Free: The Future of a Radical Price

"The Future of a Radical Price," says the subtitle of Chris Anderson's Free. But for many readers unschooled in the preposterous paradoxes of the Internet economy, the idea of "free" as a financial price sounds ridiculous rather than radical, more comic than economic, closer to Monty Python's Flying Circus than to Adam Smith. Perhaps it is no coincidence, then, that Anderson begins Free with the hilariously stern public announcement made by the Monty Python team on the free video website YouTube in November last year. This note began in classically Monty Python tongue-in-cheek outrage:

For 3 years you YouTubers have been ripping us off, taking tens of thousands of our videos and putting them on YouTube. Now the tables are turned. It's time for us to take matters into our own hands.


The logical response, of course, would have been for Monty Python to hire some killer lawyers and sue the pants off the kleptomaniac kids. But, as Anderson explains, "taking matters into our own hands" meant quite the reverse for the Monty Python team. Instead of building more secure walls around their content, Monty Python would post all their high-quality videos on YouTube. And it would all be free!

So where's the rational economics in this? any reasonable thinking person would wonder. How can Monty Python make money if they give away their content for free? Herein lies the paradox of today's digital economy. As the announcement explained, Monty Python wanted something "in return" for their free content. But rather than their fans' "driveling, mindless comments," Monty Python wanted them to watch the free content on YouTube and then "click on the links, buy our movies and TV shows and soften our pain."

As Anderson triumphantly reports in Free, YouTube viewers did indeed soften Monty Python's pain. Three months after the YouTube "free" experiment, Monty Python's sales at Amazon.com increased by 23,000 percent and their DVD rocketed up to No. 2 on the movie and TV bestseller list.

It could have been a classic Monty Python skit, but it wasn't. Give away all your best content on the Internet and raise real sales by 23,000 percent! Not even John Cleese could have written anything that unbelievably absurd.

While Anderson -- the author of the 2006 bestseller The Long Tail who moonlights as the editor-in-chief of the Condé Nast–owned, San Francisco–based Wired magazine -- might not be quite as funny as Cleese, his Free is an accessible and highly entertaining riff on the conundrums of today's digital economy. According to Anderson, "Freeconomics" is enabled by digital technology, which "nearly" halves the cost of computer processors, Internet bandwidth, and online storage, thereby cramming down the price of distributing online content closer and closer to zero.

This zero cost of distributing digital content is, Anderson argues in Free, the core principle of the 21st-century "radical" economy. The 20th-century industrial market of "atoms" is replaced by the informational market of "bits." Digital information -- such as Monty Python videos on YouTube -- is infinitely abundant and, therefore, will inevitably be free. But Anderson, an Anglo-American economics journalist who earned his spurs in the dismal science at the dismally realistic Economist magazine, is no misty-eyed, end-of-history style cornucopian. He acknowledges that this digital abundancy creates valuable new scarcities in the 21st century, primarily those of attention and reputation, the two gold standards of the digital age.

The most radical implication of Anderson's theory is the commodification of all-things-digital and the revaluation of all-things-physical in the 21st century. Thus, using his own creative self as an example of his theory, Anderson explains that while he's perfectly happy to give away copies of Free online because it costs him nothing to store or distribute, the increasing scarcity of his time drives up the price of his live speeches, thereby enabling him, he confesses, to save enough money to send all five of his kids to college.

Anderson is, of course, correct. The Internet is killing the value of most digital content while simultaneously driving up the value both of high-end physical products and of live performance. He thus also uses the example of Radiohead's In Rainbows album, which the band gave away for free online but which ended up selling 3 million copies worldwide, including 1 million copies of a deluxe $80 box set, and triggered the sale of 1.2 million tickets for their post-album tour.

While all this macro-historical economic theory might sound a tad technical for general readers, Anderson writes about the digital transformation with verve and humor. I particularly enjoyed his all-too-brief history of the economic theory of free, with the priceless anecdote about the late-19th-century French mathematician, Joseph Bertrand, who "half-joking" reworked another French mathematician's model of free economics -- only to find that this "marginal cost pricing" theory turned out to be correct!

For humor, though, the best joke in Free concerns, in classic Monty Python fashion, dirty toilets. In discussing the environmental costs of 21st-century free economy, which Anderson acknowledges to be myriad, he dryly describes the olfactory consequences of free public toilets as "uncompensated negative externalities." Certainly this gives new meaning to Anderson's eighth principle of abundance thinking, entitled: "Embrace Waste."

Free won't be humorous for all readers. What will be entertaining reading for entrepreneurs at freeconomy companies like Google, will be consumed in gray, humorless silence by professionals of the old atoms economy. For these denizens of the old economy, reading Free will be as unpleasant as visiting a free public toilet. Indeed, Anderson gives explicit warning to travel agents, stockbrokers, and realtors to discover new scarcity in the age of digital abundance. But, of course, the sharpest polemic in Free is directed toward old-media dinosaurs whose refusal to radically rebuild their businesses is now decimating the music, newspaper, and book industries.

So is Anderson right? One profoundly important subject that only gets a cursory chapter in Free is the destructive costs of the new digital economy. My advice is to read Free in parallel with Ellen Ruppel Shell's essential new book about the downside of free: Cheap: The High Cost of Discount Culture. "Cheap" and "Free" are the two key words in our current thinking about the global economy and culture, and both these valuable books will help shape an important debate about the pricing, value, and quality of life in the 21st century.

The least convincing area in Free concerns Anderson's faith in the business models of Silicon Valley's radical-price (and radically priced) companies. Just because the old atom economy of newspapers and record labels is dying, it doesn't inevitably mean that the new digital freeconomy is viable. And while Anderson is on firm ground covering Google's phenomenal success as the increasingly monopolistic locomotive of the new economy, he's less convincing describing the supposed viability of highly trafficked free web "businesses" like Second Life, MySpace, YouTube, and Twitter -- none of which have yet to discover a profitable business model.

I wonder if Chris Anderson watched a bit too much Monty Python in researching Free. In his treatment of contemporary Silicon Valley economics, he might be seen as impersonating John Cleese in that timeless apotheosis of Monty Python's surrealism: the dead parrot sketch. By continually waving the business models of dead or dying companies like MySpace and Second Life at us, Anderson is vulnerable to becoming the victim of his own joke.

And for those of you not familiar with the dead parrot sketch, you can check it out on the Monty Python channel of YouTube. Not only is it is ludicrously funny, but it's also free (like this review). Then I would advise you to stay online and order a physical copy of Chris Anderson's Free. It might not be quite as radically absurd as the dead parrot sketch, but it is currently the spunkiest introduction to the most preposterous paradoxes of the 21st-century digital economy.

Comments
by JasCampos92 on ‎05-05-2010 06:11 PM
  1. Free The Future of A Radical Price   by Chris Anderson is 235 pages and was  published/released July 7, 2009

 

  1. Chris Anderson was born 1961 and is the editor in chief of Wired where he joined in 2001. He currently lives in Berkeley, California with his wife and 5 children. He has a degree in physics from George Washington University and also did a lot of his research at Los Alamos National Laboratory. Anderson worked at The Nature and The Scientist, and he wrote the book The Long Tail: Why the Future of Business is Selling Less of More (2006). His newest book entitled Free: The Future of A Radical Price examines the rise of pricing models which give products and services to consumers for “free”.
  2.  Chris Anderson in Free states that many businesses profit more when giving things away for “free”, therefore giving one thing away creates demand for another. “Free” did not always mean profitless, since one is “paying with a bit of [their] time, and by being seen reading the newspaper, your reputation” (pg.120). The reality is that markets are going beyond the regular market “gimmick”, the secrets behind the competition and the new development of the internet has had a huge influence.
  3. The market economy has changed over time, where before some of the “main” problems were that consumers did not understand the product or what to do with it. Take Jell-O for example it was a “jiggly treat on your dinner table”, people did not see any other use for it. Chris Anderson explains that without consumer demand merchants would not stock it. The traditional “door-to-door” strategy and the distribution of pamphlets, and putting ones face as advertisement on their product. Take Gillete as an example they gave out samples of their product to get the consumer addicted to the product, this is where the start of what “free” is today in the 21st century. Sometimes “free” isn’t really “free” since one can get a “free gift inside” but one truly is paying the cost of the gift in the overall product price. The simple idea of a “free” product is a trigger and simple marketing to get one hooked. Take the web as another example, it gives this whole new marketing a new change where the actions of a single individual can have global impact. Some “free” is just another version where different customers pay a different price.   

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