Chinese investors and techies inflating global real estate

http://www.kqed.org/a/forum/R201510271000

I know we're probably tired of the cliched lamenting over "the good old days", but this NYT piece by a CA author describes the boom-and-bust cycle of "CA dreaming" since the Gold Rush. One generation feels like the prevailing dream is dead, but then a new dream comes to take its place.

But what about now, as our state is more constrained than ever (economically, environmentally, maybe culturally)? The inclusive middle class, environmentally-sustainable (if it ever was) CA dream seems to be in jeopardy now, replaced by the "tech dream" that only a small subset of wealthy folks can enjoy, and constant environmental crises (that the rich can mostly insulate themselves from). Of course the top earners in medicine, entertainment, finance, etc. can still partake in the dream; contrary to media hype, tech is only like 10-15% of CA's workforce and GDP. But we don't need CA to be a bunch of high-end condos, yoga studios, "$20 burger" foodie joints, plus the old suburban infrastructure (golf courses, Costcos, 5BR McMansions) grandfathered in - when the tech yuppies want to leave SF to get more space. There's more to CA than that, otherwise what's the point of paying the high prices to experience it?

Top schools ostensibly lead to top salaries, which lets your kids afford to live in the top school districts later and continue your legacy. But why is there such inequality in public schools that creates real estate bubbles in the neighborhoods near the best schools? What kind of "free society" do we have when some schools have metal detectors and 1990s computers, and some schools are like this?

I don't mean to be like "woe is me, my life is so hard." I'm not happy with some aspects of my situation, but I'm trying to keep perspective. What's scary is a big % of Americans have it much tougher, in CA and elsewhere. So what is the solution? Clearly it doesn't have to be this way, and there are many "mid-cap" cities that have a great rep for affordability, quality of life, and good jobs/schools (SLC, Raleigh-Durham, Denver, etc.). They make it work without being socialist. But it's just a shame that CA, the most populous and most economically important state, is becoming an exclusive country club with an entrance fee of $300K household income. "This land is your/my land," remember? Can't we do a better job sharing and making things easier for those with fewer resources (especially as our resources are further strained by environmental problems and gov't failures)?

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I foresee housing and land as a large problem in the future, more so than now.  People want to live near where they work.  And culture and food and art follows the places where people live and have money.  So desirable living areas will always be clumpy.  California just happens to be very desirable for a variety of reasons so I can't see a way to get these problems resolved.  And ultimately there will be a distribution of incomes available to people in these areas.  People have a very hard time voting in poor people into their neighborhoods by mandate and capitalism won't provide for them when demand exceeds supply.  Not sure I have any solutions but to say that your (and my) situation is in some objective sense terrific.  To be able to, but not easily, afford to live in a world city, raise a family, take vacations, you are a global elite.  But as you noted, locally you are a B- so it is hard to feel as good as you should.  I think if you consider only asian households you are more like a C+ haha.

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Yeah that is true, but I think a common complaint is that the high prices are forcing out the "traditional" artists and culturalists from SF, so all you have left are the wealthy consumers and capitalists.

An over the top documentary about it from Pelosi's daughter: Alexandra Pelosi on RT w Bill Maher -- Destructio…: http://youtu.be/ksTRKwCDCLM

Haha in Asian households, B- = whipping and C+ = sent to foster care!

More consequences of SF's economic changes: http://ww2.kqed.org/news/2015/04/24/san-francisco-could-be-a-lot-whiter-in-25-years-predicts-a-new-profile-of-bay-area 

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http://m.sfgate.com/news/article/Million-Dollar-Shack-documentary-Bay-Area-housing-6582122.php

First time I heard of the "ghost house" term referring to empty homes
that investors just bought to park their cash, but didn't bother to
rent out. You can guess where most of the investors are from. I wonder
what % of prime BA cities' housing stocks are affected. Probably
small, but enough to affect prices.

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This apparently has been going on in certain neighborhoods in London and other world cities for a while.  A product of Chinese money disallowed from buying stocks and the poor bond returns.  Can't blame them for finding the opportunity but it is hurting the locals.

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Agreed, it's legal, but it's making the median home price in Vancouver rise to $1.5MM (c'mon, Vanc. is nice but not that nice). According to that video, it's happening all over the Pac. Rim (NZ, AUS, SEA, SoCal), and I guess the desirable parts of Europe too (I guess Russians, Saudis, Emiratis, etc. are doing the same, but there are fewer such buyers).

This seems to be another global consequence of China's social-economic policies. Unlike the US, where ~50% of households own some stock (which is still way too low considering the ROI), for China it's like under 20% - maybe this is driven by the unproven (some might say corrupt) nature of their markets, and the cultural tendencies of Chinese to put their savings in cash or physical assets. So if retirement was more secure in China (better kids:parent ratio, more functional equities markets, gov't safety net), maybe there would be less demand for foreign property. And if Chinese are using illicit funds to buy real estate, then I also fault Beijing for not enforcing the laws and regs to make that harder to pull off. And I also fault parties in the US for not checking where the foreign buyers' funds came from. As you know, to get approved for a mortgage we practically have to sacrifice our firstborn, but it's all-cash home purchase, no questions asked.

But I assume that only the wealthiest 10% of Chinese have the funds to buy overseas real estate anyway - though 10% of China is still a shitload of buyers. This is offensive and I'm just joking, but sometimes I miss the '80s when the US and Western Europe were the only rich nations, and Japan was the only rising economic power to worry about. :)

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I think in China the basic idea is that land is something you can physically own and see with your own eyes. Chinese people (well people everywhere, but maybe moreso in China) feel that it isn't too hard to be an amateur expert in property prices - that you can beat the market basically. Finally, property prices are perceived to be relatively stable compared to other forms of investment.

Compare that with stocks, where who knows how to value anything. Stock markets in China are basically thought of as gambling markets (actually not too far off....), whereas property investment is the slow and steady, tried and true investment strategy. Everyone understands (or thinks they understand) real estate markets. Understanding stock markets is not something that the average Chinese person has much experience in.

Additionally, for very wealthy Chinese there is the idea that you want a property (or perhaps multiple) overseas where you can escape if things get bad in China. The Chinese don't like pollution any more than we do and most realize that overseas places are a lot nicer than most cities in China.

Finally, getting permission to convert money into foreign currency is a lot easier if you're buying property than if you're buying stocks.

Of course, the smart strategy would be to invest in low-cost index funds in a Vanguard coop account, but I guess Vanguard's marketing team hasn't made too many inroads in China yet :-P

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These days it seems that very little in the Chinese economy is slow and steady :P - they had a major RE bubble too with levels of speculation likely exceeding those of US-CAN. I could sympathize if the average Chinese person doesn't have a lot of good options for capital gains to save for their retirement, but I assume that it's the top 10% who are the ones buying most of the foreign property (i.e. the average Chinese can't pay $1.5MM cash for a CA condo).

I don't know if funds/pensions are very popular in China, but that overcomes the investor ignorance problem. Most Westerners have no idea about equities too, but at least they leave it in the hands of pros and pay them a commission (this strategy only screws them every decade or so with a widespread financial crisis :). And as you said, you can lower risk by diversifying (equities tend to outperform REITs and most single properties in the long term).

So there is a difference between a justifiable need for financial security, and greed. I am not sure what category most Chinese overseas RE buyers are, maybe both, but probably skews towards greed. That is legal but unfortunate in my book. And of course the same can be said of domestic speculators.

There is some harm in speculators manipulating the price of securities or silver. But then again, most people aren't paid directly from capital gains (except pensioners and rich fund mgrs). But if people are inflating the prices of life necessities, like oil, water, and housing - then it's a bigger deal. Like when oil rose to $120+ a barrel, some were saying that this wasn't the speculators' fault - it was just normal supply and demand. Maybe so, but it's pretty hard to precisely pin down causality in market price, which is of course an aggregation of many factors. But huge inflation in inelastic goods tends to hurt many but only benefit few.

Bottom line, I wish people would at least buy homes with the intent to use them, or make them available to those who need them. I understand that not all of us are "entitled" to an affordable picket-fence place with a 5 mile commute. It would be nice, but there is always going to be inequality in housing. Though I think we are at pretty bad levels in most of the economic centers of the world.

BTW - if you made it to the end of that YT video, you saw that horrendous quote from the real estate mogul d-bag with the Rolls. Something like, "I think a Googler working hard is more deserving of a home in Si Valley than someone who happened to grow up here. Just get more education if you want it." Yeah, as if the issue is that cut and dried. Hard work and edu is all you need to be a millionaire in CA, sure. It doesn't need further comment - but you are all welcome to vent. :)

Silicon Valley as a preview of America's future, for better or worse

http://www.sfgate.com/technology/businessinsider/article/FEDERAL-JUDGE-NSA-Program-Exposed-By-Snowden-5069183.php

First of all, is Snowden the runaway favorite for person of the year 2013? I can't think of anyone else who affected US society more (and likely for the better). A Federal judge ruled that the arbitrary, blanket collection of Americans' phone metadata is likely unconstitutional (unreasonable search, violation of reasonable expectations of privacy) and ineffective (no clear evidence it was critical to preventing attacks). Of course the WH and NSA disagree.

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http://www.npr.org/blogs/alltechconsidered/2013/12/16/251608120/exploring-economic-inequality-from-heart-of-the-tech-boom

NPR is starting a series on Si Valley as a microcosm for the changing US economy and society. We've addressed some of these issues before regarding wealth inequality and the Bay Area housing market. Apparently some protesters recently blocked a Google bus in SF, complaining that the private buses were using MUNI stops without paying the city any fees. It's clearly part of a bigger sentiment of resentment, and part of the general debate regarding who is taking more of their fair share from society. Should those being priced out of SF "get with the program" and develop the skills needed to be able to afford living there? Or should the tech elites come down from their privileged position in society and contribute their fair share to helping the less fortunate? Or both?

As a tech employee (peon status) and longtime CA resident, I am really torn by all of this. I don't want the Bay Area to become "Facebookville" or "Elysium" where droves of poor, bitter service workers support the aloof upper class minority. But then again, we depend on disruption, competition, and innovation to win in the market, or we will suffer the same fate as Detroit. I think we can innovate and win, but also spread the benefits around so that the entire region and populace is better off. Yes, the rich should be taxed more.

Disruption is a double-edged sword. A dedicated team works like hell to address an unmet need or overcome some entrenched inefficiency, so they and their investors can be paid handsomely for it. But the industry that they just rendered obsolete is made up of people with families that depend on them. Through no fault of their own, they were disrupted out of a paycheck. A generation ago, all signs pointed to machinist or travel agent being good, stable careers with great ROI for the required education. But innovation changed the equation faster than most could adapt.

Now car services like Uber are getting rave reviews from customers, media, and generating decent financials. But what if they render thousands of low-skilled immigrant cab drivers out of a job? What if the Google self-driving car renders the Uber drivers out of a job? In some cases it is a zero-sum game, even if the metrics suggest that society overall is "better off". Does one new billionaire created compensate for 1,000 families who just got the American Dream taken from them? Everyone seems to celebrate the "winners" without considering the collateral damage. Yes, we need innovation to succeed and even survive in the world. And those who succeed should be rewarded. But what about the everyday folks who, through no fault of their own, get suddenly shifted from middle class to destitution? Do the disruptors (and the traditional companies being replaced) have a social responsibility to help those workers transition to the new reality? Does the government? If so, then I think they should fund such programs from the disruptors' stock gains.

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Sort of related (in that it perpetuates the massive inequalities of the Bay Area) is education. M Night Shyamalan just wrote a major book on education (hopefully he doesn't write more and his natural follow-up suck strikes!), and it makes a lot of good points.

http://www.motherjones.com/kevin-drum/2013/12/m-night-shyamalan-steps-education-wars

Basically, he suggests that our education system is actually great - if you're a a white kid. Our white kids do just as well as the Nordic white kids or other European white kids. But if you're a minority (and, typically, poor), the education system sucks and really drags down our averages. There are a number of ways to address this, but:

1) They take money $$

2) And they mean de-emphasizing putting resources into already highly performing white schools

I've come increasingly to the conclusion that American politics is all about race. I'm sure many of you have seen the research that support for redistribution increases if it is perceived by the voter as going to "someone like them" - i.e. someone of the same race. 

Most people in the Bay Area don't consider themselves racist and it's probably true - in fact, the Bay Area is one of the most diverse areas of the country. But poors in the Bay Area are still "the other" - they didn't go to good schools, they struggle to get by on bad salaries, their unemployment rate is x3 higher than well-educated whites. Basically, their experience is completely alien to most of the tech gods in the Bay Area and their presence is invisible. No surprise then that the tech gods (which have actual power) use little of their capacity to help the poors.

You can imagine the national consternation and outrage by the well-educated press and electorate if the unemployment rate was 20% and transportation and housing ate up 60-70% of the budget of native-born, well educated Americans, yet this is exactly the situation facing a plurality of Bay Area residents - the poors and the immigrants. I guess it's only a crisis for those that are rich. If you're poor and face such circumstances, given the media and elite orientation, it's a statistic and at best regrettable. And the rich wonder why resentment is on the increase...

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Thx, J. I agree, but why are non-whites disproportionately poor? Mostly racism. The 1% vs. 99% has also been a pervasive, ubiquitous problem for centuries, but of course the power balance has varied due to historical conditions. As you said, now more than ever gov't is serving the interests of the 1% at the expense of the 99% - and that is a big effing problem that we have to tackle if we care about democracy. But even if we returned to the economic conditions of 1960 when wealth and political power were more evenly distributed, there is the underlying racial problem that Andrew mentioned. Say we repeal Citizens United, reformed the justice system, and made a bunch of other needed changes - it will still be harder for minorities to get ahead. Addressing one problem is not a distraction from the other. Both are critical, somewhat independent, and deserve to be called out separately. There are some solutions that can mitigate both issues (namely taxation and campaign/election reforms), so we could try to prioritize those.

According to this moron, the poor and middle class are doing better than ever, because we are enjoying a "golden age of TV!" So what if I lose my job and get evicted... I can still watch the latest episode of "Duck Dynasty" at the local library's PC lab. Forget the macro indicators, our amazing selection of digital entertainment options makes life more fun!

http://www.bloomberg.com/news/2013-12-02/who-needs-a-raise-when-you-have-tv-.html

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Oh the drama of "bus-gate": http://blogs.kqed.org/newsfix/2013/12/09/google-bus-protest-most-entertaining-moment-was-staged/

Thanks, A. Good to see M. Night making a comeback of sorts, with more social value than "The Happening". Yeah it seems the path to inequality starts from grade school, and maybe even in the womb, as lower income (often minorities) generally don't have access to comparable health, nutrition, and child care as affluent whites. This could set back their development, so that even if they were lucky enough to attend America's best schools, maybe they wouldn't be fully able to take advantage of the opportunity.

It is really sad that the inequality phenomenon has such a racial component. But if a liberal dares to make that claim, you can imagine the reaction from the right (race-baiting, it's a war on white men, etc.). Roberts said that racism is over in America after all. It is especially disappointing that minorities have fallen further behind during the Obama presidency. It's not his fault and it could have been worse under a white GOP president, but Obama's heritage almost blinds America to the fact that tens of millions of minorities are not succeeding despite his meteoric, outlier success. After all, the biggest beneficiaries of US affirmative action historically have been middle class white women. The social programs that disproportionately helped the urban poor are being dismantled in the name of "budget compromise."

On a local level, I don't think the tech giants can fully celebrate their CSM and social impact, when East Palo Alto (10 miles away from FB and GOOG HQs) is still held back by the same problems it faced a decade ago. Richmond and the Tenderloin are a stone's throw away from Twitter and Salesforce. Sure the tech companies engage in their annual "day of caring" and donate millions to worthy causes, but those good works barely tip the scales vs. all the negative externalities they unintentially impose on the less privileged. I guess rather than facing the cognitive dissonance of the injustice/inequality all around them vs. their desire to make the world a better place (ostensibly for all), tech people would rather live insular lives and stick with their own kind (luxury, exclusive housing to the luxury, exclusive bus to the luxury, exclusive office to the luxury, exclusive bar, etc.). This of course is not exclusive to tech workers, and the other Bay Area professionals (doctors, lawyers, bankers) are just as susceptible, if not more. But that is the problem when achievement and career take up so much of our attention - there isn't much room left for people, especially those who are different than us.

I am not sure if it is a generational issue either. After the Baby Boomers exit the labor force, and the younger folks take the helm of the big companies, I really hope for a sea change. Douchebags aside, I think that many Bay Area yuppies would prefer a more diverse workforce and society. CA is great because it's not a stuck up East Coast cocktail party where your alma mater and family name come first. It's boring when you only work with clones of yourself who think the same way (also it's bad for business). The Valley has been successful in recruiting and naturalizing so much foreign talent, but many of them were elites from their native lands (and they tend to self-segregate in the US too). I just don't see black and Latino native residents get recruited in sufficient numbers any time soon.

Check out this slideshow from Business Insider about racial-economic segregation in SF-Si Valley: http://www.businessinsider.com/maps-show-racial-divide-in-silicon-valley-2013-9#

This issue kind of reminds me of the military crisis. When only poor people go off to war, society doesn't really notice, so our leaders may be more likely to abuse those soldiers. But in the case of WWII and Vietnam, when even some millionaire's kids and Ivy Leaguers were getting slaughtered in the field, then that changed the equation. As you said about Bay Area housing and transport costs, the privileged won't lift a finger until they feel similar pain as the poor. A more progressive income tax that funnels money to the working poor would be a start, or maybe higher property tax on richer, less diverse neighborhoods? But of course city leaders get elected by those neighborhoods, so it's a nonstarter. In France, they have a saying, "Vive l'impot!" Or a celebration of tax. It's not a dirty word like in the US. Taxes are a mark of honor, a patriotic duty to reinvest in the nation that you love. And those taxes should go to helping strengthen society from the bottom up, not further the social advantages of the elites or become giveaways to already rich special interests.

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Part of the solutions that M. Night and other education scholars have recommended is longer school days, year round schooling, and early intervention programs like head start, universal Kindergarten, etc. Basically spending a lot of money to get poor/racial minorities with bad home environments and poor nutritional habits into a much healthier system. Of course, doing this takes a lot of money. However, school inequality is still a major issue so there are some resources that could be recaptured from rich white schools.

As you may remember from the George Packer/New Yorker article, even in the Bay Area, public schools such as Woodside and Paly have foundations that parents started to "adequately" fund their school - i.e. they have way more money than they need and marginal dollars there are not doing much good, while schools like East Paly are hurting pretty bad. And of course thanks to restrictive zoning regulations meaning no new housing ever (into which the poors/middle class might move), public schools in Woodside/Los Gatos/Atherton/Paly are only public in name only: effectively they are privatized for the rich white residents. But beyond that, it would take a massive infusion of resources into places like the LAUSD, New York Public Schools, etc. that voters haven't shown the will to spend.

I know you're fairly hopeful about the promise of the younger generation, but I'm more pessimistic. It's true that race will be less of an issue for our generation and some of the issues that the oldsters have with things like gay marriage will dissipate. However, I feel like our generation, while still well-intentioned, is even more clueless about the life and struggles of poor people than any previous generation. While J is right that the gap between the 1%ers and the rest has grown astronomically, I feel like the life experiences of the top 10% is becoming increasingly disconnected from the lives of the rest. Worldly, plugged in, well educated, financially comfortable kids on the Google buses have basically nothing at all in common with day laborers in the Mission. I don't mean that they actively seek to screw them but I think it's easy for many to not even people like that exist. The problems and life experiences of the bottom 90% have basically just don't show up on the radar of your average techie or higher.

And while the top 1% have arrogated for themselves increased power, the top 10% still can drive the political conversation in the media and online. If people don't see the problems of the rest of society or only are dimly aware of them in an abstract way, I'm not optimistic that much progress can be made.

I see where J is coming from on this - I think on matters of economic policy the 1% have the resources to really get whatever they want.

But I think one of the under-appreciated developments in American politics is that, in previous historical periods, when you had this unbalanced of an income, populists would rally the poorer classes to demand change. That's how they broke up the robber barons (see Teddy Roosevelt), and that's how the back was broken of European nobility.

What's happened this time is that many of the people that might have been expected to join this populist coalition against the rich and powerful are instead diverted by issues of "other" (i.e. race). How else do you explain the fact that West Virginia, one of the poorest states in the nation, voted overwhelmingly for Romney? Or Kentucky? They're afraid that moochers (of course, moochers from out groups; in group moochers are fine) and immigrants and gays are wrecking America.  These are precisely the people that Democrats ought to find common cause with (and previously did, against the Robber Barons and again during the Depression), yet our politics that are focused on race and religion and culture have them voting against their economic interests.

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Thanks, A. It's ludicrous that there is any opposition to these youth programs, as the research indisputably shows that the ROI is huge. So the expenditures are actually cost saving measures in the long run. There should be no conservative opposition, but of course there is. Is it just a philosophical/political impasse (block ANY new gov't programs, even helpful ones), or is it the elites lashing out because they don't want poor, colored folks to succeed and compete on a more level playing field with their privileged kids? Sure the rich would rather have tax breaks now than more education spending, but as I said these programs save $ in the long run and make a stronger society, which will reduce the rich people's future tax burden and probably result in more capital gains for them, as these kids grow up on a better trajectory and become valuable consumers/workers.

The data suggests that Millennials are more tech savvy, more socially aware, and more into volunteerism than previous generations. As you said, they are worldly, and with the internet at their fingertips, they are on average much more cognizant of global social issues than their parents and grandparents at that age. So really there is no excuse for them to turn their back on social problems, even if they can't fully "relate" to the needy. But residential and workplace segregation is a terrible problem, because if you don't see diversity and the struggles of others each day, you are less likely to do anything about them. I believe that most young adults (and most of us on this email) would vote for policies and leaders who want to make our society fairer. The problem is no one is putting such debates up for a vote (probably because most of the political system is co-opted by the elites as J said). I think the youth are in the right place morally, but they just need a spark or a dynamic figure to lead them, like a modern day "Ask not what your country can do for you..." or "We hold these truths to be self evident..." We don't have that unfortunately. All our brightest young people are going into the private sector, where they can't "do good" because they are beholden to shareholders, and fighting for their lives against cutthroat competition. Only when they're super rich and semi-retired like Gates will they hopefully give back. Look at us; we have money and are well aware of the problems out there, but we don't have the time or courage to advocate for the causes (many self-imposed or social barriers stand in our way). We will vote the "right way" if the occasion arises, and maybe even give some money, but we aren't able to put in the hours (not to mention blood, sweat, and tears) to lead the populist charge as you said. I admire the few folks who do.

But maybe all is not lost and there are some leaders with potential. Here's a Fresh Air interview about Pope Francis, and of course the main theme of his papacy so far is social justice and critique of global wealth inequality (and the institutions that perpetuate it). Europe is a powder keg of discontent regarding gov't corruption, voiding the social contract, and widespread unemployment. I will give Obama credit too that he has raised the issues of race and inequality (maybe not by choice) more than any other president since LBJ. Maybe he hasn't moved the needle on the debate in America, but he isn't letting us sweep it under the rug. So we are seeing some top-down emphasis of the race and wealth issues, but unfortunately that hasn't manifested itself into new laws and reforms (the plutocrats can control lawmaking bodies a lot more than individual executives).

Re: the US history of populism, you are right that conditions were a lot different when labor was stronger and the working white poor were a major Dem constituency. But the party made a decision in the '60s to fight one injustice at the expense of the other. They fought against racial discrimination, which lost them the Southern white vote. And in order to make up for it, they had to go more corporate and turn their back on labor too. So the Dems are more elite than ever, even if the GOP is really struggling with key demos like single women and non-whites. But I don't think that racist whites in the US hate colored folks just because they bought into the economic propaganda of the elites. They had those prejudices already, and the elites just fueled the fire with scare tactics relating to black uprising/crime and immigrants taking jobs/services. We also have to address the non-economic drivers of modern racism (I am not quite sure what they are but I could speculate). I agree that the GOP is using religion as a wedge issue to keep its base from turning populist, which is of course ironic because Christian values are clearly misaligned with the modern GOP.

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As A pointed out, "But I think one of the under-appreciated developments in American politics is that, in previous historical periods, when you had this unbalanced of an income, populists would rally the poorer classes to demand change. ", I find it interesting that at that time, communication between groups was limited by lack of technology.  Now we have instant communication with anyone in the world.  You would think that it would be easy to put all of the pieces together for the oppressed to rise up.  But, these same lines of instant communication are also used to manipulate us in ways we'd never seen before, essentially keeping us divided, blaming one another for our lot in life instead of seeing the real picture.

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http://www.insidepolitics.org/ps111/riseofinternet.html
http://gnovisjournal.org/2010/04/25/media-fragmentation-and-political-polarization-how-high-choice-media-environment-leads-great/

Thanks, L. Yeah media fragmentation in the US can be a big problem. Families don't tune into the same 3 info sources around the radio or TV set anymore. So of course FNC says that everything MSNBC says are lies, and vice versa (and CNN just talks about the Kardashians) - adding to distrust, misinformation, and most harmful... polarization. Plus we are blitzed with too much info now on our multiple devices (especially entertainment/time-wasting content), which distracts us from thinking, collaborating, and rising up together.

Twitter and Facebook helped the Arab Spring gain momentum, but sadly it can't really do the same for us (even though we invented those services). Well, when commercial crap like Bieber and Coke are the most liked/followed entities on social media, you know we have a problem. It seems US social media is (deliberately or not) functioning to prevent us from mass political debate and assembly, whereas it has the opposite effect in repressive/dysfunctional foreign countries (which is why their state security services try to block/monitor it)?

The SF Bay Area housing crisis

http://blogs.kqed.org/newsfix/2013/10/30/kqed-launches-priced-out-the-high-cost-of-housing-in-the-bay-area/

This is probably he most important social issue for the area. It's strange that SF has a proud history of inclusion (and a pretty good record in overall today), but this housing crisis is driven by exclusion and privilege, not necessarily "normal economics."

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Well if you average the entire Bay Area, places like Brentwood and Antioch will bring down the average. But SF is #3 priciest per sq. ft. in the US behind NYC and HNL. Versus the whole world, SF is not that bad, but real estate is really messed up in older, more cramped cities in the EU and Asia.

http://curbed.com/archives/2011/09/27/heres-a-chart-of-the-worlds-cities-by-price-per-square-foot.php

It's not even about rent vs. own. Renting is very pricey too, obviously. I think one aspect of the problem is that landlords are taking rent-controlled (or regular) units off the market in order to convert them to TIC/condos for more $, or sell the whole bldg to speculators because there is no much insane pent-up demand and high willingness to pay from the upper classes. So rental supply is going down, which causes rents to rise too.

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If you hit Wikipedia for median income by city in ca you'll find that those areas are also quite rich.  Housing doesn't happen in a vacuum.  More a function of income and the real problem is income inequality

It also happens with respect to density. The more houses/apartments available = the cheaper the rent. Nimbys in the Bay Area would like to still have their .5 acre ranch houses on some of the most valuable land on earth, meaning that the poors have to live 2 hours commute from their jobs.

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Totally agree. The social justice element also comes into play that historically lower income, blue collar, often minority neighborhoods (Mission, Castro, etc.) used to be less desirable for yuppies and therefore more affordable and off the radar of speculators. But now they are hipster paradises, and with gentrification, the "traditional residents" can't even maintain their old lives and are priced out of the market. I guess that is like economic eminent domain.

Measures like rent control or mandated affordable housing are often economically inefficient and flawed (because they are written and implemented by flawed bureaucrats, like healthcare.gov), but sometime optimal economics must take a back seat to concerns about fairness and social values (see taxes, labor laws). I'd rather have confusing rent control laws and too high minimum wage than a total lack of regulation (at least imperfect laws are a springboard for iteration and improvement). Because as you said, with the huge inequality gap, what is the point for the poorest 60% to struggle so hard trying to fit into the rich man's world (yet not really be allowed to live in the rich man's world... I guess like the "Elysium" plot, which I did not see)? Most people with a shred of heart would probably agree that there is something inherently unjust with greedy politicians/companies and wealthy invaders "annexing" and developing suddenly desirable land, which leads to the economic eviction of the residents who were there before (through legal market mechanisms and the landlords/property owners). Pardon my melodrama, but it's scarily similar to the Trail of Tears.

I heard an interview about the subject a while back, and one new SF resident and tech employee said something like, "Assholes (his word) like me can afford $3K/1BR rent and are making it hard on the previous residents, but hey, I want to live here." At least he had clear eyes. It's just sad because everyone has one life to live, and we don't want to compromise or suffer if we don't have to - even at cost to others (esp. when others' suffering at our hands is mostly invisible). Sorry for stereotyping, but I think the Gen X-ers and Millennials especially (present company excluded) really fixate on what I like to call "life maximization." Similar to their work habits of optimizing, achieving, and disrupting everything, in life they want it their way and they want it all. Best job, best home, best network, best gear, best marathon time, best family... best, best, best. When that is not really the goal but the status quo expectation in SF/Si Valley (when excellent becomes average/normal, what do all the sub-excellent people do?), then that doesn't really encourage a culture of togetherness and SHARING. We don't need the best life... can't we just enjoy our regular life? Isn't enough enough? Can I give a little up and still live a plenty comfy life so that more needy people can get a break? People don't ask these questions of themselves enough (myself included).

Sharing is the key I think. This isn't my world, it's our world. There is PLENTY of food, money, and room for everyone if we share reasonably, but the problem is the fucking 1% and the institutions who advocate for them just don't want to (and don't have to). Americans and some other cultures really fixate on fencing off what's yours and amassing/diving the pie, so that breeds an adversarial, zero-sum attitude that conservatives really eat up. Therefore, it's especially sad when educated, young, open-minded "liberal" West Coast people do the same and may not even realize it. At least liberals don't bad-mouth and hate the people they marginalize, but that doesn't leave them in the clear (myself included).

The best teachers I have had in my life (not necessarily in school) really cared about expanding the pie rather than dividing it. How can we make everyone happier? Any asshole with a bit of smarts can compete and beat others. But a truly smart, wise person goes out of his/her way to cooperate, find ways to align incentives, and make everyone better off - not just him/herself. For all the smug talent and genius brains and big money in the Bay, that skill is scarily absent. Don't get me wrong, some people practice it faithfully and I am in awe of them, but it's not enough to stem the tide. That's why I probably will leave this place next year, as much as it makes me sad and for all I am leaving behind. I don't want my kid to grow up in such a culture. At least I will make room for another person/family to have my stressful job and little slice of condo.

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Sorry I realize that I was unclear about one point in my last rant (unclear about at least one point, haha).

The Google buses are often scapegoats but not really the problem. By no means am I placing the bulk of the blame on the young, techie hipsters invading the Bay. They are not really the 1% and not the real driver of the problem, they are just a "symptom". Except for Zuck who bought a whole block of SF for privacy haha.

As usual, the problem is the old rich Nimby fucks that A alluded to. They are the ones who gobbled up all the choice land decades ago, and who currently occupy all the seats of political power and business influence. They are the ones who invested/profited from the tech boom (more than the current workforce), and stand to profit from real estate development and appreciation. They took so much that the current hipsters are practically forced to gentrify the Mission and maybe Hunter's Point soon. I bet most hipsters would much rather live in Nob Hill or downtown Paly, but all the old rich pricks there are just cramping their style anyway (and even a Twitter engineer still can't afford a $5M Nob Hill pad).

As A alluded to, we are not in the '50s Levittowns anymore, or not even in the '90s nouveau-riche gated golf communities. But the assholes want to keep us in the past, because they like the status and lifestyle they have, and don't want to give up even a shred to others. The city of Paris (and many other ancient cities) is like a 10-layer cake. New generations tear down the old crap that isn't working anymore and rebuild to fit the needs of the current people. We aren't really doing that, because the old fossils control the bulldozers. So all we have is SF Elysium vs. Vallejo. 

But "the people" are fighting back, and at least voted down a luxury condo development on the Embarcadero. It's a small victory in a long war that the good guys will almost certainly lose. But we might as well smoke a blunt and celebrate while we can. :)

http://www.sfgate.com/bayarea/nevius/article/Following-the-bankroll-for-SF-s-Propositions-B-C-4961999.php
http://www.npr.org/templates/story/story.php?storyId=243537913&ft=1&f=2&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+NprProgramsATC+%28NPR+Programs%3A+All+Things+Considered%29&utm_content=Yahoo+Search+Results 

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i once heard someone say cities are either places to live or places people come to make money.  he was talking about SF and that we were at a crossroads.  it was when matt gonzalez was running for mayor against gavin Newsome.  The speaker was making the case that if Newsome wins, the city will lose its soul, it's artist community, it's diversity of culture and class.  that's what you're looking at here….plain and simple.  and, you know what?  the city sucks now.  It's filled with people who are in a hurry, who lay on their horns, who yell.  

George Packer on the socioeconomic contradictions of Silicon Valley

http://www.kqed.org/a/forum/R201306061000
http://www.newyorker.com/reporting/2013/05/27/130527fa_fact_packer?currentPage=all
http://www.newyorker.com/online/blogs/georgepacker/2013/05/silicon-valley-taxes-and-libertarianism.html

"Move fast and break things."

- Zuck

"The Valley is a little bit at risk of moving in the direction that Wall Street went in... Losing sight of the real purpose of technology, just as Wall Street lost sight of the real purpose of finance. And instead looking at that little narrow way to a big payoff. But that can be very short-term and not particularly productive."

- G Packer

When financiers say that they’re doing God’s work by providing cheap credit, and oilmen claim to be patriots who are making the country energy-independent, no one takes them too seriously—it’s a given that their motivation is profit. But when technology entrepreneurs describe their lofty goals there’s no smirk or wink. “Many see their social responsibility fulfilled by their businesses, not by social or political action,” one young entrepreneur said of his colleagues. “It’s remarkably convenient that they can achieve all their goals just by doing their start-up.” He added, “They actually think that Facebook is going to be the panacea for many of the world’s problems. It isn’t cynicism—it’s arrogance and ignorance.”

- G Packer, New Yorker

Joshua Cohen, a Stanford political philosopher who also edits Boston Review, described a conversation he had with John Hennessy, the president of Stanford, who has extensive financial and professional ties to Silicon Valley. “He was talking about the incompetent people who are in government,” Cohen recalled. “I said, ‘If you think they’re so incompetent, why don’t you include in a speech you’re making some urging of Stanford students to go into government?’ He thought this was a ridiculous idea.”
- G Packer, New Yorker

In New Yorker style, a very long but detailed and thoughtful presentation of Packer's argument that the "Siliconization" of the US economy/culture is not necessarily good for everyone. The interview on his book The Unwinding is interesting too. I was surprised that he didn't get more rebuttal call-ins, since KQED is a Bay Area station after all.

I am too tired to properly summarize the story, but basically Packer is saying that the features that make Si. Valley great are also leading to some negative social effects. Innovation requires boldness, unorthodox thinking, and almost a "F it" attitude about consequences. Si. Valley embodies that paradox of socialist-Utopian desire to make the world more connected and better vs. the cutthroat, libertarian pursuit of riches unfettered by any regs or CSR (VC culture, Foxconn, avoiding taxes, FB IPO scam, you name it).

You can't be great and rise above the pack by playing it safe and by the rules. But that's the big difference between the Great Expansion of the '50s and '60s (blossoming of the US middle class), and the Great Divergence of today (the widening wealth gap and shrinking middle class). In the past, a WASP with a HS education and decent intellect/work ethic could have a job for as long as he wanted it, and earn enough to be middle class, provide for his nuclear family, retire in comfort, and set his kids on a path for the upper middle class. That hasn't happened too often in human history. But that was probably an outlier era, as Reaganomics/globalization put an end to that.

For Gen X and the Millennials, we get the sense that only schmucks and working stiffs believe in that old system of playing by the rules, working hard, and making a decent living. Now it's all about getting that mad loot ASAP, and stepping on whatever is in our path. Packer uses the example of Jay-Z to describe this attitude: he came from nothing and with little hope of achieving the American Dream. So he unabashedly sold drugs to finance his music career, and he used his music riches to build a corporate empire. Of course he needed a lot of hard work and luck too, but Jay-Z "skipped the line" to the upper crust. In interviews, he is surprised that more people don't hate him. But instead, we cheer for him, because his story makes us believe that we can be him too. He is both hero and villain, and 100% modern American. So for the rest of us who aren't blessed with entertainment, athletic, or drug-selling skills, basically we have to find a way to succeed in finance, tech, or medicine... or be just another chump.

But getting back to the Si. Valley paradox, it should be telling that Gates didn't engage in philanthropy until he was the richest man on the planet, and Zuck didn't either until "The Social Network" came out and his company went public (but to his credit, Zuck has now become one of the most socially-conscious CEOs in the Valley). For tech guys who are obsessed with efficiency and creative problem solving, it's awful convenient to believe that you are saving the world while you're getting rich and helping yourself. But we know what the order of priorities is.  Though if Si. Valley was so public serving, then why are some of the most economically depressed and violent zones in the Western US (Richmond, Oakland, East PA) located just short drives from the Google and Apple HQs? Their geniuses can figure out how to put the Internet on eyeglasses and revolutionize what a mobile phone is, but they can't reduce crime and poverty in the Bay Area?

Let's be honest, tech companies make the world better for rich people - they are invested in solving rich people problems (and they do it really well), because obviously there is a market for that. There is nothing inherently wrong with that - the business of America is business. But then don't act so superior. Remember those older Apple commercials showing images of Gandhi and MLK with the slogan "Think Different"?

http://www.youtube.com/watch?v=cpzvwkR1RYU

Despite their marketing intentions, such a commercial is basically comparing a for-profit company to heroes who devoted their lives to fight injustice, and died poor. That is frankly outrageous. As Packer said, the hypocrisy is evident in Apple's calls for immigration reform, so they can get more visas to hire cheaper Asian engineers. They say they can't find enough qualified candidates domestically, yet their tax-evasion tactics have served to starve our public education. Don't complain about the quality of workers here when you aren't investing in them. And of course it's not just Apple.

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The buses—whose schedules are withheld from the public—have become a vivid emblem of the tech boom’s stratifying effect in the Bay Area. Rebecca Solnit, who has lived in San Francisco for thirty years, recently wrote in The London Review of Books, “Sometimes the Google Bus just seems like one face of Janus-headed capitalism; it contains the people too valuable even to use public transport or drive themselves. Right by the Google bus stop on Cesar Chavez Street immigrant men from Latin America stand waiting for employers in the building trade to scoop them up, or to be arrested and deported by the government.”

One question for technology boosters—maybe the crucial one—is why, during the decades of the personal computer and the Internet, the American economy has grown so slowly, average wages have stagnated, the middle class has been hollowed out, and inequality, has surged. Why has a revolution that is supposed to be as historically important as the industrial revolution coincided with a period of broader economic decline?

I honestly despise living [in the Valley], in many ways. I detest the "Silicon Valley Masters of the Universe" narrative and all the fuckers in BMWs who tailgate me on my way to the grocery store. I hate the fact that people around here go on and on about "innovation" yet spend their lives on yet-another-bullshit-useless-copycat-web-startup, instead of actually working on solving real, hard problems (many of which, as you point out, A, can't really be solved with software, or even hardware). I hate the fact that said bullshit web startup can get millions of dollars in funding with comparatively little effort, while people working on actual hard problems have to beg or fight tooth & nail for fractions of that amount from governments or foundations. I hate the cognitive dissonance of the inequality experienced by the line cooks, baristas, waiters, and janitors who serve all of the self-important pricks around here; some of them have even been forced into homelessness, as reported on Bill Moyers' show not long ago.

The Valley desperately needs this kind of takedown, repeatedly. Bring it on.

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This stuff is so spot-on and poignant that I have to stop thinking about it or I'm going to start destroying work equipment in rebellion. But I think the Millennials are in general more conscientious, so I hope enough of them will see things for what they are and try to fix them. Of course some will become selfish pricks like their parents, but I have hope. It's great to see that fast riches are not a major priority for a lot of young people (despite their possibly spoiled upbringings). They want to be happy, better themselves, and help others - which we need very desperately today.

The FB thread brought up a good point - since the PC/internet revolution, why hasn't the average worker gotten richer? If anything they have gotten poorer due to job insecurity and rising prices as you said. The only sector that has consistently profited is the 1% and corporations (or those who had the disposable income to invest prudently). So the promise of tech making our lives better/easier may be anecdotally and superficially true, but actually empty. As you also said, tech gets co-opted by business interests anyway, so the "good potential" is often diminished. 

I wonder if the Masters of the Universe were born during a previous era, what would they be doing? Guys like Jobs, Zuck, Gates... would they have been as great as Edison or Ford, or at best a middle-manager chump? Clearly Zuck and Jobs don't have what it takes to be anything but the boss. But people change with the environment, and maybe they would be a lot different without such great opportunities available to them (especially as a Jew and a half-Lebanese orphan). 

Is the tech industry turning free love SF into a wealth-driven caste system?

http://www.kqed.org/a/forum/R201209250900
http://www.modernluxury.com/san-francisco/story/how-much-tech-can-one-city-take

This topic is quite inflammatory, but just thought I'd put it out there (I don't necessarily agree with the whole argument, and of generalizing a whole industry, but it's better than discussing reality TV!). I guess this is basically the same story as what Wall St. did to NYC. Of course the tech booms brought a lot of money and non-tech jobs to the Bay, but with some costs. Some of the guest's points:

- SF is giving preferential tax treatment to some tech firms, even though other valuable industries could use the lift
- The demand for high-paying tech jobs is driving up rent and other costs for millions of others not employed in tech (and even $100K engineers have to have roommates and can't afford a car)
- Tekkies exists in a "cocoon", as they are just working all the time, are often immigrants to SF, and therefore do not show much civic engagement with the "real SF"
- Despite some high-profile donations from super-rich execs who barely felt it, tech people are generally "selfish" and aren't giving back to the communities that enabled their careers (there is a popular trend of hipster, self-absorbed tekkie libertarianism)
-  "The unique urban features that have made San Francisco so appealing to a new generation of digital workers—its artistic ferment, its social diversity, its trailblazing progressive consciousness—are deteriorating, driven out of the city by the tech boom itself, and the rising real estate prices that go with it." - though it's unclear how much prices would have risen and culture would have changed anyway (ask the black people that used to live in SF before gentrification).
- Really, how much is the next social gaming or shopping app startup contributing to society's benefit - and is that worth the loss of SF uniqueness (it would be a shame if the city becomes just another sterile commercial zone)?

But regardless, it is against the American and San Franciscan democratic, pluralistic spirit to have an elite class of tekkies and investors dominating valuable metro areas, with the rest of the people serving as their supporting underclass but unable to afford to live within 50 miles of their jobs. That is a major social, economic, and moral problem - and one industry is not fully to blame of course.