Is San Francisco the next Detroit?

Detroit's wartime mobilization wasn't the result of entrepreneurial genius. The federal government banned civilian auto production in February 1942, then guaranteed manufacturers' costs and a percentage of profits on wartime goods. The auto industry literally couldn't lose money. By June 1942, 66% of Detroit's machine tools were producing military goods. San Francisco's tech economy emerged similarly downstream of capital flows the city itself didn't create — dotcom-era venture capital, post-2008 quantitative easing, and pandemic-era stimulus that flooded into tech companies whose products suddenly became essential. In both cases, the city benefited from policy and capital decisions made elsewhere.

Approximately 500,000 workers — many of them Black Southerners — flooded into Detroit for defense work between 1940 and 1950. The city's housing, services, and social structure were not prepared. The 1943 Detroit race riot, with 43 dead and 433 injured, was the bloodiest racial episode of the decade. San Francisco's tech-era migration was smaller in absolute numbers but transformative in its effect on local cost of living. Bay Area real estate values tracked the tech industry's growth. Long-time residents who didn't own property were pushed out. The city's homeless population grew alongside its wealth. The conflicts looked different — protests against tech buses rather than housing riots — but the underlying dynamic was the same: a new population economically incompatible with the existing one.

Detroit perfected the very technology its residents could now use to leave. Postwar highway construction, financed and politically supported by the auto industry, made suburban living possible. The Federal-Aid Highway Act of 1956 was the master stroke — federal money to build freeways into cities that primarily served as exit routes. Detroit's population began declining within a few years. San Francisco built the internet that made San Francisco optional. Zoom launched in 2012; by 2020 it had made physical proximity to a tech workplace a choice rather than a requirement. The city had perfected the technology its residents could now use to leave.

Detroit's tax base depended on auto manufacturing wages. When manufacturing left the city for suburbs and then for cheaper labor markets, the tax base collapsed. Even today, Detroit takes in less tax revenue than it did from property taxes alone in 1963. San Francisco's tax base depends heavily on tech companies and high-earning tech workers. The city's budget more than doubled from $6.4 billion in 2010 to $13.7 billion in 2020 — almost entirely on the back of one industry's success. If that industry's interests diverge from the city's, the brittleness becomes visible.

The single most important reason San Francisco didn't follow Detroit's exact path is housing supply. Detroit had cheap and available housing throughout its boom, which is how 500,000 workers could move in. San Francisco's byzantine housing policies — many of them enacted in response to the destruction caused by 1950s freeway construction — made it nearly impossible to build new housing. The result: San Francisco's population grew only 1.6% from 2003 to 2013, compared to Detroit's 14% growth from 1940 to 1950. The "exodus" risk that Detroit faced — millions of people leaving — was structurally impossible in San Francisco because there were never millions of people to leave.

Detroit's influx was largely poor rural Black Southerners with no economic option to return to where they came from. Their presence created a permanent population of city-dependent residents whose interests were tied to the city's services. San Francisco's tech-era influx was high-earning workers with abundant options. When the industry shifted to remote work, many of them left — for Austin, Miami, Bend, Nashville, or back to their hometowns. The city has shed high earners but retained its long-term residents, the opposite of Detroit's pattern.

By 1962, only Chrysler and Cadillac assembled vehicles in the actual city of Detroit. The factories moved. The physical economic activity moved. San Francisco's tech industry has not physically moved in the same way — even with remote work, most major companies still operate offices in San Francisco. Apple is in Cupertino, but Apple was always in Cupertino. The companies that defined Web 2.0 still have headquarters in or near the city. The exodus is of workers and personal residences, not of the underlying economic base.