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The Increasing Importance of Physical Location

The debate over the importance of the physical in light of technological advances and increased mobility and transportation options is not new. Is technology making the world flatter as Thomas Friedman argues? Or is the world getting spikier, as Richard Florida suggests? Does place matter more than ever? According to Friedman, the importance of location is diminished if not obliterated — one can "innovate without having to emigrate." Florida counters that location still matters, that both innovative and economic activity remain concentrated in "spikes," in certain urban areas which reflect a disproportionate amount of activity and talent, and that this trend is increasing, not decreasing.

We believe that location does matter and will continue to matter. People are moving into large urban areas at an accelerating rate — today over 50% of the world's population lives in dense cities versus ~30% in 1950. If location no longer mattered in terms of economic potential for an individual, it seems likely that more people would stay in place rather than uproot themselves to relocate.

Obviously, there are many reasons for movement, but we see two key factors. First, tacit knowledge — the "know-how" that is not codified and is often gained through experience — is increasingly valuable; rich exchanges of tacit knowledge generally require face-to-face contact. But what about the emerging technologies that we've said will improve the creation and sharing of knowledge? These technologies, including ones like telepresence which help to create richer interactions, are largely focused on explicit knowledge that can be expressed in data and written text rather than supporting the kind of informal gatherings that promote the sharing of tacit knowledge.

The second factor is related to serendipity, the ability to attract people and resources we need but don't yet know exist. In a dense city, the probability of serendipitous encounters increases; if the city draws a specific talent pool (such as entertainment in LA or finance in NY), the number and quality of encounters improves.

Far from making location obsolete, the digital infrastructure is actually fuelling spikiness. On the one hand, the Internet (and global transportation and mobile phones) have provided unprecedented access to the world for residents of small towns and distant countries. At the same time, this has made relocating to an urban area more attractive and reduced the opportunity cost. In the past, choosing to move to a specific city was a more significant commitment because it implied sacrificing contact with other parts of the world. Today, global digital infrastructures help us to stay in touch across urban areas, allowing us to benefit from richer interactions within a city while maintaining connections with other parts of the world.

Making the "big" city a little smaller. New technologies, particularly location-based services, have the potential to make cities even more attractive. As a city gets bigger, finding and connecting with the people and resources that matter becomes more challenging. Location-based services help make the resources of a city more visible and accessible. A growing number of augmented reality services (e.g., Yelp's Monocle, Wikitude, Layar) make use of the camera, GPS and compass on a person's smart phone to provide information--including histories, reviews, menus, special offers-- about specific nearby venues as well as providing directions and information about taxis and public transit in the vicinity. As user data accumulates, these apps can even provide personalized recommendations, making the experience of a city both richer and easier.

Location-based services are also likely to increasingly play a role in shaping serendipity. For instance, Citysense (currently beta testing in San Francisco), offers a mobile application which provides real-time heat maps of where people are congregating . Based on your pattern of movement over time, it assigns you to a "tribe" of people who share your patterns (and presumably interests) and begins to offer specific recommendations for finding where the people like you hang out. Over time, these services are likely to provide profiles of people in your vicinity and suggest connections that may matter. As people with similar interests find it easier to connect with each other physically, virtual platforms help to augment the face-to-face contact. For example, writers who meet in a class or at a reading may continue to share and critique work through virtual forums which supplement the periodic live meetings.

Passion is a magnet. People who want to develop their own talents by engaging more deeply with a community of people who share their interests will likely be increasingly drawn toward dense metropolitan areas. Communities of interest, so common on the Web, tend to evolve into tighter communities of practice in urban areas as people engage in sustained efforts to develop things together. The passion of a few tends to inspire and draw in others. The ability to sustain interactions in online environments amplifies face-to-face interactions and fuels the passion of a growing number of participants. The physical/virtual community of practice becomes a magnet for others to move to the city. Certain cities become known for having a critical mass of passionate people, and that motivates even more people to relocate to these evolving urban spikes.

Thus, rather than reducing the incentive to gather in dense cities, information technology will likely increase their value and accelerate the movement of people into cities. Of course, people still have compelling non-economic reasons for where they live — in the future, as now, family ties, lifestyle preferences, even aesthetics may cause a person not to relocate. Just don't look for technology to eliminate the imbalance of economic opportunity and talent and innovation between geographies — those imbalances still exist and will tend to become more significant.

What about you? Are you more or less likely to live in cities? How much of the choice is driven by the opportunity to develop talent more rapidly? Does location no longer matter?

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