SF go/no-go decision framework

Sep 8, 2020

There’s been talk recently on “the great San Francisco exodus”, usually attributed to the fact that major tech companies have gone remote, thereby giving workers leeway to escape to somewhere cheaper.

In opposition, there’s a segment of San Francisco true believers who refuse to believe anyone would leave the city, attacking both the very idea, and the numbers as misleading. So far, the information we have seems to be telling, but without being overwhelmingly definitive. As seems to be the Achilles Heel in data analysis with many things these days, it can be massaged to fit many narratives. Prices are down, but they’re much more down in business districts like Fi-di and SOMA, and can be made to look less grim by scoping down to desirable neighborhoods further out of the core and looking at them in isolation.

My prediction is that although the numbers aren’t definitive yet, they will be undeniable in 2 to 6 months. I take a walk down through the city in the morning, and many days I’ll see one or more moving trucks. Pure anecdote I know, but there’s going to be a lagging effect in good information.

I’ll also suggest the existence of a “coiled spring” effect, where people have been putting off making a decision, but know what they have to do, and will action over the next half year or so. Local media makes it out to specifically be a “tech exodus” because that’s what their readers want to hear, but it’s more likely a general exodus – there are a lot of good reasons to leave San Francisco right now.

I’m in the coiled spring camp, probably. I don’t take quick action even where I should, and have mulling over what to do next. I decided to write some of my thought process down in the hopes that it’ll help with my go/no-go decision.

If I step back and think about why I’m here in the first place, it boils down to three major elements: access to work, access to culture, and urbanism.

The Bay Area and peninsula have been tech hubs for as long as we’ve had tech. I was lucky enough to live in San Francisco in 2012 and will always have fond memories of those days. Not only could you find work at an interesting company, but you could go to any bar or meetup in the city and have a legitimately profound conversation about many things. People were passionate about the good software would do for the world. It was inspiring.

That climate’s tapered off over the years as the industry’s grown more mature and more employees have consolidated into a handful of the area’s biggest companies, but for a software engineer, it’s remained the best place on Earth to find work.

Even prior to Covid, the cracks were showing. San Francisco politicians had been working hard to legislate tech companies away by levying new red tape and special taxes. Their latest achievement (a heated topic as recently as March, but now completely forgotten with recent events) was to tie expansion of the city’s office space to affordable housing 1, effectively freezing it because the city also refuses to build housing. What no bureaucrat (or voter) seems to understand is that as a company, the only thing you need to do to escape this hostile environment is move your office a few miles in any direction (to another city in the Bay), so many were already taking heed of prevailing winds and downsizing their presences in SF, or in the more extreme cases, planning evacuation. November’s ballot already holds two new business taxes 2, a handful of more general ones that will indirectly make operating here more expensive 3, and it’s likely that the 2021 ballots and beyond will be more of the same.

My prediction is that although the peninsula will stay tech-heavy, SF itself is going to bleed its tech sector. This will take longer than employees leaving because moving or closing an office is a bigger operation, but over the next few years many of the SF flagships will have a much reduced presence, or none at all. The premise of being here in the first place was that while you have to pay more in higher costs, taxes, and salaries, it was worth it because of the network effects in funding and access to talent, and because it put you in a city where people wanted to be, full of interesting things to do and cultural events. All of that is going away, and the equation no longer balances out.

The first big example so far is Pinterest cancelling its new $440M office project in SOMA (even at a $90M penalty!). Lots of smaller startups have been downsizing their office space, but aren’t big enough to be note-worthy. There will be more.

One of the best reasons to live in a big city has always been the access to its culture: art, music, nightlife, eclectic book clubs, and so on. SF had a lot of this. Some of my favorite things were to sit in a cafe and read/write, or go visit one of its myriad of famous cocktail bars.

SF isn’t looking good right now. I walked down to get a coffee on Valencia Street yesterday, previously a bastion of energy and creativity with its collection of bookstores, bars, breweries, and boutique shops. Nowadays, it feels like a ghost town, with trash everywhere and most windows boarded up. It becomes more lively a few evenings a week as two blocks (16th to 17th and 18th to 19th) are closed to car traffic to give restaurants some outdoor space, but with sharp restrictions. The road opens at 4 PM, and all restaurants must be closed and the road again ready for car traffic by 10.

A major contributing factor to the growing urban blight are SF’s lockdown measures, which have taken the most extreme possible stance. Getting a haircut (that’s not on a sidewalk), for example, is still illegal even under strictly controlled conditions. The original premise for lockdown was that it would last a few months, but it now looks like it’ll stay in place until a vaccine is available, and probably long after too as the city and state leaders adopt the same maximally conservative strategies employed consistently up to now – e.g. no reopening until every single person is vaccinated. The predictable effect will be that very little survives. Hundreds of stores, bars, and restaurants have already shuttered, but even the ones that have put themselves into stasis, hoping the finances will allow ends to meet for a few more months, have no chance of making it to mid-2021. This will have a profound impact on the cultural landscape of the city.

Even after it’s all over, it’s still going to be difficult to recover, even on a decade scale. Between permitting, expenses, and neighborhood opposition, starting a new business in SF is infamously expensive and onerous. Combine that with post-Covid uncertainty and a whole class of small business owners who have just been squeezed to death, and you’ve got a perfect recipe for long-lived stagnation. Even pre-Covid, a lot of the best institutions in the city only exist because they were started decades ago and have coasted through from a different era when costs were lower and requirements were simpler – imagine trying to start Zeitgeist or El Rio under today’s conditions.

Dense cities have many positive qualities in everything ranging from professional to environmental. I like to make my home in them. I’ve enjoyed a lifestyle for years where I can walk to my friends’ houses, work, the gym, or the grocery store, and having been born in sprawled suburbia where even the convenience store is a 45-minute walk away, I love it.

Covid’s taken its toll here too, and it’s heavy. Walking has become a stressful activity as panic-stricken San Franciscans jump out into traffic to avoid having to pass another human on the sidewalk (and that’s with masks, which San Franciscans have taken to with religious zeal – 95%+ use outdoors). The city’s issued strict guidance that people should maintain strict 6 foot distances from each other, but the pedestrian space remains exactly the same, making that physically impossible throughout most of the city (without resorting to jumping into the road). Stretches of two roads (JFK and the Great Highway) have been closed as a symbolic motion in the direction of the problem, but it’s nowhere near enough. Politicians applauded their own ingenuity as they introduced a “Slow Streets” program to theoretically open a few roads to people by reducing car traffic, but with no enforcement, those would-be-slow streets reverted back to normal roads the second the signs were dropped off. Not helping either is that parking on sidewalks remains informally legal, so just like before Covid, it’s unusual to walk the length of an entire block without it being blocked at some point by a parked vehicle.

On top of that, the city’s more cynically regressive population has actually managed to create a culture of exercise shaming. Runners in particular are scorned because even with masks, they’re known to carry Covid, and known to be able to project particulates of distances up to a mile. All of this in the midst of a pandemic where being in good health substantially improves your odds of survival. Yet again, this to some degree is anti-tech sentiment expressed indirectly, as running is viewed by San Franciscans as the tech worker’s sport of choice.

Another urban hallmark is mass transit. The area continues to coast of its one good decision to build BART back in the 70s, but both Muni and Caltrain are in serious trouble. Most Muni lines continue to be closed, and the organization has already declared that even post-Covid, many will never reopen. There was a brief moment of hope last week when the Muni rail lines came back online, only to close again 72 hours later. Even given five months of zero traffic and a perfectly ideal environment for maintenance, the city still botched the job, and the trains are once again closed indefinitely (Muni is currently saying at least until the end of 2020!).

Those of us who happily don’t own cars and who have been using Uber and Lyft to spot fill, are now going to find a new system as California’s passage of AB5 may make them untenable in the state.

The one bright spot is bicycling, which has gotten incrementally better thanks to traffic levels that remain slightly depressed thanks to less commuting. I biked down to SOMA the other day in a certain way it’s the nicest it’s ever been. Previously, the area’s around-the-clock snarl of gridlock traffic made it dangerous and unbearable.

I won’t spend but much time on this, but all of San Francisco’s notorious problems, of which practically everyone on Earth is well aware, are still there, and have become more exacerbated in recent months.

Meanwhile, San Francisco politicians are testing the absolute limits of deficit spending. Even during the peak of its tech boom years they weren’t able to come even close to a balanced budget. Post-Covid, the two-year budget deficit is already at $1.7B, and as we wake up to just how many businesses have closed or departed over the next year, that number is going to get much worse. Getting even near a plausible budget this year is contingent on the passing of new special tax measures being passed by voters on the November ballots (see 2 3). The current budget proposal also premises moderate economic growth going forward, which is nothing less than unapologetic dishonesty.

So that’s the dilemma. If it was just a matter of a temporary reduction in living quality, that might be one thing, but San Francisco doesn’t seem to be setting itself up for long term success.

The crowd of true believers will stay, but even they might become disillusioned by what they see in the coming years. In a purely objective sense, the decision for anyone with reasonable mobility seems to be, for better or worse, relatively clear.

1 Note that in San Francisco “affordable” housing doesn’t mean affordable housing in the literal sense of the word. It refers to the BMR (below market rate) program where a fraction of a project’s units are reserved to be sold at a reduced rate and only eligible to be purchased by buyers in specialized groups. Because demand for those units far outstrips the supply, opportunity to buy is distributed by lottery.

2 New business taxes (Prop F) and “overpaid executive tax” (Prop L).

3 $487.5M new bond to add to future debt obligations (Prop A), parcel tax (Prop J), and new sales tax (Measure RR).

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