Is Silicon Valley Really Last Among Tech Hubs?

This week the Silicon Valley Leadership Group released its second annual "study" showing the Bay Area as the worst among major global tech hubs. From the San Jose Business Journal

For the second year in a row, the Leadership Group has ranked Silicon Valley last among U.S. tech centers in its measure of quality of life and business encouragement indicators.

Raleigh-Durham-Chapel Hill, N.C., comes in first among domestic rivals by the Leadership Group's measure, which is based on unemployment rate, the percentage of people able to afford a median-priced home, traffic congestion, 8th-grade math achievement, cost of electricity and state taxes.

Seattle comes in second, followed by Denver, Austin, Texas, and Portland, Ore. Denver was new to the list of comparisons this year, as was Philadelphia (6), Washington, D.C., (7), Chicago (8) and New York (10). Boston was ninth and San Diego was 11th, next to last.

Furthermore, the group puts us behind a dozen international cities, places like Bangalore, Tokyo, and Dublin as well.

I understand what the group is trying to do. They're trying to motivate policy, make sure we don't grow complacent or arrogant. Maybe swipe a little tax money for their pet projects. But I question the tactics and I deeply question the methodology of the press release study. (I can't find any full explanation of the methodology on the group's web site.) California's tax system is indeed ridiculous, but no where in the press coverage is that a focus of the group's call to action. Housing is expensive, but no where do they call to increase supply.

The conclusion that the "quality of life and business encouragement" in the Bay Area is lowest is due, as far as I can tell, to high housing costs. The group admits they don't measure things like weather, environment, or culture, which is fine,
but realize that mean temperature alone makes my house worth a good
chunk more than, say, Chicago.

It seems to me that the group is measuring the symptoms of massive success and remarkably amazing quality of life and business encouragement. Homes cost a lot in the Bay Area because smart, hardworking people from all over the world want to live here and they get rich doing so. end. of. story.

Let me share a few anecdotes about why these conclusions are crazy and counter productive.

I frequently use the free WiFi at the Red Rock cafe in downtown Mountain View. There is no place in the world like this. On any given day you can overhear people negotiating A-rounds, recruiting developers, hacking away on Ubuntu, etc. It's 5 minutes from Google, Microsoft's SV headquarters, start-up lawyers, venture guys, not to mention countless start ups themselves. Teeming is the only way to describe the businesses being encouraged here. We're talking start-up-nerd heaven. Maybe you can find a cafe in Cambridge that is as "encouraging to business" as this place, but I doubt it.

Contrast this to some of the "better" places to live and do business in the group's study:

• I've done extensive work in India. Let me tell you that Bangalore is a remarkable, exciting place right now. But any city where you find a family of four on the same motorcycle (oh yes. the 2yr old straddling the gas tank) and you have to watch out for the goats in the trash bins outside the office, has a long way to go on quality of life issues. I once asked a friend's 13 year old daughter who had just returned to India after four years in Silicon Valley which she liked better. Her reply "well, in the US I had to drive to see my friends. In India I can just go downstairs and they're all right here in the street." Proximity to friends is indeed important. Also the 8th graders do better on math tests. That's why we should encourage the import of people after they've gotten their EE degrees.
  
• Seattle is number 2 on the list. Lots of great opportunity and innovation power Seattle these days. The Microsoft mother ship is a glorious asset. Paul Graham has captured eloquently the factors that build a great tech center and Seattle in my opinion is as well positioned as any place in the world to replicate the Silicon Valley success. But Paul points out that success takes a long time and Seattle is about 15 years behind Silicon Valley purely in terms of fermentation time. (It is notable, too, that Paul didn't write How To Be Raleigh-Durham.) In the next 15 years though, watch Seattle home prices approach California. It's not a symptom of a problem, its a symptom of success. Rock on. (Barring some ironic twist of global warming fate, California homes will still have a sunshine-premium.)
• BTW- there is nothing in Tokyo's tax structure, housing costs, traffic, or employment rates that suggest it could possibly rank higher on this group's study, but apparently it does. Math scores again?
  

Of course the group readily admits "Our strength is in innovation, research and design," available venture capital is four times the nearest competitor.

The bottom line is that the SVLG is out for some headlines. But if you are out to start a company, especially a tech company, my thoughts for you are simple: Housing costs are a tiny price to pay until you get rich yourself. Go elsewhere at your peril.

Update: this story got Dugg yesterday. Digg it again.