Rotman Management

Does Innovation Cause Inequality?

THREE TECH GIANTSGoogle, Apple and Facebook — are headquartered in the heart of Silicon Valley, an hour or two south of San Francisco. The area is deep suburbia, and as such, isn’t attractive to younger people with highly prized technical skills. As a result, many programmers live in San Francisco or Oakland and make a daily trek along Highways 101 or 280.

Given that technology workers were already putting in long hours, it didn’t take long for their employers to step up and make this commuting time productive: They established their own private bus system, with comfortable seats, Wi-Fi and access to drinks. And in the process, those buses became a symbol. In 2014, buses carrying tech workers were blocked by angry locals. Protesters in Oakland threw rocks at them.

The protesters were pointing the finger at the impact that Silicon Valley’s most successful companies were having on housing costs in the Bay Area. Those gleaming private buses were like a finger in the eye to locals now struggling to pay the rent. Many San Francisco tenants would probably have foregone the access to the world’s information that Google gave them in exchange for being able to pay 1990s rents again.

The same forces are also squeezing out affordable city homes, making it harder for people on modest incomes to buy or rent in popular places. The average Manhattan apartment now rents for over $40,000 per year — slightly above the average disposable income per person in the U.S. As urban studies theorist Richard Florida has pointed out, “Techies and tech startups are just the latest players in a much longer running battle over urban space.”

The tripling of San Francisco rents over the past generation has priced out many locals. But other locals benefit from the influx of new arrivals. Old neighbourhoods were upgraded. New buildings were created. Restaurants and cafés are booming. A bike store owner in Oakland who used to literally watch tumbleweeds go by claimed, “Now I’ve got people walking in every few minutes.”

Seen in, co-founder of , the world’s most successful start-up accelerator program. Each year, Y Combinator selects over a hundred (mostly) young entrepreneurs to put through a three-month program designed to turn their ideas into start-ups by offering funding (in return for an equity stake) and mentorship. Out of its program has emerged a network of thousands of entrepreneurial successes including , , and .

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