If you’re a techie in Silicon Valley today, chances are you have a six figure salary and a pretty comfortable living situation. But what if you don’t work in tech? What’s it like being in Silicon Valley when you have to struggle to make ends meet and you see twenty-year-olds with million dollar mansions?
Zoe Kleinman, a presenter for the BBC’s Business Daily asked me to explore the “underbelly of Silicon Valley” for the BBC World Service. I found some some people who experience the underbelly of glamorous Silicon Valley every day, and others deeply resentful at being forced to leave the “Valley of Heart’s Delight.”
“I resent the people that got lucky and got to just go to college, get a job, buy a house, be rich instantly and by the time they’re 30, they’re super rich.” Radel Swank (school teacher)
You can listen to my report at BBC Business Daily (starts at 11:00 in the BBC podcast). The program aired on November 3rd, 2015 on the BBC World Service and San Francisco’s public radio station, KALW.
“When I first moved out here 23 years ago, if I’d’a bought a place then at $140,000 I would’a sold that place and been long gone. I’d’a been on Easy Street…” Bruce (lives in a Silicon Valley trailer)
Here’s an edited transcript of the program and report (plus some bonus material from the most articulate cop I’ve ever met).
Zoe Kleinman: We gave Silicon Valley journalist, Alison van Diggelen the difficult assignment of popping out for a drink in the local bar, to find some people not in the tech sector…Some less than enthused residents of Silicon Valley…
Sounds of Britannia Arms Bar, San Jose (includes bar hubbub and cursing when beer is spilled on a precious iPhone by a tech worker )
Alison van Diggelen: I’m here at a popular watering hole in SV to explore the economic and social impact of the tech boom on the local community. It’s a tale of two communities: the haves and the have-nots; the techies and the non-techies. When I speak to people working in tech, they have no complaints. Life is good. Biz is growing, and there’s plenty of money flowing. Yet for those not in tech, like teachers, police officers and the service industry, life in Silicon Valley is not so rosy, especially if they can’t afford to buy a house.
Home ownership is the great divider in SV. With house prices growing to an average of $1M this year, most homeowners are sitting pretty with a healthy nest egg for retirement. Those forced to rent are feeling the pinch.
Here’s Bruce, a longhaired Grateful Dead fan, who lives in a trailer in San Jose. He works in the sports industry.
Bruce: I live in a trailer, it’s pretty cheap. Costs me about $2200 a month.
van Diggelen: That a lot for a trailer, is it not?
Bruce: Yeah, but I heard there was a trailer in the Hamptons that sold for a million dollars…so I thought that was a pretty good deal.
van Diggelen: So tell me: why do you live in a trailer here?
Bruce: Cos it’s the only thing I could afford. When I moved out here in ’93 I shoulda bought a place…. By the time I decided I was gonna stay it’d went through the roof. I couldn’t afford it, so I just rented. Anything that we woulda wanted woulda been about $650… $700,000. It woulda been $5000 a month, so we bought a nice little frickin’ trailer in an over 55 (years) area. Works great for me.
When I first moved out here 23 years ago, if I’da bought a place then at $140,000 I woulda sold that place and been long gone. I’da been on Easy Street…
van Diggelen : For others like Radel Swank, a teacher in her 50s who recently lost her job and her home and plans to leave SV for good, life is a daily struggle.
Radel Swank: If you’re one of the lucky people and you’re in the tech groove, everything’s great. You’re making great money, you’re riding the wave. It’s great. But if you’re not in the tech groove and you’re a teacher or a waitress, you’re unlucky. I resent the people that got lucky and got to just go to college, get a job, buy a house, be rich instantly and by the time they’re 30, they’re super rich. I feel like luck is part of it.
Right now I’m renting a room in a house… It’s just weird after having my own place and my own space for 10 years, to be in a little room, sharing a bathroom with some guy I just met yesterday.
Alison van Diggelen: Does part of you wish you were in the tech community, ride the tech wave?
Swank: I am a little envious. My roommate, the one who owns the house. She obviously has an awesome job (in tech) because she owns a beautiful house and she’s in her 20s. I’m a little resentful and envious that she is that young and that successful. When I was that age, I was waitressing and working my way through college. How do some people get so lucky?
Anyone who’s not in this tech environment can’t afford to live here any more. SF rents are like $2500 for a studio. You can’t live on $15 an hour and pay that kind of rent. It’s out of line with reality…a lot of people who’ve been in SF a long time are being pushed out…unless you bought your home 30 years ago, then you’re OK.
If you’re someone like me in the middle you can’t make it here…I’m really in a pickle.
van Diggelen: With SV rental rates averaging $2300 a month and growing faster than average incomes, it’s putting a squeeze on many residents in SV.
Even those with a steady job are feeling the pinch. I spoke to Officer Nabil Haidar who’s been with the SV police force for almost 20 years and has witnessed the seedy underbelly of “glamorous SV.” Even inside million dollar mansions, he’s seen real suffering. For some, Spam Valley might be a more apt description of Silicon Valley.
Officer Haidar: When I started 19 years ago, we didn’t have the homeless population that we have now…because everything is getting more expensive and the economic situation is pushing people onto the streets.
van Diggelen:So they’re getting priced out of the housing market?
Officer Haidar: Priced out of everything…Me? There’s no way I can afford to buy a house with my salary…we make good money but it’s not enough. You’re talking about small apt going for $2500 a month, or small condominium going for six, $700,000. That’s ridiculous.
Everything is going up, homes prices are through the roof, rents is ridiculous, even food. Everything is expensive.
van Diggelen: Officer Haidar is concerned about the disconnect between the haves and have-nots in SV.
Officer Haidar: I see the poor and I see the rich. I go to (emergency) calls…rich people getting involved in domestic violence and I go to poor people who cannot even afford to eat. So I see it all.
van Diggelen: What do you think would wake up the tech community to the plight of people less fortunate? They’re so focused on the next tech gadget.
Officer Haidar: They need to go out on the street and start walking around and opening their eyes and seeing the homeless. I’m here in SJ…I talk to people on the west side, they’ve never been to the east side. They have no reason to be on the east side, but that’s where the poor, the hardworking, the blue collar people live there. If they just had the time to drive down on the east side and see really what’s happening, maybe that would be a wake up call for them… I hope that my interview will wake up some people.
There is disconnect between the rich and the poor and from my experience, as law enforcement, I realize that 80% of the problem going on in SJ has to do with financial. A lot of people they went and they bought homes…all their money going into the homes and they cannot really afford it.
Some people, they work two jobs, even three jobs.
Alison van Diggelen: And in their efforts to keep up with their neighbors and their million dollar mortgages, the impact of the tech boom on families can be fatal.
Officer Haidar: You get drugs, domestic violence, people get depressed. The peer pressure. People want to catch up to the Joneses. And then they stretch themselves too much and realize they’re over their heads with bills and money. Then they go to things against the law: fraud, theft…it’s all like domino effect. When you are desperate, people do desperate things.
People get depressed, suicide. People get ashamed that what they did. Some people use drugs to cope, some people are in denial. That’s SV: there are so many things behind the scenes no one knows. As a police officer, I’ve seen it. I’ve dealt with it.
van Diggelen: You feel some in SV are neglecting their families, their kids to make the big bucks, to make the big mortgage?
Officer Haidar: Of course. I see it all the time. They’re just catching up to the Joneses, but the problem is, they don’t know that the Joneses are also having a problem. It’s very sad story. They want to pay that million regardless of what expense.
***
Here’s Rachel Massaro, a senior researcher at Joint Venture Silicon Valley, a local nonprofit. (Interview took place in July 2015)
Massaro: 40% of SV renters are technically burdened by housing costs. Which means they spend more than 35% of their gross income in housing. And because of that, they’re really struggling. One third of our young adults 18-34 are living with a parent and 10% of SV residents are living in poverty.
If you look at all households in SV, about a third of them are not self sufficient, which means that they rely on public or private informal assistance, like living with a friend or a family member, free babysitting, food from food banks, other services from churches and others.
Housing prices are high…in some places (in SV) homes are selling for 200% of more than the national average, rental rates are as high as 185% of the national average, but also the cost of goods and services is higher here by about 6%
The top 5% earning households in SV make over 400,000 (dollars) more than the bottom 20%….Income does include stock options and interest on investments.
The top 5% of households in SV make more than 31 times the income of the bottom 20%.
California’s worse drought in decades has spurred everyone to pay close attention to their water use. Farmers are especially thirsty for water saving ideas, so it’s a sector ripe for innovative Ag Tech solutions. On July 10th, I joined Fergus Nicoll of the BBC’s Business Matters to discuss the challenges and opportunities the drought has created. The program also featured an interview I did with California State Water Resources Control Board member Dorene D’Adamo.
Check out the extended transcript of our interview below, in which D’Adamo shares some tips for Ag Tech entrepreneurs. Number one: Get your hands dirty on the farm, talk to farmers…
Photo caption (above): Alison van Diggelen interviews avocado farmer and drone entrepreneur Jon Tull of Farm Solutions at the Silicon Valley AgTech Conference, May 2015)
Fergus Nicoll: Let’s talk about drought. We’re what…three years now into this prolonged drought in California, Alison?
Alison van Diggelen: This is the 4th year now.
Fergus Nicholl: So what are new incentives that (CA Governor) Jerry Brown has come up with?
Alison van Diggelen: Last April, Jerry Brown made his historic executive order. He mandated a reduction for residential consumers: they have to reduce on average 25% of their water use. He’s carrying a big stick on this. He has the ability to fine water districts up to $10,000 a day and allow water districts to charge surcharges for people who’re not reducing. It really is biting…
Fergus Nicholl: This is being measured presumably?
Alison van Diggelen: This is being measured and in May, Californians were patting themselves on the back…it was just released a couple of weeks ago that in May we actually reduced on average, 29%. So we’re getting there, but depending on which city you look at, some are reducing by up to 40% and some are not doing their fair share, so there is still some rankling.
Fergus Nicholl: So what happens with that? Is it public naming and shaming if you don’t get to 25%?
Alison van Diggelen: Absolutely. Drought shaming is going on and basically, they’re using the price mechanism. People are going to see it on their monthly or bi-monthly water bills and they’re going to feel the pain of using too much water.
Fergus Nicholl: I told you about Alison’s interviews on Fresh Dialogues… Let’s hear from the California State Water Resources Control Board. This board reports directly to the Governor and we’re going to hear from (board member) Dorene D’Adamo.
WHY THIS DROUGHT IS DIFFERENT
Dorene D’Adamo: We’re currently in our third year of drought and it is a very serious situation. We’ve had back to back dry years and of course the soil in many areas of the state is very dry and in addition, we’ve had a very low, dismal snow pack. In fact less than 5% (of the average) snowpack.
We also have a different situation than last time we had a serious drought, which was 1977. Our State has grown in population significantly. We also have a hardened demand (for water) because we have a lot of permanent crops that have been planted (e.g. fruit and nut trees). We also have a healthy respect for the environment, so we have redirected some of our supplies to environmental protection, to protect fish and wildlife.
Alison van Diggelen: What do you say to people who complain – urban dwellers – who complain that farmers are using 80% of the (State’s) water…we’re having to cut back and not water our lawns etc.?
Dorene D’Adamo: Well, we all need to be part of the solution and without a doubt, agriculture has vastly improved its irrigation efficiency over the last decades but it’s possible for them to do more and it’s also possible for the urban sector to do more. This 80% of agriculture supply…others will say it’s 40%. The number is probably not as important as is the fact that we all have to do our fair share. Agriculture and urban dwellers can do more which is why we recently called up on implementing the Governor’s Executive Order that Californians state-wide reduce their use by 25% for urban uses.
ADVICE FOR ENTREPRENEURS
Alison van Diggelen: We’re here in Silicon Valley, and of course it’s full of entrepreneurs with lots of hot tech ideas. Are there any particular tech ideas you’ve seen today…and can you comment on drones?
Dorene D’Adamo: Now that we have this new groundwater legislation in California, local entities will be called upon to put together a groundwater sustainability plan…to determine how much is being taken out of their aquifers, going into their aquifers. The question I have for this (AgTech) group is this: What technology…satellite or drone technology can be used?
Alison van Diggelen: Were there any other technologies you saw here that you feel have potential?
Dorene D’Adamo: What we’re looking for is assistance with monitoring…groundwater, contaminants, and also monitoring (water) use. There’s so much the Silicon Valley has to offer not just in terms of monitoring but data…putting together the data and the analysis. And I would encourage this industry to be looking at water supply and water quality much in the way they have in the energy sector. We have gone a long way addressing the greenhouse gas emission targets in California, in large part because of the innovative ideas that have come from Silicon Valley. This (water) area is ripe for investment and if we saw the investment in water quality and supply that we have did in the air quality and energy sector, in years to come, we’d see a huge improvement in both areas.
Alison van Diggelen: For young entrepreneurs who have ideas…what advice would you give them for making their idea a reality?
Dorene D’Adamo: Get out on the farm, get your hands dirty…go out and meet with farmers; learn from them directly as to the challenges they face. Even when there are these smart systems (soil probes, precision irrigation etc) implemented on farms, sometimes they’re not used properly, so I think the tech industry needs to better understand the needs of the farmer and that would help them put systems in place that would be used effectively.
Yet the biography is already courting controversy. Today Musk said one passage about his attitude to employees and childbirth was “total BS and hurtful.” He addedthat Vance’s book was “not independently fact-checked” and should be taken “[with] a grain of salt.”
So is there a definitive guide to Musk’s remarkable life? One that doesn’t need fact checked or taken with a grain of salt? You could start with a description of his life from the man himself.
As far as I know, this is the first time Elon Musk has shared his whole life story, so candidly, even tearfully, in front of a live audience.
Watch the video or read the transcript, as Musk takes us on a journey from the suburban streets of South Africa to the tech mecca of Silicon Valley…and beyond. He tells us about his teenage “existential crisis” and his bookish quest for the meaning of life; how the retirement of NASA’s space shuttle both upset him and inspired his space transport startup SpaceX; and why he became the reluctant CEO of electric car company Tesla Motors.
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Interview highlights and key turning points in his career:
The Rebellious Child: Musk grew up in South Africa. At age 6, he desperately wanted to attend his cousin’s birthday party, but was grounded for some long-forgotten transgression. How did he get there? (This was probably the first of his many rule-breaking adventures.)
“It was clear across town, 10 or 12 miles away, further than I realized actually, but I just started walking…I think it took me about four hours…My mother freaked out.”
The Iron Man Inspiration: He was a huge fan of comics and read Iron Man comics. Did he ever imagine he’d be the inspiration for Robert Downey Jr’s movie character, Tony Stark?
“I did not. I would have said zero percent chance…I wasn’t all that much of a loner…at least not willingly. I was very very bookish.”
The Hitchhikers Guide to the Galaxy: How did the novel fire his imagination?
“I was around 12 or 15…I had an existential crisis, and I was reading various books on trying to figure out the meaning of life and what does it all mean? …I read Hitchhikers Guide to the Galaxy and it highlighted an important point which is that a lot of times the question is harder than the answer. And if you can properly phrase the question, then the answer is the easy part. To the degree that we can better understand the universe, then we can better know what questions to ask. Then whatever the question is that most approximates: what’s the meaning of life? That’s the question we can ultimately get closer to understanding. And so I thought to the degree that we can expand the scope and scale of consciousness and knowledge, then that would be a good thing.”
Why was Silicon Valley his mecca at age 17?
“Whenever I read about cool technology, it would tend to be in the United States…I wanted to be where the cutting edge technology was and of course, Silicon Valley is where the heart of things is…it sounded like some mythical place.”
Why did his startup X.com (the precursor to PayPal) come close to dying in 2000?
“The growth in the company was pretty crazy…by the end of the first four or five weeks we had a hundred thousand customers and it wasn’t all good…we had some bugs in the software…Various financial regulatory agencies were trying to shut us down, Visa and Mastercard were trying to shut us down, eBay…the FTC…there were a lot of battles there. (But) we had a really talented group of people at PayPal…It worked out better than we expected.”
After making over $150M from PayPal, why not just buy an island and relax?
“The idea of lying on a beach as my main thing sounds horrible to me…I would go bonkers. I’d have to be on serious drugs…I’d be super duper bored…I like high intensity.”
On the seeds of SpaceX
“I always thought that we’d make much more progress in space…and it just didn’t happen…it was really disappointing, so I was really quite bothered by it. So when we went to the moon, we were supposed to have a base on the moon, we were supposed to send people to Mars and that stuff just didn’t happen. We went backwards. I thought, well maybe it’s a question of there not being enough intention or ‘will’ to do this. This was a wrong assumption. That’s the reason for the greenhouse idea…if there could be a small philanthropic mission to Mars…a small greenhouse with seeds and dehydrated nutrients, you’d have this great shot of a little greenhouse with little green plants on a red background. I thought that would get people excited…you have to imagine the money shot. I thought this would result in a bigger budget for NASA and then we could resume the journey…”
On negotiations with the Russian military to buy two ICBMs
“They just thought I was crazy…I had three quite interesting trips to Russia to try to negotiate purchase of two Russian ICBMs…minus the nukes…I slightly got the feeling that was on the table, which was very alarming. Those were very weird meetings with the Russian military…’remarkably capitalist’ was my impression (of the Russians).”
Why he chose to create his own rocket company, SpaceX
“I came to the conclusion that my initial premise was wrong that in fact that there’s a great deal of will, there’s not such a shortage. But people don’t think there’s a way. And if people thought there was a way or something that wouldn’t break the federal budget, then people would support it. The United States is a distillation of the human spirit of exploration. People came here from other places…people need to believe that it’s possible, so I thought it’s a question of showing people that there’s a way…There wasn’t really a good reason for rockets to be so expensive. If one could make them reusable, like airplanes then the cost of rocketry (and space travel) would drop dramatically.”
How did the vigils for the death of the EV 1 help inspire Tesla Motors?
“It’s crazy. When was the last time you heard about any company, customers holding a candlelight vigil for the demise of that product? Particularly a GM product? I mean, what bigger wake-up call do you need? Like hello, the customers are really upset about this…that kind of blew my mind.”
“I tried really hard not to be the CEO of two startups at the same time…It’s not appealing and shouldn’t be appealing if anyone thinks that’s a good idea. It’s a terrible idea.”
On the idea for SolarCity
“Solar is the obvious primary means of sustainable energy generation…in fact, the earth is almost entirely solar powered today. The only reason we’re not a frozen ice-ball at 3 degrees Kelvin is because of the sun…”
Check back soon for more from Musk on:
where his inspiration strikes (hint: not just Burning Man)
how to build, motivate and retain an excellent team
If we need any more evidence that clean tech is hot in Silicon Valley, this is it. Last Wednesday, I attended a lecture on Clean Tech Entrepreneurshipby Andres Wydlerat Stanford University. Originally planned for 20 to 30 students, the class was heavily oversubscribed and extended to 80 students. As of this writing, there are still 30 on the waiting list.
The class was packed with energetic people and ideas: a woman from National Geographic, just back from the Antarctic who’d witnessed the scale of the ice melting; a “green” executive from WallMart; entrepreneurs working in the solar, wind, and batteries sectors, and at least one VC. According to Andres’s questionnaire, two key factors are motivating attendees: making a living and making a difference. Several attendees are “between jobs” so the down economy is providing opportunities for some efficient reallocation of capital and labor.
Andres, founder of smartgrid company, BPL Global, wants to equip cleantech entrepreneurs with the tools they need to leverage their skills and ideas; and is bullish about Silicon Valley’s role in the world of clean tech. Admitting that the U.S. currently lags the rest of the world, he anticipates that we will be in the forefront of clean tech in certain sectors within the next 3-5 years.
“When Silicon Valley puts its mind to something, it’s a fantastic environment to pursue a cause,” he says.
The regulatory enviroment is moving in the right direction
Encumbant energy companies are motivated to change
FDR’s motivation: “a crisis is a terrible thing to waste.” (heard again by President Obama’s chief of staff Rahm Emanuel most recently )
VC fundingfor clean tech is at record levels. Although 2008 Q4 showed a marked reduction in VC funding, Andres points out that it’s still attractive and alternative clean tech funding sources are available
Coming Soon: After his last class in February, I will interview Andres at length to find out what hot clean tech entrepreneurs he discovered, and get an overview of his conclusions and predictions for clean tech in Silicon Valley.
Last Friday, I met with Linda Holroyd, CEO of Mountain View based FountainBlue to discuss her views on the resiliency of green tech in today’s economy. Given that the oil price has now tumbled to under $50 a barrel and gas prices are half of last summer’s high of $4+ a gallon in Silicon Valley, is there still a pressing case for clean energy and green tech investment? We discuss:
van Diggelen: That a lot for a trailer, is it not?
Fergus Nicoll: Let’s talk about drought. We’re what…three years now into this prolonged drought in California, Alison?
How did the vigils for the death of the EV 1 help inspire Tesla Motors?
