I’m a pretty big fan of Chris Anderson. His last book, The Long Tail, provided an interesting look at how the Internet is changing the way that we shop and view things, and thus, how well those who aren’t terribly popular are able to make a profit. But what about those who offer their goods for free, as an increasing number of people are doing? (Such as those of us who publish articles for free access on blogs, as one example.) What about them?
Free looks at those goods and services that are offered for free (usually online), and how it is affecting the world in general. The subtitle of ‘The Future of a Radical Price’ should give you an idea of what this book discusses, looking at things like the psychology of getting things for free and how it is affecting the widespread behavior of people. Does it provide useful insight or leave you feeling insight-free? Let’s read on!
Summary of Free
Free (the book) opens with an example of Monty Python providing their videos for free via YouTube, and using that as a means of selling more of their DVDs. From there, it notes there are all kinds of paradoxes that arise with ‘Free’ (the concept, and used as shorthand for free goods and services throughout the book and this review), that people can make more money by giving many things away for free and noting the progress of the cost of things, particularly digital things, toward zero (or infinitesimally close), before getting into the main portion of the book.
Chapter 1 – The Birth of Free
The first chapter opens with some of the nineteenth and twentieth century examples of how people were able to use Free items and services as marketing tools and strategies, from Jello to Gillette. It notes that the twenty-first century version of Free will be completely different, with valuable items (particularly digital items) being given away at a default price of nothing and profit being generated through alternate means.
What Is Free?
Chapter 2 – Free 101
This section of the book starts by looking at what ‘free’ actually means, noting that there are differences between free as in ‘freedom’, and free as ‘without cost’. It covers the concept of cross-subsidies, that things must be paid for in some fashion, and discusses four different ways it can work: direct cross-subsidies (one product given for free convinces you to buy another), the three-party market (where advertising supports free content), freemium (where paid users support free content for others), and nonmonetary markets (where any time where things are given away without expectation of payment).
Chapter 3 – The History of Free
This book looks at how Free has come to be, noting that it’s had a lot of difficulty. The number ‘0’ itself hasn’t existed in most societies, and when capitalism started to become the default market system, giving things away wasn’t exactly looked on positively. From there, examples of how Free has been used throughout the past several centuries were given, leading to a discussion of how over the past century, things, all things, have been getting been getting less expensive over time.
Chapter 4 – The Psychology of Free
There’s a difference in how people portray paying nothing, and paying something, even if that something is only a penny. How that difference affects their actions is the subject of chapter four, noting that increasing the price of an item from free to anything causes people to think about whether the item in question is worth spending anything on. As a result, Free is not the same as any other price in most peoples’ mind.
Chapter 5 – Too Cheap to Matter
Chapter five opens the second section of the book by noting that there are three inputs into digital technologies (processing, storage, and bandwidth), each of which are decreasing in value on a regular basis. Given that fact, it’s inevitable that the price of digital material (referred to as ‘bits’ throughout the book) will continue to drop, as the price necessary to provide them continues to decline, eventually reaching a point where it becomes so low that the price is ‘too cheap to matter’, as the chapter title notes.
Chapter 6 – “Information Wants To Be Free”
The next chapter looks at a quotation from Stewart Brand, considering the hacker belief that information will reach the point where it be given away. It provides a further context for the quotation, and clarifies how it details the effect of the information economy on the price of information.
Chapter 7 – Competing With Free
There are various ways that companies can compete with Free and still manage to generate a profit. Here there are two examples that are provided. The first looks at Microsoft competing with Linux as the primary operating system for the majority of computers, and adapting to Linux’s growth over several years. The second is how Yahoo’s email system adapted to Google’s unveiling of Gmail in a matter of months.
Chapter 8 – De-Monetization
Speaking of Google, chapter eight looks at Google’s business practices, and how they default to Free, providing services at no cost, even if they need to spend money in order to do so. It notes that the primary reason for this is to expand Google’s reach as much as possible, in order to lead back to those services (primarily their search engine) that DO make money. Add in the fact that the profitable parts of their business make money without charging users fees, and Google represents a good example of how to make money in the Free economy.
Chapter 9 – The New Media Models
Here Anderson notes that free media dates back to the 1920’s and the use of broadcast radio; the only difference now is that that model of Free content is becoming the default for everything online, from music to software. This chapter covers several ways that companies are monetizing their products in the new economy, such as subscriptions, virtual goods and merchandise based off of the media, and examples of how people (including him) have successfully used Free to improve their careers and businesses even while giving away goods.
Chapter 10 – How Big is The Free Economy?
This section rounds out by trying to tally the Free economy. Several variations of the Free economy are considered, from the attention or users gathered by various websites to the money paid for advertisements or the ‘freemium’ market, and a back-of-the-envelope tally is provided to give a guess as to the scale of the world-wide affect of Free on the economy.
Freeconomics and the Free World
Chapter 11 – Econ 000
Prices fall to the marginal cost; in the digital economy, this cost is (or at least, can be rounded down to) zero. That’s the point of chapter eleven. Increasingly, methods of keeping prices from falling are failing (think copyrights versus pirating), leading the price that digital goods can charge to fall, as if driven by gravity, to zero.
Chapter 12 – Nonmonetary Economies
This chapter looks at the sort of alternative economies that develop in the Free economy, in particular economies of attention (how much people read or watch particular shows or, say, blogs) and of reputation (how well regarded a site is). It looks at way we are starting to measure these economies (think Google Pagerank or Facebook Friends) and how it’s affecting the view of what is important in the modern economy.
Chapter 13 – Waste is (Sometimes) Good
With the expansion of the Free economy, abundance is becoming the default, and that leads people to waste things (computing power, server space, etc.) on things that are otherwise pointless. (Think cat videos on YouTube.) By doing so, though, it’s possible to develop new technology and entertainment, building up new resources to grow and develop, like reputation and web traffic, that encourage new types of growth.
Chapter 14 – Free World
Here we see how Free is treated throughout the world, in particular in China and Brazil. In China, it looks at how the huge pirate economy (for both digital and physical goods) has lead to people working around the piracy, creating markets for ringtones or superior genuine products that would otherwise not exist. For Brazil, it looks at how street vendors selling CDs has helped to prime the market for bands to make incredible profits from live performances.
Chapter 15 – Imagining Abundance
This chapter looks at how past science fiction writers have looked at potential future societies that had abundance, and how they imagined things would turn out. (In general, rather poorly.) It then looks at how societies that have developed abundance in one area (such as the abundance of physical power upon steam generation) didn’t collapse as frequently imagined, but instead looked at the next peak; with digital goods becoming too abundant to measure, other things, like attention and reputation, are becoming the new scarcity to be sought after.
Chapter 16 – “You Get What You Pay For”
The last chapter looks at fourteen doubts that people have about Free, as given in examples from people who have expressed them, and with Anderson’s rebuttal to each. From ‘There’s No Such Thing as a Free Lunch’ to ‘Free is Breeding a Generation that Doesn’t Value Anything’, several common complaints are raised complete along with quotations expressing them, and refuted over the course of the chapter.
There are several segments that round out the book. The Coda looks at how Free developed in the wake of the tech bubble crash and speculated on how it would continue now that economy has gone down again; in short, very well. The Free Rules laid out some of the principles of the Free economy, and how to think in a world where abundance is the default.
For those looking to put these principles into practice, the section on Freemium Tactics lays out some possible ways of using Free as a technique while still making a profit. This is continued in the Fifty Business Models section that provides numerous examples of how companies have put Free techniques into practice for some or all of their business methods. The book finishes, appropriately enough, with a link to a free version of the audiobook (albeit, an abridged one).
- Very Thought-Provoking: Much like The Long Tail, Anderson raises some very interesting points, and provides research and excerpts from conversions to support his hypothesis.
- Highly Entertaining: Anderson has a very entertaining writing style, one that makes the book hard to put down, even when simply reading for pleasure.
- Provides Numerous Examples: Throughout the book (and particularly the final sections) there are many examples given of companies that have applied the Free economy principles, either intentionally or unintentionally, and succeeded as a result.
- Limited Advice On Your Own Application: If you’re hoping to create a Free economy success story, you’ll need more help than what is offered in this book.
- Little Refutation Of Disagreement: A single chapter doesn’t seem enough to address all the objections and arguments (piracy in particular) that people have with the Free economy.
Free provides some very interesting food for thought. You might have realized this change in the economy, possibly instinctively (Anderson noted that those under 30 seemed to do so), but having it expressed in a written form makes it easier to understand. This isn’t the book for real advice on how to get into the Free economy, but if you’d like to learn more about the Free economy (and read quite a few success stories), it’s definitely and interesting read.