Pando

The houses that Zuck built

By Sarah Lacy , written on July 29, 2016

From The Disruption Desk

Long time curmudgeonly tech reporter John Dvorak once pointed out to me how similar the 1990s era of suburban tech campuses are to old coal mining towns.

Yahoo or Google took over huge plots of land in places like Sunnyvale or Mountain View and provided nearly everything you might need. It went well beyond providing a variety of food options so you didn’t have to leave at lunch time. Well beyond free coffee bars. Beyond a gym.

The parking garages would wash your car and change your oil. You could drop off your dry cleaning. There were convenience stores on site.

Sure, some of this was considered employee perks, but a selfish message was also clear: Spend all of your waking hours here. Have breakfast, lunch, and dinner here. Have your afternoon Starbucks run here. Work out here. Don’t even run tedious errands anywhere else.

This fostered some of the intense feelings of community still seen at these companies today-- even the struggling ones like Yahoo-- because it was almost like going to college with people, not just work. I was once told the Yahoo annual Christmas party was almost like a prom. Amid CEO after CEO and high profile entrances and departures of execs, teams of “bleed purple” people would stay at the company as loyal to one another and their daily routine as they were to the company.

Some of that playbook has been eroded by the tech giants of today. Marc Benioff of Salesforce based his “campus” not in a sleepy suburb but in San Francisco, making the city around him his “campus” and encouraging employees to leave the cloistered walls. Twitter, Square, Uber and others followed suit.

But Facebook hewed to a traditional model, expanding from Palo Alto to Menlo Park. And it seems they may be taking Dvorak’s analogy even further. This week the Wall Street Journal reported that Facebook is now building apartments, not just for its employees, but as a necessary alleviation of the Bay Area’s housing shortage. Facebook will build “at least” 1,500 units. The move is in part designed to ameliorate objections to it expanding its headquarters.  

This is a real problem. The Bay Area is simply not geographically big enough for the industry that is home to Facebook, Google, and Apple, before you even get to Uber and Airbnb and Salesforce, and all the existing giants like Oracle and Cisco and all the thousands of startups getting created every day.

Particularly with the region’s insistence in not becoming another New York in terms of skyscrapers and high density housing. The Bay Area has added some 380,000 jobs, and permitted just 58,000 new units in the same period. What every single city says it wants more than anything else-- job creation-- has turned apocalyptic here. And while there’s been a pull back in funding in some sectors, the largest companies that employ the most people are still raising more funds. There’s no crash coming in the near term that will have a meaningful effect on housing.

You can have too much of a good thing.

Facebook is doing what Facebook does when its upward growth hits a natural obstacle: It’s throwing money at it.

From the Journal piece:

Under the plan, 15% of the units would be reserved for low- or middle-income families, and the company is offering numerous other benefits for the city, including millions of dollars to study and improve transportation. It is unclear whether Facebook or a third party would develop the buildings, which are located on a site that is currently a set of industrial buildings owned by Facebook. The timing, too, is uncertain.

When Facebook was failing on mobile it spent nearly $20 billion buying out future competitors at seemingly insane prices. It now dominantes messaging. Journalists struggle for new adjectives to describe its mobile growth each quarter.

When Facebook wanted more Indian users, it’s plan was to just bring them all the Internet-- full stop.

Now Facebook has built a plane that can beam the Internet down on places that don’t have it, lest anyone on the planet not be able to use its platforms.

Closer to home, this problem is comparatively easy: How do we make everyone OK with us gobbling up more space and find places for our employees to live? Well, that’s a lot easier than the India thing and a lot cheaper than WhatsApp. Let’s just build apartments.

And you can bet other tech giants will follow suit if it works. Also from the Journal:

Other tech giants are likely watching closely. Google Inc. has voiced support for allowing housing on numerous sites it owns in its hometown of Mountain View, Calif., though it has no detailed plans for those sites. 

Facebook didn’t address the surprising housing plans during its earnings call this week, but it did say it had 14,500 employees now, up some 32% year over year. It is also scouting out office space in San Francisco. If Facebook’s growth was fucking up Menlo Park, imagine what it will do to the already absurd housing prices in San Francisco.

Now, Facebook has been clear these aren’t Facebook “dorms.” But just like its internet plan in India or Facebook’s algorithms having the impact they do on news, you have to think about the potential implications to any large private company having such civic responsibility. If it was hard enough to quit your job at a 1990s tech campus because of the conveniences afforded and the free meals, imagine when you live in a building built and owned by your boss. Imagine a city, where Facebook-- not the municipality-- is studying traffic patterns and how to make the city better.

Nearly a decade ago, San Francisco once scuttled the option to wire the entire city with WiFi for free paid for by Google, out of bureaucracy and similar concerns to the ones Indians had with Facebook’s scheme. I was one of many citizens annoyed by this at the time. I didn’t mind Google having natural advertising advantages or even collecting data on me if I could get free awesome WiFi everywhere. But with the benefit of age and a few more years covering this industry, I have to admit now it may have been a dangerous slippery slope.

You have to wonder if that political resolve would hold today if, say, Google wanted to rebuild public transportation by having a self driving car lane on the freeway and supply all the cars. Particularly with a tech community that has far more power in local politics than it did back then. Indeed, in 2014 Google was successful in wiring up some 30 public spots in San Francisco, hailed as a “give back” to the city for the toll the tech economy was taking on it. Time cited it as “exactly this kind of public-private partnership” that the tech world and politicians wanted to encourage more of in the Bay Area.

These are the waters Facebook is testing. And while it sounds like a way for Facebook to help solve a problem it’s helped create, it is not without risk.

This could easily end as a modern day Pullman, Chicago, a town that was created to house employees working to build Pullman rail cars in the late 1800s. The houses boasted indoor plumbing, gas and sewer systems-- what Wikipedia calls the “amenities” of the day. They weren’t exactly dorms either, as employees were charged rent. But they also weren’t quite treated as just tenants. George Pullman set behavioral standards they had to comport themselves by.

Employees who were utterly dependent on this corporation, learned the hard way that you judge a company by how it behaves in bad times not good times. From Wikipedia:

During the depression that followed the Panic of 1893, demand for Pullman cars slackened. The Pullman company laid off hundreds of workers and switched many more to pay-per-piece work. This work, while paying more per hour, reduced total worker income. Despite these cutbacks, the Company did not reduce rents for workers who lived in the town of Pullman. Pullman, despite the depression, paid his share holders their dividends which upset workers whose wages Pullman had just cut.

Workers initiated the Pullman Strike in 1894, and it lasted for 2 months, eventually leading to intervention by the US government and military.

We’ve never seen Facebook in bad times.

Just as I always say when Facebook changes its algorithm, this is a company adept at always doing what’s best for Facebook. To solve a very real problem Facebook faces, this is a no brainer idea, and it’s a surprise no one has done it yet.

But if culturally the Bay Area is tearing itself apart over the domination of tech in the economy, imagine what it’ll be like when we’re all living in Facebook and Google and Uber apartments.