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FAANG companies have already been trying to hire in US cities outside of Silicon Valley and Seattle in order to cut costs. Austin in particular comes to mind.

FAANG companies have already been trying to hire in US cities outside of Silicon Valley and Seattle in order to cut costs. Austin in particular comes to mind. It turns out to be fairly difficult to recruit engineering talent in the United States outside of major metropolitan areas. It also turns out that when tech companies start to hire people in a new city, the cost of living in that city rises substantially -- again, Austin in particular comes to mind. In the end, if tech compensation decreases substantially I don't think it will be because of remote work, but rather because the recession will kill a lot of startups and the same amount of engineering talent will be chasing a smaller number of jobs, thereby giving employers more leverage.

barry-cotter 6y ago
> It also turns out that when tech companies start to hire people in a new city, the cost of living in that city rises substantially -- again, Austin in particular comes to mind. That is inevitable if more housing is not built. If demand rises and supply doesn’t, or rises slower than demand rents and house prices rise. Or you could be like Tokyo with population growing 50% over the last twenty years and flat housing costs.
- evancox100 6y ago
  Do you know anything about Austin? There are cranes all over downtown, mid-rise apartment buildings sprouting up everywhere, etc. We’re certainly not perfect in terms of housing, could use more “missing middle” housing such as duplexes/triplexes/etc., but the idea we are not allowing new housing is crazy. Costs are still going up, definitely the most expensive big city in Texas at this point, but obviously nowhere near Bay Area levels.
  - bobwaycott 6y ago
    The parent, responding to a comment that mentions Austin, never suggested new housing wasn’t allowed—you seem to have inserted that thought yourself. They simply observed that housing supply—and how well it matches (and avoids lagging behind) demand—has an impact on cost of living. They don’t even make a point about Austin specifically—Tokyo is the place they call specific attention to as a point of comparison to the GP’s thoughts. I find it interesting you chose to defend Austin against an attack that wasn’t made. Of course, I also think there may be more than housing supply at work to explain why cost of living increases in a place that starts to see a new uptick in tech hiring. I’m not sure if anyone has studied and documented the extent to which increased tech hiring in a new location leads to a surge of new people trying to live in that area before cost of living begins to increase. If that isn’t the case, and cost of living and goods starts increasing before population does, it seems likely there’s more than housing supply to blame— perhaps all the existing property and business owners start raising prices to get some of those sweet tech dollars in their pockets?
    - evancox100 6y ago
      You are reading too much in to my psyche here, and I am not defending Austin. Like I said it has a lot more work to do, and it’s arguable whether much of the housing being built even constitutes a net social good or not, given the issues around gentrification and running minorities out of town, etc., etc. My point was, responding to a comment that “housing costs are rising in Austin” by explaining it as “price rises are inevitable if you don’t build enough housing” is a very misleading statement. Maybe that is a true statement, but Austin does not satisfy the antecedent so it says nothing about the situation here. Unlike in many places, the housing is being built here, yet the prices are still rising significantly and forcing many out or into homelessness. So clearly development is not a sufficient condition for keeping housing prices in check. Like you say, it could instead be totally driven by the job market. Or maybe development is a necessary condition, along with other things such as subsidized/public housing, job programs, etc. We have to move beyond armchair economist statements that are basically “har har har it’s supply and demand duh”, that don’t even capture all the straightforward/first order economics of all the various buyers and sellers of housing (demand for what type of housing? What type of housing supply is allowed to be built? etc.), much less the second order effects tangential to the economics. Your speculations are on the mark here, and we do need good studies that look at exogenous shocks to try to tease out cause and effect, along with lots of small-scale experimentation by governments. Finally, I don’t know enough about Tokyo to comment in any way on that part of the post, so I did not.
      - bobwaycott 6y ago
        I assure you I wasn’t reading into your psyche. Just observing a single curious point: you specifically called out and disputed that the idea Austin wasn’t allowing new housing supply was crazy—and yet neither the parent or GP had suggested such an idea. You suggested and responded to that idea yourself. I think it’s interesting that we both seem to have read the parent and GP posts quite differently. You read that the parent was responding to a post that said housing prices are rising in Austin. I read that the parent was responding to a post that said FAANG companies are hiring in new areas to cut costs, and cost of living seems to increase wherever tech starts hiring (and Austin was just a city that came to the GP’s mind as an example of this phenomenon). Yes, the parent’s comment about housing supply was a rather shallow retort that I think we both agree provides little insight and comes up too often as if it possesses sufficient explanatory power on its own—but they weren’t quite suggesting what you responded to. To put it into a different space, what I found interesting and pointed out was that your comment read like others we’ve probably both seen where Programmer A says Erlang has a great concurrency model that enables developers to easily build fault-tolerant distributed systems, and Programmer B comes along to argue that the idea that Java doesn’t allow you to build fault-tolerant distributed systems is crazy. The idea was never suggested by A in the first place, so B’s response stands out. Anyway, this has been fun. Thanks. Apologies for my original response coming off the wrong way.
kortilla 6y ago
That’s a great example of why restricting to offices doesn’t work for expanding your labor pool significantly. If a company starts a new office in Austin and they had one in the bay, now they are realistically only tapping the additional talent in Austin. There isn’t a huge chunk of people willing to relocate to Austin that wouldn’t relocate to the bay. Removing location restrictions all-together is a completely different ballgame because it opens the entire country up, not just one city.
- twblalock 6y ago
  I think most of the best tech workers are already living in major cities. Before the virus lockdowns started, those people were required to work in offices just like everyone else, so they had to move to where there employers were located. I don’t really buy the argument that there is a major untapped pool of talent living outside major cities — if there is, what have those people been doing for work until now? It hasn’t been easy to have a good career in tech in rural areas, for example.
  - selimthegrim 6y ago
    Oil and gas? Academia?
  - jcrawfordor 6y ago
    There are definitely markets which attract strong tech talent that have been largely ignored by the tech industry proper as a source for recruiting. A sibling mentions oil & gas, I have personally worked with two former Schlumberger engineers who had been employed in rural areas and were excellent software and systems talent. At least one I know only left the position because he wanted to move to a city due to family, Schlumberger had been paying him a rate that was hard to match in the city though. Subjectively, too, I think both people had a certain oil-field scrappiness, the tech industry might call it "bias to action," that is a great value in any environment. I would add, though, the defense industry. My city has a huge talent pool of engineers, software and not, employed in the defense industry. Many have top academic qualifications and long experience. The tech industry struggles to recruit them mainly because the tech employers in the area offer more or less equivalent pay and significantly inferior benefits (leave, retirement, etc). On a cost-of-living basis, at least at entry level, I would say the FAANG companies offer inferior pay and benefits - coming from someone who left San Francisco to work in this area and make, cost of living adjusted, twice what I made in SF, with significantly more paid leave. My point is that it feels like part of the tech industry's recruiting problem is that there is a tendency to look, for recruiting, only within the tech industry and within its established centers. I have had offers from Bay Area and NYC companies for remote work which I have declined because their pay was actually below what I can get from local companies here, I think because they viewed this area as advantageous primarily due to low cost of labor. The cost of labor actually isn't as low as they think, and I suspect in part because their salary analysis did not incorporate what I can make in 'adjacent' fields like cybersecurity R&D and fundamental CS R&D, which are major sectors here compared even to the bay area in terms of per capita employment. Or let me put it this way: this city is considered to have a total dearth of the tech industry, defined as startups and explicitly software companies, and it is largely ignored by tech recruiting. Yet, the third largest employer in the city is a science and engineering R&D institution with extensive software divisions, the second largest employer has large software and engineering sections although their employment numbers also include general labor, and the second largest employing industry in the area after services is defense, and the primary defense work in the area is currently shifting from aerospace engineering to software and systems engineering. I left that industry and have actually been working for various startups in the area. I am often asked for recommendations to fill openings, and I have plenty, but the startups generally do not offer sufficient pay and benefits to dislodge them from a very comfortable career with a level of benefits, not to mention job security, rarely seen in the tech industry.

barry-cotter 6y ago

> It also turns out that when tech companies start to hire people in a new city, the cost of living in that city rises substantially -- again, Austin in particular comes to mind. That is inevitable if more housing is not built. If demand rises and supply doesn’t, or rises slower than demand rents and house prices rise. Or you could be like Tokyo with population growing 50% over the last twenty years and flat housing costs.

evancox100 6y ago
Do you know anything about Austin? There are cranes all over downtown, mid-rise apartment buildings sprouting up everywhere, etc. We’re certainly not perfect in terms of housing, could use more “missing middle” housing such as duplexes/triplexes/etc., but the idea we are not allowing new housing is crazy. Costs are still going up, definitely the most expensive big city in Texas at this point, but obviously nowhere near Bay Area levels.
- bobwaycott 6y ago
  The parent, responding to a comment that mentions Austin, never suggested new housing wasn’t allowed—you seem to have inserted that thought yourself. They simply observed that housing supply—and how well it matches (and avoids lagging behind) demand—has an impact on cost of living. They don’t even make a point about Austin specifically—Tokyo is the place they call specific attention to as a point of comparison to the GP’s thoughts. I find it interesting you chose to defend Austin against an attack that wasn’t made. Of course, I also think there may be more than housing supply at work to explain why cost of living increases in a place that starts to see a new uptick in tech hiring. I’m not sure if anyone has studied and documented the extent to which increased tech hiring in a new location leads to a surge of new people trying to live in that area before cost of living begins to increase. If that isn’t the case, and cost of living and goods starts increasing before population does, it seems likely there’s more than housing supply to blame— perhaps all the existing property and business owners start raising prices to get some of those sweet tech dollars in their pockets?
  - evancox100 6y ago
    You are reading too much in to my psyche here, and I am not defending Austin. Like I said it has a lot more work to do, and it’s arguable whether much of the housing being built even constitutes a net social good or not, given the issues around gentrification and running minorities out of town, etc., etc. My point was, responding to a comment that “housing costs are rising in Austin” by explaining it as “price rises are inevitable if you don’t build enough housing” is a very misleading statement. Maybe that is a true statement, but Austin does not satisfy the antecedent so it says nothing about the situation here. Unlike in many places, the housing is being built here, yet the prices are still rising significantly and forcing many out or into homelessness. So clearly development is not a sufficient condition for keeping housing prices in check. Like you say, it could instead be totally driven by the job market. Or maybe development is a necessary condition, along with other things such as subsidized/public housing, job programs, etc. We have to move beyond armchair economist statements that are basically “har har har it’s supply and demand duh”, that don’t even capture all the straightforward/first order economics of all the various buyers and sellers of housing (demand for what type of housing? What type of housing supply is allowed to be built? etc.), much less the second order effects tangential to the economics. Your speculations are on the mark here, and we do need good studies that look at exogenous shocks to try to tease out cause and effect, along with lots of small-scale experimentation by governments. Finally, I don’t know enough about Tokyo to comment in any way on that part of the post, so I did not.
    - bobwaycott 6y ago
      I assure you I wasn’t reading into your psyche. Just observing a single curious point: you specifically called out and disputed that the idea Austin wasn’t allowing new housing supply was crazy—and yet neither the parent or GP had suggested such an idea. You suggested and responded to that idea yourself. I think it’s interesting that we both seem to have read the parent and GP posts quite differently. You read that the parent was responding to a post that said housing prices are rising in Austin. I read that the parent was responding to a post that said FAANG companies are hiring in new areas to cut costs, and cost of living seems to increase wherever tech starts hiring (and Austin was just a city that came to the GP’s mind as an example of this phenomenon). Yes, the parent’s comment about housing supply was a rather shallow retort that I think we both agree provides little insight and comes up too often as if it possesses sufficient explanatory power on its own—but they weren’t quite suggesting what you responded to. To put it into a different space, what I found interesting and pointed out was that your comment read like others we’ve probably both seen where Programmer A says Erlang has a great concurrency model that enables developers to easily build fault-tolerant distributed systems, and Programmer B comes along to argue that the idea that Java doesn’t allow you to build fault-tolerant distributed systems is crazy. The idea was never suggested by A in the first place, so B’s response stands out. Anyway, this has been fun. Thanks. Apologies for my original response coming off the wrong way.

kortilla 6y ago

That’s a great example of why restricting to offices doesn’t work for expanding your labor pool significantly. If a company starts a new office in Austin and they had one in the bay, now they are realistically only tapping the additional talent in Austin. There isn’t a huge chunk of people willing to relocate to Austin that wouldn’t relocate to the bay. Removing location restrictions all-together is a completely different ballgame because it opens the entire country up, not just one city.

twblalock 6y ago
I think most of the best tech workers are already living in major cities. Before the virus lockdowns started, those people were required to work in offices just like everyone else, so they had to move to where there employers were located. I don’t really buy the argument that there is a major untapped pool of talent living outside major cities — if there is, what have those people been doing for work until now? It hasn’t been easy to have a good career in tech in rural areas, for example.
- selimthegrim 6y ago
  Oil and gas? Academia?
- jcrawfordor 6y ago
  There are definitely markets which attract strong tech talent that have been largely ignored by the tech industry proper as a source for recruiting. A sibling mentions oil & gas, I have personally worked with two former Schlumberger engineers who had been employed in rural areas and were excellent software and systems talent. At least one I know only left the position because he wanted to move to a city due to family, Schlumberger had been paying him a rate that was hard to match in the city though. Subjectively, too, I think both people had a certain oil-field scrappiness, the tech industry might call it "bias to action," that is a great value in any environment. I would add, though, the defense industry. My city has a huge talent pool of engineers, software and not, employed in the defense industry. Many have top academic qualifications and long experience. The tech industry struggles to recruit them mainly because the tech employers in the area offer more or less equivalent pay and significantly inferior benefits (leave, retirement, etc). On a cost-of-living basis, at least at entry level, I would say the FAANG companies offer inferior pay and benefits - coming from someone who left San Francisco to work in this area and make, cost of living adjusted, twice what I made in SF, with significantly more paid leave. My point is that it feels like part of the tech industry's recruiting problem is that there is a tendency to look, for recruiting, only within the tech industry and within its established centers. I have had offers from Bay Area and NYC companies for remote work which I have declined because their pay was actually below what I can get from local companies here, I think because they viewed this area as advantageous primarily due to low cost of labor. The cost of labor actually isn't as low as they think, and I suspect in part because their salary analysis did not incorporate what I can make in 'adjacent' fields like cybersecurity R&D and fundamental CS R&D, which are major sectors here compared even to the bay area in terms of per capita employment. Or let me put it this way: this city is considered to have a total dearth of the tech industry, defined as startups and explicitly software companies, and it is largely ignored by tech recruiting. Yet, the third largest employer in the city is a science and engineering R&D institution with extensive software divisions, the second largest employer has large software and engineering sections although their employment numbers also include general labor, and the second largest employing industry in the area after services is defense, and the primary defense work in the area is currently shifting from aerospace engineering to software and systems engineering. I left that industry and have actually been working for various startups in the area. I am often asked for recommendations to fill openings, and I have plenty, but the startups generally do not offer sufficient pay and benefits to dislodge them from a very comfortable career with a level of benefits, not to mention job security, rarely seen in the tech industry.