
The disruption of Silicon Valley’s restaurant scene - kanamekun
http://www.nytimes.com/2016/09/19/technology/how-tech-companies-disrupted-silicon-valleys-restaurant-scene.html
======
twblalock
There's nothing specific to tech about this. In any place where rents increase
more than 60% in a few years, whether that increase is caused by tech or
anything else, lots of restaurants aren't going to make it. The same is true
for many other small businesses with small profit margins, such as indie
bookstores, for example.

On the other hand, I pass through downtown Palo Alto every weekday, and I see
plenty of open restaurants. Many are able to succeed. It's not like the area
is a wasteland of tech offices with private cafeterias. There are more people
in downtown Palo Alto eating and drinking now than at any time in the past.

~~~
adrianN
I wonder how the zillion Ramen shops in central Tokyo stay alive. The rents
there are horrendous, and the noodles are fairly cheap.

~~~
mercer
I've wondered the same thing about some of the tiny shops in the center of
town here. They sell cheap phone covers and whatnots that I can't imagine
bring much profit.

Could it be that these places have existed for a long time and rent protection
keeps the rent down?

The only other explanation I can think of when it comes to some of these
shops/food joints is that they're used for money laundering or something like
that.

~~~
crdoconnor
>They sell cheap phone covers and whatnots that I can't imagine bring much
profit.

Those things actually have really high margins.

~~~
yitchelle
However, high margins does not necessary means high profit.

We have plenty of these setups in our weekend markets, and I don't really see
them selling these in high numbers. Actually, most of the time, the shops are
empty but they are there, every weekend selling the same items.

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lukeschlather
Like a lot of Silicon Valley's problems, this really comes down to
unreasonable height restrictions. When you have to choose between a 3000
sq.ft. restaurant and 3000 sq.ft. office space, the offices can pay better.

If the city would let people build large office towers they could put
restaurants on the ground floor and this choice wouldn't have to happen.

~~~
crdoconnor
The city's usually just responding to property owners lobbying to restrict the
supply of their scarce asset in order to maintain/drive up its value.

This is what's going on in London (note that the list of supporters including
property-owning associations, property developers and hedge funders):

[http://www.skylinecampaign.org/](http://www.skylinecampaign.org/)

Politically it's easier to throw sand in the wheels of new projects than it is
to propose new projects, which is why this remains an effective way of
lobbying.

~~~
seanhunter
This is a very broad accusation, but certainly most hedge funds I know are
based in Mayfair, where almost all property is owned by the Duchy of
Westminster. Of the top of my head I don't know any hedge funds who own their
own office space in London (I'm sure they must exist).

Hedge funds as a group would almost certainly be able on average to lower
their rent if there was more property development.

~~~
crdoconnor
It isn't about whom they rent their offices from. It's about what they have in
their portfolios.

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danso
Some context:

[http://sf.curbed.com/2016/8/23/12603188/palo-alto-mayor-
hous...](http://sf.curbed.com/2016/8/23/12603188/palo-alto-mayor-housing-
interview)

The mayor recently made news about wanting to _stifle_ job growth, as it far
outpaces what he believes is acceptable housing availability:

> _Burt: Palo Alto’s greatest problem right now 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. They’re chasing their
> tails. We started reining in office growth and put a cap on it. And then we
> began expanding housing in our downtown areas, which we’re in the process
> of._

What's funny is that the mayor himself is a CEO of a tech company
headquartered in Palo Alto downtown. Some of the things he says are
infuriating ("We don’t want to turn into Manhattan"...as if PA were anything
close to Manhattan) but as I understand it, he was the more pro-housing/growth
candidate in the mayor race:

[http://www.paloaltoonline.com/news/2016/01/04/burt-
returns-t...](http://www.paloaltoonline.com/news/2016/01/04/burt-returns-to-
the-mayors-chair-in-palo-alto)

> _The two votes mean that the council 's top two leadership positions will
> now shift from members with the heaviest slow-growth residentialist leanings
> to ones with less predictable voting records. While Burt has played a
> leading role in the council's recent adoption of an office cap, its efforts
> to preserve retail and its reform to the "planned-community" zoning, he had
> also split from the residentialists in supporting several recent
> developments, including mixed-use projects at 101 Lytton and 441 Page Mill
> Road (Holman and Schmid had opposed both)._

~~~
spiffage
Mayor Burt's not pro-housing. He's just the least anti-housing of the anti-
housing majority on the city council.

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KKKKkkkk1
"It is a story playing out across Silicon Valley, where restaurateurs say that
staying afloat is a daily battle with rising rents, high local fees and acute
labor shortages. And tech behemoths like Apple, Facebook and Google are hiring
away their best line cooks, dishwashers and servers with wages, benefits and
perks that restaurant owners simply cannot match.

...

That may not be an issue for tech workers with access to free, farm-fresh
cuisine in corporate cafeterias, but for everyone else here it is leaving a
void between the takeout cuisine popping up around Palo Alto — picture bento
boxes ordered on iPads at a counter — and $500 meals at high-end restaurants."

I consider the Bay Area as being affected by a Dutch disease phenomenon,
meaning that all industries are crowded out by the one that has a comparative
advantage, and that products and services that are not easily transportable
undergo significant price and wage inflation.

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Animats
First world problem.

Palo Alto's University Avenue has enough good restaurants. Some are not
obvious. Gyros Gyros has excellent fish platters and kabobs. There are several
decent Chinese restaurants. Paris Baguette is OK.

It's interesting that Palantir is leasing all the available office space.
That's unusual, but not unheard of. In the early days of Autodesk, they at one
point had leased most of the office space in Sausalito. The city council was
unhappy about this, so Autodesk moved to San Raphael where they could lease
large office buildings.

I noticed yet another rug store opening on University Avenue recently. Someone
must need an investor visa. The guy who owns most of the rug stores used to
lease the upstairs to startups in exchange for equity. Now he's a venture
capitalist.

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temp20160423
Are these restaurants just not that good to start with? If they were good,
couldn't they increase prices and then increase wages they offer to staff?

The article implies that the fast casual $10-15/person places are doing fine.
My impression of PA is that the fancier $30+/pp places are also busy. It's
possible there's simply less demand for the places at a price point in between
(although there's not really evidence of this in the article).

~~~
zaphar
The market sounds a little imbalanced. If they were competing with other
restaurants then that would be an option. But they aren't competing with other
restaurants. They are competing with companies that give the food away free to
their employees. Those companies can afford to pay the chefs, and kitchen
staff more because they don't make money selling the food. They make money on
high margin digital goods. The market will only sustain so many $500 a meal
restaurants. The casual dining restaurants, which sound like the hardest hit,
can only increase their prices so much before they price themselves out of the
market.

~~~
marmot777
This seems way more extreme than the general problem. I live in a city that
does not have any problem supporting a variety of great restaurants from low
to high end. It sounds to me like possibly the people who are being hired away
from the tech companies are benefiting. I think it's still an ethical issue as
this situation is obviously hurting restaurant owners and people who don't
have the money for the super high end. That's a shame.

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DrScump
The article is oddly silent on food truck competition. Food trucks avoid real
estate costs, most employees, and are given free rein to compete with brick-
and-mortar restaurants, even to the point of being allocated parking right on
the same block in some cases. The result was easily predictable.

~~~
reustle
I would never want to open a brick and mortar shop of any type, but I have
this weird desire to build an automated food truck. A tablet on the side with
big plexiglass windows so you can see the simple process internally building
your food (sandwiches or burgers). Maybe I've been spending too much time here
in Japan :-)

~~~
jayjay71
Automating food is harder than you think. I agree though - that would be
amazing.

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jdale27
It's hard to imagine why anyone outside Palo Alto would care about the food
scene in Palo Alto. As far as food goes, Palo Alto is a provincial backwater
that just happens to have a few decent restaurants due to the unlikely
concentration of rich people in the area. The continued cultural
desertification of the peninsula and the south bay (there wasn't really ever
much culture there to begin with) is yet another effect of the tech
monoculture dominating the socioeconomic ecosystem.

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Steeeve
The result of this is extraordinarily poor service at some restaurants. And
some restaurants are downright scary. Business is brisk at most places that
I've been to - quality of food and service seems to have little to do with how
much business they do. Some places have fantastic service and great food. For
the most part, I think it really is a matter of competing for the right
employees. Chains don't do well in the area outside of the Stanford Shopping
Center. (For instance, I stay away from Cheesecake Factory even though I
really like them outside the area).

I find it strange that the New York Times would print something about Palo
Alto restaurants. I'm sure the same scenario exists in several areas of NYC.
High rents make it tough to bring in good employees for service jobs. At least
PA has a student body to work with.

~~~
ZanyProgrammer
Do Stanford students really work part time jobs? I'd always imagined even the
poorest of them to be scholarship and student loaned up enough to be able to
not too.

~~~
Steeeve
I don't think such a utopia exists. There are plenty of working students.

------
DannyBee
This is basically what should happen.

I'm also unsure what relation tech has to it.

Either restaraunts/etc pay enough to make it possible for people to live there
(and in turn, people living there pay for those things), or they close,
eventually causing people to stop deciding to live in those parts (eventually
helping to bring prices back down)

It happens right now that tech is a major industry in the area can afford to
pay those people enough to live there.

But it's also probably true that people would not like PA as much if every
restaurant closes.

So, .....

This is the same as the cities having trouble attracting police/firemen/etc
because they can't pay enough.

Either the people living there will pay more, or they'll be okay with no
police/firemen, or they'll decide they don't want to live in a place with no
police/firemen, which will help bring prices back down.

~~~
twblalock
That's not what happens.

What happens is that the policemen, firemen, and restaurant workers commute
from areas where it is cheaper to live. It's been that way in Palo Alto for a
while, and it certainly has not caused any downward pressure on prices.

~~~
DannyBee
Sure it is.

"But in recent years, many police agencies across the Bay Area have seen a
decrease in applicants. Some say the area's high cost of living is partly to
blame as job seekers move to other parts of the state to start their careers."

They only commute if the cost of doing so is worth it. When they can find
reasonable jobs that provide the life they want elsewhere, they stop :)

The expensive area police hiring has dropped dramatically (SF, etc) when the
less expensive areas have seen increases in ability to recruit (San Mateo,
etc).

It's only when the less expensive areas don't need police that you see
increases in hiring elsewhere. Even then, they are still having more and more
trouble hiring over time.

~~~
twblalock
This is beside the point. This is what you wrote:

> Either the people living there will pay more, or they'll be okay with no
> police/firemen, or they'll decide they don't want to live in a place with no
> police/firemen, which will help bring prices back down.

That has not happened. Every place in the Bay Area has sufficient numbers of
police and firemen. There is no place that has run out of them. Trouble hiring
is not the same as no hiring.

Furthermore, there is no evidence that trouble hiring policemen and
firefighters causes downward pressure on housing prices, which is what you
said should happen.

~~~
marmot777
Yeah but does their life suck because they have to commute this insane
distance every day to get to work? Yes, they are willing to do it because they
need to eat but that does not sound like an ideal situation where all the low
and mid income jobs have to be filled by people who commute from outside.

~~~
twblalock
What's your point?

~~~
marmot777
My point is that nobody addresses the costs that the decisions the market very
well. It's glossed over. It used to be a fire fighter or, say, teacher could
live pretty near work. Now in certain places they have to drive ungodly
distances each day. Those are costs to many individuals and there are
substantial costs to society too. It's not just a matter of saying it's a
solved problem, we can put out fires pretty quickly when they happen. It'd be
a worthwhile exercise to be more open to the real pain that the market's
decisions inflict on people at times. I'm not saying I have a solution to that
or that I know what's best for anyone. But making some people life worse as
part of the process of making other people's life far better, isn't something
that should be dismissed out of hand. It is an act of courage to face
something at least a little bit, pain caused to other human beings.

------
ignasl
Rules and regulations create market imbalances and no change later is possible
because of special interests lobbying. Population is later brainwashed into
blaming free market and "evil" corporations. Such a life in socialist
dystopia. At least SV is not Venezuela and they really have first world
problems. Just remove all the permits to build housing and the problem will go
away in a few years. Of course special interests who already extracting very
nice rents of their properties wouldn't like that.

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marmot777
Are the staff that are hired away from the restaurants better off in a
substantial way to off set the damage done to the restaurant owners and non-
tech industry people. Yes, I do think it is an ethnical issue even though the
market's involved. :-)

~~~
PhasmaFelis
I'm not sure what you're asking. The staff that are hired away are presumably
better off in the matter of ready cash, which is perfectly reasonable. Ethics
in job choice are important--you probably shouldn't take a job supporting a
CIA hit squad even if the pay is great--but poor restaurant choice, while
unpleasant is hardly a human-rights issue.

~~~
marmot777
I guess what I'm trying to get at is that choices the "market" made are viewed
almost with a sacred reverence by a lot of people. They'll even call you a
socialist if you question anything about it. I'm no ethics expert either by
studying or being ultra ethical in practice, but I think it's worth it to at
least discuss the implications when the market makes a decision that hurts
people. It doesn't follow that I'm a socialist. Reading between the lines and
categorizing things is useful but it requires a bit more sophistication to be
able to adjust those filters and focus on what they're saying not what you
perceive as the sub-text. (Note, by you and I don't mean you as in the person
I'm responding to I mean a more general "you" as in all of us as I'd like to
be more skilled at resisting the default as well)

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cyberferret
Article is behind a paywall. Anyone got a precis?

EDIT: Not sure why this was downvoted? I thought it was reasonable to ask for
a short summary of the article seeing as I don't have a paid subscription to
the NY Times? Or are people who don't want to spend the cash simply excluded
from the conversation with no recourse?

~~~
QuercusMax
I believe if you search for the article title in Google, and click on the
link, you can avoid the paywall.

Disclaimer: I work for an Alphabet company.

------
eruditely
This is because our impotent tech elite have failed to even solve the first
issue they've organized to solve, housing!

We should ask for new elites, it's always been ok to ask for new elites when
they've failed. They literally installed a foreign elite everywhere they went
who did not know the local population and always brought negative
externalities with them.

The tech elite managed a feat that not even the financial elite have, they
managed to get the locals to hate them everywhere they've moved in!

------
RangerScience
I really like the formula! (Performance = Potential - Interference)

This reminds me of two recent things, and one older thing.

A)
[http://killsixbilliondemons.wikia.com/wiki/Meti's_Sword_Manu...](http://killsixbilliondemons.wikia.com/wiki/Meti's_Sword_Manual)
"You must strive for attachment-non-attachment when cutting. Your cut must be
sticky and resolute. A weak, listless cut is a despicable thing. But you must
also not cling to your action, or its result. Clinging is the great error of
men. A man who strikes without thought of his action can cut God."

B) I've been playing _a lot_ of Holopoint, a VR archery game that keeps you in
constant motion. I notice I do much better when I loose arrows without paying
_that much_ attention to the result of the shot... _if_ I've started slow
enough to get into the proper rhythm.

C) I've heard about a study on pottery student. One group was told they would
only be judged on the best pot they produced; the other was told they would
only be judged on the quantity of pots produced. In the end, the quantity
group _also_ produced the best pots.

