> That's the problem, how do you spark the network effect? People don't setup in SF for ironic atari t-shirts, they're there for the talent pool and infrastructure (i.e. the stuff amazon will bring)

In short, you bring them in for other reasons. The most common being Universities, but it can also be Government or Private Sector research labs. One oft overlooked factor in Silicon Valley's success has been the great Universities nearby attracting some of the brightest people from all over the world.

Pittsburgh (CMU), Raleigh-Durham (UNC) and Austin (UT, TAMU) are succeeding in tech for similar reasons.