Cognitive Elite In California Support Rest Of State
Silicon Valley is carrying the rest of the state.
The San Francisco Bay Area has accounted for more than half of all job growth in California since 2007, though it accounts for less than one-fifth of the state’s population. Robust Silicon Valley earnings have also driven up income among the state’s elite and bolstered California’s budget. Last year, capital gains—profit from the sale of investments—accounted for nearly 10 percent of general fund revenues.
Bring in brains and thrive. Bring in people to do your manual labor, well then don't thrive.
Los Angeles is in with the losing parts of the state.
L.A.’s struggles predate the recession of 2008. In the past 20 years, greater Los Angeles has lost 3.1 percent of its jobs, according to a 2014 study by UCLA’s Anderson School of Management.
The pattern in California fits a larger national pattern. America is dividing up into tiers with big differences of income. Rural counties are going down along with some urban areas. Other urban areas have the brightest knowledge workers and they are thriving.
I expect this trend to become even more pronounced as more routine work gets automated. Already the employment prospects for the intellectually less able are dismal.
In a sane world we'd use knowledge of these patterns to set immigration policy and trade policy. But we don't live in a sane world. The great awakening is still some years off but probably less than 10 years.
By Randall Parker at 2016 February 07 09:47 AM
Do you know the price of love for a Silicon Valley man? That's what I thought Randall.
The price of love is more than just the dozen roses you need to buy after a fight. The price of love entails gifts, dates, trips, wedding ceremonies, homes, college tuition for your kids (if you make it this far), and the constant upkeep of making sure your significant other knows you still care.
According to the US Census Bureau, Americans spent $11.5 billion on chocolates and $8.4 billion on non-confectionary items in 2011. In the month of February alone, jewelry stores sold an estimated $2.8 billion worth of merchandise in 2013 compared to $1.5 billion during normal months. Forget about saving the children. Let’s save our marriages!
Think how much simpler a hug and a kiss would be. Well, not if you want to hold on to your woman. Despite many women saying it's the thought that counts, no man should ever come up empty-handed during Valentine's Day, birthday, anniversary, or winter holiday.
Let’s go through an exercise on the growing price of love from the perspective of a 30 year old Silicon Valley man who lives in San Francisco. Mr. Engineer makes $120,000 at a tech startup, rents a $3,000 a month one bedroom apartment, has a net worth of about $200,000 and hopes to make a couple million dollars when his company goes public in an estimated three years.
Before you judge him, remember that love makes people do anything and everything.
Mr. Engineer meets Ms. Daisy, a middle school teacher who makes $45,000 a year. A typical date consists of going out to a mid-tier restaurant like Garcon in the Mission District for some clams in white wine sauce, steak frites, seared scallops, and a bottle of pinot grigio for $120 total. Afterward, it’s only right for him to take her to get some Butter Love pie and hot chocolate. Add another $15. By the time they reach the SF Jazz Center, they’re feeling a little sleepy thanks to all the food they’ve eaten. No matter, Esperanza Spalding promises to get them moving out of their seats. But those upper deck seats cost $90 for two. The night is a blast for $225. All he’s hoping is for her to call again, and she does.
Once you start strong, you can’t fade. $225 nights are now the norm as he takes her out on at least 12 more similar type of dates plus 20 $50 dollar cheaper dates until he realizes she is the one! It’s time to ring shop.
Total date cost for the year: $3,700.
The engagement ring is another fantastically marketed item where all men are forced to buy a diamond ring, and hopefully a big one at that. Of course any educated man knows that carat size is not the only attribute of importance. He must also get a diamond of ideal cut, G or better color, and clarity no worse than VS1.
The reality is that only the carat size is what matters when your fiancee shows off the ring to her girlfriends. Let’s discuss some basic rules. First, there is the three month gross salary rule for how much to spend. Since our engineer friend makes $120,000 a year, he should consider spending $36,000. Another rule that is growing in popularity is the age equal to carat size rule. Let’s say the love of his life is 28, then a 2.8 carat engagement ring it is. Finally, there’s my absolute favorite rule which is the car rule for engagement ring buying. This rule states that the amount he should spend is roughly equal to the present value of his car. If he just bought a $60,000 BMW on lease yesterday, then he better go out and buy that 3 carat pillow top ring from Tiffany’s. If he’s driving in a frugal 2003 Honda Civic, then perhaps a nice $3,000 ruby ring would do.
Given engineers are practical people who tend to marry practical women, let’s go with a $10,000, 1.3 carat, G color, VVS2, princess cut engagement ring that was custom designed.
Total cost: $3,700 + $10,000 = $13,700.
The average wedding costs $28,000 in America compared to the median household income of just $51,000. Some of you may be shocked by such ostentation for one night, but don’t be because the average car sold is now $31,000. Is there really any wonder why the average American is struggling to accumulate wealth for healthier retirement?
Mr. Engineer and his fiancee would like to have a Napa wedding for 120 of their closest friends and relatives. But after discovering the massive booking costs at Auberge du Soleil and Calistoga Ranch, they decide to make the destination even farther by going to The Resort at Squaw Valley, Lake Tahoe instead. Perhaps this way, less than 100 people of the 120 people will come, thereby saving $550 per head. The end result was a $55,000 destination wedding plus another $3,000 for dinners and drinks for guests who came early for the rehearsal dinner and party.
Total Cost: $3,700 + $10,000 = $58,000 = $71,700.
No perfect wedding would be complete without the perfect honeymoon. After careful consideration, Mr. and Mrs. Engineer decide on a relaxing stay in one of those fancy huts over the emerald blue waters in Bora Bora for 10 days. The cost at the all-inclusive Four Seasons Bora Bora is $1,200 a night. Add on $2,500 for roundtrip tickets in economy for each and the couple is now at $17,000. Let’s budget in another $2,000 for random expenses such as taxis, souvenirs, and excursions. Considering the wedding cost $58,000 for the weekend, $19,000 is a steal for 10 nights.
Total Cost: $3,700 + $10,000 + $58,000 + $19,000 = $90,700.
Unfortunately for new home buyers in San Francisco, the median price for a single family house is roughly $1 million. Sadly, $1 million doesn’t buy you much unless you’re willing to live out in the Richmond, Sunset, or Bernal Heights districts. There you’ll find a healthy 1,800 square foot, three bedroom, two bathroom Edwardian that needs $50,000 of work if you don’t get outbid by the hundreds of real estate starved buyers.
Mr. and Mrs. Engineer don’t want to live that far away from work, so instead they opt for a one bedroom, one bathroom condominium in a high rise downtown. The cost for such modern living is $950,000 and $840 a month in HOA dues for a place at One Hawthorne Place. Mr. Engineer decides to pay the entire down payment like a good husband.
Total Cost: $3,700 + $10,000 + $58,00 + $19,000 + $200,000 (downpayment + closing) = $290,700.
After three years of marriage, Mr. Engineer begins to hate life because his startup, which paid him $30,000 a year below market rate is dying a quick death due to intense competition. Half of his department was let go last quarter and he knows he’s next. Thanks to his fancy one bedroom condo, he was only able to save about $16,000 a year. With the thought of paying a $3,600 /month mortgage + a $840/month HOA fee and no job, Mr. Engineer is stressed out of his mind.
Before buying the one bedroom condo his friend warned him, “No matter how much you guys get along, get a two bedroom so you can have your own space when times are tough!” Mrs. Engineer is the loveliest, kindest woman in the world, but Mr. Engineer starts getting incredibly annoyed at always bumping into her in their 800 sqft apartment. To make matters worse, they’ve been trying to have a baby for the past year to no avail.
Mr. Engineer feels like a failure largely because the company on which he spent 12 hours a day for three years is now going bankrupt. He feels ashamed he can no longer provide the ideal life he promised his wife. One day, Mr. Engineer comes home early to find Mrs. Engineer swimming with Mr. Engineer’s old boss in the pool downstairs. He hated his old boss and seeing them together made his temper flare. Although nothing happened, Mr. Engineer began yelling at Mrs. Engineer and breaking everything in the apartment. It turns out his old boss was just there to offer Mr. Engineer a job at his new company. That’s not happening anymore.
Mrs. Engineer files for divorce, and takes all of Mr. Engineer’s $50,000 in savings. They decide to sell the property for $1 million because neither of them can afford to live in such luxury. The proceeds net them only $930,000 after commissions and transfer taxes. After paying off the $750,000 remaining mortgage, they are left with $180,000 which they divide equally even though he ponied up 100% of the downpayment. Both realize things could have been much worse if they had to sell years earlier in 2008-2009.
Total Cost: $290,700 – $90,000 + $115,000 for the divorce = -$315,700