Will the Tech Industry Ever Replace San Francisco?

It doesn’t take a rocket scientist to understand that San Francisco is a city in decline. Even before the start of the coronavirus crisis, San Francisco was plagued with unsustainable housing prices, rampant homelessness, and many other social ills. All of what was wrong with the city was only amplified and accelerated by COVID-19.

Tech companies that still call San Francisco home are starting to lose some of their workers to other locales. Those able to work remotely are doing just that. Moreover, they are not doing it in San Francisco. They are moving to other cities that offer better housing opportunities, better neighborhoods, and everything else workers are looking for.

This all leads to a particularly important question: will the tech industry ever replace San Francisco? It seems tech companies might be less willing to keep pouring money into the Bay Area if things do not change. As jobs move out, employers may move out as well. San Francisco could be a shell of its former self a year from now. Is there another city waiting to take its place?

Manual vs. Cognitive Labor

A professor at Northwestern University’s Kellogg School of Management wanted to know if San Francisco would ever be replaced. While her research did not result in a definitive ‘no’, it did provide clear evidence that any such replacement will not be at the hand of a small or mid-size city. The research boils down to manual versus cognitive labor.

Assistant professor Hyejin Youn looked at cities of various sizes and the predominant work done within their borders. What she discovered was fascinating. Apparently, urban environments do not begin to make the transition from manual labor to cognitive labor until the population reaches about 1.2 million.

She reasons that cognitive labor – like computer programming and data analytics – requires a larger set of collective brains. It thrived in San Francisco because the population was so large. The same goes for cities like Houston, Dallas, and Raleigh.

Youn looked at a number of small cities, including Carson City, Nevada, to assess their potential as a San Francisco replacement. Carson City’s population is too small according to her research. It is a great city, and one that people enjoy living in. But there are not enough people to get over that hump of transitioning from manual to cognitive labor.

Technology Requires Collaboration

Vivint Smart Home, a home automation and security company that operates in Carson City – and across the country as well – sees some validity in professor Youn’s research. They say that developing new technology requires a considerable amount of collaboration that is only possible when you have enough brains working on a single problem.

The more tech minded workers you have in a given area, the more brains there are to collaborate on new technologies. It stands to reason that cities with a high concentration of properly trained tech workers become hotbeds of innovation. That is where the tech money goes. That is where companies set up headquarters. It is where they open new manufacturing plants.

No Replacement Necessary

Knowing what we know about San Francisco and remote work, it may be that the tech industry abandons the Silicon Valley model altogether. Perhaps there is no need to replace San Francisco. Maybe it is better for individual companies to find a city that meets their needs without necessarily having to be in the company of other tech players.

Instead of a single Silicon Valley, we might be headed for smaller technology hubs scattered around the country. And if that ends up being the case, California’s influence over technological innovation could be nearing an end as well.

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