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Places Where the Silicon Valley Bubble Could Pop 107

Posted by Soulskill
from the acquire-while-the-acquirin's-good dept.
waderoush writes: "If Silicon Valley is in a bubble — which it is – how will it finally burst? Where is the bubble's membrane being stretched so thin that it's in danger of tearing open and letting the real world rush in? This commentary from Xconomy picks real places around the San Francisco Bay Area embodying tensions, imbalances, injustices, or dangers that could escalate into a show-stopping crisis for the technology economy. One is Bank of America's former headquarters in the heart of San Francisco's Financial District; another is an elementary school in Oakland that happens to sit on the Hayward Fault. 'If we can identify the fractures that threaten to destroy the innovation machine, we might be able to patch them up and keep the system going for a while longer — and maybe even point it in a smarter direction,' the piece argues."
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Places Where the Silicon Valley Bubble Could Pop

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  • I Read TFA... (Score:5, Informative)

    by NotSanguine (1917456) on Friday May 02, 2014 @05:35PM (#46903835) Journal

    It was disjointed and didn't really seem to have any sort of point or theme. Now I can't get that time back. :(

    • by CheshireDragon (1183095) on Friday May 02, 2014 @05:40PM (#46903891) Homepage
      I have to agree with you..
      Good thing most of the crowd comes here after only reading the summary and may heed your warning
    • by Darinbob (1142669)

      Not really sure how San Francisco or Oakland have anything to do with Silicon Valley either.

      • Re:I Read TFA... (Score:5, Insightful)

        by curunir (98273) * on Saturday May 03, 2014 @02:16AM (#46906395) Homepage Journal

        Read the linked TechCrunch article...it's really a great explanation of everything that's going on. One good example was Mountain View working on a commercial development that would bring 42,550 jobs to the city while only creating additional housing for 7000 people. This in a city where already far more people work than live. To Mountain View, it's simple...residents require more services like schools, fire departments and police than do office complexes. But those workers have to live somewhere and cities like Mountain View that are acting selfishly are pushing rents up in nearby cities.

        Two of those cities are San Francisco and Oakland. Both cities have a lot of housing when you ignore one minor detail...the current residents that would need to be displaced. But since all those jobs in Mountain View pay way more than the current residents make, developers and landlords are only too happy profiteer off the well-compensated tech workers by pricing the current residents out of the market.

        But, as the piece lays out, it's not tech workers that are to blame and, for the most part, not tech companies either. It's mostly local and state government's 30+ years of stupidity that's led to this. Starting with prop 13 in 1978 and the backlash that led to rent control laws, government created an environment where homeowners fight tooth and nail against new housing and rent control drives rent up by distorting the market. The ensuing difference between controlled and uncontrolled rents causes conflict between tenants and landlords who see how much money they're losing each month. So the city adds even more idiotic regulations that ensure a certain amount of housing is sold/rented below market rates, which has income restrictions that just about guarantee that poor people won't be able to afford them...but zero-income children of parents willing to cosign qualify quite easily.

        Meanwhile, companies keep growing/starting up and more and more high-paying jobs keep coming to the area. But thanks to all those "I got mine, screw the rest of you" homeowners who keep new developments from being built, those jobs come without the corresponding increase in necessary housing. So what are current landlords to do...every form of meddling is forcing prices through the roof to the point where only highly-paid professionals can afford them? You could either sit by and allow your tenant to pay you a small fraction of what the place is worth (and sometimes rent it out for full price on AirBnB...no rent control there) or you could use some sleazy tactic to evict the long-time tenant and let the boom dollars roll in. Also, notice I didn't say tech professionals...we make up less than a quarter of the well-to-do SF population...there's more finance than tech.

        As per usual, the ones most hurt by this are the working poor. The abject poor are doing the same as ever...when you make zero and live off city-provided social programs, rent prices really don't affect you all that much. But the people trying to be productive members of society are basically forced to move away and commute back to the city. And this has some really nasty side effects...like police officers who have no real attachment to the community they serve because they've been priced out of living there.

        Protesting the Google bus makes for a great shot on the 11pm news, but is otherwise counter-productive. If we want to fix the issue, we should:
        a) Repeal prop 13, rent control, the below-market-rate program and all the other government meddling.
        b) Tell homeowners to go fuck themselves and start building new housing as fast as we can.
        c) Add significant tax incentives for people who live close to work. This would have the dual effect of being "green" by reducing commutes and making it unattractive to work in cities that do not provide enough housing to support the businesses there.

        Alternatively, we could just accept that poor people will need to move and let it happen. It's heartless, but given how bungling government is, it's pretty much inevitable. The unfortunate part is that what's considered poor is almost ridiculous. Someone making $100k/yr will basically never be able to afford to buy a home in SF.

        See...SF and Oakland have a lot to do with Silicon Valley :-)

        • Re:I Read TFA... (Score:5, Informative)

          by NotSanguine (1917456) on Saturday May 03, 2014 @03:19AM (#46906517) Journal

          Thank you. You should have written the article. :)

          The housing issues are nothing new. I don't live in the bay area now, but back in 2000 I did live in Santa Clara for about six months. I recall reading an article in the San Jose Mercury News back then about full-time public school teachers in San Jose who were living in homeless shelters because they couldn't afford to rent or buy in the area. I also recall at least a couple of colleagues commuted 2.5-3 hours each way because they couldn't afford to house their families any closer to the bay area.

        • by doom (14564)

          You've got a fair grasp of what's going on, but this is crap:

          a) Repeal prop 13, rent control, the below-market-rate program and all the other government meddling.

          You'd think in this day and age people would think two or three times before going with laissez-faire free market "solutions", but there's a lot of you guys around at this point...

          The trouble with these ideas is that whatever they say, people don't really *want* to leave issues like the character of their neighborhoods up to the whims of The

    • Me too. I should have stopped at the "which it is".

      It's a total jingoistic piece that's more or less written as a rant about how much nicer things used to be, before the (presumed) current tech bubble.

      Why do we care if large "funny money" transactions are happening? It's not like an all stock purchase of supposedly valueless companies by a supposedly valueless company matters to anyone, in an economic sense.

      I have no idea why he brings up BofA, which has little to do with tech funding, why he brings up "Go

      • by flyingsquid (813711) on Saturday May 03, 2014 @08:46AM (#46907513)

        I don't know if I'd call it a tech bubble, it's more of a froth- lots of little bubbles. During the original tech bubble that started in the late '90s, pretty much everything was massively overvalued, and pretty much every shitty startup would go public and see its stock rocket up, even (especially) if they didn't make a profit and didn't have a business plan. It was widespread financial insanity, collective economic madness. The average stock on the S&P 500 traded at 40 times earnings, versus about 18.8 today. In other words, the average company costs about twice as much (relative to its earning potential) then as now.

        Today, there are definitely some overvalued tech stocks. Facebook has a P/E of 76, Netflix has a P/E of 128, Amazon has a P/E of 428. Which means that at current earnings levels, a dollar invested in Facebook will pay off in 76 years, that same dollar invested in Netflix will pay off in 128 years, and Amazon stock will pay for itself in a little over four centuries. You're speculating (i.e. gambling) if you buy any of those companies. But other tech stocks are more reasonably priced. Google has a P/E of 28, Microsoft's P/E ratio is 15, Apple's is only 14. We are seeing bubble-like behavior in certain companies and in certain industries (social media, for example) but it's going a little far to say that the entire industry is in a bubble.

    • by Dahamma (304068)

      Luckily the summary lost me at "If Silicon Valley is in a bubble — which it is – how will it finally burst?"

      Ok, pretend to ask a question and answer it in the SAME sentence... yeah, it's bound to be a well thought out impartial article...

  • It is WAY over valued.
    • Re: (Score:3, Insightful)

      by ShanghaiBill (739463)

      It is WAY over valued.

      If you are so much smarter than the market, then you should be able use your superior intellect to make a fortune by taking a perfectly timed and highly leveraged short position. After you cash out, come back and post a picture of your yacht.

      • by Anonymous Coward

        It is WAY over valued.

        If you are so much smarter than the market, then you should be able use your superior intellect to make a fortune by taking a perfectly timed and highly leveraged short position. After you cash out, come back and post a picture of your yacht.

        Your conceptualization is turned around the wrong way.

        It doesn't take a smart person to see Facebook is overvalued. It takes a lot of really dumb investors to overvalue social media, hence the bubble.

      • Re:Facebook. (Score:5, Insightful)

        by Anonymous Coward on Friday May 02, 2014 @06:03PM (#46904057)

        Markets can remain irrational longer than you can remain solvent

        - Keynes

        • Markets can remain irrational longer than you can remain solvent

          - Keynes

          Eventually, the bubble pops, the collective delusion ends, and gravity and other natural laws reassert themselves, the whole thing comes crashing down. The key word being "eventually". Bubbles are self-sustaining, there's a feedback loop. People buy in because the price goes up, as more people buy in, the price goes up more, and so on. Sober, rational people look at fools making money and eventually decide they've made a mistake and start jumping in even as the whole thing starts racing towards disaster and

      • by citizenr (871508)

        This only works with rational actors. Problem is 100 billion flies simply CANT BE WRONG!!1 So eat that shit up.

        • "Problem is 100 billion flies simply CANT BE WRONG!!1 So eat that shit up."

          100 billion flies are NOT wrong. It is the one thinking that what's good for a fly is good for people the one being wrong.

  • This is a complete waste of time. Don't even bother to read it.
    It's a random list of stuff that's not quite right or might go wrong... nothing to do with Silicon Valley, really.

  • by Anonymous Coward on Friday May 02, 2014 @05:54PM (#46903995)

    Honestly, I don't even take these kind of posts seriously anymore. At least the tech industry in general puts out products(as meaningless as some of them are). How about the real estate market, where houses are overvalued tremendously in most cities and real estate agents are making a living from something that can be done more efficiently by yourself online?
    How about the stock market in general, where it's basically reduced to trying to make money from micro trades instead of long term investment? How about when that bubble pops?
    How about any number of other sections of our economy(the over-regulated medical industry, the government protected entertainment industry, etc) that are propped up by things that are seemingly fragile and unstable?

    Don't get me wrong, I'm worried about the tech industry(and silicon valley at it's heart), but not nearly as much as the many sections of our economy which are less productive.

  • In other news, solar energy will never be viable as long as innovation bubble engines continue to run on coal and oil.

  • The author states that Silicon Valley is a bubble. What does he mean by that? Does he mean that real estate prices in Silicon Valley are over-valued? Does he mean that the tech companies in Silicon Valley are over-valued? Does he mean that the advantages for a tech company, or a technology professional to be located in Silicon Valley are over-valued? Or does he mean something else?
    I did not read the article because the summary made me think that the author never defined what he meant by that statement. Without that meaning being defined there is no way to evaluate the soundness of his arguments about it (well, actually, there is. One concludes that the reason it is left poorly defined is to hide how unsound his arguments are).
    • by NotSanguine (1917456) on Friday May 02, 2014 @06:34PM (#46904291) Journal

      The author states that Silicon Valley is a bubble. What does he mean by that? Does he mean that real estate prices in Silicon Valley are over-valued? Does he mean that the tech companies in Silicon Valley are over-valued? Does he mean that the advantages for a tech company, or a technology professional to be located in Silicon Valley are over-valued? Or does he mean something else? I did not read the article because the summary made me think that the author never defined what he meant by that statement. Without that meaning being defined there is no way to evaluate the soundness of his arguments about it (well, actually, there is. One concludes that the reason it is left poorly defined is to hide how unsound his arguments are).

      He means, "please visit my site. I want more ad revenue. I don't have anything approaching interesting, coherent, relevant or even moderately useful to say, so I'll just string a bunch of random crap about the SF bay area together and see if I can get slashdotted.

  • The tech industry needs duct tape! Duct tape will keep anything from fracturing.

  • I get it. (Score:4, Interesting)

    by statemachine (840641) on Friday May 02, 2014 @06:42PM (#46904365)

    I mean, I've been seeing a lot of columns/op-eds/blogs lately about how California and/or SF & Silicon Valley sucks. This article is tame, but it hits on every single political talking point -- much like a back-handed compliment. When you have to bring up employer-sponsored shuttle buses (remember vanpools?) and a hypothetical future earthquake, you've got nothing.

    California just raised $18 billion surplus in tax revenue from a booming economy and from raising taxes -- and they're arguing about how much debt to pay off. OTOH Kansas cut taxes and is getting close to $500 million in the hole with high unemployment -- and they're arguing about how much more taxes to cut. Missouri's governor just vetoed a plan similar to Kansas' basically saying KS is crazy -- now the legislature wants to impeach him.

    Unemployment is down nationwide and 288,000 jobs were gained this month. If your state is still in a recession, it's your own state's leaders.

    I guess there's a narrative that people have to tell themselves while watching success from the viewpoint of the bottom of the pit they dug themselves.

    It's also campaign season.

    • by perpenso (1613749) on Friday May 02, 2014 @10:27PM (#46905651)
      California has had surpluses before, it does not have a revenue problem. What California has is a spending problem. When surpluses occur the legislature usually goes wild with spending, and some of the governors join in. They act as if the current peak in the economic cycle is the new normal and spend accordingly.

      Gov Gray Davis saw revenue increase by about 10% but he and the legislature increased spending by about 30%. Things were so out of control Davis was recalled and Schwarzenegger was voted in.

      So seeing a budget surplus in California may simply be a precursor to the next budget disaster.
    • by Anonymous Coward

      Unemployment is down nationwide and 288,000 jobs were gained this month. If your state is still in a recession, it's your own state's leaders.

      I guess there's a narrative that people have to tell themselves while watching success from the viewpoint of the bottom of the pit they dug themselves.

      It's also campaign season.

      You apparently didn't recognize that 800,000 (plus) people dropped out of the labor force (meaning gave up looking for a job or their unemployment ran out). Those are simply government unemployment CLAIM numbers. The real statistic is rather concerning.

  • is complete lack of developers. When I, as a high school drop-out, can get a job in less than a week after I decide to start looking, there just aren't enough developers. I changed jobs 19 times in the 15 years I lived in San Mateo, and it was never hard to find a job. Despite jumping around a lot and having some terrible recommendations, it's still easy to find a job there if you can spell Java. That is killing innovation, and I don't think SV will survive the drought. I since moved to Seattle, and wh
  • by Moof123 (1292134) on Friday May 02, 2014 @06:55PM (#46904465)

    The article had no thesis, and really was just mindless rambling.

    Why is there no similar rant about New York, Malibu, or many other very expensive places? New york may be more expensive yet.

    • by Animats (122034)

      The article had no thesis, and really was just mindless rambling.

      Agreed. The ad-driven tech bubble will burst at some point, but not for any of those reasons.

      Bank of America was bought by North Carolina National Bank in 1998. So that issue was 16 years ago. SF has a sizable homeless population because SF isn't that homeless-hostile. Compare San Diego [sandiego.gov].

      Earthquakes are a real worry. SF prepares for them. All new buildings get serious reinforcement, and most of the old ones have been retrofitted. All through SF, you see huge diagonal steel braces in buildings. (In some r

      • SF has a sizable homeless population because SF isn't that homeless-hostile. Compare San Diego [sandiego.gov].

        As I recall, SF actually provides better than most places for the homeless. I'm reminded of a news article I read a number of years ago about a city in Florida (sorry, no cite) that, since SF was so homeless friendly, decided to devote their minimal allocation of funds for the homeless to pay for bus tickets to SF for their homeless population.

        And people say Republicans are dumb. Bus tickets, FTW!

    • by vandamme (1893204)

      Not the real New York, where we keep the cows, grass, and mountains. The cost of living is incredibly lower.

  • Assuming that there is a bubble, it will burst and take the dumbass fools who think the dot-com glory days are about to make a comeback.

    Nothing of true value will be lost. Stupid people and money will be parted.

    Assuming that there is a bubble in the first place.

    Which I am told there is, but that might be BS.

    Slashdot is like that.

    Beta still sucks.
    • Nothing of true value will be lost. Stupid people and money will be parted.

      Not necessariry. When all those people lose their jobs, the folks who used to sell them coffee and rent them apartments, those who sold them cars and hotel reservations for their travel, their grocers and pharmacists, all will suffer. They are not "stupid people". They are businesses who sell to the folks employed by your "stupid people". The knock-on effects are often larger than the crash itself, if you hadn't remembered that from

      • If you only sell coffee to bubble surfers, you yourself would be a bubble surfer. You might consider marketing coffee to tradesmen like plumbers and such; they aren't going anywhere.
  • Neither 1 Infinite Loop nor 1600 Amphitheatre Parkway nor 1 Hacker Way were on the list.

  • simply means a bigger mess when it happens.
  • If you want to pick a Bank of America symbol, go for 1455 Market, not 555 California! Nothing "important" was in 555; 1455 was carefully guarded by 1 South Van Ness which actually had a BofA sign, but no real operations.

    1455 is now the home of Square, among others, and the abandoned buildings adjacent were rebuilt as domiciles for the tech elite... That building is the quintessential icon of the Silicon Valley bubble burst (in SF), helipad and all!

    (OT 555is Ha Ha Ha in Thai...)

    • by pigiron (104729)

      You don't know WTF you are talking about. 1455 Market was one of the three data centers. All the executive, marketing, financial accounting and planning, and securities trading offices were at 555 California.

  • The really puzzling bits are where he talks about how it'd be a shame if the bubble popped because of all the cool innovative stuff those guys are working on... that's news to me, I thought it was all mobile-phone versions of sweatsox.com.

    "Our knew app automatically counts sidewalk cracks, and allows you to post the total to your facebook page!"

    Remember, the idea doesn't matter, it's only the execution that counts!

  • But not in the way the website intended. When I navigate to the link using Chrome with Ubuntu 12.04 a popup appears and stays on the screen making it had to read the text of the article. I might save the page to see if I can defeat the advertising, and that is why Silicon Valley Tech is a bursting bubble. The greed-driven intrusions companies are creating on their web pages is driving people away. There is only so bang for the buck that can be squeezed out of the real estate of a web page without getting d

  • I had trouble with a popup when I first loaded the linked page, but going back to it the popup wasn't there and I got to read the article, and I agree with it mostly. I have said many of the same things it does in my posts here. I live in SV and am pretty critical of what it has become especially after 2000. I am critical of investment, the amount of capital companies with dubious business plans have been able to raise. That and the banking situation and the face that the problems that caused the Bubble of

  • I live in Silicon Valley. Yesterday, the news media reported with some hoopla that BART has bored a nice tunnel under Lake Elizabeth in Fremont for its extension to Warm Springs and Silicon Valley. Nice, now tech workers can live in the East Bay and get to work in San Jose faster. What they didn't tell you, and I should know because I have my degrees in Geology and studied the geology of the Bay Area, is that Lake Elizabeth is probably a sag pond associated with if not in the Hayward Fault. The OP link to

  • 'If we can identify the fractures that threaten to destroy the innovation machine, we might be able to patch them up and keep the system going for a while longer

    It's in the nature of materials or systems under stress that they'll break somewhere else, if you apply a patch to one identified weak point.

  • Even Silicon Valley has had some in past. Teh dot.com/9-11 downturn vacated lots of SoMA property. A dozen years before that th post cold-war demilitarization and dud products like A.I. and pen-OS slowed the market. If you could time the next downturn you'd be rich. All we can say is it will happen again.

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