However, many companies still - and often almost obsessively so - insist on a specific location for work to happen. Ironically, this attitude seems to be particularly widespread in Silicon Valley companies.
You could probably create the same objective value in another location. For these companies however location seems to be an important component of their value creation equation, which is why they have to pay a premium for it.
The value you create is the upper bound for your pay; the lower bound is what you're willing to accept. Expensive locations raise that lower bound significantly. Devs won't work in Silicon Valley for $40k because that's not a comfortable wage. In Eastern Europe it is.
The value people create is (roughly) an upper band on how people can expect to be compensated (short of market failures), whereas the high cost of living increases the floor which companies need to pay to attract talent.
>Judging from the parameters you mentioned I presume you live in the Bay Area. Keep in mind that's probably one of the most expensive places to live in the whole world. A developer elsewhere might not earn half of what you make but he or she probably also has a much lower cost of living.
This is a contradiction. Does working in an expensive location provide more value to the business?