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Tim Peter

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September 17, 2009

Chris Anderson's "Free: The Future of a Radical Price" (Book Review of the Week-ish)

September 17, 2009 | By | No Comments

There’s an old joke about a physicist and an engineer who spot a pretty girl walking towards them. The physicist notes that if he continually halves the distance between himself and the girl, he’ll never reach her, since dividing by half never can result in zero. “Sure,” says the engineer. “But for all practical purposes, you can get close enough.”

And it’s with this in mind that we look at Chris Anderson’s new book, Free: The Future of a Radical Price. Anderson thinks seriously big thoughts. First he came up with The Long Tail: Why the Future of Business is Selling Less of More, one of the 12 most important business books of the last 10 years. And for many writers, a book like that would make a career.

But not Anderson. He’s continually looking for what’s next. And he thinks he’s found it with Free. In “Free,” Anderson argues that we’re entering – or have entered – a new age, one in which marginal costs race towards zero, creating untapped possibilities for those businesses able to “free” their mind from yesterday’s business models and embrace the power of Free.

When Anderson is at his best, he offers compelling evidence of companies using this “power of free” to drive, counter-intuitively, even greater revenues and greater profits. His favorite example is Google, a company that assumes they’ll never charge consumers for their products, though he also offers plenty of others like open source software companies like Red Hat and predicts the same for pharmaceutical makers and others. And it’s there where he’s not at his best, opens himself up to criticism of his core premise – and that criticism comes across as too logical to ignore.

The fly in Anderson’s free ointment is in the distinction between physical and intellectual goods. Free works best – indeed, its whole premise is predicated on – the advancement of Moore’s Law. As computer technology moves forward, the price for older technology falls, roughly at a rate of 50% annually. Eventually, Moore and Anderson argue, the price falls far enough to effectively round down to zero. Or, in the words of our engineer friend above, “for all practical purposes, close enough.” Hence, “free.”

For people in the information business – and, to some degree, we’re all in the information business these days – “free-dom” opens up worlds of possibilities for businesses to explore the economics of abundance, as opposed to “20th-century economics of scarcity.” Anderson extrapolates from this view to look at all the potential areas “free” might touch. And it’s when he moves away from information that he’s most vulnerable. Malcolm Gladwell wrote a strong criticism of Anderson’s notion in the New Yorker, largely skewering this far-reaching view. And, it seems clear to me, too, that if your business involves physical stuff, the effects of “free” likely won’t be as large or impact as many areas as Anderson suggests.

Still, this criticism – and others like it – largely miss the point. Even if you restrict Anderson’s premise to information alone, this “economy of abundance” worldview makes tremendous sense. A quick look, for instance, at how businesses that thought they had physical products, like the music business (records), travel agencies (tickets) and newspapers (um… newspapers) have been impacted by iTunes, Expedia and Craigslist shows how industries that rely on information can either benefit from – or be shoved aside by – those who understand how to put “free” to work.

All criticisms aside, Anderson has a winner here. He’s right far more than he’s wrong. And even when he goes wrong, he’s thought-provoking in a way few writers can match.

Buy the book. Or, if you prefer, don’t buy it. (You can get an audio edition, for free, from iTunes). But read it. Will Free change everything as much as Anderson says? Probably not. But, “for all practical purposes,” it’s likely to change enough to be worth the investing your time. And your money.

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