San Francisco is a city of contradictions. From a sociological perspective, you won’t find a more interesting city to study.
I grew up in San Francisco, but rarely spent time in the areas I visit when I return to the city. I grew up in neighborhoods like the Marina, the Presidio, the Richmond, and the Sunset, but when I visit San Francisco now, I spend most of my time in SOMA, the Mission, and the Financial District.
Here’s what stands out from my time in San Francisco:
The Coffee: San Francisco has the best coffee of anywhere I’ve traveled. Every high-end coffee shop seemingly competes to make the perfect cup, so the flavors are richer and more diverse than what I’ve had anywhere else.
Public Transportation: I spoke with one friend who has never taken MUNI or BART (SF’s public transit systems) even though he’s lived in San Francisco for seven months. In New York, that would be unthinkable. Almost all my friends take the subway every week. As a result, New York has much more cross-pollination between neighborhoods. Almost everybody in New York can point out Hell’s Kitchen, Williamsburg, DUMBO, or Greenwich Village on a map. Beyond that, almost everybody who lives in Manhattan has been to all these neighborhoods. In contrast, people in San Francisco are more likely to skip public transit and Uber around the city. Subways and street cars are sparse, so most of the people I know in San Francisco stay in a select number of neighborhoods. Almost everybody I spoke with had never been to West Portal, the neighborhood my parents live in — right in the geographic center of the city.
The Writing Scene: Samo Burja beautifully explained the differences between the New York literary scene and the San Francisco blogosphere. In New York, writers show off their expertise with references to famous artists and writers, sprinkled with a blend of verbose language to flaunt their education. The San Francisco writing scene prizes clarity and contrarian originality. The thirst for clarity is shaped by computer scientists who outline their work by writing documentation, and the drive for contrarian originality is driven by entrepreneurs and venture capitalists who arbitrage the difference between the state of the world as it exists today, and state of the world as it will be once their startup becomes successful. The method I teach in Write of Passage is shaped by the San Francisco style because that’s where the opportunity is.
The Center of Gravity is Shifting North: Silicon Valley traditionally referred to the area between Palo Alto and San Jose. But in the past decade, the big companies have moved north to San Francisco. Startups don’t need as much space to launch a minimum viable product, and most don’t need as many employees to build a big company.
Philanthropy: All the technology IPOs have minted hundreds of millionaires. Some of that new wealth will go towards philanthropy. East Coast philanthropy goes towards classic institutions like museums, universities, public parks, and symphony halls. I suspect Silicon Valley philanthropy will look different. During my time in San Francisco, I attended a party for Palladium Magazine, which, to the best of my knowledge, is funded by Silicon Valley entrepreneurs.
The Contrast: San Francisco has the prettiest natural surroundings of any city in America. The rolling hills provide glorious views of the water, the parks, and the buildings. But the beauty is juxtaposed with extremes of entrepreneurship and homelessness. The entrepreneurs are freakishly ambitious. They have bold visions for the future and an ecosystem of investors to finance their risky pursuits. The optimism is contrasted with the angriest homeless people of anywhere I know. During my trip, I saw one man smash and destroy a radio, another empty the contents of a garbage bin and throw it over the sidewalk, another smoking weed on the train, another get kicked out of the diner I was eating at, two people pissing on the streets, and two other men yell at me during conversations with friends. When I went downtown to write and workout on Thanksgiving Day, the streets felt like a scene from I Am Legend. My roommate described the streets of San Francisco as “opening the doors to a mental asylum.”
The Weather: Officially, San Francisco has a temperate climate. But in normal person terms, San Francisco is always “kinda cold.” It’s sweater weather 300 days per year. Or, as Mark Twain once said: “The coldest winter I ever spent was a summer in San Francisco.” It’s rarely hot enough to sit outside, and the city’s street life takes the brunt. Most restaurants don’t have outside seating because it’s rarely warm enough to sit outside, especially at night when the streets feel like a hollow, fog-filled wasteland.
Rapid Mobility: Living in San Francisco is like an MBA for people in technology. People move there in their 20s to build their network and learn about the technology industry. Then they move away when they’re ready to have kids. Cities as a networking tool is fueled by the end of lifetime employment. Employees can’t expect lifetime employment anymore, so they build career stability through strong professional networks that stay with them even as they jump between jobs. Cities like San Francisco are the best place to build a network. Temporary residency brings side effects. The people who don’t expect to stay in San Francisco don’t seem politically engaged. I feel this intuitively from conversations with friends, but the data shows the opposite. According to the San Francisco Chronicle: “An eye-popping 74.4 percent of registered San Francisco voters cast a ballot in the midterm elections, the highest percentage for a midterm election here in modern history.” According to the city’s Department of Elections, voter turnout fell its low in 2013 and 2014, when only 29 percent of voters went to the polls. I’m not sure what accounts for the schism between the data and my intuition. I suspect San Francisco homeowners are more politically engaged than the renters or even homeowners who live in other cities.
The Housing: San Francisco has deeply conservative tendencies for such a liberal city. Its housing supply isn’t growing fast enough to keep up with rising demand. The median price of a San Francisco home ($1.35 million) has doubled in the past decade, compared with just a 40 percent increase for the rest of America. Rising costs aren’t restricted to San Francisco. Between 1970 and 2010, real housing prices in California increased by 385 percent. As Kim-Mai Cutler wrote: “San Francisco had the highest median prices per square foot and had the lowest number of new construction permits per 1,000 units between 1990 and 2013.” I dove into the research and discovered that San Francisco has a long history of blocking big developments, such as the Freeway Revolt in the 1960s. Without the protests, the Bay Bridge would be connected to the Golden Gate Bridge via the Embarcadero Freeway, and other freeways would extend to the Richmond and Sunset neighborhoods. Say what you want about people who block new modern housing projects, but I believe San Francisco is a better city because these big developments have been blocked in the past.
The Old Embarcadero Freeway
Before and after image of the Embarcadero after the freeway demolition
The Middle Class is Leaving San Francisco: Most new San Francisco housing is built for people with “above moderate” incomes. Where there are housing subsidies, they’re geared towards low-income residents. Thus, there’s hardly any new housing for people with moderate incomes, leading to the hallowing out of San Francisco’s middle class. Where below market homes are built, the competition is brutal. 2,800 people applied for 60 units at one affordable housing development in SOMA.
The Two-Tiered School System: California’s K-12 schools are financed by property taxes. According to one essay, California’s spending per student fell from 5th in the nation in the 1960s to 50th — last in the nation — in this decade. In contrast, California spends more money per prisoner than any other state. At an annual rate of $65,000, each prisoner costs roughly the same amount as sending a student to Stanford for one year. San Francisco is known for its terrible public schools, so 30 percent of the city’s students attend private schools, many of which cost more than $30,000 per year. As a kid, I remember hearing that students couldn’t wear blue or red to public school because the gang violence was so bad.
Before we move on, you have to know about Proposition 13. Here’s a definition from a recent explainer: “Proposition 13, adopted by California voters in 1978, mandates a property tax rate of one percent, requires that properties be assessed at market value at the time of sale, and allows assessments to rise by no more than 2 percent per year until the next sale. This means that as long as property values increase by more than 2 percent per year, homeowners gain from remaining in the same house because their taxes are lower than they would be on a different house of the same value.”
The Missed Opportunity: Due to San Francisco’s restrictive housing policies, the number of people benefiting from the city’s growth isn’t nearly as high as it could be. Even though California residents earn 11 percent more than their national counterparts, mortgage payments 44 percent higher and rents are 37 percent higher than the national average. Because of Proposition 13, the average tenure length of a homeowner increased by three years in the Bay Area. San Francisco’s rental market is negatively impacted because the incentives of Proposition 13 decrease turnover for homeowners, and contribute to a lock-in effect which strengthens over time. According to UC Berkeley economist Enrico Moretti, new jobs benefit society because they bring spillover effects. Across the country, each new technology job produces roughly five additional local-services jobs. But because of San Francisco’s restrictionist housing policy, the spillover effects aren’t as large as they should be. Ted Egan, an economist for the city of San Francisco calculated that each new technology job produces only two extra jobs, not five. Restricted housing supply leads to increasing wages. But instead of distributing wealth across society, a disproportionate share of that increased purchasing power is going straight to homeowners. In another paper called Housing Constraints and Spacial Misallocation, Moretti found that the housing constraints in three cities (San Francisco, San Jose, and New York) have negative spillover effects for the entire country. Relaxing the housing constraints in these three high-productivity cities to the level of the median US city would “increase the growth rate of aggregate output by 36.3 percent. In this scenario, US GDP in 2009 would be 3.7 percent higher, which translates into an additional $3,685 in average annual earnings.” If true, better housing policy is a giant low-hanging fruit in America. It would raise incomes and increase welfare for all US workers.
Over the next 15 years, I don’t think the prospects for San Francisco look good. I wouldn’t want to live there and it’s no longer necessary to start a tech company there. Real estate costs are too expensive for what you receive. For the vast majority of companies, it makes sense to staff people in lower-cost cities such as Provo, Boise, and Boulder. Fundraising is one of the biggest benefits of living in San Francisco. But people with strong networks and online audiences can build connections and fly to the Bay Area only when they need to. With that said, I write these words with only 60 percent certainty. Admittedly, I may be under-estimating San Francisco’s network effects and the tacit knowledge required to buy a venture-scale company. If you want to build a billion dollar business, there’s still no better place to be.
Over the next 50 years, I have a positive outlook for the city. It’s destined to be a hot-bed for innovation and economic opportunity. Beyond that, the center of power in America continues to shift towards the San Francisco region. Bay Area built technologies are disrupting the East Coast: New York (finance), Washington D.C. (government), and Boston (academia). The Bay Area will benefit if it retains its network effect on tech-savvy talent.
Most of all, San Francisco will never lose its beauty. Since the Gold Rush, it’s attracted innovators, entrepreneurs, and marginalized groups, and I don’t expect that to change.
I publish a weekly newsletter called Monday Musings where I share ideas like this every week. You can subscribe here.
