We actually pay dearly for what's happening to the so-called Unexotic Underclass.
1. Many of us will join them. Most people who join VC-istan and Wall Street in 2013 aren't going to make any money. By the time they're eligible to sit at the table, the money will be elsewhere. The vicious culture of VC-istan (with extreme deadlines, fast firing, and little investment in doing things right; so you end up not learning not much) comes out of this "get rich before the ball drops" culture, especially prevalent among young people.
2. Real estate. Why's it so expensive to live in the star cities? In large part, because the rest of the country is dying.
We're in 1927 territory. In 1927, there was a deep rural poverty problem (see: Mad Men flashbacks) but urban elites thought there was no way it could reach them. Some of those elites were in New York, which recovered. Some were in places like Buffalo and Detroit and Harrisburg, Pa.
Five years later, that cancer of rural poverty was metastatic throughout the whole economy.
Replace "rural" with "suburbs and small towns" and you see what's going on today, and what the risks are.
VC-istan is actually very top-down, despite its PR, which is why I don't think it's that stable. Most VC-istan companies are more vicious and hierarchical than the archetypal corporate dinosaurs; but also, to get funded, you have to live where the money is.
What's bizarre about all this is that the money often comes from elsewhere. The VCs don't get their money from local sources, and they sure aren't going to put their own money in it until they reach a nine-figure net worth, so the money that's often funding these "anti-problem" startups is from the Iowa public school teacher pension fund. Shouldn't they have, at least, the option to fund local talent and revive their own economies, instead of having it all sent West into an investment vehicle that hasn't earned its keep since the late 1990s?
At any rate, I don't know how to solve this problem, but kudos to the OP for drawing attention to it.
Michaelo Church or Michael O. Church, I don't know who you are, but this is a great comment on the article. Thank you for this perspective. As someone once in VC, I laughed when you said what is true: most VCs are not actually putting their own money behind the investments. Indeed, it's only the 9-figure celebrity ones.
My only quibble was your line about not making money. Your first year associates/analysts are pulling in 6 figures which I think is pretty decent dough, even though it may feel like a middle class wage in the "star cities" you rightly mentioned.
Your first year associates/analysts are pulling in 6 figures which I think is pretty decent dough, even though it may feel like a middle class wage in the "star cities" you rightly mentioned.
Rent burns it all, and VC-istan and Wall Street both have ageism problems.
It's the same thing as for athletes. A typical major-league professional athlete (which means we're already in the top <0.1 percent) making $600,000 per year isn't really that overpaid when one considers that he has a career that lasts about 6 years, and that his job has extreme physical demands. (Most people pay attention to the celebrity assholes, but the average professional athlete has to be a disciplined in-bed-at-9 type of guy to maintain peak performance.)
When you consider how tight our window of employability is (as soon as we're not "shiny" anymore, we're thrown back into the regular economy, and the locals out there have good reasons not to like us) and how much nonsense we have to put up with, we're not that privileged. Most of the VC-istan hotshots making $175,000 per year will see a 30-50% salary drop (in addition to a -100% ROI on their startup equity) when the bubble goes out.
In addition to rent, there are high taxes on income (making $150 for 10 years means you pay higher taxes than if you made $75k for 20 years, particularly if your $150k is earned in California vs. $75k in Texas), and other high cost of living issues.
I liked this comment , but instead of funding local talent ,wouldn't it make more sense to fund the best solutions for important problems ? Yes the direct financial gain might be a bit less(specially with today's thin startups), but better products and services might offer a lot more value.
I agree with you. I also think it's somewhat pointless that a bunch of people have to move to a high-COL area when they really don't want to be there.
There are plenty of people who'd love to have the same jobs as they can get in the Valley in smaller towns. They move where the jobs are. That'd be fine, except they get taxed to death by the landlords.
Location should, in truth, be completely irrelevant. It's not so much that I see a virtue in funding "local talent" as I'm averse to the conditions that require such talent to be elsewhere, in a place where they have to compete with housing against Russian oligarchs and parentally-funded dipshits (i.e. "funemployed" hipsters) with effectively infinite resources.
What about Texas (with lots of job growth) or North Dakota (with really low unemployment)? There's been mass migration back to the South too.
Maybe (NY, CA, DC, etc..) are dying, and maybe they'll bring the rest of the country with them, but there are other places in the US which seem to be OK.
The employment in north dakota is mostly due to oil/gas drilling. These are not long term jobs that pay well. These are very hard, dangerous jobs that can be performed only for short durations. Besides this is not good the country because of the pollution and damage caused to environment.
Texas is having a somewhat similar problem, but the economic boom is masking it a bit - the suburbs are now the place where a lot of the poor live, and the cities are getting expensive.
1. Many of us will join them. Most people who join VC-istan and Wall Street in 2013 aren't going to make any money. By the time they're eligible to sit at the table, the money will be elsewhere. The vicious culture of VC-istan (with extreme deadlines, fast firing, and little investment in doing things right; so you end up not learning not much) comes out of this "get rich before the ball drops" culture, especially prevalent among young people.
2. Real estate. Why's it so expensive to live in the star cities? In large part, because the rest of the country is dying.
We're in 1927 territory. In 1927, there was a deep rural poverty problem (see: Mad Men flashbacks) but urban elites thought there was no way it could reach them. Some of those elites were in New York, which recovered. Some were in places like Buffalo and Detroit and Harrisburg, Pa.
Five years later, that cancer of rural poverty was metastatic throughout the whole economy.
Replace "rural" with "suburbs and small towns" and you see what's going on today, and what the risks are.
VC-istan is actually very top-down, despite its PR, which is why I don't think it's that stable. Most VC-istan companies are more vicious and hierarchical than the archetypal corporate dinosaurs; but also, to get funded, you have to live where the money is.
What's bizarre about all this is that the money often comes from elsewhere. The VCs don't get their money from local sources, and they sure aren't going to put their own money in it until they reach a nine-figure net worth, so the money that's often funding these "anti-problem" startups is from the Iowa public school teacher pension fund. Shouldn't they have, at least, the option to fund local talent and revive their own economies, instead of having it all sent West into an investment vehicle that hasn't earned its keep since the late 1990s?
At any rate, I don't know how to solve this problem, but kudos to the OP for drawing attention to it.