Why Conservatives Hate San Francisco's Nancy Pelosi (it has nothing to do with communism and everything to do with the disruption of markets)

Republicans really hate Nancy Pelosi. Last week, in the midst of a pandemic taking 1,000 lives a day and a reminder that we still have 11 million newly unemployed people, the most popular story on Facebook was about Nancy Pelosi's haircut. On a related note, I've seen a number of Trump fans holler about how a vote for Biden will be a vote for socialism or communism, some of it explicitly tying this charge back to Pelosi who - in their eyes - apparently is a socialist or represents a socialist part of the country.

Nancy Pelosi -Democrat - is the Speaker of the House. Mitch McConnell - Republican - is the Senate Majority Leader. There are 535 members of Congress but these two easily have the most influence on legislation. By comparing the regions that elected them as representatives, you can learn a lot about who Republicans and Democrats are.

Kentucky is the 2nd most dependent state in the union, taking in far more money than it pays in taxes. California is 41st on that list.

Kentucky had 39 startups attract $743 million in venture capital in 2018. San Francisco had 1,127 startups attract $24 billion in venture capital, 30X the number of startups and venture capital in spite of the fact that San Francisco's population is only 20% that of Kentucky's. No Republican has explained why venture capitalists are so enamored of the communists in San Francisco but so avoidant of the capitalists in Kentucky.

Average income in San Francisco and % of folks with a BA are both 2.4X higher than in Kentucky. In Pelosi's San Francisco, households make nearly $100,000 more than those in Kentucky. In January, the unemployment rate in Kentucky was twice as high as it was in San Francisco.

The Republican - Democratic divide along with income is not limited to Kentucky and San Francisco. Of the 8 states with the highest per capita income, Biden is strongly favored to win all 8 (per fivethirtyeight's forecast 6 Sep). Of the 8 states with the lowest per capita income, Biden is favored to win only one. This November, the other 34 states will be deciding whether to follow the lead of the communities that host Silicon Valley, Wall Street and Harvard and MIT or to follow the lead of rural Mississippi, Alabama and Kentucky.

How do politicians like Mitch McConnell manage to convince so many folks that the socialists are in San Francisco and the true capitalists are in Kentucky, a state that manages to attract lots of government subsidies but very little venture capital? In other words, a region highly dependent on the government but not capital markets?

Maybe it is because markets are disruptive and the real issue for Republicans is a preference for tradition over the disruption of change. The whaling industry was made obsolete by oil wells. Oil wells are being made obsolete by solar panels. Progress has little respect for tradition and for conservatives, tradition is more important than markets.

William F. Buckley was the right's favorite intellectual for decades. His most telling quote was, "A conservative is someone who stands athwart history, yelling 'Stop!'"

The Bay Area is not communist. It does, however, represent a threat to tradition. It continually tries new things with less regard for tradition than perhaps any other region of the world. Now California governor Gavin Newsom was the first elected official in the country to grant same-sex wedding licenses when mayor of San Francisco. Dee Hock - former founding CEO of VISA - helped to invent the modern credit card in San Francisco. Genentech was founded there, the first company to dare turn genetic code into intellectual property, starting the biotech industry which threatens to change humanity at a its most basic level: our DNA. For many conservatives, this sort of entrepreneurship, innovation and social invention is more threatening than any socialists. And yet it is the natural culmination of market economies, the very opposite of communism.

Acting on Forecasts Rather than Proof

The forecasts for COVID-19 deaths are falling. That's wonderful news. It turns out that measuring the cost for exponential growth of a virus has something in common with measuring the value of startups. It is subject to error but can still inform you how to act.

One key lesson is to move first and move fast. By the time you have data proving the value of a startup, you pay far more for it. Similarly, by the time you have data proving the severity of a virus, you pay far more for it.

Number of deaths thru 11-Apr:
San Francisco: 14
New York: 6,898

"[San Francisco mayor London] Breed ordered businesses closed and issued a citywide shelter-in-place policy effective on March 17, at a point when San Francisco had fewer than 50 confirmed coronavirus cases. (California Governor Gavin Newsom followed with a similar statewide order 19 March.) On that date, New York City already had more than 2,000 positive cases. But New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio, reluctant either to shutter schools or issue a stay-at-home directive for the nation’s largest city, didn’t take similar action for several days. By the time New York City fully shut down on March 22, more than 10,000 cases were reported across its five boroughs." [From the Atlantic, "The City That Has Flattened the Coronavirus Curve"]

5 days can make a big difference when facing a virus that spreads or contracts exponentially.

I see people wondering how stock prices can go up when we're still in a pandemic. Stock prices represent an attempt to price an endless stream of future profits. It is true that the Dow is up 30% in the last couple of weeks. It is also true that it is still down 25% from its peak a couple of months ago. Stock prices fluctuate because people are trying to estimate something in the future that is continually changing as events and best estimate methodologies change. Investors still agree that the coronavirus and measures to protect against it have lowered the value of future profits; their margin of error in estimating that means that stock prices are going to fluctuate. A lot.

I see people dismissing the models forecasting coronavirus deaths as being wrong. Models are always wrong but that doesn't mean that they aren't helpful. One catch-22 with models and policy is that the group taken least seriously could be proven most accurate. What do I mean? Let's say that we had ignored the coronavirus warnings from experts and continued as normal - never socially distancing and not changing anything. In that scenario, New York would be a best case for cities and fatalities would be multiples of what they are now. We could easily have 1 million deaths rather than 100,000. The best-case forecasts would now seem tragically naive. On the flip side, if we listened to those who warned of the worst and took serious measures to protect against that, moving fast and dramatically, the worst-case forecasts would now seem morbidly pessimistic. We would have far less than 100,000 dead and would never come close to a million. Even without behavior change, forecasts of anything that grows or contracts exponentially are likely to be off. Hugely. The outcome could easily be 10X or 1,000X better or worse given just small changes in the rate of contagion or mortality.

Early investors in Apple likely never once stopped to think that it could be worth a trillion early the next century. But they didn't have to know it would be worth that much to know it was a good investment. Given the Bay Area is the epicenter for trying to value the future, it is unsurprising that it would become a model for how to minimize the harm of a virus. Among the many things the folks in the Bay Area have learned is that it is better to move first to pursue a possibility - whether that possibility is avoiding fatalities from a pandemic or owning shares of a startup that later make you rich - and then learn from and adapt to reality than it is to wait for the data to come in and by then to have missed your opportunity.

As the future comes at us with increasing speed, the ability to quickly assess what models suggest rather than what data confirms could make all the difference.

The Test for Gods and Worldviews

Once upon a time people had a fairly simple test for the power of a God. They simply wanted to know, did he help you to win battles? Constantine supposedly adopted Christianity before a major battle and then won it, cementing his conversion and prompting him to make Christianity the official religion of the Roman Empire.  When Romans proved themselves stronger with their god, other communities took this as proof that this was the god to worship. A few centuries later, a similar wave of "proof" in the form of power and conquest swept down the silk routes from northern Africa to China with Islam.

It is easy to mock this test but it's not the worst test of efficacy; does adopting your god make us more powerful, more able to get what we want? For whatever limits we have in making arguments or accepting data that contradicts deeply held beliefs, we might still benefit from this simple test: does that worldview make people prosperous or poor? Does it give you the power to live a life of your choosing?

Right now facts seem to have gone out of style. Republicans and their president have largely dismissed the importance of facts, particularly the ones that challenge their worldview. People worry that the party - the country even - will never recover and will be hijacked by irrational worldviews that weaken the country. It might.

I think, though, that this worldview is too ineffectual to last long.

In San Francisco, average household income in 2015 was $119,406. In West Virginia average income was less than half that, $56,425.  Less than half of San Francisco's population is white; 94% of West Virginians are white.

Making the assumption that every baby has the same potential at conception - regardless of race or gender - San Francisco is obviously doing a better job of creating prosperity for its residents. It might be that their residents are genetically superior to West Virginians who suffer from a lack of racial diversity; or it might be that the worldview of San Franciscans is more effective than that of West Virginians.

There are a variety of ways to define the difference in worldview but one simple one is to look at how these two communities voted. Fewer than 10% of San Franciscans voted for Trump; more than two-thirds of West Virginians did.

One of two things will happen in our country. Either the Trumpian worldview will spread like a virus and the country will become like West Virginia, a place where Trump holds rallies when he wants comfort. Or people in places like West Virginia will see the worldview of the people in San Francisco - a worldview that embraces diversity and disruption, a place that funds startups rather than tries to protect a coal industry that first emerged in 1740 - as more powerful and adopt it. If the first happens, the country will look back at the 20th century as a golden time; if the second happens, West Virginians will look back fondly at the time that their grandparents adopted a new worldview that made them prosperous and powerful rather than poor and angry, roaring approval of a man who manages to connect with facts only about 25% of the time.

Why Crowded Cities Provide the Space for Creativity

One reason that women migrate into cities is because they are more free to create their own lifestyle. At the extreme, you can think of the girl raised in a Taliban village who would be free to choose whether to wear a veil or jeans and t-shirt if she moved into the anonymity of a big city in the West. To a lesser extent, even moving from a small rural area where people don't just know you but also know your grandparents will make it easier for a young girl raised Amish, say, to pursue a career and buy a BMW without accusation of being pretentious.

Curiously, this freedom leads to innovation, both technological and social. It's not just personal lives that get invented within the anonymity of a city: a handful of cities generate more patents than the rest of the country combined. 

20 cities generate 63% of all patents in the US.

The research universities that are within these regions help to provoke a great deal of the innovation. They also tend to cultivate a spirit of openness and tolerance for new ideas and dis-respect for authority that fosters innovation. People in these innovative cities are more likely to be individualistic and are less family oriented than folks in less innovative cities. Innovation isn't something that gets neatly contained to work.

When you socialize with folks you know well -and who know you well - you are less likely to encounter new ideas. Job leads tend to come from folks outside of your immediate circle of friends. More than that, loose acquaintances are people with whom we're free to try on new ideas and new ways of being. Someone from a  small town who knows that you get your half grin from your grandpa are less likely to let you become someone new than an acquaintance in a city who barely knows you. This freedom not only lets the Amish girl wear lipstick but it lets the inventor explore new ideas The more varied our interactions, the more potential for novelty.

I have spent considerable time in 6 of the top 10 cities in the list above. They are characterized by what I'd call personality. Santa Cruz, Boulder, and Austin share a very similar vibe and the folks living there certainly don't match the description conservatives would give of capitalists. These are places that aren't merely tolerant of diversity: they celebrate it. The 6 cities I know lean left - to a considerable degree. They are places that are more likely to support people than judge them, less likely to require drug testing for welfare recipients than to legalize pot. It is in these milieus from which creativity emerges. It's not just that conservatives have very little support among creative types in the arts; conservative cities and rural areas have very little patent activity. When I lived in Santa Cruz in the early 1980s, it was the only city in the US with an openly gay, communist mayor. Austin has a campaign to "Keep Austin Weird." Yesterday I ate in Native Foods in Boulder, a place that more traditional communities might chuckle at for its unabashed embrace of organic, vegan food. It's little wonder that these communities are cradles to new ideas. It is, to me, no coincidence that 3 of the top ten cities in this list are in California's Bay Area, a place where people seemingly feel little compunction about conformity - whether in thought, dress, or lifestyle - a home to the Free Speech Movement that helped to usher in "the 60s." 

All cities - and some more than others - provide space for the individual to step outside of tradition. Unsurprisingly, being open to novelty is a package deal: whether you first open the door to social invention or technological invention, the disrespect for tradition is likely to spill into all walks of life. 

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Graphs are from a Brookings report here. Claims about how people in different cities poll on topics like family or individualistic tendencies come from p. 143 of Bill Bishop's The Big Sort.