Chris Anderson's big idea is to charge nothing for everything. It's good publicity for his own brand; but not necessarily good business for everyone elseby William Davies / July 23, 2009 / Leave a comment
Free: The Future of a Radical Price
By Chris Anderson (Random House, £18.99)
Chris Anderson is a professional exaggerator. His previous book, The Long Tail (2006), made the eminently plausible claim that online retailers can extract revenue from serving very niche tastes because they’re not limited by the finite shelf space of the high street. But he exaggerated this to the point of predicting the end of the blockbuster. In an article in 2008 for Wired magazine (of which he is editor-in-chief), he gave a fascinating analysis of how the vast data sets collected by Google could be used scientifically to identify behavioural correlations and patterns. But he couldn’t resist calling time on the very foundations of western thought, entitling the article “The End of Theory: The Data Deluge Makes the Scientific Method Obsolete.”
Anderson’s latest book has been in a state of public gestation for some time now. Like The Long Tail, it began as a Wired article in early 2008 and has been developing on a blog ever since. Anderson begins with the hunch that the internet is making it rapidly harder to sell things for a price, as demonstrated by free newspaper content, music and software. He also recognises that marketing has a long tradition of selling products well below cost price, by getting them cross-subsidised either by other products (such as razors that are given away in order to sell more razor blades), by other users (low cost airline tickets subsidised by business-class fares) or by advertising (carrying ads lowers newspaper cover prices).
How do we make sense of all this? he asks. The answer is that we don’t. “Humans are wired to understand scarcity better than abundance.” When prices disappear, we forget how to do economics. Free sets out to plug this apparently gaping hole in the history of economic thought.
This turns out to be a little disingenuous. For, as the bulk of the book makes plain, there are already plenty of theories and business models available with which to understand what is going on.
First, take the theories. On closer inspection, much of Anderson’s argument comes down to a combination of two famous tools of economic modelling, both of which he acknowledges. One is Moore’s Law, the prediction made by Gordon E Moore in 1965 that the cost of computer processing power will halve every two years. This assumption has informed the…