Why Technology Firms Are Moving Downtown - Pacific Standard

Why Technology Firms Are Moving Downtown

Young and inexperienced (and cheap) talent has never wanted to live in the suburbs. It's just not cool.
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Downtown San Francisco. (Photo: Christian Mehlführer/Wikimedia Commons)

Downtown San Francisco. (Photo: Christian Mehlführer/Wikimedia Commons)

The Innovation Economy, that epoch on the heels of manufacturing's decline, is dying. How do I know? The cost of talent is too damn high. Dave taking me to task and supporting my assertion:

You don't go from Big City to IBM in Dubuque. IBM is interested only in recent college grads who are willing to work cheap in exchange for some tech experience. When they hire these folks into Dubuque, they bluntly recommend against them buying a house - IBM has no intention of keeping them for many years.

IBM Dubuque represents the opposite of what you're describing ("cut teeth in expensive Big City, then migrate to smaller place where your experience will be impressive"). They are cutting people's teeth in cheap small city, then telling them to take a hike when they want more money.

In any case, the Dubuque, and similar efforts by IBM in Columbia MO and East Lansing MI, are not about dispersing talent from Silicon Valley or Boston, it is about keeping outsourcing costs down, because there are so many tech jobs in India now, that employees over there are able to demand higher salaries, quitting and going to a competing firm if the company refuses. Dubuque and Columbia are competing with Bangalore and Mysore, not SV and Boston.

I don't know Dave from Adam, save the occasional comment on a blog post. I gather he has some experience in such matters. If he's right, then IBM is in Dubuque for exactly the reason I argue. The cost of talent is too damn high.

Young and inexperienced talent is cheap talent. Dave's jabs got me to thinking. Why would a tech firm move to where the rent is too damn high, in the urban core? The alpha and omega of innovation geography, Silicon Valley:

Last year, my colleagues at Stamen and I used a grant from the ZERO1 Biennial in San Jose (with the support of the James Irvine Foundation) to follow the corporate commuter shuttles around San Francisco, count people getting on and off them, and collate and combine their reports into a map of the area’s clandestine private transportation network. ...

... Egon Terplan at SPUR, a non-profit organization that promotes good planning and government for the city of San Francisco, suggested a novel way of thinking about the shuttles. That is, conventional wisdom has it that the routes are a way for companies to respond to the desires of young, hip urbanites who want to experience the frisson of urban life in between their shifts down to soulless suburbia.

But when you look at the zoning regulations in Palo Alto, you learn that the tech companies have basically run out of room to build parking lots on their campuses — they can’t grow any further using the model of one parking spot per worker. So it’s logical that the tech companies would need to use shuttles to bring their workers to campus.

And where’s the densest place in the Bay Area, the place where the largest numbers of people can use the smallest numbers of buses? By this logic it’s not the youngsters that have chosen San Francisco to gentrify, but the Facebooks and the Googles who are incidentally causing this kind of development through the simple calculus of where they can house the most workers.

That they’re young and educated and lots of them are millionaires is kind of beside the point. Only a map is going to lead you to this kind of thinking. It’s about more than gentrification as we’ve experienced it thus far: It’s about an entirely reconfigured relationship between density and sprawl, and it’s going to need new maps to help us navigate this landscape.

Emphasis added. Conventional wisdom supports my converging Innovation Economy hypothesis. Cater to the wants and needs of talent and win the war for talent. Great, save that isn't what the private bus map reveals. Cramming employees into San Francisco neighborhoods is a cost effective way to house talent while sparing dearer real estate for production. I'm still standing on firm ground.

Nonetheless, tech firms are moving to downtown San Francisco. Why? I didn't have a good answer for that question until I read this story about businesses abandoning the suburbs for the urban core of Chicago:

For longtime employees, however, corporate moves to the city mean longer commutes and disrupted schedules and family life. And the corporate quest for youth and innovation can leave some workers feeling slightly unwelcome.

"We joked about the older suburbanites being excluded from the new [business] model," said Jon Scherf, age 42, a marketing professional who left Hillshire shortly before its December 2012 move to downtown Chicago. "They would've been happy to have me but they're also happy to bring in new blood."

Companies say some attrition is normal. Motorola is offering full relocation packages for employees who choose to sell their suburban homes and move closer to the new office. Still, management expects 2% of its staff to depart and about 75% to stay after the relocation. The remainder, said Mr. Sullivan, will likely be "on the fence."

The shift to urban headquarters favors cities such as Chicago, San Francisco and Boston, destinations of choice for recent college graduates, while aging cities like Cleveland and Detroit struggle with corporate flight and economic decline.

Emphasis added. Welcome back to Dubuque, Iowa: "IBM is interested only in recent college grads who are willing to work cheap in exchange for some tech experience." Dump the older and more expensive suburban-based employee. Plug in the millennial intern dazzled by the streetcar. Chicago is so cool I would work there for nothing.

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