I lived in Cali for a while ... loved it. I have no bones to pick with the state. Most of the midwesterners I've known who dog Cali are usually pretty clueless.You forgot to mention how businesses are priced, regulated, and taxed to death so pick up roots and move.
Plenty of businesses remain there too ... still a big market. It costs to do business - so businesses pass that cost on to the consumer (usually). Also, it's a labor market that benefits from a lot of excellent universities (UC system, Harvey Mudd, Stanford, caltech, etc) ... businesses also spring up around where there is the talent. Silicon Valley just didn't emerge from nowhere.