Wednesday, July 22, 2009

My $0.00 worth

I have a confession to make. I hadn't actually read Chris Anderson's book before discussing a review of it.

I was OK with that because, judging from Gladwell's review, I've already seen the basic thesis put forth, and because I didn't see any pressing need to buy a book about how everything is going to be free.

But just in case, I just read a shorter version of the same spiel, appearing online in Wired. On the one hand, it's more tightly reasoned than the strawman version that forms in one's head in the absence of the original item (for example, Anderson has of course heard of King Gillette). On the other hand, I still side with Gladwell on this one, and it doesn't seem likely that anything in the book but not the article would change that opinion.

The main beefs I have with the argument are:

Free stuff is not a new idea. Anderson acknowledges as much. Indeed he opens with Gillette inventing the "give away the razor, sell the blades" model. But this puts the burden of proof on Anderson to show how the web is different from other historical examples.

For example, the net offers near-zero marginal cost in some contexts, but so has broadcast radio/TV. The default hypothesis is therefore that the web offers basically more of the same, albeit with localized disruptions such as occur with any technological change -- my not-so-disruptive-technology hobby horse. I simply don't see the clear-cut case that things are radically different.

There are (at least) two kinds of "free" in play here. One is "free" in the marketing sense, which really means that the cost is hidden somewhere else. Anderson gives a taxonomy of six ways this can happen, none of which seems particularly new or peculiar to the web. The other is "near-zero marginal cost," which as Gladwell points out, really means "near-zero marginal cost for part of the puzzle".

In the marketing world, there is a big psychological difference between free and cheap. In the technical world, Moore's law and its cousins provide some hope that certain costs will get exponentially close to zero, but will never actually get there. Implicit in the whole argument is the idea that near-zero costs ("free" in the second sense) enable giving things away ("free" in the first sense). But giveaway marketing doesn't depend on the inputs being free. It depends on being able to hide, defer or otherwise shift the costs. Granted, this is easier when said costs are low, but the two are definitely not the same thing.

Moore's law doesn't apply to everything. When disk space starts getting tight -- yes, it still happens -- it's traditional for development to complain to IT. "C'mon ... you can get a terabyte for a hundred bucks these days. What's the holdup?" The holdup is that the cost of the disk drive is only part of the cost of the storage. Time spent ordering and installing the drive costs something. Adjusting the various administrative parameters/scripts/whatever costs something. Ideally not much, but something.

Google and company have found ways to reduce those costs, too, making it attractive to move storage out "into the cloud". But such a move costs time and disruption. Once you're in the cloud, some of the administrative costs go away, but some don't. New costs might even arise from not being able to just go look at the hardware. Ideally not much, but something.

All the while certain costs are tending asymptotically toward zero, there's generally something in the system resistant or immune to the trend. A big something in many cases is the content -- the movie, song, text or whatever that's being conveyed at near-zero cost. Content costs to produce and the money has to come from somewhere. If it doesn't, some content just won't get produced (rest assured, dear reader, that this blog is definitely not that sort of content).

Gladwell's point about electricity too free to meter, that the important question is why this didn't and couldn't happen, is dead on.

Ah, the irony. It's easy to nitpick, but to me it seems more than curious that an author arguing that prices are going inevitably to zero should choose a good old-fashioned hardback book, and not a particularly cheap one, as a medium [hmm ... have I beaten that point into the ground yet?]. Likewise, if digital technology has driven costs of movies and such to near zero, how can one cite a $15 DVD as a loss leader?

If "[b]roadcast commercials and print display ads have given way to a blizzard of new Web-based ad formats", why am I still bombarded with broadcast commercials and print display ads, not to mention billboards, signage and, for that matter, junk mail? One could argue that "given way" is just a figure of speech here, execpt that it clearly fits an overall pattern of claims that the web has supplanted the old order. Calling out more clearly when the web has and hasn't actually supplanted older forms might have been tedious, but might also have been instructive.

In sum, while I don't dispute that hardware and bandwidth getting cheaper and that this is bound to have some economic effect, and while I agree that the web has had and will continue to have some disruptive effects, I remain deeply skeptical of claims that the web is bound to revolutionize business or economics.

If the claim is merely that the web will cause an increase in various forms of freebie marketing, that's a testable hypothesis and one that, in my own shaky estimation, might well be confirmed. However, I don't get the impression that this sort of gradualism is what the headline "Free! Why $0.00 Is the Future of Business" is trying to convey.

That's all the virtual ink I care to spill on Free: ... at least for the time being. On to something more geekly now, I hope.

[Seven years on, it's pretty clear this has come and gone ... maybe long enough gone that someone will bring it back soon --D.H. Jan 2016]

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