Why companies don’t prefer to expand in central part of country where everything is inexpensive?
One comment I have heard from people is lack of talent pool outside tech hubs, wouldn’t talent go wherever there are better opportunities?
A while back I worked for a company that was in the networking business. We had an office in the Twin Cities supporting some but not all products. The company was at the "need warm bodies" stage as they looked for people to fill some tech support roles in the valley and just couldn't get anyone. They reluctantly recruited a few of us from the Twin Cities (they were told they had to). It was all "oh man I hope you can handle this" / "This job usually requires a Master of Computer Science and 8 years experience..." and so on.
Then we started doing the job. After all that build up we were shocked, by how easy it was. It was still just tech support, and no more complex than we had done in the past with other products. You never once would think of computer science and that job. Just know the product, be able to communicate (funny enough customers didn't like the guys in the valley...), and work your way logically through problems. They were doing in the valley for +2x per person costs (and they were less productive) absolutely convinced the jobs had to be there....
2) Partnerships. If you're in a tech hub, it's easier to find companies to partner with, even by happenstance. It's also easier to sell yourself if your from SF, NYC, Boston than if you're from Boise, unfair as that is. Lastly, it's easier to convince a company to acquire you if they already have an office in that metropolitan area.
3) Talent Pool. This is really about two things: tech workers and seasoned execs. Generally speaking the talent pool is much higher in the tech hubs. The average engineer has been to multiple meetups, best practices have filtered down from the FAANG alumni into the general engineering population. Anecdotally, the people we turn down at my current job would have been "rockstars" at my previous jobs in CT and Westchester (the NYC suburbs). Execs are more likely to have been part of a high growth startup or at least have exposure to tech best practices or tech in general.
Outside of tech hubs, you're really committing to hiring junior engineers and training them, hiring consultants to fill key exec or management roles, hiring engineers from consultation companies (many of the hires that are willing to travel are international) and if you want truly great hires your going to be flying in a lot of candidates and many will still decide that they don't want to move anyway (they essentially need to decide to move away from their family, friends and work connections and rebuild that. It's a hard decision and many people back out late in the process)
A good technology analogy is that starting a company in a coastal tech hub, is like being able to use AWS cloud services. It can be cheaper to build your own data center, but being able to spin up server clusters at will and outsource database management, etc increases a company's velocity significantly. You can build a tech company outside of a tech hub (see ExactTarget), but it's harder to scale up past a certain size and exiting is much harder. Getting venture capital is harder and may be on worse terms. Finding good engineers in your stack nearby is more difficult (anecdotally it's a frequent occurrence to find companies using custom frameworks and/or best practices from 3-5 years ago, including the regional "success" stories)
The "crowded" part is the reason companies don't move inland. It really can't be overstated how much the quality of talent drops off as you leave regional hubs like NYC or SF. This compounds too, things may be expensive in these cities, but the amenities, job opportunities, and networks are exponentially better. Cost of living reductions evaporate when stacked up against lost future earnings (percentage raises on a smaller base + no opportunity to job hop + reduced opportunity for any potential spouse to do the same), more money spent on transportation and housing, etc.
For established companies, they can seek out talent pools available in major non coastal cities and build satellite offices.
I am not familiar with all of the central USA, but I am familiar with Denver. Denver is one of the 20 finalists for Amazon hq2, and gusto and slack opened Denver offices. Oracle has a big presence in the Denver area, and Microsoft and Google both have offices in Boulder (close to Denver).
Plus, if you want to save money, you can send work to India, Phillipenes, etc and plug into a network of managers and business types.
Is it short sighted and probably a bad thing in the long run for American companies? Sure. Does that matter? Nope!
https://www.google.com/amp/s/www.citylab.com/amp/article/399...