Reflections of a Baby Boomer in Silicon Valley

Jeff Berger —


I have recently retired after spending 37 years working and living in the Silicon Valley region of northern California, and lately I have spent a lot of time reflecting on my lucky circumstances. I have a lot of reasons to be grateful for my good luck.

First I was lucky to be born in California, the land of milk and honey. The Mediterranean climate in California is what most people dream about.

Picture of a "For Sale" type sign that says, "Can you afford it?"I was also lucky that when I was in college, the University of California was virtually free, especially to California residents. But then my parents’ generation decided to pull up the ladder so that subsequent generations would have to pay through the nose. They did that by passing the famous (or infamous, depending on your point of view) “Prop 13” in 1977.  Prop 13 placed a cap on growth in property taxes, which solved a problem that was created by the extraordinary inflation of the 1970s when elderly people on fixed incomes were being priced out of their homes. Only new home purchasers now had to pay property taxes based on market rates. Since I bought my current house in 1983, my property taxes are far below my younger neighbors (except for the neighbors who were lucky enough to inherit their house from their baby-boomer parents). Thus, I am part of a privileged California aristocracy. I am privileged just because I am a baby boomer and I had the foresight to remain in the same house.

It is largely a result of Prop 13 that the state can no longer subsidize the cost of college education. In order to make up for lower public financing, California has increased the number of non-resident students in the University of California system, thereby making it much tougher to get accepted into a university. If the same tuition costs existed in the 1970s when I attended college, I either couldn’t afford it or I would have graduated with  immense debt. But, with the academic qualifications that I had in the 1970s, I wouldn’t have qualified for admission anyway—at least not as a freshman.

Without my Prop 13 benefits I could ill afford to remain in California. Furthermore, California is one of 37 states that does not tax Social Security. Thus, California is doubly friendly to seniors who have owned their homes their entire lives. And since home inflation in California is among the highest in the nation, I have a large amount of equity that I can tap into if I ever need it. California also has the highest income tax rate in the nation, but it treats its seniors very well. And now that California is a “right to die” state, I can look forward to dying at a time of my own choosing should I become fatally ill.

ibm_wallpaper_apMy last bit of luck has to do with policy changes that my employer instituted in 1999. Here it was my own generation that pulled the ladder up after itself. My employer was IBM. IBM used to provide a pension annuity and free health insurance to all of its retirees, in exchange for non-competitive salaries. The prospect of a pension was another form of golden handcuffs, but in the 1990s many IBMers were quitting to work for higher salaries and stock options. IBM decided that it needed to offer the same kind of salaries (and in rare cases, IBM stock options that never became worth much) for its regular employees. Thus, if you weren’t a baby boomer born before July 1, 1959, you lost your pension. IBM became a two-tiered company, one tier for baby boomers and one for the rest of the employees. I got to keep my pension and also received the same higher salaries as the younger employees. During the 1990s IBM also gave a cost of living salary adjustment to employees in California. Thanks to IBM, I was able to keep my cake and eat it.

03rfd-image1-custom1Finally, a few years ago IBM froze salaries in the midst of phenomenal job growth and salary increases in Silicon Valley. My short time horizon before retirement made me indifferent to a salary freeze, but mid-career engineers began quitting IBM in droves. Thus IBM became a farm system for the major league ball clubs in Silicon Valley. It became the second rate high-tech company that Stanford graduates always thought it was (which is why there are virtually no Stanford graduates working for IBM). Furthermore, ever since IBM froze salaries, its stock has dropped by a third while the rest of the stock market has risen by a third. Now I need to thank the IBM executives for treating baby boomers so well while they destroyed the company.

One of the great things about Silicon Valley is its culture—a melting pot of different races and ethnicities. This culture is very tolerant of opposing points of view. The education level of the population is far above average and not coincidentally, the population is increasingly non-Caucasian and non-Republican. Silicon Valley also leads the world in entrepreneurship and job creation. Asians from many different countries have swarmed across the Pacific Ocean and settled in California, while Hispanics have come up from Mexico to pick our strawberries and build and clean our houses. Silicon Valley has the best plastic surgeons that money can buy. More Teslas are driven here than anywhere in the world, and Californians pay extra in the summer for cleaner burning fuel.

In 2007 a developer purchased the termite infested shack that was next door to my house and tore it down, just before the housing bubble burst. For several years the lot was vacant and I lived with a forest of weeds next door. However, last year a brand new 3700 square foot house with five bedrooms was built, and it was purchased by a Chinese company that is using it as a dormitory for its employees. The kitchen cabinets that were purchased at Home Depot were probably made in China. To be sure, companies like Google, Facebook and Amazon are driving up the cost of housing, but Chinese money has a lot to do with it. However, my new neighbors are very nice and quiet—a vast improvement over the meth/prostitution house (occupied by Caucasians) that used to be across the street before the sheriff’s SWAT team shut it down.

Of course, living in California is not all gravy, even for an aristocratic baby boomer. It may be the land of milk and honey, but 40 million people think the same thing. Traffic in Silicon Valley is a nightmare—in part because the poorer segments of society have to either commute very long distances or cram themselves into tighter living spaces. A good transit system is virtually non-existent. Water is a scare commodity; a green lawn and flushing the toilet without using a bucket are considered luxuries. Finally, with the latest earthquakes in Japan and Ecuador, I am reminded that this land of milk and honey could soon become buried under a pile of rubble.

 

5 Comments on Reflections of a Baby Boomer in Silicon Valley

  1. Another good article, Jeff!

    Like

  2. High income tax and high real estate prices, yet silicon valley is the leader in job growth creation in the nation. So high taxes don’t stifle job creation, or am I missing something here?

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  3. Jeff Berger // May 23, 2016 at 11:00 am // Reply

    The truth is more nuanced. Silicon Valley has Stanford University. If Florida and Texas want an economy like Silicon Valley, they have to start by competing with Stanford. Once a student spends a few years living in Palo Alto, I think they never want to leave because they become addicted to the great climate. The entrepeneurs and engineers graduating from Stanford are the job creators of Silicon Valley, but they produce a trickle down effect to low skilled jobs, which is also the source of all of the region’s problems, because of the shortage of low cost housing and transit.

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  4. Wow. I haven’t seen it all laid out that concretely before. I wish I could see the road back. For one thing, I suspect it involves thinking globally, but as far as I can tell, that’s headed in the wrong direction, too. Instead of the paycheck-dependent people working together globally for the common good, it’s only the inanimate corporations doing that.

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