Original Title: What's That Smell in San Francisco?
Original Author: Spencer Yen
Original Translation: Peggy, BlockBeats
Editor's Note: San Francisco is re-emerging as a crossroads of technological revolution and financial bubbles. AI companies, research labs, venture capital, outdoor advertising, and gossip networks together create a highly frenzied urban atmosphere: some are pushed forward by valuations and equity packages, others are immersed in AGI doomsday imaginings, and some view math competition geniuses as the gateway to the next generation of excess returns.
The author starts with the line "I smell money" from "The Big Short," recording his observations after moving from New York to San Francisco: the city's technological density, wealth creation, and information asymmetry are real, as are the anxiety, comparison, and Big Bubble Behavior. When AI becomes the only status game in San Francisco, innovation, speculation, faith, and fear begin to blend, forming the most intuitive live sample of this round of AI fever.
The interest of this article lies not in hastily judging when the bubble will burst, but in presenting how the bubble occurs: how people talk, compare, invest, and feel anxious, and how they seek their place in the narrative of "the future is coming." The music is still playing, the party is not over yet, but the author ultimately reminds himself and everyone involved: you can dance, but don't get drunk.
Here is the original text:
One of my favorite movie scenes is the Jenga scene in "The Big Short": the character played by Ryan Gosling pitches the hedge fund team led by Steve Carell on a deal to short the U.S. housing market.
In that conference room, he has a self-confident jerk aura, accompanied by three props: his sidekick Chris, his quant Jiang, and Jenga blocks embossed with mortgage bond ratings. The opening line is also brilliant: Do you smell that? What is that smell? Perfume? No. Opportunity? No. It's money. I smell money.
https://www.youtube.com/watch?v=YgF98vyn2fY
A few months ago, I moved from New York to San Francisco to join a friend's startup. Before moving, everyone told me, "You have to go to San Francisco," saying that's where everything happens. So during this time, I've been grappling with one question: Is San Francisco really that important? Did I miss something while I was in New York?
So far, my answer is: If you want to be in the center of this huge technological revolution and bubble, then this really is the place to be. The density here is real, the gossip networks are real, and that's why the information asymmetry is also real.
During my time in San Francisco, I've accumulated some observations and thoughts. Here are the things that I've "smelled" in San Francisco:
1. People are all trembling
2. There's only one status game here
3. A city that is always screaming "wolf is coming"
4. An obsession with math geniuses
What shocks me is how starkly different people's experiences can be in the same city—walking on certain streets, you might unfortunately feel like you're in hell; change to another street and you can see the bay, distant cypress trees, and beautiful scenery. The most futuristic, techy moments here probably come when watching various self-driving cars meandering through the streets. Every time I see those new, friendly light blue Waymo vehicles, I can't help but smile. Or you might feel like you're being watched by Ava, this AI BDR (Business Development Representative). I hate that ad. But I have to say, they've used "anger bait" to successfully make me mention it even now. Every morning, when I step out of my apartment, the monster I see is this:
Why does everyone go graffiti friend.com but not graffiti this trash ad? Also, if you live nearby, let’s go eat ice cream together!
People in San Francisco are trembling
A few weeks ago, I hung out with my friend Jared (@imjaredz). He lives in New York but recently joined Cognition. We had lunch and coffee at the Cognition office. The atmosphere was nice, the coffee was great, and the rooftop was awesome. I asked him what he thought of the vibe in San Francisco.
"Did you notice that people in San Francisco are trembling?" I laughed, thinking: What? Trembling? Then I realized I had consumed 300mg of caffeine after drinking cold brew that morning, so I was a little shaky too. "Yeah, it's literally trembling. I'm not against everyone being pushed to the edge of ADD, but you might want to keep an eye out for it next time you have a coffee chat—see if they’re trembling."
Bubbles and booms bring a kind of restless energy, as if there’s no chance if you don’t "make it" now. I can't escape it either—after Jared reminded me, I found that I sometimes felt like I was trembling too. That meme of "desperately hustling, escaping the permanent underclass" has been beaten to death, but every meme's popularity has some degree because it captures the zeitgeist. If nightlife is the heartbeat of a city, also a thermometer defining its culture, then what does it say when a 24-hour café of a "dog startup" becomes the de facto nightlife hub?
Trembling is part of the technological revolution and financial bubble process. Next, I incorporated AI into this writing; if you want to kill me for it, I apologize in advance. But when I was Googling Carlota Perez, looking for quotes, I really liked Gemini's summary of the "Frenzy Phase":
Frenzy Phase: The peak of the installation period, where market psychology abandons fundamentals. Financial participants pursue capital gains rather than dividends, resulting in the decoupling of the "paper economy" from the "real economy."
Source: https://stratechery.com/2021/the-death-and-birth-of-technological-revolutions/
A friend of mine coined a term called "Big Bubble Behavior." It's a lovely expression that I've been using to label everything that fits the characteristics of the frenzy phase over the past two weeks. Market euphoria sometimes leads people to make irrational choices. Trembling is Big Bubble Behavior. I've seen plates of lobster tails twice in my life: the first time at a crypto party in a Venetian Island mansion in Miami in 2021, and the second time at ClawCon in 2026.
Big Bubble Behavior
There is only one status game in San Francisco
David Foster Wallace, "This is Water": https://fs.blog/david-foster-wallace-this-is-water/
In San Francisco, that water is AI. Outdoor advertisements are everywhere—billboards, buses, bus stops, shared bikes, even the blue sky seems occupied by it.
My concern about San Francisco is that there is only one dominant status game here—technology. When you go out for dinner or stroll in the park, you hear the same batch of words. You will also see various kinds of "alpha farming" behavior, as those gossip networks truly exist. And I can’t even be angry because I'm one of those people. Don’t hate the players; if you’re going to hate, hate the game.
The problem is that when a city has only one dominant status game, it's too easy to compare yourself to others.
We increasingly measure and compare each other using some vanity metrics, such as how much money we’ve raised, or at what round your company is at in the alphabet. I really wish someone could raise a Series Z, because that would directly prove how absurd the private market has become. You hear all sorts of gossip: which hot startup is being pursued by financial players, and what scorching valuation they’ve reached. Then you can’t help but start doing that nauseating, Blind-style reverse math calculation: how much someone's equity package is worth now.
I told a friend that if you saw that reverse compensation math and optimization offers on Blind, you would be embarrassed to your toes. Blind is that anonymous large company social network, and its most famous meme probably is: "I'm going through a midlife crisis, my wife might leave me, but do you think I should take the L6 at Meta or the L9 at Google? TC: $969,000." So why are we doing the same thing here now? Go touch some grass. Or maybe, it's just my cope.
In New York, at least 7 status games coexist. Finance, law firms, music, fashion, the celebrity circle, old money family offices, news, sports, entertainment. Because the scope is so wide, some games are far enough to be almost unreachable, making them interesting to talk about and learn. It disperses the attention of all the ambitious people.
I enjoy asking law school friends about which top law firms are the most prestigious, and I also enjoy understanding the subtle differences between each; I enjoy learning about the fashion and luxury world, and what it takes to survive in that industry; I also enjoy learning about the privileged life of quants and their arrangements for garden leave.
San Francisco is creating unprecedented wealth, which brings a strange energy. A friend who does research mentioned that the people around them are already looking into buying land and diversifying their assets into scarce resources. There’s a feeling here: you’re either someone who owns laboratory equity or you’re not. There’s a joke that says San Francisco people don’t know how to spend money; this strange energy comes from the large amount of new wealth being created, but people don’t know what to do with it. First-time sudden wealth? Let experienced rich kids show you how to enjoy life.
"Super Rich Kids"—Frank Ocean: https://www.youtube.com/watch?v=0XCQNpjWmRE
A city that is always screaming 'wolf is coming'
My first impression of San Francisco is a sense of apocalyptic emotion. Maybe the researchers in the labs really see some kind of "second coming." If so, their calls to slow down and emphasize safety are certainly reasonable. But I can't really know. The only thing I know is how this doomsday thinking makes me personally feel—not good!
I’ve had quite a few nihilistic conversations, generally revolving around: "If Mythos could wipe all this out at once, or slash through everything, then what are we doing here, writing software?" and "Will AI destroy our lives?" and "Will AI lead to huge inequality and bring a lot of pain to society?"
One thought I have here is: humanity always finds other things to do, work will migrate to higher levels of abstraction, and new things will become valuable.
We are not very good at predicting what future society will look like. I feel the angry direction of those anti-capitalists I read in college was actually wrong—imagine what their reaction would be if they saw humans derive joy from AI-generated fruit garbage videos or "Tung Tung Tung Sahur" from Italian brain rot.
"The problem isn't that AI makes content dumb, [sniff], but that we enjoy this dumbness, treating it as a sacred garbage, a digital fetish, [sniff], right?"
From my friend Samir. His resume reads: not a researcher, but he has a "fish brother."
Does anyone else have their own "such-and-such brother"? Please tell me.
A friend working in a lab pointed out that the GTM (Go-To-Market/Sales/Growth) team and the research team within the same company actually have completely different life experiences right now. That kind of apocalyptic thinking is balanced by another thing: "Come play with the GTM team, have a beer, touch some grass." The pessimism of model creators and the optimism of those closest to technology implementation are indeed worth pondering. It's time to get Forward Deployed!
Reality has a surprising amount of detail: https://johnsalvatier.org/blog/2017/reality-has-a-surprising-amount-of-detail
Six years ago, when I was still in college, I wrote on how AI reshaped social structures, titled "Polanyi and the Second Great Transformation" (no need for Pangram AI detection, Medium before 2023 was like an organic farm of human writing).
Let me explain this citation: Karl Polanyi was an economic sociologist from the Austro-Hungarian Empire, his seminal work is "The Great Transformation." Written in 1944, this book critiques the rise of modern market capitalism in 19th century Britain. So, the "First Great Transformation" refers to the transition to capitalism, while I, thinking I was clever at 21, referred to AI as the "Second" Great Transformation... you know.
Polanyi's most famous concept is the "Double Movement," which describes a historical push-pull phenomenon: on the one hand, free markets continuously expand; on the other hand, society produces a counterforce, attempting to protect itself through regulation. The first movement is capitalism's elites attempting to expand free markets and commodify society; applied today, it is the commodification of intelligence. The second counter-movement is how people respond to the destructive nature of market forces, attempting to protect society; applied today, that refers to anti-AI, anti-data center rhetoric.
This is what I naively wrote at 21:
Polanyi explains that the development of machines for production leads to the "fictional commodification" of labor (humans) and land (nature). Even though the Fourth Industrial Revolution has occurred within a market system, the arrival of mechanical mentality brings a different threat: job takeovers. As computers can complete more "human" cognitive tasks with higher efficiency, many ordinary people may lose their jobs.
Polanyi wrote: "Nothing can save the ordinary people of England from the shock of the Industrial Revolution. Blind faith in spontaneous progress has occupied people's minds..."
https://medium.com/@spenceryen/polanyi-and-the-second-great-transformation-6d6364b5d3c6
So thinking back, maybe those who keep shouting "wolf is coming" really have a point. Blind faith in spontaneous progress may not yield good results. Polanyi's critique of market capitalism is that for most of human history, economic activity has been subservient to social, cultural, and religious systems. But later, market capitalism inverted that relationship, making society subservient to the economy.
How can we ensure that society does not become subservient to a nation composed of geniuses in data centers? As Ben Thompson accurately pointed out in his article on Anthropic's Mythos, the punchline of the "wolf is coming" story is that the wolf really comes.
But what would my inner capitalist think? Let’s invest in social, cultural, and religious institutions! If you have any good deal ideas, feel free to DM me your pitch.
Obsession with math geniuses
Another favorite line of mine from the Jenga scene in "The Big Short" is when Ryan Gosling points at the Chinese guy next to him and says, "That's my quant." This atmosphere has an eerie similarity to the recent crop of hot founders pursued by investors—they often come from backgrounds as math competition prodigies.
Still Ryan Gosling, responding to Steve Carell's doubts:
"So you mean, once the default rate hits 8%, these bonds will collapse, and it's already at 4%? If it rises to 8%, that means the end of the world?" "Yeah, exactly." "Why is no one talking about this? Are you completely sure about this mathematical model?" "Look at him. That's my quant." "Your what?" "My quan-ti-ta-tive, my math expert. Look at him. You haven’t noticed what's different about him? Look at his face." "That sounds pretty racist." "Look at his eyes. I’ll give you a hint, his name is Yang! He won the national math competition in China, doesn’t even speak English! So yeah, I’m very sure about this mathematical model."
In the eyes of some investors, a key predictive indicator for assessing a fund’s DPI (Distributed to Paid-In Capital) seems to stem from the founder's childhood—either he was a math competition prodigy as a kid, or he has some childhood trauma. I grew up in the Bay Area, and my perception of my math abilities was shattered early because my genius classmates were all involved in the math competition scene. Now, most of them have become quantitative traders or gone into big model labs as researchers.
I clearly remember a scene from seventh grade: My dad and I were flipping through sports channels on the home TV, and I saw my middle school classmate on ESPN2... he was competing in the Mathcounts competition. At that moment, I knew my path was over. I jokingly say that when I started playing the "hustle college applications" game in ninth grade, I knew I could never compete with those Intel STS, RSI, AIME, USACO kids, so I had to find my own set of rules.
I greatly admire many of these outstanding CEOs, founders, and researchers, and I have indeed financially bet on one of them. But I find it funny that there is now a complete asset class and investor narrative formed around “cultivating the smartest math competition kids and treating them as tickets for excess returns.” Thinking about it, it’s not so different from scouts looking for the next Wemby (Victor Wembanyama). However, I also want to believe in the story of Jalen Brunson—that hard work, perseverance, and ambitions can win as well.
Reveling like it's 1999
https://x.com/elonmusk/status/1656326406618619910
A very wise investor once gave me two pieces of advice:
First, you will experience three bubbles in your life.
During the first bubble, you will be completely immersed in ecstasy. You have no experience, join the party, and get swept up in the fervor.
During the second bubble, you remember what happened the first time, so you can exit with some victories, but you’ll still likely get caught up a bit.
Only during the third bubble do you have the opportunity to create intergenerational wealth—you've accumulated enough experience from the first two to know how to manage risk, emotion, and timing of exit.
The second piece of advice is: When the music plays, go dance, but don’t get drunk.
Now the music is deafening, possibly about to break the sound system. But a bigger backup sound system is being built, clearly the party is not over yet.
This is a reminder for myself and for everyone who needs to hear this: Remember to touch some grass, cook for yourself, don’t let Big Bubble Behavior distort your judgment. To borrow the wise words from my friend Samir: let’s have a barbecue together soon. Do you know anyone selling fish?
From Peter Thiel's "Zero to One."
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