> & plenty of talent.

Unconstrained by non-competes?

The theory is that the Bay area has a huge liquid pool of talent, and that not being able to hire critical talent at all is even less "economical", in that you're less likely to be able deliver your product or service to market.

Because there is value in having people in personal contact, especially if they are expected to work in a team. I don't know what I'd do if I didn't have the option of dropping by a coworkers office for a 5 min quick chat or a 3 hour informal meeting on a whim, where we might pull out our notebooks and pull up relevant files and email threads. Deep thinking can't happen on a slack channel, it happens during the skull session.

California is also a powerhouse of a state. It has the 5th largest economy in the world, and the most productive state government in the U.S. Ambitious projects actually get attempted and built in California unlike so many of the stagnant states in the U.S. Another reason of why SV and not Idaho is the academic research environment of the bay area and the ease of recruiting the excellent talent that comes out of California's universities every spring.

I think it has to do with desired quality. Hiring high quality engineers can be a difficult task even in the massive talent pool present in SV, and it’s only going to be more difficult in cities with smaller pools. That’s not to say that quality doesn’t exist in these places, but it’s certainly not as readily available.

These other major tech-centers have less well-paying competition than SV as well. As someone who has done hiring in several companies in Berlin & Vienna the difficulty mostly lies in the fact companies don't want to pay much.

If you are willing to pay 10-15% above market rates (which is still 1/2 of SFBA market rates) there is no shortage of senior engineers in Berlin.

It's not economical. But the investors and executives who make decisions on corporate locations enjoy living in SV/SFBA, so here we are.