Silicon Valley Is America’s Wealth Engine, Not Its Job Engine

The New York Times’s Catherine Rampell might have been one of the first to notice that Silicon Valley’s magic isn’t creating an enormous number of jobs. Today’s front-page article cites Redfin’s endless demand for the world’s best engineers, but mostly it focuses on unemployed folks in markets like Corvallis, Oregon, the home of the Beaver and, as the article would have it, once “a hotbed of startup activity.”

The engineers in Rampell’s story aren’t the ones that Redfin has been eagerly recruiting for job openings here and in Seattle. Corvallis and most of the rest of the US are in a different world than the tech centers in the Valley, Seattle, New York or Boston, which now seem more like Las Vegas: oases of fantastic wealth in the center of a desert. The agonies of this recession have hardly affected many technology companies, and we have hardly affected the course of the recession.

Reading Rampell’s statistics about rising unemployment among software engineers, I thought about Paul Graham’s argument that fewer and fewer engineers will have more and more power. Paul argued that the gap between “haves” and “have-nots” will continue to widen not because of social policy but because of the increasing importance in our economy of leverage. Leverage is what allows one very smart person to invent a new financial instrument or technology that widely propagates throughout the world. The more widely that instrument or technology propagates, the more that one smart person is worth.

And now leverage is creating divisions even among engineers, placing such a premium now on the very best that the “haves” are getting smaller in number and wealthier, while the “have-nots” swell in size. Silicon Valley will continue to head in that direction, with startups staying lean so a smaller number of employees can get a larger piece of their own pie.

Efficiency is a good trend. That said, we should stop thinking about the Valley as a panacea for unemployment. Government programs to drive down unemployment should focus on more employment-intensive work like solar panels or roads, or just educate people better so that the next generation can be on the right side of leverage.

Discussion

  • http://twitter.com/gglockner Greg Glockner

    And how many of the employed professionals of Silicon Valley, Redmond, etc. are transplants – computer experts who migrate to the tech centers because that's where the jobs are. In other words, being 'the next silicon valley' may help attract professionals, but it may not help bring locals back to work.

    • http://blog.redfin.com GlennKelman

      That's a great comment Greg, and one I hadn't considered. I don't think Microsoft or Redfin for that matter has a preference for local talent…

  • Dave

    The correction to your headline should be “America's Wealth-concentration Engine.” That's what leverage is about. And leverage doesn't happen because it is efficient or right, it what the venture capital community and Wall Street demands.

    Sure it's not Redfin's role to be an employment program, but there are tons of people with good skills who are unemployed due to circumstance not of their making.

    Beware of the relentless march towards efficiency. I'm sure there are some nice perks you enjoy right now that someone else will want to remove in the name of efficiency.

    Any economic system starts becoming inefficient risks collapse, but I don't think we're ready to restart slavery again either in the name of efficiency. Balance is needed. A long term jobs/education program is great. But in the near time, these people need to be made productive. If these people can't be gainfully employed and create value, they won't buy houses either. And where would you be if that happened?

    • http://blog.redfin.com GlennKelman

      Hi Dave, I tend to think efficiency is good but Redfin is different from many startups in that we want to be an efficient large company, not one that is just acquired. And I share your concern about wealth concentrations; it's exactly the right concern.

      • Dave

        I certainly laud your desire to be an efficient large company, but how do you define this efficiency and for what purpose does it serve? Being efficient for the sake of it seems to be dogmatic rather than pragmatic.

        I'd imagine in the near term it's about preservation of cash/positive cash generation. But I suppose that will change over time. (Don't mean to get to you talk biz strategy in public if you don't want…)

        • http://blog.redfin.com GlennKelman

          You're right, the emphasis on efficiency is so we can be profitable and self-sustaining, while still returning plenty of value to the customer. Any one in a customer-service or retail operation feels the same pressure.

  • http://blog.redfin.com GlennKelman

    That's a great comment Greg, and one I hadn't considered. I don't think Microsoft or Redfin for that matter has a preference for local talent…

  • Eyenot

    You were quoted in a recent article [ http://www.nytimes.com/2010/09/07/business/economy/07jobs.html?_r=4&hp ]

    ( “We are firing up our college recruiting program, enduring all manner of humiliation to try to fill these jobs,” said Glenn Kelman, chief executive of Redfin, an online brokerage agency for buying and selling homes that is based in Seattle and San Francisco. “I do think we’re still chasing them, not the other way around.” ) — from the article

    I am just wondering, what sort of humiliation have you put yourself and your staff through in order to fill these jobs? What sort of humiliation have you had to endure? How was/is it directly related to seeking out and hiring new staffers, and how was/is it personally humiliating?

    • http://blog.redfin.com GlennKelman

      I think the article was summarizing my general point that the shoe is definitely on the other foot when it comes to recruiting talented graduates from the best computer science programs.

      Even though I have had some success, I adjust my schedule to make sure to meet each candidate at a time that is convenient for her, and work very hard during the meeting to persuade the candidate Redfin is a good place to work, which it is. It's a strange dynamic between a 39 year-old and a 19 year-old, and it wasn't what the journalist was expecting to hear when we are in the midst of a recession.

      My personal experience is that high-quality computer-science graduates are in very high demand, and that companies go to great lengths to hire them; this is especially true of Redfin.

      • Some Call me Tim

        Sounds like you have no idea what the word humiliation means. You might want to invest in a dictionary.

        • http://blog.redfin.com GlennKelman

          Hi SCmT, there are many, many worse forms of humiliation than chasing undergraduates whom you hope to offer a job, which I will probably be doing nearly every November deep into middle age. Since this is a friendly blog, please keep it civil here in the comments…

      • KarenS

        “high-quality computer-science graduates are in very high demand”

        Interesting. I know someone who works on an actual operating system for… well, one of the few major companies that makes an operating system. He's on a core, top-tier team responsible for the most important functions. Maybe ONE person out of his entire dozen-strong team actually has a “computer science” degree. Most were hobbyist programmers with degrees in mathematics, chemistry, and other scientific fields. Heck, a few don't even have degrees at all. The best programmers are the ones who love programming and do it on their own time. His team does not actively recruit “computer science” graduates because most colleges out there teach theories and limited use of few programing languages… not actual programming. They sit these new graduates down and ask them real-world questions like “okay, how would you optimize this function?” and they're usually clueless. His company prefers experience to education.

  • djbinoz

    Keynesian programs to drive down unemployment generally are ineffective UNLESS the created infrastructure enables increases in economic productivity, ie dam projects that brought cheaper and more accessible power or improved transportation systems. You hit the nail on the head with your last words, “just educate people better so that the next generation can be on the right side of leverage.” I'm happy to award the engineers because they have what we want. I don't begrudge them. Society is better off as a whole because of the inventions of those with leverage.

    • http://blog.redfin.com GlennKelman

      That's exactly right, excellent point DJBinoz…

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