Why Tech Firms Flock to Expensive Cities | WSJ
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- čas přidán 19. 07. 2024
- New York City’s "Silicon Alley" is back - this time, on the west side of Manhattan. WSJ explains why tech companies tend to cluster in the same neighborhoods.
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Don’t all industries do this? I mean auto clustered in Detroit, TV & Film largely clustered in LA, big oil and gas in Houston, big finance is NYC and much of the northeast. Industries that grow in a spot just attract others to the same area.
Dude your statement will DEFINITELY go Unnoticed and uncared for, it's just like you sobered all over yourself
But something like tech does not need same factors. Especially the Tech in NYC. It’s just software and IT
??? Explain?
Alfred Olumba finance is not that clustered. There are lots of satellites abound. Hardware is physical so have to near each other. Unless we develop transporters (Star Trek). Software however can literally be transported or teleported far away
Plus conventions are for industry get together and they all in LV
I used to live in Seattle and surrounding area. Don’t think that big tech companies coming to your town will make your life easier. It gets harder as your rent and home price increases and everything becomes more expensive.
Seattle only had to deal with Microsoft but now they also have Amazon and Costco.
Just don't be poor
@@msergio0293 I'm a HVAC tech in the bay area I live in the central valley so about 4hrs everyday commuting, rent is rising....But yall get heart attacks when we present you the repair bill or replacement lol....and it's our fault?
grandmother lives in san Fransisco her house is worth a fortune now compared to when her and my grandad first bought it years agoand the crazy thing is that it just keeps going up in price
Inflation is a bit**
This is why my baconeggandcheese costs $5 now
Lol
More than that.
My string of dental floss costs $5.
Lol big mac price index
That's cheap
Housing affordability for residents of that area goes out the window.
Start a drug war and prices will come down
That is because of government regulation and zoning.
don't think Manhattan was going to be very affordable regardless
so
Ya that didn't need help from big tech...
It's because clustering makes it easier to recruit talent. Lets you want to start a new ecommerce company. Where are you going to find great software engineers to help build your website. Seattle or Wichita? San Francisco or Lexington? The main reason Jeff Bezos started Amazon in Seattle was so he could hire Microsoft engineers.
bingo
JoshMcR for that price/wage people will apply from everywhere. You don’t have to be next door
@@MbisonBalrog They all pay high wages.
In a similar fashion, Elon Musk started spacex in LA to hire engineers from Boeing and Lockheed
Uh Boeing is predominantly based in Seattle tho?
I’d love to see a post-COVID update to this.
Same here
COVID and remote working debunks everything he said about industry clustering
@@Chris-pq3wp The benefit is there, but companies can operate without. For example, just last week, I taught my coworker in-person how to search our codebase faster, cause I saw him doing it in an inefficient way.
@@Chris-pq3wp no one now wants that. Tech companies are now monitoring key strokes and cursor activity, which makes just go to office better.
I remember when we were promised that tech would allow us to work anywhere. I also remember that tech was going to bring down our use of paper.
Exactly the same thoughts I had. Quite ironic that it's the very same tech companies that were supposed to democratize work are themselves clustering in the same places just like old tech.
Paper use has decreased: www.statista.com/statistics/252710/total-us-consumption-of-paper-and-board-since-2001/
I can't prove it's because of tech, but it seems obvious. Look at old movies or videos of offices - reams and reams of paper binders. There is still paper, but a lot of records are digital.
Government has used more paper so not much has changed. Gotta give the paper pushers something to do.
Paper is booming
@@pianoforte611 paper & board were on track to plummet due to the down fall of newspapers, magazines, and mail. However cardboard went up as online shopping became much bigger. I think wsj did that article a few weeks back.
OK, so is this an altogether different phenomenon from the existence of so many pizza places that happen to be right next to each other?
M_Faraday or gas stations or salons or other restaurants etc
yeah theres a ted video of that you can see! it's basically about competition and the share of customers
edit: it's here
czcams.com/video/jILgxeNBK_8/video.html
Or brothels
Yeah, that is got to do with the mathematical theory called the "Nash equilibrium"
Pizza places tend to "cluster" around Italians.
You mean to say its harder to find qualified workers in silicon valley for tech companies.. seriously?? they have most of their headquarters in the bay area. I believe the offices in New York serve a different purpose mostly related to business, finance and probably marketing and not about the technology.
Workers probably moved out of the bay area cause it's expensive.
Most of the companies mentioned in the video are publicly traded company and I guess they all just want to be close to Wall Street in case their stock tanks.
I guess NewYork is equally expensive..
@@aatishkamble3108 Yeah. As I mentioned may be for business and finance reasons.
silicon valley has world-class schools like stanford and UC berkeley right around the corner. i find it hard to believe they have trouble finding workers
it's because of talent. Companies want to go where there is good colleges. Look at the bay they have berkeley, stanford, and UCSF. National labs also help.
^This is the actual answer. This and the fact that tech hubs are also close to finance hubs to help fund the startups.
well the bay area is the origin of big tech, as a result of federal issued tax incentives to settle in silicon valley in an effort to spur these companies
Agglomeration benefits are something WeWork should be utilizing to deliver on their (currently vapor) collaborative ecosystem promises. Up and coming startups would absolutely pay a premium to be in the same building as a Google or Amazon.
As a startup founder moving to NYC, this statement is not true
@@booksandbrainsclub What's your take on how startups can benefit from the effects of agglomeration?
Also I’d love to connect on Twitter, just watched a couple of videos
That was already a large part of their business model - maybe not the same building, but the building next door. It didn't work.
@@booksandbrainsclub Thanks for checking out our videos Vanessa, we're under the same username over on twitter, @Applico.
Question, why y’all put a random shot of Detroit in here? Appreciate the rep tho.
I had the pause the video for a moment I was like, hey that's the RenCen lol.
Aren’t there more tech companies expanded into Detroit?
@@Wangan_W Many however it's far from a tech city.
@@Wangan_W It's growing but it still has a long way to go since its collapse.
Lol some editor just was throwing stock footage of city skylines together.
Small and medium companies follow the big companies which have done the research already.
Actually its the opposite. Just take google for example, they buys many small to medium companies. CZcams, Android, and DeepMind to name a few, were separate companies before Google/Alphabet bought them. All the Big Tech Companies do the same.
You’re wrong
Michael Iverson u both are a little tight little company mock bigger company’s because it’s tested and gives back good returns but they buy. Out anyone who had done a better job then they would have so they buy them out of there business
Because that's where the people are, dur.
I think it's really wonderful when people from around the world gather to work on something meaningful closely together.
The tech agglomeration is not a US only phenomenon. London has attracted several major tech companies. Both Facebook, CZcams and Google have offices (or are building offices) in Kings Cross which is a tiny area of London. Apple is also moving in as the anchor tenant of the redevelopment of Battersea Power Station
Austin feeling this about now...
Found the comment I was looking for
This happening in the uk as well not just tech but finance companies. The only jobs in cities close to big cities is amenities like sores for people who live but work in the big city. However unlike the uk american cities have more control over tax and income whereas in the uk our cities especially he big ones are getting funding costs t the largest even though we have the highest inequality due to high paying jobs excluding people from the housing market
They will eventually be the new southern silicon valley :P
They ruin cities that size.. trust me. A place like ny is big enough to handle it. Amazon destroyed Seattle. Nothing is affordable and there is rows of former residents in tents. They pay no tax,
Austin is a great location for businesses. You have talent in Austin as well as Waco, DFW, and Houston.
The dude low key said people from Silicon Valley are dumber.
yeah, but that's like saying Bill Gates is poorer than Jeff Bezos
That's not what he said.
No he didn't. He implied silicon valley has just been oversaturated with tech jobs so its hard to find good people because they all already have jobs in tech.
@@michaelschipper3312 or perhaps they set the bar too high. ie Entry level position - Requirement: 5 year experience in field....
@@willn8664 what jr developer has 5 years of experience
The map missed spotifys office on 18th
@Sanjay Rawat did they move the entire office to fidi? Their longest standing office space was at 45 w 18th
@@mwmattioli Google kicked them out
I'm sure there would be some kind of change in the commercial real estate outlook post covid since this has taught us that businesses can function (specially the finance industry) with people working from homes. This has opened our eyes to greater possibilities regarding the work culture.
Basic manufacturing, retail and Healthcare don't seem to change significantly in the clusters....
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The volume of this video is set really low.
Hm, not for me, check your player volume (lower left corner).
The interviews, yes, the music, no. Classic mixing error.
Yes
I think as the tipping point occurs (when real estate becomes exorbitantly expensive to purchase), going forward, more and more companies will be forced by economic constraints to migrate and open new offices in smaller cities. Companies encouraging remote working are already present.
Not going to happen very fast though. The talent pools are in the tech hubs and companies want to be close to the talent...and the talent doesn't want to take a job a rural location..what happens if that company sucks? How hard is it to find a new tech job if you live in Des Moines Iowa vs Boston?
Great information. Also most employees in NYC area have to be more productive due to the fierce competitions in the job market.
No houses in NYC goes for 500K......double that
For San Fransisco, the housing prices skyrocket due to the ban of high-rise residential buildings. Due to the scarce of land and housing, an more and more people move in to San Fransisco, makes the housing prices explode dramatically in recent years
This was written 5 months ago. In the meanwhile, thousands of folks from Manhattan are working remotely and went various places in order to socially-distance. Hope this "de-agglomeration" trend continues. Imagine having people with 200k salaries in neighborhoods where the income is only 100k - that would bring a lot of local tax revenue to other cities besides just the big 4-5
So educated, tech-savy, and innovative people are of the value of billions of dollars in real estate but they are not of value of a proper salary to live in a decent size apartment ... hmmm...
What are you talking about? Tech employees make bank. Did you not see the median salary figures for Google and Facebook in the video? They can definitely afford decent sized apartments
Are you kidding? Educated tech-savy people are easily making 6 figures. If you are a software engineer and you can't live on your salary that is your fault. Plain and simple.
@Thomas Headley 🤣🤣🤣
Great story - well done!
my friend interned at amazon in that Hudson yard location! They subsidized the majority of his housing! 500 bucks for a one bedroom apt 5 minute walk from that location!
Because everyone wants to live in Modern and trendy place.
False
@@ltdzinger Lol well that was an easy one to debunk, huh? He probably meant most millennial and gen z, not all.
Not quite
Did you comment before watching the whole video?
Zinger3 Actually true
Very true. For someone living in SF I want to work in SF, I don’t want to switch to a job in Oakland or San Mateo
If you have job in SF do not leave to go to Oakland. That is the dumbest thing I have heard.
This guy looks like an older Edward Snowden lol
As much as we think telecommuting and remote work is a thing (and arguably it can be for some people/some companies), on average there's still a large onus on physical collaboration in the workplace. Therefore, as a company, you still want to employ people who can work at your physical office location and that means clustering your office with others of a same industry. Clustering means you'll have a larger pool of talent flocking to the area, you can poach talent from other competitors and generally speaking you will also have other companies providing goods/services that cater to your industry more easily.
It certainly isn't impossible for tech companies to scatter into smaller towns; as many have echoed, of all the industries they're probably among the most mobile, but it might be more difficult/a pain for them to do so. The large players can move wherever they want sure, but the smaller startups (that eventually grow into larger companies) will make their lives easier if they are in cities nearer to the big players.
More chance for ideas to bounce and evolve
how does that work? they look at each other from the windows i dont get it lol
More chance to steal from each other....
@@tomeryud 🍻 hApPy hOuR 😎
@@tomeryud Employee poaching is a thing. Plus no need to pay an employee to relocate if the talent can found on the floor below you.
Yea it’s nice being able to go over to a friends office for lunch down the street or to join meetups/networking events happening walking distance away after work
Penn station, jersey city , Hoboken , Williamsburg , downtown brookyln. Plus the west side is generally nicer and more connected than the East .
This video is from January so would like to see an updated version as we are 6+ months into the pandemic.
its cheaper for Amazon to hire staff in NYC with a large population then in San Jose where they pay a lot more of Tech Labor
This is false, NYC is an employee market, meaning their are more jobs openings in NYC that employees to fill them. Despite NYC large population. This is why NYC has the highest wages in the nation across the majority of job fields.
SofaSpy , nope , its about 10k cheaper to hire in NYC vs San Jose if u need Tech Workers
@@Beachdudeca that's because those salary surveys are by region. San Jose /San Francisco and it's suburbs make more. But NYC only makes the same if not higher. You have to account that the neighboring areas around NYC don't pay so well in tech
I'm a tech worker. I feel the magnetic pull whenever I go near by..
I build tech companies & wish a tech hub would start somewhere we might actually like to live...
Just remember - all of the folks who bought ads through one of those platforms directly or indirectly financed the huge building development projects shown.
In recent memory Austin is also a great example of this within 20 years it went from a relatively smaller unknown city to a bustling tech city.
@Mason Presley this tends to be an issue wherever tech companies take hold.
It would be nice to see the average output per worker bar chart adjusted for average hours worked.... my prior is, top 5% work longer hours.
'If you're smart, sigh up to be a wage slave in an unaffordable city'. That's awful advice for a society.
"Insulin was invented at the University of Toronto, Canada, from 1921
Please support ! Please Donate！Invest!
help me!
Hello World! !
I want to eradicate diabetes type 1 from the world
I want to help eliminate pain from people around the world with diabetes
please donate your money develop the Cure for Diabetes.
The complete cure of diabetes is a dream for humanity of 100 years!
please invest and Donate for diabetes cure New Technology
And Talk about diabetes with family
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make 6 figures and live very comfortably , don't project your problems lol
July 2020 me, in response to this video title: "lol, USED to!"
Why can't people work for internet based tech companies from anywhere on the internet? 🤔
Because knowing each other and trust your team is part of social life and boosts productivity and business results. Human interactions will still be relevant in the future, with or without Covid.
This is beginning to happen in Midtown/Downtown Atlanta.
the CEOs decided why not stay at good places at flashy offices when the money isn't mine but other people's
Where are they supposed to be located? In rural Iowa? What's the point of this video?
Exactly. Like you could actually find workers to build google or facebook in Iowa...oh sure you might find 100 such people in the state, but please when you need 10's of thousands of tech savy people you don't move to Iowa. DUH.
Also in Iowa you will have to deal with Cold.
I bet another soon will be Austin.
Don’t you mean “How Tech Firms Create Expensive Cities”
What a narrow view to think that the only promising tech careers are with the major tech companies in the major markets.
Out of college students need something to buildup their experience and big tech companies are a good way to increase knowledge as they are always involved with upcoming technology which you will hardly see in small companies.
@@aatishkamble3108 Exactly. After a few years in the industry you can get decent remote jobs and live where ever, but getting started, if you want quality work with good pay, then you are moving to a tech hub.
This is not entirely true because of the following reasons.
1) EPIC - The largest medical record software company has their headquarters in Verona Wisconsin.
2) During this pandemic, tech workers are working from home and they're realizing that they can do this from anywhere. They don't have to be in San Francisco. That's why SF rent prices are finally dropping.
Great point also these Tech Comapnies are leaving these cities all together or putting new facilities elsewhere. Thats why you see States like Virigina, Texas and North Carolina getting a growing tech presence.
At 0:00: "This is Hudson Yards. Late in 2019, Facebook completed a lease for over 140 thousand square meters of space across three buildings in the area."
Seems like a sneaky advertisement for Bloomberg for President.
K K because name calling any mayor is too illustrious otherwise
They would save if they used cheaper cities.
The exact opposite happens in London, all back-office software development centres for major companies/banks are outside of London (JPM, Barclays and NationWide have most of their devs in Bournemouth) while something like 20% of their dev workforce is in Canary Wharf, Victoria Embankment, City of London.
Isn't Cornell Tech on the east side (Roosevelt Island)?
*expensive places tends to be populated with more people & money circulating so it makes since*
lol learn to use the right word before bolding everything
@@davidli7286 ok radio
This is something someone without insight would say 😂 it will bring social inequality that only liberal policies promise in the guise of progressiveness
Well, life has changed and these office spaces won’t be used much anymore..
This video certainly hasn't aged well 😂
@fane babanu you can see the future?
@@oliversissonphone6143 companies are not going to waste their money on office space. WFH is temporary.
Same way all tech companies are now opening offshore in India Hyderabad, cheaper resources and huge pool of resources
Apparently tech companies don't know teleconference exists.
They created teleconferencing. They also know it's not nearly as effective as collaborating with a highly educated team in person that is next to you 8hrs a day.
Actually they do... plenty of us work remote.
@@johnfurr5698 but not the majority. Unfortunately upward mobility hits a ceiling if a majority of your work hours are spent outside the office. You'll never be a lead role, engineering manager, director, vp, cto, etc...
We have guys that are remote and it works for them, but it's not ideal, at least with the teleconferencing tools we have now.
@@pkal244 There are plenty of successful remotely distributed teams. Commuting to an office and staring at a screen for 8 hours/day with headphones on doesn't magically make you more productive.
@@JDiculous1 no that doesn't, but casually discussing a problem you're facing and the three possible solutions you're thinking of to solve it to the person next to you is nice. Especially when two other senior developers overhear the conversation and offer their experienced input.
Happens all the time when I come the into the office. And this is coming from a guy that works from home multiple times a week.
@6:05 Highlander!!
With the net, no need for clustering. People can work in places like Omaha.
Probably shouldn't put a server farm in Tornado Alley, though.
@@palmshoot Tell that to HPE who built (one of) ours in Tulsa.
What isn't mentioned is that some other cities that are forming clusters of industries as we speak and attracting nets of thousands of people a year have still managed to keep their housing prices low, because the supply has kept up with the growing population.
Most prominent of those big cities is Houston, TX, which, in my view, is a success story when it comes to housing policy and affordability. Cost of housing is still around $190K, including in areas not far from the urban and high-density clusters. *Development-friendly public policy matters.*
Fascinating
Keep your friends close and your enemies closer.
oh how times have changed...
I love it because all these folks spend money with me so please bring it on.
Nice puff piece for Bloomberg...
All tech companion requires at least 2 hours commute both ways..
Condition is same in India as well, be it Bangalore, Mumbai or Pune
I hope corona will change the landscape of offices , work culture and work locations all together . I think this will definitely start from High real estate places like Sanfrancisco to Mumbai . Instead of agglomeration i think Distribution of resources is what beneficial to country at large
Great observation! Your point about distribution of resources is the output I'm hoping for.
How do someone get an idea to silicon vally?
impressionnant
Now these Tech companies are leaving these cities. It clearly wasn't sustainable. Now you see more Tech companies going to smaller large cities like Austin, Boston, Denver.
Agglomeration breeds regional income inequality .
Covid 19: HOLD MY BEER
Qualified workers are everywhere. Tech companies just don’t want to pay for them accordingly, so as a result they setup shop in areas where high competition limits choice. Add a corporate tax break as the city bends over backwards to accommodate these giants and this is what happens.
Basically but people think is more complicated than that🤷🏽♂️
No dude. Just because someone has a degree doesn't make them good.
Qualified workers are not everywhere. They may have title, but their talents vastly differ.
lol, i love watching pre-covid videos
Has this changed in the era of covid ?
I believe it depends specifically on what aspects of tech you work on. Companies like Twitter have made working remotely a permanent option so we could see many leave cities but that'll only be an option if your job just requires a laptop/phone like coders or customer service. If you work on physical computer chips or other things that require special tools or you work on super top-secret technologies you most likely will still need to work in one of the hub cities. Not to mention, start-ups will still most likely need these types of environments both for the concentration of talent as well as other resources that can help them grow.
@@ItsBigL21 Nice answer, thanks a lot.
This is one GIANT ad for Michael Bloombergs presidential election.
Paused at 3 seconds in. The answer is easy.
*Tax subsidies and infrastructure* are usually the top considerations for operations site selection.
Do I need to watch the WSJ piece?
Yeah no, that wasn't mentioned
@@orangeboy97 Isn't it odd that tax subsidies make or break site location decisions yet it isn't mentioned here?
I figured the WSJ would omit this. The owner class hates attention drawn to subsidies as a prime motivator for site selection.
economics.princeton.edu/2020/01/06/new-data-on-state-and-local-business-tax-incentives-across-the-u-s/
To answer your question it depends if you want the answer OR understand the subject and connect the dots
I think it's misguided to blame tech companies as the reason for housing unnafordability/high cost of living. The bottom line is that NYC, SF and Seattle are vibrant urban places that are highly desirable to live in. Therefore they are more expensive. Maybe the reason tech companies are moving there is for the same reason anyone else does. They're exciting, culturallly rich and full of human capital. Also, think of the demographics of most tech people; young, educated, ethnically and culturally diverse. Where do you think most of these people would want to be? I think reports like this get it completely backwards. Big tech isn't the reason cities are expensive and housing is going up. The desirability of big cities, and corresponding demand for them, drives up the cost of living. Big tech moving in is just a byproduct of this.
You mean Google can't find the talent they need in Mississipi?
What are those fans for at 4:05
Awesome
"Flock" -- interesting synonym for "ruin"
Funny how shyt changes so fast
That's where all the talents flock to.
As someone who moved from the bay area to Michigan, there's a reason people want to live in Northern California even though it's stupid expensive. It's a really nice place to live.
Zane DuFour I agree, also moved out of bay area as it was such a terrible place to live.
@@TheSpartan180 why
It's were most of the tech schools are as well.
I agree with that statement about working for the one of the big tech firms.
I would say taxes do the trick..before Hollywood..most movies were made in Fl or other states...but in the 70's LA started to attract the film industry by giving them tax cuts and subsidizing some things
I am moving to Bengaluru to start my company... Or should I got bombay,gurgaon??
Companies like Apple are moving to Austin where wages and rent is cheaper. But there’s always the chance that the talent won’t relocate. If you get laid off in the Bay Area there are many more jobs than a smaller town or hub. And the company ends up spending so much time and money on travel.
With Zoom, Microsoft Virtual Office, hopefully the improvement of VR/AR we will see tech workers working from the comfort of their home 😀
The public perception is price equates to quality. So they create that image to sell product.
That Astro turfing
Quite a few companies do this nowadays so that only those whom have higher educational credentials, more field experience qualifications, and possibly ties to wealth and influence can obtain these "only on a need to know basis" positions...
More productive. Better quality talent pool. Tech companies want to be near each other to compete and stay up to date.
👏🏼wsj is producing excellent content lately
Income and employment levels are higher in NY than somewhere else, because you have to be able to pay rent in NY or you got to move
Google should move their HQ to rural Alabama
ATS_ why?
Because sweet home Alabama
Yeah that will be the day 😂
@@Jab_Reel if companies started moving out to more rural communities they can revitalize them, while also allowing their workers affordable housing.
Right now all the costs of agglomeration is put on the people. Both urban people whose cities become crowded and unnaffordable and rural people who are locked out of the new economy.
@@Aamie best post in this thread 😂😂