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The City and the Valley: how Tech is impacting San Francisco and vice versa

The Bay area is not only an economic reality with a level of investments, quantifiable turnover, number of unicorns or tech business stock market. It is also a territory that stages its own history.

January 2017
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Executive Summary

The Bay area is not only an economic reality with a level of investments, quantifiable turnover, number of unicorns or tech business stock market. It is also a territory that stages its own history, one we could coin as atypical: almost with no memory of its own past (technological history excepted) and with a permanent focus on the future. The “Valley” draws its strength on its ability to embody and renew the mythology of progress, by perpetuating a temporal confusion between present and future, probability and certainty, knowledge and belief.

Nevertheless, its geography does bear marks of its past. As a living map, it provides silent reference points to the history of the computer industry. Stretching over a hundred kilometers, the strip of land running from the North of San Francisco to the South of Jan José can be analyzed as an ice core. Beyond the frantic entrepreneurial energy that runs through it, we could see different architectonic displacements, which keep track of deeper transformations, from Sunnyvale to Cupertino, from Mountain View to Menlo Park, from Palo Alto to San Francisco.

The peaceful, semiconductor-focused and suburban Valley around San Jose inherited from the 1970s has very little in common with the fast-paced apps scene of San Francisco’s South Market. Silicon Valley still stands as the epitome of economic modernity, but major actors such as Peter Thiel or venture capitalist Danny Rimer are pointing out the emergence of a computer age Rust Belt: “The closer you get to San Jose, the more of a Rust Belt it has become.

In a nutshell, there is an important gap between inside and outside perceptions of Silicon Valley. For instance, companies that could be considered as emerging and aggressive from the outskirts of the tech industry are considered as legacy organizations from its center. Netflix, which both fascinates and frightens the “old” media, is perceived in the Bay area as a “daddy company,” with a majority of employees in their forties. And within the top-notch developer community, engineers talk about Google, the so-called Internet “monster” for bureaucrats in Washington D.C. and Brussels, like it was a place for golden retirement (“go there, get and rest” as they say) after one’s overwork startup.

The Valley myth lags behind the evolution of the place: echoes and projections create a structural misrepresentation of its ever-changing present. And today, its most active part isn’t anymore the area around Stanford. The city of San Francisco is concentrating over 30% of Northern California’s investments. Twitter, Uber, Salesforce and Zendesk headquarters are all located on Market Street, the San Francisco “magnificent mile,” as well as many young startups, still unknown but closely tracked by all major VCs of the region.

This geographical shift has introduced to a new configuration. In spite of a few transmedia companies which have been settled in town since the late 1980s (LucasArts Entertainment, Pixar, etc.) or the dot-com bubble era, San Francisco and Silicon Valley cultivated a long-term of economic, social and symbolic distance through the last century. In contrast to the story telling of Steve Jobs or of Bay ideologues like Stewart Brand or Kevin Kelly, the counter-cultural movements of which San Francisco has been an echo chamber since the 1960s have been in a way the antagonist cultural life style model of the “square” and “business” mentality of the Valley.

Thus, the convergence between the City and the Valley raises a number of issues, mainly related to a speed gap between the superstructure, i.e. the tech industry, and the infrastructure of the city. Housing, education, homeless crisis, transportation, gentrification, etc. Today, these issues mar the heart of a city that seems an island of prosperity to the rest of the watching world. How has San Francisco become the epicenter of Silicon Valley? How has a “small city” (around 850 000 residents) become host to the expanding tech world? And should we consider the opposite perspective: what has San Francisco done to the tech community? We can draw enlightening elements from this question set at a time when tech are presented as an inevitable – and often advisable – “revolution.”

The tech industry as a social space

Not a day goes by without dozens of press articles, blog posts and graphics mentioning a “digital revolution” and its impact. But what kind of revolution are we dealing with? The Internet founding fathers desired a collective movement fueled by equally important actors and areas and common representations of the digital world maintain this image of a decentralized universe. However, like other economic sectors, the digital and, more broadly the tech industry, are primarily concentrated in limited interconnected world-economies. And today, San Francisco is its capital.

But, unlike any other traditional industry, focused on optimizing the performance of capital and labor by standardization, the tech industry is primarily an economy of gambling, fundraising and investment portfolios. In this respect, it sounds like an economy of promises more than profits. San Francisco has become a space of possibilities, based on a network of actors, with both reversible and cumulative roles, working together to make real future projects and projects about the future: entrepreneurs, scientists, investors, venture capitalists, developers, designers, data analysts, lawyers, accountants, managers, journalists and influencers. We can find a striking diversity of skills, opinions, beliefs and ideologies in the Tech scene, half composed by foreigners. But despite their linguistic, cultural, moral and technological expertise heterogeneity, people need to cooperate, and doing it faster than the other industries.

For this reason, the prevailing mode of interaction in the tech world is essentially a narrative one. In a supposedly rationalist and objectivist sector, storytelling is a key skill to success. From investment funds worth several billion dollars to Sunday barbecues, futuristic and projective narrative arcs structure social life. In a three-minute elevator pitch or an hour-long presentation, wannabe entrepreneurs need to spark interest, synthesize their project and distinguish themselves, explain and persuade, if not of the quality of the project, at least the quality of the project leader. Even though presentations need to be highly individualized, they are a piece of a broader, interwoven narrative repertoire: a “pitch” leans on a “story” which inspires “values” that will shape a “mission” which itself is part of the Tech collective destiny (progress), supported and embodied by a professional community.

These narratives intertwine through a spatial and social organization. This is true on the micro level with tech industry companies designed as campuses, with their own soccer field and Friday after work session. From this perspective Stanford University, and its socialization-oriented organization around the central “quad,” the “Dish” walk or the golf course separated the campus from Sand Hill Road and its prestigious VC firms, could be seen as their archetype. Not to mention the coffee shops in the San Francisco area that offer a working space to every newcomer in town who need to refine his “decks,” present a project to experienced entrepreneurs, or pitch it to investors from early breakfasts to late drinks, as we can observe it on day-to-day basis at the Creamery.

For this reason, understanding the social characteristics of this professional world requires a focus on how a social space fits into a physical territory. The “Tech City” is embedded into San Francisco and its 11 districts, a limited area with a complex history, made of shadows (corruption, underground economies, political organization, diasporas, immigration networks) and lights (civic marches, psychedelic and sexual revolutions, hippy movement, fights for minority rights, etc.).

The Valley is eating the City

“Software is eating the World.” Even if Marc Andreessen’s prophetic words haven’t become a reality just yet, the Valley is definitely eating the cities around San Francisco: San José, Oakland, and beyond the area, Los Angeles, Portland, Seattle, Denver, etc. This proliferation revealed a mutation of the high-tech sector industrial core, in which software holds a more and more prominent place, attracting a growing influx of new high-wage workers, mostly young and male, who want to stay close to an urban leisure and nightlife environment. For this reason, the capitalist dynamic reactivated after the 2008 crisis combines a strong increase in investments in the tech industry in general and in the software sector in particular; in the Valley in general and the San Francisco startup ecosystem in particular. The last quarter of 2015 marked the apex of this trend. This investment increase, stimulated by Apple, Google and Facebook’s stock exchange performances, has produced a suction effect for speculators in the housing market, property developers and private honors wishing to sell, rent and even sublet (through the Airbnb platform) their places. In recent years, rents – but also evictions – have risen thanks to a unintended State of California legal provision (the Ellis Act), and prosperous-looking building projects have emerged at different key points of the city.

This urban trend is connected to a cultural movement, a “symbolic revolution” as the French sociologist Pierre Bourdieu would say. Convergent trends have transformed the tech industry into a culturally attractive sector, imbued with romanticism. Bestseller authors (Guy Kawasaki, Peter Thiel, Elon Musk, etc.), Hollywood narratives (from Matrix to the HBO 2016 production West World), dedicated publications (Wired, TechCrunch, Business Insider), specific intellectuals (“influencers” like Tim O’Reilly, Paul Graham, Charlene Li, etc.), computer culture, etc. The tech industry has become a full-fledged object of pop culture, generating curiosities, vocations and ambitions. The number of students applying to Computer Science courses in major US universities has increased every year for a decade, while the excitement around entrepreneurship programs and startup incubators has intensified in major cities of the World, far beyond the localized success of YC Combinator.

This power of attraction draws thousands of young, friendly, bold techies every quarter in the streets of San Francisco, boosted both by the tech industry’s rebellious image and its moralist credo. In an open democracy, who wouldn’t endorse the former Google’s mantra (“Don’t be evil”), the freedom of expression defended by Twitter, the openness to the world promoted by Airbnb and Facebook or Uber’s supposed goal, the mitigation of unemployment in economically depressed areas? Especially when the voice and the face of this political agenda are those of middle-class entrepreneurs, less than 35 years old, advocating for emancipation and freedom against the executives of the “old economy” and outdated political institutions.

But the truth of this new entrepreneurship narrative is ambiguous at best, as illustrated by the situation in San Francisco. In a city constrained by space limitation and a strict legal framework for new housing spaces, the tech sector has increased from 9% to 20% of the active population between 2010 and 2016. Just like during in Renaissance Venice, the city center bears the scars of a swift but unequal distribution of economic growth. Penniless entrepreneurs, middle-class workers such as teachers, journalists, public servants and artists, not to mention workers from the service sector and illegal aliens, some of whom have been living in town for several generations, are evicted and relegated to the city’s outskirts, even when they have actively contributed to making San Francisco a safe haven for political and sexual minorities. In this respect, there is a stunning social suffering in the area, reflected in confrontational artistic forms: street arts, theater performances, jokes about techies in stand-up comedy shows, etc.

These tensions fuel a series of political battles, led by a handful of activists who find supports and echoes in the entire city and beyond: fights against evictions, real estate projects with few to no affordable units, rental inflation, stigmatization of homelessness, migration of artistic spaces, disappearance of local shops, police violence against minorities, proliferation of private buses leading employees from their home (San Francisco) to their workplace (the Valley), etc. These tensions have gradually split the people of San Francisco, some eager to defend tech and its enlightening and positive outcome, the others filled with anger and tricked by the illusion that “tech” is one linear, homogenous and mischievous whole. A line of demarcation has emerged in a city which has been characterized since the 1960s by its openness and its welcoming spirit.

Tech and its Protean syndrome

Most people tend indeed to apply catchall formula (“Silicon Valley,” “digital economy,” “tech industry,” etc.) to a highly differentiated world, molded by opposing forces. From this perspective, we could speak about tech as a “bipolar” economy, for at least three reasons: its members defend divergent orientations; they project a misrepresentation of their social organization (a supposed meritocracy, based on radical innovation, friendly relationships and openness); they take part to a professionally segmented world. Distortions between practices and narratives, are not exclusive to the digital industry. But with tech, this dichotomy is particularly problematic because it entrenches asymmetries of information between its members and disseminate negative externalities through its environment.

To state the obvious, the strategic (sometimes cynical) takeover of spaces, devices, platforms, projects and data, justified by selflessness or mutual assistance creates more and more disenchantment. In San Francisco, the so-called “sharing economy” is giving way to utilitarist uses like artists transformed into private drivers under a double label Lyft/Uber during few hours during the day (or night) but still harshly criticizing these same companies.

From another perspective, the link between the tech industry’s rationalization process and its inclination for fantasy is even more ambiguous. Logic is magic: the intellectual structure of the tech industry is based on a culture of engineering, a world built around the equation “problems=solutions” with an increasingly rationalist trend. At the same time, it is guided by a Promethean faith in the ability of engineering to solve all the issues of the world. Like a casino, the tech industry gives reasons to believe in this myth from time to time, either through technical solutions or success stories, propelling at a steady rate young engineers from an anonymous startup to the Forbes Magazine cover.

However, if tech produces numerous services that improve quality of life (a life going faster, longer, more efficient, more connected, like relieved from the burdens and constraints of the physical world), it has very little to say about well-being. This blind spot explains why its members – even the most prominent ones – seek comfort in mixed spirituality, borrowed from different sources between East and West: meditation, yoga, philosophy, back-to-the-land movements, art and cultural industries, or recreational drugs. The Burning Man festival provides them a vivid laboratory for these spiritual experiments and cultural hybridizations.

Similarly, the image of the rebel-entrepreneur who reinvents norms maintains a significant gap between the economic reality and the social conformity of the tech world. While two-thirds of Silicon Valley founders live on less than $50,000 per year (whereas the average rent for an apartment with bedroom is $3,200/month in San Francisco), their interactions follow a limited set of conventions, codes and ways of doing things, socially controlled by recognition and reputation process.

Moreover, the mythology of success needs to be reread by taking into account its dark side: the mythology of failure, regularly reassessed and integrated into the high-tech industry’s narrative, but always retrospectively. The famous startup “pivot” is nothing more than a reassessment and reinterpretation of failure. And if we try to analyze seriously what “success” means and implies in tech, from a Promethean perspective, we have to point out a bitter reality: successes, including the most spectacular ones, fuel a form of dissatisfaction for successful people. They often express a malaise through impostor syndrome, panic attacks, Sisyphus syndrome, paranoia, non-achievement of life feeling, etc. If we look at the big picture, we can clearly see a paradox: by solving technological problems, the tech industry creates new issues (social, moral, psychological or even environmental) without the ability to address them.

From this regard, the analysis of the dynamics of innovation is particularly enlightening. According to a classic narrative arc, innovation implies a daring, continuous and infinite overtaking of the knowledge limits, carried by heroic entrepreneurs. This image hides a more prosaic reality: in each area of hyper-specialization, cumulative processes involve hundreds of stakeholders competing with each other, with only a handful of winners – often regardless of their real merits.

This contextualization of tech myths draws the attention towards a better understanding of law and its effects. Larry Lessig’s provocative statement “code is law” (Harvard Business Review, 2000) has been often misinterpreted. This formula implies its exact reversal: law is code. Legal inertia is observed on a daily basis in San Francisco and Silicon Valley’s transactions, whether in terms of contracting, patenting or winning markets. Beyond the “disruption” narrative, the law and the spirit of law still act as a powerful framework for entrepreneurship and innovation, within and without the tech boundaries, as the running conflict between the city of San Francisco and Airbnb exemplifies.

This far too quick picture calls for a balanced attitude towards tech. Like the portrait of Dorian Gray, this industry nurtures a living complexity epitomized by San Francisco. Even if new ideas and bonds of solidarity are formed every day, there are intertwined with negative dimensions. The era of suspicion propagates through binary reasoning and staging: “tech vs. anti-tech,” “natives” vs. Argonauts, dominating “white people” vs. oppressed “minorities,” the “haves vs. the have-nots,” “the 1% Against the People,” etc. This system of antagonisms is dramatized by the exemplary status of San Francisco as a benchmark for cities which have been impacted by similar dynamics: Seattle, Portland, Austin and Los Angeles in the US, Paris, Berlin, London, Stockholm and Barcelona in Europe. Techies, who consider themselves as agents of progress, don’t always understand the drivers of a situation that turns them into the agents of the crisis. The blind trust in the omnipotence of technology relegates the knowledge about traditional tools of administration and regulation to the level of 20th century fads. But the connected futures of the tech industry and the city of San Francisco could very well depend on their ability to explore the common solutions of the past.

This article is a transcription of a presentation in Monique Dagnaud and Olivier Alexandre’s EHESS seminar, The Californian Model.

Olivier Alexandre
Sociologist, Labex Icca and Cems-Imm / EHESS