When the pandemic opened a window of opportunity for remote work, one city focused all eyes: San Francisco. Its bay area, the cradle of the tech industry as we know it, had by then become one of the most dynamic and at the same time stifling regions on the planet. The high cost of living, difficult access to housing, the rise of the homeless, transportation problems. Everything coexisted with its obvious benefits.
Suddenly, many were able to flee. And they did.
Long look. We have an example in Stripe, one of the most popular payment platforms: if in the first quarter of 2019 34% of its new employees came from other corners of the world, in the last quarter of 2021 the percentage had risen to 74%. Revealed it yesterday its CEO, Patrick Collison. San Francisco and Seattle, the other great hub technology on the west coast of the United States, are no longer its main talent providers.
In Q1 2019, 39% of Stripe’s hiring was outside Bay Area and Seattle. Last quarter, it was 74%. I think the rate at which tech industry is going global is still under-appreciated, and that this will be a big tailwind for the world over the next decade.
– Patrick Collison (@patrickc) January 10, 2022
Global look. It is a drastic change. “The rate at which the tech industry is becoming a global industry is still undervalued,” says Collison. Today, 40% of his new hires come from countries other than the United States. “Silicon Valley was the place you should be. The feeling right now is that the place you should be is the Internet (that is, anywhere)”, I answered Brian Chesky, CEO of AirBnb.
In figures. His personal experience and vision is consistent with the data. San Francisco has lost around 10% of its residents in the last two years. The rental price has fallen by 27% and the number of vacant offices is now around 16% of the total, a figure never seen in the last ten years. At least 63% of companies based in the city have reduced or plan to reduce their office space, including Twitter, PayPal, Pinterest, Stripe, AirBnb or Eventbrite. The flow of technology workers (arrivals vs. departures) is around -35%.
First here. And where are they going? First and foremost, to other cheaper American cities. Austin is the great beneficiary of the great relocation of the technology industry, but also Atlanta or San Diego. The latter is a good example of the medium-term future of almost all industries: the average salary in the city has grown by 9% not because companies have moved there, but because of the arrival of workers who now enjoy remote conditions .
In January 2020, large companies were interviewing candidates from 2.2 “markets” (regional zones) and 1.4 different time zones. By June 2021, the number of markets had risen to 3.4 and the number of time slots to 1.8. The industry is increasingly interested in other geographic locations. Small and medium-sized cities are also doing their part: as we saw, many are giving away money to those who decide to move there.
Then there. The next step is the rest of the planet. We spoke about it recently on behalf of Turkey: thousands of qualified young people are fleeing the country without changing their residence. They work for large multinationals remotely encouraged by escalating inflation. It is a mutual gain: they charge in dollars without having to move; they, the companies, reduce their labor costs and open the doors to a pool of international talent that has been more elusive today.
Without conformity. This report from The Wall Street Journal is illustrative: telecommuting has opened a “national competition” for offshored talent in which the small local companies of yesteryear are outnumbered by the financial muscle and job appeal of big tech. Or in the words of an expert consulted by the FT: “Companies have proven what it means to attract talent in a radius greater than 20 kilometers. And there is no turning back.”
Caution. San Francisco should not be considered dead, however. The city is still the place-to-be for most of the industry. And investment has not declined, as MarketWatch detailed a year ago. It has simply changed. Alphabet, Meta or Apple have built their big and shiny new headquarters there. Small businesses and workers flee, so to speak. Silicon Valley is year after year more synonymous with “Big Tech”: they already represent 40% of its workforce. Not only are they staying, they are swallowing the economy of the bay.
Image: Tomek Baginski / Unsplash