Sunday, April 02, 2006

cost of not living

had lunch with a friend who is head of interventional radiology at an east bay practice. we had the same conversation we always have. he wants to live in the penninsula, be in an academic center like stanford, work with innovative technologies, and work with venture capitalists. what holds him back is the "cost-of-living" index issues. he makes a handsome salary, which carries his lifestyle a bit further in the east bay than here. if he came to stanford, he is concerned that he would take a double hit on his lifestyle due to lower salary and higher cost of living. i have similar conversations with people from all over the region and all over the country who express sticker shock at the cost of living and the relatively small salaries. there are valid reasons to like living elsewhere and valid reasons to choose to live away from the peninsula. there are people for whom a ceiling exists and cost-of-living is an insurmountable issues. however, for those that are talented and want to live here but are held back only by the cost of living issue, here is a thought:

in honor of all of them, i'd like to introduce the concept of "cost of not living index" which specifically tracks the value created by a particular environment that is not captured in the simple but misleading equation of happiness = salary - costofliving. cost of not living would include opportunities that are made more accessible by living and working in a particular area, such as working at stanford in order to work with VCs. the fun, activities, weather, quality of people, quality of opportunities, intellectual stimulation, and networking effect have enormous value that can't easily be quantified. the economic value, though at first vague, is ultimately very large and greatly outweights the more tangible costs. yet it is human nature to measure the things that are measurable and capitulate on the intangibles.

the good news is that the bay area's "high" cost of living works as a great filter to select in those individuals that are good at assessing value, especially the vague but large intangible value. high cost of living, thus, is a self-fulfilling prophecy as the area continues to attract fearless, clear-eyed talent who are going to arrive, work together, and sustain the economic revolution. not recognizing and acting on this dynamic is the real cost, captured in the concept "cost of not living".

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