Investors are fueling a startup boom in San Francisco by pouring billions into generative AI, creating a frenzy reminiscent of the birth of social media in the early 2000s. This has led to hopes that the nascent AI sector will revive the city’s decaying downtown after the pandemic.
However, tech industry professionals warn that the rapid growth of the artificial intelligence business may not be a panacea for the city’s economic and commercial real estate woes. Unlike previous tech booms, generative AI firms excel at staying lean and automating work, which means they create fewer jobs.
Silicon Valley investor Jeremiah Owyang cautions against excessive optimism, stating, “I think we should curb our optimism that San Francisco commercial real estate will bounce back because of AI. The mentality of AI startups is AI-first. So you get AI to do the job before humans do it.”
An analysis by San Francisco Mayor London Breed’s office, using data from venture capital firm NFX, reveals that even though eleven of the country’s top 20 AI companies are based in San Francisco and have collectively raised $15.7 billion between 2008 and 2023, these companies only employ a total of 3,400 people in the city. This amount is a mere 2.3% of the estimated 150,000 daily workers lost during the pandemic.
Generative AI, which learns from past data to create new content, is considered a game-changer for workplace efficiency, especially for software engineers who form the backbone of San Francisco’s tech workforce. According to research from code hosting platform GitHub, 92% of software developers use AI, and developers who use GitHub’s coding assistant complete tasks 55% faster.
However, AI companies differ from industry giants like Airbnb and Dropbox, which employ thousands of people. Erin Price-Wright, a partner at San Francisco-based Index Ventures, states, “These (AI) companies almost certainly won’t have thousands of employees and corporate cafeterias, like Airbnb or Dropbox.”
For instance, OpenAI, backed by Microsoft and known for developing the popular chatbot ChatGPT, has raised over $11 billion in eight years and has around 500 employees. OpenAI uses AI to tackle challenges within the company, including training AI to help staff handle support tickets more efficiently.
Despite San Francisco’s societal issues, the city has earned a reputation as the “AI capital of the world.” The enthusiasm for AI is evident at tech events in the city, reminiscent of the pre-pandemic era when tech companies flocked to San Francisco due to an eight-year tax break dubbed the “Twitter tax break.”
However, the city faces significant challenges, such as over 30% vacancy rates in office buildings and a decline in public transit ridership. The crises of drugs and homelessness have also marred the city’s reputation, deterring tourists and business visitors and leading to store closures.
While some tech professionals believe AI will still boost the city’s economy, others fear that rewards from the technology will primarily benefit top executives and their inner circle, exacerbating inequality.
In conclusion, while generative AI offers opportunities for San Francisco, it may not be a magic solution for all the economic and social challenges the city currently faces.
Credit: The Star : Tech Feed
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