Life in a Liminal Zone

I moved back to San Francisco a year ago, drawing litanies of doom loop alerts from others. To which, I'd reply, “Sounds like no better time to be there”.

By chance, I landed where I'd hoped, at the edge of San Francisco’s Barbary Coast-Jackson Square Historic District. Over the past year, walking through it every day, I've seen it become the preeminent center of global AI (Artificial Intelligence) Venture Capital funding. The rapid development has been astounding.  

Yet even more astounding is that AI was hardly mentioned in the 2024 election cycle, especially at the presidential level, because that office is destined to preside over decisions around the most profound technological transformation in human history. 

Most egregious of all was the Democrat's total silence around Peter Thiel even after the revelation that he promoted Vance, his protege, as Trump's successor in waiting.  If you can get through Bloomberg's paywall, read this 2018 article, Palantir Knows Everything About You.  Believe the headline. 

Palantir is Peter Thiel's data surveillance platform that got client startup funding in 2004 from the CIA. Since then it has secured US government contracts within at least twelve departments including Medicare and Medicaid which then VP Biden praised in 2010 for its success in uncovering Medicare fraud.  Wikipedia's Palantir reference (as long as it survives) has linked details: Palantir Technologies

And now at the dawn of the unknown Age of AI, Trump is the frictionless enabler for those who are actually in charge of creating a world that no one can accurately predict.

So to those gearing up to fight for their endangered issues, take heed of the wisdom about choosing battles wisely. Here's one small example of why social initiatives such as DEI (Diversity, Equity, Inclusion) become irrelevant in the Age of AI.  

Though I’m not inside the VC firms just blocks from my apartment, I do catch worthwhile bits of street level conversation. Walking behind two Venture Capitalists funding an AI tool to screen new-hire applicants, I heard them describe how it can determine the best "fit" using only a candidate's voice response patterns.

To the vast majority of us who know little to nothing about what AI is already capable of detecting, this can be touted as an audio only “color-blind” solution.

Yet, speech patterns, vocabulary, tone, metaphor, accent, etc., can accurately define cultural, economic, psychological identities with no human accountability for AI's decision. Meanwhile, in our day-to-day lives, we all contribute terabytes of training data 24/7 to refining its "fit" finding skills.

Facing a time that may be best summarized by the title of Peter Pomerantsev's book, Nothing is True and Everything is Possible, take stock of your own bottom lines. What is a "decent" life? What is a "meaningful" life? What is a "convenient" life?  At least these might be answers you can trust. 

Waymo Do You See Me?

I recently moved back to San Francisco after a too long time away. My neighborhood has one the oldest historic blocks in the City.  It was certainly built for foot traffic.

A lifelong preference for walking has brought me discoveries and insights that aren't likely to have happened while driving.  Curious turns and anomalies on foot build a sense of all the others who've traced this same path through time.

Pedestrian sensations also give me a comparison to how I feel when driving a vehicle, a machine made to be insulating, controlling, powerful - and even a potential weapon. The walker in me knows the vulnerability of having to trust in the goodwill of random vehicular traffic.

It's up to pedestrians to make safety checks. Look both ways before stepping into a crosswalk.  Make no assumptions about the driver's attention/intentions. Get confirmation that you've been seen.

Living in the AI whirlwinds of San Francisco is an immersive preview of unintended consequences.  Trust may be the most common issue raised in discussions around Artificial Intelligence.  Responses usually involve assurances that misleading "hallucinations" will eventually disappear. But little has been said of how an eroding sense of trust increases alienation in general. I got a flash of that erosion while walking in my historic neighborhood. 

Late at night, alone on Jackson Street near Hotaling Place, I stepping into an intersection as an empty self-driving car turned and came toward me. My immediate reaction was to trust in a fundamental human act of mutual acknowledgment. 

With the wave of my hand, a wave of absolute "aloneness" washed over me.  There was no one to respond when I signaled, "Waymo, do you see me?"

The vehicle did stop but I felt an impact just the same...the meaninglessness of my own human training data. 

Spinning in the Doom Loop

Shock sells news.  Slogans trump truth.  Lies outlast facts.  

The doom loop scenario originated in a November 2022 National Bureau of Economic Research (nber.org) working paper entitled "The Remote Work Revolution: Impact on Real Estate Values and the Urban Environment".  The phrase first appeared on page 35 of the report as "urban doom loop", then shortened to "doom loop" twice in the next few paragraphs.  

It summarized a section of the report, Fiscal Implications for Local Governments, which focused on the possible recurring impact of lost tax revenue and used NYC as the primary projection model but stated that conclusions were applicable to the majority of US urban centers.  Yet, Doom Loop now seems to be synonymous with only San Francisco. 

The opening paragraphs of a recent New Yorker story, What Happened to San Francisco, Really?, suggest the reason for this association is based in an American version of schadenfreude (pleasure derived from another's misfortune). 

Since the end of the industrial period, the main path of the U.S. metropolis has been what’s often called urban renewal: transforming old frameworks into beautiful, dynamic settings for prosperous middle-class life. No city excelled at the assignment more than San Francisco.

It invested in lush, landscaped parks, tree-lined boulevards, and world-class museums where there had been none. It grew rich, and seemed to climb out of the Great Recession with both influence and a mandate. “There’s a lot of pent-up envy of San Francisco from a lot of other cities that think of themselves as more important,” one local told me recently.

The reporter paints this backdrop with a very soft brush neglecting to even mention the City's most recent and questionable economic revival effort, the 2011 "Twitter Tax Break".

The late Mayor Ed Lee had bet the tax break, which erased the 1.5% payroll tax for companies that moved into certain Mid-Market buildings, would keep tech jobs in the city and help revive seedy Central Market Street. At the time, half the area’s offices and 30% of the retail shops were empty, according to city data.

Filling vacant buildings with creative tech startups, Lee reasoned, would attract hip, independent retailers...finally ushering in the Market Street revival that had eluded San Francisco mayors since the 1970s.

“We’re on the move,” the mayor said. “This is all for real. No more talk.”

Further down in this 2019 (pre-Pandemic Doom Loop) story, the San Francisco Chronicle offers - Mid-Market: Vision and Reality - an overall assessment of the result:

Despite billions of dollars coming into the neighborhood, retail vacancies plague the street. Thirty months after it was completed, a new 250,000-square-foot mall between Fifth and Sixth streets, branded 6X6, sits vacant, the victim of rising construction costs and apprehension over the drug use, homelessness and filth on the street, its developer said.

Longtime residents and business owners say more drug dealers work the area now than six or seven years ago. Men with wads of cash in hand crowd the corners at Eighth and Market, and Hyde and Golden Gate, openly selling heroin, meth and crack.

Also noteworthy is the fact that Twitter's tax break was about to expire (May 20, 2019) just a few weeks after this Chronicle story appeared and a deepening downtown exodus was once again threatening the City. Of course, a tiny virus intervened, allowing the highest-tech heads to conflab under the cover of quarantine, excluding even the fluffiest news coverage. And now X marks the epicenter of the Doom Loop.

In this 2019 KQED story about the Board of Supervisors assessment of the tax break, 'That's Just Really Sad': Supervisors Lament Results of Twitter Tax Break they seem convinced that the policy was a mistake.

"This policy was poor policy that was poorly implemented by the city," said Supervisor Gordon Mar at a committee hearing on Thursday to discuss the community and economic benefits of the so-called Twitter tax break. "It really just resulted in a handout to the tune of $70 million to a small number of corporations."

The tax credit, officially known as the Central Market/Tenderloin Payroll Tax Exclusion, was championed by city leaders, including then-Mayor Ed Lee, when it passed in 2011 as a way to revitalize the dilapidated Mid-Market and Tenderloin areas -- and simultaneously keeping and attracting corporate tenants like Twitter, which was threatening to move to Brisbane at the time.

In exchange, those tech companies were supposed to invest in the community and provide "robust community benefits," in the words of Supervisor Matt Haney, who represents the area and called for the post-mortem hearing on the credit after it expired last month.

But the consensus from supervisors throughout Thursday's hearing, as they heard reports from several city departments on the tax break's impacts, was that the tech companies did not deliver those benefits, in part because the legislation that created the credit did not specifically outline what those benefits should be.

"They got to decide what was important and how they were going to benefit the community," said Supervisor Vallie Brown of the companies that took advantage of the tax break, "and I think that's just really sad because they didn't know the community, and they came in and said, 'This is what we're going to do.' "

..."If we continue to do it this way, we're going to keep getting what we get," said Haney. "A lot of feel-good stuff and a lot of impacts on the community that are often not positive."

The story's opening paragraph even states a strong determination to avoid repeating the same mistake.

It seems unlikely that San Francisco will ever again undertake a corporate tax break like the one that allowed companies to avoid paying payroll taxes in exchange for moving to and investing in the city's Mid-Market neighborhood over the last decade.

So, what's the new magic public benefit Unicorn that San Francisco proposes next? How about a tax break?

In her State of the City address Thursday, SF Mayor London Breed announced a multipart plan aimed at revitalizing the city's beleaguered, seemingly half-empty downtown, and it involves some Twitter tax-break-style tax breaks.
Mayor London Breed Announces Tax Breaks, Other Incentives Aimed at Reviving SF's Downtown

The spin this time is about focusing on small and "sensitive" businesses. A few high-profile well-timed start-up spin-offs should do nicely.

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Given the demonstrated repetition of these doom loop cycles, why is nothing done to prevent them?

Like most puzzling questions regarding humans, the reasons are complex and often deeply rooting in our very nature. History, in particular, is especially challenging to unravel. Rather than ferret out causes, effects, and patterns from the past, we prefer to wrap it in a satisfying but simple narrative and move on. Like the title character sang in "Annie": Just thinkin' about Tomorrow, Clears away the cobwebs, And the sorrow 'til there's none. Thus, the drivers of repetition have largely escaped scrutiny. That is, until now.

In 2003, along with an international assembly of colleagues, historian and data-scientist, Peter Turchin, opened a new field of historical inquiry called Cliodynamics - (Clio is the muse of history and dynamics is the process of change). Consolidating the now immense bodies of accumulated historical and evolutionary data, they began a new "mathematical" approach to the dynamics of history. On his website, this paragraph explains the benefits of this method.

Mathematics is not just about quantities (it includes such fields as mathematical logic, abstract algebra, and topology). However, if we are interested in understanding the dynamics of such historical processes as population change, territorial expansion/contraction, and the spread of religions, we must get involved with numbers and rates. Furthermore, a “naked” human mind, unaided by mathematical formalism and computers, is a poor tool for predicting dynamical processes characterized by nonlinear feedbacks, or grasping such complex behaviors as mathematical chaos.

On his website, the results outlined in Turchin's new book, Elites, Counter-Elites, and the Path of Political Disintegration, are summarized as follows:

The lessons of world history are clear, Turchin argues: When the equilibrium between ruling elites and the majority tips too far in favor of elites, political instability is all but inevitable. As income inequality surges and prosperity flows disproportionately into the hands of the elites, the common people suffer, and society-wide efforts to become an elite grow ever more frenzied. He calls this process the wealth pump; it’s a world of the damned and the saved.

...in America, the wealth pump has been operating full blast for two generations.

The book's introduction offers a broad summary of the "wealth pump" dynamic that played out in the 20th Century United States.

Wealth is accumulated income; in order for it to grow, it has to be fed by directing a portion of GDP to the elites. The proportion of GDP consumed by the government has not changed much over the past four decades. The main loser has been the common American.

For two generations after the 1930s, real wages of American workers experienced steady growth, achieving a broad-based prosperity for America that was unprecedented in human history. But during the 1970s, real wages stopped growing. While the overall economy continued to grow, the share of economic growth going to average workers began to shrink. We can index the operation of this wealth pump by tracing the dynamics of relative wages - typical wages (for example, for unskilled workers or for manufacturing workers - it doesn't matter as long as we use the same group) divided by GDP per capita.

Before the 1960s, the relative wage increased robustly, but after that decade it began declining, and by 2010 it had nearly halved. This trend reversal in the share of economic growth going to workers also resulted in the change of the fortunes of the wealthy. It's the Matthew Effect: if you take from the poor and give to the rich, then the rich will get richer while the poor get poorer.

When America entered an era of wage stagnation and decline, it affected not only the economic measures of well-being but also biological and social ones. I'll talk more about it in chapter 3, but for now it is sufficient to note that life expectancies of large swaths of the American population started to decline years before the COVID-19 pandemic. "Deaths of despair" from suicide, alcoholism, and drug overdoses spiked among the noncollege-educated from 2000 to 2016, while remaining at the same, much lower level among those with at least a college degree." This is what popular immiseration looks like.

And popular immiseration breeds discontent, which eventually turns to anger. Popular discontent coupled with a large pool of elite aspirants makes for a very combustible combination, as we have experienced in America since 2016.

Against this backdrop, let's return to why SF is the Doom Loop poster child.

Nowhere in the US, or perhaps the world, has the "wealth pump" consolidated economic power more visibly than in the San Francisco Bay Area. Although Atherton in Silicon Valley near Menlo Park consistently tops the list of wealthiest US communities, it is San Francisco that, with good reason, immediately symbolizes the entire region.

With its exquisite geography, romantic history, and unparalleled examples of Art Deco architecture (the Golden Gate is the most photographed bridge in the world), San Francisco deserves to be the area's designated crown jewel. Yet, since the unprecidented surge in nearby tech wealth, The City has pandered to that cohort with financial incentives and the sprawling expansion of now vacant office space in order to maintain its standing.

Beginning in the 1970's, which Turchin marks as the period where average US worker wages stagnated then declined, Hewlett-Packard, along with cuts in federal capital gains taxes, got the Venture Capital party started in what was then referred to for the first time as Silicon Valley. But in 1995, the VC party became a full on Rave with Netscape's IPO (Initial Public Offering)

Wikikpedia-Netscape On August 9, 1995, Netscape made an extremely successful IPO, only sixteen months after the company was formed. The stock was set to be offered at US$14 per share, but a last-minute decision doubled the initial offering to US$28 per share. The stock's value soared to US$75 during the first day of trading, nearly a record for first-day gain. The stock closed at US$58.25, which gave Netscape a market value of US$2.9 billion.

While it was somewhat unusual for a company to go public prior to becoming profitable, Netscape's revenues had, in fact, doubled every quarter in 1995. The success of this IPO subsequently inspired the use of the term "Netscape moment" to describe a high-visibility IPO that signals the dawn of a new industry...The IPO also helped kickstart widespread investment in internet companies that created the dot-com bubble.

The resulting dot-com bubble mentioned in this excerpt is a notable example of another power "pumping" strategy, sometimes called "pump and dump", where Venture Capital finances and heavily promotes an often shaky business model all the way to a thoroughly hyped IPO, then sells before the stock price falls for retail investors.

At this point, though, with so much wealth amassed at the top, public trading is just too tedious for the Captains of Venture Capital. By focusing solely on Private Equity, they now invite only the worthiest "power players" to a gaming platform from which to truly rule in a Winners Take All finale. As Supervisor Vallie Brown foreshadowed in the earlier KQED quote: "They got to decide what was important and how they were going to benefit the community...they came in and said, 'This is what we're going to do.' "

As part of its latest image enhancement effort, City officials adopted an ad campaign that itself is stirring controversy and even confusion. San Francisco Has a New Slogan, and Not Everyone Is a Fan.

Its theme revolves around the slogan, It All Starts Here SF and, in an interesting coincidence, it launched just a few days before the New Yorker story, cited earlier. That slogan, it turns out, is a good fit for underlining the national fear described in the article. "In San Francisco, the nation saw its dreams, and now it thinks it sees its nightmares."

So, is San Francisco on the verge of a doom loop collapse? No one really knows. But it's worth noting that one of the loudest voices promoting the City's "post-apocalyptic" scenario now occupies a prominent Market Street address (rent free it seems) made possible through the Twitter Tax Cut.

Meanwhile, down in Atherton, the luckiest conehead on Earth spews polemics like the Techno-Optimists Manifesto (Better called the Techno-Opportunists Playbook) from his conscience-free cranium. Unfortunately, San Francisco seems all too eager to once again twist its outstanding potential into a toady role, heavily touting Artificial Intelligence (AI) as its next big impact on our digitally circumscribed  lives.

In land area, San Francisco is actually quite small which could make it an ideal candidate for a this newfound savior: AI as the Ultimate Security Solution - The City as Gated Community! Relentlessly patrolled by darling droids! How safe will that be!

On the other hand, there could be a quake.