Seattle Bubble has moved! Redirecting...

You should be automatically redirected. If not, visit http://seattlebubble.com/blog/and update your bookmarks.

Off-topic comment? Interesting link?
Head over to the forums, or click here for open threads.

Tuesday, September 19, 2006

Seattle's Tenuous Smartness

Yo ho, mateys. This be a fairly long article from the weekend, but considerin' that it be about Seattle's smartness 'n high tech jobs, I be findin' it worthy of postin' here.</pirate>

A once-proud hub of innovation left to languish as brilliant people, new ideas and dazzling products bubble up elsewhere. An urban wasteland that's left wondering — as Detroit was with cars — how it lost its mojo with software and the Internet.

That's the dire message Microsoft's top executives are sending to legislators, educators and anyone else who will listen. And nobody is arguing with this simple truth: The state is doing a terrible job producing computer scientists. Those whiz kids who will make computers smarter, faster and more useful for everyone.

"At a certain level, it's simply a tragedy," says Brad Smith, Microsoft's general counsel. "It's a lost opportunity for the next generation of people growing up in Washington state."

Microsoft's warning may sound strange in a region that has thrived from the technology boom of the past 15 years. But Smith says there's no such thing as stability in his business: You're either innovating or falling behind. The industry can turn faster than a Detroit SUV.

The sometimes-bumpy boom has created more than 300,000 high-tech jobs statewide, and the big money flowing from those jobs employs hundreds of thousands more in traditional industries. The state estimates there will be nearly 30,000 openings for computer specialists in the next decade, and the technology they create is needed in every industry from fishing to aircraft manufacture.
...
Yet consider this: Just 160 seniors graduate in computer science or computer engineering each year from the University of Washington, home to the state's most respected program. Another 90 finish graduate degrees.
...
By contrast, Seattle has, almost by accident, become the most educated city in the U.S. Engineers and computer specialists make up a higher proportion of the workforce here than just about anywhere else.

That's because fresh graduates are flooding into Microsoft, Amazon.com, Google and other companies with operations here. But they're not from Magnolia or Mukilteo. They're coming from Boston, California, India.
...
But the fact that the state is not coming close to producing even its fair share of computer scientists has many worried.

With other states and countries — think India and China — leaping ahead in the technology race, Seattle may find it harder to continue luring top talent here, and companies may decide to take their toys elsewhere. Seattle's boom-and-bust history could repeat itself.

The shortcomings of public schools and universities here may already be discouraging some talented people from coming, Smith argues, because smart people want to live somewhere they can send their kids to great schools. There may be an unfounded complacency that Seattle's natural assets will continue to draw people.
...
Meanwhile, Microsoft continues to add workers locally at the rate of 4,000 a year.

In this year's record class of 5,400 UW freshmen, 300 say they're hoping to graduate in computer science or engineering. Even if none dropped out or changed majors, the class of 2010 wouldn't amount to a month's supply of new workers needed just at Microsoft's Redmond campus.
I found the assertion at the end of the article to be somewhat dubious. Where does that 4,000 per year number come from? Reporter Nick Perry doesn't say. Did he pull it out of his... hat? Who knows?

You may recall that back in May I looked at the subject of how many jobs Microsoft is really adding to the Puget Sound. Taking the statements of official company spokesman Lou Gellos and applying some relatively generous assumptions, I came to the conclusion that Microsoft is adding roughly 1,350 new jobs per year to the Puget Sound.

Furthermore, if you take a look at the official State labor data for employment totals in the "Software Publishers" industry, you can see that state-wide, the number of employees is not even growing at 4,000 jobs per year. The numbers are more like 2,500 to 3,500, across all "Software Publishers" in the state (xls).

So what's the deal, Mr. Perry? Do you care to back up that 4,000 per year figure?

[Update: I located this article in the Seattle P-I that sort-of confirms Mr. Perry's claim. Microsoft did indeed "boost its employee ranks by 3,938" in the Puget Sound during their previous fiscal year. I stand corrected on that.

I say "sort-of" because it should be noted that: "Explaining the increase, Microsoft spokesman Mark Murray cited factors including upcoming product launches." So it definitely seems like a stretch to say that "Microsoft continues to add workers locally at the rate of 4,000 a year." "Continues" implies something that has happened in the past, and will keep happening in the future. From '04 to '05 they added just 1,388 jobs to the Seattle area, and judging by the statements of the company spokesman, last year's jump is just a spike due to the imminent launch of upcoming products. Mr. Perry is using a single accurate statistic to paint an inaccurate complete picture.]

Leaving aside the possibly bogus Microsoft growth data, basically the jist of the article seems to be that thanks to a few high-tech companies (Microsoft, Amazon, and—to a lesser extent—Google), Seattle is drawing in far more smart workers than it produces, but unless we shape up, we could easily lose that draw, and be left behind in the high-tech industry.

Although these companies are big, and they may be paying handsomely to attract talent from around the country & world, I still don't personally think that will be enough to keep Seattle's outrageous home prices afloat. Honestly, you're talking about tens of thousands of jobs—maybe a few hundred thousand—in a region of over 3.4 million people. If you think Microsoft and kin are enough to keep Seattle's bubble from bursting, I think you may be in for a bit of a letdown.

(Nick Perry, Seattle Times, 09.17.2006)

43 comments:

Anonymous said...

To be honest, I am not sure why someone would want to go into Computer Science in this country. The future is in services that can be done face-to-face and that is specialized. Becoming a developer/architect in a field where you would demand 5-8 times more than a similiar canditate in India/Brazil/Phillipines/China is beyond me.

Anonymous said...

anon 3:52:

pardon me, but you sound a bit ignorant about the computer science industry as a whole. the computer science industry is vast, very vast, and the domain of positions includes much more than "microsoft software engineer," and the applications of computer science spans much, much more than business and web applications. i agree that many of the new positions at microsoft are being outsourced more. i also attest from first-hand experience (i was applying for positions early last year) that microsoft (at least last year) was hiring a huge amount of contract positions, many contracts ranging from 3 months to 1 year. rarely did i see a microsoft opp for full time positions (which i did interview for, as well). yes, they're offering contractors/indentured servants a pretty penny, which, for a reasonably experienced candidate (NOT fresh ones!...those positions are still a bit tight) can amount to 27-40/hr...or maybe 50-95K/yr. however...remember contracting positions are BENEFIT-LESS (no health, 401K, life and all the other nice perks full-time microsofties get). how's that to skew the data?!? so, in my opinion, w/o any hard data to back it up other than my own personal observations when i was interviewing last year...many of the new microsoft jobs people are talking about are mainly contract/hourly positions. i also suppose the turnover rate on those positions are high, as the work involved is mainly grunt work. side note: these positions are advertised by microsoft as "developer in test," which i'd say are a large majority of the available positions. a "developer in test" is a guy who "develops" in-house/proprietary software to facilitate the testing process. so, the only thing they develop is internal test driving software. how boring! of course no new, fresh, hot shot comp sci grad wants those positions! give those to the indians!!! they love those kinds of jobs!!!

plymster said...

Keep in mind that for every "Developer/architect" on a project, 4 support positions exist solely help that person do their job. These are functional testers, project managers, configuration managers, network admins, product support. These people aren't quite making the 100K starting (functional testers are a dime a dozen, and the work is frequently off-shored).

Then there are all the HR reps, salesmen, accountants, receptionists, janitors, etc.

Microsoft may be adding 1,350 jobs to the region, but I'd bet that less than 50 of them are the 100+K developer types. Most are the 40-70K support folks.

Also, of the software developers that are out there, maybe 10% are women. So you're not seeing a large number of developer couples pooling their resources as a 200+K condo-buying household.

The argument that Seattle is the "playground for the wealthy" is largely based on fear and fantasy. Otherwise, the median income would be rising, not falling.

Anonymous said...

Well Anonymous anon 3:52,

I do agree that you will find many Indians in SDET positions but that DOES NOT mean that you will not find them in many other high paying jobs. You would be considered a "professional" if you delete your post!

meshugy said...

The numbers are more like 2,500 to 3,500, across all "Software Publishers" in the state

They're probably not counting the marketing jobs...which have been half of the new hires:


Microsoft employment stats, by category

There were roughly 4,000 net additions in product research and development (a 17 percent increase in that category); 3,000 in sales and marketing (17 percent); 1,000 in product support and consulting (8 percent); and 2,000 in general and administration (40 percent).

Here's the data from Microsoft:

Fast Facts About Microsoft

Shows over 10,000 new hires. 33,223 employees around Puget Sound.

Anonymous said...

anon 4:30:

right back at you! i see many, many indians in very high paying jobs, this is true. i'm poking fun at the fact that there are also many, many incompetent (imho) indians getting hired to fill positions that microsoft just can't fill with homebred comp sci grads. again, my professional experience. and besides, you've got to be the same anon troll that i've come to loathe because you seem to be very pollyanna-ish. nor do i care whether you think i'm a professional or not. and tim will delete my posts if he sees fit.

redmondjp said...

Three of my former housemates worked at MS at various times during the past ten years and two of them had FT positions, one was contract which led to FT (none of them are still there BTW--not because they got rich and retired, either). One of them was in an internal IT support position, and he was not making anything near the numbers (which I question) being thrown around in this blog for entry-level MS positions. For every high-paid programmer at MS, there are ___ (suggest a #) much lower-paid 'grunt' positions. The days of getting rich at MS are over.

I live a mile north of the MS campus. There is no doubt that Microsofties played a significant part in the Eastside housing market over the past decade. However, new houses in my neighborhood start in the $600K range. How many entry-level MS newbies with $80K of college loans and a new H3 on credit can afford one of those?

Anonymous said...

I was personally responsible for relocating close to 800 microsoft employees in 2005. Working on a team of around 15 people most have a lighter caseload than myself but I could see how the number of new jobs is at or near 4000 no problem.

plymster said...

Anon 3:52 - You may not realize this, but Computer Science IS face to face. It is a highly complex, highly interdependent world of people who MUST be able to communicate with each other freely. Gone are the days of developers sitting in a cave, banging out simple applications. Typical small IT projects require teams of 20-100 people to design, develop, implement and support IT work. Very little of this work can be done effectively if it must be conducted in multiple languages, or worse, English-to-broken-English.

If you think it's tough talking to Dell customer support in India, imagine trying to explain back-end functions to someone who is trained to reply "yes" to every question, and has not mastered the concepts of word-processing software.

Anon 4:17 - You are dead on. I know scores of techies with 5-20 years of experience that are in the $50-95K/year range, and most companies like MS work them 60-80 hours a week. These are employees, not contractors.

Contract labor has become much more attractive to big companies since they can cut them loose at the drop of a profit. Contractors tend to make a little more, but have no benefits, and their "contracts" are meaningless. I had one friend who started a "12-month" contract, and was cut loose a week into it because her project was cancelled. This is the sort of danger you have to live with in the contract employee realm (not the sort of work that promotes mortgage payment).

Anonymous said...

mesh,

again, many, many of those positions are CONTRACT positions, with durations of 3 months to 1 year. i just don't have the hard data, but i'm sure you can do that yourself, since you have so much spare time. a popular model for micro$oft is: "let's work the poor bastard for a while and see how he does...after a year, if we don't like him/her, we'll throw him/her away, hire another contractor...(and add that as a new employee stat to boost our numbers)" this data is SKEWED as well.

Anonymous said...

I work at MS, and I can say that MS hiring 4000 people a year locally is definetly possible. In MSN, where I work, we easily hired 1000 more people last year. You must have heard all the hype about MS running out of office space, and needing to expand. Its true. I cannot even find parking space if i arrive to work after 10am. We even have Valet service so that we can get our cars parked.

Also, IT\Computer Science is still a very attractive area for new grads. Almost every facet of life is influenced by technology and that will only increase. In the overall scheme of things, as India and China progress, even those countries will require computer experts to power their own economies. I think the future for IT\Computer Science is bright, and will continue to be. When people and companies want to cease to do things more effienciently, faster and better, then its time to get out of IT\Computer Science.

Anonymous said...

And your next job will be at Wal-Mart when your job is outsourced by Microcrap.

Anonymous said...

In my experience (which is both first and second-hand), Microsoft doesn't pay very well for technical skill. They like to hire new grads whom they can overwork and underpay, and when they don't find enough of those naive wage-slaves in the local market, they complain that the government really needs to "train more workers" (read: "increase the H1B quota.")

I know a number of highly-experienced, skilled software engineers who either can't get a gig at Microsoft, or won't work the hours that they demand for the wages that they offer.

e-sidedave said...

remember contracting positions are BENEFIT-LESS (no health, 401K, life and all the other nice perks full-time microsofties get)

Volt is one of the major suppliers of temps at MS. You get Volt benefits working as a MS contractor. Other temp agencies work the same way.

No, the bennies aren't as good as MS, but they're not bad.

Anonymous said...

I've been in the computer industry for 10 years, the last 4 at MS. I can tell you for a fact that I do not know a single person who got let go who was actually good at their job. If you got layed off in the computer industry, its probably because you either sucked at what you do or have some seriously weak inter-personal skills.

Anonymous said...

I find pay at MS pretty decent and the benefits are good. I make about 105K a year after bonuses. I'm not and a manager, just a regular Software Development Engineer. Am I scared of my job getting outsourced? Nope. As long as you keep up to date and do not stagnate, continue to learn and improve your skills, you have nothing to fear.

Anonymous said...

e-sidedave:

this is true that many temp outfits give bennies for their clients...however, from what i remember when i was interviewing, the positions w/ bennies came w/ a pay cut, so it seems you're still getting a bit jacked (i.e. i would see volt et al advertise positions like: SDET2, $35/hr w/o benefits, $30/hr w/ benefits). i don't think volt et al gives out free parking...

The Tim said...

Meshugy,

See the update to the post.

Lake Hills Renter said...
This comment has been removed by a blog administrator.
Anonymous said...

anon 6:02/6:07:

i agree that as long as you've got the tech/interpersonal skills, you'll stay in the club. 105K/yr after bonuses and not a manager? sure, reasonable figure, i believe you are probably one of the "high end" people. GFY! however, i don't think the 4000 jobs or whatever are these types of positions, rather a small portion of them. just don't count on all those 4000 jobs getting continuous 5% raises for the next 7 years before their new ARMs reset...

Anonymous said...

I work at MS and make about 100K a year after bonuses. I rarely work more than 40 hours a week. I’m not a high-flying software engineer, but a documentation guy instead. If you are good at what you do (dev, test, PM, or UE), you can make really good money there. The average technical worker bee makes between 60-100K. Good developers and architects make much more than that.

The 4000 employee a year figure could be right, but this is temporary growth that I don’t think will continue.

As for the contractor thing: Yes, they do get worse benefits from their staffing agencies, but they also typically make more than MS full timers. I know a bunch of folks who actually prefer to contract because the money is good and they can work in lots of different groups.

Also, I don’t know anyone who has ever lost a job because they were outsourced to India. People are laid off because they can’t keep up or they can’t get along with people. Even if your project is canceled, you still have two months to find a job (at full pay) before you get let go.

So, there are a lot of people making excellent money at MS. However, in a metro area of 3.8 million people, I don’t think Microsoft pumps up the economy enough to make a big difference. A 100K salary will NOT get you into the vast majority of houses here unless you take out a suicide loan.

meshugy said...

Thanks for the update Tim. I think you're right that Microsfot alone can't carry the weight of the entire local economy. However, Seattle is expereincing some of the highest job growth in the country right now. It's a lot more then just Microsoft.

Here one indication:

Online job ads up 10%

New online job ads across the United States increased to 2.57 million in August, with New England leading the growth, according to The Conference Board Help-Wanted OnLine Data Series, released today.

Adjusting job ads for the size of the local labor force, San Diego for the second month in a row was the only metropolitan area with more than 4 job ads per 100 persons in the labor force. Other metropolitan areas with a large number of ads per 100 persons in the labor force were concentrated on the East and West coasts and include San Francisco (3.94), Seattle-Tacoma (3.98), Boston (3.87) and San Jose (3.56). In August, the Detroit metropolitan area with less than one online job ad per 100 persons in the labor force (0.9) had the lowest number of ads adjusted for the labor force.

meshugy said...

"Buyer's market" for job hunters as state unemployment rate dips

"It's really a buyer's market for people who want to work in Washington," said Employment Security Commissioner Karen Lee. "Whether someone is interested in working at the local mall or wants a career in nursing, there are plenty of jobs out there, and new jobs are being added all the time."

Anonymous said...

Mesh, your jobs per 100 employees is interesting, but it's also interesting to note that both Boston and San Diego are clearly bubble cities in the midst of a housing free fall, so there is literally no correlation between jobs and housing value according to this data.

On another note, the word I hear on the street (not as an MS employee) is that they have a hiring freeze on all positions and you need to justify all positions, which has effectively reduced the overall expected hiring.

Larry Nusbaum said...

Last spring I attended a Mutual Fund Retirement Seminar in Phoenix. There were about 200 older people there. The host asked everyone to raise their hand if they plan to sell their home and move into a rental unit. About 3 hands went up. How does a real estate bubble pop if everyone remains in their home?

Crashcadia said...

Larry,
People attending a retirement seminar have probably been in their homes for some time. They probably purchased years ago. If they have not tapped their equity then they are not the problem.

The problem is all of the toxic mortgages handed out over the last few years, coupled with rampant speculation. The end effect is unqualified people purchasing multiple properties at inflated prices with toxic mortgages, while relying on job growth in the housing industry.

Phoenix is not the only frothy location. The froth is nation wide. The froth is worldwide.

Did the host ask everyone to raise their hand if they had purchased investment property within the last few years?


We have a negative personal savings rate for the first time since the early 1930’s.
We have a record national debt.
We have a record number of homes built in recent years.
We have record speculation in real estate.
We have had record low interest rates in the world first and second larges economies and a record number of sub prime loans have been handed out.

I am beginning to sound like a broken record.

Those who have been following this credit bubble know that a deep recession or possibly a greater depression is six months to a year away.

You see it’s not just a real estate bubble. It’s a credit bubble. It’s bigger than you may think and it’s worldwide.

synthetik said...

Larry,

If you fart in space and no one is around to hear it "pop", did you still fart?

Go peddle your snake oil somewhere else.

synthetik said...

Wait a minute here lurch... you are a realtor in Arizona, the frying pan of the housing crash, and you dont' think there is a credit/housing bubble?

And you are on this blog peddling a book about how to become wealthy? Maybe you should try the PI's RE blog down the street. It's the blog marked "abandoned" -- but don't worry, if you're a realtor you can still get in through the back door.

I guess you figured you can't make money in RE so you thought you'd write a book.

arrr, to the plank with yee. (still 34 minutes left)

Anonymous said...

Oh Larry,

How could you?

Bad Larry.
Bad, bad, Larry.

No soup for you.

Eleua said...

Larry,

If you have 20 years of experience in the RE field, you are probably looking for a clean pair of shorts, right about now.

How am I doing so far?

Inventory climbing...(especially Arid-zona)

Baby-boomers looking to save their retirement McMansion equity (how do 77,000,000 Mouseketeers hit the exits all at once, without causing a panic?)...

ARMs readjusting (100 megaton financial grenade that is about to go kablooie)...

Every stiff that wants a house, has a house...

Feds about to give the lending industry the rubber glove treatment...

Price/Income ratios severely outta-whack...

Lame-stream Media carries a Housing Bubble story every day...

Realtors getting one or two sales PER YEAR...

War with Iran looming...

Dollar running on vapors...

Spec/Second/Vacation homes at record highs...

Californians facing increasing headwinds in selling their homes (X-Cals prop up your market, just like they do here)...

Tech companies reporting increasing inventory, decreasing end markets, with investors bidding shares to dizzying heights...

Do you buy Maalox by the train-load?

You can follow Larry's advice, or follow the advice of The Big E.

Eleua said...

Larry,

You are so full of it.

70% of Discoballers think the principle funding of their retirement nest egg will come from the sale of their home.

Just ask one. See where their money is. The average Boomer has saved (not counting their house) less than $20K.

Unless they think they are going to die 6 months after retirement, WTF are they going to do for money?

If you said "sell the McMansion to some coffee inhaling, code pounding, GenX thrill seeker" you are dumber than you look - and that's quite a feat.

Eleua said...

I hate to turn this into a "bitch slap Larry" thread, but he actually gives bulls, like 'Shug,
a bad name. At least 'Shug makes an honest living as a minstrel. At least he brings something worthwhile to our society.

The LAST thing we need is another RE agent peddling a book on how to get rich in real estate - AT THE TOP OF THE BIGGEST BUBBLE IN GALACTIC HISTORY!!!

Yes, many "older people" may not want to rent, but they certainly aren't going to stay in their 4 bed, suburban Garagemahal when they are in the dusk of life. Again, how do 77,000,000 people all exit the 'burbs in an orderly fashion?

They don't. These aging hippies still have to fund college for the "baby-on-board" generation.

This is what happens when you have a 35 year bull run in an asset class. The imbalances are legion.

When things are this outta-whack, they have a nasty habit of getting back into whack in a very disorderly fashion.

Spokes said...

LOL. Was the next question "Can you present your 'plan' and show that you've got enough to cover your expected burn rate including a few 'unplanned', yet expected, expenses?" Seriously, I've seen study after study that shows that the average person is unrealistically overconfident about their retirement prospects. I think that the question that was really answered was "do you hope to stay in your home?" rather than "do you plan to stay in your home?".

Anonymous said...

Well, as for trends, I work one of the largest I/T companies in the world ( three letters). And one of the stated goals is by 2010 to have 30-40% of the workforce be based in India. The North America workforce would be primarily customer-facing ( in person ), that leaves you with marketing,sales,upper level mgmt, and some local development to meet gov't requirements/regulations. I wouldn't doubt that this is the trend at most shops. Of course I wonder how Microsoft deals with analysts in having to maintain a high-cost workforce in a , now, very high cost area. Why isn't the work being relocated to Texas? Honestly a dis-serive to the shareholders, especially when the stock has been trading sideways for years...

uptown said...

$100k a year was a nice salary 10 years ago, but it doesn't go as far today. MS used to be attractive because of the stock, and will be again if they ever get around to breaking the company up. Something they should have done 10 years ago.

So if you're smart enough to do a CS degree why not go for something that pays and can't be offshored? BTW you should ask WaMu how well offshoring works (it doesn't).

octopuswithafez said...

So if you're smart enough to do a CS degree why not go for something that pays and can't be offshored?

LIke being a divorce lawyer? Those should be in demand with the bubble bursting ;-)

meshugy said...

There were about 200 older people there. The host asked everyone to raise their hand if they plan to sell their home and move into a rental unit. About 3 hands went up. How does a real estate bubble pop if everyone remains in their home?

Maybe only three of them had their hearing aids on?

Sorry Larry, but you'll need better data then that to prove your point.

Anonymous said...

I need to change my practice from criminal defense to bankruptcy and divorce. I could make a killing.

Anonymous said...

Awesome. Shug, you are now one of us. Glad to have you aboard.

now sell f'ing house for crissakes!

Anonymous said...

Of course I wonder how Microsoft deals with analysts in having to maintain a high-cost workforce in a , now, very high cost area. Why isn't the work being relocated to Texas? Honestly a dis-serive to the shareholders, especially when the stock has been trading sideways for years...

Yeah, Microsoft is just hemorrhaging money right and left. The cost of the workforce is just killing profits...Yeah right!

It's hard to compare MS and IBM. IBM is MUCH bigger and is MUCH more hardware focused. Profit margins are much better on advertising and software.

In any case, I still don't think MS is propping up the housing bubble

Anonymous said...

Microsoft's margins are some of the highest of any industry. Its ranked the 7th most profitable company in the US. IBM is not even in the top 10.

MSFT revenue was about 39 billion in 05, with 12.2 billion in profits.

IBM revenue was about 91 billion in 05, and only 7.9 billion in profits.

http://money.cnn.com/magazines/fortune/fortune500/snapshots/879.html

So the idea that MS has a high cost work force is unfounded. The margins in software are huge.

I work at MS, and yearly bonuses where paid last week. I'd estimate at least 350 million was pumped into the local economy due to bonuses.

Anonymous said...

It is not just Microsoft that is hiring in the area. Also, MS pays dividends now and while that doesn't mean much to those who got hired in the last 6 years, there is a lot of play money flowing around.

dash_point said...

Seattle has, almost by accident, become the most educated city in the U.S

I hear this oft repeated by people around Seattle, but it makes me chuckle more than anything. Does Seattle have some kind of unspoken inferiority complex? I would bet numerous metro areas compare to Seattle in terms of education level.