I wrote the article, and I'm personally concerned that housing prices affect the mix and balance of companies in the local tech ecosystem in favor of the big corporations like FB, Google, Apple and heavily venture-backed startups. It's bootstrapped and smaller companies that hurt in this situation because they can't afford to pay the salaries that cover the living costs here.
If the bootstrapped companies can't afford to be here, they end up starting in some other city far away and growing into a significant presence there. That's probably good for those communities, but not necessarily good for the long-term health of the Valley if our ecosystem ends up being too dependent on two or three mega-corporations.
If you look at Palo Alto, it's a microcosm of what could happen to the entire region. That city has basically starved itself of young companies because it's not growing housing or office capacity. And with foreign purchases of 1950s era ranch homes there, I'm mildly concerned that Palo Alto will turn into our regional equivalent of the Park Avenue stash pad or the Kensington ghost mansion for Chinese that are escaping a poorly performing domestic real estate market and Xi Jinping's unprecedented crackdown on domestic corruption. Perhaps that's good for property prices, but it's terrible for having a living, breathing, dynamic community.
It's bad for bootstrapped startup, but startups who decide to raise funds can still do fine.
Anyway that's always been Silicon Valley's strength: VC money. If you want to start a bootstrapped startup, Silicon Valley is a bad place to start with. You're in competition with so many cool companies for recruiting, while in a big enough city with a university you can easily be one of the sexiest company to work for and attract the talented workers who don't want to move to California.
Right now, the way that tech companies get around this is by paying their employees progressively more and not really engaging with the political system.
But this particular strategy also has its downsides from a community perspective, because it starves out other uses of our city for public service workers, teachers, artists, etc.
Perhaps there is another way where we are politically engaged, where we can generate broad political will for more housing given that the largest and most successful companies have a hand in funding or supporting diverse growth (in the way that New York's biggest corporate institutions are also great patrons of the city's arts).
Many of the foreign-owned houses are actually bought by corrupt Chinese officials and business men planning their exit from a country that will probably eventually execute them if they stay.
The corruption crackdown forces the money out precisely because the time of reckoning draws nearer, while many more honest Chinese also see overseas markets as a value compared to over inflated domestic markets. Actually, if housing gets cheaper here in China (which it should), you'll see more activity here and less activity abroad for the same reason.
Good point-- one of the assumptions of increasing supply is that the demand will remain roughly the same. The demand curve may be so steep that even large increases in supply will be bought up and not lower prices much.
> If the bootstrapped companies can't afford to be here, they end up starting in some other city far away and growing into a significant presence there.
I would love to hear of examples of this. I cannot think of any at all.
If the bootstrapped companies can't afford to be here, they end up starting in some other city far away and growing into a significant presence there. That's probably good for those communities, but not necessarily good for the long-term health of the Valley if our ecosystem ends up being too dependent on two or three mega-corporations.
If you look at Palo Alto, it's a microcosm of what could happen to the entire region. That city has basically starved itself of young companies because it's not growing housing or office capacity. And with foreign purchases of 1950s era ranch homes there, I'm mildly concerned that Palo Alto will turn into our regional equivalent of the Park Avenue stash pad or the Kensington ghost mansion for Chinese that are escaping a poorly performing domestic real estate market and Xi Jinping's unprecedented crackdown on domestic corruption. Perhaps that's good for property prices, but it's terrible for having a living, breathing, dynamic community.