Okay, I take back what I said elsewhere on this thread: Boston is considerably cheaper than this. My wife and I had a 2BR, an entire floor of a house with off-street parking, in East Arlington for $1400 a month. A mile walk from the Red Line, on a major bus route. For a cute second-floor walkup 1BR in Davis Square, Somerville -- literally thirty seconds from the Red Line if you run -- I paid $1150.
The funny thing is how living out here in the valley warps your mind about real estate rental (and purchase) prices. When I moved out here I was stunned that I'd be paying twice as much as my mortgage in Austin for less than two thirds the space. Now that I'm out here, I see a place in SF going for $1675, and I think, "Wow, I need to jump at that one! Nah, probably already gone, at that price...why get myself worked up over nothing?"
I'm also probably shopping in somewhat nicer areas than is strictly necessary (in addition to shopping for a bigger place than someone right out of college is probably going to want). I have a dog, and I tend to walk at all hours of the night...it's just a habit I've had for ten to fifteen years, and I think altering it would negatively impact my life, so I'm shopping only in pretty safe areas. And, because my reason for moving to the city is to be nearer to live music, I'm shopping pretty centrally, as well.
You can get a small 1 bedroom place in the $1300 range in both SF and Mountain View. But, that's probably the lower bound, without living in a really sketchy or far out location. I guess that's a big part of the reason most YC founders live with roommates. Splitting a $2700 place three ways works out to a pretty good deal.
And +1 to your strategy of biting the bullet and paying what it costs to be happy, provided you can afford it of course. I'd prioritize keeping the commute short, because that wears on you every day. On the other hand, I used to work in Fremont and live in Fremont, and the commute was nice and short, and rents are decent, but... Fremont? Not such a happening place. At least a 20 minute drive away from all my friends except the one who was my roommate at the time.
So the ideal is probably to live in SF and work in SF, or live in Mountain View/Palo Alto (but not East Palo Alto, unless things have really changed since I left) and work there as well. Or live in Mountain View and work in your spare room. ;)
My current apartment is only a few hundred feet from the Castro downtown and is around $1200 for a 1000sqft 2 bedroom apartment. I'd like to see someone find something like that in SF for the same price.
You got a really, really, good deal. Before I moved out here, I looked at numerous tiny 1 bedroom places that were $1275-$1400 and I considered them unlivable. And, when my rent went up by $150 on the house I live in now, I shopped around again. I'm just not seeing prices anywhere near what you're paying for that kind of space. And, I've been pleasantly surprised to find that housing in the city is not that much more expensive...maybe $100 or $200 more per month, for the locations I'm shopping in.
I will say that I'm now kinda shocked by how ridiculous the paperwork is for most SF rentals. They want huge swaths of banking data. Far more than I had to provide for any other place I've ever lived (even buying a house in Austin wasn't this intrusive). I've talked about the topic with my landlord (who wasn't too intrusive when I moved in here, and has been mostly great and hands off), and he said it all boils down to how hard it is to evict someone in California. Since throwing someone out takes as much several months after they stop paying or do something else against the rules, the property owners do everything they can to insure they never have to throw their tenants out. But, I still find it horribly annoying.
Mountain View is very nearly the same price as San Francisco. Because of Google it is among the most expensive places in the valley. I've lived here since we did YC last year, and I've enjoyed it. It's a lovely, quiet, and highly technology focused area, with good restaurants (as long as you like Asian and Mediterranean food), cool little groceries and produce markets (mostly Asian and Mediterranean, but also the Milk Pail which is close to heaven for fans of fresh food), a fantastic library, and even a decent cultural scene (though it is very much white bread small town culture...the performing arts center is excellent for such a tiny town; the massive tax base of the city insures most city services are excellent).
I don't know anything about Boston, but I've heard it's also quite expensive.
I'm paying $2145/mo for a two bedroom rental house a few blocks from downtown Mountain View (with a garage). It's pretty big compared to where most of the folks I know out here are living, but I moved from an even bigger place in Austin, so it was definitely downsizing for me. I've been shopping for a place in SF, and have found that prices are pretty similar for smaller places--$1600-$2000 for a one bedroom (sometimes plus small office) apartment in a decent location.
Salaries in California are enough to make up for most of the higher cost of living, as long as you don't have a strong desire to own your own home anytime soon.
"- Any advice on which of two hypothetical is better: big fish little pond or little fish big pond? Alternatively, would you rather be at an important team in a lesser-known company, or a less-important team in a well-known company?"
How long is a piece of string? We can't tell you what the best work environment is for you. You'll need to try it and see.