From self-driving cars roaming the streets, to the world’s first fully-autonomous restaurant, and every tech-enabled invention in between, sensational headlines are often attached to San Francisco news. In recent decades, the city has become the innovation hub and tech trendsetter not only for the U.S. West Coast but the whole world. To get to work you’ll probably use Uber or Lyft, at work you’ll upload your files on Dropbox, if you need inspiration for a new concept you’ll check Pinterest, during your lunch break you’ll order food on Yelp, check the news on Reddit, update your Twitter account, and when you want to go on vacation you’ll look for the best deals on Airbnb. Yes, all these apps, websites and digital tools that are now an integral part of your daily life originated from one place: San Francisco. But in the not-so-distant past, the city was the West Coast counterpart to New York’s thriving financial industries; a place of stocks and bonds not Tweets and Likes. So how did San Francisco make the transition into a mecca for tech, advertising, media and internet (TAMI) talent, while retaining the same prestige that put it on the map?

When gold was discovered in California in 1848, it created an urgent need for banking and financial services in San Francisco. The city boomed rapidly and banks were set up to safeguard deposits and manage the shipping of gold to the East Coast. It was in the early 20th century that San Francisco became a major financial capital; the “Wall Street of the West” as many commentators would dub it. Later on, when the U.S. stock market crashed in 1929 and the Great Depression hit the USA, and by extension, the world, not a single bank in San Francisco failed. It was actually during the Great Depression that San Francisco took up some major – and costly – engineering and construction projects, including its iconic Golden Gate Bridge, whose construction lasted from 1933 to 1937. And even though San Francisco was hit by two major earthquakes in 1906 and 1989, the city still managed to quickly rebuild itself and maintain its status, thanks to the resilience afforded by an economy rooted in gold. Currently, San Francisco is ranked in eighth place among the top global financial centers.

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Meanwhile, the last years of World War II and the decades that followed helped San Francisco become the home of all things counterculture. Between 1941 and 1945, around 9,000 gay servicemen and women were discharged from the U.S. Military as part of an active campaign to flush homosexuality from the armed forces, and many of those were processed in San Francisco. This thriving, activist LGBT community continued to grow during the 50s and 60s, thanks to the city’s gay-friendly vibe, underlined by what’s now referred to as the San Francisco Renaissance – an artistic movement centered on poetry, particularly Beat Poetry, which attracted writers, poets, musicians and artists to what was flourishing into a vibrant, creative city populated by Hippies. The Summer of Love in 1967 cemented San Francisco’s standing as the home of counterculture, as up to 100,000 convened at the city’s neighborhood of Haight-Ashbury to celebrate alternative lifestyles, oppose the Vietnam War and preach tolerance and inclusiveness.

This Bohemian way of life continued to characterize San Francisco, attracting more and more creatives in the 70s and 80s, while several landmark court rulings in favor of gay defendants saw political reforms that underscored its progressiveness and attractiveness for a generation of Hippies across the country. However, these social movements were not without their obstacles: in 1978, former police officer and member of San Francisco’s Board of Supervisors, Dan White, assassinated both the city’s mayor, George Moscone, and prominent gay activist and the first openly-gay elected official, City Supervisor Harvey Milk. Meanwhile, the early 1980s saw huge waves of homelessness begin to appear as the city’s warm weather and generous welfare policies attracted thousands who were displaced by the closure of state institutions for the mentally ill, Reagan-administration cuts to housing benefits and the endemic availability of addictive drugs during this decade. Homelessness continues to plague San Francisco today, leading to calls for a ‘state of emergency’ on homelessness and shelters by City Supervisors in March 2016. In June, San Francisco Mayor Edwin Lee announced a proposed budget for 2016/2017 which specifies $32 million for services and projects to tackle the increasingly visible problem, including a new Department of Homelessness.

Live music during the 1967 'Summer of Love'.

Live music during the 1967 ‘Summer of Love’.

From Dotcom to Web 2.0

In the early 1990s, the world was witnessing a major technological change. Personal computers (PCs) were proving to be increasingly useful and became affordable for both business and personal use. Tools were developed to increase PC users’ productivity in business (tax preparation, word processing, etc.), and on the entertainment front, PCs started to substitute TV as gaming began to make an impact in the marketplace. “During the 1990s, the U.S. computer industry decided to focus primarily upon computer software development instead of designing and manufacturing computer hardware. The reason for this focus was because computer software was a product with very high profit margins, unlike computer hardware. Software companies generated profits by selling licensed software, which costs very little to reproduce,” explains economic analyst Jesse Colombo. This caused software companies to perform really well in the stock market and encouraged many software startups to emerge. This tech-driven and highly profitable industrial shift quickly saw advertising and media talent follow coders and programmers to San Francisco, as the need for marketing for dotcom firms became quickly apparent.

San Francisco protesters stop a bus carrying Google employees to and from Silicon Valley.

San Francisco protesters stop a bus carrying Google employees to and from Silicon Valley.

Music manager, record producer and Blues Hall of Fame inductee Mike Kappus of Rosebud Agency, remembers the boom well – “The music industry lost great staff to the tech world, because they weren’t just looking for technical talent, but then needed PR people, secretaries and assistants. And the packages they were offering during the height of the boom just couldn’t be matched by other industries,” he explains. Today, his San Francisco headquarters is surrounded by some of the biggest names in technology, including Pinterest and Firefox. “The Google shuttlebus, that picks up employees and takes them to and from Silicon Valley every day, is indicative of a second dotcom boom that’s even stronger this time round. And that frustrates some people. You’ll see the busses every couple of blocks in a neighborhood like Haight-Ashbury – where home prices are being driven up by tech high-flyers.” Though the very same districts that were once the focal point for a country-wide counterculture movement are now re-occupied by a corporate class (albeit a very different one than the banking class that set the tone for San Fran’s development), Kappus insists there’s still a cultural vibrancy and demand for the arts that made San Fran a mecca for creative types to begin with.

Given its creative and enabling environment, as well as its tax exemption policies designed to retain tech and internet industries in San Francisco, rather than fleeing to Silicon Valley, the city is very much reaping the financial rewards of the continuously growing Web 2.0 bubble. Known colloquially as the ‘Twitter Tax Break,’ the incentive scheme that saw millions of dollars in payroll tax exemptions for companies that occupy San Francisco’s Mid-Market and Tenderloin neighborhoods was introduced to some controversy in 2015. Nevertheless, millions were injected in the dilapidated downtown areas: the city’s urban center is now denser and full of mixed-use buildings, and old factory lofts and warehouses are often repurposed. Twitter’s headquarters in a formerly vacant 1937 Art Deco landmark in the Tenderloin is a case in point.

Twitter headquarters, located on Market Street.

Twitter headquarters, located on Market Street.

Despite the problems of gentrification and rising prices due to the high incomes of tech professionals, and the advertising and media industries attached to them, the policies put in place seem to be working. San Francisco saw 423 venture-backed financings in 2013, compared to just 61 in 2003. Between 2010 and 2015, 2.5 million square feet of office space were leased to Silicon Valley firms moving north to San Francisco, counting big shifts from Twitter and Pinterest. Meanwhile, countless headlines have noted the shift, and anticipate San Francisco to be next big tech destination. As new generations of young tech and associated professional talents come into the workforce, the resurgence of San Francisco as the home of tech and innovation in America – and indeed the world – can be attributed to changing attitudes, in line with millennial trends across the country. Today’s young professional shun big suburban mansions for urban penthouses and slick studios. They prefer to walk from home to work to the bar and home again; a privilege only afforded to those who live in the cores of big cities. San Francisco’s functional public transport network is also a big enabler for the car-conscious. From the BART, to the Muni Metro, busses and the iconic cable car, the city’s residents are spoiled for choice.

The Home of Tech… But Who Else?

The dotcom booms of the late 90s and early 2000s had a huge impact on the city, especially in terms of housing. San Francisco is confined to roughly 49 square miles at the tip of a peninsula where the Bay to the east drains through the northerly Golden Gate into the Pacific Ocean to the west. Consequently, when large numbers of tech-industry talent moved into the city, causing its gentrification and a spike in rent prices of once poorer neighborhoods, a lot of local residents and businesses who could no longer afford to live there were pushed out, reducing the city’s population by 30,000 in just a few years. Today, the median home price is $1 million in San Francisco, and a shortage of affordable or mid-income housing continues to drive out those who can’t keep up with the high-flying salaries the TAMI industries are characterized by. In the same vein, San Fran is notoriously the most expensive rental market in the States, with a one-bedroom apartment median rate at a whopping $3,590 monthly.

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“The housing crisis we’re seeing in San Fran is similar to Oakland and other Californian cities. Past practices and policies are coming back to impact us now,” says Manish Goyal of San Francisco’s Office of Economic and Workforce Development. He’s referring to a number of policies and projects which aimed to tackle housing stock during San Francisco’s rapid development that could never quite predict demand, nor community reactions to proposed housing projects. However, he explains to us the ongoing requirement the City has put in place for all real estate developers: “For every 10 units of housing you build, you have to make 12% of it affordable. There are discussions now to make that number 25%. That’s one way to ensure that there’s some affordable units.” He explains that developers can either take an inclusionary approach by integrating the affordable units into their master plan, or they can transfer the equivalent cost into a city-controlled trust fund that’s designed to go towards future affordable-housing projects.

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However, given the number of housing projects going on at any one time, and the demand for land to accommodate these real estate developments, prices for labor and land are high – a cost passed on to the homebuyer. Meanwhile, in an attempt to increase supply and affordability, the city has relaxed its long-standing building height restrictions and zoning codes, ushering several high-rise buildings. Instead of adding affordable units, however, this policy is largely responsible for a wave of “Manhattanization” in the form of tall residential skyscrapers in South of Market (SoMA) such as One Rincon Hill, 300 Spear Street, and Millennium Tower – all high end condominiums.

High rise buildings begin to overshadow traditional San Francisco architecture.

High rise buildings begin to overshadow traditional San Francisco architecture.

Nevertheless, the City is resolute in solving the housing crisis and is implementing programs to retain the original characteristics and residents of historic neighborhoods, and revitalize low income areas. Invest in Neighborhoods is one such initiative designed to solve San Francisco’s housing challenges. Initiated by the Office of Economic and Workforce Development, it aims at creating a dialogue between the City’s Planning Department and the public, letting residents have ownership over their areas and affect development in their neighborhoods. “We work mainly on the commercial corridors of these neighborhoods, as this is where employment opportunities are and this is where the community congregates,” explains Goyal. By creating qualitative surveys and talking directly with local business owners, merchant associations and neighborhood groups, the Invest in Neighborhoods teams work to find the unique needs of each neighborhood and leverage city, community and non-profit resources to create simple, but crucial fixes. “Some neighborhoods wanted cleanliness, others needed community meeting spaces. Others still just wanted to repaint their storefronts or funds to market their neighborhoods,” continues Goyal. Invest in Neighborhoods is being piloted in 25 commercial districts around the city, with Lombard Street being hailed as a success story.

Lombard Street renovations through the Invest in Neighborhoods initiative.

Lombard Street renovations through the Invest in Neighborhoods initiative.

 

Meanwhile, San Francisco’s historically healthy civic society means that “Planning Commission meetings show a full spectrum of residents from San Francisco. It’s very interesting: depending on the neighborhood, the arguments are very different,” as Goyal explains. “There are instances of high income communities fighting back against affordable housing developments. They’re hard to watch because it doesn’t make sense – their perspective is that it’s going to affect housing value and neighborhood characteristics. But if you’re living in a city, you need to look at it as a whole, and at the long term health of a community.” Similarly, he points at instances of neighborhoods voting against transitional housing for troubled youths, who, with no other options, end up on the streets, perpetuating the city’s homelessness rate (nearly 7,000 homeless people were counted in 2015).

San Francisco 2.0?

With the rapid changes and influx of population, it’s no surprise that some have questioned whether the “soul” of the city has actually changed. “I started noticing how everyone I knew was leaving. Growing up, a lot of my friends were musicians and artists, and I know a lot of people who are filmmakers. Those people couldn’t afford to stay in the city,”says filmmaker Alexandra Pelosi. In her HBO documentary San Francisco 2.0, she tackles issues of income inequality, displacement and the change taking place in the identity of San Fran: “a city that was once the center of counterculture being transformed into a moneyed metropolis by an influx of tech companies ranging from Adobe to Uber.” Pelosi explains that young techies are oblivious to the culture they’re displacing in San Francisco. However, when we met Stonly Baptiste, Co-founder of Urban.Us, a venture fund for startups that make cities better, we heard the other side of the story. Baptiste – a young techie himself – is heavily engaged in making cities better and more liveable. “With urbanization you have challenges. As you get more and more people into cities, it becomes harder to deliver high quality services, especially with the financial resource pressures on the government,” says Baptiste on the role of the tech industry in assuring a good quality of life.

With the private sector largely responsible for gentrification and the use of resources, others are heeding the call from urban techies like Baptiste and the companies his venture fund invests in for responsible businesses that solve city-specific problems. Tax credits and incentives on both state and city-levels are increasingly geared to reward companies that contribute to the revitalization of blighted neighborhoods, such as the Tenderloin and Central Market, while green businesses and clean technology companies also benefit from tax breaks.

So what does the future hold for San Francisco? Is it living in a bubble? And is that bubble about to burst? Contrary to common belief, San Francisco’s biggest economic impact comes from tourism and hospitality, not technology industries, as Manish Goyal confirms. This diverse economy and a characteristically resilient population has helped San Francisco through various crises and, thanks to a new wave of techies that have social, ecological and cultural consciousness at their core, there might just be some merit to the sensational headlines declaring San Fran a bigger, better and more promising alternative to Silicon Valley.


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