Free allows you to be profligate in your resources. It enables a massive global experiment.
Economics has very little to say about abundance and free. What are the economics of free?
Starts by talking about King Gillette, the guy who invented disposal razors. See his Wired article for all the details.
You give away something to establish a pattern of use and a lifetime of revenue. See also cell phones.
Wired costs $10 a year, less than 10% of what it costs them to produce the magazine. Writing a cheque indicates ‘an expression of true interest’.
The Wired model is ‘third party pays’. In this case, the third party is the advertiser.
How would the world change if electricity was free? You could desalinate water for no cost.
Three inputs that are becoming free in today’s world: processing power, storage and bandwidth.
Thus far, this is pretty much a live presentation of his Wired article.
Technologists need to make technology cheap, easy and ubiquitous. The world will tell us what it’s for.
A terabtye costs about $300 – $350. Anderson’s 9-year-old has twice the storage of Wired magazine. “The market price of storage is zero.”
The marginal cost of reaching an audience member is zero. The old economic model drove us to invent mass media on TV. Hence, “Everybody Loves Raymond”. Nobody loves Raymond. Everybody only likes Raymond.
“The things we share are relatively banal.” We disagree about the things we love–we love the things that mark us as individuals.
Today it costs 0.25 of a cent to stream a video to one person for one hour.
YouTube violates every of traditional television.
3-D printing is a physical example of ‘complexity is free’ moving into the physical world.
“In a competitive market, price falls to the marginal cost.” “Anything that can become digital, will become digital. And everything that is digital, will become free.”
New forms of free that leverage digital economics:
- Freemium: give away 99% to sell 1%. See, for example Flickr’s basic and pro model.
- Labour exchange: consumers create something of value in exchange for free goods and services. For example, Google’s 411 service provides voice recognition training for their software.
- Gift economy: open source and Wikipedia.
Attention and reputation are the new scarcities.
He subsequently applies these ideas of free to games.
He’s a great speaker, very smart and engaging. Having read his article and blog, there wasn’t much new for me in this talk. Judging by the audience’s reaction, though, his ideas are very fresh for a lot of people.