This is a story about the triumph of the City—not “the city” that Ed Glaeser has written about in sweeping global and historic terms—but the triumph of a particular city: San Francisco.
For decades, the San Francisco Bay Area’s economy has been a microcosm and a hot house for studying the interplay between innovation, economic prosperity, urban form and social impacts. It gave us the quintessential model of technological geography, Silicon Valley. And today, it’s showing us how that geography is changing—and shifting towards cities.
As a graduate student at the University of California, Berkeley, more than three decades ago, one of the first things I learned about living in Bay Area was that the large city between us and the Pacific Ocean was not “San Fran” nor “SF,” and especially not “Frisco.” San Francisco was simply “the City.”
In the late ’70s and early ’80s, San Francisco was the queen of her little geographic universe, the center of arts, culture, and commerce in Northern California. That was heyday of San Francisco Chronicle columnist Herb Caen, the martyred Harvey Milk, and George Moscone in City Hall. In the wake of Prop. 13, California’s voter-adopted property tax limitation measure, there was a lot of political unrest that led to, among other things, rent control in the City.
Down Highway 101, there was Silicon Valley—or, to those in the Bay Area, simply “the Valley.” Santa Clara County, on the peninsula south of San Francisco, was long regarded as an agricultural hinterland—much as the Central Valley or Salinas are thought of today. The Stanford University campus, the South Bay’s major intellectual center, was (and still is) nicknamed “the Farm”; the area was historically famous for its fruit orchards. But all that changed. San Jose and its surrounding communities grew steadily in the 1960s, 1970s, and 1980s to become the economic hotbed of the region. The personal computer was essentially invented in Silicon Valley garages. Hewlett-Packard, Intel, and Apple all got their start in The Valley. Cities and states across the nation and the world set about trying to replicate what they perceived to be the elements of Silicon Valley’s success: research universities, science parks, technology transfer offices, entrepreneurship programs, and venture capital investment. But no matter how many emulators emerged, Silicon Valley remained the dominant epicenter of new technology firms in the U.S.
As the Valley grew, the City seemed quaint and dowdy by comparison. In the 1990s, it lost some of its corporate crown jewels, as Bank of America decamped its headquarters to—shudder—North Carolina. Sure, the City had its counter-cultural cred with the Jefferson Airplane and, later, Dead Kennedys and others, but the Valley was where the work got done.
The technology wave, particularly the personal computer and the Internet, seemed to bypass San Francisco of the big new firms, the Ciscos, the Oracles, the Googles, got their start in Silicon Valley and grew there. Measured by gross domestic product per capita, San Jose blew by San Francisco in the 1990s, and never looked back. It was, as Joel Kotkin famously argued, the victory of the suburban nerdistans. Engineers and businesspeople wanted to live split-level houses on large lots in suburbs and drive, alone, to work each day. While Kotkin admitted that some creative types might gravitate toward Richard Florida’s boho cities, he pushed that most job growth would be in sensible suburbs:
“Today’s most rapidly expanding economic regions remain those that reflect the values and cultural preferences of the nerdish culture — as epitomized by the technology-dominated, culturally undernourished environs of Silicon Valley. In the coming decade, we are likely to see the continued migration of traditional high-tech firms to new nerdistans in places like Orange County, Calif., north Dallas, Northern Virginia, Raleigh-Durham and around Redmond, Wash., home base for Microsoft.”
But for the past decade or so, and most notably since the end of the Great Recession, a funny thing has happened. Tech has been growing faster in the City than in the Valley. Lots of new firms working on new Internet technology plays—the Ubers, the AirBnBs, the SalesForces—started up in San Francisco and grew there. At the same time, more and more young tech workers, not unlike the young workers nationally, had a growing preference for urban living. The City is a lot more urbane than the Valley. As Richard Florida has chronicled, venture capital investment, perhaps the best leading indicator of future technology growth, has shifted from the suburbs to the cities—nowhere more strikingly than in the San Francisco Bay Area.
And so, to accommodate the needs and desires of their most precious input—the human capital of their workers—Silicon Valley companies started running their own subsidized, point-to-point transit services. The “Google buses” pick up workers in high-demand neighborhoods in San Francisco and ferry them, in air-conditioned, wifi-enabled comfort, to prosaic suburban office campuses 30 or 40 miles south. These buses became the flashpoint for protests about the changing demographics and economic wave sweeping over the city, as Kim-Mai Cutler explained in her epic TechCrunch essay, “How Burrowing Owls Led to Vomiting Anarchists.” In the past 12 years, the number of workers commuting from San Francisco to jobs in Santa Clara County has increased by 50 percent, according to data from the Census Bureau’s Local Employment and Housing Dynamics data series.
Those trends came to their logical culmination this week. The San Francisco Business Times reported that Facebook, now headquartered in the Valley’s Menlo Park, is exploring the construction of a major office complex in San Francisco. According to the Times’ reporting, the company’s decision is driven by the growing desire of its workers to live in urban environments. Additionally, Facebook has faced competition and poaching for talent from San Francisco-based companies, including Uber.
Facebook’s interest in a San Francisco office is just one harbinger of the northward movement of the tech industry. Apple, which has famously insisted that its employees work in its campus in Cupertino, has recently leased office space in San Francisco’s SoMa neighborhood. Google now has an estimated 2,500 employees in San Francisco, and has purchased and leased property in the city’s financial district.
The miserable commute to Silicon Valley from San Francisco means that busy tech workers find it more desirable to work closer to where they live. Paradoxically, as Kim-Mai Cutler warned, the protests and obstacles to Google and other tech buses are prompting tech companies to expand their operations in The City, which brings in even more tech workers to bid up the price of housing there. As she tweeted on July 25:
As we’ve chronicled at City Observatory, jobs are moving back into city centers around the country, reversing a decades-long trend of employment decentralization. Companies as diverse as McDonalds, which is relocating from suburban Oak Brook to downtown Chicago, and GE, which will move from a suburban Connecticut campus to downtown Boston, all cite the strong desire to access talented workers. Those workers are are increasingly choosing to live in cities. While we view the resurgence of city center economies as a positive development, it also poses important challenges, especially concerning housing supply and affordability. For economic and equity reasons, it is critical that we tackle the nation’s growing shortage of cities.
Our apologies to Ed Glaeser for borrowing the title of his excellent book, The Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier, for this commentary. We’re deeply indebted to Dr. Glaeser for outlining many of the forces at work in America’s cities, including agglomeration economies and the theory of the consumer city. These are chief among the explanations for the recent triumph of San Francisco over Silicon Valley.