There have been a few comments on my recent WIRED piece about the SF caste system that warrant a response. They’re good observations, and I wish I could have addressed them in a 1000-word piece
Will do so now.
Those observations mostly boil down to: the owner/professional/service/outsider hierarchy exists in all cities, and SF is no different. What’s special about it?
While that’s true to a point, I think SF is fundamentally different in key ways that make it particularly interesting.
Why SF is a unique Petri dish of growing US inequality:
1. The technology ouroboros
2. Radically different returns to technology and capital
3. SF’s (relative) economic homogeneity
I'll address each in turn.
1: SF is uniquely hostile among its various tiers. Those in the Inner/Outer Party are very explicitly working to eliminate every job the Service class might have, which isn't true in most developed urban economies.
When an Uber engineer takes an Uber back from work, they have spent their day working to eliminate the other human in the car from the equation. Their financial well-being (and valuations are steep functions of margins, public perception, etc.) depend on replacing the driver.
Contrast that with me as a young, hopeless i-banker, ordering a delivery dinner or taking a black car home. While part of what we did might negatively affect the average American via finance shenanigans, we weren't trying to literally code the service people out of a job.
That's actually the main activity of much of the SF Outer Party.
Not that the Outer Party is itself safe. AWS put lots of server wranglers out of a job. TensorFlow could do the same for ML engineers. The Party will also eat itself, and automation will be partially automated.
Again, contrast this with a more mainstream city like Boston or Chicago: the partner in the law firm isn’t somehow conspiring to put the associate out of a job forever, nor are they concerned with removing their UPS guy or restaurant worker from the economic picture.
Put another way, while the threat of automation will have economic repercussions everywhere, in SF it’s happening in particularly sharp (to not say anthropophagic) relief. And because it’s software-driven automation, it’s happening very, very quickly.
Point 2: Crazy returns to technology.
Consider Facebook. It has a market value of over half a trillion dollars, and it employs something like 20k people. To put that in perspective, that’s about 1/40th of the US GDP (as a reference point).
That’s unreal. By contrast, GM has about a tenth the market cap, with 10x as many employees, a full two orders of magnitude difference in productivity (and FB has existed for not much more than 10 years, while GM is a national institution).
This means that even if shareholders and VCs keep the lion’s share of returns (which they do), employees are being paid serious cash. The most expensive real estate markets in the US, are in the SFBA. Forget NY and Boston: they’re not even keeping pace with Seattle (AKA, SF II).
Point 3: In the SFBA, there’s no game in town other than tech. Most cities have some diversified portfolio of industries that keep the tills and taxmen happy. But not in SF. You’re either a coder, a hustler, a VC, or someone servicing those three. Everything else is commentary.
Those three forces together: the cannibalistic relation among tiers, crazy returns to capital, and industry homogeneity, make SF a unique testbed for the forces that will assail the global economy soon.
Sure, those forces will impact the entire economy, everywhere. But one can imagine the lawyers and doctors and accountants and salesmen of Boston and Chicago doing their business for decades to come, with no end in sight (though with inequality worsening along the way).
In SF, we’ll reach the omega point of automation taking almost all repetitively cognitive or manual tasks in the next decade or so, with the least talented or essential of the Outer Party the next on the chopping block.
Imagine that: a San Francisco teeming with self-driving cars, delivery robots, and buzzing drones, and almost nobody human except Party members, a smattering of service people, and the odd outcast. That’s easy to envision in SF; bit harder in New York. That’s why SF is different.
An important piece; Glad you tackled this topic. What really got my attention with your reporting on SF is how poorly education is being handled in such a progressive place. A close friend who went to USC & lived in Berkley often talks of the education-income disconnect.
Every Uber driver I talked to in SF does not live in SF. Typically they drive down from Sacramento or East Bay. There are few SF Uber drivers that live in SF. Uber has already replaced the bulk of them. It is already a more bifurcated caste system.
Very interesting and highly useful for my own research (a book for a french publisher).
By any chance, would you be available for a small talk this afternoon ? Is your boat sailing close to Palo Alto or the surrounding area ?
If not, let's Skype or something ?
DM ;-) ?