“You’ll go broke saving money” is a phrase my grandfather was well known for saying, meaning be prepared to open your wallet whenever a seemingly good deal crosses your path. For MCDM’s Economics of Digital Media class, professor Kathy Gill charged us with writing a review of Chris Anderson’s FREE in which he frothily hypothesizes a radical idea: the price driving the modern economy is as little as $0.00. How can this be? And, more importantly, how can we trust it as it’s the opposite of what we’ve believed for generations? Anderson, editor in chief of techno-geek’s WIRED magazine frames his central argument around the fact that technology costs are dropping and valuable business inputs are becoming too cheap to matter, leading to business models where value is given away, seemingly for free. This fact creates low risk opportunities for businesses, benefits individuals and, Anderson believes, is changing the rules of economics. I’m inclined to say, same old song and dance.
Anderson’s casual and likable writing style is as approachable to the lay-person as those more familiar with the laws of economics. He uses this to his advantage as a way to engage the skeptics and to educate others on how things used to be. Using real “sidebar” examples and amusing anecdotes, Anderson explains that in the digital world there is no place for price to go but down. Citing proof such as Moore and Mead’s Laws (p. 84-85), today technology costs – the so called “triple play” of processing, storage, and bandwidth (p. 78) – are going down, and will continue to drop leading to surprisingly good deals for individuals.
He argues that when resources are free, or too cheap to matter, business models are revolutionized and, theoretically, are turning our economy on its head. While it is true, businesses are seemingly giving away valuable products that are traditionally sold, like Google Documents (on which I write this paper), it isn’t really for free. The concept of giving something away in order to gain market share on another item is as old as advertising itself. Google isn’t giving me this document program for free; I am paying Google with my attention and allowing them to track my behavior, which they then use to improve their marketing algorithms, turning it into targeted ad space. They are also making sure Google is as well known in households as Kleenex or Q-tips. Who writes ‘facial tissue’ on their grocery lists?
Anderson acknowledges that the old adage ‘there is no such thing as a free lunch’ is probably the biggest come-back to his argument and he attempts to win over the skeptics by addressing it directly. He smartly outlines why we are hesitant and gives examples to justify our gut reaction. Unfortunately, his examples are mostly based on loss-leader schemes. Businesses are always trying to get customers in the door in the hopes that they’ll buy something that wasn’t on their list. Come for the free wifi and stay for the $3 coffee is no different than come for the free compressed air and stay for the new tires.
As entertaining as he is, his argument is imperfect. My favorite of his examples – Monty Python using You Tube to generate new sales – is great but flawed. Monty Python recouped the cost of creating that content ages ago. They first sold it in theaters and to the BBC and later they made even more through VHS sales. Leave it to those goof-balls to squeeze out a third round of sales for 20 year old content. It was a fun example but the only thing Anderson convinced me of is I really should buy The Quest for the Holy Grail so I can watch it with my nephews. Monty Python is simply expanding their fan base whereas producers of new films will still need to generate revenue to fund their projects.
Anderson insists the differentiator is that many products aren’t sold directly in these new business models as they are more about mind share and thought leadership – the attention and reputation economies (p. 181). But while attention and reputation may be desirous for many we are still primarily motivated by money. Many of his “sidebar” examples are immature businesses of which I suspect the primary way to make money is to develop a product or service, create demand by giving it away, and then sell the business. Turning a profit becomes the next owners’ challenge.
In FREE Chris Anderson makes an entertaining yet imperfect argument. Throughout , he shows us why the concept of giving things away can sometimes make sense, yet this idea doesn’t always apply, and isn’t revolutionary. For the most part, my grandfather’s conservative ways are still correct. While we may not be opening our wallets as much, we are still paying with our time, attention, and insightful behavior. Despite the cost being $0.00 it is anything but free.