I don't think that's really the "people around you" concept he's talking about. There are lots of social sites out there that will find activity partners and groups in your city - Meetup being the most salient example. The "people around you" services are the ones that go "user123 is 3 blocks away!". Hyper-local, if you will.
I'm hanging out with friends at a bar, I couldn't give two shits that cutegrrl123 is a block away and also likes chess. In fact, I'd be hard pressed to think of a single moment in my life where "meet a random stranger based on an algorithm" is a substantially more attractive option than what I'm doing at that moment.
"user123 likes chess and challenges you to a game this week" might work
"user123 is two blocks away and wants to play chess right the hell now" is not a really good use case
This is a concept that really only works in your head - every implementation of it has landed somewhere between "creepy" and "really useless".