As San Franciscans depart in droves, many are claiming SF is “over.” It’s true that what drew people to SF in the first place is less alluring in COVID times. It’s harder to justify the sky-high rents when you can’t take full advantage of our world-class food and cocktail scene, and you don’t have to commute to work. So many people are leaving SF that rents are precipitously declining.
But reports of SF’s death have been greatly exaggerated. While coronavirus might be a once-in-a-lifetime crisis (hopefully!), SF has seen more than one mass exodus since its early days as a port town. Here are three reasons widespread work from home won’t spell the end of SF as a cultural and economic powerhouse.
“More living space” was one of the most popular answers for why people are leaving SF. It’s undoubtedly true that your money will buy more space in pretty much any other city in the US. What people may not realize until later is that more living space doesn’t make the average person any happier.
The research here is clear. For example, if more space led to more happiness we’d expect to see housing satisfaction go up since the 1970’s. Between then and now, the average American house has doubled in size. Yet it has stayed about the same.
Why? Because more living space doesn’t make you happier. Instead, a big house or apartment is a status symbol. It’s an endless game of keeping up with the Joneses. People are only happier living in a bigger house if it’s bigger than their neighbor’s. The comparison effect is so strong that most people would choose to live in a smaller house, as long as it’s bigger than their neighbor’s.
Living space is a classic hedonic treadmill. In one survey, people who bought a bigger home initially saw their housing satisfaction increase by 1.2 points on a seven-point scale. Three years later, their housing satisfaction dropped 30% because their idea of what a “big house” means had adjusted to the new normal.
The only real link you can find between housing size and happiness in the literature is that people don’t like feeling cramped. But that feeling is subjective, and likely has more to do with status and expectations than actual square footage.
It’s also interesting to consider that the average home in Europe is much smaller than in the US. Yet Europeans are much happier than Americans on average.
While large living quarters won’t make you any happier, they can make you less happy. “The big house represents the atomizing of the American family,” landscape development historian John Stilgoe told NPR. “Each person not only has his or her own television—each person has his or her own bathroom. The family members rarely have to interact.”
The happiness literature indicates gratitude, close connection, meaning, and experiences make people happy. Big homes do not.
SF has tons to offer in terms of close connection and experiences.
When it comes to where to live, there’s a lot to consider. Living space should be low on the list if you want to maximize happiness.
I’d argue the people around you should be the most important consideration in deciding where to live. There are two reasons for this. First, when it comes to happiness, meaning, and achieving your goals, the literature is pretty clear that relationships are everything.
While it’s true that relationships have gone global, in-person time is still really important.
“You’re the average of the five people you spend most of your time with,” Motivational Speaker Jim Rohn is quoted as saying. Notice that he didn’t say the five people you’re closest to emotionally. It’s a well-studied quirk of human behavior that we tend to emulate the people around us. The effect is so strong that if a friend of your friend, who you’ve never met, gains a lot of weight, you are also more likely to gain weight.
The people who live in SF are special. Here’s how Writer Diana Helmuth described us:
On a daily basis, I get to work with freakishly brave, casually brilliant minds, curated and imported not just from across the United States, but from India, China, Canada, Britain, New Zealand, and South America. I am also proud to be part of a liberal community that is trying to be a safe zone for people who would otherwise be persecuted in other parts of the country or the world.
Of course you can find amazing people everywhere. But for tech workers especially, SF is still (and will likely continue to be) a place like no other.
SF not only boasts the highest concentration of tech talent in the US, but the most unicorns and VC firms as well. “In San Francisco, everyone works in tech or venture,” Crunchbase News Savannah Dowling wrote. “All your neighbors are entrepreneurs and investment people,” YouTube influencer Silicon Valley Girl said of living in the East Cut.
Living near job opportunities was obviously important when telework was difficult. Experts have long predicted the “death of distance” and diaspora away from expensive cities as tech made it easier to work from anywhere.
Yet, curiously, as telework became easier and more common, the opposite happened.
Since the 1970s, but accelerating starting after the 2008 Recession, “The biggest places with the richest exchanges of ideas among highly educated workers have enjoyed the greatest economic returns,” Brookings scholars write.
This is due to a phenomenon called “agglomeration.” Cities with a lot of talent tend to attract more talent, resulting in exponential innovation and economic growth. Not only is talent more highly concentrated in SF than in any other US city, but that concentration enables talented people to achieve more here than they could anywhere else.
The difference is quantifiable. In one study, companies outside California, New York, and Boston raised funds 10% more slowly, were less likely to get acquired, and were acquired for less than companies located in tech hubs.
Pandemic has forced employers to recognize the many benefits of remote work. Less than 10% of workers worked fully remote before pandemic. Today, just under half of all US workers, and most knowledge workers, work from home full-time.
Just as telework-enabling tech didn’t devalue cities, widespread WFH won’t either. Researchers at the Brookings Institute expect large, dense cities to further entrench their advantage in the 21st century knowledge economy. They point to the fact that SF tech companies have uniquely benefited from coronavirus.
Many tech workers have left now that they can work from anywhere. But the so-called “tech exodus” is overblown. First, many tech workers say they plan to return to SF at some point. Second, a large portion of the people who are leaving SF aren’t tech workers and therefore won’t impact agglomeration effects.
In her goodbye SF video, Former Product Manager and Software Engineer Luba correctly pointed out that you don’t need to be physically located in SF to close deals anymore. Clockwise CEO Matt Martin closed our Series B (link paywalled) over Zoom. But both did so with people they got to know in-person before lockdown. In her own goodbye video, Silicon Valley Girl admitted, “Most of my investor friends say they’re going to invest in people who they have met before.” Networking over distance is difficult. It’s still harder to establish trust and convince people to take action over text or video compared to in-person interactions.
San Francisco is facing some major challenges, including an ongoing and worsening housing and homelessness crisis, decreasing tax revenue, and major employers leaving the city. None of these problems are technical in nature. Nor are they intractable. They’re the predictable results of decades of poor policy decisions. Ideally, our leadership will use this opportunity to test new policies, like by-right permitting, streamlined bureaucracy, and a fairer tax code.
Despite our incompetent elected leadership, a global pandemic, and an economic recession, it’s way too soon to count us out. SF has weathered worse and still come out ahead. The main thing other cities have to offer is space, which doesn’t matter. Meanwhile the economy will continue to disproportionately reward dense, talent-rich cities like SF. To all the ambitious, talented, hungry people out there I say, come West! Rents are down, and we have so many rent-controlled units. So don’t count SF out yet. We’re only going up from here.