A columnist for Wired has an interesting look at how telecommunications are actually making it more interesting to reside in populated areas instead of allowing the complete disregard for distance.

All I need to get my work done is a place to perch and a Wi-Fi
signal. But if that’s true, why do I still live in London, the
second-most expensive city in the world?

If distance really didn’t matter, rents in places like London, New
York, Bangalore, and Shanghai would be converging with those in
Hitchcock County, Nebraska (population 2,926 and falling). Yet, as far
as we can tell through the noise of the real estate bust, they aren’t.
Wharton real estate professor Joseph Gyourko talks instead of
"superstar cities," which have become the equivalent of luxury goods —
highly coveted and ultra-expensive. If geography has died, nobody
bothered to tell Hitchcock County.

Maybe it’s because society hasn’t wholeheartedly accepted the idea
of working remotely. Or perhaps communications technology just isn’t
all it’s hyped up to be. After all, the journalists and consultants who
tell us that location is insignificant are biased. Like me, they’re the
people whose lives have been most transformed by the Internet and cell
phones.

But I think the truth is more profound than either of those glib
explanations: Technology makes it more fun and more profitable to live
and work close to the people who matter most to your life and work.
Harvard economist Ed Glaeser, an expert on city economies, argues that
communications technology and face-to-face interactions are complements
like salt and pepper, rather than substitutes like butter and
margarine. Paradoxically, your cell phone, email, and Facebook networks
are making it more attractive to meet people in the flesh.

The most obvious example is online dating. With sites like BBW (Big
Beautiful Women) Datefinder and Senior People Meet, it’s a lot easier
to find like-minded flames. But that’s not much use unless you live
within driving range of your 98 percent-compatible love connection. The
kind of contact that follows online winking is far from virtual.

It follows that matchmaking is most effective in densely populated
areas, where there are plenty of fish but an awfully big sea. If you
live in Los Angeles, online dating is the killer app. If you live in a
small town, you’ve likely already met all your potential mates at
church or a bar.

Of course, the rest of life isn’t like courting. Or is it? In big
cities, our communication tools are especially helpful because they
keep us from getting lost in the crowd (which is not something you
worry about in a one-street town). There are even services that tell
you where your friends are by locating their cell signals.

New technologies can strengthen ties within your business, too. A
2007 study by economists Neil Gandal, Charles King, and Marshall Van
Alstyne looked at the networks formed by 125,000 email messages from
the staff of an executive-recruiting firm. It found that email’s real
value isn’t in communicating with Kuala Lumpur but with Betsy in the
next cubicle. The most productive workers have the densest intracompany email web.

This shouldn’t surprise us. Email makes it quicker and easier to
reach your colleagues — you don’t have to interrupt them, and messages
are easy to process. But email doesn’t stop you from wanting facetime,
too. Just the opposite: By enabling us to maintain productive business
relationships with more people, it encourages more face-to-face
contact. Have you noticed business travel dying out? Neither have I.
Air travel is at record highs.

One day, perhaps, virtual communication will become so good we’ll no
longer feel the need to shake hands with a new collaborator or
brainstorm in the same room. But for now, the world seems to be
changing in a way that actually demands more meetings. Business is more
innovative, and its processes more complex. That demands tacit
knowledge, collaboration, and trust — all things that seem to follow
best from person-to-person meetings. "Ideas are more important than
ever," Glaeser says, "and the most important ideas are communicated
face-to-face."

Which explains why the highest-tech industries are the most dependent on geography. In a study published in the American Economic Review,
researchers examined 4,000 US-based commercial innovations and found
that more than half came from just three areas: California, New
York/New Jersey, and Massachusetts. Almost half of all US
pharmaceutical innovations were invented in New Jersey, a state with
less than 3 percent of the nation’s population.

In theory, technology should allow new-economy firms to prosper as
easily in Nebraska as in Silicon Valley. But far from killing distance,
it has made proximity matter more than ever.

As for me, I’ve been finishing off this essay between a coffee date
with my wife and some essential chitchat with my publishers at a
central London restaurant. This old city isn’t cheap, and it isn’t
easy. But with my cell phone and laptop to back me up, I can’t afford
to live anywhere else.

By Tim Harford at Wired Magazine