D. Plen, I was happy with Dell's performance today, given the Fed Fears. I just read this article about the changing economy in Austin, because of Dell and the other Tech companies. I am more familiar with the economy in the Silicon Valley, as I grew up there and my best friends live there.
Enjoy your vacation! Hawaii sounds great to me right now! :)Leigh
usnews.com
Cover Story 2/21/00
A tale of two Austins
How one boomtown is coping with the growing wealth gap
By William J. Holstein
AUSTIN, TEXAS-Down here in Austin, there's a name for folks like Paige and Mitchell Jacobson: "Dellionaires." The two of them joined tiny Dell Computer in the late 1980s and poured their savings into Dell stock. Over time, they loaded up on more shares and options. Friends told them they should sell some, just to diversify. Luckily, they never got around to it: The value of a Dell share has increased 900 times since the company went public in 1989. Today, the Jacobsons live in a 7,800-square-foot, $2.2 million home in the rolling hill country west of Austin with a panoramic view of Lake Travis. At 36, Paige has retired to concentrate on being a mother to two small children; Mitch, 42, also has left Dell to manage his investments. "When we started, Dell was just a high-tech company that was fun to work for," says Paige, sitting in her award-winning kitchen. "We never knew all this would happen."
They aren't the only ones enjoying the fruits of Austin's high-tech explosion. Robert Fabbio, 42, who arrived in Austin in 1987, founded and sold three software firms, including Tivoli, which IBM bought for $750 million. Among his toys is a 38-foot cigarette boat aptly named: Over the Top. He also owns a private island in a lake in southern Canada, where he spends time during the summer. Then there's Richard Garriott, 38, a Houston native and co-founder of game company Origin, who has caused a stir by starting to build a 25,000-square-foot castle, complete with moats and dungeons, that will cost about $25 million. "I need the space," says Garriott, who lives alone but is an avid collector of everything from medieval armor to space memorabilia.
Digital divide. Clearly, America's high-tech boom has been very good to Austin, whose metro population has increased by a third since 1990, to about 1.1 million, with roughly 2,000 newcomers arriving each month. But the city also exemplifies a major pitfall of the New Economy-an ever widening wealth gap. Austinites refer to it as the "digital divide," the fact that many working and middle class people haven't gotten on the tech bandwagon, don't own stock, and haven't seen their net worth jump anywhere near that of the techno-elites.
As rents and real-estate prices increase, many middle-income people are getting squeezed, sometimes moving to smaller surrounding communities with lower real-estate prices. Two out of three private-sector jobs created in the 1990s in Austin paid wages below the city's average, according to researchers at the University of Texas-Austin. A third of the work force is trying to live on $350 a week. Workers in hotels, restaurants, and hospitals have been particularly hard hit. Even teachers are finding it harder to make ends meet. Altogether, only 20 percent of Austin's work force is employed in technology-related areas.
Another aspect of the digital divide is access to the Internet itself. The swank hill country neighborhoods outside Austin's city limits are among the most wired in the nation. But poorer residents, mostly African-Americans and Hispanics who live in East Austin on the other side of eight-lane I-35-which divides the city, literally and figuratively-often don't have access to computers and the Internet.
The barriers against participating in the digital economy seem to grow wider by the day. High-tech companies west of I-35 are crying out for programmers and database architects, and have thousands of jobs they can't fill. Yet some 800 people a month visit the DeWitty Job Training & Employment Center in East Austin looking for work. Since a high proportion of them either have criminal records or haven't finished high school, the mismatch in skills is nearly total. "The message is, if you're not part of the computer economy, you're a loser," says Gary Chapman, director of the 21st Century Project at UT-Austin.
Part of what's happening here is unique to Austin, of course. After all, it's a highly eclectic university town, where hippies from the 1960s still embroider designs on motorcycle jackets. The impact of the tech boom is more vivid in Austin than in Silicon Valley or larger cities such as Atlanta or Dallas because it has happened in such a short period of time. As recently as the '80s, Austin's economy was flat on its back as a result of overbuilding and the decline of oil and agriculture.
But Austin's widening digital divide also has national implications: The city's boom and the frictions it has created have occurred literally within view of Gov. George W. Bush's office in the state Capitol building and could emerge as an issue in the presidential race. Mayor Kirk Watson and others believe that even though Austin may be riding higher in the saddle than some other parts of the country, other communities and indeed the nation as a whole will face similar experiences. "Austin is ground zero in the New Economy," says Scott Harmon, chief executive officer of Motive Communications, an Austin software company.
Bubba-land. To sample how Austin's predominantly white working class feels about the New Economy, cross the Colorado River into South Austin, an area that newspaper columnist John Kelso affectionately calls "Bubba-land," complete with gun stores, pawnshops, and a deer-processing center for hunters. The parking lot at the Warehouse Saloon on Ben White Boulevard is filled with pickup trucks. Inside, four power-line workers have gotten off work and are drinking pitchers of beer.
All of them are making what they consider good money, because Austin needs new electrical lines connected to the new million-dollar homes out west and to all the gleaming high-tech campuses as well. Ronnie Daniels, 39, says he can make $2,900 in each two-week pay period if he works seven-day, 80-hour weeks. His base pay is $25.36 an hour, the highest at the table. If the high-tech boys spend their money on mansions and Ferraris, "It don't bother me," says Daniels. "Let 'em spend. If they make money, we make money."
But his friends aren't so enthusiastic. Their wages have inched up because of a recent cost-of-living increase, but the most important reason they're making more money is that they are working many more hours. Only one of them can afford to live in Austin itself. Daniels has moved out of Austin, to a town 18 miles away, since the three-bedroom home he used to rent for $800 a month is now going for $1,600. Although the guys at the Warehouse Saloon have computers at home and know how to get on the Internet, none has financial market investments. "Our paychecks don't go up as fast as theirs do," says Bill Hornyiak, 36. "Our gains barely keep up with inflation."
The sense of disaffection is deeper in East Austin, just minutes from the Capitol. Down by the Quickie Pickie convenience store, many homes are boarded up, vacant lots are strewn with garbage, and men sit outside drinking beer at midday. In one former ranch-style home, Toni Williams, a 46-year-old woman, runs a program called the Austin Learning Academy that attempts to provide literacy and computer training for the disadvantaged.
Dell has donated five computers, and Austin Free-Net, a nonprofit organization, has equipped them with Internet access. Mexican immigrants, most of whom can't speak English, sit at the machines logged on to QuePasa.com, seeking news from back home. Young African-American women completing their high school graduate equivalency degrees, meanwhile, are trying to develop computer skills. "We are divided by a big concrete wall out there called I-35," says Williams. "On one side, they have computers in the schools and know what the Internet is. On the other side of the concrete, we don't."
One-time donations of computers to learning centers, libraries, and unemployment centers in East Austin don't do much to close the digital gap, community leaders say. "It's not simply a question of putting the computers in there and expecting people to be able to use them," says Ana Sisnett, executive director of Austin Free-Net. "You have to have people to help them and the technical support to keep the machines up and running." Dropping a visitor off at the Four Seasons Hotel, where the cheapest room is $300 a night, she remarks, "It's almost as if we live in different cities."
Just about the only time the high-tech crowd glimpses South or East Austin is on the way to the airport. When venture capitalists and chief executive officers get together, the talk tends to center on business plans and "liquidity events"?when their companies either launch initial public offerings or else get purchased by larger companies.
High-tech leaders revealed the extent of their isolation from the wider community at a recent conference, called in part to address the digital divide. Steve Papermaster and Peter Zandan, venture capitalists who organized the invitation-only 360.00 Summit meeting at the Four Seasons, pulled pranks like arriving on the podium riding their stunt bikes. They then donned crash helmets and invited several hundred techies to start throwing 2,000 whiffle balls at them. Later that night, they held the Whiffle Ball, a party at La Zona Rosa, a music club. Searchlights pierced the night sky, guiding partygoers to the club.
But in their own way, the New Economy chieftains seem to be recognizing that they have to find a way to respond to criticism from church leaders, community activists, and others. "There's no reason for the animosity that develops between these various constituencies," says Tivoli founder Fabbio. "We have to do something to ensure that the perception [against high tech] doesn't become a reality."
Let 'em drink microbrews. Michael Dell and other tech leaders are giving millions to charities. They also have launched an innovative concept called the Austin Entrepreneurs Foundation. Austin companies in their pre-IPO stage donate shares to the foundation. When they go public and their shares soar in value, they can then direct the foundation to make grants to particular charities, using the gains from their shares. Attendees at the 360.00 Summit pledged to become more involved in community affairs. Another way the tech crowd tries to help is by sponsoring a High Tech Happy Hour once a month at a local nightspot. Proceeds go to charity.
Is it enough? Probably not. "I'm scared to death," says Ed Perry, chief executive officer of Human Code, a multimedia content company. "My fear isn't terrorism or anarchy. It's just that we'll see increased inequity." He says technologists have to find a way to work with government and educators to keep the New Economy rolling. "There's so much we need to do to bring the Old Economy up to speed," says Perry. "How do we pull people on board when technology is changing so fast?"
Clearly, there's no one silver bullet to narrow the gaps among income groups. But Mayor Watson, for one, is guardedly optimistic. Among other things, he notes that the area's high-tech sector wants to find what he calls "linkage points" with the community around them. "To some extent, we're making it up as we go along," says Watson. "We're all kind of growing up together in this New Economy."
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