But it is absurd to say that it can only be done in the valley. Did Microsoft go to the valley when HP and Apple had a huge presence? No. People came to them.
If it couldn't be done elsewhere, we wouldn't be working on ours in Vancouver. ;-)
Still, if I were 22 and single, I'd start my start-up in the valley without a moments hesitation.
Oh yes, and as for Microsoft--the rules are different for them. (When your revenues dwarf the GDP of some small countries you get a little more latitude.)
A brilliant algorithm isn't tantamount to business success. Plenty of great ideas languish, while lesser ones manage to gain traction.
As important as any idea or innovation is the ability to connect it with the people who can help spread that message.
I'd love it if this weren't true, but I'm afraid it is.