On San Francisco Values

November 28, 2006 at 11:25 pm | Posted in American politics, San Francisco | 10 Comments

Bill O’Reilly loves to talk trash about San Francisco and its supposed evil values. Well, Markos on DailyKos shares some of the values that Bill O’Reilly must let go of lest he be called a hypocrite….

Did you hear that O’Reilly invented the slur “San Francisco values”? Yeah, he also thinks he invented sliced bread and fire.

But let’s talk about “San Francisco values”, you know — tolerance, entrepreneurship, and creativity.

Since O’Reilly boycotts everything he hates, I look forward to his boycott of all Bay Area-origin products. Same with every conservative who bashes San Francisco and the Bay Area. So no iPods or anything Apple. No HP computers. No Google. No Yahoo. No eBay. Those conservative bloggers using Blogspot, MovableType, or TypePad? Sorry. Those products are Bay Area-based.

Also no Adobe or Macromedia products. No computers, either, since most run on AMD or Intel. No tax preparation using Intuit products. Cancel your Netflix subscription. Cancel your TiVo subscription. Remove your Network Associates or Symantec virus protection software from your computer. Unplug your Netgear wifi router.

Don’t wear Gap, Banana Republic, Old Navy, or buy your kids Gymboree. Avoid LeapFrog learning toys. Boycott Pixar movies. Boycott any movie using George Lucas’ ILM special effects shop. Stay away from Treos and other Palm devices. Don’t let Charles Schwab manage your portfolio. Don’t bank at Wells Fargo.

Yeah, those “San Francisco values” sure are dragging the region down. Making it weak as it falls behind the rest of the country — the parts that don’t share “San Francisco values” — economically and socially.

Or, maybe — just maybe — it’s made the region a magnet for the world’s smartest, most innovative, most entrepreneurial individuals and an incubator of the world’s most dramatic technological advances.

It’s nice to see just how much San Francisco and the Bay Area has influenced and benefited America. Having grown up in the Bay Area, I’m rather proud of that heritage, and I’m glad to see the House of Representatives being led by a woman full of “San Francisco Values!”

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  1. I often wonder why it is that the Berkeley group did so much better than the MIT group in the technology arena. (Back in the 60s, they were quite the rivalry.) There’s only a handful of Massachusetts-based tech companies, yet they practically grow on trees in the Bay Area.

    Before Markos gets too snooty, though, he should take note that a lot of companies in that area are moving operations to cheaper labor markets. There’s a reason that Raleigh-Durham, Austin, and Minneapolis are fast-growing tech hotspots. Utah’s doing a pretty good business in tech as well. The Bay Area that did a great job incubating is going to watch its “children” leave the nest in droves over the next decade as power, land, and labor costs drive companies to other areas.

    Know why Google opened a data center in rural Oregon? Cheap hydroelectric power. Know why Oracle, Symantec, and Novell all have large Utah operations? A huge supply of cheap college grads. California needs to get its taxes, property values, and power problems in line or face the music. Homeshoring (moving operations to cheaper locations in the same country) will tear the whole area apart.

    Some of these *are* caused by leftist values in San Francisco. There’s not enough power generation because the environmentalists oppose every major power project in the state. (Even clean wind power gets slammed because it supposedly kills birds.) Tax-and-spenders get the state into all kinds of expensive programs including the $3B hand-out to biotechnology they recently approved. Opposition to developing new land and building larger highways has lead to massive congestion and sky-high real estate prices. (FYI, the median home price in the Bay Area now tops a cool $750K.) I can see why Bill, despite all of his negative attributes and general distastefulness, might lay some blame at their feet.

    And really, what does rattling off a list of companies in the area have to do with anything? Is it implying that the politics of the reason are why those companies exist? That’s a weak sauce argument and an even weaker connection. That kind of rebuttal might as well be a “your mom” joke: it has nothing to do with the content it responds to.

  2. Hey Jesse,

    You and I have had previous debates on the subject of commerce and liberal areas. Generally speaking the wealthier areas of our nation tend to be more liberal, such as Massachusetts, New York, and California. The Bay Area is so stinkin’ left, that I believe they voted 80% against Bush in the last election (if I recall my data correctly). The conventional wisdom argument against leftists by rightists and supposedly business-friendly advocates is that leftist policies drive away businesses. We had this argument over the issue of raising the minimum wage. The data shows that states that have higher minimum wages actually have a greater number of small businesses than those that have lower minimum wages. I’d love to look at those numbers, but I’m not on LDSLinkup anymore.

    In any case, you’re making an interesting argument here about businesses from the Bay Area moving out. You claim that businesses from the Bay Area are opening centers elsewhere. That’s fine and dandy. When a business does well, it needs to expand. You offer examples of Google going off to Oregon. Can you please provide your evidence that their underlying reason for moving there was the “cheap hydroelectric power,” or do you just link the two together (i.e. Google expands to Oregon + Oregon has cheap hydroelectric power = thusly Google moves to Oregon for cheap hydroelectric power).

    With all that which you have said against the Bay Area, I wonder then why the Bay Area is doing well with their businesses and unemployment rate?

    Unemployment rates were even lower in the Bay Area. In the East Bay, the Oakland-Fremont-Hayward area rate was 3.9 percent. For San Francisco-San Mateo-Redwood City, it was 3.5 percent. On the Peninsula, San Jose-Sunnyvale-Santa Clara had a 4.2 percent unemployment rate.

    “The Bay Area and Oakland (region) in particular is doing the best (of job markets in the state) now,” Roth said.

    I realize that cost of living is extraordinarily high in the Bay Area—trust me, I’d love to go live back in the Bay Area, but can’t afford to—however, it seems the fruits of San Francisco values seems to be pretty good.

  3. Hmmm… I left another response here last night, but it appears to have not posted. Maybe it’s caught in the spam filter or moderation queue. It *did* have a lot of links in it.

  4. Jesse,

    I’m afraid that I emptied the Akismet last night (there were like 85 spam posts), without looking through them. I sometimes look, because some posts are caught. My apologies, Jesse. I’m sure your comment was well worth the read.

  5. Well dang. I should’ve known better than to do something that’d generate a “false positive” like that.

    Anyway, do a search on Google for “google oregon hydroelectric” to find articles on that, and “homeshoring bay area” to find articles on companies leaving because of the high costs. Very enlightening stuff.

    Homeshoring is a particularly fascinating concept as jobs stay in the country but leverage the lower costs of land, power, and labor in rural markets. Beats the heck out of them ending up in Calcutta.

  6. I took a look at several articles like INC.com’s article on the Top Cities for Doing Business in America, and Google’s Not So Secret Weapon on why Google is opening a plant in Oregon.

    Google needs all that extra power that cannot be found in the Bay Area, simply because there is no dammed river in the Bay Area. Their expansion north doesn’t have much to do with the cost of the Bay Area. I don’t see their move there based on tax laws, or labor regulations. Oregon is just about as liberal as California. The difference, obviously, is that housing is far cheaper in Oregon than in the Bay Area.

    Are there any examples of large stalwart companies packing up and leaving the Bay Area over costs? Sun remains there. Google remains there. IBM remains there. Apple remains there. I understand the need for smaller, startup companies to begin their rise elsewhere. They would definitely have a harder time starting up in the Bay Area…however, Google started in the Bay Area, fairly recently too. And here they are one of the most powerful companies on the planet.

    I guess the data just doesn’t convince me that the liberal values of San Francisco drives away business, or dumbs down production. I don’t see that.

    Take a look at these statistics about small businesses in California.

    In 2005 California had 3.5 million small businesses (with employees from self up to 500). The number that fascinates me is the job gains vs. job losses. There were 810,700 new establishments in 2002-2003, 1,493,900 expanded establishments, compared to 781,100 closed establishments, and 1,388,000 downsized establishments, netting an increase of 135,500 new or expanded establishments.

    Idaho has 145,000 firms, and they had an increase of 13,100 new or expanded establishments during the same period. Now, because Idaho is far smaller than California, its increase is proportionally larger. Which is normal. Smaller states tend to have a greater proportional increase, simply because of the small amount of numbers. But what if we compare California with a larger state?

    Texas has 2 million small businesses with an increase of 60,300 new or expanded establishments. In comparison to California, Texas’s increase is slightly lower than California’s increase. Yet Texas has lower costs and lower taxes.

    New York presents the most interesting picture. New York has 1.8 million small businesses and they had a net increase of 191,600 new or expanded establishments over the same period. I haven’t done the calculation, but that sure looks like a far better increase than even Idaho.

    Utah has 224,000 small businesses, but their net increase actually is 0 (zero).

    Overall these numbers, to me, paint a pretty good picture for states that have higher taxes, higher minimum wage requirements, and a higher cost of living, than states that have lower costs of living. That just seems curious to me, when all the talk is that higher costs are driving small businesses away from the more expensive areas.

    New York City itself has more than 200,000 small businesses alone! This survey asked an interesting question of these small businesses. Would you consider relocating your business to another city? 76% of New York City small business owners who participated in this survey said, no, they’d rather stay in the city.

  7. The Inc article points out that regulatory environments and taxes are primary causes of businesses moving to places like Idaho, Florida, and Texas. It even shows that while San Jose took a bath on tech jobs, Boise cleaned up nicely during the same time period. Delving into the actual list, California placed miserably, with none of the Bay Area cities making the Top 100. San Francisco places 188th, below Tulsa, OK. The only California cities to break the top 25 are San Diego and Riverside, both rather conservative areas.

    The number of small businesses or the number of businesses reporting gains or expansion aren’t meaningful figures. It says nothing of unemployment (2.5% here in Utah, w00t), wage growth, or cost of living changes. The number of businesses is not an indicator of how many jobs there are nor do they indicate the quality of the compensation of those jobs relative to the expense of the area.

    Furthermore, the percentage of business owners unwilling to relocate doesn’t mean much without a comparison to other areas and regions and quantifying the reasons for not moving. I don’t think I would expect that kind of material from a cheerleader pamphlet like that though. (Seriously: ad copy.)

    The Bay Area is artificially propped up by technology firms that have already demonstrated a willingness to move jobs to cheaper markets. The only thing they haven’t found yet is a plentiful source of bandwidth like the kind San Jose can offer. What they’re realizing, however, is that exchange points between San Francisco and Chicago offer the same bandwidth but at a lower cost of operation. Places like Reno, Salt Lake City, Denver, Phoenix, and Dallas all sit on the major fiber routes. Utah’s even taken the lead with UTOPIA, a muni fiber system that offers 30Mbps connections starting at $125/mo. (You can’t even get a T1 line for that kind of money, yet it’s 5% of the speed.)

    If we look at the trends in technology firms, we also see that the Yahoos and Googles of the market are being replaced by niche websites. These niche websites don’t need gobs of bandwidth because they have a smaller yet more dedicated client base. Google may need hundreds of gigs a day in transfer, but small and specialized sites (LinkUp is a good example) don’t need nearly as much and can and will shop markets. The shift in the technology market spells bad times for an area built on riding the wave.

    Jumping back to the power issue, San Francisco’s own papers detail that regulatory processes have hampered the state’s ability to build adequate power supplies, something that (no surprise) technology depends on to be able to operate. This isn’t going to get better when cities in the southern half of the state cancel contracts with coal plants in pursuit of cleaner (and more expensive) power. Something has got to keep those computers running, but it isn’t going to be California’s regulatory environment.

    Even clean power can’t get a break. There hasn’t been significant solar development since the old SEGS projects in the 80s and late 90s, and wind projects get blocked by environmentalists claiming they kill too many birds. (I swear I can’t make something like that up. It happened to my father-in-law.)

    I think many California residents know how bad it is. They’ve been flooding Nevada, Arizona, and Utah for two decades now and they keep on coming. Most estimates say that California would be losing population if not for immigration, legal or otherwise, from foreign nations. Every Californian I met while I lived in Vegas left because of terrible traffic, high taxes, and a lack of affordable property.

    I don’t think it takes a lot of work to connect the dots between California’s failings and the liberal political climate there. Environmentalist fanatics and expansive government programs are directly responsible for not being able to build enough roads, driving costs higher, and lacking in power production.

  8. Jesse,

    I’m disappointed that you cherrypicked the Inc article, regarding the “primary” causes for businesses growing in other areas. you say that the primary causes are regulatory environments and taxes, however, the article states:

    Thanks to lower housing and labor costs, more favorable regulatory environments, and, in some cases, lower taxes, these smaller cities are proving ideal places for doing business

    I think equal weight needs to be placed on lower housing and labor costs (which are interrelated), as to regulatory environments and lower taxes. Housing and labor costs don’t have as much to do with liberal/conservative politics as with other factors such as value.

    Also the article talks about a trend of some movement, not a full on escape, to the rural countryside. Like that cheerful pamphlet showed of businesses in New York City, most businesses would rather stay in the place where they began. Businesses have to weigh the pros and cons of doing business in Boise or San Francisco. Would your business do better if it were closer to your competitors and/or target audiences, business liasons, distributors, etc or would it do just fine far away in the mountains?

    There’s a reason a large company like Sun Microsystems does not move their entire program out of the Bay Area to, say, Oregon.

    You also deride the small business statistics, but see, they are quite important. If, as you say, there’s a link between “California’s failings and the liberal political climate,” then small businesses should not be flourishing in such an environment. If liberal political policies are detrimental to the business atmosphere, why can small businesses breathe in that atmosphere?

    I guess what I’m saying is that the data on the ground just doesn’t show me that liberal policies are really that detrimental to the business world. And I’ll say that our environment, nature around us, would suffer immensely if businesses were left to their own devices. Without regulatory pressures, businesses would have no incentive to care for the environment around them. Their record is fairly miserable when left to their own devices. After all, it is costly to take care of the environment. What incentive do businesses have to invest? Unless forced, they would not care at all.

  9. As I said, incumbency is what keeps big cities like San Francisco, Los Angeles, New York, and Chicago from eating themselves alive. The new economy, however, places less emphasis on physical presence as telecommuting makes location irrelevant.

    The Bay Area is going to eat it first. Hardware companies have had their wares reduced to commodity status, having to make up their money on volume and not margin. Software is starting to get there as “software as a service” becomes the new norm. As Silicon Valley seeks ways to keep costs down and preserve ever-shrinking margins, you can bet more and more of them are going to move operations outside of expensive California markets to other places.

    What’s California’s solution to stem the tide? $3B in corporate welfare for biotechnology. What did California do when there was a budget surplus for transportation? They raided it for other programs instead of building much-needed roads and mass transit. Californians are addicted to spending and voting their taxes down at the same time. Lawmakers don’t seem willing to tighten their belts either: California’s budget has almost quadrupled between 1980 and 2001 even as tax rates have largely stayed flat. Sen. Feinstein continues to urge the state to spend more on Medi-Cal, the state medical assistance program, even as deficits loom! Only in California would someone think the medical system is more critical a need than transportation.

    The facts are there: disastrous spending policies are driving California into the ground, and the main population centers, San Francisco and Los Angeles, are the liberal epicenters. (Not that conservatives in San Diego, Sacramento, or Orange County have done that state any favors. Anything to be a “moderate” candidate, right guys?) When the roads are crumbling, the housing isn’t affordable, and you can’t fully staff the highway patrol office, the last things you need to be overly concerned with are social services. California can’t take care of it’s primary functions of safety, schools, and streets because it’s so busy being pulled into medical care, environmental protection, and a myriad of other tangental programs.

    And on environmental policy: that’s the old school way of thinking of environmental policy, and it’s all but dead. The New Greens rule the roost now, and they know that they can sell eco-friendliness to businesses by talking about how much it saves on the bottom line. Regulations don’t work so well because they are little more than brute force and businesses oppose them at every step. Showing a company how conservation can save them a boatload of cash and make them some good PR on the other hand… *that’s* the winning proposition. Get onto the pro-growth, pro-technology, pro-money-saving environmentalism, because that Greenpeace methodology is a dying breed.

  10. Jesse,

    I think we’re going to have to agree to disagree. From my study of history, I have never seen businesses give a damn about the environment unless threatened with regulations by a more powerful entity, because taking care of the environment is not a profitable business. And that’s just how it is. You can talk all you want about incentives and such, but without the fact that regulations lurk in the background, companies would never care enough to waste so much money on protecting the environment around them. If you really want, let’s do an experiment where we take all regulations off for ten years, or even better, let’s give companies what they want, no regulations at all. I promise you that in not too much time, they will not care enough to regulate themselves. For one reason and one reason only: IT IS COSTLY!

    You want to know why companies are listening to eco-friendly advocates? Because they have to. Not because they want to. Environmental regulations are working, much to the dismay of pro-business, or libertarian advocates.


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