Will Everything be Free? – My Review of Free

So, I’m on a roll now. As promised I would share my review of several books. This is the next one: Free by Chris Anderson. An article in Wired about Free triggered me to read this book. Free is a big deal nowadays. Many products and services are offered for free. And people are making lots of money charging nothing. “Not nothing for everything, but nothing for enough…” (p. 3)

Free has always been around a long time, but it’s changing. The internet seems to be doing something interesting to what we pay for things. “Somewhere in the transition from atoms to bits, a phenomenon that we thought we understood was transformed. “Free” became Free.” (p. 4) This book is about this phenomenon.

Chapter 1-3 dive into the fascinating history of free. And the different kinds of free: direct cross-subsidies, three-party market, freemium and nonmonetary markets. (p. 23) Free started out as a marketing method. Now free is an entirely new economic model. (p. 12) The old free was based on the economics of atoms, now it’s based on bits. When something becomes software it inevitably becomes free, in costs and often in price as well.

Interestingly Anderson shows how humans are wired for scarcity. We focus on the things that are scarce, e.g. time and money. While there’s abundance of lots of resources now. We have to get used to that. And work with abundance. “When abundance drives the costs of something to the floor, value shifts to adjacent levels…” (p. 52, 131) And: “… the highest profit margins are usually found where gray matter has been added to things.” (p. 54, also refer to ch. 13 and 15) So knowledge is added, ideas are shared. Why are ideas so interesting and important in this context? Let me share two interesting quotes from the book:

Ideas are the ultimate abundance commodity, which propagates at zero marginal costs. Once created, ideas want to spread far and wide, enriching everything they touch. (p. 83)

Information is how money flows; aside from the cash in your wallet, that’s what money is – just bits. Information is how we communicate, as every call is turned into data the moment the words leave our lips.” (p. 92) “Information wants to be free.” (p. 95, ch. 6) This means: “Commodity information (everybody gets the same version) wants to be free. Customized information (you get something unique and meaningful to you) wants to be expensive. (…) Abundant information wants to be free. Scarce information wants to be expensive. (p. 97)

So, information is abundant now. Where’s the value now? Anderson quotes Herbert Simon on this:

In an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention. (p. 180, relate to this blogpost for more about information and attention.)

The rise of “freeconomics” is being driven by the underlying technologies of the digital age. Computer processing power halves in price every two years, the price of bandwidth and storage is dropping even faster. The internet combines all three. (p. 13, also refer to ch. 5) Google is mentioned as a company that makes more money as the costs of information falls. (p. 125)

Chapter 4 is about the psychology of free. It’s about the excitement we experience when something is free. But free also makes us think the quality must me less than with a paid product/service. And do you care about something you get for free?

What are the free rules? The ten underlying principles of free or abundance thinking are (p. 241):

1. If it’s digital, sooner or later it’s going to be free.
2. Atoms would like to be free, too, but they’re not so pushy about it.
3. You can’t stop Free.
4. You can make money from Free.
5. Redefine your market.
6. Round down.
7. Sooner or later you will compete with Free.
8. Embrace waste.
9. Free makes other things more valuable.
10. Manage for abundance, not scarcity. 

I enjoyed reading this book. The visual examples of free throughout the book explaining how free is/can be applied in different markets are insightful.

I’m not an economist. I read these books because they take me to the edge, challenging me to think and reassess what I’m doing. A big question for me and my work is: How far does free go for a consultant? For instance, I love to share what I know about certain topics. I’d happily go to a company, share my knowledge and leave without asking money for my vision/advice. When do you stop giving/sharing for free? I’d love to hear your thoughts.

Bonus: I’ve collected some links about ‘free’ here. Hope this helps.

A Brief History of the Corporation

There are lots of good bloggers and blogposts out there. But every now and then I run into a post that is just great. This is one of them: A Brief History of the Corporation: 1600 to 2100 by Venkatesh Rao. It's a long post! So, make sure you have some time to read and process it.

Why do I think this post is so interesting? Well, there's been lots of debate about what social media means for traditional business. Will it change or is it changing the way we do business? Is the traditional, hierarchical way of organizing companies sustainable? Is social media correcting the industrial revolution? Or should we say 'the industrial interruption', like 'The Cluetrain Manifesto' says. Is this enterprise 2.0 or social business?

Much has been and is being written about this topic. Just think of the books 'Wikinomics', 'Macrowikinomics' and 'The Cluetrain Manifesto' itself.

So, what is this post about. In it's own words:

The Age of Corporations is coming to an end. The traditional corporation won’t vanish, but it will cease to be the center of gravity of economic life in another generation or two.

And it goes on to provide proof or leads for this statement pointing to fundamental forces creating this shift in the world.

One of the things that also struck me was the way Rao writes about technology. As if it's an autonomous force. It's the same way of talking about technology that I'm reading about in 'What Technology Wants' by Kevin Kelly. (Note: You should check the interesting discussion between Carr and Kelly here.) Roa says about technology (and business):

It is technology, acting through business and Schumpeterian creative-destruction, that drives monotonic, historicist change, for good or bad. Business is the locus where the non-human force of technological change sneaks into the human sphere.

But what's the point of this all? Growth has changed over the years. And growth has never been limitless. In our time there may be an unlimited amount of ideas, but attention is not limitless. This has implications for business. 

The equation was simple: energy and ideas turned into products and services could be used to buy time. Specifically, energy and ideas could be used to shrink autonomously-owned individual time and grow a space of corporate-owned time, to be divided between production and consumption. Two phrases were invented to name the phenomenon: productivity meant shrinking autonomously-owned time. Increased standard of living through time-savingdevices became code for the fact that the “freed up” time through “labor saving” devices was actually the de facto property of corporations. It was a Faustian bargain.
Many people misunderstood the fundamental nature of Schumpeterian growth as being fueled by ideas rather than time. Ideas fueled by energy can free up time which can then partly be used to create more ideas to free up more time. It is a positive feedback cycle, but with a limit. The fundamental scarce resource is time. There is only one Earth worth of space to colonize. Only one fossil-fuel store of energy to dig out. Only 24 hours per person per day to turn into capitive attention.
Among the people who got it wrong was my favorite visionary, Vannevar Bush, who talked of science: the endless frontier. To believe that there is an arguably limitless supply of valuable ideas waiting to be discovered is one thing. To argue that they constitute a limitless reserve of value for Schumpeterian growth to deliver is to misunderstand how ideas work: they are only valuable if attention is efficiently directed to the right places to discover them and energy is used to turn them into businesses, and Arthur-Clarke magic.

HT Andy McAfee for pointing to this post!http://info-architecture.blogspot.com/2011/07/brief-history-of-corporation.html

Productivity, Multitasking, and the Death of the Phone - HBR IdeaCast

One of the podcasts I listen to is the HBR Ideacast. They have lots of interesting talks with people. Sometimes these talks are related to articles published in HBR. Recently they interviewed Sherry Turkle of the much-debated book 'Alone together'. You can find the podcast here: Productivity, Multitasking, and the Death of the Phone.

It's an interesting podcast to listen to and think about. I understand the problem she is seeing and describing (although I still have to read the book). I understand she is worried about it too. But every time I read about her book and listen to what she's saying I think: Shouldn't this problem be addressed by helping young and old people understand the new web and using it in the 'right' way? For instance, help people filter the web, search the web, understand web privacy and build networks using the web. I see a huge need for this around me. And I don't see many schools (and parents) stepping up to this task.

I liked Turkle's 3 areas where more thinking and debate is needed:

• the role that we are going to give to robots in daily life
• about productivity in the workplace and new social tools
• getting rid of the word 'addiction' w.r.t. computer devices

If you've listened to the podcast, let me know what you think. We'll continue the discussion on your or my blog!