The bubble is back - Page 2

City policies are encouraging a new tech boom — but have we learned any lessons from the last one?


But CEO Mikkel Svane told us the tax break wasn't a big factor in choosing this location. He knew they wanted to be in San Francisco and he just liked the space. "The people here want to be a part of a dynamic culture and not on a big campus in Silicon Valley," he said. "For a technology company, being here where everything is happening is important."

And even though the new bubble has yet to reach its full proportions, small businesses and nonprofits in the area are already finding landlords jacking up rents in anticipation of the well-heeled new arrivals.

As with the last dot-com boom, some people are going to make a lot of money and spend it around town, and some of it will probably trickle down to the rest of us. But what price will the city and its residents pay for that bump, and what kind of city will this become? Have we really learned anything from the disaster of the first tech boom?



The question of whether this tech bubble — and Mayor Lee's focus on jobs — is good for San Francisco involves many realms, but at its center is a question of economics. Does it make economic sense to offer public subsidies and other incentives to boost the tech sector?

We consulted three San Francisco economists with expertise on the situation and a range of perspectives: Tapan Munroe, a business-oriented economist and the author of Dot-Com to Dot-Bomb: Understanding the Dot-Com Boom, Bust, and Resurgence; Peter Donohue, a longtime consultant to cities and unions and principal of PBI Associates; and Ted Egan, the city's economist.

"I think San Francisco is sitting pretty right now," Munroe said, noting that tech companies and employees are naturally drawn to this vibrant, culturally rich city. "Young people like to be in San Francisco more than the Silicon Valley...It's such a unique place, we are so fortunate to live here."

Monroe said San Francisco is in a league of its own and it doesn't really have any direct competitors in the region, so tax breaks and other incentives to lure businesses here don't make much of a difference. High rents and living costs are a factor, he said, but "the main thing the city can provide is quality of life."

He also doesn't believe this current tech bubble is going to burst like last time, when the Internet was still new and venture capitalists were throwing money at every kid with a good idea or cool URL. "We're not seeing anything like that this time," he said. "Last time, people went crazy."

This time around, the seemingly crazy stock valuations on tech companies might make more sense: "The global economy is very much being guided by mobile technology. The world is moving to mobility so the valuations have some justification," he said.

But he added: "The market will speak. If they can't make money in the next five years, they'll be gone."

That's precisely the concern that many people have voiced, that Twitter will avoid paying taxes to the city as it beefs up and goes public — creating another litter of young millionaires in the process — and that it may fold before its six-year tax holiday ends, leaving little in city coffers. And along the way, the bubble will raise rents and displace the working class.

"Rising prices displace people, that's just a fact of life," Monroe said. "That's the way the market works, but it has social impacts."

More progressive thinkers dispute that kind of fatalism, saying it isn't some all-powerful "market forces" that are threatening to remake San Francisco but a certain brand of speculative, monopolistic capitalism that is being aggressively pushed by a handful of wealthy investors and their political partners.