Why do people [Why Would I] live in expensive places?

Questions on how we spend our money and our time - consumer goods and services, home and vehicle, leisure and recreational activities
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pongun
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Why do people [Why Would I] live in expensive places?

Post by pongun »

Hey, everyone.

I've been lighting up the forums lately with my bizarre, possibly thought-provoking and hopefully interesting questions and ideas. Here's another one: why do people live in expensive places when there are cheaper places that can work just as well?

I live in an area where I was able to live rather successfully on around $16k per year gross (I now make more and I feel kinda posh). Yet, a lot of people I've spoken with on these forums say they need something like $30k for bare minimum survival, or even more like $100k per year (like in San Francisco). I have no idea why a person would intentionally live somewhere that is so expensive, when every amenity is available for a fraction of those costs in other places.

Could someone non-mockingly explain to a guy who's actually ignorant about this sort of thing? I like cheap. Why do others like expensive? Thanks!
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Re: Why do people live in expensive places?

Post by mac808 »

I'd say the most common reason is proximity to high-paying jobs. If you want to be a five minute drive from your $150k-a-year job at Google, it's going to be expensive. If you're willing to commute two hours each way, you will save a lot of money.
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Re: Why do people live in expensive places?

Post by mackstann »

Look at it the other way: Why are these places so expensive? Because people want to live there. They have a lot going for them.
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pongun
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Re: Why do people live in expensive places?

Post by pongun »

I just know that whenever I visit a place, I'm still me. I can be happy or sad anywhere, and it doesn't seem to matter what I'm looking at, what the weather's like or any of that other stuff. What factors do you mean as far as having a lot going for the places?

Don't people with high-paying professional jobs just telecommute? I know that'd be in my contract if I were a $150k/yr Googler, Google-person or whatever.
ks289
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Re: Why do people live in expensive places?

Post by ks289 »

Off the top of my head

1. Jobs, strong and broad economic base.
2. High quality school district
3. Convenience (close to major metro, airport, highway) and short commute times.
4. Other amenities (arts/culture/recreation opportunities, Shopping.)

I sound like a realtor now!
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Re: Why do people live in expensive places?

Post by madbrain »

pongun wrote:I just know that whenever I visit a place, I'm still me. I can be happy or sad anywhere, and it doesn't seem to matter what I'm looking at, what the weather's like or any of that other stuff. What factors do you mean as far as having a lot going for the places?

Don't people with high-paying professional jobs just telecommute? I know that'd be in my contract if I were a $150k/yr Googler, Google-person or whatever.
That's not the way google works actually, they built the googleplex with all kinds of on site services so people stay in the office as long as possible.
Things like free food, onside doctors, haircuts, gyms, etc. There may be some telecommuters but they are not the majority.
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Re: Why do people live in expensive places?

Post by traineeinvestor »

ks289 wrote:Off the top of my head

1. Jobs, strong and broad economic base.
2. High quality school district
3. Convenience (close to major metro, airport, highway) and short commute times.
4. Other amenities (arts/culture/recreation opportunities, Shopping.)

I sound like a realtor now!
+1

And proximity to family.

Living in Hong Kong the very high cost of living is offset by the lower tax rate, although that was not a motivating factor for me.
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Re: Why do people live in expensive places?

Post by Kuota Rider »

I was just telling a friend the other day -- you can't put a price tag on your neighbors and the friends your children will grow up with. I lived in one town where neighbors never socialized, everyone hunted and taught 6-month old toddlers how to drive ATV's in the sreets. Now I live in an area where neighbors all wave, visit, watch eachothers kids. I have no issue paying more to live in a nicer neighborhood / city.
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Re: Why do people live in expensive places?

Post by madbrain »

pongun wrote: I live in an area where I was able to live rather successfully on around $16k per year gross (I now make more and I feel kinda posh).
I call BS on living "rather successfully" on $16k gross.

The poverty level for 1 person is $11,170.

Does your employer withhold any payroll taxes from your paycheck ? Like SS, medicare, or disability.

Do you pay any federal or state income tax ?

Do you pay for your health insurance, dental insurance, life insurance, disability insurance ? Do you just go without all of these ? If so, how successful are you really going to be the day you get sick ? If some of these are paid for by your employer, you need to properly account for the actual value of the benefit. The employer subsidy needs to be accounted as part of your income and the actual full premiums in your expenses. In reality the benefits would likely cost you more if you were not working and trying to obtain them on your own at individual rates.

Do you ever go to the doctor ? Get a checkup ? Get preventive tests ? Buy any prescription or over the counter medicine ? Go to the dentist ? Ever got any cleaning, xray, fillings ?

Do you have a telephone ? Cable or satellite TV subscription ? Cell phone ? Internet connection ?

Do you have water, electricity, gas for heating ? Does your garbage get picked up ?

Do you drive a car ? Is it a beater ? Do you pay car insurance ? Do you buy gasoline for it ? Do you ever pay for repairs ? Do you have car payments ? Do you ever pay for parking ? Toll ? Registration ? Have you ever gotten a ticket ?

Do you eat food ? Is it all Ramen every day ? Do you ever go out to eat ?

Do you ever buy new clothes ? Do you wash and dry them ?

Do you cut your own hair ?

You indicated you were a homeowner - do you pay property tax ? Do you actually maintain the house ? Do you have loan payments ? Do you ever improve the house ?

Does your house have any furniture ? Any appliances ? Any utensils ? Do you buy cleaning products ?

Do you ever take vacations away from home ?
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Re: Why do people live in expensive places?

Post by snyder66 »

Sure, You can live in 16K in the middle of Appalachia if you buy a farm, grow your own food, and have a stream in your bachyard to wash your own clothing.
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Re: Why do people live in expensive places?

Post by JupiterJones »

pongun wrote: I have no idea why a person would intentionally live somewhere that is so expensive, when every amenity is available for a fraction of those costs in other places.
Because every amenity actually isn't available in other places, at any cost.

Sure, you can get groceries and gas and the basics just about anywhere. And if you're happy with that, then living cheaply in the boonies is the way to go.

But I like to be in a city. I like the restaurants (good ones, not just chains), bars, music, employment and educational opportunities, theater, a nearby airport, a short commute to work... an on and on. And I've lived in a more expensive city before too, and loved what it had to offer also (excellent public transit, a nearby major airport, world-class theater, etc.)

Basically, I derive value from the things that my city offers that cheaper ones don't. And the higher cost of living is what I consider a fair price to pay for that value. If I could afford to live in a place like San Francisco, I very well might, but where I am is a good balance of cost and value for me.

That's what it boils down to in all these conversations, whether we're talking expensive cities, watches, cars, Apple products, paying off low-interest debt, you name it. People derive value differently from you, so it's a often a perfectly rational economic decision to spend their money on things you wouldn't.

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Re: Why do people live in expensive places?

Post by Kosmo »

pongun wrote:I just know that whenever I visit a place, I'm still me. I can be happy or sad anywhere, and it doesn't seem to matter what I'm looking at, what the weather's like or any of that other stuff. What factors do you mean as far as having a lot going for the places?
You might be happy where you live and where you work, but what if there's 2 hours of traffic between those places? It's a lot less stressful to be in close proximity to places like grocery stores, gas stations, and shopping malls. There's huge advantage in terms of time and effort spent if there's a short drive or even walk to get to the things you do every day. And often times you have to pony up the big(ger) bucks to get that.
Don't people with high-paying professional jobs just telecommute? I know that'd be in my contract if I were a $150k/yr Googler, Google-person or whatever.
I don't know too many people who are that good at their job that they can dictate to their employer the terms of their employment. And even so, there's just some things that you need to be at the work location for: access to certain systems, face to face meetings, take physical control of items, etc.
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Re: Why do people live in expensive places?

Post by The Wizard »

Some close-in areas in large metro areas are reputed to have HIGH CRIME. People are willing to pay more to avoid those parts of town...
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Re: Why do people live in expensive places?

Post by 3CT_Paddler »

Why do people live in expensive places?

... Get married and you will have your answer.
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Re: Why do people live in expensive places?

Post by sscritic »

A high paying job might require a license that doesn't travel well. A tenured position at a university doesn't travel at all. Now try to find two tenured positions at a university. Good luck picking a random spot on the earth to live that will give you two tenured positions.
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Re: Why do people live in expensive places?

Post by z3r0c00l »

sscritic wrote: Good luck picking a random spot on the earth to live that will give you two tenured positions.
Boston would be a good bet, but it is expensive to live there for some reason...
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Re: Why do people live in expensive places?

Post by YDNAL »

pongun wrote:I've been lighting up the forums lately with my bizarre, possibly thought-provoking and hopefully interesting questions and ideas. Here's another one: why do people live in expensive places when there are cheaper places that can work just as well?
I don't see how this thread falls under..... Board index‹ Investing - Theory, News & General :?

With regards "residing" in any specific place, one can do it anywhere if they can work at what they are good at. If one can't do that, then you must live elsewhere or commute.

Some very highly paid jobs require commuting by plane (actors that film in California yet live in Bermuda).
http://www.experiencebermuda.com/sights ... uglas.html

Others live extensively in Florida, fly their own big jet (and a little one), and have a big landing stip in their backyard.
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Re: Why do people [Why Would I] live in expensive places?

Post by DTSC »

Things like schools, safety, who your neighbors are and whether they deal drugs. That's not to say that lower income people commit more crimes, but lower priced areas collect less property taxes and therefore can afford less police services when criminals set up shop and terrorize the neighborhood.
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Re: Why do people [Why Would I] live in expensive places?

Post by Harold »

pongun wrote:when every amenity is available ... in other places
This is where your premise fails. Some "amenities" valued by people who live there are available only in desirable (i.e. expensive) places.

Conversely, some things that people in cheaper places value (e.g. a 3 car garage to store accumulated "stuff") are not considered important at all by some who forego them to live in "expensive" places.
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Re: Why do people [Why Would I] live in expensive places?

Post by mhc »

I think the main reasons are:

1. Weather
2. Scenery
3. Schools
4. Jobs
5. Safety
6. Amenities

Some jobs are concentrated in just a few places in the country. My preferred job limits where I can live.
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Re: Why do people [Why Would I] live in expensive places?

Post by sscritic »

Harold wrote:
pongun wrote:when every amenity is available ... in other places
This is where your premise fails. Some "amenities" valued by people who live there are available only in desirable (i.e. expensive) places.
Is that what is called a false premise?
A false premise is an incorrect proposition that forms the basis of an argument or syllogism. Since the premise (proposition, or assumption) is not correct, the conclusion drawn may be in error.
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Re: Why do people [Why Would I] live in expensive places?

Post by JSMill »

Different strokes for different folks.
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Re: Why do people [Why Would I] live in expensive places?

Post by coalcracker »

Based on this and some of your other posts, I am wondering if you are part of a Fight Club and make soap out of liposuction fat for a living.
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Re: Why do people [Why Would I] live in expensive places?

Post by Harold »

sscritic wrote:
Harold wrote:
pongun wrote:when every amenity is available ... in other places
This is where your premise fails. Some "amenities" valued by people who live there are available only in desirable (i.e. expensive) places.
Is that what is called a false premise?
A false premise is an incorrect proposition that forms the basis of an argument or syllogism. Since the premise (proposition, or assumption) is not correct, the conclusion drawn may be in error.
You're surely right. I sometimes avoid common phrases like that because I don't precisely know how people define the terms (e.g. google says your "question" was a "Known Answer Question" -- but I didn't know that).
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Re: Why do people [Why Would I] live in expensive places?

Post by steve_14 »

pongun wrote:I've been lighting up the forums lately with my bizarre, possibly thought-provoking and hopefully interesting questions and ideas. Here's another one: why do people live in expensive places when there are cheaper places that can work just as well?
That's like asking why people would eat crab cakes when a can of beans would work just as well. Quality of life (weather, cultural opportunities, neighbor quality, schools, crime, jobs, food, transportation etc.) is higher in expensive areas, so people pay more.
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Re: Why do people [Why Would I] live in expensive places?

Post by hicabob »

Other than housing prices (and taxes in some places), expenses are very similiar thru most of the 48 - the expensive places these days are when you leave the US.
As far as housing goes - over the long term (20 years) it has been not too bad an investment in the "expensive places" in the US.
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Re: Why do people [Why Would I] live in expensive places?

Post by Dave76 »

steve_14 wrote:
pongun wrote:I've been lighting up the forums lately with my bizarre, possibly thought-provoking and hopefully interesting questions and ideas. Here's another one: why do people live in expensive places when there are cheaper places that can work just as well?
That's like asking why people would eat crab cakes when a can of beans would work just as well. Quality of life (weather, cultural opportunities, neighbor quality, schools, crime, jobs, food, transportation etc.) is higher in expensive areas, so people pay more.
Living in an expensive area can actually degrade your quality of life -- having to settle for a smaller apartment/house, eating out less, vacationing less, working more, saving less, more stress, less simplicity, etc.

I think it's best to avoid both ends of the pole.
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Re: Why do people [Why Would I] live in expensive places?

Post by Raymond »

Neal wrote:Based on this and some of your other posts, I am wondering if you are part of a Fight Club and make soap out of liposuction fat for a living.
"The first rule of Fight Club..." 8-)

For the OP: We all like different things.

Maybe you should start a thread about why some people like $5000 watches :twisted:
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Re: Why do people [Why Would I] live in expensive places?

Post by CMartel2 »

I think the obvious answer is that there are typically lifestyles that people are willing to pay for. You can't recreate New York anywhere else in the US. You certainly can't create California weather anywhere in the US.

What's more interesting to me is why employers in these more expensive locales pay their employees higher wages to live in these more expensive cities. It's certainly not efficient. Why should a business pay to have employees living in San Francisco or Los Angeles or NYC when they could hire a workforce just as talented in a place like Omaha, Nebraska, or Nashville, Tennessee, for far less? with lower taxes?

It seems to me a very inefficient business practice.
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Re: Why do people [Why Would I] live in expensive places?

Post by sscritic »

CMartel2 wrote: Why should a business pay to have employees living in San Francisco or Los Angeles or NYC when they could hire a workforce just as talented in a place like Omaha, Nebraska, or Nashville, Tennessee, for far less? with lower taxes?
You answered your own question earlier in your post. I live in California. California can't be recreated in Omaha. They would have to pay me more to work in Omaha. There is no "far less" in Omaha, unless you are talking amenities.

Or are you talking Governor Moonbeam, where the psychic pay we get from living in California substitutes for real dollars. Under this theory, people living in CA should be paid less than those living in Omaha. But wait, that still invalidates your "far less."
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Re: Why do people [Why Would I] live in expensive places?

Post by market timer »

1. Jobs -- not just high paying, but for whatever reason considered desirable
2. Finding compatible mates
3. Being close to friends and relatives
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Re: Why do people [Why Would I] live in expensive places?

Post by HueyLD »

It is an efficient market and a place is expensive (or cheap) because of supply and demand.
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Re: Why do people [Why Would I] live in expensive places?

Post by sscritic »

Re Omaha:

Ask yourself why students and graduates of the University of Nebraska at Omaha didn't create Google, Apple, Hewlett Packard and all the other Silicon Valley companies in Omaha? If they had, maybe we would all be living in Omaha, but they didn't. And why didn't Mark Zuckerberg move Facebook to Omaha when he left Harvard?

P.S. About Apple: Both of Steve Job's parents worked for tech firms at some point, and Steve Job's told how he as a teenager called Bill Hewlett at his home. If he had been living in Omaha and called Warren Buffet at home, Apple would likely be a financial company, not a tech company.
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Re: Why do people [Why Would I] live in expensive places?

Post by tibbitts »

CMartel2 wrote:I think the obvious answer is that there are typically lifestyles that people are willing to pay for. You can't recreate New York anywhere else in the US. You certainly can't create California weather anywhere in the US.

What's more interesting to me is why employers in these more expensive locales pay their employees higher wages to live in these more expensive cities. It's certainly not efficient. Why should a business pay to have employees living in San Francisco or Los Angeles or NYC when they could hire a workforce just as talented in a place like Omaha, Nebraska, or Nashville, Tennessee, for far less? with lower taxes?

It seems to me a very inefficient business practice.
I think that some employers are no longer paying as much more in expensive areas. That's probably more prevalent on the lower end of the wage scale, but will probably migrate up. Consider off-shoring of jobs; sometime Omaha is the high-cost area that loses jobs to lower-cost areas. Employers are gradually reducing what they pay employees for being old, too - or getting rid of old employees entirely. It takes employers a while to catch on to new concepts.

As for google, their headquarters is certainly in a high-cost area, but they don't necessarily build data centers (which admittedly aren't employee-intensive, but do have staff) in high-cost areas.

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Re: Why do people [Why Would I] live in expensive places?

Post by kermit »

I live in one of the most expensive cities in the country. But I never want to leave. Why? Proximity to all of this awesome stuff. Friends, family, museums, hiking, restaurants, bars, shopping, etc etc etc. If I walk 10 minutes in any direction from my apartment and I will have crossed several outstanding bars, a few Michelin star restaurants, 2 world renowned museums, cafes, groceries, and more. 2 blocks in one direction is a huge park. 3 blocks in the other is an excellent hike. Wine country is less than an hour away.

Being near all of that is expensive. But I wouldn't have it any other way.

We used to live someplace boring and cheap. We ended up getting "wanderlust" (that's what we liked to call it) and went on expensive vacations often to get away from the ho hum small town life where you have to drive to get anywhere interesting and there are only 2 good places to eat in the whole city. I'll never do that again.
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Re: Why do people [Why Would I] live in expensive places?

Post by TomatoTomahto »

CMartel2 wrote:What's more interesting to me is why employers in these more expensive locales pay their employees higher wages to live in these more expensive cities. It's certainly not efficient. Why should a business pay to have employees living in San Francisco or Los Angeles or NYC when they could hire a workforce just as talented in a place like Omaha, Nebraska, or Nashville, Tennessee, for far less? with lower taxes?

It seems to me a very inefficient business practice.
My wife's employer has been attempting a strategy of, in addition to "on-shore" and "off-shore", adding staff and migrating on-shore staff to what they call "near-shore." Florida, the Carolina's, etc rather than New York City. IMO, it's been a mistake and they're just reluctant to admit it. The new hires there are not impressive, overall, although it has been a lifeline for some. No serious talent has been willing to migrate; it has been mostly those who felt that they were in dicey waters professionally in NYC, a few who wanted to get off the radar for a while, and some who were using the move as an exit ramp to retirement.

"just as talented?". Uh, no, sorry.
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Re: Why do people [Why Would I] live in expensive places?

Post by tibbitts »

sscritic wrote:Re Omaha:

Ask yourself why students and graduates of the University of Nebraska at Omaha didn't create Google, Apple, Hewlett Packard and all the other Silicon Valley companies in Omaha? If they had, maybe we would all be living in Omaha, but they didn't. And why didn't Mark Zuckerberg move Facebook to Omaha when he left Harvard?

P.S. About Apple: Both of Steve Job's parents worked for tech firms at some point, and Steve Job's told how he as a teenager called Bill Hewlett at his home. If he had been living in Omaha and called Warren Buffet at home, Apple would likely be a financial company, not a tech company.
I'm not sure - why did Mark Zuckerberg not move Facebook to Omaha? Or some third-world country? Maybe because he's smart - or maybe because he's not running the business in an optimal manner. Sometimes the best person to start a business isn't the best person to keep running it. The market will ultimately decide.

For industries dealing in large physical objects, there's clearly a reason for them to be clustered - for example, the recreational vehicle industry in Indiana. For tech companies, there's probably a reason they're founded where most other tech companies and feeder institutions already are. But there's probably less reason for them to have to stay there.

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Re: Why do people [Why Would I] live in expensive places?

Post by cheapskate »

CMartel2 wrote:I think the obvious answer is that there are typically lifestyles that people are willing to pay for. You can't recreate New York anywhere else in the US. You certainly can't create California weather anywhere in the US.

What's more interesting to me is why employers in these more expensive locales pay their employees higher wages to live in these more expensive cities. It's certainly not efficient. Why should a business pay to have employees living in San Francisco or Los Angeles or NYC when they could hire a workforce just as talented in a place like Omaha, Nebraska, or Nashville, Tennessee, for far less? with lower taxes?

It seems to me a very inefficient business practice.
Many other regions have tried to replicate Silicon Valley. Off the top of my head, Austin, Research Triangle Park, New York, Salt Lake City (?) at some point or another had ambitious plans and proposals to recreate the Silcon Alley/Silicon Glen etc. While these areas have met with some success in attracting technology businesses and workers, none have come close. At least 3 of these 4 locations are far less expensive. Austin has no state tax (compared to California, that's a 10% difference). Other than relatively low cost, Austin, Salt Lake City and Research Triangle Park have some of the key ingredients necessary - good schools, world class universities, great scenery. But I think there are still some key elements missing in these places compared to Silicon Valley.

- Access to Venture Capital
- Great weather
- Diversity. Silicon Valley is highly culturally diverse and therefore desired by foreigners (particularly Asians). In my daughter's public high school, 60% of students are Asian (including Indians). Another 10% are hispanic.
- Probably most important - Network Effects. Techies want to come here because there are plenty of other techies. Entrepreneurs come here because they can meet and team up with other like minded partners, hire tech workers. Asians want to live in Silicon Valley because there are plenty of other Asians here. This network effect just feeds on itself.
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Re: Why do people [Why Would I] live in expensive places?

Post by tibbitts »

Claude wrote:
CMartel2 wrote:What's more interesting to me is why employers in these more expensive locales pay their employees higher wages to live in these more expensive cities. It's certainly not efficient. Why should a business pay to have employees living in San Francisco or Los Angeles or NYC when they could hire a workforce just as talented in a place like Omaha, Nebraska, or Nashville, Tennessee, for far less? with lower taxes?

It seems to me a very inefficient business practice.
My wife's employer has been attempting a strategy of, in addition to "on-shore" and "off-shore", adding staff and migrating on-shore staff to what they call "near-shore." Florida, the Carolina's, etc rather than New York City. IMO, it's been a mistake and they're just reluctant to admit it. The new hires there are not impressive, overall, although it has been a lifeline for some. No serious talent has been willing to migrate; it has been mostly those who felt that they were in dicey waters professionally in NYC, a few who wanted to get off the radar for a while, and some who were using the move as an exit ramp to retirement.

"just as talented?". Uh, no, sorry.
I would argue that there's a tipping point. So long as enough comparable employers stay in NYC and are willing to hire employees who won't relocate, you probably have a point to some degree. If enough employers join the near-shoring parade, that's a different story. But it's not accurate to say that in any large organization, "no serious talent" would be willing to relocate. There will always be some percentage of very talented people who would gladly leave NYC, and some percentage who would never have lived there in the first place. Not everyone desires the same lifestyle.

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Re: Why do people [Why Would I] live in expensive places?

Post by steve_14 »

Dave76 wrote:
steve_14 wrote:
pongun wrote:I've been lighting up the forums lately with my bizarre, possibly thought-provoking and hopefully interesting questions and ideas. Here's another one: why do people live in expensive places when there are cheaper places that can work just as well?
That's like asking why people would eat crab cakes when a can of beans would work just as well. Quality of life (weather, cultural opportunities, neighbor quality, schools, crime, jobs, food, transportation etc.) is higher in expensive areas, so people pay more.
Living in an expensive area can actually degrade your quality of life -- having to settle for a smaller apartment/house, eating out less, vacationing less, working more, saving less, more stress, less simplicity, etc.

I think it's best to avoid both ends of the pole.
Sure, if you're facing financial constraints, an expensive area will lower your quality of life in some ways. I was thinking in the more abstract sense - for example there was an article in the LA Times a few years ago comparing a house in Oklahoma City to an identical one in a nice area of LA (Brentwood, I think). The OK house cost something like $120K, the LA one was $800K.

Clearly living in Oklahoma doesn't work out "just as well" for most people, otherwise the houses would cost the same. People are voting with their pocketbooks that Brentwood offers a better quality of life.
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Re: Why do people [Why Would I] live in expensive places?

Post by Dave76 »

kermit wrote:I live in one of the most expensive cities in the country. But I never want to leave. Why? Proximity to all of this awesome stuff. Friends, family, museums, hiking, restaurants, bars, shopping, etc etc etc. If I walk 10 minutes in any direction from my apartment and I will have crossed several outstanding bars, a few Michelin star restaurants, 2 world renowned museums, cafes, groceries, and more. 2 blocks in one direction is a huge park. 3 blocks in the other is an excellent hike. Wine country is less than an hour away.

Being near all of that is expensive. But I wouldn't have it any other way.

We used to live someplace boring and cheap. We ended up getting "wanderlust" (that's what we liked to call it) and went on expensive vacations often to get away from the ho hum small town life where you have to drive to get anywhere interesting and there are only 2 good places to eat in the whole city. I'll never do that again.
The relentless quest for activity outside the body is the direct consequence of inactivity inside the body. People who constantly crave entertainment and amusement are living a spiritually vacuous existence.

I recommend this book -- 'A Guide to Civilized Loafing', by H.A. Overstreet
Last edited by Dave76 on Sat Sep 15, 2012 12:10 pm, edited 1 time in total.
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Re: Why do people [Why Would I] live in expensive places?

Post by Dave76 »

steve_14 wrote:
Dave76 wrote:
steve_14 wrote:
pongun wrote:I've been lighting up the forums lately with my bizarre, possibly thought-provoking and hopefully interesting questions and ideas. Here's another one: why do people live in expensive places when there are cheaper places that can work just as well?
That's like asking why people would eat crab cakes when a can of beans would work just as well. Quality of life (weather, cultural opportunities, neighbor quality, schools, crime, jobs, food, transportation etc.) is higher in expensive areas, so people pay more.
Living in an expensive area can actually degrade your quality of life -- having to settle for a smaller apartment/house, eating out less, vacationing less, working more, saving less, more stress, less simplicity, etc.

I think it's best to avoid both ends of the pole.


Sure, if you're facing financial constraints, an expensive area will lower your quality of life in some ways. I was thinking in the more abstract sense - for example there was an article in the LA Times a few years ago comparing a house in Oklahoma City to an identical one in a nice area of LA (Brentwood, I think). The OK house cost something like $120K, the LA one was $800K.

Clearly living in Oklahoma doesn't work out "just as well" for most people, otherwise the houses would cost the same. People are voting with their pocketbooks that Brentwood offers a better quality of life.
I see your point, but there are better alternatives to both. Chapel Hill, NC? Blue Bell PA? Ringwood, NJ?
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Re: Why do people [Why Would I] live in expensive places?

Post by steve_14 »

tibbitts wrote:
sscritic wrote:Re Omaha:

Ask yourself why students and graduates of the University of Nebraska at Omaha didn't create Google, Apple, Hewlett Packard and all the other Silicon Valley companies in Omaha? If they had, maybe we would all be living in Omaha, but they didn't. And why didn't Mark Zuckerberg move Facebook to Omaha when he left Harvard?

P.S. About Apple: Both of Steve Job's parents worked for tech firms at some point, and Steve Job's told how he as a teenager called Bill Hewlett at his home. If he had been living in Omaha and called Warren Buffet at home, Apple would likely be a financial company, not a tech company.
I'm not sure - why did Mark Zuckerberg not move Facebook to Omaha? Or some third-world country? Maybe because he's smart - or maybe because he's not running the business in an optimal manner. Sometimes the best person to start a business isn't the best person to keep running it. The market will ultimately decide.
The problem is talent. Facebook or Google or Apple wouldn't have had access to anywhere near the labor pool it needed to draw from in Omaha. And few employees would follow if it moved there. Same reason movie studios and investment banks all locate in the same place.
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Re: Why do people [Why Would I] live in expensive places?

Post by tibbitts »

steve_14 wrote:
tibbitts wrote:
sscritic wrote:Re Omaha:

Ask yourself why students and graduates of the University of Nebraska at Omaha didn't create Google, Apple, Hewlett Packard and all the other Silicon Valley companies in Omaha? If they had, maybe we would all be living in Omaha, but they didn't. And why didn't Mark Zuckerberg move Facebook to Omaha when he left Harvard?

P.S. About Apple: Both of Steve Job's parents worked for tech firms at some point, and Steve Job's told how he as a teenager called Bill Hewlett at his home. If he had been living in Omaha and called Warren Buffet at home, Apple would likely be a financial company, not a tech company.
I'm not sure - why did Mark Zuckerberg not move Facebook to Omaha? Or some third-world country? Maybe because he's smart - or maybe because he's not running the business in an optimal manner. Sometimes the best person to start a business isn't the best person to keep running it. The market will ultimately decide.
The problem is talent. Facebook or Google or Apple wouldn't have had access to anywhere near the labor pool it needed to draw from in Omaha. And few employees would follow if it moved there. Same reason movie studios and investment banks all locate in the same place.
Employees will follow if enough other tech companies relocate to seemingly worse places. Or, employers will figure out how to let them work remotely - but pay them like they're living in Omaha. It's not like a factory job where employees have to work together physically.

Paul
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Re: Why do people [Why Would I] live in expensive places?

Post by steve_14 »

tibbitts wrote:
steve_14 wrote:
tibbitts wrote:
sscritic wrote:Re Omaha:

Ask yourself why students and graduates of the University of Nebraska at Omaha didn't create Google, Apple, Hewlett Packard and all the other Silicon Valley companies in Omaha? If they had, maybe we would all be living in Omaha, but they didn't. And why didn't Mark Zuckerberg move Facebook to Omaha when he left Harvard?

P.S. About Apple: Both of Steve Job's parents worked for tech firms at some point, and Steve Job's told how he as a teenager called Bill Hewlett at his home. If he had been living in Omaha and called Warren Buffet at home, Apple would likely be a financial company, not a tech company.
I'm not sure - why did Mark Zuckerberg not move Facebook to Omaha? Or some third-world country? Maybe because he's smart - or maybe because he's not running the business in an optimal manner. Sometimes the best person to start a business isn't the best person to keep running it. The market will ultimately decide.
The problem is talent. Facebook or Google or Apple wouldn't have had access to anywhere near the labor pool it needed to draw from in Omaha. And few employees would follow if it moved there. Same reason movie studios and investment banks all locate in the same place.
Employees will follow if enough other tech companies relocate to seemingly worse places. Or, employers will figure out how to let them work remotely - but pay them like they're living in Omaha. It's not like a factory job where employees have to work together physically.

Paul
That may be your theory, but look around - it isn't happening, and if it could happen, public companies would be compelled to do it to lower costs. The reason may have something to do with the responses to a recent thread: "If you could retire anywhere, where would you live?" http://www.bogleheads.org/forum/viewtop ... st=1490088 . Most people said California or Manhattan. Well the talent (I mean the top talent) *can* live anywhere, and they have the same preferences. In a sense it's the opposite of a factory - employees may not have to go to the same location during the day, but they all want live in the same place at night.
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Re: Why do people [Why Would I] live in expensive places?

Post by TomatoTomahto »

tibbitts wrote: I would argue that there's a tipping point. So long as enough comparable employers stay in NYC and are willing to hire employees who won't relocate, you probably have a point to some degree. If enough employers join the near-shoring parade, that's a different story. But it's not accurate to say that in any large organization, "no serious talent" would be willing to relocate. There will always be some percentage of very talented people who would gladly leave NYC, and some percentage who would never have lived there in the first place. Not everyone desires the same lifestyle.

Paul
Paul, I'm sure that there is a tipping point, but we're currently so far from it that it is non-existent for all practical purposes. I perhaps overstated it when I said that no serious talent would be willing to relocate, but it is true to say that, to date, no serious talent has been willing to migrate.

Arguing against the migration for "serious talent" is
1. It makes it more difficult to change jobs later
2. You won't make what you're accustomed to. There's not much point in moving a 200-400k employee to an area where the going salary is 100-150k if you're going to pay them the old amount. Savings on real estate are not enough, you have to lower compensation expense also. In practice, it is difficult to feel good about 150k when you previously made 200k, even if the cost of living is lower.
3. Many spouses don't want to move, especially if they're employed outside the home.
4. You will be off the radar. Usually, people who want to be off the radar are not the serious talent.
I get the FI part but not the RE part of FIRE.
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Re: Why do people [Why Would I] live in expensive places?

Post by tetractys »

The simple and comprehensive answer is, it all balances out. -- Tet
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Re: Why do people [Why Would I] live in expensive places?

Post by btenny »

Back in the 1970s a lot of tech companies in silicon valley California got tired of the high cost of living and high costs of employees there and the constant turnover and loss of those employees to a company down the street set out to move away. In particular Intel and Hewlett Packard both moved a lot of operations out of Santa Clara. See here for the Intel move to Arizona. They also moved a great deal of stuff to Oregon and some to Sacremento. HP moved a good deal of stuff to Idaho and Texas and Sacremento.

http://www.intel.com/jobs/usa/sites/chandler/
http://m.spokesman.com/blogs/boise/2012 ... k-dies-77/

Well fast forward 30 years or so and see how that worked out. Both companies are still headquartered in Santa Clara and both still have huge operations there. Why? Well maybe the network effect breds good ideas and the people like the big city and the good weather and lots of other reasons too complex to figure out. But net net silicon valley just breds good companies and lots of good ideas and is a fun place to live. Yes it is very expensive and unless you like the big city fast technical lifestyle it is not for you. Most non technical kids move away during college or shortly after due to these issues. That is why places like Boise and Phoenix and Sacremento are good places to work as well but just not as start up friendly as Silicon Valley, not enough techies in one place. Maybe the creating of good ideas around the BBQ or the kitchen table over beers is why it is so fast at creating things. In other cheaper places the people talk about kids baseball or golf and so forth around the BBQ or kitchen table....

I suspect it it very similar in NYC but the topics are all related to the latest finance or stock market or banking thing... I also know that lots of movie and TV people congregate in Hollywood and north LA for the same reasons. They want to make movies and TV shows and be imersed in them so they stay in north LA...

So yes people live in these expensive places to make a living and live the way they prefer and they like it that way......

Bill
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Re: Why do people [Why Would I] live in expensive places?

Post by DiscoBunny1979 »

One of the things that hasn't been mentioned is that many of the 'expensive' areas of the country to live - New York (Manhattan), California (Bay Area), Massachussettes (Boston) have a large population of folks that believe in certain moral principles that conflict with ideology of the 'rest' of the country. For instance A Gay person that wants to have their Union recognized by the 'state' and does, will not feel comfortable moving to a state that forbids such Unions - like now the Carolinas. They will pay the price to stay in a state that recognizes their relationships - whatever that price might be.

But in California, there are pockets of areas to live that are much less expensive, but yet have all the amenities PLUS some. For instance, Palm Springs. You can buy a house in Palm Springs area (ie palm desert) for about $250,000-$300,000. That's half the price of starter home in south San Jose, CA. But if you ask my retired Parents why they won't want to sell their $750,000 house that's paid for and buy a nice little house with pool in Palm Desert - they'd give an answer like 1) the weather, 2) don't want to change Doctors (although they recently have), or 3) they like their grocery store (like the desert doesn't have grocery stores).

But the reality of living where my parents do, in the particular neighborhood that they do, at $750K, is that there is NO readily available public transportation from walking distance from their house. They must drive everywhere. From my perspective, if I were in my parent's shoes in the late 70s/80s, I'd be looking to move to a place that does have public transportation right out the front door because there's no knowing how much longer they actually can drive themselves around town. People have their own priorities. For instance, my parents say they enjoy living where they do . . . but really? Most houses in the Bay Area require walking up a few stairs/steps to get inside the house. When the day comes that they need a walker for assistance, they will be wishing they had moved to a place with no steps. But that's just me being realistic. Many folks in 'expensive' places aren't realistic, they pay above price for a roof over their head, saying to themselves they love it . . . what else can they say? My parents for instance, want to feel like they're wealthy, when they are not, so they can claim they live where they do.
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Re: Why do people [Why Would I] live in expensive places?

Post by 64415 »

Check out www. mrmoneymustache.com to see how a family of three lives lavishly on $24,000 per year.
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