Covid can’t kill Silicon Valley

Fully Charged
Bloomberg

Hi, this is Laura Bliss from Bloomberg CityLab, the latest addition to the Bloomberg Media family, covering all things cities. Signs of Silicon Valley's telecommuting future were here long before the pandemic. Newspaper headlines go back to the 1990s about California tech workers setting up home offices in more affordable West Coast locales, then taking the quick plane trip back for a weekly meeting or two. In recent years some startups were making a splash for their remote-only policies, and at least one offered a "de-location package" to incentivize moves anywhere with lower housing costs.

But just as often, remote work overhauls didn't pan out. Yahoo, Best Buy Co., Reddit Inc. and others all reversed course on flexible work arrangements in the past decade. It turns out there's a reason that the largest Silicon Valley companies designed their campuses to keep workers on site for as many hours as possible. Meanwhile, Bay Area rents have climbed ceaselessly higher. 

It took a pandemic to actually make mass telecommuting a reality. That's thanks in large part to companies like Alphabet Inc., Facebook Inc. and Twitter Inc. announcing plans for significant portions of their workforces to remain remote even after offices reopen. Since March, rents in San Francisco and San Jose have dropped more than 7%. Meanwhile, in nearby Sacramento, Reno and other so-called "satellite communities," prices are ticking upward.

Silicon Valley is the gold standard for creative clustering, the virtuous cycle that occurs when people with similar knowledge sets are close together. In 2015 the Bay Area produced nearly 20% of all patents in the United States and had a gross domestic product of $721 billion (higher than all but five U.S. states). If a substantial number of tech workers leave, it could undermine the forces that made the region a juggernaut in the first place. 

But there are a few reasons to believe the pandemic housing reshuffling could paradoxically make Silicon Valley stronger, or at least, make it easier to get a job in tech.

Susan Wachter, a professor of real estate and finance at the University of Pennsylvania's Wharton School, has studied the importance of industry clustering. She believes that the flight from tech's cities will largely be a good thing for major tech companies—creating more capacity for them to hire and expand. In recent years, the Bay Area's absurdly high housing costs (pre-pandemic, the median one-bedroom rental in San Francisco surpassed $3,700 a month) were creating a barrier for new talent and even retaining workers. This was particularly true at newer startups but also at Apple Inc. and Facebook, which along with Google and Microsoft recently pledged billions to try to address the state's worsening housing crisis.

"It was nearly impossible to get young talented people to join the workforce at wages that could cover those prices," Wachter said. "This will now make it possible to expand and increase Silicon Valley's size, not in a geographic cluster sense, but in a network sense." She envisions the formation of what she calls "neighborhood nodes," where divisions of employees constellate in communities up and down the West Coast, in areas where people can occasionally drive to larger population centers.

Of course, something will be lost if big tech campuses are weakened. While the pandemic's work-from-home paradigm is working well enough for some companies, performance is starting to slump at others. Younger workers hoping to build skills through exposure to more experienced colleagues will lose out, Wachter said, "They gain tremendously from being part of a geographically clustered pool." But at least now, they'll be able to afford rent. —Laura Bliss

If you read one thing

The class of 2020 graduated in the middle of a pandemic and an economic downturn. For those lucky enough to land jobs in tech, many have never met their colleagues, will face unexpected immigration headaches and will grapple with an industry in transition. "Mostly, I work a lot and don't talk to anyone," said one graduate. 

Bloomberg News is tracking the approximately 200 students who graduated this year from the computer science program at the University of Illinois Urbana–Champaign. Follow their trajectory as part of the new series, the Class of Covid

And here's what you need to know in global technology news

The battle between Epic Games and Apple has accelerated. After having its wildly popular game Fortnite banned from the app store, Epic is asking a California federal court to block the loss of its developer account, which is now under threat.

Robinhood is raising even more money. Fresh off a $320 million funding round in July, the fee-free stock trading company said on Monday it had brought in another $200 million from investors, bringing its valuation to $11.2 billion. 

TikTok has started a new website and a Twitter account aimed at addressing misinformation in real time. 

Apple is extending the length of time after a purchase that customers can buy AppleCare+, from 60 days to one year

 

 

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