palo Alto, since there is no grade separation” for the train tracks. The single greatest transformative investment would be to trench the tracks so there can be an increase in cross-town flow. Without, even the future promised technology improvements will be insignificant.

    If  BART is ever extended to San Jose, down the east side of the bay, how would that help us? The Transportation Management Association might put a dent in the traffic problem, but it’s basically underfunded and complicated/expensive to enforce. Scoop is a good idea, a good use of public money, but do Palo Alto worker actually use it?

    Downing, by contrast, thinks that “adding housing…is going to relieve a lot of the congestion we’re seeing” by allowing people “to live in the same community where they work. If you look at the people who actually live and work in Palo Alto,” she told Brinklow, “a substantial number…are walking or biking to work, so they’re not part of the traffic.” Now most of the in-commuters live far away.

    Palo Alto Forward’s website lists “five common-sense reforms that could remove barriers to housing”:

    • Encourage studio apartments and smaller units
    • Encourage residential units over ground-floor retail
    • Make it easier for homeowners to build second units
    • Allow car-light and car-free housing in walkable areas near transit
    • Facilitate new senior housing, including alternative models

    The underlying assumption is that growth is essential to economic health and hence must be accommodated. From its platform:

    On its current course, Palo Alto will continue to experience traffic and parking issues from denser uses of existing buildings, but it will have turned away new businesses and new workers who no longer have appropriate housing. The very economic growth that makes Silicon Valley a gem in America’s economic crown will slowly be chipped away, hurting local businesses, school funding, and employment rates alike.

    Dancing around the growth issue

    What the PAF platform never quite makes clear is whether the group can thinks the city should seek to accommodate as much growth as possible.

    Brinklow asked Downing: “What about people who argue that a city like Palo Alto just can’t ever build enough housing to really satisfy demand?”

    Downing: “I think it’s a misconception that you can never build up to demand. We have a pretty good idea what demand is: Every day, the effective population of the city [66,000] doubles from the number of people who come in just for work. That tells us something about how much housing we need. It’s not infinite.”

    But elsewhere, she indicates that growth per se is advantageous.  A member of the Bloomberg News team asked her if she thought “it’s fair for a community to collectively say, we don’t want to get any bigger, we don’t want to increase our population, we don’t want to live in a more dense area.” She replied: not if it’s a job hub. “As for these companies getting big,” she wrote in one of her Medium posts,

    —that’s something to celebrate and be happy about, not to lament. It means you live in a prosperous area with lots of high paying jobs and that your city is getting tons of tax revenue to support the sort of services and programs residents want to see. The response is to build out the necessary infrastructure to make sure your city can handle the growth and plan thoughtfully about how to grow in a way that will be beautiful and convenient. The response isn’t to murder the golden goose which is making your city so desirable in the first place.

    One of the qualities that made Palo Alto so “desirable in the first place” to the tech industry was the very thing that Downing would readily dispose of: the town’s suburban character. Paradoxically, that character is now jeopardized by the industry’s rampant growth. For Downing, however, nurturing that growth is paramount. Constraining it, she says, will lead to the decline of Silicon Valley.

    “[I]f [what Palo Alto is doing],” she tells Granato,

    continues this way, eventually we really are going to drive businesses and young people away. I mean it’s driving me away, right? And at that point, the locus of organization and development is going to shift; it’s going to go somewhere else. And I think that will be an extraordinarily painful thing for Stanford. It means less opportunities for its students, it means less collaboration between businesses and professors. I don’t think Stanford wants to be in a place that used to be the innovation capital of the world, but that’s kind of where we’re headed.

    Forbidden questions

    I’m no fan of Kate Vershov Downing—that’s been clear since the start of this story. I confess, however, that until recently, I shared Downing’s view that cities should strive to house the people who work in the businesses within their city limits, and that those who don’t should be judged harshly. Downing calls Palo Alto and other tech towns with jumbo job-housing imbalances “abusive,” referring to their unwillingness to house their tech workers. To me, the abusiveness involved dumping their housing and traffic issues on other cities—the sight of a “Google bus” parked in a Muni bus stop makes me scowl—and clogging the roads with long-distance commuters: when I left Palo Alto at 4 p.m. one afternoon last February, it took me two and a half hours to reach my north Berkeley home in my car, lurching forward in stop-and-go traffic all the way.

    Contemplating the fight over growth in Palo Alto has made me rethink my position. Pace Downing, the Bay Area’s tech sector seeks infinite expansion. A report released by the Silicon Valley Competitiveness and Innovation project last February found that for the first time since 2011, more residents—7,600—left Silicon Valley for other parts of the U.S.—Seattle, Austin, southern California—than arrived from other parts of the country. The area still had a positive net migration, but many of the new arrivals came from abroad. The American-born workers are headed to places where the cost of living is lower; the competition for jobs, space, and venture capital less intense; single-family homes more affordable; and traffic less daunting.

    In the report’s introduction, the sponsors of the project, the Silicon Valley Leadership Group and the Silicon Valley Community Foundation, called these numbers “warning signs” that “skyrocketing housing costs and increasing traffic congestion are eroding our quality of life” and making it hard to draw and retain sought-after employees.

    In response, the SVLG and the SVCF lay out much the same agenda as Kate Downing: sustain the local tech industry’s warp-speed job growth by building a commensurate amount of housing and expanding the region’s transit infrastructure accordingly. Just so, SVLG supported Brown’s by-right housing bill, though, in a move that I suspect Downing, with her opposition to “centrally controlled affordable housing,” would criticize, it also cheered the California Supreme Court’s decision that upheld San Jose’s inclusionary housing ordinance.

    Concentrated power undermines democracy. I’m talking about the economy, of course. Right now about a fifth of total jobs in the region—746,100—are in tech. The Bay Area’s appalling income inequality and its associated housing affordability crisis exist not in spite of but largely because of the high-rolling tech cataclysm.

    But democracy entails more than economic equality; it also involves political freedom. Money talks, and these days tech oligarchs are speaking much too loudly in our public life—think, for starters, Ron Conway and Airbnb.

    This quest for endless growth needs to be put on hold and replaced with a debate over the region’s carrying capacity and relevant public policy. How many jobs and people can the Bay Area support without further degrading the region’s quality of life, its cities’ distinctive characters, and the stability of their neighborhoods? Is it worth sacrificing these things for the sake of competitiveness? Who really benefits from the competitiveness race? Should a city’s receipt of a company’s taxes obligate that city to approve housing for the company’s workers? Do people have a right to live wherever they want? Barring prospective residents from your town on the basis of race or ethnicity or gender is wrong—and illegal. What about setting a limit on density or the size of a city’s population? And where’s the proof that people living in dense, transit-oriented development drive significantly less?

    For the region as a whole, the best thing that could come out of the Downing imbroglio is the expansion of the debate that’s roiling Palo Alto—not just to every city hall, but to every state and regional planning agency and legislative body. One point of universal agreement is that neither Palo Alto nor any other city can resolve the jobs-housing conundrum on its own. But today the growth ideology reigns supreme; no questions allowed. As long as that’s the case, the conundrum will persist and worsen.

    This piece originally appeared at 48hills.org.

    Zelda Bronstein, a journalist and a former chair of the Berkeley Planning Commission, writes about politics and culture in the Bay Area and beyond.

    For ongoing, in-depth coverage of Palo Alto’s land-use politics, see the reporting of Gennady Sheyner in the city’s alternative newspaper, the Palo Alto Weekly.

  • Today’s Tech Oligarchs Are Worse Than the Robber Barons

    Yes, Jay Gould was a bad guy. But at least he helped build societal wealth. Not so our Silicon Valley overlords. And they have our politicians in their pockets.

    A decade ago these guys—and they are mostly guys—were folk heroes, and for many people, they remain so. They represented everything traditional business, from Wall Street and Hollywood to the auto industry, in their pursuit of sure profits and golden parachutes, was not—hip, daring, risk-taking folk seeking to change the world for the better.

    Now from San Francisco to Washington and Brussels, the tech oligarchs are something less attractive: a fearsome threat whose ambitions to control our future politics, media, and commerce seem without limits. Amazon, Google, Facebook, Netflix, and Uber may be improving our lives in many ways, but they also are disrupting old industries—and the lives of the many thousands of people employed by them. And as the tech boom has expanded, these individuals and companies have gathered economic resources to match their ambitions.

    And as their fortunes have ballooned, so has their hubris. They see themselves as somehow better than the scum of Wall Street or the trolls in Houston or Detroit. It’s their intelligence, not just their money, that makes them the proper global rulers. In their contempt for the less cognitively gifted, they are waging what The Atlantic recently called “a war on stupid people.”

    I had friends of mine who attended MIT back in the 1970s  tell me they used to call themselves “tools,” which told us us something about how they regarded themselves and were regarded. Technologists were clearly bright people whom others used to solve problems or make money. Divorced from any mystical value, their technical innovations, in the words of the French sociologist Marcel Mauss, constituted “a traditional action made effective.” Their skills could be applied to agriculture, metallurgy, commerce, and energy.

    In recent years, like Skynet in the Terminator, the tools have achieved consciousness, imbuing themselves with something of a society-altering mission. To a large extent, they have created what the sociologist Alvin Gouldner called “the new class” of highly educated professionals who would remake society. Initially they made life better—making spaceflight possible, creating advanced medical devices and improving communications (the internet); they built machines that were more efficient and created great research tools for both business and individuals. Yet they did not seek to disrupt all industries—such as energy, food, automobiles—that still employed millions of people. They remained “tools” rather than rulers.

    With the massive wealth they have now acquired, the tools at the top now aim to dominate those they used to serve. Netflix is gradually undermining Hollywood, just as iTunes essentially murdered the music industry. Uber is wiping out the old order of cabbies, and Google, Facebook, and the social media people are gradually supplanting newspapers. Amazon has already undermined the book industry and is seeking to do the same to apparel, supermarkets, and electronics.

    Past economic revolutions—from the steam engine to the jet engine and the internet—created in their wake a productivity revolution. To be sure, as brute force or slower technologies lost out, so did some companies and classes of people. But generally the economy got stronger and more productive. People got places sooner, information flows quickened, and new jobs were created, many of them paying middle- and working-class people a living wage.

    This is largely not the case today. As numerous scholars including Robert Gordon have pointed out, the new social-media based technologies have had little positive impact on economic productivity, now growing at far lower rates than during past industrial booms, including the 1990s internet revolution.

    Much of the problem, notes MIT Technology Review editor David Rotman, is that most information investment no longer serves primarily the basic industries that still drive most of the economy, providing a wide array of jobs for middle- and working-class Americans. This slowdown in productivity, notes Chad Syverson, an economist at the University of Chicago Booth School of Business, has decreased gross domestic product by $2.7 trillion in 2015—about $8,400 for every American. “If you think Silicon Valley is going to fuel growing prosperity, you are likely to be disappointed,” suggests Rotman.

    One reason may be the nature of “social media,” which is largely a replacement for technology that already exists, or in many cases, is simply a diversion, even a source oftime-wasting addiction for many. Having millions of millennials spend endless hours on Facebook is no more valuable than binging on television shows, except that TV actually employs people.

    At their best, the social media firms have supplanted the old advertising model, essentially undermining the old agencies and archaic forms like newspapers, books, and magazines. But overall information employment has barely increased. It’s up 70,000 jobs since 2010, but this is after losing 700,000 jobs in the first decade of the 21st century.

    Tech firms had once been prodigious employers of American workers. But now, many depend on either workers abroad of imported under H-1B visa program. These are essentially indentured servants whom they can hire for cheap and prevent from switching jobs. Tens of thousands of jobs in Silicon Valley, and many corporate IT departments elsewhere, rent these “technocoolies,” often replacing longstanding U.S. workers.

    Expanding H-1Bs, not surprisingly, has become a priority issue for oligarchs such as Bill Gates, Mark Zuckerberg, and a host of tech firms, including Yahoo, Cisco Systems, NetApp, Hewlett-Packard, and Intel, firms that in some cases have been laying off thousands of American workers. Most of the bought-and-paid-for GOP presidential contenders, as well as the money-grubbing Hillary Clinton, embrace the program, with some advocating expansion. The only opposition came from two candidates disdained by the oligarchs, Bernie Sanders and Donald Trump.

    Now cab drivers, retail clerks, and even food service workers face technology-driven extinction. Some of this may be positive in the long run, certainly in the case of Uber and Lyft, to the benefit of consumers. But losing the single mom waitress at Denny’s to an iPad does not seem to be a major advance toward social justice or a civilized society—nor much of a boost for our society’s economic competitiveness. Wiping out cab drivers, many of them immigrants, for part-time workers driving Ubers provides opportunity for some, but it does threaten what has long been one of the traditional ladders to upward mobility.

    Then there is the extraordinary geographical concentration of the new tech wave. Previous waves were much more highly dispersed. But not now. Social media and search, the drivers of the current tech boom, are heavily concentrated in the Bay Area, which has a remarkable 40 percent of all jobs in the software publishing and search field. In contrast, previous tech waves created jobs in numerous locales.

    This concentration has been two-edged sword, even in its Bay Area heartland. The massive infusions of wealth and new jobs has created enormous tensions in San Francisco and its environs. Many San Franciscans, for example, feel like second class citizens in their own city. Others oppose tax measures in San Francisco that are favorable to tech companies like Twitter. There is now a movement on to reverse course and apply “tech taxes” on these firms, in part to fund affordable housing and homeless services. Further down in the Valley, there is also widespread opposition to plans to increase the density of the largely suburban areas in order to house the tech workforce. Rather than being happy with the tech boom, many in the Bay Area see their quality of life slipping and upwards of a third are now considering a move elsewhere.

    Once, we hoped that the technology revolution would create ever more dispersion of wealth and power. This dream has been squashed. Rather than an effusion of start-ups we see the downturn in new businesses. Information Technology, notes The Economist, is now the most heavily concentrated of all large economic sectors, with four firms accounting for close to 50 percent of all revenues. Although the tech boom has created some very good jobs for skilled workers, half of all jobs being created today are in low-wage services like retail and restaurants—at least until they are replaced by iPads and robots.

    What kind of world do these disrupters see for us? One vision, from Singularity University, co-founded by Google’s genius technologist Ray Kurzweil, envisions robots running everything; humans, outside the programmers, would become somewhat irrelevant. I saw this mentality for myself at a Wall Street Journal conference on the environment when a prominent venture capitalist did not see any problem with diminishing birthrates among middle-class Americans since the Valley planned to make the hoi polloi redundant.

    Once somewhat inept about politics, the oligarchs now know how to press their agenda. Much of the Valley’s elite–venture capitalist John Doerr, Kleiner Perkins, Vinod Khosla, and Google—routinely use the political system to cash in on subsidies, particularly for renewable energy, including such dodgy projects as California’s Ivanpah solar energy plant. Arguably the most visionary of the oligarchs, Elon Musk, has built his business empire largely through subsidies and grants.

    Musk also has allegedly skirted labor laws to fill out his expanded car factory in Fremont, with $5-an-hour Eastern European labor; even when blue-collar opportunities do arise, rarely enough, the oligarchs seem ready to fill them with foreigners, either abroad or under dodgy visa schemes. Progressive rhetoric once used to attack oil or agribusiness firms does not seem to work against the tech elite. They can exploit labor laws and engage in monopoly practices with little threat of investigation by progressive Obama regulators.

    In the short term, the oligarchs can expect an even more pliable regime under our likely next president, Hillary Clinton. The fundraiser extraordinaire has been raising money from the oligarchs like Musk and companies such as Facebook. Each may vie to supplant Google, the company with the best access to the Obama administration, over the past seven years.

    What can we expect from the next tech-dominated administration? We can expect moves, backed also by corporate Republicans, to expand H-1B visas, and increased mandates and subsidies for favored sectors like electric cars and renewable energy. Little will be done to protect our privacy—firms like Facebook are determined to limit restrictions on their profitable “sharing” of personal information. But with regard to efforts to break down encryption systems key to corporate sovereignty, they will defend privacy, as seen in Apple’s resistance to sharing information on terrorist iPhones. Not cooperating against murderers of Americans is something of fashion now among the entire hoodie-wearing programmer culture.

    One can certainly make the case that tech firms are upping the national game; certain cab companies have failed by being less efficient and responsive as well as more costly. Not so, however, the decision of the oligarchs–desperate to appease their progressive constituents–to periodically censor and curate information flows, as we have seen at Twitter and Facebook. Much of this has been directed against politically incorrect conservatives, such as the sometimes outrageous gay provocateur Milo Yiannopoulos.

    There is a rising tide of concern, including from such progressive icons as former Labor Secretary Robert Reich, about the extraordinary market, political, and culture power of the tech oligarchy. But so far, the oligarchs have played a brilliant double game. They have bought off the progressives with contributions and by endorsing their social liberal and environmental agenda. As for the establishment right, they are too accustomed to genuflecting at mammon to push back against anyone with a 10-digit net worth. This has left much of the opposition at the extremes of right and left, greatly weakening it.

    Yet over time grassroots Americans may lose their childish awe of the tech establishment. They could recognize that, without some restrictions, they are signing away control of their culture, politics, and economic prospects to the empowered “tools.” They might understand that technology itself is no panacea; it is either a tool to be used to benefit society, increase opportunity, and expand human freedom, or it is nothing more than a new means of oppression.

    This piece first appeared in The Daily Beast.

    Joel Kotkin is executive editor of NewGeography.com. He is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, will be published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He lives in Orange County, CA.

    Official White House Photo by Pete Souza.

  • SF Vs LA: Different Strokes In Urban Development

    Book Review: “The Rise and Fall of Urban Economies: Lessons from San Francisco and Los Angeles.” Michael Storper, Thomas Kemeny, Naji P. Makarem and Taner Osman; Stanford University Press, 2015.

    How and why do places differ in their pace of economic development? Why do some flourish while others lag? These are among the most profound questions in economics and related fields. Are explanations found in geography, culture, institutions, or fortune?

    In “The Rise and Fall of Urban Economies: Lessons from San Francisco and Los Angeles,” Michael Storper, Thomas Kemeny, Naji P. Makarem and Taner Osman consider these questions for two great cities. Storper, Kemeny, Makarem and Osman (hereafter SKMO) direct their attention to the Los Angeles and San Francisco “extended metropolitan regions” — the Census Bureau’s Consolidated Statistical Areas (CSAs) — in the post-1970 years. SKMO claim to have a plausible story about LA/SF divergence, which they do a fine job of presenting in this clearly written and well documented volume.

    Both areas were established centers in high-amenity coastal California settings with similar levels of economic success in base-year 1970. But their fortunes have diverged ever since, with San Francisco taking a significant lead.

    What happened?

    Much of SKMO’s story springs from employment trends summarized in their table, below, which shows jobs data by major sector for their beginning and ending years for each region. Looking at employment shares, both areas had a similarly sized IT sector in 1970, but the Bay Area’s grew spectacularly while LA’s stayed about where it was. LA was specialized in aerospace and defense but, as is well known, that sector declined as the Cold War ended. Both geographic areas started almost equally in share of logistics jobs, but SF’s specialization in that sector subsided, while LA’s grew. LA’s lead in entertainment grew. Both areas lost jobs in apparel, but this hit LA harder, as the region had been more specialized in that sector.

    The LA area was long recognized for its leadership in the entertainment industry, just as the San Francisco area was for its leadership in tech. Yet “Hollywood” has been emulated in many places, including India, South Korea, China, and several European countries, while Silicon Valley’s would-be emulators, though numerous, have been far less auspicious.

    The post-1970s success of the SF region owes much to Silicon Valley, and SKMO note that, on average, SF’s tech sector salaries were higher than those in LA’s entertainment sector. Lots has been written about the unique culture of innovation and entrepreneurialism found in The Valley. There are real and aspiring ‘techno-hubs” practically all over the world. But the Holy Grail — to identify and bottle some kind of formula to spawn another Silicon culture — has not been discovered.

    SKMO note various Silicon Valley pre-1970s events: how the electronics industry had its roots in radio hobbyists, and the 1960s convergence of hippies and techies. The authors identify eleven historical “critical turning points.” Some are private business choices (“Hollywood’s creation of a new project-based organizational structure in the 1950s and 1960s”); some are more in the realm of public policy (“Los Angeles’ Alameda Corridor Project in the 1980s and 1990s”). Others (Steve Jobs liked The Whole Earth Catalog) also make the list, but without any clear direction for today’s planners.

    The authors devote a chapter to what local governments in each of the two regions spent and prioritized. Bay Area government spending was greater in the 1990s, as well as in the first decade of the 2000s. While Bay Area public transit spending was much greater, SKMO admit that both areas suffer bad traffic congestion, and back away from concluding the extra Bay Area public spending had payoffs. They end up concluding that we simply do not know enough about the programs that were funded to make strong statements about how spending might have (or should have) been re-allocated among programs.

    The key chapter of the book addresses what the authors call ‘Beliefs and Worldviews in Economic Development’: “We will see … how the Los Angeles Economic Roundtable and Chamber of Commerce generated very different narratives from those of the Bay Area Council and Joint Venture Silicon Valley… Bay Area leadership has had a more focused and time-consistent perception of its regional economy as a new knowledge economy. Greater Los Angeles leadership beliefs and worldviews have been inconsistent over time, with fleeting conceptions of the New Economy subsequently crowded out by the perception of Greater Los Angeles mainly as a gateway to international trade and logistics and specialized manufacturing.”

    We have to be careful here. The sequence of events is significant: Did important policy choices pre-date the good (SF) or the bad (LA) events the authors document? The unique entrepreneurial and innovative culture bred in Silicon Valley has no discernible starting date. Did the view of Bay Area elites of a new knowledge economy lead the way, or simply acknowledge facts on the ground?

    In their study of LA and SF, SKMO say little about how both areas have failed to reign in housing costs. By failing to contain the rising costs of most households’ single largest expenditure, both regions have failed. Labor markets cannot do their job when many people’s location choices are restricted. In all of their talk of the best regional development strategy, this essential one is not touched on in the study.

    But, caveats aside, “The Rise and Fall of Urban Economies” is data-rich, wide-ranging and provocative. Anyone interested in the American West’s two premier cities should read this important book.

    Peter Gordon is an Emeritus Professor, Price School of Public Policy at the University of Southern California. He now teaches each summer at Zhejian University in Hangzhou, China, and is currently at work on a book that explores how modern cities contribute to economic growth. He blogs at petergordonsblog.com.

  • Silicon Valley: Jelly in the Jam

    My last post was about how Silicon Valley is evolving into an urban form that’s not quite leafy and open enough to be a suburb anymore, but not really vibrant and compact enough to be a proper city either. “Too thin to be jelly. Too thick to be jam.” The story got an unusually large number of visits. I received some well informed comments that touched on the reality that Silicon Valley is a big place and I shouldn’t generalize. Palo Alto is very different from Fremont and so on. It’s not all isolated corporate enclaves. Fair enough. So here’s a quick follow up that explores the jelly in the jam.

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    This is the town of San Carlos twenty five miles south of San Francisco and an equal distance north of San Jose. We all have our biases. I’m partial to the kind of walkable Main Street small town that was common everywhere a century ago. I like a place with mom and pop shops and a mix of modest cottages and grand stately homes a few blocks in each direction. For me that’s the perfect balance of city and suburb. A Main Street provides a broad range of activities while accommodating pedestrians, cyclists, and cars without prejudice. These places can also be well served by public transit – not so much to get around town, but to efficiently connect people to other towns that are also walkable. If these small towns are then surrounded by working farms and a bit of nature all the better. Toss in a nearby city for access to culture and jobs and I’m in heaven. But such places are hard to come by in America these days. Fortunately, Silicon Valley has a string of such places along the historic rail line like little gems imbedded in the post WWII sprawl.

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    San Carlos sits between two major freeways and right on El Camino Real and the CalTrain line that serves the entire peninsula. It’s possible to navigate most parts of San Carlos as a pedestrian, hop on a train or a bus, or drive to just about everything in the Bay Area. You have a lot of transportation choices that are equally good. What’s more important to me personally is that being a pedestrian or cyclist is actually pleasant in San Carlos. Transit within most of the town itself is entirely unnecessary. There are areas up in the hills with a lot of twisting cul-de-sacs that are more manageable in a car, but there’s at least a continuum of housing options including small apartment buildings next to shops downtown. People can select their own personal sweet spot.

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    There are relatively “affordable” $950,000 bungalows (this is the Bay Area) while the big fancy homes up on the hill with water views sell for $7,000,000. I understand these numbers seem ridiculous to people in other parts of the country, but San Carlos has immediate access to very well paid jobs so these prices are justified based on local incomes. If you have the money it’s a great place to raise a family with excellent public schools and a safe clean environment. It’s also a pretty fabulous retirement spot if you decide to age in place. And it isn’t terrible to be a young single person in San Carlos either. That little downtown and the train station make all the difference. You’ll find the same basic arrangements in similar older towns along the train line: Burlingame, San Mateo, Menlo Park, Mountain View, and so on.

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    Here’s another point that’s often overlooked by city planners obsessed with making everything pretty or attracting the right demographic to their town. Every town needs some ugly utilitarian stuff. Even in a place where schmaltzy tract homes sell for a million bucks people still need plumbers, electricians, and low grade warehouses. If a town zones or redevelops these areas out of existence they induce more people to get into their cars and trucks to commute to distant industrial parks in a region where freeway traffic already comes to a complete halt during most business hours. And these suburban warehouse districts are also excellent buffers from the ugliness and noise of freeways and rail lines. No one wants to live pressed up against a diesel train or freeway interchange full of tractor trailers. It’s often a mistake to see these light industrial areas as redevelopment opportunities for dense infill housing.

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    Some of the comments I received from my last post mentioned recent projects that brought transit and density to some Silicon Valley suburbs. This is San Bruno, home to tech companies like YouTube. It has all the same advantages of San Carlos: immediate access to good jobs and nearby culture, the same freeways, El Camino Real, a BART rail station, similar single family housing stock, and so on. But the two towns are very different. I would love to live in San Carlos, but I could never live in San Bruno. Here’s why.

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    San Bruno was built after cars had come to dominate the landscape. There never was much of a town and everything built over the last sixty or seventy years has been organized around the freeways. A rail station in a shopping mall parking lot that’s cut off by massive twelve lane roads is just miserable for pedestrians and of little use to people in cars. There are plenty of people on foot in San Bruno, but they’re very poorly served in this environment.

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    Density and transit all by themselves do nothing for a town if the public realm is completely car oriented. These new infill apartment buildings are perfectly respectable and I’m sure they’re very comfortable on the inside. But once you step outdoors you find yourself in the left over space between parking lots and highways. You can physically walk to the supermarket and the dentist and the train station so it checks off a lot of boxes on the “Smart Growth” list, but you feel like a social outcast as you schlep around the edge of speeding vehicles. The scale is out of whack with human needs because the needs of cars always come first. Adding apartments and giant parking garages to a suburban environment also adds that many more cars to the already congested roads. This kind of development bothers people who want a traditional suburb and it falls short for people who want a genuine urban experience. As I walked around this cluster of apartments I thought about how it could have been done better. What if the ground floors had shops in them? What if the sidewalks were wider? What if the roads were more narrow? What if the buildings were organized around outdoor public space instead of having the greenery sprinkled around the edges in useless landscaped berms and highway medians?

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    As I made my way from one suburban train station to the next I discovered another infill project that actually made an effort to do many of the things on my list. Wide sidewalks? Check. Meaningful public space? Check. Shops on the ground floor? Check. At least a few narrow side streets? Check. Train station around the corner? Check. This place was significantly better. But… context is important.

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    Here’s a Google Earth view of the area in which I colored the roads, surface parking lots, and multi-story parking garages blue. What would you call that building to pavement ratio? It looks like 60/40 to me in favor of pavement. The largest garage is owned by BART and is designed to collect suburban drivers and funnel them into the city by train for the last little stretch of the commute. This kind of train station is a highway patch to relieve traffic congestion in the city. It has nothing at all to do with “transit” or any kind of urbanism. It’s a clumsy and expensive prosthetic limb for cars and highways.

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    Here’s what it looks like on the ground. This well intentioned mixed use infill project is an island in the middle of the usual suburban sprawl. I’m quite certain that the people who live in the single family homes across the street drive to the Trader Joe’s market even though it’s only a block away. If I had to choose a spot to live this place is marginally better than San Bruno, but still an order of magnitude worse than San Carlos. And I should point out that San Carlos has a downtown of mostly one story buildings surrounded by much smaller apartment buildings than these and a majority of detached single family homes. “Density” has nothing to do with the success or failure of good urbanism.

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    Here’s the sad part. Even after what must have been an heroic effort on the part of everyone involved in getting this project built it still fails to cultivate enough foot or vehicular traffic to support small shops. The Trader Joe’s and the Starbucks are doing well enough, no doubt feeding off the morning and evening commuter flows from the BART station. And there is a small dry cleaner that’s managing to get by so far. But the rest of the storefronts are empty and have been so from the get go. Too thick to be jam. Too thin to be jelly. I keep wanting suburban retrofits to work, but they rarely do. The typical suburban chassis makes incremental urbanism a hit or miss affair. Mostly miss. The question is… what are the alternatives? Do we just let the cost of the existing single family homes rise until people and businesses pick up and move to Scottsdale or Orlando in search of economic relief? Do we let taxes rise on all the strip malls and gas stations until the necessary funds appear to repave all the twelve lane roads out in front of them? Or is mediocre the best we can expect from half assed infill projects that do the best they can under the circumstances?

    John Sanphillippo lives in San Francisco and blogs about urbanism, adaptation, and resilience at granolashotgun.com. He’s a member of the Congress for New Urbanism, films videos for faircompanies.com, and is a regular contributor to Strongtowns.org. He earns his living by buying, renovating, and renting undervalued properties in places that have good long term prospects. He is a graduate of Rutgers University.