This city of enormous prosperity also faces great challenges. Can the techies solve the problems they helped create?Destination 2016: San DiegoDestination 2016: Seattle
Let me give you two snapshots of San Francisco—two ways of living and working in the city. Just to start the conversation. One is at the corner of Second and Howard Streets in SoMa, the South of Market neighborhood, where LinkedIn, the internet company that describes itself as “a business-oriented social networking service,” just built a new skyscraper. LinkedIn is a remarkable story. It was launched in 2003, and most of us paid it no mind at first. Now it claims over 400 million users in more than 200 countries and territories. It makes money from selling information about its users. Almost 10,000 people work for it, and presumably they do well: The average salary for a tech worker in San Francisco in 2014 was $176,275. LinkedIn’s cofounder, Reid Hoffman, is said by Forbes to be worth a little under $3 billion.
It’s a center of intellectual creativity that has changed the world.
From mentorship to the availability of capital, this is the place to start a company.
From bikes to recycling, San Francisco takes the environment seriously.
[/one_third][two_third]The new building, officially 222 Second Street, is pretty cool. According to the San Francisco Chronicle, each of its 26 floors has a San Francisco theme—movies filmed in San Francisco, landmarks, famous residents and so on. The entryway to each floor is designed around a concept. One has a “silent disco,” where you can put on head-phones and dance. Another has a wall called “Video Games of San Francisco,” on which employees can post pictures of themselves dressed as video game characters. Another has a Nerf-gun dart board. There’s a gym and a cafeteria called Nourish, which has signs identifying all the farms from which the cafeteria food is sourced.
It’s almost too easy to make fun of this sort of thing, but to be fair, the building has some more mature attributes. Its first floor, stocked with chairs and benches, is open to the public. There are lots of bike racks, important in a city where auto traffic is a constant and worsening problem. The building is applying for LEED certification.
Tenant Protest © Justin Sullivan/Getty Images; San Francisco Museum of Modern Art © Scott Chernis; LinkedIn’s new headquarters © Courtesy Tony Chung/LinkedIn; Homelessness Issue © Reuters/Beck Diefenbach; Pacific Heights neighborhood © Daniel Viñé Garcia/Getty Images
That’s picture one. Drawn also from the Chronicle, picture two is a composite of a typical public school teacher in San Francisco—Susan, let’s call her. Susan makes the average salary for a public school teacher in the city: $65,240. That ranks a mediocre 528th out of 821 California school districts that report their numbers. City officials say the number is low because they keep class sizes small, which means they have to hire more teachers, so each one gets paid less.
But because the median rent in San Francisco is about $3,700 a month—the highest in the country—Susan can’t afford to live there. Instead, she pays $1,200 a month for a room in a shared Oakland apartment. To make some extra cash, Susan drives for Uber after school. But, as for many other teachers in the city, her schedule is wearing her down. It’s not just that it’s hard to make ends meet; it’s that it’s depressing to be so financially stressed when so many of your peers are living large. So, she’s going to quit. And she’s hardly alone: By this spring some 11 percent of San Francisco teachers had informed the school system that, come summer, they were gone. (By comparison, Los Angeles’ rate last year was 3 percent.) That’s double the percentage of just five years ago.
This is the paradox of San Francisco now. It is in many ways an incredible place to live. It’s probably the most beautiful city in the country. Born, mostly, out of the Gold Rush of 1849, and surviving earthquake and fire, plague and assassination, it has a unique and soulful history that’s relevant to many residents. After all, much of San Francisco’s counterculture identity was forged in recent memory by people who fought hard to win social acceptance—Beats, hippies, gays. As local David Talbot wrote in his history of San Francisco, Season of the Witch: Enchantment, Terror and Deliverance in the City of Love, “The people who radically changed San Francisco in the 1960s and 1970s—and thus, the world—have been ridiculed and trivialized for so long that we’ve forgotten who they really were. But it took a frontier breed of men and women to conquer a town like San Francisco.”
In recent years—say, the past 10 to 15, but speeding up after the 2009 recession—another frontier breed has conquered San Francisco: the techies, who have built companies like Airbnb, Dropbox, Facebook, Google, LinkedIn, Pinterest, Salesforce, Splunk, Snap-chat, Twitter, Uber and Yelp. They came because of the Bay Area’s great universities, because of existing tech firms like Cisco, Apple, HP and Oracle, and because San Francisco had no problem with their particular brand of geek weirdness. They have ushered in an era of intellectual creativity paired with business-building that may be unparalleled in history. Which—because the news in this story is not all good—is important not to forget as you read on: At their best, the technorati don’t just want to make a fortune; they want to create something amazing that changes the world. Collectively, and sometimes individually, they’ve done that.
Without a doubt, their companies fuel the thriving San Francisco economy. The city has an unemployment rate of about 3.4 percent, meaning that virtually everyone of sound body and mind who wants a job in San Francisco can get one—and this is true even though the tech boom is attracting around 10,000 newcomers to the city every year. Commercial property taxes have fattened spending by the administration of two-term mayor Ed Lee; the city budget for 2016–2017 is $8.96 billion. All of this has elevated San Francisco’s profile in the United States and around the world. San Francisco used to be counterculture. Now, it is the dominant culture, as other cities try to follow its business model and hundreds of millions of people around the world internalize its creations, mores and aspirations. San Francisco is shaping the way humanity interacts.
In the process, the techies have created enormous wealth. The internet high priests and the tens of thousands of acolytes who heeded their call and moved to San Francisco have flooded the city with money. More than 50 billionaires live in the Bay Area and Silicon Valley, 26 of them in San Fran-cisco, according to Forbes. But that’s just the top of the pyramid. There are also thousands of millionaires, and in the next tier down are more thousands of young people—not just in their 30s, but also in their 20s—who are pulling down six-figure salaries. San Francisco tech is an economic overclass.
Wealth in San Francisco is not as showy as it is in, say, Miami. That’s long been true of San Francisco’s old money—in Pacific Heights, the Bohemian and Pacific-Union clubs, tony suburbs like Atherton. But it has also, in a different sort of way, been the culture of new tech money. The tech millionaires don’t spend a lot on clothing, don’t drive cars much flashier than a Tesla, don’t flash six-figure watches or build McMansions. There are some signs that that’s changing—note the 2013 wedding of Facebook investor Sean Parker; it took place in a redwood forest and all 364 guests had to wear custom costumes designed by the woman who created the costumes for the Lord of the Rings movies—but still, you’re not seeing Maseratis cruising up and down Market Street.
So far, tech millionaires have generally spent their money more discreetly—in the townhouses they’re top-to-bottom renovating, the second homes they’re building in Napa, the food culture, one of the country’s best, that they’re underwriting. You can see it in the daily spending on little things: the $8 coffee from the Stanza Coffee shop; the Smitten ice cream, which comes in flavors like crème fraîche with pear caramel and is made to order with liquid nitrogen while you wait; the $10 juice you can buy from a JuiceBot vending machine.
Let’s recap, then: San Francisco is rich, and so are a lot of its residents. It’s a beautiful city with world-class museums, incredible restaurants, sports teams that keep winning (in cool new stadiums) and tons of young people, and it is having a profound influence on the rest of the world.
So why are so many San Franciscans so pissed off?
This April, the San Francisco Chamber of Commerce released a poll that found that more than half of San Franciscans believe the city is headed in the wrong direction. In May, a group called the Bay Area Council reported that 34 percent of San Francisco–area residents were thinking of leaving. As reporters John King and Heather Knight recently wrote in the Chronicle, “San Franciscans have long worried that the future is bleak, that the ‘real’ city is in danger of disappearing forever. But these days, it’s hard not to look around and wonder if the nostalgic cynics and apocalyptic doomsayers may finally be right.”
Not long ago, I traveled to San Francisco for work. Jet-lagged, at about 5 a.m. I left the St. Regis, a very nice hotel next door to the beautifully renovated San Francisco Museum of Modern Art, to get coffee from a nearby 7-Eleven. As I walked by the floor-to-ceiling glass walls of the lobby lounge bar, which draws an after-work tech crowd for $17 cocktails, I saw something that woke me up fast: a homeless man defecating on the sidewalk, right in front of those expansive windows.
Homelessness in San Francisco has become so ubiquitous, it’s now a huge concern even for longtime residents. There are an estimated 6,000 homeless in the city, half of whom are reportedly sleeping—and engaging in other human activities—on the streets. The New York Times recently told the story of Audrey Cooper, the editor in chief of the Chronicle, who was pushing her 6-month-old baby through the city’s business district in a stroller when they came upon a homeless couple in a tent—having sex. When Cooper yelled at them, they sicced their pit bull on her.
Homelessness has been a highly visible problem in San Francisco since at least the 1980s, when Reagan budget cuts deinstitutionalized tens of thousands of Americans, many of whom took to the streets. Some headed to San Francisco because of its mostly mild weather and its reputation for tolerance, and that phenomenon still happens. Even so, city bureaucrats will tell you that though there only seem to be more homeless per capita in San Francisco than other cities—it’s just that San Francisco, with its empathetic values and its reverence for civil liberties, doesn’t take the more aggressive measures of, say, New York, which shunts the homeless to shelters and service centers on the city’s margins. In San Francisco, it doesn’t matter if you’re staying at the St. Regis; you’re staring the issue in the face.
It’s hardly a bad thing for the comfortable to be reminded of the afflicted. But longtime residents will tell you that homelessness has gotten much worse, and it’s very likely contributing to a rise in crime. San Francisco has the highest per-capita property crime rate of the nation’s 50 largest cities, and there’s been a particular rise in “smash-and-grab” car break-ins. There were 28,899 reported property crimes in San Francisco in 2015; in San Diego, whose population of about 1.4 million is 500,000 residents larger than San Fran- cisco’s, there were 13,776.
Some of this is a political failure: After Gavin Newsom, mayor from 2004 to 2011, instituted some tough-love measures to curb homelessness, his successor, Ed Lee, neglected the issue and is now desperately playing catch-up.
But it’s also true that the tech boom has worsened homelessness by fueling such a demand for real estate that San Francisco has lost housing and facilities for low-income residents. In a city where the median house price is $1.1 million, there were 2,120 eviction notices filed with the San Francisco Rent Board in the year ending February 28, 2015—about a 55 percent increase from 2010. Landlords want to raise their rents and/or sell their homes.
If tech is unintentionally contributing to the problem, then is tech doing anything to solve it? The consensus is: not really. With some significant exceptions like Marc Benioff of Salesforce and Facebook’s Mark Zuckerberg, the tech community—largely young, many not from affluent families where philanthropy is a learned behavior—hasn’t yet become engaged in philanthropy. And when it has, it wants to pursue “disruptive” philanthropy, to find some cool new project to tackle rather than the unsexy work of combating homelessness. And sometimes the techies seem less empathetic toward the homeless than you might hope from people blessed with such good fortune. In February of this year, Justin Keller, founder of a server-management company called Commando, wrote an open letter to the mayor decrying the homelessness problem. “I know people are frustrated about gentrification happening in the city, but the reality is, we live in a free market society,” Keller wrote. “The wealthy working people have earned their right to live in the city…. I shouldn’t have to worry about being accosted. I shouldn’t have to see the pain, struggle and despair of homeless people to and from my way to work every day.”
Keller took a lot of grief for the letter. But he also got about 9,400 “kudos” on the personal site where he posted it.
And that crystallizes some of the everybody-versus-the-techies debate. People who have been in San Francisco since pre-boom days cherish the city’s lefty identity and 196os values. They worry that the tech wealthy don’t share those values, and that the identity of the city is being lost as a result. So they’re fighting to preserve it, often by trying to rein in the free market. Last year, for example, 57 percent of city voters favored a plan to support “legacy businesses” in danger of losing their leases. The plan, which is now a reality, will pay qualifying businesses $500 per employee and their landlords $4.50 per square foot. Basically, the city is simply writing checks to San Francisco shops so they don’t move or close.
The techies have also lost support because, as their businesses have matured, they’ve selectively abandoned lofty mantras about new ways of doing business. Uber and Airbnb have grown their businesses by simply ignoring local regulations in new markets, then dealing with the fallout later. Facebook recently instituted a stock plan that would allow Zuckerberg to sell stock without diluting his voting power, a move corporate watchdogs consider poor corporate governance. Online human resources startup Zenefits, based in SoMa, is imploding over revelations that it allowed unlicensed brokers to peddle insurance.
So much changed, so quickly—that’s unquestionably part of the tension. Imagine how much technology has changed your life in the past decade. Now consider the impact if you lived in the social and economic crucible of that technology. It’s not for everyone. I spoke with one woman—she asked not to be named—who, along with her husband and two children, is leaving San Francisco for a job opportunity elsewhere. She and her husband are an architect and an urban planner; each has a graduate degree from Harvard. Reasonably representative of many highly educated, highly trained San Franciscans, they loved San Francisco in many ways. But they felt constant financial pressure. Some of it was tangible, like the high costs of housing and food. Some of it was the stress that comes from living amidst people who seem to feel no financial pressure at all. This woman described, for example, asking parents in their community what they were doing for spring break. The answer would come back: “Oh, we’re taking Cassidy to pet the Bengali tigers.” Or: “We’re going to show her the Galápagos so she can really understand what it means to be losing biodiversity.”
After a while, the blanket of ubiquitous wealth felt suffocating. So when younger women asked her for career advice, she strongly discouraged them from taking a low-paying job such as at a nonprofit. No one in the city respects that right now, she would say. Make some money first.
Most of the old-timers I spoke with share one quality: fatalism. You can’t turn back the clock, they say. Even if this tech boom proves to be a bubble, it’s lasted long enough, and generated so much wealth beyond paper profits, that San Francisco’s economic divide isn’t going anywhere soon. The challenge is how to negotiate it; how to make San Francisco work for all its residents.
San Francisco techies created this future. Will they own it?
This article was originally published in the 2016 June/July issue of Worth.
Founded in 2014, the center provides resources for the veritable tsunami of startups that continues to wash over the Bay Area. A media lab, innovation hub and experimental pop-up store serve as testing grounds for entrepreneurs, their investors and mentors. 505 Howard St., thecenter.nasdaq.org
A think tank for all things Silicon Valley, Singularity U is not a traditional university. But this hive of thinkers and doers is constantly engaged in using technology to solve problems—and incubate a few companies along the way. NASA Research Park, Building 20, South Akron Road, MS 20-1, Moffett Field, 650.200.3434, singularity.org
Startup incubator Y Combinator boasts a list of companies—valued at $65 billion-plus—that have gone through its development program, including Airbnb, Dropbox and Twitch. tv. 335 Pioneer Way, Mountain View, ycombinator.com
Primarily a private club, the Battery also has a small, luxurious hotel open to nonmembers. Rooms, suites and an expansive penthouse feature breathtaking views, complemented by the Battery’s renowned service. 717 Battery St., 415.230.8000, thebatterysf.com/hotel
A luxury establishment situated in SoMA, this sophisticated hotel offers signature butler service, Remède Spa and an indoor, heated, infinity pool—and it’s steps from both the Museum of the African Diaspora and the SFMOMA. 125 Third St., 866.225.0397, stregissanfrancisco.com
The iconic Ritz-Carlton occupies a 1909 Neoclassical building in centrally located Nob Hill. Each room features a city or bay view, and the hotel’s restaurant Parallel 37 serves New American fine dining. 600 Stockton St., 415.296.7465, ritzcarlton.com
Collectively a farm, butcher shop and restaurant, Belcampo seeks to simplify food with a “back to basics” approach to farm-to-table and a commitment to sustainability. 1998 Polk St., 415.660.5573, belcampo.com
Influenced by Thai, Indian and Chinese flavors, this popular Burmese eatery is best known for its tea leaf salad and samusa soup. 309 Clement St., 415.387.2147, burmasuperstar.com
In a city of revolving restaurants, Foreign Cinema has been going strong since 1999. The California-Mediterranean menu is fluid and eclectic; the dimly lit space is known for its fireplace, patio, and screening of classic and indie flicks. 2534 Mission St., 415.648.7600, foreigncinema.com
Named for the French Route Nationale 74, chef Michael Mina and sommelier Rajat Parr’s collaboration is all about the wine: An extensive list emphasizing French Burgundies accompanies a menu of expertly cooked fare. 301 Mission St., 415.543.7474, michaelmina.net
One of the largest collections of modern art in the U.S., SF-MOMA reopened in May after three years of expansion. The transformed 10-story space, designed by Norwegian architecture firm Snøhetta, houses works by Picasso, Warhol and more. 151 Third St., 415.357.4000, sfmoma.org
One of the nation’s great ballparks, AT&T Park overlooks the San Francisco Bay. The Tony Bennett Suite affords views of the Bay Bridge, while the Anchor Suite comes with its own Anchor Brewing taproom. Or get down to field level in the CarMax Field Box. 24 Willie Mays Plaza, 415.972.2298, sanfrancisco.giants.mlb.com/sf/ticketing/luxury_suites
Classical music lovers should not miss an opportunity to hear a San Francisco Symphony performance, led by conductor Michael Tilson Thomas. Order drinks and snacks online in advance and have them waiting when you arrive. email@example.com, 415.864.6000, sfsymphony.org