5 ms·

It is generally-expected behavior for an automaker to shift production to the cheapest labor market. Well, maybe not the absolute cheapest. Cost of goods transp

It is generally-expected behavior for an automaker to shift production to the cheapest labor market. Well, maybe not the absolute cheapest. Cost of goods transport, e.t.c. also factor in. But it doesn't surprise anyone for manufacturers to open factories in locations that lower their costs. It's an obvious thing to do. So it has always baffled me that tech companies do the exact opposite. They motivate the most skilled people to leave low-cost areas and move to the most expensive. They pile them in higher and higher and keep driving their own labor costs through the roof. And VCs exacerbate the problem by refusing to fund anything in less expensive locations. It's easy to dismiss this as irrational. But is it really? Are there benefits to this that are so huge they outweigh the costs? If you could pay $10,000,000 to move 1000 devs to Kingman, AZ, then cut their avg salary from $250,000 to $150,000, why wouldn't you do that? What is the downside to saving $90,000,000 after moving expenses in the first year alone? The obvious first argument is reduction in the standard of living would cause the talented to refuse. I'm sensitive to this, but also skeptical. People making 150 in Kingman would improve their SOL. I could be wrong, but I think there are more important factors. I think there is too much money at stake for these employers to have not thought it through. When a common behavior looks insanely irrational, it is more likely that you haven't seen all the variables.

25mph 6y ago
Perhaps the location is only a side effect, while the true reason is the low supply of qualified coders. Why do corp lawyers command $400-600/hour? Why not to just hire a lawyer in India for $40/hour? Why not to hire a cheap accountant in Phillipines? Ah, right, the cheap options cost more in the long run and those who are competent have migrated to the US and now command the same 600/hour.
8ytecoder 6y ago
Companies that require skilled labour don’t move to places with cheap labour. They move to places with abundant skilled labour that’s available at a reasonable cost. Or, they spend money training and equipping the available labour. There’s no way around it.
- rodgerd 6y ago
  If you think building cars is unskilled labour I can only assume you've not owned anything newer than a Leyland P76, and managed to miss the whole "Japanese car makers eating the US and British industries" thing.
  - renewiltord 6y ago
    Auto workers have a skilled tradesman classification and other classifications and most aren't skilled tradesmen. They still perform pretty complex tasks. It's just a term, like how in insurance contracts you'll read "Act of God". That doesn't mean that State Farm is a theistic organization that believes that supernatural beings are imposing earthquakes upon us.
closeparen 6y ago
Automakers move manufacturing to cheap labor markets, pretty sure HQ and engineering are still in relatively prestigious cities.
danans 6y ago
> So it has always baffled me that tech companies do the exact opposite. The primary inputs to the tech industry, especially but not exclusively consumer software industry, are culture, trends, and of course software engineering labor. All of these predominantly generated by cities, and among those, the big cities of the world. The inputs to auto manufacture are materials, skilled manual labor, and schematics. The schematics like software, are a product of culture, and trends, and engineering research, all of which are cultural objects predominantly produced by major urban hubs. That is why auto manufacturers still design their cars in cities. That doesn't mean that software can't be developed remotely or in cheaper COL places. But its most likely be to be designed in proximity to major cultural centers.
- supportlocal4h 6y ago
  By that reasoning, the biggest tech centers should be... 1. Tokyo 2. Delhi 3. Shanghai 4. São Paulo 5. Mexico City 6. Cairo 11. New York City 17. Manila 23. Los Angeles San Francisco would rank #16 in the USA, just behind Columbus, OH, and just ahead of Seattle. So spend the $10,000,000 to relocate 1000 devs to #5 Phoenix (200 miles from Kingman).
  - deathanatos 6y ago
    Comparing the direct population of Columbus OH to SF is silly; it ignores the huge amount of the surrounding area, as SF proper is rather small. Some quick Googling says the Columbus MSA is ~2 M people, and the SF+San Jose MSAs are 5-7 M people.
    - supportlocal4h 6y ago
      Some quick Googling says that Phoenix metro is about 5M people. Meanwhile, the bay area is the #1 highest COL in the continental U.S. Phoenix is ~#29. If the argument is that tech requires a big city, I think Phoenix qualifies. If this is a hangup for you, consider Philadelphia: 5-7 M people, #21 COL. It is obvious to me that population size is not why tech giants gravitate to SF or Seattle. (I'm confident that the high COL is also not the reason.) Tucking 1000 employees into Houston and 1000 into Charlotte and 1000 into Toronto, then saving $200,000,000 per year seems very attractive to me. And if relocating 3000 makes sense, why not 10000? There's obviously enough good reasons that they haven't done it. But from my seat in the balcony of the ignorant it seems awfully strange from an industry that prides itself on disrupting stale thinking.
TulliusCicero 6y ago
> The obvious first argument is reduction in the standard of living would cause the talented to refuse. I'm sensitive to this, but also skeptical. People making 150 in Kingman would improve their SOL. There are two problems with your reasoning here: 1. What counts as standard of living or quality of life varies according to the individual. For example, the bay area has excellent weather, a ton of ethnic/cultural diversity, very solid restaurant scene, lots of interesting nature nearby to explore, the area around SF has passable public transit, some bits have decent biking/walkability, and there's excellent options for international travel. Never heard of Kingman, but based on it being in Arizona and cheap, it's probably substantially worse on all those metrics. Sure, you'll be much more easily able to afford a nice big house in a good school district, and for some people that's of paramount importance. But not everyone; some people value the things I listed above more, and don't mind living in an apartment. 2. You also have to think about it from a long-term perspective. If you settle down in the bay area, yeah the housing situation is awful, but you don't have to worry too much about your particular company going under or treating you like garbage one day, because there are a ton of other tech companies you could switch to. If you move to a random non-techie city where your current employer is the only employer of note, then that means settling down there puts you in an awkward situation: you're now tied down to them. Switching companies may well mean moving again, which could be awkward if you've put down roots.

25mph 6y ago

Perhaps the location is only a side effect, while the true reason is the low supply of qualified coders. Why do corp lawyers command $400-600/hour? Why not to just hire a lawyer in India for $40/hour? Why not to hire a cheap accountant in Phillipines? Ah, right, the cheap options cost more in the long run and those who are competent have migrated to the US and now command the same 600/hour.

8ytecoder 6y ago

Companies that require skilled labour don’t move to places with cheap labour. They move to places with abundant skilled labour that’s available at a reasonable cost. Or, they spend money training and equipping the available labour. There’s no way around it.

rodgerd 6y ago
If you think building cars is unskilled labour I can only assume you've not owned anything newer than a Leyland P76, and managed to miss the whole "Japanese car makers eating the US and British industries" thing.
- renewiltord 6y ago
  Auto workers have a skilled tradesman classification and other classifications and most aren't skilled tradesmen. They still perform pretty complex tasks. It's just a term, like how in insurance contracts you'll read "Act of God". That doesn't mean that State Farm is a theistic organization that believes that supernatural beings are imposing earthquakes upon us.

closeparen 6y ago

Automakers move manufacturing to cheap labor markets, pretty sure HQ and engineering are still in relatively prestigious cities.

danans 6y ago

> So it has always baffled me that tech companies do the exact opposite. The primary inputs to the tech industry, especially but not exclusively consumer software industry, are culture, trends, and of course software engineering labor. All of these predominantly generated by cities, and among those, the big cities of the world. The inputs to auto manufacture are materials, skilled manual labor, and schematics. The schematics like software, are a product of culture, and trends, and engineering research, all of which are cultural objects predominantly produced by major urban hubs. That is why auto manufacturers still design their cars in cities. That doesn't mean that software can't be developed remotely or in cheaper COL places. But its most likely be to be designed in proximity to major cultural centers.

supportlocal4h 6y ago
By that reasoning, the biggest tech centers should be... 1. Tokyo 2. Delhi 3. Shanghai 4. São Paulo 5. Mexico City 6. Cairo 11. New York City 17. Manila 23. Los Angeles San Francisco would rank #16 in the USA, just behind Columbus, OH, and just ahead of Seattle. So spend the $10,000,000 to relocate 1000 devs to #5 Phoenix (200 miles from Kingman).
- deathanatos 6y ago
  Comparing the direct population of Columbus OH to SF is silly; it ignores the huge amount of the surrounding area, as SF proper is rather small. Some quick Googling says the Columbus MSA is ~2 M people, and the SF+San Jose MSAs are 5-7 M people.
  - supportlocal4h 6y ago
    Some quick Googling says that Phoenix metro is about 5M people. Meanwhile, the bay area is the #1 highest COL in the continental U.S. Phoenix is ~#29. If the argument is that tech requires a big city, I think Phoenix qualifies. If this is a hangup for you, consider Philadelphia: 5-7 M people, #21 COL. It is obvious to me that population size is not why tech giants gravitate to SF or Seattle. (I'm confident that the high COL is also not the reason.) Tucking 1000 employees into Houston and 1000 into Charlotte and 1000 into Toronto, then saving $200,000,000 per year seems very attractive to me. And if relocating 3000 makes sense, why not 10000? There's obviously enough good reasons that they haven't done it. But from my seat in the balcony of the ignorant it seems awfully strange from an industry that prides itself on disrupting stale thinking.

TulliusCicero 6y ago

> The obvious first argument is reduction in the standard of living would cause the talented to refuse. I'm sensitive to this, but also skeptical. People making 150 in Kingman would improve their SOL. There are two problems with your reasoning here: 1. What counts as standard of living or quality of life varies according to the individual. For example, the bay area has excellent weather, a ton of ethnic/cultural diversity, very solid restaurant scene, lots of interesting nature nearby to explore, the area around SF has passable public transit, some bits have decent biking/walkability, and there's excellent options for international travel. Never heard of Kingman, but based on it being in Arizona and cheap, it's probably substantially worse on all those metrics. Sure, you'll be much more easily able to afford a nice big house in a good school district, and for some people that's of paramount importance. But not everyone; some people value the things I listed above more, and don't mind living in an apartment. 2. You also have to think about it from a long-term perspective. If you settle down in the bay area, yeah the housing situation is awful, but you don't have to worry too much about your particular company going under or treating you like garbage one day, because there are a ton of other tech companies you could switch to. If you move to a random non-techie city where your current employer is the only employer of note, then that means settling down there puts you in an awkward situation: you're now tied down to them. Switching companies may well mean moving again, which could be awkward if you've put down roots.