High rents is an effect of bigger corporate dynamics, not the cause.

Corporations generally locate the highest-priority projects in the head office to minimize communication costs. The executives are at the head offices, the largest concentration of staff is there, and you can pick the top employees from a larger pool. That means that if you're an ambitious young professional, you go to where the highest-priority projects are, because they will benefit your career the most in the future. This further reinforces the need to locate high-priority projects at headquarters.

I saw this play out at Google. The most ambitious, career-oriented young employees would move from NYC, Pittsburgh, or Boston to work in Mountain View, where they could have their pick of projects. Meanwhile, more family-oriented employees would move from Mountain View to Pittsburgh, Michigan, etc. to enjoy a higher standard of living and be closer to family. Who gets promoted with a big raise? The folks who work on the highest-priority projects. What does that do to area rents? It makes them rise in line with the highest-paid employees in that area.

You might ask why corporations don't move their whole headquarters to another location. Some do - Wells Fargo moved most of its operations from San Francisco to Minneapolis in search of cheaper labor. However, the same dynamic between employees within a company also plays out between companies within an industry. Google can't move its headquarters and operations because most of the interesting developments in the tech industry - startups to buy, startups to fund, new technologies to keep up with, key employees to hire - are in the Bay Area, and moving to say, Detroit means that they'll miss out on the cross-pollination of ideas that keeps them relevant in their industry. Note that this is not a serious issue for Wells Fargo, whose entire brand is based on "We're stolid and conservative, and we may not be in the forefront of financial innovation, but we will keep your money safe."

This dynamic played out a hundred years ago too - Detroit became Motown, USA because everyone involved in automobile manufacture was incentivized to move there, Hollywood became Hollywood because everyone in the film industry was incentivized to move there, etc. When those industries were vital and growing, they faced the same pressure on rents and economics as the Bay Area does today.

Doesn't Google do that? I'm pretty sure salaries at their Pittsburgh office are pretty much on par with their NYC office despite Pittsburgh being half as expensive (or less).

Not sure why Google insists on staying in such an expensive place, rather than moving. Some possibilities:

1. There are synergies to having much of the staff working together at the same place. And the only place an employer the size of Google can find enough staff who are up to Google standards is the Valley.

2. Once you get to the Valley, anywhere else is cottage country. Google is by necessity somewhat geographically distributed, but its senior management is completely centralized. Last I checked, all the SVPs were in Mountain View. It's easy to mistake the best place for the only place.

3. Google started in the Valley and grew up there. Moving their main operation anywhere else would be very disruptive. Getting employees to move is hard at the best of times; getting highly sought-after engineers to move away from the center of their profession, where they have many many options should they decide to stay, would be brutal.

> Why don't blubsoft or blub.ly open offices in city X and continue to pay the same salaries there.

Because they could open offices in city X and pay smaller salaries in absolute value, though equivalent relative to living costs, and get the same hires for less money. I don't see the paradox here; you could phrase it as a question: why should blubsoft or blub.ly pay more for something, when they can pay less and still get it.

They don't have to be in silicon valley. The only reason for Google to be anywhere is employees and to a lesser extent investors, lawyers and other service providers of the cluster. It's mostly employees though.

Why are they there, paying high salaries if they could be getting the same for less elsewhere?

Or, what might they be getting (or think they're getting) that they wouldn't (think that they would) be able to get elsewhere?

Maybe they're concerned about lead times for hiring new people (stealing someone from a competitor vs all new employees needing to move first)?

Supposedly one of the reasons that Silicon Valley did so well, is that California doesn't allow non-compete agreements. Perhaps there's actually some benefit to exchanging employees with your competitors more often? (But then, what about the no-poaching agreements that companies were getting sued over recently?)

Maybe they're concerned that being the only shop in town would make managers more reluctant to fire people who need it (does corporate location preference correlate to corporate culture regarding expected length of service)?

Maybe having offices in less expensive locations hurts the company image (for customers, or potential employees, or both) enough that the extra salary cost is worth it?

There's a benefit to everyone in the industry for exchanging employees with your competitors often, but there's a cost to your company. Hence, geographical areas where that happens do well overall, but the individual companies involved hate it and want it to stop. It's very much a prisoner's dilemma situation.

Similarly, technological developments that benefit everyone in the industry are good for the industry as a whole, but bad for each individual firm in the industry, which now face increased competition. That's why big companies often try to spread FUD around "open" alternatives to their core business.

> "if they could be getting the same for less elsewhere"

Maybe it's because they can't get the same for less elsewhere

They could if they were willing to leave the CS chauvinism behind. There are plenty of non-CS engineers, mathematicians, scientists and even non-STEM liberal arts majors who are not just capable, but competent or very competent computer programmers and software developers.

Granted the concentration is likely to be higher in the Valley, but it's not that much higher. Then there is the argument that "if you build it, they will come."

Markets reward efficiencies and punish inefficiencies, "CS chauvinism" or otherwise

A possible answer is that they often do. And those companies that do relocate discover that they can pay less, and book the difference.

Obviously there are examples of companies and individuals doing all sorts of things. But there is still a huge spread in cost of living between places. The reasons for that spread existing are diminishing. Meanwhile, the spread is growing, not shrinking.

There are companies that hire in the top-20 (as opposed to top-5) markets. They usually have their own idiosyncrasies (like taking 3 weeks to schedule an onsite interview), but they are out there.

I'm on the job hunt now and hiring is still a huge mess as it ever was.