Spoils of success force adjustments in Silicon Valley
Imagine that you are just graduating from California Institute of Technology with a degree in computer sciences. Twenty companies offer you a job. Your wife wants to remain in California, so you accept a job at Silicon Valley Industries, with a starting salary of $35,000 a year. Where do you live?Skip to next paragraph
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Not in Silicon Valley, where a four-bedroom, two-bath house on a quarter-acre of land costs $250,000.
In this little vignette, which is happening quite frequently, lies a tale about the crescent of land stretching from Palo Alto to San Jose. It is now so expensive to live here that it is increasingly difficult to attract ''fresh faces'' to devise the computer games and software programs of the future.
Yes, Silicon Valley, which has always thrived on change, is itself changing. Real estate prices are now in the stratosphere, pollution leaves a smudge of smog in the air, traffic at rush hour is comparable to New York's Long Island Expressway, and workers are commuting over an hour to get to their jobs.
All of these pressures are hitting the valley in its breadbasket. ''When companies go to site a new plant,'' says J. Michael Murphy, an editor of the California Technology Stock Letter, ''they go to where people want to live. Engineers today can hold out for life style. And they don't want to live in Silicon Valley.''
The valley is changing, agrees Thomas D. Hinkelman, executive director of the Semiconductor Industry Association. ''For the past five or six years the valley has been reacting to the rapid development,'' he said in his office here. ''You no longer have a large unskilled labor force.'' So when corporations want to build a new plant, they go to Texas or Utah, or to Ireland or Puerto Rico. ''I think the valley will remain the headquarters and research-and-development center,'' Mr. Hinkelman says, ''but manufacturing will take place elsewhere.''
However, even some of the headquarters are moving elsewhere. Reid Dennis, a general partner in the venture-capital firm of Institutional Venture Partners, located in Palo Alto, has noticed the change in his business - finding and funding new ventures. His two most recent ''deals'' were located in Portland, Ore., and Boulder, Colo.
''In the case of the Boulder deal, we were able to hire a very competent chief executive officer out of Silicon Valley and move him to Boulder, where housing is 10 to 20 percent cheaper.''
And, Mr. Dennis, who was a venture-capital investor in such companies as Collagen Corporation, a biotechnology company, and Seagate Technologies, which makes Winchester disk drives, says entrepreneurs in Silicon Valley are getting greedy. ''The fact is,'' he says, ''deals elsewhere are more reasonable.''
The manufacturing end of the business is not the only part of the business changing addresses. Companies that design software, the instructions that tell the computers how to perform, are also locating elsewhere.
''We've talked about moving some operations elsewhere,'' says Tom Lavey, executive president and chief operating officer of ASK Computer Systems Inc. in Los Altos, which develops software for manufacturing companies. ''Higher pay differentials just don't make up for the real estate values.'' Mr. Lavey should know; he moved to Silicon Valley from Westfield, N.J., only five years ago.