One other thing to note is that office space, while expensive, is much cheaper than your developers. You can easily get 10-20% more productivity with a better working environment.
Also, that "collaboration" that people value? None of that is getting written down. Circle's team is already half remote, so placing a strong emphasis on 'library voices' means more communication happens over hipchat and email. More things get written down, and the remote employees are able to collaborate more, and there's a written record of "oh yeah, on Friday 2013/01/03, Paul and Allen thought it was a good idea to try X.