Kraken CEO: Helping San Francisco Homeless May Lead to “Worsening Situation”
11.05.2018

Expanding on an interview with BREAKER last week, Kraken CEO Jesse Powell on Friday reiterated his opposition to San Francisco’s Proposition C homeless relief initiative in a Medium post forecasting the “demise of San Francisco.” Powell describes SF’s existing policies on homelessness as “a failure,” and argues that the extra money generated by corporate taxes under Prop. C, up for a vote Tuesday, would not improve the situation. Though he doesn’t detail how or why existing or planned policies have failed, he does quadruple-down on his prior descriptions of drug addicts living in the streets as “crack-zombies.”

Many current and former San Franciscans last week agreed with Powell’s assessment of the city’s bleak state, and acknowledged the attractiveness of simply leaving. But Powell’s characterization of so-called “crack zombies” disturbed other concerned residents.

“There are people who meet that profile on the street,” said Jim Cruz-Youll, a DevOps engineer and housing activist in the city. “[But] I am disgusted that [Powell’s] first response is rage and hatred, rather than pity and sympathy. I always remember every one of those people was a little kid once, some not so long ago.”

On Twitter, SF Bay Guardian publisher Marke Bieschke described Powell’s prior comments as lacking “any sense of community, empathy, or self-reflection (not to mention data-based logic—this is a ceo?)”

Jennifer Friedenbach, Executive Director of San Francisco’s Coalition on Homelessness, told BREAKER that comments like Powell’s are too common among “folks of real extreme privilege,” and represent “a severe case of living inside a bubble that doesn’t recognize the real life experiences that the most destitute San Franciscans are facing.”

Friedenbach says over half of SF’s homeless population is African-American, and two-thirds are people with disabilities. For decades, San Francisco has attracted gay youth rejected by their families, and Friedenbach says 30 percent of the city’s homeless population is LGBTQ.

“People are in that kind of shape because they’ve been victims of really bad policy decisions,” Friedenbach said. “When people are homeless for long periods of time, their physical health deteriorates. Often their mental health deteriorates, and then that goes untreated. They self-medicate with drugs and alcohol, [as] a coping mechanism for dealing with the extraordinarily severe trauma they face living on the streets.”

“To paint human beings in [Powell’s] terms is despicable.”

With its promise to move 4,000 households into affordable housing, keep 7,000 households in their threatened homes, and expand shelter, Prop. C in part reflects the “Housing First” approach to homelessness that has been widely adopted in recent years. Advocates argue that providing stable housing makes it easier for troubled individuals to seek assistance for issues including substance abuse and mental health, offering a clear roadmap for turning the “crack-zombies” Powell so loathes back into productive members of society.

But Powell’s latest arguments were focused less on actually solving the homelessness crisis than on the supposed economic consequences of increasing local business taxes. Powell emphasized that San Francisco is “heavy on tech business, which has no physical/geo dependence,” and that most tech workers are “mobile” and “flight risks.” “The decision to leave gets easier,” Powell writes, “with every walk to work each day, every zombie encounter, every tax hike.”

Friedenbach says such arguments have been repeatedly used by businesses resisting San Francisco policies including expanded healthcare, minimum wage increases, and even gay partner benefit requirements. But none of those rules has resulted in a mass exodus. “Decisions about where companies locate are much more complicated than that,” says Friedenbach. “People are drawn to San Francisco because of our employee base. They rely on creatives and people’s ability to think outside the box.”

Powell also claims that “high-earning knowledge workers” will take advantage of remote work options to leave the city. But there’s clear evidence that well-off individuals are unlikely to move to avoid taxes. New York City, for comparison, has some of the highest taxes in the U.S. They help fund an increasingly ambitious homeless-housing policy which Friedenbach believes has contributed to New York’s dramatically declining crime rate over two decades. But even very wealthy individuals have rarely followed through on threats to move from New York to lower-tax locales like Florida. That may mean tough luck for the various respondents to Powell’s comments last week encouraging him to move himself or his company to locales including Wyoming, New Hampshire, or Nevada.

Powell’s reasoning does very roughly line up with some evidence that early-career U.S. workers in their 20s and 30s are moving away from the largest cities to places like Louisville and Pittsburgh, though that’s not specifically to escape either the homeless or taxes. There’s also significant evidence for his argument that remote work, particularly for software developers, is a viable alternative to clustering workers in a city, though managers and decision-makers still clearly benefit from face-to-face collaboration.

Still, tech companies leaving the city was a scenario that San Franciscans on Twitter greeted with some relish—especially when it came to Powell specifically.

 

Further, none other than Salesforce CEO Mark Benioff, a Proposition C advocate, has taken the time to clarify that Proposition C’s tax increases might not even impact smaller, low-revenue companies like Kraken.

In an exchange with Zynga CEO Mark Pincus, an opponent of Prop. C, Benioff pointed out that the proposed tax would only impact businesses with more than $50 million in revenue.  San Francisco’s Gross Receipts tax system is quite complex, and the Prop. C tax rate varies with a company’s concentration of workers within the city, but the revenue floor is straightforward.

Kraken was estimated by Bloomberg to be generating $256,000 in revenue per day in March, as the crypto market was cooling down. That’s just over $93 million on an annual basis. Coinbase, another U.S.-based crypto exchange, has seen trading volume decline by 80 percent since December, with much of the drop occurring after March. The drop was certainly partly driven by declining interest in crypto generally, as well as by competition from foreign exchanges.

A parallel slump could well have cut Kraken’s annualized revenues to below the $50 million threshold. That possibility is supported by the fact that Kraken laid off about 10 percent of its client services team just two months ago, in what Powell described at the time as a “cost saving measure.”

Benioff has estimated that Salesforce, with $13 billion in annual revenue, would pay an additional $10 million under Prop. C. Kraken would likely pay a different proportion of its revenue as tax, but if we ignore those complexities and give Kraken its full $93 million in peak-market revenue, Kraken’s proportionate tax increase would work out to … something around $71,000 dollars.

In Silicon Valley terms, that’s almost literal pocket change. Assuming he’s a skilled leader, Powell might even have been able to generate that much in extra revenue in the hours he’s instead spent fighting a tax that would likely improve the city he lives in.

 

Revised 11/6/2018: This piece has been revised to correct Jim Cruz-Youll’s name.

Revised 11/9/2018: The headline has been changed from “Kraken CEO: Helping the Homeless More Would Destroy San Francisco” to ‘Kraken CEO: Helping San Francisco Homeless May Lead to “Worsening Situation”‘