Maybe this is overly simplistic, but won't this all work itself out over time? More companies refuse to pay inflated SV salaries (note: most companies in the world already do not employ people there anyway), so some of the concentrated SV talent leaves for other places like Chicago where they can still get a sufficient wage relative to the cost of living. This continues for a while and eventually the COL in SV will start to equalize with other places in the country like Chicago, won't it?

Perhaps the real message here is that SV companies are realizing this is a perfect way to get out of paying $300-500K salaries for jobs that are more like $150K anywhere else in the US. It's kind of like the outsourcing craze from 15 years ago, except instead of getting 3-5 developers for the price of 1 by going to Europe or Asia, SV companies can get 3-5 developers for the price of 1 that are still US-based and only a couple of timezones away.

As someone who doesn't live in California but still near a big city in an area that is still "expensive" (but nowhere near SV prices) relative to smaller towns and rural areas, I can't figure out if this remote shift is a good thing or bad thing for me yet. I fear that my suburban house will be worth less going forward because proximity to a major city may be way less valuable now if so many fewer people ever physically go into work anymore.