How Much Tech Can One City Take?

David Talbot | October 2, 2012 | Lifestyle Story City Life News and Features Tech World

Last year, when Mayor Ed Lee heard that Twitter was planning to move its headquarters out of San Francisco and down to the peninsula, he quickly consulted with his digital experts—his two daughters, Brianna, 27, and Tania, 30. Was the company important enough to make a top priority? “Of course it’s important, Daddy!” they told him. “We tweet all the time. You have to keep them in town.”

Lee quickly made an appointment with Twitter CEO Dick Costolo to see how San Francisco could hold on to the social media giant. Costolo told the mayor that Twitter was planning to double the size of its local workforce over the next year, from about 450 employees to 1,000. But the city’s policies penalized job growth by taxing a company’s payroll, the Twitter chief said. If San Francisco wanted to attract fast-growing digital companies like his, city hall would have to reform its business-tax structure.

For Lee, the Costolo meeting would prove to be a wake-up call. Little in the mayor’s biography (he’s the son of a Chinese restaurant cook, and a former tenants’ rights agitator) suggested that he would become a close friend of the city’s dominant business interests. But ever since his Twitter awakening, Lee has been moving quickly to align his administration with the booming technology industry, shrugging off complaints from the city’s powerful progressives that he’s gotten too cozy with tech moguls, such as investor Ron Conway. The mayor’s proposal to shift business taxes from a payroll-based plan to one based on gross receipts will be on the November ballot, with wide backing from the Board of Supervisors, labor unions, and, of course, Conway. Progressive gadfly Aaron Peskin tapped a deep well of distrust on the left last month when he told the San Francisco Chronicle, “The Koch brothers are trying to buy the president of the United States, and Ron Conway has bought himself a mayor.”

Lee, unperturbed by the flak on his left, now devotes one afternoon each week to a gathering he calls "Tech Tuesday"—visiting one of the many technology companies that are flocking to the city and discussing with the executives and engineers their wishlists for San Francisco. He has sat down with the geek elite at more than 20 companies so far, including Yelp, Yammer, Autodesk, and Zendesk. The firms’ representatives tell Lee what they like about the city—the bike lanes, the arts, the cultural diversity, the different languages you hear on the streets. And then they tell him what they don’t like—the homelessness, the poor public schools, the crime.

In spite of the obvious urban warts, the word is out: San Francisco is the world’s leading tech paradise. At a rate eclipsing the dot-com boom of the 1990s, tech companies are setting up shop in the city by the hundreds, drawn by its beauty and livability, as well as the deep pool of engineering talent here and, yes, city hall’s increasingly tech-oriented policies.

Young entrepreneurs from as far away as Denmark, Singapore, and France can be seen with real estate agents in tow, roaming through converted South of Market lofts still vacant from when the previous bubble burst more than a decade ago. The city is currently home to more than 1,700 tech firms, which employ 44,000 workers, up a whopping 30 percent from just two years ago. And San Francisco has been the nation’s top magnet for venture capital funding for three years in a row. Consequently, the distinction between Silicon Valley and San Francisco has all but disappeared. It is us, and we are it.

The city is clearly benefiting from this new mind meld. San Francisco’s 7.6 percent unemployment rate handily beats the state’s 10.9 percent rate, and it’s one of the few counties in California that has experienced significant property-tax growth during the economic crisis, driven largely by the hot real estate market in the tech-heavy SoMa area. The new tech boom has helped add $6 billion to the city’s tax rolls over the past year—an increase of more than 4 percent over the previous fiscal year. There’s a sense of pride and excitement in the air, a feeling that—once again—we’re the ones creating the technologies that are driving the digital era. San Francisco is quite literally changing the world.

But despite all this, there is trouble in paradise. The unique urban features that have made San Francisco so appealing to a new generation of digital workers—its artistic ferment, its social diversity, its trailblazing progressive consciousness—are deteriorating, driven out of the city by the tech boom itself, and the rising real estate prices that go with it. Rents are soaring: Units in one Mission district condominium complex recently sold for a record $900 per square foot. And single-family homes in Noe Valley, Bernal Heights, and other attractive city neighborhoods are selling for as much as 40 percent above the asking price. Again and again, you hear of teachers, nurses, firefighters, police officers, artists, hotel and restaurant workers, and others with no stake in the new digital gold rush being squeezed out of the city.

And it’s not just about housing. Many San Franciscans don’t feel as if they’re benefiting from the boom in any way. While 23-year-olds are becoming instant millionaires and the rest of the digital technocracy seek out gourmet restaurants and artisanal bars, a good portion of the city watches from the sidelines, feeling left out and irrelevant. Dot-com decadence is once again creeping into the city of St. Francis, and the tensions between those who own a piece of its future and those who don’t are growing by the day.

In light of this, the time has come for a serious reckoning—for Mayor Lee, for the tech cognoscenti, and for the rest of the populace. In short, do we wish to be a city of enlightenment, or a city of apps? Many of those who have lived in San Francisco the longest and care for it the most are worried that their charmed oasis is becoming a dangerously one-dimensional company town—a techie’s Los Angeles, a VC’s D.C. If San Francisco is swallowed whole by the digital elite, many city lovers fear, the once-lush urban landscape will become as flat as a computer screen.

I find myself torn about the current economic tides rolling through San Francisco. It would be hard for me to entirely reject the idea of technological progress. As a refugee from the moribund newspaper industry, I founded the pioneering online publication Salon in 1995, and suddenly I found myself at the center of the city’s first dot-com explosion. The new digital wizardry gave me and my fellow ink-stained wretches a way to realize our dream: publishing unfettered journalism, free from the grip of corporate overseers, and dull-minded newsroom hacks.

No techie myself, I learned to love the quirky and deeply individualistic geek culture. Engineers were my comrades-in-arms in the revolution against top-down, corporate communications. The ones who made a difference at Salon—like Chad Dickerson, our crack webmaster and now CEO of Etsy, and investor John Warnock, who also cofounded Adobe—had artistic souls. They were deeply concerned about the direction of the country and believed that Salon’s voice needed to be heard.

There was a sense of missionary purpose to San Francisco’s first dot-com uprising. But it soon developed an ugly side. Greed will do that. At some point, the young journalists and coders seeking jobs at Salon began asking about stock-option packages before they inquired about the company’s creative opportunities. And then idiotic startup ideas began to eclipse ingenious ones. (Raise your hand if you remember the company that promised to transmit aromas through your computer.) Signs of stupid wealth were everywhere. IPO millionaires rolled their Range Rovers onto sidewalks outside the hottest restaurants and left them there to accrue parking tickets.

That first San Francisco tech bubble popped more than a decade ago. But the new one, despite the recent dips of Facebook and Zynga shares, promises to be even fatter—and potentially more damaging to the soul of the city. Once you start to look around, the warning signs are everywhere.

I’m sitting at a table outside the new Precita Park café in Bernal Heights, a gourmet sandwich shop that’s one sign of the changing times. When I moved to this neighborhood in 1993, just before the first dot-com boom, I avoided taking my two toddlers to the playground across the street from the café, because local gangs sometimes stashed their guns in the sand. And yet, despite gunfire from the old Army Street projects that often shattered the neighborhood’s sleep, Bernal Heights in those years was a glorious urban mix of deeply rooted blue-collar families, underground artists, radical activists, and lesbian settlers. The neighborhood had a funky character as well as a history. The famed cartoonist R. Crumb once hung his hat there, and his old Zap Comics sidekick, the brilliant Spain Rodriguez, still does.

But at some point the new tech boom began to make its presence felt in Bernal Heights, whose sunny hills are close to not only SoMa startups but also the Highway 101 shuttle line to Silicon Valley. Nowadays, you see Lexus SUVs parked in the driveways on Precita Avenue. Young masters of the universe in Ivy League sweatshirts buy yogurt and organic peaches at the corner stores where Cuervo flasks and cans of Colt 45 were once the most popular items.

“We cleaned up this neighborhood—stopped the violence in the projects—but now we can’t afford to live here anymore,” says Buck Bagot who has been a Bernal Heights community organizer and housing activist since 1976. “When I moved here, every house on my block had a different ethnicity. There were Latinos, blacks, American Indians, Samoans, Filipinos. They had good union jobs, and they could raise their families here. Now they’re all gone.” These days Bagot fights to block home foreclosures as the cofounder of Occupy Bernal, engaged in a battle to preserve the neighborhood’s diverse character that he admits often feels futile.

Sitting outside the café, I’m joined by another longtime Bernal resident, a 47-year-old San Francisco public school librarian. She moved to the neighborhood in 1994 with her partner, a public school teacher, when many of their lesbian friends were settling here, attracted by the relatively cheap rents. “There were a lot of us—we were young, politically active, and underpaid, but we could afford to live here in those days,” she says. “But now that we have kids, we’re being priced out.” The librarian—who asks that her name not be used because she’s concerned that any notoriety will hurt her chances of entering the tight housing market—says that she and her partner have bid on five houses this year. But they lost each time to buyers who could afford to put up tens of thousands of dollars over the sellers’ asking price—and all in cash. “Who are these people, with that kind of money?” she asks.

The librarian and her partner dread the idea of moving out of the city. San Francisco is in their souls: They fell in love here, they took to the streets here as young dyke activists, and they have a combination of 22 years seniority in the public school system. They can’t imagine moving their family to some remote suburb, where their kids would likely be the only ones with two moms. But it’s getting harder each day to hold on. To make ends meet, they have begun to moonlight as dog trainers “I don’t want to blame young tech workers,” says the librarian. “I’d hate to sound like some grumpy ‘get off my lawn’ type. I mean, I love technology. I’m an early adopter. But if people like us, who helped make San Francisco what it is, get pushed out of the city, who’s going to teach the next generation of kids? Who’s going to take care of them in the hospital?”

Under the Teacher Next Door program, the city does offer public school employees financial assistance to buy first homes in San Francisco. And Mayor Lee recently won approval from the Board of Supervisors to put a measure on the November ballot that he hopes will further address the affordable-housing crisis. If approved by voters, the measure will expand a Housing Trust Fund that will bankroll 9,000 low-income housing units and provide middle-income residents with up to $100,000 in down-payment assistance.

Still, the librarian worries that for most people she knows, the city’s assistance is too little and too late. Her family’s last hope is the Excelsior district, a neighborhood in transition, where safety varies from block to block. “We always try to figure out where the lesbians are going,” she says. “In the ’90s it was Bernal, now it’s the Excelsior. We just bid on a house for $399,000. Who knows? We’ll see if we get outbid on this one again.”

For all the real estate fervor among the Bay Area’s new digital settlers, one gets the sense that this latest generation of strivers has only the barest understanding of what has long made the city such a cool, gray oasis. When Mayor Lee sits down with the new tech royalty, he feels the need to tell them who he is, and where he came from. As a kid growing up in Seattle, Lee worked as a dishwasher, alongside his cook father, in a Chinese restaurant. He watched as his father got pushed around and verbally abused, until he finally broke under the strain, dying too young of a heart attack. As a young legal activist, Lee brought a passion for justice to his battles with San Francisco landlords and the city housing authority. “Landlords,” Lee recalls, “hated my guts.” They called him a communist.

As he chats with me in his stately office on the second floor of city hall, Lee suddenly seems to hum with the activist energy of his youth. He insists that he is not simply a servant of the new digital elite. In return for the tax breaks and other municipal favors he has afforded tech companies, he expects some civic engagement. “I say to them, ‘You’ve got to give something back to this city.’ That’s the spirit of San Francisco, to help those who can’t help themselves. This is a shared economy.”

Where are the new philanthropists of San Francisco’s tech boom? Lee is determined to flush them out. He tells the tech entrepreneurs about the Haas family, the Shorensteins, and Charles Schwab, about Warren Hellman and Bill Graham. Residents of San Francisco can see and hear and feel the largesse of this older generation of wealth: It’s all around us—in the museum buildings and Golden Gate Park, in the Hardly Strictly Bluegrass festival and the Haight Ashbury Free Clinic. This older generation of titans, Lee tells them, helped make the city a sensual delight.

But the tech crowd, for the most part, has yet to spread its wealth around, at least in ways that make a visible difference in the life of the city. There are a few notable exceptions, of course; Salesforce CEO Marc Benioff, for instance, donated $100 million to build the UCSF Benioff Children’s Hospital in Mission Bay. But overall, a sense of libertarian stinginess prevails among San Francisco’s digital elite.

One recent Friday evening, a single mother named Fufkin Vollmayer found herself at a Shabbat service hosted by Mission Minyan, a congregation started by two young Jews in the heart of San Francisco's hottest neighborhood. The fortysomething Vollmayer, who was raised in the Haight-Ashbury by an activist mother, is the kind of vibrant, idiosyncratic personality that defines San Francisco (she took her first name from the band manager in Spinal Tap, for reasons that made sense at the time).

The night she attended the Mission Minyan service, Fufkin remembers, most of her fellow worshippers had the bearing of successful digital wizards, and all seemed (to her, at least) to be single-mindedly focused on the business of tech. As the startup chatter droned on, Vollmayer finally blurted out, “What about giving something back?” A deep silence fell over the room. No one responded. After the embarrassment faded, the conversation returned to business as usual.

“Maybe it’s youth—the folly of youth,” Vollmayer mused to me later. “The group that night was clearly about 15 years younger than me. If you’re young and rich, do you really think much about the implications of the work you do and the money you make?”

Is San Francisco’s high-tech workforce too cocooned from the cultural life of the city? Karen Wickre, the editorial director of Twitter, wrestles with this question one recent afternoon, when I visit her at the company’s headquarters. The Twitter offices seem to float in the sky above the squalid urban turf below, where the raw life of the Tenderloin spills onto Market Street. Not only do Twitter employees work in the clouds, high above the rough street bustle below, but some don’t even have to rub elbows with other San Franciscans on Muni. They can avoid the teeming masses by hopping aboard an exclusive shuttle that the Shorenstein Realty Company—owner of the Twitter building—runs between the Caltrain station and their mid-Market destination.

Wickre, a 61-year-old veteran of computer-magazine publishing and Silicon Valley communications, is one of the seasoned, thoughtful mandarins who balance Twitter’s generally youthful management team. As she chats with me in the company’s high-ceilinged dining room, an army of hungry employees comes pouring in, heading for the steaming tables that are abundantly piled with a variety of lunchtime cuisines. The Twitter workforce—young, heavily male, and mostly white, Asian, and Indian—clearly has little incentive to venture onto the streets below in search of midday sustenance. Few of the cafés and restaurants in the area appear to be cashing in on the presence of their new corporate neighbor yet, despite the “Welcome Twitter” signs in storefront windows.

“It’s true that it’s more efficient and productive to have your staff stay indoors to eat,” acknowledges Wickre. “If you unleash a thousand people on the neighborhood, there aren’t enough restaurants nearby to handle them, so they would have to fan out through the city, which means lost time.”

Nonetheless, Wickre insists, “we’re interested in this neighborhood. We’ve sent volunteers to Glide Church and invited other nonprofit groups to come speak at the offices. We encourage our employees to get involved. The manager of our food service comes from Project Open Hand, so he brings that perspective to the company.”

Wickre, who is a longtime resident of San Francisco, is sure that the Twitter workforce (a significant percentage of which lives in the city) takes advantage of the urban surroundings. “Techies are attracted by the same things that everybody else is,” she says. “San Francisco is a hive of bright people and ideas. This is where Burning Man started, where the locavore movement began. There are literary events every night, pop-up restaurants opening all over the city. There’s an energy here you just can’t find in suburban office parks.”

She rejects the idea that social media companies like Twitter promote a culture of selfish isolation. “How do Occupy activists find out that demonstrators are gathering in Dolores Park? They use Twitter. Foodies in San Francisco tweet to promote meet-ups and farmers’ markets. Twitter is nothing if not a vibrant canvas of human expression and engagement.”

But not every veteran of San Francisco’s digital-media world is as sanguine about the city’s increasingly geeky sensibility. Susan MacTavish Best became so exasperated with everyone being glued to computer screens and smart-phones that she turned her rented Pacific Heights Victorian into an old-fashioned salon, where her friends and acquaintances engage in face-to-face conversation. Best, 38, who runs a public relations firm for tech clients such as Craigslist and Klout, moonlights as something of an alternative Martha Stewart, hosting eclectic dinner parties, growing kilos of kale and other nutritious vegetables in her backyard, and producing a cookbook that combines her maternal kitchen wisdom with the organic consciousness she picked up while living on a hippie farm in Mendocino. The Chronicle has anointed her as “the hippest party hostess in the history of Silicon Valley’s pocket pen-protector set.”

Best is determined to drag her tech friends away from their keyboards and make them mingle. “Everybody is hungry for human contact these days. I send out emails at 4 p.m. announcing a dinner that evening at my house, and 40 to 50 people show up hours later.”

The hostess splits her time these days between her Pacific Heights digs and a loft in New York’s SoHo district, where she also regularly entertains. She always finds herself happily pulled back to San Francisco. “Money is not the No. 1 thing in San Francisco,” she says. “I like that about this city. People come here to make money, but unlike New York they’re also here to see new ideas come to fruition.”

Best has always been drawn to tech entrepreneurs; she finds their “awkwardness” charming. But she has taken it upon herself to turn these engines of the San Francisco economy into social beings. “I will not tolerate people who think they can behave rudely just because they’ve been told their whole lives that they’re special,” she says. “I think that sort of Asperger’s behavior, that super self-absorption, should be discouraged. I don’t care if you’re a Rhodes scholar and you just got VC funding for your new app, you still need to wash the dishes.”

Best’s Salon might succeed as a geek finishing school, making the city’s young entrepreneurs fit for polite company. But what will the larger impact of this ambitious generation be on San Francisco as a whole?

Maybe, in the end, their greatest contribution will be to the city’s tax base,” observes writer and cultural entrepreneur Dave Eggers. “And I don’t minimize the importance of that. Pumping new money into the city will allow us to patch up the streets, fix the parks, improve our public schools.”

Tech entrepreneurs in search of a larger social role might find inspiration in Eggers, a whirlwind of bright ideas and good works. When he’s not writing bestselling books (his latest novel is A Hologram for the King) and screenplays (Where the Wild Things Are) and running a successful publishing house (McSweeney’s), Eggers helps incubate a future generation of writers through 826 Valencia, a beehive of education-can-be-fun activities in the Mission.

Now Eggers has a new mission: He wants to take over a mid-Market building near Twitter’s humming HQ and turn it into a showcase for artisans and craftspeople. He envisions a space filled with more than 100 producers of handmade wares, including shoes, skateboards, guitars, and clocks. “Things you can touch and hold,” he says. “I like the idea of having a place for the makers of physical things, as a hedge against a technology-only downtown corridor. The more we go digital, the more we hunger to get back in touch with real things and how they’re made.”

Eggers has pitched his idea for a Mid-Market Makers Mart to city hall officials, who have responded enthusiastically. Business development officials from the mayor’s office have taken him on tours of several vintage buildings in the area, including one pre–1906 earthquake landmark he particularly liked. But it’s a challenge to find an available and affordable building in the hot district, where landlords and developers have visions of installing the next Twitter, not cobblers and microbrewers. “Real estate people just don’t find clock makers as sexy as tech startups,” Eggers observes.

“The city agrees that should not be tech-only,” comments a member of the mayor’s staff. “And we love Dave’s vision. But he has to be realistic. In the end, Market Street might not work for him. But maybe the Tenderloin would.”

Eggers makes clear that he has no grudge against digital entrepreneurs, but he feels the city must avoid falling entirely under their thrall. “I would never judge a whole class of people. I have no idea what these people’s plans are or what’s in their hearts. But it’s important for San Francisco to pay attention to balance and to make sure that the city remains open to a broad range of people, not just the tech crowd. There’s a delicate equilibrium to all this.”

These days, when Eggers gazes out his storefront windows at Valencia Street, he sometimes sees the Google shuttle gliding by. Down the street, sleek-looking crowds pack into restaurants and bars like Locanda and Lot 9. All this in a neighborhood where Central American immigrant families still double- and triple-deck into firetrap buildings and gaunt, shabby-looking youths arrive with dreams of their first gallery opening or fashion line. But Eggers is taking all the changes in stride. “You know,” he muses, “Dolores Park is still Dolores Park. Young people still sprawl on the grass listening to music and watching the Mime Troupe. It’s still Woodstock every day. And that’s a good thing.”

There is still a “magical” dimension to San Francisco, as Ed Lee likes to point out. It’s the “open city” sensibility that allowed generation after generation of Asian immigrants to use Chinatown as a launching pad for their families’ dreams. He saw this firsthand as a young legal crusader when he lived on Pacific Avenue. “Chinatown remains strong because we connect the past with the future very fast,” he says. A family immigrates to Chinatown from a village in Toisan, unable to speak English. And a few years later, their children are having power lunches just blocks away at Harris’ Steakhouse.

But Chinatown only became a decent place to raise children, despite its harsh conditions, because of the tough activism of people like Lee. He fought against corporate lawyers with whom he had gone to law school, stopping their powerful clients from evicting poor tenants. As a young man, Lee called it “class struggle.” San Francisco could use some more of it these days.

David Talbot is the founder of and the author, most recently, of Season of the Witch (Free Press), a history of San Francisco during the tumultuous years between 1967 and 1982.

Read more about the tech industry: Was That A Pop We Heard?

Check back Monday September 24 for Tech Confidential: 17 anonymous, no-holds-barred confessions from people inside the pressure cooker—and members of a new servant class that keeps them happy, limber, and extravagantly fed.

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Correction: This story has been amended online. The Mission Minyan congregation was not started by two young Jews who work in the tech sector, as was originally reported. The founders are both educators who have never been affiliated with the tech sector. Mission Minyan does not solely host a weekly Shabbat service, as was inferred; it also offers Shabbat morning services, holiday celebrations, classes, and social service events. San Francisco magazine regrets the errors.


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