As pundits and industry insiders line up to say farewell to the dream of the Bay Area and the mythos that accompanies it, Silicon Valley veterans who have weathered previous storms remain skeptical much will change. After all, the cradle of innovation on California’s coast has already survived multiple major downturns, including the dot-com crash of the late 90s and the financial crisis of 2008.
Even before those crises, however, some felt that the region’s hyper growth was unsustainable. In 1993, AltaVista creator Paul Flaherty predicted the death of Silicon Valley as a central innovation hub, arguing “the cost of housing and office space has spiralled out of control.”
Of course each prediction has been proven wrong, making it difficult to imagine the coronavirus as the true “beginning of the end” for Silicon Valley as we know it. Then again, this time things are different. Now tech workers are being given a choice that previously wasn’t offered to them: leaving the Valley, but keeping their Valley jobs.
It’s a tantalizing prospect to those who have had enough of the long commutes, skyrocketing prices, and unsustainable growth. According to a recent survey, two-thirds of Bay Area tech workers would consider permanently leaving if they could continue working remotely.
Even if the Valley lives on, few doubt that it is in the midst of a transformation, one that began building long before the coronavirus and accompanying economic fallout brought it to the surface.
Flight of the unicorns?
As tech companies settle into their third month of operating on a remote basis, many have made sweeping announcements about the future of their remote work programs. Bay Area-headquartered giants like Facebook, Google, Twitter, Square, and Coinbase have all announced plans to allow at least some staff to work from anywhere on a permanent basis, as have other major tech employers like Shopify, Walmart, and many more are expected to follow.
It’s not just the giant multinationals that are allowing their talent to leave the Valley. In a recent survey of more than 500 venture-backed founders, 71% indicated that at least some staffers would be allowed to work from anywhere after their offices reopen.
Jocelyn Kung, The Kung Group
The iconic Silicon Valley garage idea just became a remote desk.”
Based on the survey results, as well as recent announcements made by tech giants, Kung believes the tech industry is entering a new, remote era, one in which even the concept of Silicon Valley itself is decentralized.
“I think Silicon Valley is no longer going to be located in Santa Clara County . . . I think it will stay a concept, rather than a location,” she says. “The iconic Silicon Valley garage idea just became a remote desk.”
Kung believes that the coronavirus crisis and the obligatory adoption of remote work will give way to a new “era of choice” for tech industry workers. It will also provide an opportunity for startups to save significant sums on real estate. It could even help address some of the region’s most pressing problems.
“What we were doing was not sustainable,” says Kung. “These changes, as painful as they are, are really needed.”
A hot market cooling down
AltaVista’s Flaherty declared Bay Area real-estate prices unsustainable all the way back in 1993. And yet the cost of living in the Valley has only continued to skyrocket through the years, except for a few cooling-off periods. Considering the historical precedent, some suggest the latest downturn will offer another cooling period, rather than a permanent change to the makeup and culture of the region.
Before the pandemic, “companies couldn’t find people, prices were continuing to rise both in commercial and residential markets; it had become a place that had become very difficult for the average person to live in,” explains Dan Davenport, the cofounder and president of talent solutions provider Randstad RiseSmart. “I’m not in the camp that says Silicon Valley disappears, but it certainly cools off, and perhaps gets a much-needed balancing compared to other markets.”
Davenport believes that so long as the factors that made Silicon Valley the epicenter of innovation remain—such as its universities, incubator programs, and venture capital community—innovators will continue to flock to its shores. Others, however, argue that as those resources and opportunities become increasingly available to entrepreneurs and talent outside of the Valley, the cost and inconvenience of the region may finally disrupt the predictable post-crash cycle.
“There has never been a point in time where all the tools have been in place for someone to accept a job, get onboarded, and work without ever meeting someone [in person],” explains Adam Bennett, a career expert for Valley-based human-resource consulting firm Robert Half Technology. “I think that’s one of the better things to come out of this; people will be able to separate a little bit and not feel obliged to move to specific areas because that’s where the jobs are.”
Bennett points to the sky-high real estate market as a reason for a much overdue correction. According to Robert Half’s 2020 Salary Guide, wages in San Francisco and San Jose need to be 41% and 40% higher than the national average in order to keep up with cost of living, respectively. By comparison, the report recommends a salary boost of 24% for those based in Chicago, 9% for those living in Austin, 6% for workers in Miami and Fort Lauderdale, and 0% in Detroit.
Facebook has announced it will tie compensation to location for remote workers, resulting in smaller salaries for those who move to low-cost areas. Even if other companies follow its lead, an exodus of high-paid talent could help bring down the cost of living in what the Robert Half report found to be the country’s most expensive market.
An impending generational divide?
Silicon Valley wasn’t always overpriced and overcrowded. When Kim-Mai Cutler’s mother arrived with her five sisters in 1979 it was affordable enough for the group of female war refugees in their 20s to buy a home together.
“It was very accessible, and I think that was part of the magic of the place,” says the Silicon Valley native and partner at San Francisco based venture capital firm Initialized Capital. “Now we see it’s a lot more challenging for people to make long-term commitments like that.”
Over the years, Cutler has watched homeownership in the region become inaccessible to even the well-compensated tech workers who inhabit it. “If things are breaking, they were breaking already before this, which is evident in homelessness and traffic and people not being able to afford to live here,” she says.
Given the option, the more seasoned individuals and companies are most likely to leave.
“It’s not entry-level or junior employees, it’s not people who are fresh out of college,” says Cutler. “This also happened 20 years ago after the dot-com crisis, where people who were more mature in their careers moved out, and people who are starting their careers, assuming rent and prices fall enough for it to be attractive, come back in.”
Cutler adds that the same might also prove true at the company level, with startups that are building a foundation flocking to the Valley, and then leaving once they can stand up on their own.
“If I were pre-product-market-fit, I’d want to be really close to my team members, but once you’ve figured out a process that you can repeat and scale, it’s perhaps a little bit different,” she says. “If you have strong growth, I don’t think it should matter whether you’re in a centralized office or not.”
An exodus—under the right circumstances
The reality is that it’s impossible to predict the future of Silicon Valley, because it’s too early to tell what results this unscheduled remote work experiment will yield. Previously, it was easy to feel left out of the conversation when tuning in remotely, and it often proved disadvantageous to one’s long-term career prospects.
“That has been the stumbling block for companies and individuals, because we just stank at it,” explains Christy Lake, Twilio’s chief people officer. Lake adds that prior to the crisis, only about 15% of the the San Francisco-based unicorn’s staff worked remotely. Though the company hasn’t yet determined its post-pandemic remote work policy, it recently announced that staff would have the option to stay home until at least the end of 2020.
In the meantime, Lake says Twilio is settling into a “new normal,” providing staff with a $1,500 stipend to fund their home office setup, retraining managers, and gathering feedback on a regular basis. If that approach becomes common, companies across the Valley will emerge from the crisis better prepared to manage a remote workforce in the future. If they get it right, large proportions of the current population might have little reason to stay.
“We’re learning a lot of lessons about how to be better at it, so if these lessons stick and become part of our managerial DNA, I think we’ll crack the code on this,” she says. “If we revert back to form—which is where those who are in the room get 80% of the oxygen—we’re going to be in the same place where people [working remotely] feel stranded on an island where nobody is thinking about them and their progress. So that’s the big question: can we do it?”
If so, perhaps the latest crisis will finally accomplish what insiders have been predicting since the 1990s; namely the end of Silicon Valley as a destination on a map, and the beginning of Silicon Valley as an ethos with no fixed address.