Or some of the tech companies could be distributed over a larger number of cities. It seems ironic to me that tech companies, of all industries, are placing such a huge premium on physical proximity.
I think you're underestimating the gap. I wouldn't call every other city a wasteland, but it can sometimes feel like it's hard not to have a tech job in the Bay Area.
It's also possible that people in SV are over-estimating the gap, but I think the reality is closer to the extreme they imagine.
These places look great from the outside (cheap, plenty of space, infrastructure etc.), but the job prospects during a downturn are radically different as compared to the Bay Area (I'm only talking about 2008, not the dotcom bubble).