Where Are the Tech Zillionaires? San Francisco Faces the IPO Fizzle(nytimes.com)
nytimes.com
Where Are the Tech Zillionaires? San Francisco Faces the IPO Fizzle
https://www.nytimes.com/2019/12/19/technology/tech-IPO-san-francisco.html
64 comments
> or sending their kids to private schools
I think this is the key, you're seeing mostly people with kids, and their behavior is different in general than people without kids.
I think this is the key, you're seeing mostly people with kids, and their behavior is different in general than people without kids.
You’ve been living a sheltered life.
While most workers are trying to get by, the wealth and opportunity has attracted all kinds of people, which is fine.
I’ve noticed that anywhere in America where there is money to be made, there are clusters of people who are willing to also spend all of it.
While most workers are trying to get by, the wealth and opportunity has attracted all kinds of people, which is fine.
I’ve noticed that anywhere in America where there is money to be made, there are clusters of people who are willing to also spend all of it.
Where are those people? How does one come into contact with them?
They're around. They cluster, as you might expect. I worked at one a16z-funded startup where probably 1/3 of the engineering department were big spenders. I expect the cluster was a result of the CTO being an extremely big spender, and very loud at broadcasting that fact.
Not exactly huge spenders but I know a lot of people in their early-mid 20s who spend almost all excess income (probably about $70k-120k) on clothes, food, sports tickets, cars, and vacations. And live in nice apartments.
As someone who owns shares at a company preparing to IPO, all I can say is I'm at least fortunate to have a stake in the massive asset bubble. The last thing I'll be doing is buying a house in the Bay Area though.
Exactly. Why exchange one inflated asset for another inflated asset when you can cash out and keep them in T-bills (or even a broad ETF), instead.
Plus I figure the majority of people who have significant gains likely vested around 2011-13 and are closer to middle age now like myself and are thinking about family and retirement, not wine cellars and penthouses.
wine cellars and penthouses can definitely be part of retirement :)
Talk about burning money. Treasury bills are returning negative real rates.
Back in the 80s there was a brief window where treasury bills hit close to 15% and that’s because they were thought to be suspect.
Perhaps we should get back to rationality and start suspecting that massive deficits and printing Monopoly money isn’t so good for the future.
Back in the 80s there was a brief window where treasury bills hit close to 15% and that’s because they were thought to be suspect.
Perhaps we should get back to rationality and start suspecting that massive deficits and printing Monopoly money isn’t so good for the future.
Well you can actually live in one of them.
If you suspect the price of the asset will go down, then it's better to rent than to buy it
> The last thing I'll be doing is buying a house in the Bay Area though.
The two are actually interrelated. Lots of people of amassed an incredible amount of wealth from the housing market in the bay area and is largely due to wealth generated from tech (which then trickles down to lawyers, real estate agents, etc). I'm not sure why you think the one (tech companies) is an easy "all-in" and the other one is completely (real estate) "hands-off". I would think most people would think the opposite, since real estate has a much more tangible asset to realize.
The two are actually interrelated. Lots of people of amassed an incredible amount of wealth from the housing market in the bay area and is largely due to wealth generated from tech (which then trickles down to lawyers, real estate agents, etc). I'm not sure why you think the one (tech companies) is an easy "all-in" and the other one is completely (real estate) "hands-off". I would think most people would think the opposite, since real estate has a much more tangible asset to realize.
Agreed. Working in the Bay Area makes sense despite the massive cost of renting because savings are just as large. So if you spend 10 or so years in the Bay Area and move to another part of the country you could live very well.
That’s how my wife and I paid off our student loans. We lived in non-trendy neighborhoods (Excelsior and Daily City) but within a 1.5 mile walk to bart. saved a ton of money just because of that.
There’s so much more leverage regarding engineering compensation in the Bay Area.
Keep housing a spending relatively in check, and you’ll accumulate savings the Midwest could only dream of.
There’s so much more leverage regarding engineering compensation in the Bay Area.
Keep housing a spending relatively in check, and you’ll accumulate savings the Midwest could only dream of.
Moving away from your professional network when you're only 10yr into your career is not advice often given to people looking to "do well"
Edit: Sine apparently it doesn't go without saying, for a great many people (dare I say majority) career advancement (and the compensation that comes with it) is the most practical path to a happy life.
Edit: Sine apparently it doesn't go without saying, for a great many people (dare I say majority) career advancement (and the compensation that comes with it) is the most practical path to a happy life.
I've never heard of Yondr before but, wow, what a delightful little technological window into today's burgeoning economic disparity. An entire company whose business model revolves around helping rich people hide their recreation from public view because they don't want the shame of their consumption being a little too conspicuous.
I assume the next natural evolution is a photo-sharing social network that only ultra-high-net wealth individuals are allowed to enter. That way you can still "Instagram" your life, but just to the other ultra-rich tech bros and Saudi royalty at your economic level. Now that I think about it, I wouldn't be surprised if this already exists.
I assume the next natural evolution is a photo-sharing social network that only ultra-high-net wealth individuals are allowed to enter. That way you can still "Instagram" your life, but just to the other ultra-rich tech bros and Saudi royalty at your economic level. Now that I think about it, I wouldn't be surprised if this already exists.
I don't think that's an accurate description of why Yondr exists. The impetus for solutions like that were to allow for things like phone free concerts. You don't have to be rich to be annoyed with someone blocking your view holding their phone in the air.
Sure, I think that's a valid good use case. But I honestly have a hard time believing there's enough demand for that to support an actual enforced technological solution.
Maybe I'm wrong but I find it hard to believe stand-up comedians and musicians who want the audience to be in the moment are enough to keep this business afloat. I think it's more likely for things like:
https://www.businessinsider.com/trump-clint-lorance-mathew-g...
Maybe I'm wrong but I find it hard to believe stand-up comedians and musicians who want the audience to be in the moment are enough to keep this business afloat. I think it's more likely for things like:
https://www.businessinsider.com/trump-clint-lorance-mathew-g...
The startup economy is all about forcing a technological solution whether theres demand for it or not. VC funding can make up for a lot.
Its much more likely they’re another zombie tech company than part of a sinister plot for rich people.
Its much more likely they’re another zombie tech company than part of a sinister plot for rich people.
There’s about zero chance I would ever attend an event where I had to surrender my autonomy in that way.
What if an emergency happens and you need to call 911? Is my safety less important than some vain attempt at reducing “leaks” or some fear that your precious event will be broadcast unauthorized? No thank you.
What if an emergency happens and you need to call 911? Is my safety less important than some vain attempt at reducing “leaks” or some fear that your precious event will be broadcast unauthorized? No thank you.
Public equities investing is severely underrated. I've been following the "big will get bigger" mantra for several years and it's paid off big time.
Apple all time highs (2x'd in a year!) Microsoft all time high Adobe all time high Salesforce near all time high
List goes on.
Apple all time highs (2x'd in a year!) Microsoft all time high Adobe all time high Salesforce near all time high
List goes on.
Not underrated at all. Most investments are in public equities today. I have a theory that the long boom is because we’ve wised up to investing most of our wealth in index funds and thus making it hard for any one company’s failure to bring down the rest of the economy.
I mean in Silicon Valley.
Everyone thinks you have to be employee #10 at a future unicorn to get "rich" but you could've made a very average salary and just invested your savings in tech stocks over the last 10 years and probably be well ahead of 99% of people trying to be the former.
Everyone thinks you have to be employee #10 at a future unicorn to get "rich" but you could've made a very average salary and just invested your savings in tech stocks over the last 10 years and probably be well ahead of 99% of people trying to be the former.
I think it’s not just the money. There is something about going against all odds and coming out ahead in the end that many (especially younger) people find tantalizing. There’s also the fact that many people that work for startups have a very individualistic, creative streak and resist the corporate neutering that happens at most bigger companies.
This article didn't mention how holders can be extra hurt by tanking IPOs due to taxes. Many companies release their RSUs at IPO (often withholding too little tax) and then you are locked up, as the price may fall.
You can't write off the capital loss occurred during the lockup against the ordinary income from the RSU release, meaning take home is even less than price would suggest.
No idea why companies don't wait until end of lockup to release the RSUs.
You can't write off the capital loss occurred during the lockup against the ordinary income from the RSU release, meaning take home is even less than price would suggest.
No idea why companies don't wait until end of lockup to release the RSUs.
This is how startups kinda work. It's really hard to make money from an ipo even if you joined early.
That wasn't how things were 10-15 years ago. What changed over the last decade was the pumping up of private valuations such that by the time the startups finally hit a liquidity event, they were overvalued.
This. The bulk of the returns and growth now happens pre-IPO. Then the price at IPO is disconnected from public market expectations. But you’re also at the top of the growth S curve so growth is decelerating.
But as a early employee, when you join before valuation goes up... You still make only scraps, because you're not getting that many shares to start with and "common stock" aren't worth as much as "preferred stock".
Common and preferred shares start to converge as a company approaches IPO. An employees gains are likely to exceed those of VCs in such an event. When companies are acquired and when liquidation preference comes into play is when employees get screwed.
There was also some (completely unnecessary IMO) outrage when Google went public because its cafeteria's chef was given stock options and was (eventually) able to make a nice lump sum once he was able liquidate.
There's definitely a misalignment between who founders think should be on the cap table vs those further up the food chain, and these long-running deals are I think partially done to cull the herd so to speak.
There's definitely a misalignment between who founders think should be on the cap table vs those further up the food chain, and these long-running deals are I think partially done to cull the herd so to speak.
I have a radical idea that I’d like to see put into practice. Hopefully do it myself at some point.
We tell a story about risk and innovation that justifies founders and early employees getting massively more value (equity) than later employees.
And the amount of equity given out falls off a cliff as the company grows. So you have some people with ownership that is 10x, 100x or even 1000x larger than others. That leads to radically different outcomes.
What if we rethought equity rewards to substantially flatten those ratios? And maybe 20:1 or something was the max ratio.
Then employees truly are owners.
Certainly lots of issues with this half baked idea. But my overall point is that I think the typical equity pyramid is deeply unfair. It could be more equitable.
We tell a story about risk and innovation that justifies founders and early employees getting massively more value (equity) than later employees.
And the amount of equity given out falls off a cliff as the company grows. So you have some people with ownership that is 10x, 100x or even 1000x larger than others. That leads to radically different outcomes.
What if we rethought equity rewards to substantially flatten those ratios? And maybe 20:1 or something was the max ratio.
Then employees truly are owners.
Certainly lots of issues with this half baked idea. But my overall point is that I think the typical equity pyramid is deeply unfair. It could be more equitable.
One story I enjoyed discovering that is similar to what you're suggesting is the early equity grants at Wizards of the Coast (publisher of Magic: the Gathering). The founder was liberal with giving out equity to people who were helping build the company, not just the pure cash investors. I too think the value early employees add in building a company far outweigh the equity grants that have become "standard" while the founders retain the vast majority of equity.
> I think it was my old friend from Walla Walla, Franc Sawatzki, who donated a drafting table that we valued at something like $100. Given that the sale to Hasbro yielded over $1,400 per share, that $100 “investment” yielded something like $280,000 a decade later. Not bad!
https://www.gwern.net/docs/economics/2013-adkison-wizardsoft...
> I think it was my old friend from Walla Walla, Franc Sawatzki, who donated a drafting table that we valued at something like $100. Given that the sale to Hasbro yielded over $1,400 per share, that $100 “investment” yielded something like $280,000 a decade later. Not bad!
https://www.gwern.net/docs/economics/2013-adkison-wizardsoft...
I started my career at the peak of dot com, and remember one of my co-workers leaving. He’d been early at Wizards of the Coast. Someone else said he was “calling in rich”.
Sure, I'd love if people in power gave me more money. Why don't they?
I remember a friend talking about how he didn't take Youtube options for some consulting work he did for them in their very early days. This was almost exactly 10 years ago and his comment was that he could have wallpapered his entire house in all the worthless equity he had been paid over the years. It was always hard, it was always rare, but only the winners get press attention.
The answer to the title of the article could also be "where the giant and increasing profit margins", which is nowhere.
I don't see any new company printing money like Facebook or Google.
I don't see any new company printing money like Facebook or Google.
Does it count if a new company gets bought by then?
Good point, but other than Whatsapp/Instagram, I haven’t seen many big ones in the scale of FB/GOOG which create tons of “zillionaire”.
> “We are excited by any resetting of Bay Area rents that bring them down from their artificially inflated high,” said Fred Sherburn-Zimmer, the executive director of Housing Rights Committee, which fights against evictions. “Eventually all bubbles burst.”
What a typical Bay Area NIMBY. Instead of fucking building more housing, he's just sitting there hoping for a bubble burst to reduce rents.
What a typical Bay Area NIMBY. Instead of fucking building more housing, he's just sitting there hoping for a bubble burst to reduce rents.
The credits on the YIMBY protest photo in this article are given to Housing Rights Committee:
https://shelterforce.org/2019/02/19/yimbys-friend-foe-or-cha...
You may wish to do more research on their alignment before declaring them NIMBY.
https://shelterforce.org/2019/02/19/yimbys-friend-foe-or-cha...
You may wish to do more research on their alignment before declaring them NIMBY.
My understanding is that HRC broadly opposes the construction of any higher-end housing. Effectively that's a NIMBY position. In American history new housing construction has almost always been "high-end".
The way housing becomes affordable is that high-end new construction displaces demand for yesteryear's construction turning it into mid-end housing. Which then in turn displaces demand for the previous mid-tier which now becomes low-tier affordable housing.
In effect rich consumers subsidize poor consumers by insisting on continuously replenishing the housing supply with new modern housing conforming to the latest hip trends in architecture and design. The car market is a very good example of how this works absent arbitrary supply constraints. Arguably the used car market is the biggest single vector of wealth redistribution in America. The poor benefit from a massive oversupply of cheap but reliable used cars, because the rich insist on getting a new car every two years.
HRC refuses to acknowledge this dynamic. So they may be "YIMBY" in the sense of having some sort of vision about new construction. But that vision, mass construction of new affordable housing, is completely unviable. That makes them YIMBY in principles, but NIMBY for all practical intents and purposes
The way housing becomes affordable is that high-end new construction displaces demand for yesteryear's construction turning it into mid-end housing. Which then in turn displaces demand for the previous mid-tier which now becomes low-tier affordable housing.
In effect rich consumers subsidize poor consumers by insisting on continuously replenishing the housing supply with new modern housing conforming to the latest hip trends in architecture and design. The car market is a very good example of how this works absent arbitrary supply constraints. Arguably the used car market is the biggest single vector of wealth redistribution in America. The poor benefit from a massive oversupply of cheap but reliable used cars, because the rich insist on getting a new car every two years.
HRC refuses to acknowledge this dynamic. So they may be "YIMBY" in the sense of having some sort of vision about new construction. But that vision, mass construction of new affordable housing, is completely unviable. That makes them YIMBY in principles, but NIMBY for all practical intents and purposes
>In American history new housing construction has almost always been "high-end".
Anecdotally this is the case right now here in central Indiana. Fiance and I are starting to look for a house, we can get something 20-50 years old for 150-180k or the new construction physically across the street with the same square footage (and much smaller yards) is starting around 200k headed well past 300k (because, apparently, fancy counter tops and stainless appliances are worth an extra 100k eyeroll).
There's a half dozen new additions going in where we're looking and the cost for a tiny 1 bedroom house will get you 2-3 bedroom house with 0.25-0.5 acres within a 1/2 mile drive door to door purely because of all of the 'features' which are almost entirely cosmetic.
Anecdotally this is the case right now here in central Indiana. Fiance and I are starting to look for a house, we can get something 20-50 years old for 150-180k or the new construction physically across the street with the same square footage (and much smaller yards) is starting around 200k headed well past 300k (because, apparently, fancy counter tops and stainless appliances are worth an extra 100k eyeroll).
There's a half dozen new additions going in where we're looking and the cost for a tiny 1 bedroom house will get you 2-3 bedroom house with 0.25-0.5 acres within a 1/2 mile drive door to door purely because of all of the 'features' which are almost entirely cosmetic.
NIMBY is defined by the objection to housing only when it's in one's own backyard, and otherwise being perfectly happy to see it constructed elsewhere.
You describe HRC as opposing the the construction of high-end housing regardless of location — thus, whatever else it may or may not be, it certainly isn't NIMBY.
(The outcome may end up being that not enough housing is built, and that's of course terrible, but that's still not NIMBY, nor is it NIMBY-ism. It's some other form of idealism that isn't derived from the NIMBY principles.)
You describe HRC as opposing the the construction of high-end housing regardless of location — thus, whatever else it may or may not be, it certainly isn't NIMBY.
(The outcome may end up being that not enough housing is built, and that's of course terrible, but that's still not NIMBY, nor is it NIMBY-ism. It's some other form of idealism that isn't derived from the NIMBY principles.)
There aren't that many cheap used cars. Reliable uses cars hold their value, and resale adds transaction costs (especially when going through a dealer) including the nefarious sales tax that regressively taxes goods on every transfer.
> You may wish to do more research on their alignment before declaring them NIMBY.
They're not exactly NIMBY, but also not exactly YIMBY. They opposed SB50, which was the most ambitious measure to allow new housing construction in San Francisco, and they're apparently known for objecting to other developments to build affordable housing (generally because any new development in a city means displacing or impacting at least a few people).
They're not exactly NIMBY, but also not exactly YIMBY. They opposed SB50, which was the most ambitious measure to allow new housing construction in San Francisco, and they're apparently known for objecting to other developments to build affordable housing (generally because any new development in a city means displacing or impacting at least a few people).
The NIMBY trolley problem: better to do nothing and allow 5 people to become homeless than to approve a new development that displaces 1 person.
I don't see any NIMBY-ism in that statement.
His goal is reducing evictions, and if there's less money providing an incentive for landlords to evict their tenants, then that reduction is more likely to happen.
Whether or not it's the result of a bubble bursting is a matter of opinion, but if the luxury dwelling builders are wondering where their tenants are, it's fair to say there's at least some air coming out.
His goal is reducing evictions, and if there's less money providing an incentive for landlords to evict their tenants, then that reduction is more likely to happen.
Whether or not it's the result of a bubble bursting is a matter of opinion, but if the luxury dwelling builders are wondering where their tenants are, it's fair to say there's at least some air coming out.
I don't see how any of this quoted comment or the organization he works for is indicative of someone being a NIMBY. A NIMBY wants rents to stay high, at least according to the strawman caricature definition of the NIMBY label that young people on internet forums assign to their neighbors.
Saying you want rents to come down (or at least stop rising) does not automatically mean you are against building more housing...
Many people arguing for more housing in the Bay Are are doing so because they want prices/rents to come down, and most NIMBYs want prices/rents to keep rising.
Many people arguing for more housing in the Bay Are are doing so because they want prices/rents to come down, and most NIMBYs want prices/rents to keep rising.
Artificiality high because HRC and similar organizations stop new housing at every turn...
The United States is one of the largest nations in the world in terms of land mass and there are thousands of counties all over the country that would bend over so far backwards that their spines would snap to enable real estate development for any number of Bay Area companies. T\he United States has a world class network of interstate highways that enables rapid motorized transit at high volumes in every state of the nation. There is also a network of third world caliber airports that are nonetheless serviceable.
The interstates are great for truck delivery and one-off trips such as moving/vacation, but a job is a daily round trip.
How far are software engineers really going to commute? If they don't commute, are they going to move to your 2nd/3rd tier town?
How far are software engineers really going to commute? If they don't commute, are they going to move to your 2nd/3rd tier town?
Some would but most aren't, so we see the same molasses drip of deceleration as companies that say they intend to hyper-grow stay stuck in a region that wants to hyper-stagnate.
Infrastructure is one thing. Human capital is the much more important factor for any of those companies.
Since 2010 San Francisco building permits have been on a sharp rise, with 95%+ of them being multifamily projects. See stats here: http://www.vitalsigns.mtc.ca.gov/housing-growth
I'm not a city planner so I don't know anything but what I see, and what I see is infrastructure at capacity -- gridlocked streets, BART completely full at commute times, etc
I'm not a city planner so I don't know anything but what I see, and what I see is infrastructure at capacity -- gridlocked streets, BART completely full at commute times, etc
> what I see is infrastructure at capacity
This is a function of the infrastructure that's been built, not anything fundamental to San Francisco. Building more transit capacity, reducing incentives for city dwellers to own and take cars, et cetera would alleviate these problems the same way they have in much-denser cities around the world.
This is a function of the infrastructure that's been built, not anything fundamental to San Francisco. Building more transit capacity, reducing incentives for city dwellers to own and take cars, et cetera would alleviate these problems the same way they have in much-denser cities around the world.
Allowing people to live near where they work takes stress off of the infrastructure, not the other way around
Edit: I made an incorrect comment on permitting for a minute because I was looking at the area, not just SF county.
Edit: I made an incorrect comment on permitting for a minute because I was looking at the area, not just SF county.
You could argue that the "artificially inflated" comment refers to NIMBYs blocking supply from being built.
Everyone I've worked with up to director levels at FAANG are mostly content with just investing their riches and maybe thinking about retirement or sending their kids to private schools. I haven't seen any extravagant displays of wealth - some BMWs / Teslas in the garage but never a Ferrari for instance.