
San Francisco Is Preparing for Life After This Tech Boom - getgoingnow
http://www.bloomberg.com/politics/articles/2016-06-09/san-francisco-is-bracing-for-life-after-this-tech-bubble
======
matt_wulfeck
Honestly, at this point it's too late to start "preparing" for a pop. I'm
dubious the city can come up with 6 years of money to ride out any kind of
economic turmoil without great pain.

Individuals can simply move to a better and cheaper location. There's many
more mature and cheaper tech hubs now than there were in 2007. The city is
stuck with itself and its tax liabilities. And in a place where you can't cut
down a tree without posting 90 days notice, good luck rolling back some of
that spending.

~~~
ashwinaj
I was in one of the so called "low cost tech hubs" of Dallas/Austin in 2008
during the recession. Anecdotal, but people in tech were doing a lot worse
than in SV due to lack of jobs. If you were a reasonably good engineer in SV,
you kept your job or at worse got a job at a lower salary in SV, while in
Dallas/Austin people were losing jobs outright and unemployed for months since
there weren't enough companies around.

This may have changed 8 years on, but I'm skeptical from what I hear from
friends and acquaintances in Texas. From an R&D operational point of view, you
cannot just up and move all major operations from SV to <insert any tech hub>
on a whim. It may work for a 10 person startup, not for a company with
thousands or even hundreds of employees.

~~~
todd8
My anecdotal observation about the size of companies moving to Texas is
different. My neighbor just moved his company of three hundred employees to
Austin. Another neighbor's company, Dimensional Fund Advisors relocated to
Austin, about 1000 employees. On my small street (10 families), half work for
or run companies that moved operations to Austin. Toyota just moved to a
suburb of Dallas, 4000 employees. The operational cost savings are
substantial.

~~~
legodt
The specific suburb Toyota moved to, Plano (75093), is notable because it is
the home of many large companies, tech included. Companies like PepsiCo/Frito-
Lay, Gearbox, and UGS are headquartered there alongside large offices for
companies such as HP and various financial institutions. Plano is an upper-
middle to upper class suburb of Dallas where housing for families is far more
accessible than inside of Dallas itself. Whether this suburb-based expansion
model can apply to other tech hubs in different states is debatable, but the
pattern is still worth noting.

~~~
amyjess
By the way, the proper term for something like Plano is an "edge city" [0].
It's a suburb that's managed to grow enough of its own industry that residents
can both live and work here without having to commute to the city.

Personally, I love it. I have a very cheap cost of living (paying $1 per sq.
ft. means you're being gouged here), a spacious home in an area with no noise,
_and_ a short commute all at the same time. Also, since we have so much tech
industry here bringing a lot of H1-B workers and other diverse employees (plus
a major tech university that hosts a large number of international students),
there's been a huge boom in good ethnic food here. Dallas is kinda the
opposite of most other cities: where other cities have white flight suburbs
and a diverse urban core, Dallas has _huge_ concentrations of Chinese, Indian,
and Vietnamese people (among many, _many_ other ethnicities) in the suburbs,
while the city is full of white hipsters who think living in a tiny loft is
cool. As such, you find the best food in the suburbs.

[0]
[https://en.wikipedia.org/wiki/Edge_city](https://en.wikipedia.org/wiki/Edge_city)

------
rm_-rf_slash
Question for San Francisco tech workers: if there is a massive recession
caused either locally (over-funded companies that don't make money going bust)
or globally (China is expected to hold debt over 300% of GDP by 2020), what
will you do to protect yourselves?

What languages or frameworks do you recommend learning? Which industries need
engineers and are relatively insulated from economic downturns? If the Bay
Area slams the brakes on growth, where will you move? What non-tech skills
would you recommend brushing up on?

Perhaps most importantly: if things went bust today, how fucked would you be?

~~~
zer00eyz
Having been through the cycle twice I'm going to tell you a secret.

You could be the greatest developer, who has honed skills in every language
and still be in bad shape. What you know has NOTHING to do with your ability
to survive.

You need cash on hand. A lot of it. That recommendation about three months in
the bank, you should have six months or better yet a year of your current
salary. If you get laid off, you better start living lean. Cut every expense
you don't need to make that money last as long as possible.

You need to have a network, cause skill alone won't get you work. Its quickly
going to turn into "who do you know" and "who can get you in the door". It is
vital that you build and maintain these relationships NOW, cause when it hits
the fan, its going to be too late.

Honestly, the down has always been good for the bay. There is a lot of "medium
talent" in the bay right now, and a down market is very much going to clear
all of that out.

~~~
ido
It's always a good idea to save, but if you get fired in the US do you not get
unemployment benefits?

I've been laid off in Austria before (a few years ago, the company I worked
for downsized about half its workforce around ~2010) & was IIRC entitled to
unemployment benefits for about half as long as I worked there (ended up
finding a new job before the benefits ran out).

~~~
arebop
Unemployment benefits in California* last for 26 weeks, but the maximum
benefit is $450/week, enough to cover about half the rent payment on a studio
apartment in the Bay Area. Prudent workers save on their own for the
possibility of unemployment.

*(corrected from U.S.)

~~~
ido
Interesting that it's not a percentage of your wage, seeing as you pay more
unemployment insurance/social security the more you earn (at least you do in
Austria and Germany).

In Austria it was 55% if your net salary IIRC.

~~~
laxatives
I believe it is tied to wage, but it isn't really designed to support high
income earners and has a relatively low ceiling as far as software engineers
are concerned.

------
vmarsy
That chart showing a big bump after 2000 and 2008 was intriguing, I was
curious to know how it looked before 1996 Does anyone knows what "bubble"
happened in 1990 in San Francisco?

[https://www.google.com/publicdata/explore?ds=z1ebjpgk2654c1_...](https://www.google.com/publicdata/explore?ds=z1ebjpgk2654c1_&met_y=unemployment_rate&idim=city:CT0667000000000:CT5363000000000:CT0644000000000&fdim_y=seasonality:U&hl=en&dl=en#!ctype=l&strail=false&bcs=d&nselm=h&met_y=unemployment_rate&fdim_y=seasonality:U&scale_y=lin&ind_y=false&rdim=country&idim=city:CT0667000000000&ifdim=country&tstart=631872000000&tend=1447056000000&hl=en_US&dl=en&ind=false)

~~~
packetized
Presumably, reconstruction after the earthquake in 1989.

~~~
gumby
Actually the 89 earthquake did a surprisingly small amount of damage to the
bay area (in SF primarily the marina and small but significant damage to the
bay bridge; outside it was the cypress structure and much of downtown santa
cruz).

In addition, the reconstruction was spread over a long period (for example
they haven't finished with the bay bridge).

~~~
dragonwriter
> Actually the 89 earthquake did a surprisingly small amount of damage to the
> bay area (in SF primarily the marina and small but significant damage to the
> bay bridge

Also, SR-480, I-280, and US 101 all saw significant damage and closures
requiring reconstruction and redesign (either of the freeway itself, or of
transport networks because, as in the case of SR-480, the freeway was just
deleted entirely after the damage.)

> In addition, the reconstruction was spread over a long period (for example
> they haven't finished with the bay bridge).

The Bay Bridge damage from the earthquake was repaired fairly quickly; the
seismic retrofit to make it better able to survive future earthquakes (and,
more specifically, the replacement of the Eastern Span as part of that
retrofit) has taken longer.

~~~
gumby
Yep. My point was that none of those was responsible for any sort of economic
"uplift" (in quotes because of the broken windows fallacy).

BTW after writing that comment I just walked by the old chemistry building on
the Stanford campus which was closed by the earthquake (I was actually in that
building a earlier that summer). They've finally started work on fixing it --
more than a quarter century after it was declared unsafe!

~~~
dragonwriter
> My point was that none of those was responsible for any sort of economic
> "uplift" (in quotes because of the broken windows fallacy).

The damage to SR-480 (the Embarcadero Freeway) might be a significant
counterexample to that, since it was the earthquake damage that provide the
impetus to overcome the resistance to demolishing it that had stopped that
from happening two years before the earthquake, and allowed the improvements
in that area that took place once the freeway was removed.

------
guyzero
"States are also readying for bad times by squirreling away more cash in
reserves."

Now both huge companies and local governments are hoarding cash. Which is
problematic for the economy as a whole.

~~~
tosseraccount
Cash is in the bank being lent out to others. This is good for the economy as
a whole.

Saving for a rainy day is prudent fiscal policy.

~~~
rsync
"Cash is in the bank being lent out to others."

Yes, in your textbook it is. In reality, in 2016, banks are hoarding that cash
outright, or "lending" it to other banks, etc., for near-zero returns.

------
robertelder
I think by definition, you can't 'brace' for 'a bubble'. That's the central
part of the metaphor that the bubble 'bursts' as a sudden event at a time you
can't prepare for. The act of anticipating for a 'bubble' and preparing for it
is the exact kind of behaviour that prevents it from happening.

~~~
ghshephard
You can't predict when the bubble will occur, but you can certainly brace for
it. Hiring contingent workforces that can be immediately let go if tax
receipts fall, not entering into any long term contracts with large penalties,
based on the belief you will always have a large population, and, most, most
importantly, don't enter into long term unfunded liabilities with the
hope/prayer/belief that times will always be good, and that the future will be
able to pay for the present. Unfunded Pension Liabilities (among many other
things) crippled Detroit, Puerto Rico, and, very soon, Chicago.

Also - for large infrastructure investments, certainly issue bonds for things
like water, sewer, hospital, basic infrastructure - but don't get too
crazy/extravagant with Sport Stadiums, or overly complex derivative hedges
that blow up if the economy tanks.

If you really want such nice toys for your city, consider saving for them
rather than going into debt.

Municipal finances are not like Federal (or heck, even state) finances - you
really do have to balance your books.

------
mc32
This is wise, just like guv Brown is being prudent with respect to tax
receipts while his colleagues insist he's bring stingy in a time of plenty.
Apparently, those people are unaware of the hole Grey Davis dug while riding
high on the wave of late nineties tax receipts.

~~~
azinman2
Except SF ran a deficit of 100M last year despite record revenue. Youd never
know they have billions more than just s few years ago, the streets are in a
shameful condition, homeless situation is quite bad, and public transit is a
joke. They're doing a terrible job of managing their money.

~~~
Decade
It’s not the money that’s terribly managed. And it’s our money, not theirs.

It’s that we have an awful degree of citizen participation, being directed
with a dumb combination of social feel-good and suspicion of authority. So, a
couple days ago, we had Proposition B, which forbids the City of San Francisco
from spending less than $64 million of the general fund on parks, gradually
increasing to $89 million, even if the city is running a $100 million deficit,
in addition to a percentage of property tax, with additional committees and
reports. This proposition passed overwhelmingly. Along with every other
proposition that suggested increased taxes.

It’s hard to run a city effectively when you’re being hamstrung by all sorts
of requirements and interminable committees.

 _Streets_ could be in better condition if fiber and sewers could be
coordinated with each other and with other street maintenance.

 _Homeless_ could be better if we acted like we were a state-level region with
state-level decision-making, so let’s build housing for the people already,
and not a cluster of democracies squabbling over a homeowner’s right to what’s
in the sky over a several-square-mile region.

 _Public transit…_ It reminds me of the James Madison quotation, “If men were
angels, no government would be necessary. If angels were to govern men,
neither external nor internal controls on government would be necessary.”
Sadly, public transit is run by men (and women), not angels, so there’s all
sorts of possibilities for corruption and selfish decisions. From requirements
designed for the benefit of campaign contributors, to iron-clad income
security for people whose jobs should have been automated away. It’s a mess,
and attempts to fix it with regulations tend to block sensible decisions and
cause loopholes.

In summary, it’s not the money that is mismanaged. It is the people.

------
matt_wulfeck
> The unemployment rate was 3.1 percent in April, the lowest since 2000, and
> home values are at a median of $1.1 million, the largest among the 50
> biggest U.S. cities. Mayor Edwin Lee on May 31 released a record $9.6
> billion budget proposal.

What goes up must come down. Here's my completely opinionated ideas of how an
individual in San Francisco can ride out the economic change:

1\. Sell your home.

2\. Have a 6 month nest egg saved up.

3\. Have an up-to-date resume.

The "sell your home" part is not valid in the near-zero interest rate world,
which who knows how long that will last.

~~~
SilasX
But the interest rates can stay low indefinitely; the Fed is determined to
keep it that way because of how many people depend on home value. Even moving
short-term rates to 0.25% is met with shock.

~~~
dragonwriter
> the Fed is determined to keep it that way because of how many people depend
> on home value.

No, the main two things that the Fed manages with monetary policy (and they
tend to be balanced against each other) are inflation and employment. Low
rates are used to spur employment at the cost of risking inflation, high rates
are used to constrain inflation at the risk of harming employment.

~~~
SilasX
I know what the textbook says; I'm talking about the political realities of
pursuing a policy that would cause a precipitous value in people's homes.

True, the Fed is nominally Independent, and Immune to Political Influences,
not in practice it's not. The bankers that contribute to its policies also
have to worry about mortgages going underwater from a return to historically
normal rates.

~~~
dragonwriter
> I know what the textbook says; I'm talking about the political realities of
> pursuing a policy that would cause a precipitous value in people's homes.

The political reality is that the Fed has fairly consistently -- and
reasonably predictably by experts looking at the same signals that the Fed
overtly claims to watch -- made rate decisions as one would expect considering
the combination of employment-related and inflation-related considerations
they consider under the "textbook" case. So, conspiracy theories about home
prices are unnecessary.

> True, the Fed is nominally Independent, and Immune to Political Influences,
> not in practice it's not.

I won't argue that the Fed is someone subject to political influences, OTOH,
those strongly militate both for working to promote employment and working to
constrain inflation, which are also the Feds overt mandates.

> The bankers that contribute to its policies also have to worry about
> mortgages going underwater from a return to historically normal rates.

After the 2009 crisis, the wave of defaults that occurred then, and the
tighter lending policies that banks have taken since, there's not a huge risk
there.

~~~
SilasX
The last time unemployment was this low [1], the Fed had rates near 5%, and
yet raising them to 0.25% is considered shocking, even with inflation very low
-- almost nothing over 2015 [2]. How would you explain the reticence?

[1]
[http://data.bls.gov/timeseries/LNS14000000](http://data.bls.gov/timeseries/LNS14000000)

[2]
[http://inflationdata.com/Inflation/Inflation_Rate/Historical...](http://inflationdata.com/Inflation/Inflation_Rate/HistoricalInflation.aspx)

~~~
dragonwriter
> The last time unemployment was this low, the Fed had rates near 5%

Well, leaving aside looking at current rates rather than leading indicators
(since, while problematic, its a lot more convenient), the time you were
referencing with a ~5% Fed funds rate also had inflation rates near 5%, not
hovering around 1% (like now) after more than a year of being substantially
below 1%.

> and yet raising them to 0.25% is considered shocking, even with inflation
> very low

The Fed raises rates to _control_ inflation. With low inflation, you expect
low rates. It also lowers rates to improve employment, but with virtually no
inflation, there's little reason for tightening the money supply.

The last time inflation was this low this long -- in the mid 1950s -- the
effective Fed Funds rate was also quite low, though a bit higher than now
(around 1%, rather than 0.37% now).

~~~
SilasX
>The last time inflation was this low this long -- in the mid 1950s -- the
effective Fed Funds rate was also quite low, though a bit higher than now
(around 1%, rather than 0.37% now).

So then you agree that returning to historic real rates would require the Fed
to do something currently unthinkable -- ~1% rather than 0.25%?

Edit: Also consider what a shift of 0.75% does on the implied price of a house
when mortgage rates are at 3.75%:

[http://www.bankrate.com/finance/mortgages/current-
interest-r...](http://www.bankrate.com/finance/mortgages/current-interest-
rates.aspx)

~~~
dragonwriter
> So then you agree that returning to historic real rates would require the
> Fed to do something currently unthinkable -- ~1% rather than 0.25%?

No, for three reasons.

(1) A limited sample problem; the present circumstances are nearly
historically unprecedented. When the _only_ post-WWII comparable in inflation
terms is in the mid-1950s (and, conveniently, its also very roughly comparable
in at least headline unemployment terms, though other employment measures may
not look similar), and that's deep in the Bretton Woods period which puts
entirely different constraints on the effects of (and thus the calculus
feeding in to) monetary policy, you've really got no good comparison in
history.

(2) The current _effective_ federal funds rates (what was around 1% in the
1950s period with similar inflation) is 0.37%, not 0.25% (The current _target_
rate is 0.25%-0.50%, and the actual effective rate happens to be right in the
center of that target range.)

(3) Prior to the recent jobs report, which showed gains at a slower rate than
anticipated, most predictions were for a July increase in the target rate,
possibly followed by another in September. After the recent jobs report,
predictions are mixed, with an increase by September seeming commonly
predicted, with some possibility of a July increase still on the table.
Raising the target from its current level (which, again, isn't 0.25%, but
0.25%-0.50%) isn't "unthinkable", in fact, it seems to be what everyone is
thinking.

------
vonnik
San Francisco is one of the few cities in the US where half the inhabitants
_wish_ its chief industry would stumble and the bubble burst.

------
teslaberry
the next tech bubble bursting in the u.s. will see the reformulation of
outsourcing to india and china as the 'solution' to the next tech recovery.

the great depression lasted 12 years from 29 to world war 2.

every time the tech bubble has popped since 99 the fed lowered interest rates
and increased money supply. i dont think that one will work so easily after
the next bubble because interest rates will have to go negative and money
supply has EXPLODED in the last 8 years.

the fed doesn't like high gold or oil prices so how much more can they
increase money supply after the next bubble busts?

the fed has taken 25 years post volcker to paint itself into this corner. the
results of the next bubble bursting will be multi-decade cycle in nature
meaning a bigger bustup than any of the 2008, 2004 , 99 bubbles.

------
bejar37
Sort of crazy to me that the budget for SF is $9B. Boston, which is around
200k people smaller, has a budget of <3B, which seems like a huge gap. What
kind of services does SF provide that a pretty comparable city like Boston
doesn't?

~~~
jdavis703
In the spirit of teaching a person to fish, instead of handing a fish:

[http://budget.data.cityofboston.gov/#/](http://budget.data.cityofboston.gov/#/)
[http://sfmayor.org/ftp/uploadedfiles/mayor/budget/SF_Budget_...](http://sfmayor.org/ftp/uploadedfiles/mayor/budget/SF_Budget_Book_FY_2015_16_and_2016_17_Final_WEB.pdf)
(see page 11)

One example, public safety is almost 3 times more expensive. It looks like
social services is also about 3 times higher. On a per capita basis, it looks
like SF actually pays less for transportation. But since the budgets are
broken down by different categories, it's kind of hard to tell. I'd need to do
more research.

------
AstroJetson
Very nice to see they have a rainy day fund. Watching the city government here
they really believe the TV show title "It's Always Sunny in Philadelphia" Wish
governments were paying attention to past history

~~~
rconti
Jerry Brown's been very good about this for CA as a whole.

SF doesn't have to worry a lot because they're already insulating themselves
from tech by not bothering to tax Twitter or other big tech companies in the
first place :)

------
bishnu
Implicit in this "life after" plan is that things are going okay in San
Francisco right now, which is a pretty interesting conclusion to come to.

~~~
dragonwriter
> Implicit in this "life after" plan is that things are going okay in San
> Francisco right now, which is a pretty interesting conclusion to come to.

If things were that bad, people wouldn't be _willing_ to pay current SF real
estate prices to live there, no matter what the supply of housing was like.

------
weatherlight
I wonder how this would affect Silicon Alley?

------
moribondus
The SF advantage is so incredibly ephemeral. Everybody wants to go there,
because everybody else is there.

If that is all there is to it -- and it is -- this process can very easily go
into reverse mode. SF is insanely expensive. You do not need any part of SF to
write good software. It only makes your software more expensive.

Some day -- that could take quite a bit of time though -- SF will crash and
burn, simply because there is no reason why it wouldn't.

~~~
dredmorbius
It's been ephemeral for some 60 years now.

Some ephemeralities are more durable than others. Not that they cannot change.

