Life In Microsoft's Circle Of Prosperity -- For Many, The Eastside Is An Economic Eden; Others Find The Atmostphere Altogether Too Rich
It doesn't matter much to Ysidro Munoz how many more billions Bill Gates is worth this year than last.
But the continuing prosperity of Microsoft is very important to him.
For the past three years, the Bellevue resident has earned his livelihood landscaping the 300-acre campus of the world's largest software company. His brother, Rigoberto, joined him three months ago.
The Munoz brothers, who work for Microsoft's landscaping contractor, Teufel Nursery, are among tens of thousands of Eastsiders who depend directly or indirectly on the company that Bill built.
While Microsoft's money and muscle affect the entire Puget Sound area, nowhere is the wealth more concentrated than in the cluster of suburbs east of Lake Washington.
Not only do nearly two-thirds of the company's Washington state employees live on the Eastside, so do three Microsoft billionaires and thousands of millionaires.
In the buzz of coffee-house conversations from Kirkland to Issaquah, "Microsoft" is heard countless times every day. There's a sense it's remaking the Eastside.
Microsoft employees have settled in a crescent of cities around the Redmond campus, places like Kirkland, where condos sell for as much as $500,000; or Redmond, where bulldozers are remaking the city; or Bellevue, where sales of BMWs and Lexuses are at an all-time high.
To some, the monied Microsoft workers are the new Californians: clogging roads with Range Rovers and spoiling wooded landscapes with mega-mansions and pleasure palaces, so the stereotype goes.
To others, like the Munoz brothers, the company represents jobs and opportunities on a scale never seen before in so small an area.
Whatever the attitude, the facts are indisputable:
-- Bill Gates and other company officers and directors living on the Eastside own stock worth $58 billion. Other Eastsiders have received much, if not most, of the $89 billion in employee stock options since 1983 based on current market value.
-- With nearly two-thirds of the company's 11,500 Washington employees living on the Eastside, nearby companies are hiring people to sell cars, design brochures and Web sites, clean hotel rooms, build houses and office buildings, cater meetings, and book airline reservations. For every person the software giant employs, another 3.4 jobs are created, according to a study commissioned by the company from economist Richard Conway Jr.
-- Ex-Microsoft employees are starting up spin-off companies - "Baby Bills" - in record numbers. Four hundred of the 1,000 members of the Microsoft Alumni Network have started their own businesses - most on the Eastside.
-- The average age of a Microsoft employee is just 33 and the number who have children is growing. Based on the active community involvement of many Microsoft alumni so far, their impact on local schools, arts and politics could be huge.
The impact is already being felt in some quarters.
Mercer Island resident and Microsoft co-founder Paul Allen last month became the first Washingtonian ever to privately finance a statewide election - in addition to swaying its outcome with a multimillion-dollar ad campaign. Microsoft employee dollars bought Issaquah's Village Theatre a new home, and the fund-raising campaign for a new Bellevue Art Museum was jump-started with a $2 million donation from Microsoft director Jon Shirley and his wife, Mary.
The company has determined where a Highway 520 interchange will be built and when an Overlake transit center will open. The Eastside housing market is booming, with stories of Microsoft employees shelling out cash for $800,000 homes widespread and real.
"Microsoft has bred a whole new economic phenomenon," said Catherine Rau of Windermere Real Estate. "Not only in what they earn but the age at which they earn it."
How many Microsoft millionaires are there? No one knows, in part because there is no way to determine how many employees sold their stock before its after-tax value topped the million-dollar mark. Some estimates put it as high as 10,000.
"I've heard statistics of up to 5,000 if those stock options were exercised," said Kathleen Wilcox, president of the Bellevue-based Washington Software and Digital Media Alliance. "Every year that goes by you have a new class of stock options vesting at Microsoft so it's continuously adding to the pool of people with sizable discretionary incomes."
Sharing of wealth with the little people distinguishes Microsoft and Gates from such prosperous predecessors as John D. Rockefeller and Frederick Weyerhaeuser. Stock options are widely offered as incentives in high-tech firms, but no other company's stock has risen as high as Microsoft's.
"Carnegie Steel created only one Andrew Carnegie in terms of wealth. Microsoft may have only created one Bill Gates, but it created . . . many Microsoft millionaires who have no parallel in Carnegie," noted Glenn Pascall, senior fellow with the University of Washington's Institute for Public Policy.
What does this mean to others who live on the Eastside?
That depends on your perspective.
"Redmond is being put on the map all over the world because of Microsoft," exulted Redmond Chamber of Commerce Director Dan Ramirez. On a recent trip to Ireland he found the name Redmond triggered immediate recognition.
"The first thing out of their mouths was, `How is Microsoft?' and, `Say hi to Bill for us.' "
Clerical temp worker Kathy Moss is less enthusiastic. She spends more than half her income on rent, and her daughter's Kirkland schoolmates always seem to have the latest toys, things her family can't afford. The Eastside is changing, and Moss points to booming companies like Microsoft.
"They're eating everyone up like Pac-Man," said Moss. "There's more and more high-paying jobs here, and there's more and more people going to the food banks."
Most Microsoft employees are not millionaires, but the 1995 Conway study indicates they do have an average salary nearly twice the state average, as do many other Eastsiders. When exercised stock options are included, the average Microsoft salary in 1995 was $138,270, more than five times higher than the state average of $27,320.
The phenomenon has triggered inevitable backlash.
"I think we unfairly get a lot of blame for the bad things," said Microsoft's local-government affairs manager Barry Murphy, "and too much credit for the good things."
Just ask Dustin Ingalls. Three years ago he was just a guy who had worked his way through the UW.
Now that Ingalls, 27, works as a production manager for Microsoft, new acquaintances unabashedly ask him, "So how fast did you make your first million?" "Will you donate money toward my cause?" "Can I give you my resume?" and "Will you buy something for me at the Microsoft Store?"
There's a mystique about Microsoft that inspires both fascination and frustration, employees like Ingalls have learned. Along with curiosity and astonishment over the new wealth, there is low-level discomfort, even envy, at what appears to be a privileged class receiving stock options worth more money than people in other lines of work will ever see.
"Everybody assumes you're either a millionaire or soon to be there," said Ingalls, who lives in Bellevue.
Housing, especially, has become a sore spot. With the average listing price of homes in the Bellevue-Redmond-Kirkland area approaching $300,000, the middle class is being priced out of the housing market. With rental rates in the Redmond area jumping about 5 percent in the last year, the Redmond Multi-Service Center has taken to recommending low-income residents simply move away.
Growth management and its restrictions may be more to blame than Microsoft for higher housing costs, but it's true the company is producing workers and smart investors who can pay cash for homes that most people can't land a mortgage to buy.
"A lot of people (sold stock) and they live high on the hog," said 81-year-old Dewey Farr, who lives in a home he built 16 years ago for $50,000 in Redmond, across from a Microsoft worker.
He shakes his head at the mini-mansions springing up around Redmond. "They're big, two or three times bigger than they need and they waste utilities, waste, waste, waste," he said, pointing east to homes in the Novelty Hill Road area.
All along Novelty Hill Road, subdivisions have sprouted bearing grand brick homes with high-pitched roofs, three-car garages and price tags of $400,000 or more.
But Farr, like most Eastsiders, is also quick to point out the benefits of having the world's largest software company down the road. "Microsoft is helping Redmond," he said. "I really believe that."
Homes and cars are among the few obvious extravagances indulged in by wealthy Microsoft employees and alumni. But in many ways, these folks are redefining what it means to be a millionaire.
"It's discreet, and it's also almost casual. It's not pretentious and bombastic. They still run around in their tennis shoes," said Ramirez of the Redmond Chamber.
That sentiment is seconded by 30-year-old Jill Jones of Kingsgate. Although the area's rising cost of living is making it increasingly difficult for Jones to pay her bills, she doesn't blame Microsoft.
"They still shop at Fred Meyer and they still go to the Salvation Army to shop second-hand," said Jones, who has several friends who work for Microsoft.
In his 1995 report on Microsoft's economic impact, economist Richard Conway said employees typically don't splurge on luxury items and are not turning the region into a Northwest Beverly Hills.
"A few spent their money recklessly but most put it into a house, into a car and into the bank or started other businesses," Conway said. "I got the impression that people work there because it's an exciting place to work. Getting rich is as much a lucky stroke as anything."
Ask anyone on the Eastside about Microsoft, and those who criticize will also likely cite its benefits to an area that once depended on forestry and aerospace and is now transitioning to software. Maude Guertin of Redmond, who remembers when a dirt road linked the city with Kirkland, is fed up with the traffic that newcomers have brought.
"I think Microsoft is getting too big for this town," she said.
But, she adds, her great-grandson has a job there and it's a good place to work.
TIP OF THE ICEBERG
The question now is how the new wealth, work styles and talent pool will reshape the region in the years to come. The Washington Software and Digital Media Alliance - which represents 1,000 of the state's 2,300 software companies - has the goal of seeing Washington surpass Silicon Valley as the world center for software and electronic media.
Bill Gates is talking about eventually doubling the number of employees at Microsoft. Already, the company employs a temporary local work force of around 5,000 in addition to its permanent staff. If most of the future new hires settle on the Eastside, look for more congested roads, tougher competition for homes, and more money recirculated through the economy.
"It's just the tip of the iceberg," Personal Health Connections CEO William Ellis says of the wealth that has been spent so far. "When their interests start to shift from, `Work, work, work, work,' to, `Work and then there's a life beyond work,' I think we're going to see a tremendous outpouring of philanthropy in education and the arts. I think there's going to be a tidal wave in the next 10 years."
Eastside reporter Tyrone Beason contributed to this report.
---------------- Microsoft: No. 3 ----------------
These are the nation's 10 largest companies based on market value (number of shares outstanding times price per share).
Market value
Company (in billions of dollars)
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1. General Electric $224.56
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2. Coca-Cola 176.17
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3. Exxon 160.46
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4. Microsoft 154.43
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5. Merck 126.67
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6. Intel 117.89
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7. Philip Morris 109.00
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8. Procter & Gamble 97.33
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9. International Business Machines 93.97
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10. Bristol-Myers Squibb 86.68
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- Stock options granted to Microsoft employees but not yet exercised totaled $23 billion on March 31 - an average of about $1 million per permanent employee.
- Mercer Island resident Paul Allen's Microsoft stock is worth $14 billion, more than the assessed valuation of the entire island and Redmond combined. It is also worth more than the assessed valuation of Bellevue.
- Microsoft is the No. 1 owner-occupant of office space on the Eastside, with 3.3 million square feet of offices, mostly on its Redmond campuses. Microsoft leases more than 1 million square feet of office space in Bellevue, Issaquah and Bothell, making it the largest single renter of office space on the Eastside.
- The state's leading employer, Boeing, spent $20,000 per employee on goods and services from other companies in 1995, compared with $67,000 spent by Microsoft.