Tenderloin Capital

How do we prove something to someone else? I am specificlly thinking about the positive value of poor neighborhoods in cities. John Stuart Mill dealt with this question of proof by considering the polar bear. Mill asked the question of how many black polar bears we would need to find in order to know that the species of polar bear was not white. He suggested that only one black polar bear was needed. He argued that the context&emdash;the protective value of white fur, in the case of the polar bear&emdash;was the determinant of what was required for a proof. White was so overwhelmingly central to survival in the polar region, that a single black bear would be proof of a significant new species.

On the other hand, our knowledge of albinoism is a context that would require a larger number of white bat examples to prove that a particular species of bats was not entirely black.

I believe that the bawdy core section of a city, often called the "tenderloin" in the United States, is an important source of capital and economic innovation. But what is sufficient proof of this for most people who think about and care about cities? A proof of the Mills type may not be possible. The "tenderloin" as a source of great economic vitality is out of context in our current thinking, since the tenderloin is the home of deadbeats, outlaws and neerdowells, but such a conception is not impossible.

A city is an entity of such great systemic complexity that we can comfortably entertain a large number of hypotheses about them. That is, a proof concerning cities may not be possible. Persuasion might be the only approach that would allow a new hypothesis to enter the prevailing systemic model.

Let me offer my own experience in this matter in an effort to persuade the reader. My experience has been in San Francisco, which is considered a city due to its population density, its social diversity, and its economic variety. It is thus a representative of cities. It has a been a city for a century and a half and remains vital in its contributions to world culture.

In 1974, during the hippie movement and the broader social revolution, I started the first network of small businesses called the Briarpatch. Within a few years, the Briarpatch had over 600 business members. Three-quarters of the members were in San Francisco and the rest were scattered in Berkeley, Marin County, and the northern part of the Peninsula (in that order). These businesses were enthusiastically held together in a network by hippie values: openness, a desire to protect the environment, and a commitment to cooperation.

We can discuss the Briarpatch in the context of capital in a city, particularly capital that comes from the raunchy section of a city. Our sample is over 600 business, each of which I knew personally from on-site visits at the rate of four business visits per week over a period of a decade. All of these businesses were startups in the 1970s.

In the mid-1970s, this network of small businesses generated many commercial and technological successes. First, the Briarpatch network itself, as a model for starting new businesses, was copied in Sweden in 1980, then recopied in Germany and France, and finally exported, with funds from the German Marshall Plan, to the U.S. Midwest by 1990. In the Midwest it was called Business Networking.

Secondly, many of the incipient technologies of businesses in the Briarpatch became important technologies. The list is much longer than I can give here: One business was the Palo Alto Computer Education Center where Steve Wozniak (a founder of Apple Computer) hung out, learned about computers, bought used equipment, and met a cadre of important friends. Dozens of these friends were founders of Silicon Valley computer and Internet companies.

Two other seminal businesses included the founders of the sports of mountain biking and windsurfing. Many key restaurants in the founding of New American cuisine were members, as were nearly all of the founding organizations in organic agriculture and organic food distribution, including the first promoters of tofu. Many of the founders of small publishing houses in the Bay Area were members of Briarpatch as well, and they created the first major small publishers' book fair to promote their wares.

Artists, musicians, and computer media pioneers were a major component of the membership, and by the 1990s San Francisco had the highest proportion of small businesses per capita of any city in the United States, and became the capital of Internet multimedia.

A wide range of clothing and crafts businesses were members of Briarpatch, including many seminal firms known today to specialists in these fields. One member, a designer, created the designs for a company that became North Face, with offshoots into Patagonia. Another was the originator of stone-washed Levis. Good Vibrations is a nationally known success in the field of sex toys.

Many of these established local businesses were copied (some with legal agreements) by well-known national businesses, including Mrs. Fields, The Body Shop, and the Common Ground directory. Others have grown and have their own national reputations, including Nolo Press (the best-known national publisher of self-help legal books) and Greens restaurant (haute vegetarian food) located in Fort Mason. Fort Mason itself was a member of the Briarpatch and is well known as the first national park urban center.

A notable political element in the Briarpatch is that Harvey Milk, the first openly gay elected official in the U.S. was a member via his photography store located in the Castro District.

There are many more examples, but for a small organization to generate such a visible impact on American business is sufficient to suggest its high commercial and social value. [The Briarpatch is small and quiet these days. As businesses matured they associated more with their own industries and less with comrade-in-arms start-ups. ]

What has the Briarpatch, its commercial importance, and my experience, to do with cities and bawdy neighborhoods? Nearly every one of the 600-plus Briarpatch businesses started in a small, shabby, inexpensive apartment, garage, or office. Nearly every one of these sites was in a neighborhood that was rundown, working class, and considered decayed industrial and mixed use property, with empty warehouses, lofts, and boarded-up stores. There were only a few exceptions. One of the high-fashion designers ran a sixth-floor sweat shop in a nice apartment building on top of Nob Hill ( it was his mother's apartment). Another was a perfume distributor in a fancy duplex with the workshop in her basement (she was married to a Miami Mafia member).

None of the Briarpatch businesses, that I recall, got their early financing from an established source (bank, broker, or big investor). All got their money from friends and family or modest personal savings and were bootstrap operations where the principals survived on wine and cheese while living with roommates.

The Briarpatch was an urban flowering of new small businesses. It was generated in an urban core city (as opposed to suburban or rural areas) for two reasons: The city provided the requisite population density for proximity to others with similar values for marketing, information, and technical skills. And the city provided the low-cost space and obscurity that new enterprises vitally need. Obscurity? Yes, many of these businesses would never have been tolerated by nosy suburban or rural neighbors, or middle-class neighbors, for that matter. They were different and unusual, and many were social pariahs at the time. Social diversity --- ethnic, racial, and gender --- provided the cover of tolerance for these new businesses.

In this regard, the reader may need to be reminded that many great modern commercial endeavors were dockside social outcasts in their incipient periods, from tobacco, coffee, and pornography (now 30 percent of videotape sales), to patent medicines like Lydia Pinkham Vegetable Compound, all-night and Sunday retail stores, and lotteries.

The fields of commercial development and city-planning need to remember that many important commercial endeavors and industries start as small businesses that require low-cost space and obscurity in cities. Cities are vital for small businesses because of their population density and their abundance of unappreciated property. These desirable low-cost spaces are usually in tenderloin areas and in other unpopular, low-income neighborhoods.

Michael Phillips, 1998 (revised in 2000)

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