Welcome to Episode 234 of The Digital Life, a show about our insights into the future of design and technology. I’m your host Jon Follet, and with me is founder and co-host Dirk Knemeyer.
For our podcast this week, we’re going to chat about the new company town and real estate development by Google and Facebook. So we’ve come to the point where the new golden age is engendering a lot of similar themes to the last golden age of industrialism, and wouldn’t you know, the company town is on the docket again. So how did we get to this spot? Well, as most of our listeners are very familiar with, the real estate prices in American cities known for innovation is skyrocketing. So whether you’re talking about sort of the San Francisco, Silicon Valley area, talking about Boston, or Seattle, or Austin, you know, these are all places where the real estate recovery has gone well beyond that, and it’s now competitive again to be going after the American dream of the single family home. In fact, I saw a troubling statistic about the cause of, sort of the median costs of homes in the Silicon Valley area, it’s well over a million dollars.
It’s over a million, it’s not well, but it’s over a million.
A little over a million dollars. A million dollars.
Yeah, that is some serious shekels there, that’s some money. And for me just to, you know, consider, like you know, my parents house was probably, I don’t know, 50 or 60 grand? I mean, you know, this is during the ’70s or what have you, but it’s just sort of not even in the realm of imagination of myself as a child, that I’d even be talking about million-dollar home markets.
Couple that with the competition for talent, right? You know, the fight for the best and the brightest. So there’s this ongoing and sort of escalation of talent acquisition, which Google and Facebook and the other Silicon Valley companies are all competing, and they keep raising the salaries for engineers and designers coming out of school. I mean, we’re a design studio at GoInvo, and the starting salaries at the Silicon Valley firms, you know, far out-price what we can offer. I mean we offer other things, namely, you can go home at the end of the day, but this is getting out of hand.
Because the municipalities aren’t able to keep up with sort of this combination of high-salaried employees looking for housing, and all this demand that it’s creating, Google and Facebook have taken it upon themselves to start solving this problem locally, and that starts with scooping up areas for development, and like any other developer, they’re putting together plans and proposals in Silicon Valley to create their communities, which will largely be populated by their employees, as you might expect. So these communities are going to have, it’s going to be mixed-use, there’s going to be lots of condos, there’s going to be all sorts of restaurants and shops. On that level, it seems benign, but at the same time, this is company housing. This is creating a culture around work and attaching yourself to a corporate entity that sort of goes beyond what we’re used to currently, which is that there’s some demarcation between where your work life ends and your personal life begins. And creating this housing just sort of binds you ever more tightly to companies.
Dirk, this is an issue that you’ve been think about a bunch. What’s your initial take on the new company town?
Yeah, we talked a few weeks ago on the context of the Sidewalk Labs project in Toronto about a history of company town, so I won’t reiterate that necessarily, but needless to say that there’s a long history going back to early industrial revolution of companies, of organizations that need a lot of labor, and need a lot of labor localized, which you may argue if the localization is necessary. In this day and age, I think it is more so than most do, that providing infrastructure for living is a smart tactic. And it’s not just a smart tactic, but it makes sense in, if you sort of pull yourself out of the negative consequences that can come from it, it makes a lot of sense.
I mean Silicon Valley, it’s incredibly expensive to live. I mean even if they’re paying, let’s pretend that an engineer, a really good engineer is hired out of school and are hired for $120,000, right? I think that kind of thing is happening. That person cannot buy a home that is over a million dollars. Even if they were making 120,000 living like a pauper for a decade, assuming their salary wasn’t going up, they still couldn’t afford a home for over a million dollars. I’m not super-wealthy, but my income is in the top couple percent, and I can’t afford a home for a million dollars. As a mid-40-something now, so it’s just sort of insane, and the fact is people want affordable housing. They don’t want to be worried about a rat race where you’re paying insane amounts of money for an apartment that are just draining any benefit you would get from your high salary, or can never afford a house.
To me it makes perfect and total sense in this weird, real estate bubble of Silicon Valley most specifically. You know, the same thing could stretch to other places, some like New York City, it’s not really an option to build housing in the same way. It makes sense. It is something that has the potential to be a real good for your employees. The problem is corporations, their goal at the end of the day is the bottom line, it’s very simply income minus expenses, you want the number at the end to be as big as possible. So in the process of heading down a path that has the theoretical potential of real wholistic good for the employees, for the community, and for the company, you know, it’s going to be twisted in a different way. On paper, it sounds great, in reality, probably won’t end in the best way for the people involved.
Yeah, there was some concerns raised in an article that I was reading on this about how the ultimate control of the municipalities where these companies are buying up large swaths of land. Where they took a look at one of the municipalities in this, you know, the voter turn out isn’t huge, right, so it’s just a matter of a little bit of voter organization, and all of a sudden you can sort of stack the city council sort of however you like.
Now that’s not probably the purpose behind housing lots of employees in a particular area. It’s not to politically take over any of these towns I’m sure, but the inevitable consequence-
I mean the inevitable consequence of it is that it’s going to have a similar effect right, over time. So just by the nature of it, if half of your population is Facebook employees, there’s going to be an outsize representation in local government over time, because of just who the population is made up of. That’s fully possible.
I think there’s things that are even more extreme that are possible, and some of these might be precluded by local or state laws, in the particular municipalities, but at one point, at what point after Apple is building all of this infrastructure for people to live, and be housed and so forth, you know, at what point do they break off from Cupertino and become Steve World, you know, Steve Town or Jobs Town, or whatever this topic name that they would give it.
I mean there is that potential at a certain point as these companies that are richer than nations start to build out the infrastructure of towns and cities. Of not wanting to be within the jurisdiction of some other random, stupid, slow, bureaucratic entity. They want to control for themselves, so I mean that’s the kind of sort of interesting, unexpected consequence. Unexpected to the masses, at least, that could come out of from some of this stuff.
Yeah, I mean, and that goes to the heart of what is sort of the core of power in the 21st Century. During the 20th Century, that power resided in nation states, right? And because of technology, smaller groups now have a lot more leverage than they ever used to, so you can influence people across the globe with electronic tools now. You can film discussions and revolutions, real or imagined, right? In the digital world. And there’s less benefit to being the guys in charge now. Power is getting diffused across these smaller, more agile entities. And the corporate entity makes a lot of sense in terms of their, they have a lot of money, they have a lot of smart people, and they have a lot of leverage. So what do you do with that? And you can see the trends that are favoring the corporate entity, just watching these waves come in over and over again. Whether it’s political power, or the power to retain more of your earnings. Just wave after wave, and now acquiring real estate, et cetera.
There is an interesting power shift going on. I don’t know what it means because of course, we’ve seen similar things before, but not these exact circumstances. You know, in the gilded age there was a check, a hard check that came in the form of the US government, and then also just the economy tanking, right? There will be consequences to it, and we don’t know this time around what they ultimately might be. But this is a symptom of shifting power dynamics in the 21st Century and one thing is for sure, these shifts are going to happen a lot more quickly than they ever did a century ago, because there’s this amplification that comes from technology that just supercharges these trends. So we may find ourselves at more extremes a lot more quickly because frankly, the check of government can’t react that fast, it’s just not keeping up. These dynamics are different. The system is different, and we’re getting this power shift at a time when it may not be checked as well. Who knows?
Dirk, your thoughts on that.
My thoughts, I mean, at the same time, everything old is new again, right? Because, you’re talking about these in the context of 21st Century innovation and big corporations, and fast change, but 19th Century corporations were kind of going down these same paths. So it’s modern, it’s like new to us in a certain way, but it’s old. It’s as old as business itself. It’s just taking a new form, and one that again, like we talked about on the company town show before, when those started it was Utopia City. I mean, I don’t want to say they had the best intentions because they certainly may not have, but there was optimism with from the workers. There was optimism communicated from the companies. There was optimism communicated from the media and the greater culture and community. I mean, this was positioned as something that could help us in some abstract us evolve into something different and better, and more interesting. I mean, it simply didn’t turn out that way.
There are differences, really, between what was happening then and what’s happening now at a macro level that we should think it would be any different now. I mean at the end of the day, you have people who are motivated by wealth acquisition and selfishness, who came up with the idea, who are pulling the strings, who are driving it forward, and it’s the exact same thing that we have today. So, I’m not, it’s funny, because if I was a younger person, even at my own age, if I wasn’t married with kids and have, you know, if I could go to a company like Google and get into this cool place with lots of like-minded people and get a big salary and have my housing taken care of in this neat community, I’d sign up. Like absolutely! It’s great for me as a participant over a short-term period of time living my life. But in the macro, in the systems that can build from that and where it can go, and the downstream damage in ways that we’re not thinking about as we’re living the high life on those benefits. I mean, that’s where the concern really is.
Yeah, the unintended consequences are going to be myriad from endeavors like this, I’m almost certain of that. It makes me wonder, there is this thought process around creative work, the creative class, the idea that you can sort of work anywhere and be able to make a good living. It’s freelancer nation, right?
And I wonder, whether or not, that, call that a semi-Utopian dream of being free to sort of work where you want, work from the beach, as long as you have super-fast internet you can do what you want. I wonder if that, the reality of it is that you’re going to have some very specific powerful corporate players that dictate the terms for their employees and this idea that we’re sort of free to be employed wherever, in a national or global means. If that’s just sort of smoke and mirrors, or a fantasy.
No, I don’t think it’s smoke and mirrors. I mean it’s, I think it’s just all very nuanced. First of all, corporations today, the the companies, the Googles and the Facebooks, it is not in their best interest to have everyone work in one place, at the end of the day. It’s in their best interest to have some degree of geographic diversity, for a lot of reasons, ranging from research, to marketing. It’s good for them if there are people all over the world working on their behalf. So, they are going to want people in the mothership that are in these controlled communities, but they’re also going to want the people like us, let’s say, who don’t want to be sucked into that but still want to be working for their organization.
The issue, I think, are, I don’t even know if issue is the right word, but in general, what we can expect is that the people who are more deeply immersed, the people who are going out in part of the mothership, and part of the core, those are going to be the people who are becoming the wealthiest, who are most privileged by their employment with an organization like that. And as for the other companies in the world, once you move away from this upper crust, you know, I mean, they’re just trying to tape and string it all together the best they can anyway. So, the B-class companies and below, are always going to be looking for random chuckle-heads like us, you know, whether we’re located hither or yon.
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So that’s it for Episode 234 of The Digital Life. For Dirk Knemeyer, I’m Jon Follett, and we’ll see you next time.