Why Open Shop In California?

DISCLAIMER: I live on the East Coast, so these are perceptions and opinions that I don’t put forth as facts. I’m more asking a question to start a dialog than professing knowledge.

So, I just heard a report claiming that there are more IT jobs than techs to fill them in Southern California. Anyone who ever reads a tech job board and/or TechCrunch has also no doubt taken note that a vast majority of startups seem to be starting up there, and that there are just a metric asston of jobs there anyway.

This boggles my mind. This is a place with an extremely high cost of living, making labor more expensive. At the same time, aren’t there rolling power outages in CA? Does that not effect corporations or something? Do they just move their datacenters across the border to another state?

Between what I would think is an amazingly high labor cost and what I would think is an unfavorable place in terms of simple things like availability of power, I would think more places would look elsewhere for expansion or startups.

I live within spitting distance of at least 5 universities with engineering departments that I think would rate at the very least “solid”, many would rate better. I would guess that I could get to any Ivy League school in 6 hours or less, driving (3 are within an hour of my NJ home). MIT and Stevens are very good non-Ivy schools, and lots of other ones like Rutgers, NJIT, Penn State, NYU, and lots more are here, and those are just a few of the ones between NYC and Philadelphia, which are less than 2 hours apart. So…. there’s a labor pool here.

Is it tax breaks? Some aspect of the political atmosphere? Transportation? Is San Francisco such a clean, safe, friendly city that you just deal with the nonsense to live there?

What’s your take on this?

  • http://www.zellyn.com Zellyn

    Paul Graham has written quite a bit about this. See http://www.paulgraham.com/siliconvalley.html for example.

  • http://www.loadedguntheory.com/ Tim

    I think this is a better analysis:

    http://www.austincontrarian.com/austincontrarian/2010/06/at-first-blush-cities-make-no-sense-if-we-just-look-at-costs—-the-cost-of-land-the-cost-of-congestion-the-cost-of-crim.html

    Your city doesn’t have enough cool stuff to draw the people you want to work there.

  • brian

    Well, who wants to live in an area with such crappy weather? Hot and muggy in the summer and don’t even get me started on winter…at least there are more dart players on the East Coast.

    Also, San Francisco is not Southern California, it’s like saying Charlotte, NC is NYC. San Francisco/Silicon Valley is different than LA.

    Sidestepping LA as I don’t live there; look at the companies that started in Silicon Valley: HP, Oracle, Intel, AMD, Apple, Atari, Cisco, Adobe, Kleiner Perkins, SGI, etc, etc, etc let alone the other newers ones: EA, Google, Lucas Arts, NetApp, Palm, eBay, Nvidia, Yahoo, Intuit, Western Digital, Netflix…

    Rolling blackouts…haven’t seen one of those since the Enron scandal.

    The reason for the quantity of posts is because of the quantity of talent that spins off and starts new ventures. Not saying there isn’t talent in other parts of the country, just saying look at the tech companies that started here, all those people go on to found new ones. If one could trace the family tree of Silicon Valley…a lot would be related.

    Is it reasonable for someone who lives in Philly to apply for and commute to NYC for work? Good gawd, 4+ hours commuting! I’d have to kill someone. Yea, commuting from certain parts of the bay area to others sucks, commuting sucks most places. Longest commute I’ve had is 38 minutes by train and walking.

    The main reason for the number of posts and companies: No crappy winters. Raining 70% of the time from Nov-March with a low of 45 is about as rough as it gets here. People don’t want snow at the house, they drive 2-3 hours and then they’re in the Sierras. Not to mention: Napa valley, Big Sur, tons of local farms for fruit, veg, and non-industrialized meat.

    As someone who grew up in Texas (Houston & Austin) and has been in the Bay Area for 13+ years, I don’t know why anyone would want to live on the East Coast, other than the number of dart players, but I’ve already mentioned that :)

  • Joe

    I would assume its a kind of inertia of opportunity. Conditions use to be more favorable in California and spawned places like silicon valley. This in turn created lots of great companies to work for. All of these opportunities attracted talent, who might spin off their own companies and stay in the area to tap the existing talent pool and their contacts. This creates a kind of self sustaining cycle which keeps going while state has become bankrupt, and the burden from regulation and taxes have sky rocketed.

    I don’t know how easy it is to break the cycle and drive the people elsewhere but it appears California is giving it a go.

  • http://developingupwards.com Calvin Spealman

    I think it makes them feel cool. Personally, I have zero interest in the valley. This country has a lot more room than that for us to stretch our legs.

  • Nathan

    Hi,
    I actually graduated from a Big East school (and did my graduate degree from Socal) but I started my career in Southern California and so I guess I have seen both sides of the spectrum. Here is my take on this. In your article you talk of Southern California and San Francisco as if they are one. Socal is actually way different from northern california. If you ask anybody in California, they will tell you that California is actually two states rolled into one – southern california and northern california. When you talk of socal – the universities that are around include UCLA, USC, UC Irvine and UC San Diego which would give any of the universities you mentioned above a run for their money. Northern California (including the Bay area) is supported by UC Berkeley, Stanford, UCSF and others. Between the north and south of california, I can tell you that there are a lot of really smart people coming from these places.
    What I feel is the real reason is two fold – the research focus of the universities and population demographics. With regards to research focus, most of the big east schools seem to make a big play for NSF grants (government grants) while most of the western schools make a big play for private grants (Google, Intel etc). Consequently, the professors and students on the west coast, having spent time with these industry folks, have great connections and once these students graduate they can build on these connections. I know this because this is exactly what happened to me and the other three research assistants in my lab who were working on a VMWare funded research – we were lapped up by VMWare as soo as we graduated.

    With regards to the demographics – you cannot beat the diversity in socal and Northern California (especially socal). I cannot say that there is any one major ethnicity there. Diversity will get in more diverse ideas, newer services and hence more startups. I actually feel socal will overtake the Bay area in the number of startups – just based on the diversity.

    Finally, if you live in socal and you an outdoorsy kind of guy – you are in great luck. You are never more than an hour away from the beach, about 2 hours to the nearest ski slopes in winter (Big Bear), the desert is just an hour away (Mojave) and if you are in to forests – Seqoia and Yosemite are about 4 hours away (I bet you can’t say that about any place in the east).
    As with any thing, there are cons as well. If you stay in socal and have a family – you better be making six figures as a family. Personally, I would have continued to stay in socal if it were not for the fact that my wife decided to go to school in Seattle. Regrettably, all good things must come to an end :-(

  • Nathan

    Just a side note to my rather large post above – I stayed in socal (orange county) from 2005 till the beginning of 2010. I did not experience a single blackout in all the years I was there. So any folks out there who think there is some sort of power scarcity in California might want to rethink that.

  • Matthew

    It’s been 8 years since the Enron-manipulated rolling blackouts cursed this state. I never experienced one personally even during that time – they may have affected maybe 5% of the state, for one summer. Those that were affected were only affected for a short duration (hence the term “Rolling”). If your datacenter can’t cope with a 20-minute power outage once in 10 years, you’re probably not doing your job right.

    (It’s also worth noting that any location with its own municipal power agency – i.e. all of Los Angeles – did not suffer rolling blackouts. One more reason to vote NO on prop 16!)

  • http://zhar.net John Eikenberry

    I agree with many of the above. It is a combination of being a nice place to live along with the network effect. I can also see it as attractive to single people and dinks particularly with its social scene and the fact that singles can absorb a higher cost of living easier.

    For people with a family and less flexibility in their living and monetary responsibilities it makes little sense. You get paid relatively less compared to elsewhere and won’t be able to take advantage of the social scene as much. The weather is nice, but not worth it.

  • http://unbracketed.com Brian Luft

    A little confused since you start your article talking about Southern California but end by referencing San Francisco. At least culturally speaking, you’d be hard pressed to find anyone who would consider SF to be part of SoCal. FWIW I’ll lend my perspective to the SoCal aspect.

    Pros: quite a few well-regarded private and public universities, a fairly diverse economy, an international metropolis, proximity to a huge number of wealthy media companies (movies, music, etc.) and their associated industries, 9 million people in a relatively small area, amazing weather, diverse geography, a number of defense contractors and companies with their hands in the national defense budget

    Cons: high-cost of living, higher corporate fees and taxes, traffic, dismal public transit, bankrupt state economy

  • Timon

    Take San Francisco: The greatest natural harbor on earth, among the most copacetic environments and climates on earth, an agricultural hinterland that is probably the single best on earth, a period of rapid and vast capitalization following the Gold Rush, mining, and timber at its inception, a strategic military point at the edge of the past century’s great military technological power, a series of fortunate accidents that left us with most of the worlds first 100% margin business (the other being in LA), etc., etc., etc.

    Actually the mystery to me is why California is so marginal — what kind of bizarre society have we become that far more people move from CA to deserts in Arizona and Nevada than to the Bay Area or LA. Software is a good business and is holding on, riding through the crash of the surrounding society, but just barely.

    BTW, when people say “high cost of living” what they really mean is “ridiculously expensive housing.” The groceries are maybe a tad more expensive but not really (and produce doesn’t taste like it came from a box.) But the real issue, the only issue, is housing, and it is too expensive because of ludicrous zoning rules and self-interested suburban “preservationists”, who make it impossible to build anything anywhere, and have for 30 years.

  • http://eatthedots.blogspot.com/ Casey Duncan

    As a person who, grew up in New England, lived in the Bay Area (which is definitely not SoCal) for several years, and now lives in Colorado (but still works in CA), I’ll give my perspective. IMO the Bay Area is the place to be if you are a single, or don’t have kids, are young at heart, and want to hang out with lots of nerds of all disciplines who do what they do with little regard for what the rest of the country considers “the norm” both personally and professionally. There is a devil-may-care attitude coupled with perpetual adolescence and highly educated, motivated people.

    There is also a lot of infrastructure, precedent, money, talent, and quite frankly naive dreams, there to support a cycle of tech startups. Most of these companies inevitably fail, but many, regardless of their financial success, do make an impact on the folks that work there, and many times these folks hang together in the next venture. Where I work, I am one of the few folks who has not worked with several others on my team in multiple prior Bay Area companies.

    There are other pockets where similar tech microcosms exist, such as Boston, but none seem to have the scale of the Bay Area. That said, recent realities may be leaking talent elsewhere. I moved away because even with an income that by any standard is generous, buying a reasonable home that was not going to land us upside-down in debt was impossible for our family. Also, there is a hectic, relentless strive for success and the “next big thing” there that was making all of us stressed out and ultimately unhappy. I also missed winter, and for that matter, seasons at all. The first misting rain of the season in CA would have the local media in a panic, which is pretty comical by Colorado and New England standards 8^).

    That said I have no desire to move back east. Been there, done that, bought the t-shirt.

  • James Thiele

    It is a well known concept in economics that industries tend to cluster geographically. A book I read recently “The Nature of Technology” by W, Brian Arthur quotes an econ book from 1890 on this subject. Any given industry requires a workforce and the presence of companies in that industry attracts works with those skills, which attracts other companies. Also ancillary businesses serving that industry cluster.

    There are many examples. The film industry moved to southern California because of the sunshine and even after most filming moved indoors it stayed. In the same way the auto industry, while dying in Detroit, still clusters around there, with the Japanese building plants in KY, TN, etc.

  • sprezzatura

    The rolling blackouts were 10 years ago.

  • http://www.aleax.it Alex Martelli

    Seems you’ve been getting quite a range of opinions, as well as corrections of some of your misperceptions such as the blackouts or the SF/SoCal distinctions; but I just thought I’d chip in with my own two cents, as my perspective is different — I graduated in Europe, worked in Texas and NY State in the ’80s, went back to Europe, and I’ve been here in the Bay Area for years now. The “relentless strive for success” that a commenter mentions leaves me VERY perplexed: compared to NYC’s cultural climate, at least back in the ’80s, I find CA fully deserves its “relaxed, laid-back reputation” (and I don’t find much in it either way compared to Houston, or, especially, Dallas — Austin and Lubbock, the other TX locations I know well from back in the ’80s, are OTOH admittedly even less hectic in my experience). Housing (and COL in general) is quite costly compared to TX or upstate NY (Ithaca’s freezing winters I’ll never, ever forget…) but definitely not (actually cheaper) when compared to Manhattan or any decent neighborhood in any of the other boroughs or nice and reasonably-close suburbs — and definitely not compared to Northern Italy or Tuscany, either.

    Little details such as the fact that the state of CA does _not_ recognize nor enforce “non compete” agreements can matter A LOT — if one wants to leave and found a competitor to one’s current employer, CA basically applauds (“non solicit” does apply — no poaching customers or employees for a year — and that’s only reasonable). It’s very different in many other States and even more so in Europe — at my seniority I’d owe my employers’ about one year’s notice if I was working in Italy and resigned (admittedly it’s mutual — Italian employers would owe me one year’s notice or equivalent severage if they laid me off)… so much for going away to found a startup;-). Not only did this historically prompt the flourishing of new hi-tech firms hived from other existing ones, but it means that no employer can be confident to hold its best people handcuffed — they have to make such employees WANT to stay by a combination of compensation, benefits, interesting work, great cultural climate at work, etc.

    No snow to shovel in the winter, mild summers, hot cultural and alternative life in SF, beautiful nature and open space nearby, some superb schools (Palo Alto, where basically all the Stanford professors live, is legendary for its schools — to the point that identical dwellings in Palo Alto can be 20-25% costlier than identical ones across the street in Mountain View!-) — it’s all a bevvy of little factors, some of which will matter more to some people and some to others, but they all matter overall (e.g, with my youngest stepkid now out of high school, I’m moving from Palo Alto to Sunnyvale — no reason to keep paying the premium that PA’s legendary schools command!-).

    For me, it also matters how well I can _eat_ (I *am* Italian, after all;-). Not only is a vast variety of excellent imports from Italy and France readily available (and sometimes pretty cheap, e.g. Trader Joe’s has fine Italian Chianti and Pinot Grigio for 3-4 dollars a bottle… cheaper than you can get them in Italy!!!), but the local products are sometimes amazing. Locally cold-pressed olive oil from locally grown olives, in particular, I find _better_ than what I can commercially buy in Italy (where commercial olive oil production is severely constrained by EU rules) — the first time I tasted it, I had a Proustian experience of being 5 years old again, tasting my Tuscan uncle’s homemade oil (not for sale, he was an engineer and the oil was a hobby — he barely made enough for his close family). I buy it by the barrel and enjoy it immensely on a daily basis. If I could only get Bolognese-style bread (alas, impossible to get, even in Italy if you’re any further away than 50 miles or so from my hometown, Bologna), then I’d know for sure that this is where I want to get old (though some might say that it’s too late for me to ponder about _that_;-).

  • m0j0

    Thanks for dropping by, @Alex, and thanks for all the insights on this post.

    It’s probably clear to most that my perceptions of California are a bit distorted. Thanks for your understanding there (in kind, I’ll forgive you for thinking all people in NJ, or even a majority of them, are anything like what you see on TV) 😉

    First, anyone who skipped over @zellyn’s link should really check it out. Great piece (here it is –> http://www.paulgraham.com/siliconvalley.html)

    I’ve also lived in Houston, Baton Rouge, Philadelphia, and New York City. They all have their good and bad points, but the main thing is that they’re all different from each other. Living all over the country taught me one thing very well: you don’t know a place until you live there — which is why I had to reach out to the Californians for the low-down. It’s easy to see from media coverage that everyone is in CA, but the reasoning always fails to go deep enough. Sure there are startups there because VCs are there, but why are the VCs there? Sure they’re there because the labor is there, but why is the labor there? It has to be able to be boiled down a bit more than that, and I think the comments on this post have pretty much clarified things for me (as much as possible without me actually having to live there).

    Thanks again, all.