By MICHAEL GIBSON
April 8, 2019 6:30 AM
(Stephen Lam/Reuters)The city by the bay has survived earthquakes and fires. Can it survive itself?
It’s not what celebrants want to hear when the champagne is exploding out of shaken bottles of Dom, the confetti is falling, and their stock is up 8.7 percent at the market’s close, but I have an announcement to make: San Francisco is past its prime and the fires of creation have abated.
With all the millionaires newly minted by Lyft’s IPO, and with those set to be minted by Uber’s and Palantir’s and AirBnB’s, you might expect this enclave to become the next Babylon of American capitalism. While our moralists in the media — Nellie Bowles, Emily Chang, et al. — busily tsk-tsk the greed and the lust and the hypocrisy and the hubris, there is a story here they miss: The city’s current concentration of wealth likely doesn’t represent the beginning of a golden-if-sinful era, but the end.
Magnificent in the distance, San Francisco is now shockingly ugly up close. In the decade I have lived here, the city has achieved the seemingly impossible: It has combined the expensive and the bland and the appalling into a new form of decadence. To the untrained eye, it looks magical: a city of the future, a city of gasps. Then, slowly, it reveals itself to be a city of lies, one that dismisses the idea of city living.
The distant future Silicon Valley sells with the zeal of a crusader — all the lip service it pays to making the world a better place — shimmers like fool’s gold, monopolistic surveillance capitalism cloaked in the language of the common good. Billboards off the highway announce the coming of artificial intelligence as new nonprofits pop up to defend us against HAL and Skynet, but in reality “AI” is machine learning — pattern-recognition software parsing out subtle statistical connections to win board games and show you better ads.
With a devilish consistency, this city sets you up for disappointment.
Running a venture-capital fund that invests as early as possible in startups, I now see fewer and fewer companies choosing to come launch here. When we opened our doors in 2015, maybe 80 percent of our investments were in Bay Area companies. Last year, half of them were, and we expect to see that number decrease even more in the years ahead. Andreessen-Horowitz, the famed Silicon Valley VC firm, has announced that it’s becoming more or less a hedge fund, presumably to focus on later-stage opportunities. Peter Thiel, who had lived here since the mid 90s, has now decamped to Los Angeles, and says there is a less than 50 percent chance the next great tech company will arise in an increasingly expensive, conformist Silicon Valley.
“Silicon Valley is now more fashion than opportunity,” Thiel told the Swiss newspaper Zeitung. “The heads are the same.”
Lack of independent thought aside, the Economist has identified the source of the problem: You can’t build a successful startup from a garage if a garage costs a million bucks. The flow of new creations is being choked off first and foremost because there are fewer cheap places for new things to start.
The median rent for a one-bedroom apartment in San Francisco recently hit $3690 per month, 30 percent greater than in New York City. Over the last decade, the Bay Area has added 722,000 jobs but built only 106,000 new homes. Proposition M, passed in the 1980s to avoid “Manhattanization,” limits the supply of office space. The city’s average Class A asking rent has risen 124 percent since 2010 to over $80 per square foot.
The legendary urbanist Jane Jacobs once remarked that new ideas come from old buildings, the types of places you can alter without permission because no one cares about them. This is one reason why so many garage startups and garage bands and artists spilling paint in discarded warehouse lofts have left their mark on the world. The true creative class can’t afford to rent expensive new studios.
But in San Francisco, the true creative class can’t afford to rent any space anymore.
The artists have fled. Sadie Valeri, an artist who has been painting and drawing in San Francisco for over 20 years, recently announced that she is closing her famed Potrero Hill atelier. “Our studio lease is ending,” she wrote in an email to her students last month. “And we have been informed that our rent will be increasing significantly to more than we can afford.”
There is no longer a San Francisco music scene, either. The house the Grateful Dead lived in at 710 Ashbury Street during their formative years in the 1960s is surrounded by Victorian townhouses that today sell for $3 million and more. A tourist review of the location puts it well: “Unless you knew who lived there, you wouldn’t know.”
If you can stomach all that blandness, I wish you luck with the appalling. Up and down the city’s disorienting hills, you notice homeless men and women — junkies, winos, the dispossessed — passed out in the vestibules of empty storefronts on otherwise busy streets. Encampments of tents sprout in every shadowy corner: under highway overpasses, down alleys. Streets are peppered with used syringes. Strolling the sidewalks, you smell the faint malodorous traces of human excrement and soiled clothing. Crowded thoroughfares such as Market Street, even in the light of midday, stage a carnival of indecipherable outbursts and drug-induced thrashings about which the police seem to do nothing.
The confused mumble, the incoherent finger-pointing tirade, the twitch, the cold daemonic stare, the drunken stumble and drool — these are the rhythms of a city on the edge of a schizophrenic explosion.
The cause of this blight is codified nostalgia and greed. (Nellie Bowles where are you?) Baby Boomer civil servants act as urban taxidermists stuffing and mounting a dead city so it always resembles the past. The San Francisco Chronicle tells us that there is indeed a mayor, and maybe even a chief of police, but it is not known who is actually in charge. Housing and zoning committees obscure responsibility for governance. But somewhere in the bureaucratic hierarchy faceless city functionaries administer labyrinthine regulations that benefit the rich over the poor, the old over the young, the here over those to come, the past over the future.
In one of the more comical examples of this sclerosis, a real-estate developer worked for five years and paid hundreds of thousands of dollars to show that a proposed housing development wouldn’t cast shadows on a nearby playground or destroy the historic character of the laundromat it sat atop. In another, it took two years for a woman to open an ice-cream shop.
And yet the days pass in a foggy calm. Coit Tower, the Painted Ladies, both bridges, and Alcatraz all stand serene. It is not a city of urgency and restless insomnia, not a city of any discernable power. It never roars like New York or snaps cold like Chicago. It is a pastel city that optimizes its sleep with a device.
I’m not holding my breath for a revolution.
San Francisco has been overwhelmingly Democratic since the 1950s. The last Republican mayor won an election in 1956. It is a one-party city touting a civic philosophy with its back to the wall. From afar city Democrats pay lip service to helping the poor. But up close the facts tell a different story. None of their policies in the last half-century have done much to rescue the poor from poverty. Inflexible limits on the housing supply push marginalized groups even further to the margins. The stratospheric cost of housing has flung minority families to the outer edges of the Bay Area, reinforcing segregation. A UC Berkeley study found that a 30 percent increase in the median rent led to a 28 percent decrease in the number of minority households in a neighborhood. Whole neighborhoods from the city have decamped to the hinterlands of Antioch and Vallejo. Stories of three-hour commutes from Stockton have become more common.
Alas, the media seems to have never taken an economics class, much less read Paul Krugman. It is quite simply baffling. Housing restrictions have made the situation worse and worse for decades. No one seems to notice that the same debates play out time and again to no positive end. Instead, for commentary, reporters invariably trot out someone who disguises greed with the piety of a San Franciscan born and raised. Ah, those picturesque locals! Whatever sad story they tell, they shamelessly aim to limit the housing supply, inflating the prices of their own properties. Meanwhile, the media prints their moralistic scolding of the gentrifiers, i.e. anyone with an urge to build affordable housing. No one seems to care about the unseen: the people who never get to live here because the apartments they would live in aren’t ever built, the bookstores unopened, the dance steps untried, the poetry never recited because the rent’s too damn high.
Cities are nearly immortal; though they decline, they rarely die. But creative clusters can and do bite the dust. They are fragile, fleeting things. Rome survived the fall of a civilization and two world wars; Ancient Athens and Quattrocento Florence dazzled and faded. Now, San Francisco has passed its prime and settled into a sad late-middle age.
“Cities that become dominated by a single industry, cities that reward generation of wealth and financial success over a sense of shared humanity and community have a hard time preserving social capital,” Sam Altman, the president of YCombinator, told the economist Tyler Cowen in a recent interview. “Where I grew up, no one would walk past a person collapsed on the side of the street on their way to work and not do something about it. I hope I never get used to the fact that that happens in San Francisco.”
True revolution would involve curbing the authority of the San Francisco Planning Commission. If Democrats in the city or in Sacramento actually cared about the poor or the environment (density is green), they would enact a land-value tax and establish a redistributive policy to align the interests of the city, current residents, and future citizens. Strong government housing policy could spur growth and redistribute the city’s wealth fairly. But most of all, the freedom to build and experiment is the engine of Silicon Valley dynamism. Allow the experiments of the few to become the prosperity and fulfillment of the many, and the city could thrive once again.
This is unlikely to happen anytime soon, of course. But If the dream is lost, the skills and funding remain . . . for now. I’m advising all the startups I meet with to consider staying in other cities. And anyone else who comes here should be aware that most bathrooms require a code to enter.
MICHAEL GIBSON is a co-founder of 1517 Fund and was previously the vice president for grants at the Thiel Foundation.