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Photographs by Dan Pulcrano

Heart of The City: Downtown San Jose was once the valley's social and retail nexus. Today's shiny downtown lacks character.

AS THE San Jose City Council gets up the nerve to sacrifice Susan Shick for squandering a golden moment to make downtown rock, a conga line of pundits will pound drums about why downtown San Jose can't get its groove on while a shopping center four miles up the road totally gets it.

When a new team replaced the McEnery-Taylor-Hammer administrations in 1998, it was like a Prague Spring after a two-decade run of tightly controlled decision making that had delivered mixed results. The economy had never been stronger, and there were high hopes that participatory community building would replace the back-room deals. Instead, the regime change devolved into Baghdadian chaos.

Developers and property owners have trained criticism on Shick's failure to land big deals and signature projects, on the agency's lumbering execution and the red tape that makes deal cutters want to leap off the nearest 17-story building.

The agency meltdown, however, goes deeper than shrinking government budgets or the inability to construct more shiny midrises. The agency and its political overlords have failed to partner with the community, to articulate clear goals or to make any effort to retain or appreciate the front-line soldiers of this 20-year march.

They have stood by irresponsibly as clubs, retailers, restaurants, grocery stores and cinemas exit the downtown, stripping it of its spirit and entrepreneurial life force. They have failed to address the aggressive policing problem that has driven customers who don't want to deal with bright spotlights and blocked streets to other entertainment districts.

It is a failure of leadership. Never before has there been a city administration less willing to listen or articulate its vision and make stakeholders feel valued in their community. (See "The Quiet Mayor.") It is a one-way dialogue that emanates from two towers, glassed-in vantage points from which block-size constructs of concrete, steel and glass make dramatic statements, but people are the size of ants.

Having now worked its magic downtown and killed off most of downtown's retail pioneers, RDA wants to bully its way into one of the last authentic commerce communities, a true bastion of libremercadismo, the Tropicana center at King and Story.

Former Forbes ASAP editor Michael S. Malone, the author of 10 books about Silicon Valley and one of the region's savviest commentators, spoke to the San Jose Rotary Club on Aug. 27 and delivered a tough message that resonated with many listeners. The article that follows is adapted from that speech.

While critical of past mistakes, it presents an optimistic belief that Silicon Valley and downtown San Jose will see brighter days ahead. The process can be accelerated if local government adopts more enlightened policies or, at minimum, gets out of the way.

Dan Pulcrano, editor

Let's Get It Right This Time

We spent our billions like a sailor on leave and still aren't the world-class metropolis we wanted to be. Author Michael Malone thinks there's still another chance to not screw it up.

By Michael S. Malone

SAN JOSE and Silicon Valley are emerging now from what can only be described as a decade-long debauchery, followed by purgation. We enjoyed a double-length economic boom, unprecedented in our history, and we have now endured the extended bust that inevitably followed.

Now, thank God, the valley is finally beginning to awaken again. In almost every tech sector, one can see mixed, even positive, signs:

The semiconductor industry is beginning to rouse itself as orders (at least international orders) are growing. Accompanying this is a return to profitability of that most bellwether of all tech industries: semiconductor equipment.

The systems industry, devastated more by the bust than almost any other sector, is also showing signs of life. Growth is finally returning to servers, routers and instruments.

As for PCs, well, despite what Carly Fiorina says, they may never really come back--at least not in the United States. The PC business is now a commodities game and for that reason has little to do with the future of Silicon Valley.

However, enterprise IT, the likes of Oracle and Siebel, is part of the valley's future. And it is still the sick man of high tech. Yet, even there, climbing stock prices suggest that corporations, after a two-year hiatus, may finally be planning major new capital investments.

The best news is that the key to the valley's health, its entrepreneurial spirit, remains as strong as ever. There are scores of new startups out there, many with exciting new technologies and products.

The worst news is that the area's VCs, though flush with money, are still wary. They are increasing their levels of investment, but only on the most conservative (i.e., none of the vital seed-round) deals. This wariness is understandable; until the stock markets become receptive again--that is, until we see some hot new IPOs, VCs see no exit strategies to their investments ... and are thus understandably nervous. Until that flow of new companies is restored, the valley will remain vulnerable, and if it lasts too long, we risk losing a generation of new startups. That, however, is unlikely to happen.

Turn Off the Bubble Machine

That's where we stand today. And despite all of the bad news and craziness of the last 15 years, we can look back and take pride in the fact that we did a lot of things right.

For example, under the onslaught of outrageous growth followed by devastating decompression, the companies of Silicon Valley never really lost their heads. Sure, there was some conspicuous consumption, but for the most part valley companies hired intelligently. And when the crunch came, they bit the bullet quickly. Compare this corporate maturity with the naiveté of the dotcom startups in San Francisco.

At the same time, despite the high mortality rate of new startups after the bubble burst (though, in fact, it wasn't much greater than in past booms, only more widespread) the valley did manage to build some important companies--like Cisco and eBay--that will become the bedrock of the next expansion.

The cities of Silicon Valley, with one notable exception, also exhibited intelligent growth strategies. They upgraded their infrastructures, repaired roads and didn't go insane on downtown edifices. Downtown Mountain View is a superb example.

As for the citizens of Silicon Valley, the best we can say is that we didn't go much crazier than the rest of America, though by all rights we should have, being at the ground zero of the greatest economic bubble in U.S. history.

Is This What You Had in Mind?

I said that most of the local municipalities acted intelligently. The one exception, I'm afraid, is San Jose. I want to preface my observations about San Jose by noting that I'm from Sunnyvale. But then again, so is Ron Gonzales.

Here, in essence, is the problem: though the city's growth plan was carefully crafted and often discussed, I defy you to look at San Jose with an outsider's eye and tell me what that plan was.

Look around you: Is this really what we had in mind? Are we really better off than if you had just let downtown San Jose grow organically?

The simple, and devastating, truth is that despite 20 years and $500 million spent trying to create a city center, San Jose has continued to grow exactly along the paths it was heading down all along.

For example, despite every effort by City Hall to stop it, San Jose has developed multiple power centers: between Highway 237 and Brokaw, at Santana Row, in Willow Glen and in the hills around Silver Creek. Let's look at each more closely.

  • Santana Row: Despite nearly burning down, the Row--and Valley Fair next door--has already become the retail center of San Jose, recapitulating precisely the process that gutted downtown 50 years ago.
  • Willow Glen: This is particularly ironic, because the modern downtown was specifically created in contrast to everything Willow Glen represents: low-profile buildings, unplanned development, random juxtapositions--everything that goes counter to modern urban planning.
  • North San Jose: The burst of construction of new townhouse complexes suggests that what once seemed impossible is about to occur. The Golden Triangle is rapidly becoming the new bedroom district of San Jose. Competing with it are the new communities popping up along Highway 85 in Almaden.
  • Silver Creek: Finally, there are the expensive new homes rapidly covering the eastern hills around Yerba Buena. This is where the nouveaux riches are moving, into ugly stucco monstrosities. God knows where they are going to get water during the next big drought.

What all of this means is that after a quarter century and a half-billion dollars spent on urban planning, San Jose is right back where it started ... only this time saddled with a downtown with no character at all.

The One That Worked: Mountain View's redevelopment created a pedestrian-friendly downtown with eclectic shops, sidewalk cafes and on-street parking.

Build It Brick by Brick

So, what can we learn from this debacle?

The first thing is that centralized planning, when it collides with human nature, almost always fails. We set out to create a shiny model of modern city downtown. Instead, what we got was a shining, hollow city center and a surrounding community that developed exactly the way it wanted to--and it only cost us the tax dollars of a generation of San Joseans to learn that lesson ... if indeed we have.

The interesting question is why we--or more precisely, the city fathers of San Jose, because most of us regular folks predicted this future a long time ago--didn't see the inherent problems with trying to design a city from the top down.

After all, this area is the entrepreneurial heart of the entire world. Why didn't the folks running this fair city take a cue from all those companies and venture capitalists they unsuccessfully tried to seduce downtown? You can't build enduring success by fiat from the top; rather, you build it brick by brick, through hundreds of smart, fast-moving competitors, from the ground up.

So why did they do it? I think there are two reasons. The first is that urban planning is fun. You get to move all those little hotels and houses around the Monopoly board. The second is that it gives you power. It let's you play God, which is why you get into politics in the first place.

And thus we find ourselves in our current straits. Not only does the downtown seem increasingly artificial and unworkable, but we are also suffering from all of the unexpected secondary effects of putting too much civic power in the hands of bureaucrats. Let me list some of those:

  • An obsessive dependence upon rational solutions: For a decade now, downtown San Jose has been hanging on to the fantasy of "critical mass"--just one more hotel, just one more restaurant like P.F. Chang's, just one more sports team, and suddenly everything will fall into place, the grand design will suddenly begin to hum with its own momentum.
  • A succession of Soviet-style five-year plans: We'll design the downtown for corporations. No, for families. No, for young people. No, for tourists.
  • The endless quest for the signature project that will put San Jose on the map: We need an arena. We need a major corporate headquarters. We need a light rail. We need a river park. We need a hideous, turdlike, blown-up artist's maquette for the park. We need an IMAX theater.
  • A fixation on novelty: Whatever we can bring new to downtown has to be an improvement over what is already here. That's why we're taxing, say, Scott's Restaurant, to subsidize the arrival of its arch-competitor, McCormack & Schmick's. Meanwhile, the downtown can't even keep a real grocery alive.
  • The sterility of the planned community: Real cities, successful cities, exhibit a complexity that cannot be captured by equations or even the wildest imaginings of a professional urban planner. Great cities are about random juxtapositions, about unexpected discoveries, where social and cultural highs and lows stand cheek to jowl--the pawn shop next to the elegant restaurant, the hole-in-the-wall shop hidden down a side street, hookers calling out to the Masters of Universe. You know what I mean: San Jose in 1975, before we decided to fix it.
  • The return of the small-town insider: When power is concentrated among just a handful of illuminati, rules start getting broken. Need redevelopment money for an expensive new theater? Then put the mayor's husband on the board. Need to curry support from local power brokers? Then put their names on the airport, and the convention center and the transit terminal--despite the fact that they aren't yet, in point of fact ... well, dead. Today, nothing happens in downtown San Jose without the Redevelopment Agency, and everybody has become adept at that shakedown game.
  • Most of all, a decline in leadership: When it is all being decided by planners with other people's money, who needs the people? Whether you liked him or not, the last true leader with a vision to run San Jose was Tom McEnery. Now, to be fair, I predicted that whoever followed Susan Hammer would have found himself in the thankless job of maintenance and damage control while the valley rode out a recession. Unfortunately, Mayor Gonzales has lived down to that expectation. Scandal-ridden, and largely invisible, he has been an absentee mayor for a city riding out an economic storm. Sure, you might say, what else can he do during a time of budget constraints. But aren't leaders supposed to inspire us during hard times?

Geniuses of the Stone Age

Downtown San Jose isn't all bad news. There have been a few glimmers of light. In particular, even as we made mistakes, we also learned some important lessons. One of those is that there are certain things city government can do well.

For example, it can support entertainment and the arts. The Shark Tank (a.k.a. the HP Pavilion) may have been built on a near-criminal misrepresentation of the real costs to the public, but by God, it has proven to be a great success and draw to downtown. So are the San Jose Rep, the Tech Museum, the Children's Discovery Museum and the San Jose Museum of Art. It's a pity, isn't it, that we didn't use more of that redevelopment money to save many of the other, smaller, cultural institutions we lost because we were so busy underwriting our grand, doomed schemes?

Another lesson that we should have learned, though we probably haven't, is that when you bet on high-tech companies, never put your money on one big play, but cover the table with tiny bets. I suspect the city fathers still have no idea the bullet they dodged because it was Adobe that chose to move downtown. It could just as easily have been Silicon Graphics or Novell.

The third lesson, and this may be the good news, is that short-term stupidity can sometimes yield positive long-term results. The grand rebuilding of downtown may be a near-term mistake, but to our children and grandchildren, it may look like genius. The overpriced, see-through new buildings in the downtown today will very likely prove the foundation upon which will be built the next great Silicon Valley boom.

Still, that's little consolation right now as we mourn the lost millions that could have been so better used.

Level the Playing Field

But the past is past, and money wasted is money gone. What matters now is the future that is already emerging out of the labs and offices of Silicon Valley. We don't have much time.

The first step is for the city's leaders to begin trusting the judgment of the average citizens of San Jose. For 20 years now they've been trying to force San Joseans to ride trains, carpool, move downtown, pay higher wages and, generally, behave like passive pawns in their Great Urban Game.

And being wiser than their leaders, the people have either ignored these rules, sabotaged them or, as a last result, grumblingly gone along--while silently making plans to move away. We need to face facts: the People have spoken. They don't want to live, and they barely want to work, downtown--and least of all in the downtown that has been designed for them.

So, let them create the place they want.

The second step is to finally accept that competition is good. The only place in Silicon Valley where they don't believe in entrepreneurship, innovation and rough-and-tumble competition is San Jose City Hall. San Jose, and especially San Jose Redevelopment, needs to stop trying to pick winners and instead devote themselves to clearing the way for as many competitors as possible to slug it out on the most level playing field possible. The winners of this competition will be stronger, smarter and more enduring than any the "experts" would ever designate.

Last, but hardly least, San Jose needs to stop presenting solutions and start providing tools. From shopkeepers to professionals to startup teams, entrepreneurs need infrastructure: space, low taxes, limited regulations, talented employees and patient sources of financing.

If you want a successful, thriving downtown, focus on those things, not the Next Big Thing. The most important lesson Silicon Valley teaches is that you can never predict where technology will go next. Are you really prepared to pick the big winners in bioinformatics or nanotechnology? I'm not, and that's what I do for a living.

No, you can only plant a thousand seeds and see what sprouts. The next boom is just around the corner. Smart investors and smart cities are planting right now. Silicon Valley will be at the heart of that boom, but will San Jose be at the heart of Silicon Valley?

Thanks to being in Silicon Valley, it looks like we are about to given one more shot at the brass ring. It may be our last. We owe it to ourselves, and to those who will follow us, to get it right this time.

Send a letter to the editor about this story to letters@metronews.com.

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From the September 18-24, 2003 issue of Metro, Silicon Valley's Weekly Newspaper.

Copyright © Metro Publishing Inc. Metroactive is affiliated with the Boulevards Network.

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