Free by Chris Anderson

In the pro­logue, Ander­son men­tions that his research showed two camps: those above thir­ty who remain skep­ti­cal of any­thing labeled “free” and those under thir­ty who think any­thing dig­i­tal is gen­er­al­ly free. This age def­i­n­i­tion has noth­ing to do with Tim Leary and every­thing to do with the tim­ing of the dig­i­tal rev­o­lu­tion. It was my gen­er­a­tion that real­ly took the inter­nets from a academic/ gov­ern­ment exper­i­ment to the infor­ma­tion behe­moth that we know it as. These are the peo­ple that helped to cre­ate the new free and they watched and learned as oth­ers toyed with the idea. My posi­tion of “free is great so long as it pays” makes sense. I became an adult around this notion. My wife and I both have careers now that our users/patients don’t pay for direct­ly but are added on to make our employ­ers of greater val­ue to the customers.

So, it is from this per­spec­tive that I can say that many (most, even) of the core points in Free: The Future of a Rad­i­cal Price by Chris Ander­son are absolute­ly cru­cial to busi­ness. Espe­cial­ly small busi­ness­es and arti­sans, where nim­ble­ness is a advan­tage to be lever­aged. But still yet it is one that must be reck­og­nized by old, large media such as enter­tain­ment and news if they are to flour­ish going for­ward1.

Free as a Concept

I think that there are many small con­cepts and exam­ples that make the entire book worth­while for most any­one. But I want to focus on a couple:

First, the idea of exam­in­ing what is abun­dant and scarce to you and lever­ag­ing those. It is equal­ly impor­tant to real­ize that what is abun­dant or scarce changes over time and this is why busi­ness of old long since died off. Some­times a com­mod­i­ty may not be tru­ly free, but so cheap as to not make meter­ing it worth one’s time. Using some­thing like this to draw in cus­tomers and then get­ting mon­ey out of them (or even a select few, as I’ll get to momen­tar­i­ly) is a key part of mak­ing a busi­ness on Free.

Sec­ond­ly, if we are not going to mea­sure some­thing because it is free or near­ly free, we can in fact being to waste this sort of com­mod­i­ty. When there is such and abun­dance of a com­mod­i­ty that we can afford to throw count­less num­bers into our busi­ness, some entire­ly new ideas can arise. Ander­son pro­vides many exam­ples but suf­fice it to say that essen­tial­ly every­thing we do on a com­put­er these days would have once con­sid­ered to be a friv­o­lous use of pre­cious resources. Thomas Frei­d­man’s forces that flat­tened the world indeed have changed the eco­nom­ic land­scape as well (ref. The World Is Flat).

And it is impor­tant to con­sid­er scale. Rather than giv­ing away a free sam­ple to sell most of your prod­uct, think about giv­ing away the vast major­i­ty of your work in order to scale up to many, many cus­tomers. You may only be sell­ing some­thing to a few per­cent of your total cus­tomers; with the vast major­i­ty being free­load­ers. But if that total base is large and your work costs lit­tle to make — or, more like­ly, costs lit­tle to repro­duce — the busi­ness mod­el becomes solid.

Last­ly, make no mis­take: free is tough to com­pete with. So much, it is real­ly an entire­ly dif­fer­ent mar­ket all togeth­er. From Anderson:

So from the con­sumer’s per­spec­tive, there is a huge dif­fer­ence between cheap and free. Give a prod­uct away and it can go viral. Charge a sin­gle cent for it and you’re in an entire­ly dif­fer­ent busi­ness, one of claw­ing and scratch­ing for every cus­tomer. The truth is that zero is one mar­ket and any oth­er price is anoth­er. In many cas­es, that’s the dif­fer­ence between a great mar­ket and none at all.

Cer­tain­ly, this sort of pric­ing psy­chol­o­gy can be applied either way. But in terms of cre­at­ing a large, new mar­ket almost overnight; noth­ing com­pares to free.

Free as a Book

Free is real­ly a sequel to — or, more accu­rate­ly, the log­i­cal con­clu­sion to — Ander­son­’s first book The Long Tail (which I pre­vi­ous­ly reviewed). I feel con­fi­dent that Ander­son, too, sees it this way. I think he cov­ers the key con­cepts of that book here as well in order to pro­vide con­text. Actu­al­ly, a siz­able por­tion of this book is con­text: his­to­ry of free as a price and mar­ket­ing scheme and how the dig­i­tal age has rev­o­lu­tion­ized its appli­ca­tion. There is also a num­ber of exam­ples of the appli­ca­tion of Free in real-world busi­ness­es and cul­ture. What there isn’t much of is spec­u­la­tion on the future of Free. Ander­son spares us from telling us how Free will change the world and spends most of his time explain­ing what effect it has already had.

Fur­ther­ing the case for Free as the son of The Long Tail, one of key ideas in Ander­son­’s first book which I point­ed out was the impor­tance of fil­ters in mak­ing long tail busi­ness­es pos­si­ble. Freeco­nom­ics takes the oth­er side of this coin by assum­ing the long tail as com­mod­i­ty and the fil­ter­ing as the scarci­ty; there­fore mak­ing that again the key to success.

Ander­son makes a sol­id case in oth­er aspects of free, as well. At least as sol­id as one can to mea­sure some­thing that is inher­ent­ly unmea­sur­able. After all, larg­er num­bers times zero are still zero. He uses a few rough cal­cu­la­tions to show a sense of scale. Some have wrong­ly crit­i­cized the accu­ra­cy of these, but as an engi­neer I see the val­ue in these “back of the enve­lope” esti­mates to deter­mine at least the mag­ni­tude of the issue, if not the pre­cise val­ue. Addi­tion­al­ly, he uses numer­ous exam­ples of how indi­vid­u­als and com­pa­nies apply free to make mon­ey and earn rep­u­ta­tion and atten­tion (which can, with some cre­ativ­i­ty, gen­er­al­ly be turned into mon­ey). He even has an appen­dix of sorts on apply­ing the con­cept of “Freemi­um2;” that is, giv­ing away part of the busi­ness but charg­ing for a pre­mi­um ver­sion for a select few (gen­er­al­ly 5–10% of the users). Clear­ly, this is where Ander­son sees the great­est oppor­tu­ni­ty from a busi­ness perspective.

Cer­tain­ly some of Ander­son­’s exam­ples are more con­vinc­ing than oth­ers. How­ev­er, no exam­ple of flour­ish­ing from giv­ing away prod­ucts is strong than that of Google. Just gawk at the raw scale of a com­pa­ny that gives away essen­tial­ly every ounce of inno­va­tion it generates:

This has worked amaz­ing­ly well. Today, ten years after its found­ing, Google is a $20 bil­lion com­pa­ny, mak­ing more in prof­it (more than $4 bil­lion in 2008) than all of Amer­i­ca’s air­lines and car com­pa­nies com­bined (okay, that may not be say­ing much these days!).

Despite Ander­son­’s punch­line at the expense of some of Amer­i­ca’s last-cen­tu­ry indus­tries, I think in fact that this does say some­thing quite sub­stan­tial. Google real­ized that it had a num­ber of com­modi­ties on hand from its search busi­ness: stor­age, band­width, com­put­er horse­pow­er; and saw to take advan­tage of it in any­way pos­si­ble to extend its reach. Though many of its inno­va­tions were, in real­i­ty, acqui­si­tions: YouTube, Write­ly (aka Google Docs), etc.; it has lever­aged “cloud com­put­ing” to get its adver­tis­ing cash cow in front of more and more peo­ple. And when is the last time you paid a bill to Google3.

Per­son­al­ly, I felt as though much of Free was tan­gen­tial to the any argu­ment of how to apply free tac­tics to a mod­ern busi­ness. Most the chap­ters wan­der about in a very con­ver­sa­tion­al style. The core of the book could cer­tain­ly be boiled down into some­thing much short­er4. Though some of these his­tor­i­cal and eco­nom­ic tan­gents are inter­est­ing, they don’t do much to under­score the argu­ment that free is impor­tant to busi­ness (not that that is the only pur­pose of the book, of course, but it is the title after all). Though Ander­son attempts to cre­ate a tax­on­o­my of free in busi­ness, it nev­er real­ly gels as to where var­i­ous busi­ness­es fit in, oth­er than the cat­e­go­ry of freemi­um; which, as pre­vi­ous­ly men­tioned, Ander­son goes into great depth into and even sub-cat­e­go­rizes suc­cess­ful appli­ca­tions there-of.

I also would have liked to see more con­crete evi­dence of Ander­son­’s argu­ment that free is some­thing of a nat­ur­al law in eco­nom­ics. I think that this is a key argu­ment in con­vinc­ing last-cen­tu­ry busi­ness that free is indeed the price of the future. More accu­rate­ly, I sup­pose, that chang­ing their busi­ness mod­el to giv­ing away some­thing that used to be a prof­it source in order to see rev­enue else­where. I sus­pect there is valid­i­ty to this “free is like grav­i­ty” the­o­ry, but this book leaves me want­i­ng some more sound evi­dence one way or the other.

This book has gen­er­at­ed some chat­ter and even con­tro­ver­sy online5. Oth­er than to acknowl­edge their exis­tence, I don’t want to dwell on that. The book does­n’t exist in a vac­u­um but I’ll leave that sort of thing to oth­ers. Main­ly because most of that has long since blown over by the time I was able to get around to fin­ish­ing the text!

Free: The Future of a Rad­i­cal Price by Chris Ander­son on Hype­r­i­on books is avail­able (for pay, in a spiffy bound edi­tion) at most book sell­ers. True to his word regard­ing the research project nature of his book, it is also avail­able free in ebook and audio down­loads (with updat­ed text).

1. I do not believe for one sec­ond that enter­tain­ment or news are going way. Rather, if the old com­pa­nies in these areas are to stay around instead of be replaced, they are going have embrace Free. [↩]
2. I should note that I believe the word Freemi­um to imply the oppo­site of what is intend­ed. It only makes sense in con­text of label­ing a busi­ness plan and not any­thing from the con­sumer’s per­spec­tive. It is intend­ed to rep­re­sent a solu­tion that includes both a free and a pre­mi­um (for pay) option. How­ev­er, from the con­sumer’s per­spec­tive, one would choose either free or pre­mi­um and not select some hybrid, port­man­teau solu­tion. [↩]
3. Unless, of course, you buy Google ads. Then you have the ben­e­fit of know­ing you have some the best tar­get­ed ads ever cre­at­ed. Ulti­mate­ly, per­fect adver­tis­ing is just infor­ma­tion; and Google is clos­est any­one has ever come to deliv­er­ing paid-for infor­ma­tion on a large scale. [↩]
4. Which of course Ander­son did in a Wired arti­cle last year and will even do with a cus­tom tai­lored mes­sage if you hire him for a speak­ing engage­ment. [↩]
5. See the Wikipedia con­tro­ver­sy, Glad­well’s scathing review and respons­es to it, as well as Ander­son­’s cranky inter­view with Speigel. [↩]