29 February 2020
Billionaire Silicon Valley investor Peter Thiel is said to be relocating to Los Angeles as he seeks a place 'with more intellectual diversity'. Photo: Reuters
Billionaire Silicon Valley investor Peter Thiel is said to be relocating to Los Angeles as he seeks a place 'with more intellectual diversity'. Photo: Reuters

Silicon Valley losing luster amid high living costs: report

Silicon Valley has been the obvious choice for tech talents in the US in the past few decades, but observers say the place is now fading in appeal for a growing number of executives, mainly due to a sharp rise in living costs.

The New York Times on March 4 published an article titled “Silicon Valley is over, says Silicon Valley,” that suggested that a growing number of Silicon Valley investors and tech executives are seeking opportunities in other places.

Reporting on a recent US Midwest bus tour by Bay Area venture capitalists, which saw the group visit places such as Youngstown and Akron in Ohio state, Detroit and Flint in Michigan, and South Bend in Indiana, the article cited the tour participants as saying they find the idea of relocating from Silicon Valley to some “overlooked areas of the country” tempting.

In the last two decades, the influx of people and money centered around technology has fundamentally changed the world’s top tech hub, which can be illustrated by “the exorbitant cost of living in San Francisco and its suburbs, where even a million-dollar salary can feel middle class,” NYT noted.

The skyrocketing rent, coupled with the steep salaries and cost structure, is causing headache to both investors and tech professionals.

Cyan Bannister, a partner at Founders Fund, was quoted as saying that investing in a San Francisco startup is like “you’re basically paying landlords, Twilio, and Amazon Web Services.” She was referring to the companies that provide start-ups with messaging services and data hosting.

The article also said some industry insiders are complaining about local criticism of the tech industry and “a left-wing echo chamber that stifles opposing views.”

Recently, Peter Thiel, one of the most visible investors in Silicon Valley, reportedly told people close to him that he was moving out and heading to Los Angeles and relocating his personal investment funds there, as he wants to live in a city with more intellectual diversity.

The outspoken billionaire, who backed US President Trump’s presidential campaign but describes himself as a libertarian, publicly described Silicon Valley as “a one-party state”. 

“This isn’t a full-blown exodus yet,” the NYT article said, pointing out that venture capital investment and talented computer scientists are still largely concentrated on the West Coast, and many tech workers feel it’s still an advantage to be close to the center of the action.

However, the region’s advantages may be eroding, as tech giants such as Google and Facebook, among others, are opening offices in other cities accommodating demands from employees looking to move elsewhere, the report said.

Silicon Valley investors find the appeal of a friendlier environment in other cities. Tech firms are more popular in other states than in the West Coast, “where the industry’s effect on housing prices and traffic congestion is more acutely felt,” the report noted.

A Silicon Valley investor was quoted as saying: “People want to be in places where they’re the hero.”

This article appeared in the Hong Kong Economic Journal on March 7

Translation by Ben Ng with additional reporting

[Chinese version 中文版]

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Hong Kong Economic Journal