To say that Chris Anderson’s new book Free: The Future of a Radical Price is generating a lot of discussion would be an understatement. I linked to three posts on Free in the most recent Everyman. Another post worth reading is Cory Doctorow’s review in Guardian News.
I felt Free was a somewhat tedious read on the [NordicTrack], a lot less engrossing than I anticipated. Perhaps that’s because my expectations were pretty high. Also, having read so many posts on the economics of Free, reading about it in a longer form factor wasn’t as action-packed. I didn’t think there was much new here or many takeaways, but after packaging up the excerpts for this review (with additional excerpts not displayed) ,I realized there was a lot in this book that I found interesting. 3.5-out-of-5 [NordicTrack] Stars.
p.12 In the atoms economy, which is to say, most of the stuff around us, things tend to get more expensive over time. But in the bits economy, which is the online world, things get cheaper. The atoms economy is inflationary, while the bits economy is deflationary.
p.14 Today the most interesting business models are finding ways to make money around free. Sooner or later every company is going to have to figure out how to use free or compete with free, one way or another.
p.50 Humans are wired to understand scarcity better than abundance.
p.53 Only 32 of the top 100 companies today make things you can hold.
p.54 When commodities become cheaper, value moves elsewhere.
Abundance thinking is not only discovering what will become cheaper, but also looking for what will become more valuable as a result of that shift and moving toward it.
p.59 A single penny doesn’t really mean anything to us economically, so why does it have such an impact? The answer is that it makes us think about the choice. That alone is a disincentive to continue.
p.62 So from the consumer’s perspective there’s 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 scratching and clawing for every customer.
p.68 The time it takes to avoid paying means “you’re working for less than minimum wage.” Nevertheless, if you’re time rich and money poor, that makes sense. Free is the right price for you. But as you get older, the equation reverses. 99-cents here and 99-cents there no longer seems as big a deal. You migrate into a paying customer, the premium user in the fremium equation.
p.72 He looked into the mind of the pirate and saw a paying customer looking for a reason to come out.
p.77 What if electricity, in fact, had become virtually free. The answer is that everything electricity touched, that is to say, nearly everything, would have been transformed. Rather than balance electricity against other energy sources, we would now use electricity as much as we could. We’d waste it because it would be so cheap that it wouldn’t be worth worrying about efficiency. In short, “too cheap to meter” would have changed the world.
p.79 Fairchild’s founders knew that as their production volume increased the cost of the transister would quickly go down. So they rounded down. Way down. They cut the price to $1.05 from the start before they even knew how to make it so cheaply.
p.84 Industries that have nothing to do with computer processing start to show Moore’s law, like exponential growth and price declines once they, too, become more brains than brawn.
p.92 Everything that bits touch are also touched by unique economic properties. Cheaper, better, faster. Make a burglar alarm digital, and now its just another sensor and communications node on the internet.
p.97 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.124 A max strategy can earn massive attention and perhaps reputation, but you’re left with the challenge of figuring how to convert that to cash. That’s not the worse problem in the world—most companies struggle to gain popularity, not to monetize it—but if you never quite solve that little detail, “Max” can just mean big bandwidth bills with little reward.
p.127 It’s easy to see why it’s so scary for the industries that are losing their pricing power, “de-monetization” is traumatic for those affected. But pull back and you can see the value is not so much lost but redistributed in ways that aren’t always measured in dollars and cents.
p.128 That’s the real reason why Craigslist has taken over so much of the classifieds business. Free attracted people, but the marketplace efficiencies that came with free ultimately kept them.
p.131 This is what free does. It turns billion dollar industries into million dollar industries, but typically the wealth doesn’t vaporize as it appears. Instead it is redistributed in ways that are hard to measure.
p.132 Everyone can use a free business model, but all too frequently only the number one company can get really rich with it.
p.142 Advertising in traditional media, whether newspapers magazines or TV, is all about selling a scarce resource. The problem is that on the web, there’s nearly an infinite amount of space.
p.149 You’re charging the people who want to pay because they understand the value of what they’re getting.
p.153 The purest form of marginal cost economics, give away the version that costs nothing to distribute to enhance the value of the thing that has a profit margin in the stores. Free makes paid more profitable.