There has been a lot of debate in recent weeks about plans to build on the site of the World Trade Center. Yet the competing proposals share the same odd assumption: that lower Manhattan needs more high-rises to replace the Twin Towers.

The idea that New York, or any city, needs much more high-rise office space is rooted in a deep-seated, increasingly misplaced faith in what has become widely known as industry "clusters." This idea suggests that high-wage economies must be rooted in localized and specialized networks, as epitomized by Wall Street, Hollywood and Silicon Valley.

With its origins in the industrial era, the cluster mantra has its roots in the theories of classical economists, such as Alfred Marshall, and, more recently, it has been amplified through the writings of such top economic thinkers as Charles Sabel, Michael Priore and Michael Porter. As a result, many regions expend great effort to discover and expand "clusters" that will turn their area into the next boomtown.

Tenuous

Yet today the logic underpinning many such clusters is increasingly tenuous. The use of advanced telecommunications makes coordination between disparate individuals and companies, even on a global level, increasingly easy. At the same time, the dispersion of talent and technology to various parts of the country and the world has altered the once-fixed geographies of talent. Being nearby industry sources and people is still important, but is increasingly less so.

This dispersion trend has been further accelerated by the fallout from Sept. 11. Already, many major securities companies have moved operations out of Manhattan, notes David Shulman, senior real estate analyst for Lehman Brothers. Many of them have signed long-term leases, and aren't coming back. Financial and other business service firms are migrating to the Hudson Valley, New Jersey and Connecticut.

Over time, particularly if there are further terrorist attacks, we can expect a similar outflow from other high-profile locales like Chicago's Loop or Washington's M Street. Terrorism, Mr. Shulman points out, is already forcing firms in such places to pay more for insurance and for elaborate security and communications systems. "Terrorism demolishes agglomeration economies," he suggests.

Even more important than financial considerations are the sentiments of individual workers, particularly those with families and children, who are increasingly reluctant to labor in a possible terrorist target. John Shaw, president of Jefferies Securities, a Manhattan-based trading firm, notes that since 9/11 many of his top-drawer colleagues are pressing him -- often at their wives' insistence -- to work in offices elsewhere in the region. Thirty-five people from his Manhattan office are already transferring to the company's Stamford, Conn. facilities. "It tipped many people over the fence towards moving to the suburbs," he notes. "Now people are thinking about living a different way of life."

Of course, it's not just terrorism. There are plenty of other, long-standing reasons to move to the suburbs, such as good schools, open space and affordable housing. Even when other firms were insisting employees locate in Manhattan, Jefferies Securities has long offered its key employees the option of working outside the confines of Manhattan. The firm maintains large offices in, among other places, Short Hills, N.J., Nashville, Tenn., Los Angeles, San Francisco, Richmond, Va., and Dallas. "There are a lot of people who love this business but want to be elsewhere," Mr. Shaw says. "They don't want to shlep to New York City. We get people to work for us who we couldn't get elsewhere by giving them other lifestyle options."

With the new telecommunications technology, it is increasingly easy for a firm like Jeffries to operate in a dispersed manner. The firm's chief strategist resides in Boston. The chairman lives in Los Angeles. The CEO is in Stamford. "No office is a branch," Mr. Shaw explains. "We are interactive and equally in the firm."

This development flies in the face of big-city snobbery. As one New York real-estate executive told me last winter: "Smart people have to be here." True, Manhattan has a lot of "smart" people but it would be foolish to accept the now-fashionable assumption that most high-end workers want to live in big, "hip" cities, particularly once they reach their 30s and start having kids. Most seem to prefer a squarer existence in one of the nation's burgeoning "nerdistans" located on the outskirts of major cities. Today, the best educated workforces are not in major cities but in suburban counties like as Fairfax County, Va., Montgomery County, Md., Boulder, Colo., and Johnson County, Kan.

To attract the best workers, managers in a de-clustered economy need to let their skilled workers live where they like. Forcing needed workers to change locations or worsen their "lifestyle" -- by, for instance, asking suburbanites to commute huge distances to work in downtowns, or making young creatives work in the "dull" hinterlands -- makes little sense.

Out of more than 450 employees at TMNG, a telecommunications consulting firm, only 35 people, mostly administrative staff, work out of its small headquarters in Overland Park, Kan. If one of the company's employees wants to live in Manhattan or San Francisco, that's OK, but, for the most part, workers want to stay in their own suburbs, close to relatives and familiar surroundings. "In 13 years we have never had a relocation," brags TMNG president Richard Nespola, who first came to Kansas City to work for Sprint 14 years ago. "What we find is that people want to work for us -- the key is that I don't have to sell the house and move. It's for the family issues like my kid's school, my church or synagogue. People want . . . to stay in their comfort zone."

In the future, we can expect more companies -- not only in services but in manufacturing and technology -- to follow this approach. Even in Silicon Valley, often used to illustrate the virtues of clustering, major firms like Cypress Semiconductor now scatter the majority of their top research and development facilities across many locations.

Paul Keswick, vice president for new product development at Cypress, works out of the firm's San Jose, Calif., headquarters, but runs seven labs across the country -- and three outside the U.S. Significantly, some of the firm's U.S. research facilities, which employ roughly 200 top researchers, designers and engineers, are located in areas not considered traditional tech clusters, such as Starkeville, Miss., Nashua, N.H., and Lexington, Ky. "It's really not necessary for a design center to be near customers," suggests Mr. Keswick. "The Web technology helps a great deal. We have staff working on projects at four or five sites at once."

The critical issue for Cypress, according to Mr. Keswick, lies in finding and retaining talent. Back in the 1960s and 1970s, he recalls, it was easy to lure top engineers and scientists to places like Silicon Valley, but now that has changed. "California is now a tough place to live, particularly the Bay Area," he explains. "The commutes are long and the housing is absurd. It's harder to get a good quality of life. You have to give a lot of talented engineers a different opportunity."

One successful example of this dispersal strategy has been the development of the computer-aided design (CAD) division under the leadership of engineer Alan Hawse. After graduating from the University of Kentucky, Mr. Hawse worked at Cypress' facilities in San Jose for much of the 1990s. But in 1996, Mr. Hawse felt he could no longer work out of San Jose. Both he and his wife were from Kentucky and wanted to raise their children there. "Once a Kentucky boy, always a Kentucky boy," he jokes.

When Mr. Hawse announced his decision to go home, he thought he'd be looking for work. However, Mr. Keswick was not about to get rid of one of his top designers. Instead, he offered Hawse the opportunity to continue directing the corporate CAD efforts, but out of a new facility in Lexington, Ky.

Today, Mr. Hawse runs a 30-person office in Lexington and supervises the CAD efforts in other design offices, including one in Starkeville, Miss., home of Mississippi State University. These locations may lack the buzz and intensity of established tech clusters like San Jose or Austin, Tex., Mr. Hawse points out, but they also offer what many engineers and programmers consider a more pleasant, family-oriented lifestyle.

"I leave my house in the country and drive 17 miles through the blue grass," Mr. Hawse says. "But when I open my computer I am at my center, it feels like I am back in San Jose. It's a kind of virtual Silicon Valley."

Improve Quality of Life

What are the implications of the de-clustering of America? There are many, but city officials and economic-development professionals should heed one lesson in particular: They are no longer going to be able to hold onto companies because firms in a particular line of business have "always" clustered in a specific area. Areas that want to hold onto their current economic supremacy can only do so by improving their quality of life, services and tax structures. Attempts to keep alive older clusters -- by, for instance, building more office space in downtown New York -- are likely to prove futile.

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Joel Kotkin is a senior fellow at the Milken Institute. He is author of "The New Geography: How the Digital Revolution is Reshaping the American Landscape" (Random House, 2001).