why was San Francisco so definitively the center of the tech industry why did it all like agglomerate here San Francisco is the place in the world where you can manufacture luck within a month of us moving in there they launched Twitter I was like I wow this
place is like incredible everywhere here are people starting companies really ambitious companies and then Co hit in the last year some things have happened that have turned things around they feel the energy I actually think the biggest Factor is that they have all the
building blocks to make San Francisco into the best city in the [Music] world welcome back to another episode of the light cone today we're talking about San Francisco it was dead but now like Lazarus it is back and not only that we've got a new thing to talk about
which is cerebral Valley people from all around the world are coming to move to San Francisco to just a few neighborhoods we're in one of them in the Dog Patch to build the future to build the future of AI why is that what's going on I think it's worth just charting the
course of San Francisco over the last few years as a starting point when we all got to San Francis in 2006 San Francisco was coming out of its own Doom Loop like Doom Loop 1.0 from the do crash in the late '90s San Francisco was full to the brim again
and then the dot bubble burst and when we got there it kind of felt like a ghost town like there was a lot of vacancy rents rents had crashed um and then what brought San Francisco out of the Doom Loop was the Web 2.0 boom all these YC companies like stripe and
Airbnb and Dropbox moved to San Francisco and they started hiring employees who moved into apartments and like the tech economy just like dragged San Francisco back out of out out of the Doom Loop this is like very specific point like the Silicon Valley geography
I I remember like when we were moving here in 2007 there was a real negative connotation about choosing to base your company in San Francisco instead of like pal Alto yeah paloalto Mountain View San Jose even like anything south and I think it linked to the do era where the
perception the belief was that during the dot era all of the opportunists had come to and like moved into San Francisco because they wanted to like live in a cool City and have like cool things to do instead of like working and it was a real conventional wisdom that
post that era if you were serious about starting a company you choose to be based in like the peninsula and if you chose to be in San Francisco you are like actively choosing to not be serious about your company it a real neg like investors really paid attention to this
yeah and we put YC itself in the South Bay should should we talk about where YC has been over the years yeah why combinator got started in uh Mountain View on uh one of the most legendary streets at the this point it was uh called Pioneer way and as hard said in
2005 Mountain View was the place to be Google had based its headquarters there and people don't look at Google the same way anymore but in 2005 Google was the Undisputed king of innovation all the smartest people wanted to be affiliated
with Google and so mement became this mecca for smart people it's the place where all the serious technologists were like conglomerating another major factor is just in that era people started people starting companies just tended to be slightly older right like even like
the like the Google Founders were phds like late 20s maybe it's not old but like not like 21 22 just out of college and I think even late 20s early 30s and there was a lot of it from palal also because of Stanford right yeah and people like wanted to be in the suburbs
basically and and the investors wanted to be in the suburbs CU they're all older so there just this natural pool and then the first sort of young founder Mark Zuckerberg chose to be based in like Palo Alto as well right so like the serious upand cominging startup was in
Palo Alto strip was also initially in pal stri was also initially Palo Alto but then I think like YC actually um not because Paul wanted it to but like it ended up contributing to the move to San Francisco dramatically like we probably
pulled it Forward by years yeah CU there's all a bunch of like young people who wanted to not be in the suburbs and they actually all ended up being in like the same building right like you guys were living in scraper and I lived in the same building um this building in
North in the North Beach area of San Francisco called Crystal towers that came to be known as the Y scraper because there were so many y combinator companies in it we actually wanted to be living in the building but we were rejected really yeah we were rejected
because we were we came to submit our application they told us there were lots of space um and then they told us just go around the corner to the leasing office to get it um uh filled as I was walking out I bumped into Justin Khan who at the time was working Justin.tv
and so he'd walk around everywhere with a camera on his head um which it turns out the building did not like so they they saw me talking to Justin and they must have called the leasing office to say reject their application so by the
time I got around they said there's no room left what like one minute ago you said there was like plenty of room I was like um um but so we ended up like kind of living vicariously cuz we were try and come over to the building as much as we
could for like dinnner and lunches and just every time we would learn so much like you had the fers of Dropbox in there scrip was in there uh Weebly there's actually a very important Point here I think which is for people who are Builders it's actually important to be
around other people who are like that so go you anyone who has built something that you respect that you think is really good that you want to build things similar to that like try to be near them like actually just being in a in community with other people like that
greatly increases your chance of success I mean I think that was true for for us I mean that's why we for posterous we applied to White combinator like we looked at you know Steve at Reddit or we looked at ad Drew from Dropbox or James from Heroku and we said those are the
kinds of things that we want to build and I think you know today that that sort of continues like you want to be near people like that from my personal experience I grew up I was born and grew up in England YC reading po msas and hearing about YC and getting accepted to
YC in 2007 is the reason that I moved but the initially I only planned on moving for 3 months like that's how long we could stay on a tourist waiver um but as soon as we got here it was just like a complete world of difference like I
went from being around all of my peers working in banking consultancy just thinking I was unemployed or too lazy to get like a real job and being in San Francisco and the Bay Area especially amongst the YC Founders it was like hey like everyone's doing a startup
everyone's like in the same boat we can all like support each other like it's just like in the water like it was my first time experiencing being in an environment that felt like nourishing versus draining for starting companies and you could feel that really intensely
like just being in San Francisco and then you found yourself in one of those legendary rooms very early on with your first startup yeah it was again just like a total um Serendipity luck Factor Evan Williams the fan of Twitter had happened to be speaking at a conference
at my college in like 2006 and he' we sort of my co-founder who's my cousin um cor we spoke to him and he is like hey like if you guys move out to San Francisco like we have some free office space and you should just like we have some desks and you should just like come
hang out there which is what we did and that startup at the time was called audio um Odio which is a podcasting company that was not actually doing very well and you you could actually feel it in the office but I mean it's why they
had space in free desks right like they had more space than they needed it was very much people were coming like 9 to 5 and so it just wasn't like a a super Dynamic environment but within a month of us moving in there they launched Twitter and and twizz just like took off
and then suddenly like the whole energy in the place changed there were always like interesting people coming in and out of the office and just like you got really energized by being around something that was clearly working so well and it made you want to like put in
more effort and like feed off the energy and what's funny is har startup was in the same office as Twitter and it the same time I was running a different startup and Twitter moved offices after they outgrew that space and they moved
into my office building and so my startup was actually across the hall from Twitter's second office and this kind of like this might seem like a bizarre coincidence it's actually like not that unusual because all of Tech was concentrated into this very small area
in like downtown and Soma like people who haven't been here don't don't realize just how dense it was where like you could go from any startup to any startup in San Francisco in like 15 minutes yeah I mean I remember a very specific example of that like we we left
the office to get lunch and we step outside and we bump into Ron Conway like the like legendary angel investor and he just starts asking us some questions and we start and we met him at a YC event um and we just told him like we've got
like a bunch of problems we really want like to get blah blah blah as a customer and by the time we got back to our office he'd like shot off these intros to all of the companies for us um to help us like with like making sales like wow this place is like incredible I mean
the crazy thing I think San Francisco is the place in the world where you can manufacture luck and startups for them to really get big lots of things need to happen to be right there's something special about being surrounded with all the people that kind of know how and
they're all here and they're willing to help because starting companies is actually a very anomalous than in other parts of the world it's a strange job and to your point harsh starting a company could be looked at oh you're just a bomb you're not really working at
the beginning what is it going on but here people really celebrate it because people understand how hard it is how is it for you D I'm C like because you grew up in Chile like how was the move to Silicon Valley and being around this so
it relate a lot to the story of being a misfit so in Chile when I grew up I was always a weird kid to stay indoors because also was very difficult being the only Asian kid there were no other Asian kids around and I really loved reading books and when I got a computer
I really like um also building a lot of these RPG games back then emulators I got a lot into that and internet was like my bubble but didn't know anyone like that and what was cool is I always admired all the builders and my dream was that at some point I would move to
be in Silicon Valley and be there and what was special that I didn't know and there was this poll is that when I got and moved to with to Silicon Valley I started working at intel was my first job it's the first time I felt at home there were a lot of people like like
me who really like to nerd out and really to go deep on subjects and building and it wasn't judged because I was judged back then I had to sort of hide and not talk about my interest when I go in that super deep and that was special where it was celebrated and you
can build and there's also the experts in different areas and everyone is just as deep as you with building and it's just as exciting and an optimist instead of being judg on why you like this weird thing uh one of the funniest things that
I remember from Reading Paul Graham essays that I think was one of the reasons why a bunch of us found his essays um was he would always describe what it was like in high school to be a nerd and then I I think that that might be a common experience for us where you
know you sort of grow up in the in default Society default Society you realize is a little bit foreign it has different values than you it um you know sort of value appearance more than sort of the substance um's way to do it right and that kind of keeps going even after
college let's say you um for young Founders their friend who may not be Founders end up getting whatever the standard job being an investment banker or working for a consulting or whatever or the big Tech job and they end up having this Standard
Life where it's like okay they get the promotion they get the nice vacations they get the time off and a lot of their meaning is more outside of work and then when you're friends with uh nothing against that by the way with when your friends are like that and you're doing
your startup and you're working 247 and working very hard and not really having a lot of money to take the vacations the fancy vacations you kind of get a little bit judged implicitly not directly and that can be a bit demotivating and I think what's special being here is you
surround yourself with people who are in that same mode in that same Vibe we those who working hard and you're chasing your dreams to build something and it's not look down that you're not taking a fancy vacation or going to the fancy dinners is actually on the other
hand celebrated that you're working hard and really taking taking the lead got such a deep Point Di and I think that is actually the true reason why startups and startup Founders conglomerate in Silicon Valley like some people think it's transactional reasons like oh this
is where the investors are so you have to be close to the investors or like this is where the like employees are so you have to be like the place where you can hire employees and like those I actually think those are like factors probably more minor factors I actually
think the biggest factor is that it's like people become the average of the people who they surround themselves with when you're in a city that doesn't value this kind of thing it's really hard to stay motivated it's really hard to be as
ambitious when you move to Silicon Valley and you're surrounded by people like everywhere here are people starting companies really ambitious companies people who are you know who are who are really trying to change the world in a very serious very dedicated way it just
like wears off on you and it makes you motivated to want to do the same thing it's also like um there's a particular sense of like long-term ambition here um where like startups just take so long to actually work out and make any difference that everyone who starts out
here is on that journey and it's just you know I think out generally like alistic and wants to make a difference but you're also just very incentivized to think longterm and um not pay attention to like short-term stus games you care you kind of care about like
your relationships over a long period of time and if you contrast that to say like a finance Hub like New York there's a huge amount of ambition there but it is tends to be more like how much money are you making right now and one thing
we all see is people come to San Francisco or YC with maybe like they their ambition level like they think is at like you know like on two out of five scale but like they grow from all the other people and especially if the company starts doing well like their
ambition changes right and so like and I think that's a very unique thing here where if you're working on like technology like there's almost no bound to like how far like your ideas can go it's just like how long do you want to keep pushing them and working on them
for and if you're around like other people who are also interested enough in what they're doing to keep doing it versus trying to hit some like end state of success I think that's how you end up with these companies where you have Like
Larry Ellison working on Oracle for like decades like anything that happens anywhere else this is actually a place that generates social movement like we believe X like I believe that uh Ai and large language models might regen recreate uh every type of enterprise
software and that's happening like right before our eyes right now or we believe that um you know El electrification and you know decarbonization will remake how we use energy in the world like that's sort of happening before our eyes and then being around people who have those
ideas like not all of them are going to be right even having a culture where being wrong is okay uh that's very rare and I think that's like you know having a truly inclusive place where it's uh basically what do you believe and what do you believe that nobody else believes
yet that that's the very unique reason why I think San Francisco is the most special place in the world like right up until Co it was clear that San Francisco was the center of the startup and Technology world right like you completely right
like every neighborhood was becoming busier like rents and property prices kept getting like more and more expensive like it was very clear the center of everything and then takies more and more yeah yeah like I think that was probably sping the backlash office vacancy was like
0.5% yeah new apartment buildings especially in like the area where the Salesforce Tower was built I I always felt that felt like another Turning Point like huge Tower like that whole are we had a um startup office was based right around the corner from there and
just the new apartment buildings going up on every block like it really felt the center of everything I remember in 2019 it seemed like one of the biggest problems that weissy had was it there was not enough place to put all the people who wanted to move to San
Francisco like there was not enough housing there was not enough office space we were just like bursting at the seams yep and then Co hit what happened in Co yeah how the things come kind of turn around so downturn in a matter of few months yeah everything changed in a
matter of a few months I think right up until covid everything we said is very true like there it was clearly the center of the tech world like everything people were moving but there were clearly problems with the city like beneath the surface like homelessness
was increasing like crime was increasing like there were all these like tensions that people looked past because like you had to be here and I felt like Co hit remote work became like necessary and it was a chance for a lot of people to
finally move out and experience living in another city where they didn't have as many of these problems as San Francisco did it's like I would meet people who would talk about San Francisco as though like Jared puts it this way like Gotham City right if you
were on Twitter or if you were just bumping into casual people they're like oh like it was really like was just like wow you're from San Francisco I'm sorry you go out at night yeah and it was and this was basically all of I think like 2021 and like most of
2022 and then in the last year some things have happened that have turned things around and are starting what Gary's calling this boom Loop like what what happened in the past year well the clear thing is AI right like the um chat gbt launching um was like a complete
like reset and brought everyone back and I think like to like the broader point in order to work on AI pre like CH the chat gbt 3 launch you have to be sort of like counterculture Misfit it was not at all a mainstream thing to be working on
it was kind it was not cool to work on AI if anything actually you know it was a little bit of a dead end for some people at that point like it was a bit of one of the AI Winters back then and people were keep going because they knew something that everyone it didn't this
is that part of being counter I think it's a really important point because pre that like and during the covid remote work period there were multiple hubs that had the claim to be like the next Silicon Valley and I don't think anyone was claiming that like any one of
them would be as big as Silicon Valley but there was just like a a general view that hey like the future of innovation just going to be distributed and dispersed in like some of it will be New York some of it will be in La some of it will be in London like all around the
world but the thing that actually drove the wave happened in San Francisco and it doesn't seem coincidental like if anything you can argue the fact that the city got so bad and it's still like it's come back and it's like now the center
again is just evidence of how strong the like Network effects are here yeah and it's not just open AI basically all the AI ended up in San Francisco open AI anthropic scale AI basically all the big AI companies all the big all the big
Tech AI research Labs it's all in the Bay Area and now we're saying like post chat gbt like we're seeing San Francisco really come back how is it different like what are we seeing that's like different in sort of this iteration of San Francisco versus like the peak
preo well commercial real estate is down but um I guess the wild thing is like we still have some real big problems downtown and uh in large parts of Soma and S was sort of where they allowed to you they where they allowed developers to build housing and by
default I think a lot of people watching this who are not from San Francisco a lot of them might end up in Soma and then realize oh this isn't a place where I want to live and then they'd leave but you know I think the thing I want people to sort of understand is like cerebral
Valley is not Soma cerebral Valley is actually a play on Hayes Valley which is in the center of the city there's lots of incredible food and you know shops and like that's where a lot of uh the best AI companies are choosing to be uh right now we're sitting in the Y
combinator offices we signed more than a 100,000 Square fet here so you know the amazing thing now is we can have you know three different events going all at the same time over here like this is a very different part of town that uh has
a neighborhood Vibe that's very safe and so you know explore the neighborhoods figure out don't just do the default thing which is live in fidai or Soma like there are so many neighborhoods that are incredible and they might cost a little bit more but you will get the
real San Francisco experience if you as someone that moved back I think the single thing that struck me most that's different is how much the neighborhoods have changed like it really matters which neighborhood you're in now I feel like preco you sort of you knew like the
tenlo in the Civic Center were like the bad areas of San Francisco and outside of that every neighborhood maybe had a slightly different flavor but it didn't actually matter too much if you were based in like s versus fi or all the even the mission but like now it's like
it's very important that you pick the right neighborhood right um like and I feel like YC like now we're in like the Dog Patch which we sort of locked into I would say like what is probably the best neighborhood in San Francisco yeah how
we talk about moving YC to San Francisco which is something we talked about for years but Co happened and other things happened and like now we were finally in a position to do that and you two actually led the search for YC's new headquarters do you want to talk about
like the places that you looked at and how we ended up here I mean there were lots of neighborhoods lots of different other places but uh if anything we did at startup style which is uh Dog Patch is really safe um it's being redeveloped um and this was actually before openingi
moved in over here and then there was a space uh right next to where we are right now that was the PowerHouse for pier 70 so it literally housed the uh the engines that generated the power for uh where we are which is the shipyards that built a third of the uh US Navy
during World War I and two so it's sort of like this incredible uh symbolic significance of um so much power being generated in that that house so that's actually our main event area and then we just took over the uh the office next door and so you now we have a really
sweet YouTube studio right here and across the street there's also two other YC companies astranis and also Gusto right the Dog Patch is great that's where our center of gravity is but what's some of the push back you all get from Founders about moving to San
Francisco and things they worried about and what's the advice you give them especially uh International Founders there's a lot of uh the consumption of news is from Twitter and there's a lot of things about being not safe and being scared of coming here but when they
actually move to the right neighborhood they're pleasantly surprised which is which is nice but this is not to say that the city doesn't have problems there's definitely neighborhoods that still should avoid which we actively advise them where to be
actually which which are the neighborhoods where should people be based I mean personally I love you know Mission Dolores noi Valley these are great areas they're a little bit more expensive I think you know Glenn Park is actually an incredible neighborhood
that's sort of you know hidden Burnal Heights is right over the hill from uh you know where we're at in the dog patch in petero Hill uh Mission Bay is brand new so and it's very close to YC so that's and open AI so you know I actually think that you know during the
batch we actually tell people can you be within a mile of Y combinator in the Dog Patch and the reason why is you know you're going to be working 80 90 hours a week like writing code or talking to users but you know on those Friday nights you're going to come out to uh
actually this office and we have you know uh a launch event where people demo their software and grab a beer and then afterwards they go out to the bar or grab grab pizza and then you know Friday and Saturday nights that's when you can
let your hair down a little bit and actually you know see the other people in your batch and then those are the relationships that um you sort of take with you for frankly the rest of your life I mean one of the more surprising things that uh I'm still surprised by is
you know when I got married after doing YC two whole tables were my Stanford friends but two whole tables uh were actually my y combinator friends and uh Paul Graham even came and he even wore pants there's a there's actually a Founder map that lays out where all the
founders of the current batch are staying and the center of gravity is around our office here in Doc patch and that's not random reason that's by Design and maybe we can talk about why is that I mean I remember in my uh YC batch we actually did the manual version
of this making a collaborative Google map in summer of 2008 and this was while it was was still in Boston and the funniest thing was uh that's how I got to know my co-founder Brett Gibson uh him and his co-founder were working on a
different startup called slink set um and we actually would just grab beer pizza and beers every weekend and when they couldn't raise money we ended up uh sort of merging our companies and then so Brett Gibson who ended up being my co-founder for posterus uh ended up
being my co-founder for post Haven and then also worked with us at YC the software team and now he runs uh initialized and it all started by just him happening to live next to you in Boston when you were going through YC and so where you live who you hang out
with I mean it's pretty wild that these things end up mattering and you know San Francisco is the best place in the world to sort of build that Network that Fe I mean you're not building a network you're actually just making friends for life and that's like the real version of
it and then you mentioned cerebral Valley it did actually start as Hayes Valley you could play on that but I actually think like cerebral Valley is this neighborhood it actually is this it's kind of weird that cerebral Valley became known as hay Valley I think the
real Argent for that is just that there is this one Hacker House in Hayes Valley but it was literally just a house but again what we talking about during the period that that Hacker House started San Francisco was pretty dead yeah it was it was so dead that like the
hacker house is probably like the most happening place you can become the center of San Francisco by literally having the one house like 10 hackers in it working on like AI stuff right but like it's not true today like open AI has this huge lease right around the
corner from here in like Mission Bay which is next to the Dog Patch we're here like the startups are going to start being based here like this seems like it's the real real cerebral Valley right here this is the real cerebral Valley and I think a lot of the
companies that we're working with right now uh they're going to find product Market fit they're going to get their first million then 10 million then 100 million then billion dollar a year in net revenue they're going to fill the office Towers in fidai and Soma they're
going to build these businesses that create thousands of jobs and there's not going to be you know one Salesforce Tower there might be dozens if not hundreds in the next 10 years and so we're really talking about a real boom Loop here this already happening I was
talking to companies from the last couple batches and there's this um office Bas in s where there are a bunch of YC companies that just got that just raised their seat around and they're surrounded around each other and they feel the energy there's this thing about being in
the right Vibe they need a cool name like wi scraper then I think we're also seeing like another just a fact of being here is like the AI specifically like if you're working on developer tools like in a big area right now like you want to
be here they all of the best Engineers who are going to be using your like Cutting Edge developer tool or infrastructure all based out here if you're building AI software you need someone especially enterprise software you need someone who's going to be your
champion and Advocate and is going to take a bit of a bet on like a startup that's using some you know like Cutting Edge AI model that's not fully proven yet and they're all like those people tend to be here it's always clear that you can build companies outside of San
Francisco and Silicon Valley like there's always going to be exceptions and maybe there'll actually be more of them over time but I just think all else being equal if you're starting out like you andone Play Just maximize the odds to be in your favor like you should you
should be here despite the the fact that it will always be exceptions why don't you want to get more lucky here in San Francisco yeah maximize your luck so the great thing is I mean we want San Francisco to be hyper inclusive and what
that means is uh you don't have to pay that much for rent uh you can feel safe walking down the street there's great small businesses that are uh you know thriving and then frankly this is the place where you should start your startup and Thrive here as well 100
years from now what does San Francisco look like in Tech I mean I'm a big fan of uh Gan roddenberry's ideal for Starfleet command I mean this is the ultimate techno Optimus dream which is we unlock so much abundance in the world that money doesn't exist anymore and
people can search the Stars to try to find and create their own meaning um and I I think that there's no mistake like Starfleet command from Star Trek the Next Generation and Star Trek you know the universe broadly it's like right there in the precidio in San Francisco I
think that um if you take the agglomeration effects of the smartest people in the world the best builders in the world and you put them in one place and they create this scene like this um you know set of people who all run in the same direction create these
companies that matter and then people stay here and you know they make the schools awesome they build housing they actually you know invest into Arts we actually make the city the kind of the best city in the world like we have all the building blocks to make San
Francisco into the best city in the world where you know give us your Misfits give us your nerds give us your autists give us the people who you know just wouldn't fit anywhere else like they have this capability with their hands and with their brain to create
something that has never existed before and we put them all in one city and they go and create software and hardware and technology and biotech and climate tech for that will touch billions of people and all of that wealth comes back into this one city and we make the city more
and more awesome that's what San frano is that is what San Francisco could be and we will Manifest this the boom Loop is happening guys so maybe that's a great place to end that's it for this week of the light cone we'll see you guys next [Music] time