I think this article shows how removed a lot of journalists and media are from the technology scene.
They completely ignore the growing startup scene in New York - Silicon Alley, Digital Dumbo[1] - and latch on instead to a story about a huge, already established company that's buying a building they already have 2000+ employees in.
Tech meccas are born from hundreds of small technology companies constantly pushing the limits of a platform, not from the presence of a single, large employer.
"Tech meccas are born from hundreds of small technology companies constantly pushing the limits of a platform, not from the presence of a single, large employer."
I would think having a few large tech companies in an area would aid in the creation of smaller ones.
There are many places where there are large tech companies but few startups. That's because the people who quit to do startups go to the Bay Area, which has a lot more to offer little companies.
For instance, there are a lot of ex-Amazon employees doing startups in SF now. There's a reason they left Seattle, and it's not entirely due to the crappy weather.
The large tech companies are a big part of the Bay Area startup ecosystem, though. Both as training grounds for future entrepreneurs, and as potential acquirers with lots of cash, and as research shops that create the fundamental technologies that entrepreneurs exploit.
Necessary but not sufficient conditions. A bunch of big companies by themselves do not make a viable startup ecosystem. A startup ecosystem without the big companies won't get off the ground, though.
Agreed. more than that, though, what you need is a series of very successful exits to create entrepreneurs/early funders with the cash to fund the next generation. We're getting there, in NYC, but the numbers are still tiny compared to the west coast.
So true. The interview was typical of mass media. They interviewed a real estate guy about the technology industry and the startup scene. They got the kind of insightful commentary on entrepreneurship that you would expect ;-p.
Considering that Google already has ~2000 employees in this building, then by this logic shouldn't they have already turned NYC into a "tech mecca"? This is silly.
Anton says once Google buys the building, businesses will clamor to get in, if only for a chance to make that elevator pitch to CEO Eric Schmidt
Quite a bit of hyperbole here. The building already has lots of big companies as tenants http://www.111eighth.com/
It's worth noting that with the exception of the National University of Singapore, there's virtually no worthwhile research done in the whole of the tropics. Cold climates seem to be far more conducive to scientific productivity.
That's the point. A supervillain would want the research to remain secret, at least until the world domination plans are well under way. What better place to hide a top-notch science facility than a remote island nobody would suspect?
Preferably one with a volcano, because geothermal is so hot these days.
Why would New York City want to be a "new tech mecca", anyway? They're already the de facto US and/or world headquarters for several huge industries, and the competition for scarce office and employee living space has already pushed prices to insane levels. Why would they want to throw another more-money-than-sense industry into the mix?
I hate to turn it around again, but why would they want to be a new tech mecca?
I don't know, I think some people here have the idea that high tech is intrinsically better than other industries. But from a city's point of view, it's just another industry. The SF Bay Area is high tech. Los Angeles is entertainment. New York City is finance, fashion and publishing, except for the other bits of finance which are in Chicago.
New York City has many problems (though not as many as it used to) and none of them can be solved by bringing in a new industry.
Sure. The point being that if it were taken away they'd no longer be New Yorkers -- they'd move to somewhere more reasonable for their income. The employment market would adjust.
What would happen if only rich people could afford to live in New York? Gee, I dunno, probably about the same thing that happens when only rich people can afford to live in Beverly Hills.
Comparing NYC to Beverly Hills is apples and oranges. The only likeness they share is, perhaps, that they are both independent municipalities.
Exhibit A, NYC: The most populous city in the US with the highest density and having the highest economic output. It is considered the world capital for finance and is a world cultural center for fashion, media, art, theater, food, and music. More people live in the city limits of NYC than 40 of the 52 states.
Exhibit B, Beverly Hills: An affluent bedroom community with around 30,000 residents and a suburb of Los Angeles.
Of course, they're very unlike each other. I'm just not convinced by the idea that a city needs poor (both in income and in quality) people in order to function.
The low-paid jobs which do need to be done in Manhattan can easily be done by people commuting in from New Jersey.
I'm actually not sure about the outer boroughs, I've never actually been there (that sounds snobbier than it is, I've only been to NYC twice). It seems to me that gentrifying the outer boroughs should be one of the great challenges facing New York City.
Low, middle, and high-income people alike already DO commute from outside the city. The NYC metro area has extensive and expensive transit infrastructure that is constantly expanding. Cost of construction and infrastructure increases with density in a super linear fashion.
There are a few problems applying pure supply/demand theory onto the problem of available space in NYC. There are some heavy external costs involved: moving expense, employment churn, desirable local culture. People aren't going to leave NYC, they'll just keep moving around the same area for a better deal. Instead of efficient allocation, you'll have something more akin to musical chairs, which could have serious consequences for the local economy.
So, economists loves to look at situations like NY rent control and pass judgement, but it's just a much more complex situation than that, even beyond the moral implications of kicking grandma out. I used to think the way you did and was skeptical of rent control, but research has led me to understand it, at least somewhat. The Wikipedia article has some good insight into why it's helpful from an economic point of view.
> Instead of efficient allocation, you'll have something more akin to musical chairs, which could have serious consequences for the local economy.
It seems to me that you're neglecting the economic reality that, were rent control dropped, landlords would be buying up land within the city left and right. Since price ceilings wouldn't be inhibiting profit potential and introducing negative incentives into maintaining apartments, opening apartment buildings would be an extremely attractive investment. The market would be flooded with new dwellings. Thus, should rent control be killed, a natural market equilibrium would be sought, the middle class could again reasonably live in NYC, and the city itself would bloom.
I'm not sure which city are you talking about, because there isn't any land left in NY to buy up and build on. If you are talking about dozing and rebuilding, well, there's not much incentive to do this anyway, since existing investments are often so profitable that it's pointless to incur risk. Opening apartments _IS_ an extremely attractive investment and happens constantly, but you are talking about an area with EXTREME scarcity. No amount of flood of new development is going to bring housing prices down in Manhattan, an area with a residential population of 13 people per square foot of land.
Modern rent control laws only really prevent the landlord from raising rent (EDIT: more than a certain percentage every year) on existing tenants. This is considered "rent stabilized," which covers almost half the available units in NYC. Less than 2% of the available rental units in the city area are considered rent controlled, which is where the government actually mandates a certain rent level. The pricing of over a third of the rental units in NYC are unregulated.
If you are talking about dozing and rebuilding, well, there's not much incentive to do this anyway, since existing investments are often so profitable that it's pointless to incur risk.
How to make money:
1. Buy up a row of those five-storey brownstones which seem to cover most of Manhattan (say, a hundred apartments)
2. Knock 'em down, build a 30-storey tower (say, a thousand apartments)
3. Sell 'em off as condos.
That doesn't sound all that risky to me. In fact, it sounds like a great way to make a crapload of money very quickly and I would happily invest my money in a scheme like this. The fact that there's virtually zero new high-density condos being constructed in NYC means there's some kind of regulation seriously screwing with the system, because high-density construction should happen naturally when medium-density housing gets insanely expensive.
Sounds simple, but apparently you don't understand NY construction projects... the devil is in the details:
1. Good luck. Brownstones in Manhattan are pretty rare these days, and they're quite expensive, largely because you'll be finding them in the Upper West Side. There are wealthy families who have lived in these for decades and aren't about to move out. In order to compel people to move out and find a new place, you'll have to pay them 2-3x market rate, especially if they get wind that you're a developer, which will work out to be around $15-100 MILLION DOLLARS per building, if we're talking about a decent section of Manhattan. If you're lucky, you'll find someone to finance this operation. It will take you years to do get all of this done. In the mean time, you'll be getting sued by the people you didn't buy out because you are going to be blighting the hell out of their neighborhood.
2. 30 story towers don't have 1,000 units. Usually you'll see 200-400 units on new construction for a 30-ish story building. However, let's say for a moment you WERE able to get a cluster of 30 brownstones (15x2), you'd have about 50,250 square foot of land (1675 sqft per brownstone) to build on. You'll only be able to use about 75% of that on each floor, and given a 10% allowance for common space, and eliminating the first floor for management, you'll have about 33,918 sq ft on each floor (983,622 sqft total). You divide them up into 30% 600sqft studio, 30% 850sqft 1bdrm, 15% 1200sqft 2bdrm, 10% 1500sqft 2bdrm, 5% 3000sqft 3bdrm, and sell off four half-floor penthouses. That would leave you with 491 studios, 347 1bdrm, 122 sm 2bdrm, 65 big 2bdrm, 16 3bdrm, and 2 penthouses. At market rates, you'd be able to sell as follows: 491 studios for $600k each, 347 1bdrm for $800k each, 122 sm 2bdrm for $1.2m each, 65 big 2bdrm for $2m each, 16 3bdrm for $4m each, and the penthouses for $15m each. That's a cool $972.6m of revenue. Not bad, eh? Well, you paid $750 million for those brownstones (30 at 25 million a pop), and you spent $400m in construction ($400/sq-ft average construction cost in NYC). Oh, and your real estate agent charged you 8% to sell off the units, which ate up another $77.8m in revenue. It took you 5 years to complete the project, and you borrowed $1 billion at 5%, so the bank wants $250m in interest. You're now out $505 million.
3. We're talking about rental units aren't we? There are no price controls on condos.
Perhaps you should try attacking other forms of government regulation that actually inhibit growth such as the lengthy and bureaucratic building permit process and availability of non-union labor. I think you'll find that even regulation aside, the economics of in-filling in Manhattan are still quite prohibitive. Density is expensive, at least from a construction point of view. This is demonstrated time and time again in dense cities.
> The fact that there's virtually zero new high-density condos being constructed in NYC means there's some kind of regulation seriously screwing with the system, because high-density construction should happen naturally when medium-density housing gets insanely expensive.
You're letting your ideology guide your conclusion. There is constant new development happening in NYC, but it's expensive and complex, therefore impossible to outstrip the demand.
Wow, thanks for your in-depth reply, with a lot of delicious mathematatics.
You're right, I don't understand New York construction projects very well. You've convinced me, there's a lot more going on here than just rent control. Thanks again!
I moved from NY to SV this year. NYC is great but it is so large that the tech scene gets diluted by all the other industries. The suburbs are a tech wasteland (fine for other purposes I suppose).
That said, the banks there have very large development teams, but it's all in the service of banking and trading. I've been there, done that; so I could be biased. Overall, the vibe is very un-tech--unless you think algo trading is the tech's ultimate expression.
They completely ignore the growing startup scene in New York - Silicon Alley, Digital Dumbo[1] - and latch on instead to a story about a huge, already established company that's buying a building they already have 2000+ employees in.
Tech meccas are born from hundreds of small technology companies constantly pushing the limits of a platform, not from the presence of a single, large employer.
[1] http://www.digitaldumbo.com/about/