In the current knowledge economy, the most important production factor, human knowledge, is much more mobile than the dominating production factors of previous periods. This means that theories of spatial development, formulated during the manufacturing-industrial era, might not be wholly applicable today. One of the basic assumptions of spatial theory is formulated in Waldo Tobler's first law of geography: "everything is related to everything else, but near things are more related than distant things." This article discusses the validity of this law in today's knowledge economy. While several factors have made distance less important, a crucial factor for innovation and growth-tacit knowledge-is still highly dependent on face-to-face contacts. This suggests that Waldo Tobler's first law of geography plays an important role also in the knowledge economy.