Not everyone is irrationally exuberant in my beloved and crazy San Francisco, serial epicenter of magnificent tech and real estate bubbles and their subsequent busts. The trench between those who are benefiting from the bubble and those who’re run over by it as it pushes rents into the stratosphere and inflates other essential costs of living just got a lot deeper with the arrest of security contractors for Apple who were protesting at the Apple Store downtown.
Ironically, just a few days ago, San Francisco was declared to have the fastest growing compensation for tech workers among 34 markets across the country: In 2013, the value of their wages, stock compensation, meals, and other benefits jumped 18.9% from prior year to an average of $156,500. The highest average compensation levels were in Santa Clara County in Silicon Valley at $196,000 and in San Mateo County in the middle of the Peninsula, at $291,500.
San Mateo County’s figures include the compensation of Facebook CEO Mark Zuckerberg. In addition to free lunches, a salary of $1, and some other benefits, he pocketed $3.3 billion via FB stock options, up from $2.3 billion the year before. Remove his stock option gains from the equation, and San Mateo County’s average tech compensation plummets to $210,000. If you then take the next 19 most remunerated individuals out, it’ll come down to a more realistic level.
But the manna for the lucky ones covers up the plight of others. A whole hullabaloo arose two weeks ago when the USA Today featured the hapless drivers of the gleaming, Wi-Fi equipped tech buses that crisscross San Francisco and head down the Peninsula every morning, and return in the evening, shuttling employees to the campuses of Google, Facebook, Yahoo, and other companies. These buses have already become the target of irate locals who have to deal with banged-up city buses from a prior era.
But the drivers of these tech buses aren’t actually employees of Google, Facebook, or Yahoo. They’re employed by outside contractors to drive around tech workers. USA Today interviewed some of these drivers, and the picture that emerged wasn’t pretty.
They drive about nine hours a day in a split shift, with a long, unpaid, and mostly useless break in the middle. Some of them leave home before their kids wake up and get back by the time the kids go to bed. The drivers employed by the SFO Shuttle Bus Company to drive Facebook employees around earn $18 an hour. While that may be a decent wage in Oklahoma, it’s not in San Francisco and Silicon Valley, some of the most expensive areas in the country. By comparison, Facebook pays its high-school interns $6,213 per month and Palantir pays its interns $7,012 per month, which is nearly twice what the drivers get.
And on Thursday, in front of the cool-exuding Apple Store in downtown San Francisco, the two layers collided again.
A group of people, apparently security guards at the Apple Store, staged a sit-in, as freelance journalist Julia Carrie Wong live-tweeted from the event – to protest low wages. Holding up signs, they sat around in a circle inside the store, at the foot of the glassy stairs leading to the second floor. To the bafflement of customers and the consternation of employees, they sat there for over an hour. “Invisible No More,” a sign read. Or “Opportunity for All Our Communities.” They were contractors employed by outside companies to guard Apple’s cool.
But when the protesters moved to the sidewalk and blocked the entrance of the store from the outside, police officers, of whom there appeared to be more than protesters, decided to step in. San Francisco doesn’t have a lot of patience with this sort of thing in front of an Apple Store. Wong tweeted:
Apple Store has closed it’s doors. Outside the police appear to be warning the protesters. #techcandobetter pic.twitter.com/XGEChSwnf3
— Julia Carrie Wong (@juliacarriew) August 28, 2014
SFPD is now declaring an unlawful assembly with protesters blocking the sidewalk in front of Apple Store in SF pic.twitter.com/0b61c3LrG0 — Julia Carrie Wong (@juliacarriew) August 28, 2014
Arrests have begun #techcandobetter pic.twitter.com/tC7uBtpg0N
— Julia Carrie Wong (@juliacarriew) August 28, 2014
Zip-ties placed on protesters, who are not resisting. #techcandobetter pic.twitter.com/WQyvzAn2aq — Julia Carrie Wong (@juliacarriew) August 28, 2014
In all, 12 protesters were hauled off to the hoosegow, Wong reported.
So what the heck happened at the Apple Store? The tech bubble and the housing bubble, nurtured by the tsunami of hot money that years of QE and ZIRP from central banks around the world have unleashed and that has washed over San Francisco, collided with frustrated people who represent much of the American reality [How the Surge of Hot Money Pushes San Francisco to the Brink].
Denizens of this American reality are struggling to make ends meet. They have trouble paying soaring rents. Buying even an old starter-shack in San Francisco, where the median home price is now around $1 million, has moved out of reach. Even 2.1% inflation cuts too deeply into their budget. And to go to work, they face long expensive commutes. Whether they’re guarding Apple Stores, driving Google buses, or work in any of the millions of other non-tech occupations, such as teachers, the tsunami of hot money sloshing around the area has made life too expensive for them.
So how much does it cost to manipulate an entire market? Not much. And it’s getting cheaper! Read…. Pump and Dump: How to Rig the Entire IPO Market with just $20 Million
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All bubbles must end Wolf. When this ones does it will be just like a Sheppard leading a sheep to slaughter. With volume at the lowest it has ever been? A juiced 4.2 GDP with things such as iTune sales included?
The bubble in San Francisco and Silicon Valley is truly magnificent. It has spread to surrounding areas, as before. No one here believes – or wants to believe – that it will end any time soon, but everyone knows what will come afterwards. We here have been through this so many times that it is starting to feel routine.
Look dude, Wall Street does not need any help from anyone including the central bank to lend money to itself. Finance = pyramid scheme.
Bashing the Fed over ‘money printing’ is peak oil denial and nothing else. The reason for our economic malaise is at the end of your driveway.
The central banks are collateral constrained and cannot create new money (collateral is loans already made by others). For central banks to make unsecured loans is for them to become instantly insolvent: this is a ‘condition’ like gravity not one of those tricky ‘monetary’ rules. At that point, the bank(s) role as lender of last resort and guarantors of banking system deposits vanishes (see ‘Argentina’).
Get with it!
“Bashing the Fed over ‘money printing’ is peak oil denial and nothing else. ”
Then why is it possible to buy a gallon of gas with the token silver in two pre-1963 dimes? That’s a face value of 20 cents.
I live in the SF East Bay suburbs,housing prices have already peaked and there is a lot more inventory which are selling more slowly. They blew another bubble and it looks like it’s about to pop.
“They have trouble paying soaring rents. Buying even an old starter-shack in San Francisco, where the median home price is now around $1 million, has moved out of reach.”
And who’s to blame?
Look, the price bubble in the SF housing market, including sky high rents, are a product of decades of SF politics, poverty pimps and NIMBY’s .
Stop whining about sky high housing prices and rents in SF. In context the sky high prices are self inflicted and due to all the poverty pimps,(housing rights activist) and NIMBY’s protesting “any” new housing in SF. It’s been going on for decades.
How’s this for a dose of reality. Soft cost just to bring a housing project to a point of braking ground run from $300 ~ $600 a sq foot. And it takes on average three years for a developer to get through the entitlement process in SF. If their lucky!
Is it any wonder why housing sells for $1100 + per sq foot? Is it any wonder why a one bedroom unit rents for $3100 + per month?
49 square miles and nearly half of that covered with mostly single family homes with occupants who loath growth and over crowding.
Factor in the building codes, limited supply of vacant land, it’s obvious why housing cost are so high. Factor in rent control….(property control) imposed on all pre 1978 housing stock and you begin to get the picture.
In the twenty five years I’ve been living in SF I’ve seen the continuum of a never ending circular firing squad when it comes to housing issues.
Yeah…..not everyone can afford to live in SF. So what’s the solution?
Once you figure it out let’s all know.
No money, no boom, no bubble, no bust. Or at least much smaller ones. So where does the flood of money come from that periodically washes over San Francisco (and Silicon Valley)? My articles explain it. SF and Silicon Valley are among the destinations of worldwide easy and free money. And when that money arrives, it distorts everything … until the whole thing crashes. As it always does.
That said, I agree with much of what you said about the difficulty and expense of building in SF. On Russian Hill, for example, the old reservoir has been a massive fenced-in blight for decades, and neighbors have resisted any kind of development (though I think there’s change underway now). And that certainly is part of the problem in those areas.
At the same time, I’m sure you’ve noticed the incredible building boom going on in other parts of SF right now, from “micro apartment” condo high-rises to office towers. Sprouting like trees.
So much of what has been said by Wolf as well as the others comments is absolutely true. Yes easy money is coming back to the Bay Area faster than almost any other ( possible exception of NYC and London). That is artificially driving demand through the roof. But demand is inversely related to price, and decreases sharply as the pyramid comes to a peak.
As someone with 35 years in Real Estate Development, much of it in the Bay Area ( and Silicon Valley in particular ), I also appreciate the comments as to how ‘government’ has only exacerbated the problem from the supply side.
But supply and demand represent only 2/3 of the price equation – the third is Psychology. When buyers expect a market to rise, it magnifies the supply/demand imbalance dramatically. When they think the appreciation party is over, it works in reverse, with even more speed.
That is where we are now ( IMO), and even overpaid ( or to be fair, simply highly paid) tech employees tend to have an average age of about 30, and are more likely to not make a first home purchase ( or second,etc. ) if they think there is a hint of prices falling. The Millennials have the greatest tendencies torward renting versus buying of any generation, and this will only make the coming correction faster and more severe.
In UK, I keep seeing new offices being built even though there are plenty of vacant buildings covering with dust and webs. Most of these ‘Office to Let’ signs hang outside since 2008!!! It’s actually ghost business park. The irony is that my company tried to relocate to another office and failed to find any affordable price in this dire climate. You would think the office rental price would be pretty cut throat competitive but no!!!