What Is Really Happening in San Francisco

The media have portrayed San Francisco as being in a doom loop. After his recent visit, Atul commented on a part of this. I’d like to add to that, so here is a little real-world perspective written by someone who is a native.

First, San Francisco has always been a boom-and-bust economy.

Everyone knows about the great San Francisco Earthquake and Fire of 1906. What many people don’t realize is that the city burned down several other times between 1849 and 1906.

Starting with the Gold Rush, people came to San Francisco to make their fortune. Some did, and they left. Others didn’t — but they fell in love with the area and stayed. The Chinese who came to build the transcontinental railway called the city “Gold Mountain.”

San Francisco has always had a rough-and-tumble side. In the Barbary Coast days, men in bars were drugged and woke up on ships at sea, working as sailors. This was so common it had a name — “Shanghaiing.”

In modern times there has been a series of threads that have shaped the city. The Great Depression hit San Francisco hard. The labor movement was strong and resulted in the only time in the US a city was shut down by a general strike.

Word War II produced a boom. One of the things that happened was the forced relocation of the Japanese. Their homes were filled by Black people moving from the South for war jobs.

After the war came a bust, along with a wave of immigration. San Francisco was as far away from Europe as you could get without starting back around. Many refugees from the Holocaust settled in the city. Similarly, it was as far away from Asia as you could get without starting back around. Many people from Asia immigrated. This enhanced the city’s culture of “freedom.”

Out of the postwar bust grew the Beatniks. Then came the Civil Rights movement and the Campus Revolts. That led to the Hippies. During 1967, the city was flooded with young people who came with nothing — not even shoes. This led to another bust. And so on…

The explosion of Silicon Valley led to great economic growth on the San Francisco Peninsula. But the peninsula was very slow to develop cultural resources. People started living in the city and commuting. Companies in the valley started bus services. The valley money drove property values up and displaced a large percentage of the city’s population. Then, tech companies figured that they could attract better talent if they set up offices in the city. Office values skyrocketed, and other businesses were pushed out.

In the background, were three other factors:

1. The Beatnik and Hippie experience happened in the context of the “War On Drugs,” which caused serious damage to people’s lives. So, there is an inherent resistance to laws, government, etc., doing anything relative to drugs 
2. When Reagan became governor of California, the state had a very good system of mental health hospitals. Reagan decided that they were too expensive and shut them down. Now, there is no good source of help for people with serious mental problems.
3. Successful Valley entrepreneurs became captives of the Libertarian philosophy.

Then, the pandemic hit. Everybody wanted social distancing. The techs fled the City.

What was left was all the problems the techs had created.

Then came fentanyl — which is really an international problem, manufactured in China and smuggled and retailed by cartels from South America.

San Francisco is in a bust cycle. But, it will come out of it into another boom cycle. Today, people are flocking to the for generative AI. Will that be the next boom cycle? What will the next boom cycle look like? It is still too early to say.

Sincerely,

Mark Cummings