Actually there isn't as much competition as you think. There are more employers here in the Bay Area than there are available employees to hire. The only way to get employees for a new company here is to snipe employees from another company. The last time I attended a job fair here (approximately 2 months ago), I had no less than 15 job interviews thrown at me.

Also, it's great to have many "competitor" companies working within a few miles of each other. If you decided to leave a company like Playfish, all the competitor companies like Zynga, Rock You, and Playdom will want to snatch you up in a hurry.