It is both. A buyer needs to have the funds to be able to pay.

> The lack of supply is why you are paid more, not because startups are rich.

It's both. If software companies were poorer across the board, without changing the supply/demand ratio, salaries would be lower.

If the supply/demand ratio stayed the same, salaries couldn’t go lower. But you are right that if software companies were poorer that there would be a necessary reduction in demand.

I’m not totally convinced. It seems that sometimes when profits fall across an entire industry, the best thing to do is to operate at the tighter margin instead of firing workers to maintain the previous margin. I concede that might be rare, but the restaurant industry comes to mind. If rice gets more expensive, you could fire workers, pass the increase to the customer, or eat the cost. Often the best choice is to concede and eat the cost and say goodbye to the “cheap rice bubble”.

I expect a lot of software companies don't make any money, only living on investment dollars in some hope of making money someday, so margins may not matter much.

But if the companies were to be become sufficiently poorer, the amount they are able to pay has to come down at some point, and once that happens you've got a reduction in demand. That doesn't necessarily mean firing anyone, demand simply measures desire and ability to pay a given price to attain what is wanted.

Silicon Valley can only exist because a software business can be located anywhere but investors and workers must utilize agglomeration.

What this means is that software companies are closer to the money than other businesses.

Investment and workers can be located anywhere. Even Silicon Valley companies list themselves on New York stock exchanges to access capital from around the entire country and the globe.

What's unique about Silicon Valley is the density of software-minded people willing to adopt products made by their friends. It sets up a "if you build it, they will come" situation. That promotes the early adoption needed to grow into something larger. If you were located in Iowa and your friend group was made up of farmers, they likely won't care about the software you are building, and you'll stall out quickly in trying to find users.

On the flip side, if you are building something that would be of interest to Iowan farmers, you will have a greater chance of success having that farmer friend group than a bunch of Silicon Valley tech bros to share with.