Interesting article. I wonder how much of the income disparity would be relieved if there was more room to build affordable housing, as in the "limitless" cities like Phoenix and Las Vegas where you can buy a nice 3 bedroom 2 bath for $150K.
In Phoenix, there are also rich people and poor people, but not the stark contrast of Silicon Valley. Fewer billionaires, I think and also the neighborhoods are so vast and more or less homogeneous in tract size that you don't really notice wealth disparity. The average family pretty much lives in a house with a yard and 2-car garage, regardless of income. You can get in your car and drive to tony gated communities in Scottsdale and peek over the walls, but who would? You have your job, your two cars, your Harley, and your flatscreen, and life is good.
Maybe California can find a way to build out onto the ocean as was done in Singapore, and relieve the housing pressure a little. God, I'd love to be making the kinds of software engineer salaries that they offer out there, but the housing -- yikes!
Even if there was room for affordable housing, who would build it? Home builders need to make a profit, and you do that by building $900K luxury townhomes, not by building $400K roach traps that need tax payer subsidy to break even. Do you think the tax payers lounging in their Atherton mansions give a crap about housing for poor and middle class people?
If market conditions warranted it, someone would find a way to make a profit on modest construction. I would think that the Bay area is bursting with people yearning to buy a real house for around $350K or less. If you could magically find the land to create such a subdivision, I'd bet you'd sell out in days.
Living in the Silicon Valley after reading this article might sound awesome; but it's far from the truth.
I grew up there. I feel like I was deprived of a childhood. I moved away a couple of years ago and am never going back. You have nothing but sprawled out office parks, rich internet tycoons, a police force with nothing to do, helicopter parents, and soccer moms. The thing that topped it all off was the super competitive vibe amongst the peers and parents. I would not recommend living there under any circumstances.
No, seriously now. I've got a friend who 5 years ago decided that he needs "to straighten his life out", and now he has a huge house in SV and is lead engineer at Apple. That's really fine, and obviously not everyone can have such a life. And people will really have to look inside themselves, and ask themselves what it REALLY is they want. If they want status and big houses, then they better be extraordinary smart & disciplined and/or rich. Me, I just want an office where I can do my thing, not being responsible to anyone else but myself.
A solution to this dystopian future would be the basic income as proposed in Switzerland. This is the only way in my opinion to make sure that a master/slave relationship will not exist, and people are really paid what the job is worth, unpressured by the need to survive.
A solution to this dystopian future would be the basic income
I'm fascinated to see how philanthropic society will choose to be. Here's why. With the advent of robots I believe that something fundamental has changed. Elites, if they so choose, will not need to accommodate lower classes.
Previously, there had to be some sharing because elites still had to rely on other humans for policing and military. However, it seems like robots might cut that connection. What will happen when elites feel like they don't need a large part of the population? Will they be altruistic?
I don't know. Personally I'm pretty cynical and think we're heading for a future that's both more egalitarian and dystopian. The internet will give people a similar opportunity to succeed but those who do succeed won't be charitable to those who don't.
Think of the other side ... all the hacker movies that we watched - they could become a reality. When you launch your startup why not just try to use zero day exploit to mess with the brakes of Zuckeberg's tesla (that is PS4 on wheels) while he is near a cliff.
Home made drones - with the advance of 3d printing why not? If 10 people could create a billion dollar company today just think what a rogue genius could do in 10 years if he is hell bent on eating the rich.
Technology is an enabler. It also enables the nasty stuff.
And the elites while more powerful than ever will also be more fragile and vulnerable. And if they unravel the social fabric that keeps them safe now ...
"Technology is an enabler. It also enables the nasty stuff. And the elites while more powerful than ever will also be more fragile and vulnerable."
I'm trying to imagine the risk exposure with and without technology regarding the benefit for one's safety. In the past the rich people have always been exposed to robbery and other kind of crimes, and the only real solutions have been keeping a low profile or employing protecting forces. The technology worked well in reducing the risks of exposure. There doesn't make much sense now to be attacked for robbery as wealth isn't carried much around with you. I admit though that being attacked out of personal reasons wasn't brushed off by technology, but I didn't quite understood why would anyone be "hell bent on eating the rich"?
This statement surprises me. I'll admit to being a little bit unstable perhaps, but when I look at people I know who have succeeded and don't need to work anymore, I struggle a lot with feelings of anger and rage.
The "story" we're told is: work hard and you will succeed. But these successful people aren't working. They're just rich. Isn't that the whole idea? Passive income?
But then I look and see, my labor is supporting their passive income. That makes me angry. Not out of some altruistic desire for equality, but out of jealousy. Why can't I be the one with the passive income?
Class structure has only a little to do with absolutes and a lot to do with relative comparisons. You could tell me that, worldwide, I'm the 1%. I have a place to sleep (heated), food to eat (cooked), and the safety of a policed city. Boom, that's more than most of the world will ever dream. But does that help? No, it doesn't. Because we always compare upwards. It's miserable. I'm miserable every day. I'm angry, I'm rageful, I'm scared. I'm a broken person.
I try to fix these things by focusing on amazingly lucky and well off I actually am in the global scheme, by focusing on how my Maslow needs actually are being met, by focusing on pride in my work and professional accomplishments, and by ignoring both the horrors below me in the world and the lavish luxury above me. But can I understand how someone could lash out, could become violent, at such perceived injustice? Absolutely I understand!
> You could tell me that, worldwide, I'm the 1%. I have a place to sleep (heated), food to eat (cooked), and the safety of a policed city. Boom, that's more than most of the world will ever dream.
Oh for God's sake. I'm fairly sure you're not actually in the worldwide top 1% just for having food, housing, and safety. Those things have actually been reasonably common throughout history.
Now I understand this too. In time the humanity worked to combat the causes of more crude crimes which now are relatively rare. I guess the next step is to work out the remaining causes of violence, which is exactly what the article mentions - socioeconomic acceptance and being happy with beans.
Why would anyone be? I don't know - ask Lenin, Robespierre ... if we live in a world where there is only the 0.1% and all the rest - some people will try out of desperation, spite or just for the thrill.
The middle class is the great buffer - the promise that keeps the poor invested in the system. If it disappears - the future will be darker for everyone.
That's all within the realm of possibility, sure. But keep in mind that the affluent could simply buy a drone(or what-have-you) with all sorts of bells, whistles, and 10 years of improvements to security. The amount of work necessary to DIY something that even begins to approach the capabilities of something built by a company that knows what they're doing would be extreme - I'd argue insurmountable in many cases - even with 10 years of improvements to manufacturing and the availability of components.
Right now, the Americans spend billions to defend against men with $5 boxcutters from Wal-Mart. Defense is more expensive than offense by a large multiple. A little more capability to attack requires an immense amount of additional capability to defend against.
A little more capability to attack requires an immense amount of additional capability to defend against.
I think that depends on the type of weapon.
Part of the issue with airlines is how highly valued human life is.
If for example all we were trying to do is have an acceptable level of losses on drone aircraft we'd probably accept a much lower level of protection (and correspondingly lower costs)>
What you're saying is true at a high level. However, it isn't box cutters they're using and the situations are so radically different in every aspect that I'm not entirely sure why this anecdote is even relevant.
Isn't the silicon valley creed that a small group of skilled trained passionate about the product people can put huge multinational order of magnitude companies on their knees?
Technology is only good if you know how to use it (or can find out). If you keep the underclasses poor and dumb they will never be able to afford it and won't know how to use it. This is why the digital divide is such an issue.
"Previously, there had to be some sharing because elites still had to rely on other humans for policing and military. However, it seems like robots might cut that connection."
You're right. Out of sight, out of mind. Or probably it would be a sentiment similar with how the African subsistence is thought about. There is some sympathy involved, maybe some occasional donation even, but how much and how often the problem actually falls on one's agenda?
Africa and Brazil is part of what I'm thinking about. We don't have to imagine elites walling themselves off and being indifferent ... there are places on earth where that already exists.
In fact, to be fair to Africa and Brazil, I think that exists to a large extent in America. Lots of people couldn't care less what happens in poor parts of the country.
But how do you handle inflation in a base income economy? It seems that any extra freely allocated capital would immediately be nullified by the increase to inflation it would cause?
Basic income does not increase the money supply, which would bring about inflation. There may be an increase in the general cost of living for many, but that's not inflation, and it wouldn't absorb the entirety of one's basic income.
It seems that "inflation" has an equivocal meaning here. I presume he meant that the purchasing power of the currency would diminish and it's not hard to imagine why. Look at housing - if the credit wouldn't be cheap (or if it wouldn't be available on a large scale), the houses have to have a price between the basic price (the combined cost of land plus house construction) and the price that the market can bear. Given the credit, the housing becomes able to bear a lot more. The housing credit affects just housing, but a basic income would affect pretty much everything an average Joe would require. A basic income would rise both the basic prices for every human-involved activity (the payed work becomes more expensive) and the bar of what a vast pool of potential clients could bear/afford.
Why do you think inflation would go up? I have never understood this argument. It seems to me as likely for the price of consumer goods to go down as for them to go up in such a scenario. Or you may see no movement at all.
the idea is to replace current system of welfare transfers with basic income for an equivalent amount of money, not simply to print more money and give it away
Great article. I have been living in Silicon Valley for the last tree months because I accepted a contracting gig at Google. My wife absolutely loves Mountain View and she would like to move there. I resist because our home is in the mountains of Central Arizona - a very affordable area to live. My argument against living in high cost areas like Silicon Valley is that for a lot of knowledge work, location does not much matter. Remote work is very easy to get especially if consulting rates are adjusted for lower cost of living and no commuting costs.
I view Silicon Valley as a really fun place to visit and live for a while, but if I was not very wealthy I would not make it a permanent home.
I get that this is a stark contrast and functions as a great example. But, isn't every place in America like this?
Maybe I've lived in Texas too long but I see it when I travel too. The immigrant labor class allows even lower-middle class families to live like "rich people". A lot of people now use a cleaning person and who mows their own lawn anymore?
In an economic sense, it's America's new version of slavery. Where once we provided food and shelter in exchange for labor. Now we exchange barely enough money for food and shelter in exchange for labor. At least the ugly parts are mostly gone. However, I can't help but thinking that will create a passive acceptance of this societal structure.
The rest of country has rich and poor areas, but most of it is 'middle class'. The idea is that in the Bay Area you're either paying ~$1M for a shack in a decent school area or you're in a slum.
"I can't help but thinking that will create a passive acceptance of this societal structure"
Giving the fact that there are American activists trying to combat external social problems such as the Indian caste system, I can't help but laugh when I come to read something like this. Irony!
Cowen bluntly predicted what he called “wage polarization.” The increasing ability of computers to perform ordinary tasks will inexorably transform America into an income oligarchy in which the top 15 percent of people—with skills “that are a complement to the computer”—will enjoy “cheery” labor-market prospects and soaring incomes, while the bottom 85 percent, that is to say, 267 million out of America’s 315 million people, will be lucky to find Walmart-level jobs or scrape together marginal “freelance” livings running $25-a-pop errands for their betters via TaskRabbit (say, picking up and delivering a pair of designer shoes from Nordstrom) or renting out their spare bedrooms (if they have any) to overnight lodgers via Airbnb. That is, if they’ll be working at all. “There are many other historical periods, including medieval times, where inequality is high, upward mobility is fairly low, and the social order is fairly stable, even if we as moderns find some aspects of that order objectionable,” Cowen writes in his new book.
In other words, what is coming is the “new feudalism,” a phrase coined by Chapman University urban studies professor Joel Kotkin, a prolific media presence whose New Geography website is an outlet for the trend’s most vocal critics. “It’s a weird Upstairs, Downstairs world in which there’s the gentry, and the role for everybody else is to be their servants,” Kotkin said in a telephone interview. “The agenda of the gentry is to force the working class to live in apartments for the rest of their lives and be serfs. But there’s a weird cognitive dissonance. Everyone who says people ought to be living in apartments actually lives in gigantic houses or has multiple houses.”
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So? Hypocrisy is hardly a new phenomenon. People really are ought to be living in apartments, even if it is suggested as part of some supposed agenda. I really don't understand all the anxiety that pops up on HN every once in a while with regard to some imaginary utopia that is decades away if it will ever come at all - Inequality is entirely secondary to the Median, the article describes a high quality of life all around with the upper echelons of society a sort of step-function above "everybody else". That's supposed to be horrible?
What about the inequality between the US and the rest of the world? I guess hypocrisy is not exclusive to any one tax bracket either.
I guess they are pointing the fact that as soon as West Coast got access to the power through money, they did what the East Coast did: protect themselves from the plebe and create a new nobility with barriers to entry instead of using it for greater motives than simple personal accumulation.
And this is exactly why SV is not anything revolutionary, despite the insistence of PG and co. There is no Golden Age, just a bunch of old guys accumulating wealth by exploiting youthful naivete by cranking out a steady stream of technological toys designed to hook us, rather than serve us.
I liked this sidenote in the article: "made their founders billionaires (New Economy founders typically retain large blocks of their own stock)"
Histoically, founders gave up most of their equity to investors. "A" round? Investors take 50% for $3 million and set aside another 20% for an employee pool. "B" round? The founders end up with 4% of the company.
I think pg helped everybody realize "Hey, us founders have the power here. We're not giving up shit. In fact, pay us out at each round too. We need to be millionaires sooner than any possible 5-year-out exit."
Isn't it different because those toys are part of our new people-as-a-product economy? To me it seems like this and the public-private-partnership blur factor make this different, and the walls are going to get a lot higher than in similar situations in the past.
I see a lot of articles about how you need to be connected to find some capital and that the decision makers always rely on sergeants for introductions, so I guess the meritocracy soundbite is slowly coming to a rest.
But criticizing SV is still not finding a good way to conduct our life that would make us happy and avoid having a negative impact on the society in the long run. This is a negative feeling.
So if something is intentionally misleading by the Robber Barons of Silicon Valley ("it's a meritocracy" is the 21th Century version of "there's gold in them thar' hills" - the only people getting rich are the ones selling office space/furniture or developer tools now, or the big companies that swallow up competitors they have screwed for pennies on the dollar) it shouldn't be criticized because "it's a negative feeling"?
Part of the reason that this line of bullshit needs to be criticized is so that nobody else falls for it. Only be criticizing it can we start to look for alternatives.
According to figures collected by Joel Kotkin, the dotcom crash wiped out 70,000 jobs in the valley in a little over a single year, and since then the tech industry has added only 30,000 new ones, leaving the bay region with a net 40,000 fewer jobs than existed in 2001.
Not all tech jobs are for "programmers". Writing HTML may not be glamorous or prestigious, but it's undeniably a tech job, as is being a sysadmin or ops or qa or technical writer.
To clarify: My point was that the height of a bubble (like 2001) is not a good baseline for employment statistics. If the number of employees in the tech sector were lower than in, say, 1995, that would be more meaningful.
Ruby is an actual programming language that runs on most platforms, what's the problem? Do you have a specific flavor of Real Programming that you prefer?
Ruby is a programming language. Rails is a framework. I guarantee that you can, in 2013, find "Ruby on Rails programmers" who wouldn't know what to do if you took the Rails away.
Serious question: What can you usefully do in C without a compiler? Write your own self-hosted compiler somehow?
I reject the notion that people who are skilled at using a set of tools are "talentless amateurs" because they don't know how to work without those tools, or create the tools from scratch.
How good is a master carpenter if you took away his hammer and saw?
London is always going to be a worst-case scenario. You guys don't just have the journalist-making-a-hyperbolic-statement sort of royalty, you still have the for-real kind.
But the sort of houses they are calling sv crowd out for buying in the best location in SV are no where near the same as the equivalent location in the UK.
The class divide is indeed huge, but I'm having trouble following some of the article's logic. The article seems to be saying that the upper class are the capitalists that have founded successful companies, and the middle class are all the engineers, and the lower class are the rest of society. A lot of the class divide seems to be most evident in housing costs.
Where do these $1 million tract house valuations come from, if the middle class engineers can't afford to buy them? It would appear that they're mostly owned by people that have been living in the area for the past 20 years? And because people have not moved, even though they are apparently no longer in the middle class, the supply has been constrained and the few houses that do go on the market go for extremely large amounts of money.
Anyway, I'm not sure what to make of the article. There are troubling comparisons, and glimpses at incredible wealth, but the parts of the article don't seem to fit together very well into a picture of what's going on.
The article seems to be saying that the upper class are the capitalists that have founded successful companies, and the middle class are all the engineers, and the lower class are the rest of society.
This view of class division in an industrialized society is not particularly new. Kurt Vonnegut's novel Player Piano presents this exact scenario (upper class of managers, middle class of engineers, unemployed masses), and it was published in 1952.
I agree that the class division is fairly standard (though the middle class also includes the lawyers, doctors, and other professionals that earn as much or more than engineers), but I guess I don't understand the connection to real estate prices. Who owns all these homes, and buys all these homes? It seems as though it's a bubble that's almost ready to burst, the way that it's been laid out in the article. Or that the wealthy have been buying up huge proportions of properties to turn them into rentals. But there should be numbers that would back up that latter case.
It's both: property prices have bubbled up to the point where many real buyers are investors looking to rent the houses out rather than residential owners.
> It seems as though it's a bubble that's almost ready to burst
It's not a bubble if you already own and keep owning - California Prop 13 prevents the tax man from raising property taxes more than 2% a year.
It's not a bubble if you paid cash, which is majority of real estate purchases in Santa Clara County - unless you choose to go the HELOC route.
It's only a bubble if the buyer is taking out a mortgage to buy the piece of real estate, has very little as far as rainy fund, and needs to have a job to continue making payments.
I don't think Valley real estate prices are that reasonable (and have voted myself out of the market by selling last month), but it's not truly a bubble where you hope the greater fool will come around and buy the stuff from you.
It's a mix. I know a lot of families in SV that have lived there for a long time and have somehow managed to hold on to their houses, working two jobs and just making it. Also, there seem to be quite a few immigrant families from Asia that cram extended families into relatively small homes and get a foothold. There are also plenty of young tech workers that can afford a small house or condo as long as they are willing to take on a lot of debt.
Whenever I visit my in-laws in Palo Alto I enjoy it but I'm always glad to leave it behind again. Every year they add a lane to 101 but they never make it any wider.
I believe the author would argue that these 'middle class' Valley engineers really aren't middle class at all, but rather upper class. They're likely up in the 95th percentile of earners. Though I struggle to come to terms with how to control for living costs and geographic inflationary trends. I would like to see an accounting of how wages across the employment spectrum are adjusted, as well.
In my mind, if wages for other forms of employment aren't similarly inflated, it makes a much stronger argument for a further bifurcated society.
> They're likely up in the 95th percentile of earners.
For 95% of people in the Valley to earn less than average software engineering salary, 95% of people would have to be employed outside of tech specialties outside of tech companies. And that's not the case.
I read that as meaning "95th percentile nationwide" in which case no such conclusion can be drawn.
And FYI, what you are saying could happen with 90% of people employed outside of tech companies. (Because half of engineers earn below the median software engineering salary.)
Interesting that an article that deals this directly with class is running in the Weekly Standard. Outside a couple swipes at green building codes and a pass at hypocracy vis a vis apartments, this is almost something I could see running in Mother Jones.
This is rather surprising fare for the Weekly Standard, which is (to my understanding) a conservative magazine. Perhaps the American political climate is realigning in an interesting way.
I had the same thought. I used to read the Weekly Standard to see what the other side has to say but gave up on it. This piece was outside their usual sphere.
One important aspect of Bay Area wealth to keep in mind is that Silicon Valley has a very supportive entrepreneurial culture-- wealthy exited entrepreneurs generously funding seed rounds for up and coming startups, lending a hand to pull up those around them. The mentality of modesty and collaboration greatly detracts from the sort of dystopian and polarized picture this article paints.
> "lending a hand to pull up those around them. The mentality of modesty and collaboration greatly detracts from the sort of dystopian and polarized picture this article paints."
"Those around them" = those like themselves, who 99 times out of 100 aren't actually from around the Bay Area.
Hell, even the businesses supported by the Bay Area elite are not at all similar to those that already existed before. The wealthy exited entrepreneurs aren't lending a hand to pull up the taco stand or the nail salon, they are evicting them in favor of businesses they like better.
Which may simply be the natural order of things, but it's a far cry from this populist "floating all boats" story you're weaving.
More importantly, wealthy exited entrepreneurs are funding new generations of startups - but that's a far, far cry from "pulling up those around them". One of the things that really, really bothered me when living in the Bay Area was how the tech industry literally does not give one iota of mind to anyone who isn't in the tech industry.
The tech industry helps itself and lets the world go to shit around them. The tech industry builds gated garages instead of helping solve crime in their neighborhoods. They invest in bigger and fancier buses in which to transport their own kind, instead of helping solve transportation in their cities. Even innovations like Uber are priced in such a way that there may as well be a "techno-elites only, kthx" sign on the door.
It's only non-dystopian and non-polarized if you already have membership to the ol' boys club that is Silicon Valley, in which case the entrepreneurial community is indeed supportive and has each others' backs. If you aren't lucky enough to belong to this club though, you're shit out of luck, even if you live just down the street.
Which, now that I think of it, isn't that different from how East Coast Old Money works. Funny how we keep making fun of them.
I have to think that it's always been this way in civilization. Some people figure out how to position themselves at the top where all the money and control is, a bunch of others can't figure out how to squeeze up there, but do figure out how to service the people at the top for scraps, and then there are the hoards who don't even know how to get into the game at all. I think of it as just mechanical positioning. It's exactly the same as if you sent a crowd of people running to touch a magic pillar. There'd be room for a few to reach the pillar, then a bunch who could see the pillar and imagine what it would like to be one of the ones touching it, then a mass of people on the outside, barely able to see it at all. The only difference in real life is that the crowd is structured by the flow of money, goods, and services, where the flow is wider at the middle.
Rich == you don't have to work for a living. You might choose to, but you don't have to.
Poor == you're on government assistance of some kind, WIC, food stamps, welfare.
Can you think of anyone in SV that's in between those two extremes? A "middle class" of sorts?
There is a vast, vast middle in SV, it's just that the scale is different which never stops blowing people's minds. Instead of a $50k income being middle class, $150k is.
In Phoenix, there are also rich people and poor people, but not the stark contrast of Silicon Valley. Fewer billionaires, I think and also the neighborhoods are so vast and more or less homogeneous in tract size that you don't really notice wealth disparity. The average family pretty much lives in a house with a yard and 2-car garage, regardless of income. You can get in your car and drive to tony gated communities in Scottsdale and peek over the walls, but who would? You have your job, your two cars, your Harley, and your flatscreen, and life is good.
Maybe California can find a way to build out onto the ocean as was done in Singapore, and relieve the housing pressure a little. God, I'd love to be making the kinds of software engineer salaries that they offer out there, but the housing -- yikes!