Ignore the Tech Naysayers — San Francisco Isn't Dying

David Paul Morris | Bloomberg | Getty Images
  • In recent months, a steady stream of investors, executives and companies have left the San Francisco Bay Area for places like Miami and Austin, Texas.
  • But the tech industry has deep roots in San Francisco, and the naysayers' complaints are neither novel nor convincing.
  • San Francisco may change, but it's not going anywhere.

If you believe what you read, San Francisco is dying.

Over the last few months, there has been a steady stream of investors, executives and companies leaving for places like Miami and Austin, Texas. Many have lobbed parting shots on their way out the door.

Investor Joe Lonsdale pointed to San Francisco's population of transients and open-air drug users, the state's practice of condoning rolling blackouts during windy weather to prevent downed power lines from starting fires, and restrictive zoning laws that make new housing expensive and hard to build. Venture capitalist Keith Rabois called the city "massively improperly run and managed."

Tesla CEO Elon Musk slammed local Covid regulations that paused manufacturing at the company's plant in Fremont, and compared the state to a sports team that's been winning too long and become complacent.

Palantir CEO Alex Karp wrote in the firm's IPO prospectus that the company felt out of step with Silicon Valley's morals and rhetoric, writing, "Software projects with our nation's defense and intelligence agencies, whose missions are to keep us safe, have become controversial, while companies built on advertising dollars are commonplace." The company moved its headquarters to Colorado over the summer.

Security software start-up Tanium moved to a suburb of Seattle. CEO Orion Hindawi -- previously a lifelong resident of the Bay Area -- criticized its "real governance issues" while noting that the pandemic's work-from-home provisions had allowed many Tanium employees move to other cities, where they tend to be "a lot happier."

Residential rents in San Francisco are plunging, housing inventory is rising after years of extreme scarcity, and the region's exceptionally aggressive shutdowns have not stopped the coronavirus. California now has the one of the worst new infection rates in the nation, and hospitals are close to overwhelmed, while destroying local businesses.

In the midst of all this, the local government indulges itself with headline-grabbing (not in the good way) symbolic proposals like renaming more than 40 schools named after people as varied as Sen. Dianne Feinstein and Abraham Lincoln, and condemning the fact that Mark Zuckerberg's name was added to the local public hospital after the Facebook CEO donated $75 million.

A personal perspective

All of these criticisms have validity. Many are shared by a lot of people in the city, including me.

But before dismissing San Francisco's, and California's, continuing relevance to the tech industry, consider the following thoughts, based on my historical knowledge of the area, personal perspective and conversations with many lifelong residents and newcomers alike.

(Because some people will dismiss this essay if I don't present my bona fides: I've now lived here for exactly one-third of my life, 17 years. I passed through with my parents in the early 1970s, moved here after college in 1992 and made it through most of the dot-com boom before it got too expensive, then finally returned for a third time in 2010. My wife and I own our home, and our kids have grown up attending San Francisco public schools, where my wife has put in thousands of hours leading local PTA chapters and dealing with every kind of political conflict and bureaucratic barrier that you could imagine.)

So, some things outsiders should know:

The biggest tech companies have deep roots here. Google's parent company, Alphabet, and Salesforce employ about 30,000 workers in the Bay Area, and have built out hundreds of thousands of square feet of office space in San Francisco alone. Alphabet is undertaking a major redevelopment of downtown San Jose and has committed $1 billion to build more affordable housing in the area, while Apple spent billions on a space-age office complex in Cupertino and has put down $2.5 billion toward affordable housing.

Facebook may be allowing employees to work from home forever after the pandemic ends, but it has also spent billions building out a massive campus in Menlo Park and is signing new leases across the bay in Fremont, where Tesla's main factory is located. These companies may seek to expand elsewhere, but it would be economically crazy to wind down operations here in the short-run after investing so much.

That's not to mention dozens of smaller and more recently public companies like Twilio, Zoom, Airbnb, Doordash and Pinterest, many of which have said they plan to stay. As long as they're here, they'll attract at least some employees who are entrepreneurial enough to strike out on their own. They'll seek funding from all those venture capitalists whose offices still line South Park in San Francisco and Sand Hill Road, up the street from Stanford.

Speaking of which, Stanford and U.C. Berkeley are world-class higher educational institutions with strong local networks and connections to the tech industry.

Tech has appropriate, but limited, political power in San Francisco. One of the oddest laments of the departing crowd is that the tech industry has been unappreciated and unable to exercise political power to change the city.

This is a bizarre claim. In 2011, San Francisco voters elected Ed Lee as mayor. He was supported by tech industry luminaries like investor Ron Conway and future Yahoo CEO Marissa Mayer (then at Google). People like Conway and Salesforce CEO Marc Benioff are longtime San Franciscans with deep social and political connections and capital. Benioff in particular was a big proponent and contributor to a 2018 proposition that taxes large companies on their gross receipts and uses the tax to mitigate homelessness; the current mayor and many other tech executives came out against it. (It passed but was held up in court challenges, which the city finally beat this year.)

Under Lee, the city instituted a payroll tax holiday on companies that relocated to the mid-Market neighborhood, drawing Twitter, Uber, Zendesk and a handful of others. It reshaped an entire area of the city, but did not solve the rampant homelessness and street crime in the area.

Lee also leaned toward the tech industry's point of view on minor controversies such as whether tech company bus shuttles should be allowed to park at the city's Muni stops in the mornings. Lee died in office in December 2017 and was replaced by London Breed, a similarly tech-amenable mayor who grew up in the city's public housing.

The power of the mayor in San Francisco is limited by the Board of Supervisors, an 11-member city council, each of whom is elected from a discrete geographic area, giving neighborhood voters uncommon power over how the city is run.

The supervisors oversee most governance in the city, and they serve a range of very powerful constituencies, including public workers' unions, neighborhood groups, the huge local health-care industry, homeowners, renters and local "progressives" -- who, despite their name, vote mostly against new development and growth and in favor of preserving what they perceive as the old San Francisco. The city also allows voters to put initiatives on the ballot, leading to more bizarre and often contradictory laws, which are often challenged in court, not enforced and so on.

Working within this diversity of opinions is challenging. It's easier to have cities line up with incentives every time you threaten to leave. But it's also why San Francisco is a city worth living in for many of the people who live here, including the young creative workers who flock here in search not only of a paycheck but also adventure and novelty.

The area's gnarly problems predate the tech industry. Tech critics point to San Francisco's inability to "solve" its homeless problem over the last decade, but the problem stretches back well before the dot-com boom. When I first moved here in 1992, Mayor Art Agnos was dealing with the fallout of allowing (that is, not actively opposing) hundreds of homeless people to live in the park in front of City Hall. The last seven mayors have all tried various approaches -- law and order, relying on services, "cleaning up" various parts of the city, shelters, more funding for housing and so on. It's the kind of problem that resists simple algorithmic solutions.

The roots of the problem include broadly popular zoning and housing laws that make it difficult and expensive to build new houses, a reduction in mental health services in the 1980s that has never been recovered, historically permissive attitudes toward hard drug use and many other factors. (Kim-Mai Cutler's 2014 long take on housing policy and Nathan Heller's piece on homelessness during the pandemic are excellent places to start if you're truly interested in learning what's going on, instead of just repeating talking points from national politicians and tourists who can't understand why all the hotels are next to the roughest neighborhood in town.)

The same goes for most of the other problems the tech departees are citing. Power outages? Let's go back to the early 2000s when a botched deregulation plan and market manipulation contributed to rolling blackouts, leading voters to recall Democratic Gov. Grey Davis and replace him with Republican Arnold Schwarzenegger. Wildfires? How about the 1991 firestorm in the Oakland hills, which killed 25 people and burned thousands of homes? Corruption? Been going on for more than a century (like with many big cities).

These problems are real. It sucks having to deal with them. Nobody's blaming anybody if they're tired and want out.

But for people in the tech industry to somehow believe that their presence or absence has any bearing on these problems is the height of arrogance. Tech companies and workers flocked to the Bay Area when the economy was booming, despite these problems. There's no reason to think these same problems will keep them away when the economy booms again.

San Francisco is not New York

Perhaps some of the misunderstanding comes from people who expect San Francisco to be like New York. People move to New York to make it.

People move to San Francisco to find themselves.

Sometimes finding yourself also means finding riches, but San Francisco has historically drawn the misfits, the outcasts, the refugees from places filled with intolerance and hatred. This outsider's mindset is embedded in the culture. (David Talbot's "Season of the Witch" offers some excellent historical perspective.)

These outsiders, who sometimes ally or overlap with the anti-growth "progressives," have long pitted themselves against the "pro-business" or "downtown" forces that think the city is unnecessarily hostile toward business.

The tech industry may think it's special, but in this place, it's just another manifestation of those same pro-business forces, fighting the same fights and making the same complaints.

Whichever side you're on, sometimes enough is enough and you move on, as I did in 1999. That's OK. You can always visit. We love tourists here. We appreciate your business. And we hope someday you'll return.

San Francisco isn't going anywhere.

Copyright CNBC
Contact Us