Is it a Sprat to catch a Mackerel, a genuine attempt to improve the lot of mankind, or is it a new kind of economics. (I wanted to call this blog Free-conomics but didn’t out of respect for the admirable Freakonomics).
Chris Anderson (of Long Tail fame) has recently published Free:The Future of Radical Price and since this a pet subject of mine I’ve been following a number of discussions about Free.
Anita Campell has written a criticism of the book at The Free Economy Debate, Battle of the Gurus As always this is a good read so please check it out to get your own take on her argument that
“If you buy into this “new economic model” idea too completely, you could end up going down the wrong path in your business.”
Chris Brogan has explained his perspective in I Believe Mark Cuban is Right, an equally worth while read. Chris summarizes his view”
“My take? I give away general ideas for free and I sell customized information and execution.”
Jason Falls in The Economy of Free is Stupid you should read his explanation there will ultimately be no content if there’s no payment.
“Is open source sustainable? Are venture capitalists leading the world in dumb moves right now? Can television shows survive without advertising? If so, will enough people pay to watch what they want to sustain entertainment as we know it?”
They’re all arguing a case from their own perspective, of course. And since we’re, in our own small way, involved in the disruptive “use it for free game” it seems justifiable that I should do the same.
Firstly we need to recognize no business model lasts forever, and very few established companies are able withstand new waves of technology. The main points of competition change as costs of production and distribution fall. Big businesses are hide bound by their cost structures and can’t keep up with the innovation.
Secondly the only way new entrants can force their way into markets is with disruptive business models. This disruption used to be discounted prices but increasingly now it’s Free. Effectively they create a new “race to the bottom” in which the established businesses can’t follow.
Thirdly, this isn’t new. Henry Ford used the strategy (in terms of production cost and price) to dominate the auto business. “Find a way of creating more user value for less cost” has always been the way new businesses grow into big businesses.
Fourthly, the pace at which innovation in both technology and business strategy is accelerating, and particularly in those markets where physical product and associated knowledge can be separated. Negroponte wrote about this more than twenty years ago in Being Digital. It’s going to get worse.
Lastly, this isn’t my thinking. I was fortunate, back in 1995, to listen to Peter Drucker explain this is the way the world goes around.
More value at lower cost is only where it sits right now. We’re moving on to “more value at negative cost”.
This gets really scary so I’d like to point to the Google example. It’s reached an accommodation with the world in which we are all players. Either we use it’s Search, providing page views it can sell to advertisers, or we pay Adwords to be put in front of the “Searchers”, or we provide it with “content” which it uses to attract “Search”.
Google gets to make money because it owns the means by which buyers and sellers find each other. We’re all better off as a result.
Continuing, the thinking the question arises “how do we displace Google?”. The answer doesn’t lie in “Search” – it’s in “Relationship”.
Establishing that relationship requires new thinking that results in more user value at increasing levels of negative cost.
In other words, “Not only will I provide you with value for free, but I’ll share with you whatever I can make out of the fact we have a relationship. So stay with me, help me understand how to add more value and share more of what I make with you”.
And finally this isn’t new. It’s exactly the proposition developed by the Co-operative movements in the UK in the early 1900′s.
So my view is we need to engage people with ideas, make them more successful, and do it for Free.
How we make money out of it is our problem, not theirs.
What’s your interpretation?
Related articles by Zemanta
- Mark Cuban Remains Confused About Free (techdirt.com)
- Who pays the price of a free-for-all? (guardian.co.uk)
- If You Live By Free, You Will Die By Free (tech.slashdot.org)
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