The potential value of an engineer is unlike anything else. At the time of Whatsapp's acquisition by Facebook they had 10m users per employee and a roughly $500m valuation per employee.

That's pretty insane if you think about it, even if it's an outlier. Workers in other industries couldn't cut hair fast enough, fill grocery bags, cook meals, wait tables or chauffeur people fast enough etc to generate that much value in SV. There's just no competing with the type of worker that can de facto service millions of customers every minute of the day like a Whatsapp engineer does.

Given that, and network effects and the gigantic pile of liquidity the US/world is sitting on right now (at bizarro low-inflation interest & rates the past decade), and it all just pools around one spot.

They'll put support staff in satellite offices, but they can easily afford to put the core devs in central locations. Facebook had about 15k employees up until 2016 or so, Walmart has 1.5 million (100x) on somewhat similar net income (same order of magnitude). These ridiculous salaries aren't the biggest deal to tech companies as insane as that sounds.

A bit of both I would think. It's hard to hire skilled developers etc. in the Bay area if they would have a better standard of living elsewhere. Arguably they would anyway--as has been the case forever--but there are various compensations to SV and Northern California. AND, while they'd prefer to pay less, many companies can in fact afford it if the alternative is to be unable to hire or to be forced to hire lesser talent.