Will the last entrepreneurial person leaving the Bay Area please turn off the lights?

Is this the time that it really happens, when the Bay Area finally begins to lose its ability to attract and keep the critical mass of innovative employees necessary to maintain the region’s primacy in the hi-tech world? Is it really the time to ask: Will the last entrepreneurial person to leave please turn off the lights?

“Come on, Kat, that is such a hackneyed question. Hi-tech types have been moving in and out of the Bay Area for years. What’s different now?

Maybe nothing, or maybe major changes are afoot. Consider the recent article in The New York Times by Nellie Bowles, entitled “They Can’t Leave the Bay Area Fast Enough”. Bowles succinctly describes what she has been observing --

The Bay Area struck a hard bargain with its tech workers.

Rent was astronomical. Taxes were high. Your neighbors didn’t like you. If you lived in San Francisco, you might have commuted an hour south to your job at Apple or Google or Facebook. Or if your office was in the city, maybe it was in a neighborhood with too much street crime, open drug use and $5 coffees.

But it was worth it. Living in the epicenter of a boom that was changing the world was what mattered. The city gave its workers a choice of interesting jobs and a chance at the brass ring.

That is, until the pandemic. Remote work offered a chance at residing for a few months in towns where life felt easier. Tech workers and their bosses realized they might not need all the perks and after-work schmooze events. But maybe they needed elbow room and a yard for the new puppy. A place to put the Peloton. A top public school.

And, so, it is argued, they are fleeing. By one account, the top destination is Austin, Texas, with Seattle, New York, and Chicago right behind. Miami is actively recruiting refugees from the Bay Area, but so are Topeka, Kansas and Tulsa, Oklahoma. “When people decide to leave San Francisco, they usually don’t know where they want to go, they just want to go,” said Terry Gilliam, founder of Facebook groups “Leaving California” and “Life After California.”

Meanwhile, it is reported that housing prices in San Francisco have declined slightly and the number of houses on the market is on the decline. Residential rents have dropped 27% from last year, while the office vacancy rate has increased to 16.7%. Bowles reports that Twitter, Yelp, Airbus and Dropbox have all tried to sublet some of their existing space and that Pinterest paid $90 million to break a lease on a facility that it had previously intended to expand.

The picture being painted is that the pandemic, when joined by the long-in-place housing and employment dynamics in the Bay Area, have conspired to make the region the least attractive it has been in recent memory, perhaps in a systemic and long-term way.

Or perhaps not. The question is whether these data points are merely analytical noise, being no more than the usual churn of employees in and out rather than an indicium pointing to real changes in the hi-tech demography of the region.

Indeed, as Bowles notes, while employees may be leaving from, more than they are coming into, the Bay Area, the leading hi-tech companies are not leaving--

The biggest tech companies aren’t going anywhere, and tech stocks are still soaring. Apple’s flying-saucer-shaped campus is not going to zoom away. Google is still absorbing ever more office space in San Jose and San Francisco. New founders are still coming to town.

Point taken, but still, consider the following. In December 2020, Hewlett-Packard Enterprises, popularly known as HPE (created as part of the 2015 split of the Hewlett-Packard company), announced that it was moving its headquarters to Houston. HPE focuses on servers, storage, networking, consulting, and support. Younger Kat readers may not appreciate that the founding of the Hewlett-Packard company in Palo Alto in 1939 is often recognized as the beginning of Silicon Valley.

But being an icon can only take one so far. Thus, while HPE is a Fortune 500 company, still, hand over heart, the core of HPE seems a bit to the side of cutting edge, hi-tech Silicon Valley. This is supported by the relocation choice of Houston rather than Austin.

Still, Bowles is probably right, to the extent that the flagship companies of the Bay Area hi-tech seem to be staying put, at least for the moment. This suggests that the movement of workers out of the area, as described by Bowles, is not (yet, at least) materially affecting the activities of these core Bay Area companies.

On the other hand, one can still ask (admittedly, at a 39,000-foot level). Are those leaving the Bay Area the kind of employees more likely to engage in cutting-edge innovative and entrepreneurial activity (such as Mr. Hewlett and M. Packard 80 years ago), while those who stay put are more likely those seeking to comfortably nestle into powerful companies with seemingly secure, indeed, commanding, positions.

To recall that word, even if both misused and overused: Are those leaving more likely to be the kind of person who could have been the engine for disruptive innovation.

Seen in this way, the question is not whether the last man or woman out should turn off the lights, but rather whether those who remain will be able to provide the cutting-edge entrepreneurial lighting necessary to illuminate the path forward to a successful innovative future.

By Neil Wilkof

Picture on right in in the public domain.

Picture on left is by PumpkinSky and is licensed under the Creative Commons Attribution-Share Alike 3.0 Unported license.