I think the OP was talking about the other "redundancy", as in "your whole team has been made redundant". In this context your story is very dark indeed :D

My old company has both data centers in the same metro area. A lot of handwaving is involved when you ask about events that can take out a metro area (natural or man made).

"~~perverse incentives~~ budgets rule everything around me"

It's probably good to situate in time when thinking about these things. The twin towers were how a lot of companies became examples of what location redundancy really means. These days people are keeping that lesson well in mind, but back then, not so much.

There are tradeoffs to higher and higher grades of redundancy and the appropriate level depends on the situation. Across VMs you just need to know how to set up HA for the system. Across physical hosts requires procuring a second server and more precious Us on a rack. Across racks/aisles might sometimes require renting a whole second rack. Across fire door separated rooms requires a DC with such a feature. Across DCs might require more advanced networking, SDN fabrics, VPNs, BGP and the like. Across sites in different regions you might have latency issues, you might have to hire people in multiple locations or deal with multiple colo providers or ISPs, maybe even set up entire fiber lines. Across states or countries you might have to deal with regulatory compliance in multiple jurisdictions. Especially in 2001 none of this was as easy as selecting a different Availability Zone from a dropdown.

Running a business always involves accepting some level of risk. It seem reasonable for some companies to decide that if someone does a 9/11 to them, they have bigger problems than IT redundancy.