Yes there are tons of companies working at scale with "cheaper" engineers, in fact the vast majority of companies in my experience are doing this. But the types

Yes there are tons of companies working at scale with "cheaper" engineers, in fact the vast majority of companies in my experience are doing this. But the types of companies in these specific markets where salaries are crazy need or think they need the absolute best to compete. They really don't care very much about the cost relative to other types of businesses. For most of these companies engineering output is their entire product and they are sitting on mountains of money. A few good engineers can make a massive difference to their products and success while a few bad ones can sink the entire business. FWIW FAANG aren't the only companies paying ridiculous salaries, they are a small subset of the SV / Seattle markets. I work for a company that pays salaries similar to FAANG. We don't interview like they do and if we did we would have a harder time hiring good people.