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The Care and Feeding of a Tech Boom

This time the tech explosion doesn't have to end in tears. How one industry's growth can benefit us all.*
 

 *And not just the kids with Google Glass.

Further reading: "The Case Against the Perma-Boom" by Paul Carr

 

By the time I catch up with Austen Allred this summer, he's already an expert in voluntary homelessness. At age 23, he self-identifies with three tribes: “Minimalist. Nomad. Entrepreneur.” runs the bio line on his blog. A Mormon reared in Provo, Utah, he spent two years on a mission in eastern Ukraine and couchsurfed for a while in China before realizing what he wanted to do with the rest of his life: Yes, he had an idea for an Internet company.

As dreams go these days, Allred’s isn’t unusual. Over the last half decade, launching a startup has become as commonplace an aspiration among middle-class millennials as forming a rock band was for their parents. Allred’s idea— hatched with Garrett Thornburg, a pal he met in Ukraine—would make social media sites less susceptible to rumor and half-truths during moments of breaking news such as the Boston Marathon bombing or the Asiana Airlines crash. In April, Allred and Thornburg showed a version of their site, called Grasswire, to Hacker News, a startup-focused discussion board. The crowd loved it, and the partners decided to pursue the company full-time.

There was just one problem: Allred was in Provo attending Brigham Young University. In theory, he could have started Grasswire from there, or from anywhere else. One of the great promises of the Internet, after all, is liberation from the petty constraints of geography. But in practice, that would have been absurd—Allred had to move to the Bay Area.

In the depressing aftermath of the dot-bomb years, many assumed that the region’s reign as the world’s innovation epicenter was coming to a close. But rather than watching its influence diminish as the Internet and its many-fingered inventions spanned the globe, San Francisco and the 1,700 square miles of suburbs to its south have been transformed anew into the red-hot center of the information economy. “I wouldn’t have moved to Austin or Cambridge to become an entrepreneur,” Allred tells me one afternoon on the phone from Utah, where he’s preparing for his upcoming wedding. “Only the Bay Area offers a big enough differential advantage that…well, you have to do anything to get there.”

Anything, for Allred, means living in his car. When he researched local housing last spring, looking both in the city and on the Peninsula, he found that he would have to spend at least $800 a month for a small room in a house with strangers. By living in his 2002 Honda Civic EX Coupe instead, he could bring his monthly burn rate down to less than $300.

Allred arrived here in May and quickly figured out a routine. He’d start his day with a shower at the YMCA in Mountain View. By 7 a.m., he would be at the Hacker Dojo, a tech coworking space nearby that’s home to a passel of startup entrepreneurs looking to make it big. He would spend all day there, building the site, networking, collaborating on ways to market his idea, and getting leads on financing. Then, after a dinner of canned food, he’d drive to a quiet suburban street or church parking lot, lay out his air mattress on the Civic’s folded-down backseat, and go to sleep—his feet in the trunk, his head in the cab.

Allred lived that way for three months—and he wasn’t alone. “There’s a decent-size nomadic community that makes camp at the Hacker Dojo,” he says. “In the places that I would go to sleep, there were lots of vans that had been set up for permanent living.”
 

What is it about the Bay Area’s tech scene that drives young people like Allred to endure such conditions in order to make it here? And should we celebrate their influx, or deplore it? The region’s tech economy is once again at full throttle, and we are, as ever, growing wary of our good fortune. A surge in rental prices (up 9.3 percent in San Francisco and 6.9 percent in the larger Bay Area in the past year, according to Zillow) and home prices (up 18.8 percent across the Bay Area) has raised the specter of a metropolis populated solely by the wealthy. How long before we’re all forced to consult the Quora thread on tips for sleeping in our Hondas?

That growing worry over where we’ll live—over affordability and gentrification— reflects a deeper anxiety about how we’ll live. A year ago, in one of this magazine’s most discussed stories, Salon founder David Talbot suggested that the bulging tech sector was threatening to swallow the city whole and turn San Francisco into a “one-dimensional company town.” Talbot, echoing fears held by longtime residents, argued that the boom would alter, and very likely ruin, the peculiar cocktail of innovation, idealism, activism, civic responsibility, and pride that makes San Francisco such a beguiling place. His essay’s headline cut to the heart of the worry: “How much tech can one city take?”

Here’s one answer: As much as we can get. Where the agonists—and, for that matter, the cheerleaders—get it wrong is in characterizing this moment as a boom. The very word connotes unsustainability, a what-comes-up-must-go-down foreshadowing of trouble. It carries the threat of immediate displacement, the forced exodus of an entire class of people who lacked the foresight to pursue a computer science degree. Then, too, it’s associated with an undercurrent of suspicion: The techies are taking us for a ride. San Francisco has been a boomtown from the beginning, and we all know how that movie ends. Big, too-good-to-be-true booms are inevitably followed by bigger, too-sad-to endure busts.

Some might see an influx of young Honda-squatting entrepreneurs as evidence of an irrational exuberance that is sure to come crashing down. But what if they’re wrong? What if it’s different this time? As a tech journalist in constant contact with industry executives, founders, investors, and engineers, I’ve been struck lately by how giddy the techies have become—how often they seem to pause in slack-jawed awe at their industry’s potential to reshape our lives over the next decade. To many in the business, the idea that our latest local economic revival might be a mere short-term spike is absurd, a gross misunderstanding of the forces that the industry is unleashing across the world economy. To be sure, hype is the mother’s milk of innovation, and many of these people are professional smoke blowers. And yet I believe them.

Study the roots of our new tech economy, and you’ll find that it differs in important ways from the Internet bubble of the ’90s. That blip was fed by the promise of future billions that we were certain to realize from the web economy. Today’s tech industry, on the other hand, feeds off of three megatrends that are already minting billions by revolutionizing every sector of the global economy, including healthcare, manufacturing, energy, media, and advertising. The first of these trends is the transition from hulking desktop PCs to ubiquitous mobile devices that allow tech firms—most notably Bay Area behemoths Apple, Google, and Facebook—to address their customers’ desires at a proximity never before achievable. The second is the rising urge to incorporate software into every corner of our lives: from booking restaurants (OpenTable), to hailing cabs (Uber), to searching for jobs (LinkedIn), to adjusting our home heating and cooling systems (Nest), to paying for everything (Square, PayPal), to finding a room anywhere in the world (Airbnb). Third is our full-throated embrace of personalized services—from algorithmically determined TV programming (YouTube, Netflix) to geographically targeted advertising (Google, Facebook, Twitter)—that are fueled by ever-larger storehouses of data collected through our mobile gadgets. And all of these forces amplify one another. More mobile devices make for more personal data, which allow for better personalized software that we use more often, which in turn makes mobile devices more attractive—and on and on in a gilded upward spiral.

Page two: The Bay Area is the perfect hothouse for innovation.