Six months since I published my first blog post with respect to leveraging your biggest asset to attain Financial Freedom; I still get quite a few questions on what are the best cities for technology jobs?
My answer today, 10 years after I pondered this question for myself, is still the same. San Francisco Bay Area is the best place if you work in technology or related fields.
Technology Hubs in USA
Brookings Institute published a report on how to spread tech innovation across America. The main findings of the report indicate that
Just five top innovation metro areas—Boston, San Francisco, San Jose, Seattle, and San Diego—accounted for more than 90% of the nation’s innovation-sector growth during the years 2005 to 2017.
San Francisco Bay area gained 46% of the nation's innovation sector job growth between 2005 to 2017 Click To Tweet
For much of the 20th century, there was no stark difference between the top 2% and the bottom third metro areas. However since 1980s, technology moved to the center of economic activity.
New demands for talent, coupled with the geographic concentration; resulted in self-reinforcing dynamics that increasingly benefited big, coastal regions; often to the detriment of other parts of the country.
Consequently both the indexed average annual wages and employment levels begin to diverge sharply. Indexed average annual wages and employment is now significantly higher for the top 2% metros.
Winners keep on winning
This compounding phenomenon is quite common in nature. In the late 1800s, Vilfredo Pareto made a small but interesting discovery. He noticed that a tiny number of pea pods in his garden produced the majority of the peas.
As an economist, he then extrapolated this discovery to his field and soon realized that this unequal distribution extends to other areas of life as well. We now commonly refer to this phenomenon as the Pareto principle.
What is unique about San Francisco Bay Area
Let us examine why the best place for Technology jobs is still San Francisco Bay Area
- San Francisco Bay area has some of the best universities, namely – Stanford and Berkeley.
- Graduates of these universities are easily connected to their past alumni.
- The past alumni have been successful and are drawn to mentoring and investing in the younger generation. All factors being equal, everyone has fond feelings for their alma mater.
- This talent stack attracts investors.
- It also attracts startup incubators.
- There is a ready talent pool in case you want to create your own startup.
- As a result of network effects; this flywheel effect is amplified and feeds on itself.
This combination attracts even more talented workers, startups, and investment, creating a gravitational pull toward the San Francisco Bay Area while simultaneously draining key talent and business activity from other places.
I am sure you would have heard of Six degrees of separation. In Silicon Valley you would find this is quite useful in terms of landing a job or creating a startup.
Why Location is important
In-spite of all the technological advancements, nothing beats a face to face conversation. Even climate change activists, realize this fact and travel for all these conferences to have an in-person connection.
- Furthermore, relationships are built not so much with formal meetings as it is with informal conversations, coffee, lunch etc. Whether you want a job at an established firm like Google or a new startup; it is easy to meet people who can connect you. Given the fact that most of the who’s who of the technology world are located in a small geographic area; it is easy to obtain an introduction and build a connection.
- If you want to create a new startup, most of the companies you would partner with; are also located in the same geography. Eg: Marketo has built an entire business model around Salesforce. As a founder, it made sense for Marketo to be based in the San Francisco Bay Area where Salesforce is headquartered.
- If you want to work in a new technology, you can be assured that San Francisco Bay Area would already have people getting their feet wet in testing out this new technology.
Can you be as successful in another location? Maybe. But with a winner take all dynamic in today’s world; you want to give yourself every possible advantage.Life is unfair. There is no reason for you to make it harder on yourself. Click To Tweet
Location matters irrespective of the industry. If you want to be a movie star, you go to Hollywood. If you want to make it on Wall Street, you go to work and live on Wall Street. If you are into fashion, you go to Paris and Milan. If you want to succeed in technology; then San Francisco Bay Area seems the most logical choice
People are the new resources
In this informational age; individuals with skills are the most coveted resources. During the industrial era, you would establish manufacturing facilities near natural resources (timber, iron ore, etc), energy sources (coal, oil, etc) and transportation routes (airports, waterways, railways, etc).
For a technology firm, it makes sense to be established where there is the highest concentration of technologically savvy people. Consequently, if you are looking for employment; it also makes sense to be in these locations. Hence the best pace for Technology jobs is still San Francisco Bay Area.
Myth of People Leaving California
It is quite common to read headlines such as SF Bay Area experiences mass exodus of residents. To rent a moving truck from Las Vegas to San Jose and you’ll pay about $100. In the opposite direction, the same truck will cost you 16 times that, or nearly $2,000. These anecdotes make for interesting party conversation.
However, when you drill into the State to State migration flow data by the US Census Bureau, you will notice that 691,000 people moved from California to another U.S. state in 2018.
And 501,000 people moved from another state into California over the same time period.
Although more people moved out of state, the number of people moving in is comparable. In fact, one could argue that number of people might not be the right metric to judge the desirability of a location but rather the economic quality of individuals. It could be that people who cannot afford to live in California are moving out because they do not have any specialized skills. On the other hand, people who are working in the technology field or interested in a career in technology; are moving to California. So the state as a whole is drawing in more high skilled individuals.
The data from Bureau of Labor Statistics provides details of the states with the highest employment level for each occupation. No surprise where California is compared to the other states.
The Brookings report highlights what we have been observing for a long period of time with respect to the countries being divided economically and consequently ideologically. Our goal is to see the world as is; and not how it should be.
Bottom line, if you are in the technology sector; move to the San Francisco Bay Area. Make your money. Then if you want, move away as part of your Financial Freedom Countdown plan.
Readers, do you believe you need to be in a specific geographic location if you work in a particular sector. Or we can all be location agnostic in a connected world?
John came from a third world country to the US with only $1,000 not knowing anyone; guided by an immigrant dream. In 12 years, he achieved his retirement number.
John started Financial Freedom Countdown to help everyone think differently about their financial challenges and live their best lives. He resides in the San Francisco Bay Area enjoying nature trails and weight training.
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