How Skyscraper Construction Ties Into Tech Bubbles
RENEE MONTAGNE, HOST:
Now let's report on a sign of prosperity, or maybe a sign of a false prosperity, a possible bubble in the tech industry. Here's Steve Henn of NPR's Planet Money.
STEVE HENN, BYLINE: For a generation, our image of San Francisco has been shaped by a handful of iconic scenes, the Golden Gate Bridge, a skyline shrouded in fog, the Transamerica Pyramid. But soon, all of that will be dwarfed by this thing.
MICHAEL TYMOFF: We're at the construction site for the Salesforce Tower.
HENN: The Salesforce Tower. Michael Tymoff at Boston Properties is in charge of building it.
TYMOFF: (Speaking over construction noise) It's music to the ears of a developer. Sometimes, I lay asleep at night with a video track of this playing.
HENN: Tymoff says of the Salesforce Tower will soon be the tallest building west of the Mississippi. It's going to cost a billion dollars. It will be an engineering marvel that has to stand up to earthquakes and hundred-mile-an-hour winds. But it's not the height of this building that has a some people worried. It's the fact that this enormous building is being named after its anchor tenant, Salesforce, a company that has never turned an annual profit.
Are you familiar with the skyscraper theory of bubbles?
TYMOFF: I am familiar with it.
HENN: Michael Tymoff doesn't like to talk about it. But Vikram Mansharamani does.
VIKRAM MANSHARAMANI: One of the indicators I have found that has worked particularly well in identifying bubbles, usually before they burst, are the world's tallest skyscrapers.
HENN: Mansharamani is an economic forecaster and a Yale lecturer.
MANSHARAMANI: One of the things to look for when trying to spot a bubble are signs of overconfidence and hubris.
HENN: And there is this long history here. Once upon a time, there was a three-way race to build the tallest building in New York City.
MANSHARAMANI: It began with 40 Wall Street.
HENN: Back then, the economy was booming. The stock market was breaking records.
MANSHARAMANI: The Chrysler Building opted to erect a spire that slightly outdid the height of 40 Wall Street so that they could claim to be the world's tallest tower.
HENN: Architects hid the fact that the Chrysler Building had a spire so the competition wouldn't know it was there until it actually went up. But this was all for naught because planners uptown at the Empire State Building had both of them beat. The year was 1929. And the next being thing was the Great Depression. In 1997, the Petronas Towers in Kuala Lumpur claimed the title of the world's tallest building. And then, just a few months later...
MANSHARAMANI: They were basically at ground zero of the Asian financial crisis.
HENN: Same story in Taipei in '99, when the tech bubble burst, and then in Dubai in 2008 with the global financial crisis. Now, the Salesforce Tower is not in the running to be the world's tallest building, not by a long shot. But...
MANSHARAMANI: This indicator works.
MANSHARAMANI: It's hubris and overconfidence embodied in this chest-thumping behavior of wanting to have the region's tallest or the city's tallest. It's not particularly rational.
HENN: Whether this is a tech bubble or not, Michael Tymoff is focused on other worries, like finishing on time.
TYMOFF: You can see out this window right now; it's just the amount of cranes. There's more than 25 tower cranes.
HENN: Everyone else in San Francisco is building too. And Tymoff is still hunting for tenants. Steve Henn, NPR News.
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