Original Article Title: What's That Smell in San Francisco?
Original Author: Spencer Yen
Translation: Peggy, BlockBeats

Editor's Note: San Francisco is once again becoming the intersection of technological revolution and financial bubble. AI companies, research labs, venture capital, outdoor advertising, and a grapevine network collectively shape a highly frenetic urban atmosphere: some are propelled forward by valuations and equity packages, some are immersed in AGI doomsday imaginings, and some see math whizzes as the gateway to the next generation of outsized returns.

The author starts with a reference to "The Big Short" and the line "I smell money," recounting observations after moving from New York to San Francisco: the city's tech density, wealth creation, and information asymmetry are real, as are the anxiety, comparison, and Big Bubble Behavior. As AI becomes the sole status game in San Francisco, innovation, speculation, belief, and fear begin to blend together, forming the most tangible on-the-ground sample of this AI frenzy.

What makes this article interesting is not rushing to judge when the bubble will burst, but showing how the bubble forms: how people speak, compare, invest, and fret, and how they find their place in the "the future is coming" narrative. The music is still playing, the party is not over, but the author concludes by reminding himself, and all those involved: you can dance, but don't get drunk.

Below is the original article:

One of my favorite movie scenes is the Jenga block scene in "The Big Short": Ryan Gosling's character pitches a trade to Steve Carell's hedge fund team to short the U.S. real estate market.

In that conference room, he exudes a cocky confidence, flanked by three props: his sidekick Chris, his quant Jiang, and the Jenga blocks labeled with mortgage bond ratings. The opening line is also impressive: Do you smell that? What's 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 and joined 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 facing a question: Is San Francisco really that important? Did I really miss out by staying in New York?

So far, my answer is: If you want to be at the center of this massive technological revolution and bubble, then this is indeed the place to be. The density here is real, the grapevine network is real, and as a result, information asymmetry is also real.

During this time in San Francisco, I have gathered some observations and thoughts. Here is what I "smelled" in San Francisco:

1. People are shaking

2. There is only one status game here

3. A city that always cries "wolf"

4. Infatuation with math geniuses

What shocked me was how in the same city, the contrast in people's experiences can be so huge—walking on certain streets, you might unfortunately feel like you are in hell; turn a corner, and you can see the bay, distant cypress trees, and beautiful views. Perhaps the most high-tech, futuristic moment here is watching various self-driving cars roam the city streets. Every time I see that new, friendly light blue Waymo car, I can't help but smile. Or you might feel like you are being watched by Ava, this AI BDR. I hate that ad. But I have to say, they used "outrage bait" successfully to make me still mention it. Every morning, when I step out of my apartment, this is what I see:

Why does everyone go graffiti friend.com, but not graffiti this kind of garbage ad? Also, if you live nearby, we can go get ice cream together!

People in San Francisco Are Shaking

A few weeks ago, I was hanging 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 good, and the rooftop was great. I asked him how he felt about the vibe in San Francisco.

"Have you noticed that everyone in San Francisco is shaking?" I laughed, thinking: What? Shaking? Then I realized, I had cold brew in the morning with 300mg of caffeine, and I was also a bit jittery. "Yes, quite literally shaking. I'm not opposed to everyone maxing out their ADD tendencies, but next time you have a coffee chat with someone, pay attention—see if they are shaking."

Both the bubble and the boom bring a restless energy, as if if you don't 'make it' now, you will never have another chance. I am not immune either—after Jared pointed it out, I found myself sometimes seeming to shake as well. The joke of 'hustling hard to escape permanent underclass' has been told to death, but every joke that becomes popular does so somewhat because it captures the zeitgeist. If nightlife is the heartbeat of a city and also a thermometer that defines its culture, then when a "dog-friendly startup's" 24-hour cafe becomes the de facto nocturnal rolling ground, what does that signify?

Trembling is part of the process of technological revolution and financial bubble. Next, this time in my writing, I used AI. If you want to kill me for this, I apologize first. But at that time, I was Googling Carlota Perez to retrieve some quotes, and 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 no longer pursue dividends but turn to capital gains, leading to a 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." This is a very nice term, and I have been using it for the past two weeks to label everything that fits the characteristics of the Frenzy Phase. Market euphoria sometimes leads to irrational actions. Trembling is Big Bubble Behavior. I have seen a lobster tail platter twice in my life: the first time was at a crypto party in a mansion on a Venetian Island in Miami in 2021, and the second time was at ClawCon in 2026.

Big Bubble Behavior

In San Francisco, there is only one status game

David Foster Wallace, "This is Water": https://fs.blog/david-foster-wallace-this-is-water/

In San Francisco, that water is AI. Outdoor advertising is everywhere—billboards, buses, bus stops, shared bikes, and even the sky seem to be taken over by it.

My problem with San Francisco is that the dominant status game here is only one—technology. When you go out for dinner or take a walk in the park, all you hear are the same set of words. You'll also see various behaviors of "alpha farming" because those underground information networks do exist. And I can't even get mad because I am that kind of person too. Don't hate the player; hate the game.

The problem is, when a city only has one dominant status game, you're too easily drawn into comparisons with others.

We increasingly use vanity metrics to measure and compare ourselves, such as how much money you've raised, or which round your company has reached 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 kinds of gossip: which hot startup is being chased by financial players, and at what dizzying valuation. And then you can't help but start doing that nauseating, Blind-style reverse math calculation: how much is someone's equity package really worth now.

I told a friend, if you see that kind of reverse salary calculation and offer optimization math on Blind, you'd cringe to your toes. Blind is that anonymous Big Tech social network, and the most famous meme is probably: "I'm in a life crisis, my wife might leave me, but do you think I should take Meta's L6 or Google's L9? TC: $969K." So why are we now doing the same thing? Go outside and touch some grass. Or maybe this is just my way of consoling myself, cope.

In New York, at least 7 status games exist simultaneously. Finance, Big Law, Music, Fashion, Celebrity, Old Money Family Office, News, Sports, Entertainment. Because the scope is so broad, some games are so distant that they are almost unattainable, making it interesting to chat about and learn. It disperses the attention of all ambitious people.

I enjoy asking my law school friends which top law firms are 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 understanding the luxurious lives of quants, and their arrangements for garden leave.

San Francisco is creating unprecedented wealth, bringing a strange energy. A research friend mentioned that people around them are already researching buying land and diversifying assets into scarce resources. There's a feeling here: either you have equity in a lab, or you don't. There's a joke that San Franciscans don't know how to spend money; this strange energy comes from a large amount of new wealth being created, but people don't know what to do with it. First time getting rich quick? Let the experienced rich kids teach you how to enjoy life.

《Super Rich Kids》——Frank Ocean: https://www.youtube.com/watch?v=0XCQNpjWmRE

A City That Always Cries "Wolf"

My initial impression of San Francisco was a kind of apocalyptic vibe. Perhaps the researchers in the lab really saw some kind of "Second Coming," and if so, their call to slow down, emphasize safety makes sense. But I have no way of knowing for sure. All I know is how the apocalypse narrative makes me feel—not great!

I've been through my fair share of nihilistic conversations, with the general atmosphere being: "If Mythos could wipe all this out in one go, or pierce through everything, then why are we here writing software?" and "Will AI ruin our lives?" and "AI will create massive inequality and bring a lot of pain to society."

My take on this is: Humans will always find something else to do, work will shift to a higher level of abstraction, and new things will become valuable.

We are not good at predicting what future society will be like. I think those anti-capitalists I read about in college were actually off-target in their anger—imagine if they saw humans finding joy in AI-generated fruit garbage videos, or in the "Tung Tung Tung Sahur" from Italian brain rot.

"The issue is not that AI makes content dumb, [sniffles], but that we enjoy this dumbness, treating it as a sacred trash, a digital fetish object, [sniffles], isn't it?"

From my friend Samir. His bio: Not a researcher, but he has a "Fish Bro."

Who else has their own "Bro"? Please tell me.

A friend working in a lab pointed out that the GTM (Go-To-Market/Sales/Growth) team and the research team in the same company actually have completely different life experiences. That sense of doomsday is balanced out by something else: "Come hang out with the GTM team, have a beer, touch some grass." There is indeed something to ponder between the pessimism of model creators and the optimism of those closest to tech deployment. It's time to Forward Deploy!

Reality has an astonishing amount of detail: https://johnsalvatier.org/blog/2017/reality-has-a-surprising-amount-of-detail

Six years ago, while I was still in college, I wrote about how AI is reshaping societal structures in an article titled "Polanyi and the Second Great Transformation" (No need for Pangram AI detection, pre-2023 Medium is like a human-authored organic pasture).

Let me explain this reference: Karl Polanyi was a socio-economic scholar from the Austro-Hungarian Empire, known for his work "The Great Transformation." Published in 1944, the book criticized the rise of modern market capitalism in 19th-century England. Therefore, the "First Great Transformation" refers to the shift towards capitalism, while at 21 years old, I arrogantly dubbed AI as the "Second" Great Transformation... you get it.

Polanyi's most famous concept is "The Double Movement," which describes a historical push-pull phenomenon: on one hand, free markets keep expanding, and on the other, society generates a backlash, attempting to protect itself through regulation. The first movement is where capitalist elites seek to expand free markets and commodify society; in today's context, it's the commodification of intelligence. The second countermovement is where people react to the market-driven destruction and try to safeguard society; in today's world, it's the anti-AI, anti-data center rhetoric.

This was my naive university student writing at 21:

Polanyi explained that the development of machines for production led to the "fictitious commodification" of labor (human) and land (nature). Although the Fourth Industrial Revolution has occurred within a market system, the advent of artificial minds poses a different threat: job takeover. As computers become capable of efficiently performing more "human" cognitive tasks, many ordinary people may lose their jobs.

Polanyi wrote: "Nothing can save the common people of England from the impact of the Industrial Revolution. Blind faith in spontaneous progress has taken hold of people's minds..."

https://medium.com/@spenceryen/polanyi-and-the-second-great-transformation-6d6364b5d3c6

So now thinking back, perhaps those who have been yelling "the wolf is coming" all along do have a point. Blind faith in spontaneous progress may not yield good results. Polanyi's critique of market capitalism lies in: for most of human history, economic activities were subordinate to social, cultural, and religious institutions. However, later on, market capitalism reversed this relationship, making society subservient to the economy.

How do we ensure that society does not become subservient to a nation led by geniuses in data centers? As Ben Thompson accurately pointed out in his article on Anthropic's Mythos, the punchline of the story of "The Boy Who Cried Wolf" is: the wolf actually comes in the end.

But what would that capitalist inside me think? Invest in societal, cultural, and religious institutions! If you have any good investment ideas, feel free to send me your prospectus via direct message.

The Fascination with Math Geniuses

In that Jenga scene in "The Big Short," another favorite gag of mine is when Ryan Gosling points to the Chinese guy next to him and says, "That's my quant." This atmosphere has a strange resemblance to the recent batch of hot founders chased by investors - they often turn out to be kid math geniuses from math competitions in their childhood.

Speaking of Ryan Gosling, in response to Steve Carell's questioning:

"So what you're saying is, if the default rate gets to 8%, these bonds will collapse, and now it's at 4%? If they get to 8%, it's doomsday?""Yeah, that's right.""Why isn't anyone talking about this? Are you absolutely certain about this mathematical model?""Look at him. That's my quant.""Your what?""My quan-ti-ta-tive, my math expert. Look at him. Haven't you noticed anything different about him? Look at his face.""That's pretty racist.""Look into his eyes. I'll give you a hint, his name is Yang! He was the national math champion in China, can't even speak English! So, yes, I'm very certain about this mathematical model."

To some investors, a key predictive indicator of a fund's Distributed to Paid-In Capital (DPI) seems to come from the founder's childhood - either they were a math competition prodigy as a child or they have some kind of childhood trauma. Growing up in the Bay Area, my self-awareness of my math ability was shattered early on because my genius classmates were all mingling in the math competition circuit. Now, most of them have become quantitative traders or joined big model labs as researchers.

I have a particularly vivid memory of a scene from seventh grade: my father and I were flipping through the sports channels on our TV at home, and I saw on ESPN2 one of my middle school classmates... participating in the Mathcounts math competition. That moment, I knew my path had come to an end. I often joke that when I started playing the "college application game" in ninth grade, I knew I couldn't compete with those Intel STS, RSI, AIME, USACO kids, so I had to find my own set of game rules.

I have great admiration for many such outstanding CEOs, founders, and researchers, and I have personally indeed placed a bet on one of them. But what I find amusing is that today, surrounding the idea of "cultivating the smartest math competition kids and treating them as a ticket to outsized returns," has become a complete asset class and investor narrative. Upon closer examination, this is not fundamentally different from talent scouts seeking the next Wemby (Wembanyama). However, I am also willing to believe in Jalen Brunson's story—hard work, perseverance, and spirit can also lead to success.

Hyperliquid.

Party 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 lifetime.

The first time you experience a bubble, you will be completely immersed in euphoria. You have no experience, attend parties, and are swept up in the fervor.

The second time you experience a bubble, you still remember what happened the first time, so you can exit with some victories, but you will inevitably get carried away a little.

The third bubble is the opportunity to create generational wealth—you have accumulated enough experience from the first two times to know how to manage risk, emotions, and timing.

The second piece of advice is: When the music plays, start dancing, but don't get drunk.

Now the music is blaring, it may even be close to blowing out the speakers. But bigger backup speakers are being made, and this party clearly isn't over yet.

This is a reminder to myself and to everyone who needs to hear this: Remember to feel the grass, cook for yourself, and don't let Big Bubble Behavior distort your judgment. In the wise words of my friend Samir: let's barbecue together as soon as possible. Do you know anyone who sells fish?

From Peter Thiel's "Zero to One"

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