Tech says the Bay Area ‘demonized capitalism,’ but is Miami the solution?

“How can I help?” Francis Suarez tweeted.

Millions read the mayor’s tweet, and the idea began to take hold, making Miami the noisiest tech upstart during the pandemic.

Soon Asparouhov and his Founders Fund colleague Keith Rabois, a veteran of PayPal and LinkedIn, made the move to Miami. So did Jack Abraham of venture capital firm Atomic.

The two companies both leased space in a boutique, glassy office building in Wynwood, Miami’s arts district, which was filled with neglected warehouses just a few years ago. Their neighbors are Uchi, a sushi restaurant with $100 tasting menus, and Panther Coffee, Miami’s answer to Blue Bottle. Startup incubators have replaced artist studios.

Then the giant Japanese tech investor SoftBank committed $100 million to fund Miami area companies. The Magic City was on a hot streak.

But economic reality still lags digital hype in Miami’s tech quest.

 Tech says the Bay Area demonized capitalism, but is Miami the solution?

An office building is under construction in the Brickell neighborhood of Miami, a city whose economy relies on service workers.

Photos by Alfonso Duran / Special to The Chronicle

Along the sunny coast, dozens of towers are perpetually under construction, but they’re almost all for hotel guests or wealthy condo buyers, not legions of tech workers. Cruise ships and tourists have returned to downtown and revelers have crammed bars throughout most of the pandemic, but the city’s economic recovery has been sluggish.

Miami’s office vacancy rate is 16.9%, the highest rate since 2013, according to real estate brokerage Avison Young. Miami-Dade County’s unemployment rate was 7.1%, in June, worse than the national and state average.

Despite prominent Bay Area transplants, in 2020 the Miami metro area had a net loss of 42,100 people who filed change of address notices with the U.S. Postal Service, according to an analysis by real estate brokerage CBRE. It was an 11% steeper loss from the previous year. LinkedIn data shows that over the past 12 months, ex-New Yorkers were by far the biggest group moving to the Miami-Fort Lauderdale area, while the Bay Area was just the sixth biggest source for new arrivals.

There’s also a lack of engineers. CBRE ranked South Florida, including Miami, Fort Lauderdale and West Palm Beach, as the 37th best North American market for tech talent, behind Rust Belt cities Detroit and St. Louis, and even below Florida’s Tampa and Orlando.

South Florida had 12,677 tech graduates from 2015 to 2019, but only 10,280 tech jobs added from 2016 to 2020, indicating a “brain drain,” CBRE said.

“South Florida lacks the educational and research infrastructure that anchored the emergence of Silicon Valley, the (North Carolina) Research Triangle or Austin. No Stanford University or the University of Texas here,” said Alejandro Portes, a Princeton sociology professor and author of two books on Miami. He said he believes Miami “is not a tech city and is not likely to be in the future.”

“Despite all the hoopla from Mayor Suarez, those likely to come to Miami are financial and real estate investors, as well as commercial and tourist-oriented firms drawing on the established strengths of the area. Miami has a solid labor supply to meet the needs of such firms, but not high-tech and engineering ones,” Portes said.

But Ken Russell, a city commissioner who represents downtown Miami, said he believes the city’s reputation has changed during the pandemic.

“We’ve never had a tangible migration. We’ve had one-offs. We’ve had companies that have come in, but nothing where there was this much energy around an attraction to Miami,” he said. “It’s not from a single tweet. This is a real thing happening.”

It’s still early. Many of the tech movers are executives and managers, and it’s unclear whether more rank-and-file workers will follow, Russell said.

“The question is, how many of them actually bring over an actual infrastructure of work? If they’re able to do it remote … then we become a symbolic tech hub,” he said. “If the companies are based here, but there’s not actually much work being done here, it doesn’t really pass the test.”


Miami’s challenges are stark.

The city’s income inequality, exacerbated by its appeal as a safe piggy bank protected by U.S. laws for international business moguls, means it’s one of the least affordable housing markets in the country when income is factored in, Russell said. The gleaming towers of downtown Miami and nearby Brickell, the city’s financial center, are a testament to the city’s wealth, but the tourist-driven economy is heavily dependent on service workers. A 2019 study found Greater Miami had the second-worst inequality in the country, behind only New York, with 47.8% of the the workforce in low-wage service jobs with an average salary of $26,532 a year.

“If you saddle a tech boom on top of that … does that actually even pinch our middle and lower class and our housing crisis even further?” Russell said.

There’s also the existential question of sea level rise and who pays for protection. The Army Corps of Engineers has proposed a $6 billion sea wall across 6 miles of downtown and Brickell, a plan that locals are concerned will hurt property values because of its ugliness.

The catastrophic collapse of the Surfside condo tower, just north of the city of Miami Beach, raised concerns about the region’s aging buildings and could dampen more in-migration. And Florida’s coronavirus cases and hospitalizations are at record highs.

Still, both new and old Miami groups are trying to bolster tech. In February, the Knight Foundation, the Miami powerhouse philanthropic nonprofit, committed $15.3 million in grants to promote tech and science at local universities. It’s invested in tech groups for a decade, including the Lab Miami, a co-working space. Miami Connected is an effort to bring internet to 100,000 households in the county. This month, hundreds came to attend the first Miami Hack Week, whose goal is to recruit 5,000 engineers to Miami.

 Tech says the Bay Area demonized capitalism, but is Miami the solution?

Melanie Ensign, the CEO of cybersecurity startup Discernible moved to Miami in part to get away from the Silicon Valley culture. Now, she’s seeing an influx of tech people and culture that she says might not be a good thing.

Alfonso Duran/Special to The Chronicle

Mayor Suarez wasn’t available after repeated requests for comment, but he has said that a tech boom would lift up all residents, keeping natives working in Miami instead of fleeing to other cities, while bolstering tax revenue for public works.

The mayor, who is a moderate Republican, has far less power than many other big city leaders, with no vote on legislation, no control over the budget and no city staff oversight — the domain of the city manager. The Miami-Dade County mayor, Daniella Levine Cava, oversees a bigger region that has six times the population of the city of Miami. (In 2018, voters rejected a Suarez-backed ballot measure that would have bolstered his power.) Suarez also works as a real estate attorney and private equity investor.

What Suarez does have is a bully pulpit, and he’s become one of the biggest cheerleaders for any city during the pandemic’s economic dispersion.

Case in point: bitcoin.

In February, Suarez asked the City Commission to study paying employees in bitcoin and potentially investing in it, though that would be illegal under state and federal laws.

The city is looking into helping workers exchange their dollars into bitcoin, and the city is now exploring the creation of its own cryptocurrency called MiamiCoin, which could help fund public projects. In June, the city hosted the largest bitcoin conference to date, with 12,000 attendees. A follow-up conference is scheduled for April.

“He wanted to send a strong message to the world of tech that this is a place that is open-minded,” Russell said. “If this is the language you speak in terms of currency and investment, we want you to know that we’re learning that language as well.”

Suarez hails Miami as the new “capital of capital,” drawing both Wall Street south and the tech industry east. Some ex-Bay Area residents have joined his evangelism.


Sizhao Yang, co-creator of the hit video game “Farmville” and now a venture capitalist, moved to Miami from San Francisco in the spring. He said his old home felt irrevocably broken.

“I’ve been in the Bay Area for 10 years, and you just don’t see California and the Bay Area improving. Nothing ever changes: no infrastructure, no public transportation, no housing,” he said.

He faults elected officials and entrenched policies. “There’s a lack of understanding of supply and demand with housing. And then because of that, they basically blamed tech for everything,” he said. “The Bay Area has now demonized capitalism.”

The pandemic has unshackled tech workers from having to be in the Bay Area, and Miami is ready to welcome them, Yang said.

Florida’s lack of state income tax means government budgets are highly dependent on property tax revenue going up, which means encouraging more housing construction. Yang calls it far more progressive than the “regressive, conservative” policies of the Bay Area.

“In five, 10 years, I think it’s going to be one of the top hubs,” Yang said. “A lot of professionals are now mobile.”

“I would say, without an exaggeration, 90% of my entrepreneur and investor network inside San Francisco have left the city” to places like Miami, Austin and Los Angeles, he said. “I’ve been very pleasantly surprised. I felt like I would be leaving my entire network. Instead, the network basically arrived here.”

And there was San Francisco crime, what Yang calls a “breaking point.” Yang said his car was broken into five times, friends had intruders in their apartments and laptops were snatched from cafes.

He feels “a lot safer” in Miami, although someone unsuccessfully tried to steal his car by masquerading as him at a valet pickup. He said it beats break-ins.

Homicides are up in Miami-Dade County, mirroring a nationwide trend, but burglaries and robberies fell in the first half of 2021 compared with last year, according to police data. Homicides also rose in the Bay Area’s biggest cities, while San Francisco has seen a spike in burglaries.

In May, Yang summed up the contrast on Twitter, citing San Francisco’s “overwhelming crime,” “pervasive drug use” and “syringes and feces on the ground.”

Two days later, he was tweeting about the Miami area’s “warm water with beaches, salads with picanha, roasted branzino with kimchi” and “optimism everywhere.” Yang said he’s been able to convince roughly one small startup a week to move to Miami.

In Miami, “everybody’s happy. The government isn’t fearing or penalizing success, and that’s unusual for people in tech,” Rabois, the Founders Fund venture capitalist, said at a recent Miami Herald panel, describing his flight from California as escaping an obsolete “Ancien Régime.”


Some Californians moved to Miami to escape tech and were unpleasantly surprised.

Melanie Ensign, founder of the cybersecurity startup Discernible, was drawn to Miami for her ocean diving hobby. Last fall, she moved from San Francisco to split her time between Miami and Tulum, Mexico — renting in two cities is about the same as the nearly $3,000 she was paying in San Francisco.

She previously worked at Facebook and Uber, and being in the Bay Area was a definite career boost. But it always felt like a temporary phase for her.

“I don’t regret the time that I spent there. I think it really made my career, in a way, and I’ve met some amazing people,” she said. “I always knew that I wasn’t going to be there forever.”

“My social group in the Bay Area was so homogeneous. Everybody was in tech. We go out to dinner, and we inevitably end up talking about work, because that’s what we all have in common,” she said. “I need more balance in my life, I need more variety, and diversity of people and topics and activities.”

Little did she know, many tech workers would have the same idea.

“As somebody that’s coming from the Bay Area, I’m not thrilled about that. I see what tech did for San Francisco, and I don’t know that that’s necessarily good for Miami in terms of really catering to that specific industry,” she said. “I don’t want to go back into that cultish culture that I just came from. I didn’t move to Miami hoping that that would follow me. I was actively trying to get away from it.”

The expansion of venture capital firms is particularly concerning, she said. “I think the VCs are the most destructive force in tech,” she said. “It’s the VCs that empower and embolden the smaller startups who grow into Facebook and Google without any accountability or taking responsibility for the impact of what their business does to the community.”

She hopes to extend a better lifestyle to the people she hires, is setting limits on how much time her employees work, and is giving benefits, even to part-time contractors.

“I don’t want to work people into the ground. I come from that culture in the Bay Area,” she said. The pandemic “really changed my hiring strategy.”

Despite all the comparisons, Russell sees a Miami future that’s less about rivalry and more about self-determination.

“We have no grudge match with the West Coast at all. We’ve really lived in our own ecosystem here. We’ve been working on this for a long time,” Russell said. “We’ve never considered ourselves a head-to-head competitor. I think we’re very young in our phase right now of what’s possible, but we have the advantage of learning from what they’ve been through.”

“We’re still on the front end of the interest in hype,” Russell said. “I think the wave is yet to come. I think we’re just teetering on it.”

Roland Li is a San Francisco Chronicle staff writer. Email: roland.li@sfchronicle.com Twitter: @rolandlisf

Article source: https://www.sfchronicle.com/tech/article/Miami-wants-to-become-the-next-Silicon-Valley-It-16382946.php

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