RIP San Francisco

Hey everybody, I'm John Coogan and today I want to talk about San Francisco, specifically whether or not it's still a good idea to move there if you're planning on building a tech startup. There's been a lot of news lately about prominent tech figures leaving San Francisco for other parts of the United States. Keith Rayboy, a VC at Founders Fund, recently told Fortune that he was moving to Miami. And Joe Lonsdale wrote an op ed in the Wall Street Journal about relocating his entire VC firm to Austin, Texas. But both Keith and Joe are billionaires or close to it. So should you follow their lead if you're just an entrepreneur who's a little less established? Let's dig into the question a bit more to find out. The pandemic has accelerated many trends, but the massive shift to remote work could have the most profound long term impact of all. More than 50% of San Francisco residents say that they would consider moving to a different city if they could work remotely indefinitely. Even though that figure seems incredibly high. 40% of Bay Area residents said that they wanted to leave in 2017. So it's not just the pandemic that's sparking interest in other cities. And it didn't take a pandemic to spur other tech leaders to leave San Francisco. Peter Thiel moved to LA in 2018, citing tech's ideological echo chamber as a key reason for the decision. Tim Ferriss moved to Austin, Texas for similar reasons. He put it really well in this 2017 interview with CNN.

If you're looking for intellectual stimulation and high powered ambition, it is certainly in the world of tech, it's the place it still is. But having no real professional need to be there, I was getting fatigued by what I perceive to be a suffocating smugness that is very prevalent in Silicon Valley. But furthermore, within the mono conversation and.

Echo chamber of tech, cultural issues are often cited by wealthy individuals when they decide to leave San Francisco. But the high cost of living is much more important for young residents who decide to leave. The average rent in San Francisco for a one bedroom apartment is approximately $3,500 per month and the SF case Shiller Home Price Index is at an all time high. It's expensive to live in sf. The reason for this is fairly straightforward. San Francisco has restricted the development of new housing for decades, so as demand for housing has grown with the booming technology industry, supply hasn't kept pace leading to higher equilibrium prices. One of the most important metrics used to diagnose a housing crisis is the number of New houses being built per thousand residents. Since human populations are growing globally, nationally and at the city level, it's important that cities approve new housing if they want to keep the cost of housing steady. Tokyo has been lauded for staving off a housing crisis under immense pressure. By lifting restrictions on both the height and the density of buildings, they've been able to build over 10 new houses per 1,000 people annually. New York has roughly half that amount of development with six new houses per 1,000 people. And housing prices have been outpacing inflation for years there. San Francisco is shockingly far behind, producing just under three new houses per thousand residents. Regardless of your political leanings, this is clearly a massive failure if you're optimizing for the growth of your city. I have first hand experience dealing with the insane San Francisco housing market as an entrepreneur. In 2013, my company Soylent was just getting off the ground and we were on the cusp of having a few hundred thousand dollars in funding. We had five people working on the project full time, three in San Francisco and two in la. And we really wanted to get everyone in the same office while keeping our burn rate low. Living together in one large house would obviate the need to pay for five different apartments along with a separate office space. So we set out to find a five or six bedroom house where we could both work and live. Options in San Francisco were nearly twice as expensive as options in Los Angeles, and there were far fewer listings. It also helped that none of us had family ties to San Francisco, which can be a big factor in where to live. With a little bit more time spent searching real estate listings and perhaps some additional fundraising, we probably could have made SF work for our company. But I think deep down we didn't want to make SF work. What drew each of us to Silicon Valley was the idea of being part of a counterculture. We idolized founders who eschewed the traditional corporate path and instead struck out on their own. But in San Francisco, everyone is an entrepreneur, everyone is working for a startup, everyone is part of the counterculture. While it's amazing to move to a new city and immediately be able to find tons of like minded individuals, being in a city with such a narrow focus on technology can be stifling. I think Peter Thiel, who moved from SF to LA in 2018, articulated this point really well.

I think it is a more diversified economy. So it's not dominated by just one industry. You have the entertainment industry, but you also have finance, you have tech, you have sort of a well diversified economic base. And I think it has much less of this sense of everyone being on top of one another, thinking the same way in one place. You know, it's a very spread out city, which in many ways is a bad thing. But from a traffic point of view, things like that. But I think it makes it much less ideologically homogenous.

I think having a well diversified economic base is important for any city that wants to thrive long term. But more importantly, it just makes for a more enjoyable daily life. Instead of only meeting people in technology, your friends will work across a wide range of industries. This can wind up ultimately supporting the development of new tech companies. New York City has leveraged its Wall street culture to develop a new wave of fintech companies. And Los Angeles has leveraged its entertainment routes to create many influencer driven direct to consumer companies. The fact that San Francisco has a monoculture doesn't necessarily mean that you should avoid living there. I loved the time that I spent in the city and don't see any reason why you should only live in places you plan to stay in permanently. San Francisco can be an incredibly exciting place to begin your entrepreneurial career. Spending even a few months there will help you build a massive network and learn how the tech industry really operates. People like Peter Thiel and Tim Ferriss have already developed huge networks. They don't need to be physically close to any particular network anymore. But if you're just starting out, your decision may be completely different. The pandemic has vastly devalued the physical proximity that San Franciscans pay so much for. So it makes sense that thousands are leaving each month. What good is that $3,500 apartment if there aren't going to be any networking events within walking distance? I'm of two minds when it comes to this relocation trend. On the one hand, I think distributing innovative companies and entrepreneurs across the country could be good for America overall. I also think that some rural regions of America are underutilized and could provide amazing living standards for people who enjoy remote work. On the other hand, I do think that it's a tragedy that we have allowed our cities to stagnate so severely. In Marc Andreessen's essay, It's Time to Build, he says that when the producers of HBO's Westworld wanted to portray the American city of the future, they didn't film in Seattle or Los Angeles or Austin. They went to Singapore. We should have gleaming skyscrapers and spectacular living environments in all of our best cities at levels way beyond what we have now. Where are they? It's tragic for a city with as much potential as San Francisco to stagnate. Despite rapid economic growth, the population of San Francisco has actually declined for the last two years. At the same time, the very fact that people are starting to leave San Francisco where will make it more competitive. If enough people leave, demand for housing will fall and eventually the cost of living will fall in line with other American cities. So if you're thinking about moving to San Francisco, you should probably think about what's best for you personally, not what's best for billionaires. Is your specific vertical booming in sf. Can you either afford the high rents or deal with long commutes and smaller living spaces? And are you sick of talking about tech or or are you just getting started and want to immerse yourself completely? San Francisco isn't perfect for everyone, but for certain people living there will accelerate their careers more significantly than anywhere else. So I think it can still make sense to move to SF in 2020. But what do you think? Let me know in the comments. If you've lived in SF and what your experience was like, and if you enjoyed the video, please consider subscribing to the channel. Thanks for watching.