The Great Reshuffling

24 thoughts on “The Great Reshuffling”

  1. The fallout wrought by COVID-19 would be much easier to manage were it not for the extreme debt levels of corporations, governments and families resulting from the financialization of our economy. Even the cautious will have their savings mauled as the government further debases the currency to rescue the financiers from the profligate.

    1. Yep. Add in all the unrealistic promises that were made that no one plans to keep yet everyone still demands… Pensions, healthcare, stock returns, municipal bonds, infrastructure…

  2. Somehow I think you may have had something to do with this pleasant cascade of events for people and properties that you are familiar with. And it’s fun to see it happening. You’ve been waiting on all this for several years of blog posts.

  3. It’s still the most beautiful city in the US. You don’t walk around here, you float. What is astonishing is that the collapse of everything has been compressed into a few months.

  4. The current tech boom is a lot like the 19th century Gold Rush. A lot of people came to SF to make their fortune. A lot of them stayed, but a good number of them made their fortune, such as it was, and then moved on. It was like Joseph and his people in Egypt. They came to sojourn there, not to stay there.

    I have a relative who works for an SF based venture capital firm, and I’ve been following the tech business there since the 1970s. The VC exits now are rarely IPOs. The goal is generally to sell one’s small fish to one of the big fish. The product is less and less often aimed at the general public. That market is already well covered by the big fish. The target is more often other businesses, frequently startups. In other words, the business model has been growing decreasingly maintainable.

    The SF area is overdue for a reset, and the timing is about right. It will take a while for rents to go down and all that startup office space to find its new community. Can we imagine art/tech startups taking over loft like open offices and turning them into creative businesses and semi-legal living spaces? In a decade or two, they’ll be pushed out by a new generation of gentrifiers just like the artists in Soho an Tribeca.

    1. It is a lot harder to take a new small company public than it was back in the late ’90s during the dot.com era. The regulations are stiffer, and you can make a pretty fair argument that many of those small, unprofitable dot.coms were never likely to last, though great pots of IPO cash kept many of them afloat longer than they otherwise would have. By the early 2000s there were a number of busted dot.coms whose market value was less than the cash on their balance sheet. The government, in the interests of protecting the public from potentially lousy, or at least very high risk, investments effectively made them unavailable to the public. The only place to sell was to the big fish. This has the ironic side effect that the benefits of the handful of startups that are big successes will be limited to those who could already afford to take the risks.

  5. These were not San Francisco people.

    Seems like people from outside aren’t welcome. Well I’m sure they don’t care. The fact is that SF has become uninhabitable. The exodus is being sped up by Covid but it’s been going on for a couple years. Now that these tech companies know they aren’t welcome and their employees know they can work from home I expect SF to be a ghost town for occasional tourists. In the end you’ll get what you want “San Francisco people” and homeless. It’s too bad because it used to be such a great city but it’s not anymore and it’s not the fault of the people who moved there for work.

    1. My point isn’t that I want to exclude anyone. It’s more like… some people never really wanted to be in San Francisco in the first place. They were induced to come here temporarily for a job or a quick adventure, but they were going to boomerang out pretty soon anyway.

      Here’s an analogy. If I had to leave the city (say… in the aftermath of an earthquake) I might temporarily live in a Ramada Inn off the side of a suburban highway or throw myself on the mercy of friends or family at the end of a cul-de-sac somewhere. But I wouldn’t stay there for long if I had a choice.

    2. Upscale living in SF generally means a very nice condo or a nicely updated house that is over 80 years old, is probably not much more than 2,000 sq ft, a tandem 2 car garage, a very small yard, and cheek by jowel with the neighboring houses. There are few neighborhoods of detached homes or even mansions, but very, very expensive. My perception of Johnny’s comment was that the lifestyle those young guys wanted long term was simply not readily available in SF.

      1. When you and I were 22 with freshly printed diplomas in hand, we also had big ideas of what life would look like 5 or 10 years down the road. In my case I was off by a good bit.

        When I am feeling contemplative I take the time every year or so to ask myself “would I have imagined my life like this 5 years ago”?

        Over the years, the answer has been “yes” only a few times, but has been yes more often in my later years.

        Perspectives, desires, wishes…all change with time. Those kids might not have been San Francisco people at one moment. I wasn’t a Hoosier, and didn’t want to be a suburbanite, but 40 years on, that’s where I am.

  6. There’s a shortage of walkable cities in the U.S., so there’s always built-in demand, even if tech bros go home to daddy. Ultimately though, crime, violence and social unrest will chip away at that inherent demand, one boarded shop at a time, and destroy the raison d’etre of urban living. A whole new generation of feckless politicians in Seattle, Chicago and NYC are re-learning this lesson the hard way. The 2020s are rhyming with the 1970s.

    San Francisco is something of an outlier here. Relentless gentrification has pushed out good people, but also certain troublemakers (professional activists and hardened criminals) to the nether reaches of the East Bay and beyond. The relative lack of rioting/looting, along with a chronic homeless problem, is evidence of a huge reshuffle that’s already happened.

    In the meantime, the no nonsense mayor has resisted the ACAB narrative, even saying that she’ll “throw some grits” on agitators. Sometimes you need a Black woman to do a man’s job 🙂 She’s got baggage for sure, but I hope residents have the sense to re-elect her and more like her. That DA though…

    This new Great Depression will fix San Francisco’s affordable housing problem, which will certainly help the homeless crisis as well. If all these stars align, San Francisco in the 2020s could be a haven from the worst ravages of this Fourth Turning, which isn’t a prediction you’ll hear on Zero Hedge!

    1. San Francisco will endure in the same way Venice has over the centuries. Decline and rebirth will play out in long slow cycles in between the earthquakes… until the sea eventually swallows it up

      Many people loved NYC and similar places in the 1970s when they were at rock bottom. (Although this narrative is also false since the era of squalid diseased tenement slums of the 1800s was far worse.) The crime and blight of the 70s were the primary “amenities” because they created space for the self selecting population of folks who needed cheap rent and a loosely regulated environment.

      Looking forward there will be many aging suburban landscapes that no longer have a reason to exist and become depressed repositories of the “undeserving poor.” Some of these might become the next havens for bohemian experimentation. If I found my tribe living in the remains of old Jiffy Lubes and dead Burger Kings I might be willing to join them…

  7. Unfortunately individuals have very short memories . This has all happened before and will continue. During the 1970s many from the Northeast moved south to avoid cold, taxes and general cost of living, now its mass miragition at full speed. Similar to Upper Midwest exodus , but many cities, not being ports may not recover. An area , except port cities, generally must have enough local resources to maintain a population or that situation has a limited lifespan directly related to the amount of resources. New terminology, initalism, expensive ( student loan) degrees ,etc are all temporary bridges that may or may not lead to newer innovations. The test of a persons duration of residency can also be determined by the number of family and aquaintances that also relocate to an area. Fresh out of college buddies do sometimes stay but it doesnt have the permanence that Multigenerational moves do.

  8. Scene: trendy bar in San Francisco

    First tech guy: I was thinking I’d buy a five-bedroom ranch with a movie theater in the basement.
    Second tech guy: Yeah! Just make sure to leave room in the driveway for your new Yukon!
    Johnny: What I think you’re failing to consider is that those purchases, made on credit, increase your exposure to an increasingly precarious and fragile financial system in addition to leaving you entirely at the mercy of complex systems of energy delivery that may not always function as they do today.
    Tech guys, with their mouths wide open: Uhhhh…

    At least, that’s how I’d like to think it happened. Haha.

  9. The amount of funny money pouring into the economy since 2008 has obscured what the “real” value of anything is. Governments enacted policies to prop up housing prices & markets, and so we’ve ended up with a bunch of price points that don’t reflect people’s economic realities. Bad economic choices have been obscured by policies rescuing people from their own folly, putting the cost on everyone else — especially galling to those of us who live within our means.

    We’ll do almost anything to avoid the harsh correction that a rational market requires. The fantasy those young tech workers entertain is rooted in a series of disastrous delusions, in which their “achievement” of outsized rewards is built on the exploitation of lower-wage workers and the destruction of a livable planet.
    
The speculative hot air pumped into housing needs to rush out, so that prices can reflect what people can actually pay. This would cause huge turmoil and suffering, but isn’t this required to avoid the moral hazard of propping up unrealistic valuations?

    Another dream that deserves to die quickly is that it’s normal to live in gigantic homes (5 bedrooms, 3 car garage!) sited far away from jobs & services. The American model of endless driving to support isolated suburban living is an ecological & economic death sentence.

    1. “The speculative hot air pumped into housing needs to rush out, so that prices can reflect what people can actually pay.”

      The existing situation represents a generational transfer that older generations — the current home owners — want to maintain. Based on the future those generations have created, most of those born later — aside from a few tech bros in SF and hedgies in NYC — are much poorer. And are the victim of public policies that will make them poorer in taxes paid and public services and benefits received too.

      An asset price collapse would work the advantage of ordinary people in later-born generations, and those who have sat out the bubble and are awaiting the crash. It would allow them to take something back from Generation Greed. That’s why the government is so keen to avoid it.

      1. I always find titles like “Generation Greed” hypocritical. Who wouldn’t want to maintain their current lifestyle when they spent most of their life working for it? There’s very little respect coming from either end of the “generation” titles–and that wouldn’t change even if the older folks simply turned around and gave a ton to the younger ones (who tend to think no further than “I deserve it, but they’ve got it!”).

        The situation is what it is. As has been pointed out many times here, everyone is trying to work the system to their advantage. Eventually it collapses from the endless abuse and has to reset. Until then, human nature will pretty much drive what exists. There’s more bad in that than good (I think), but that doesn’t come from one “generation”–it comes from everyone. It is what it is.

  10. Can we discuss this:

    These were not San Francisco people. They might drift in for a while, build up their careers, and make some easy money. But they were never going to remain for long. They were always destined for a suburban life elsewhere.

    So?

    “These were not San Francisco people” seems not far from “not one of us”. These guys did have some interest in working for San Francisco companies else they wouldn’t have even been there.

    Maybe I’m misreading, and the charitable interpretation is that you’re offering a clear-eyed reading and judgement of a situation without added implications. Maybe you meant “these were not big city people” since you juxtaposed it with their probable eventual suburban destination?

    Even still, you can be “city” and “suburban” at different times in the same life. I’ve been about half of each so far. I’m not big on disdaining either environment or the people who choose them, as both have advantages as well as disadvantages.

    1. My point is not an “Us vs Them” argument. I’ve compared and contrasted retirement villages with college campuses. They serve the same exact people at different stages of life. Some people spend their entire lives in suburbia with maybe a five year stop over in the city in their twenties. Fine by me. But Covid has quickly sorted folks out.

  11. The general panic that accompanies such a reshuffle is interesting. A cool head in such times, coupled with a spirit of contentment, will go far…if “going” is your desire.

  12. Right.

    There are some people who may remain reluctant to live in cities because they see them as more dangerous. But if 9/11, which just hit New York, didn’t make that a general belief, it is hard to see how COVID-19, now spreading in rural America, will.

    Those priced out in the past 20 years have probably had it, and thus will not return. But when the pandemic ends and employment starts to grow again, albeit from a lower level, others will move in. Today’s problem is the solution to yesterday’s problem, and it’s a long way down in price for yesterday’s problem to go away.

    One question is whether the affordability of New York and San Francisco will have a negative effect on people’s willingness to live in other, less “superstar” cities? “People moving from Brooklyn to Philadelphia due to affordability” has been a thing in every housing bubble since the 1980s.

    It goes away in a bust.

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