Here are the problems:

1. If you "complete an exit", even a mediocre one, your stock goes up in a major way. You'll have no problem getting funding off the bat (i.e. you don't have to tap savings) and the most qualified co-founders once you join Those Who Have Completed An Exit. You can play again, and you've established the ability to maintain an upper-middle-class lifestyle (even if you got chewed up by preferences, earnouts, and shit like that) indefinitely while being a career-long founder. Most people don't do another startup when they get to this point, though. They either become EIR, swing into a larger company as a mid-level executive, or move into VC wholesale. Once these people are at the the point where VCs will fund you on a handshake and let you take a $200k per year salary as CEO, they're generally no longer happy with $200k. They want the $500k per year jobs, and after working 90 hours per week to make the last startup work, they're not interested in trying that again. Long hours are a one-shot pistol for most people; you do a few months at 100 hours per week, only to discover that it takes a decade to regain the ability to do that again (and it becomes worse as you get older, because you're increasingly cognizant of the incompetence that follows from overwork).

That goal of "completing exits" is the source of a lot of this mediocrity. Now, many people think they can slap something mediocre and flip it, and then later be able to do something genuinely interesting once they've earned the respect and presumed competence associated with "completing an exit". (The East Coast counterpart is the person who thinks he'll work on Wall Street for 5 years and then support himself as a writer or philosopher for the rest of his life.) It rarely works out that way. Once people join "The Club" they lose all interestingness and ingenuity. The same thing happens to writers and artists; they start out poor but genuinely interesting, have a hit, get invited into the cocktail party scene, and become deathly boring. That's also why most of these Manhattan "artistes" produce pure shit (some intentionally, and one or two literally).

A lot of people start out with genuinely productive ambitions (write a great novel, build new technology) that seem to require social climbing, and they believe that as they rise, they'll encounter more connected, productive, and interesting people. Only the first of these ("connected") turns out to be true; what they find, instead, is that they're surrounded by increasingly competent, effective and brazen parasites. After all, the U.S. upper class in 2012 and the French aristocracy in 1785 are possibly the most effective sets of parasites in world history.

2. High house prices, in addition to destroying culture, produce mediocrity. When that much of an area's wealth is tied up in real estate, it's a cultural disaster. They result in mediocre people (by causing a wealth transfer to the wrong sorts) mediocre ideas, and the wrong kind of aspirations. The aspiration is no longer doing something great and far reaching; it's being able to afford a fucking house. People tend to believe otherwise, because the most interesting places are expensive, but they're interesting in spite of the expensiveness and all else being equal, the expensive real estate is a negative. In the long term (decades) this leads to urban decay due to the sticky nature of house prices ($500,000 houses in dangerous slums). It happened once and, unchecked, it will happen again.

The solution is to have a saner policy toward new development (instead of giving a say to rich NIMBY fuckers who shouldn't really be listened to be cause they don't add anything to anything cultural; in fact, their interests should be deliberately trampled for fun and sport because they are useless assholes) but also to keep prices sane by setting up a culture test, and capping what people can spend on real estate (rent or purchase) based on their culture test scores, because uncultured money (think real estate new money) is the bane of everything good and societies must do everything possible to keep such barbarism out. There's good elitism and bad elitism, and culture testing is the good kind.