The Drug-Dealing Model of Online Business

Question: What is wrong with free content?

Jason Fried: You know, you walk into a bakery and get a free sample because they want to sell you a muffin. That makes sense. But you go online and use a website for free and there’s nothing to sell you, that doesn’t make sense. So, I think free is a great model as long as you have something to sell also. Free should be an incentive. We like to say that you could be emulating drug dealers, basically. You know, drug dealers give you a little sprinkle or a little taste and get you hooked, and then you buy from them. They don’t just give you more free drugs all day, you buy something from them. So, we’re a big fan of emulating drug dealers, basically, or bakeries. That might be a better way to put it.

But anyway, that model works. But the open source world, that’s kind of a different thing. There are some companies that opens source software and then sell support on top of it, so that’s one way to make money off of open source. For us, we think that the opens source thing works for us because, first of all, the product is better and we get to use Rails, and so if other people are improving it, that’s good for us, we can use that in our pay products. Secondly, whenever people mention Rails, they mention 37signals, they mention Basecamp or High Rise, or us in some way. And that indirectly benefits us as well. So, that’s kind of the guiding principle for us. So, some stuff is free, most stuff is pay.

Question: What is your outlook on the ad model?

Jason Fried: Well ads do make sense in some cases, but people look at Google and they go, “Well, Google is making billions on ads, they’re putting ads next to search results, like we should put ads next to everything too because it worked for Google.” Well it works for Google because, if you think about it, if you’re going to Google to search for something, you want to find something, then advertisers are pitching their wares that are relevant, it makes sense because I’m looking to find something and they have something for me that I could find and use. That makes sense. But throwing ads up along side content that doesn’t – I’m not going in there to find and search to buy something. I’m just going in there to read an article, that doesn’t work at all. So, you see a lot of companies in software like – if I’m using software to do something, I’m not using software to do something to find an ad, I’m using software to do something to do something. So, it works for Google’s model because that’s what I’m going in there to do, to discover, to learn, to purchase something.

But in most cases, if that’s not the case I don’t think ads work all that well unless you have a tremendous amount of traffic and that’s really, really hard. There’s also a problem with a disconnect between ads and users. My belief is that you can build a better business if the people that use your product are the same people who pay for your product. In the ad supported model, the people who pay for your product are not people who use it. People paid for the advertisers, and the people who use it are the users, so there’s a disconnect. So, who are you building it for? Who do you really have to make happy.

In many cases, it ends up being the advertisers which is why you see in a lot of news sites especially, there are ads everywhere. And that’s a pretty crappy experience, I think. So, I’m not a big fan of that model. I think that some people could make it work, but I’m not a big fan of it and I think the default idea of, we’ll just put ads on it. That’s what will support it, we’ll just put ads on it is a terrible idea. And it’s much, much, much easier to get people to pay for your product or your content, or whatever than it is to throw ads up.

And the last thing I will say about this is putting a price on something forces you to make it good, and that is like, those are the constraints you need on you; a force that forces you to make something good. Because if something is free and ad supported, it doesn’t have to be that good, it’s free. I’ll use it, it’s free. I don’t care. But the moment I start paying you for it, that’s the moment it forces you to be good and give me a service that’s worth paying for and that to me is the right pressure to have on a company.

Question: What companies are now deriving value in interesting ways?

Jason Fried: I like some of the more interesting. Like, one of the things I like today is, there is a company called Twilio, I think that’s how it is pronounced. T-W-I-L-I-O. And they are basically a new type of company that’s selling, I don’t’ want to get technical, but selling API access. Basically what they let you do is they let you create conference calls and/or voice mail systems, or phone trees with really simple programming language. And what they do is they sit in between you. So, if I’m a company who wants to make a conference calling system, I might use their technology, and then I might pay per minute for their technology instead of subscribing to them on a monthly basis, or whatever, I pay as I go. And I think that model is pretty interesting. It’s similar to the way Amazon is doing with the Amazon Web Services, where I can rent a server by the minute, instead of having to buy a server or pay upfront. So, I like this like pay per true use thing. I like that model a lot. So, I think that’s kind of a cool innovation that’s coming up right now and I think that those are interesting companies to watch.

The notion that advertising revenue can save content is looking increasingly untenable. Jason Fried explains why drug dealers and bakeries may have had the best business model all along.

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Image source: Christian Zimmerman/USGS/Big Think
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The Barry Glacier gives its name to Alaska's Barry Arm Fjord, and a new open letter forecasts trouble ahead.

Thanks to global warming, the glacier has been retreating, so far removing two-thirds of its support for a steep mile-long slope, or scarp, containing perhaps 500 million cubic meters of material. (Think the Hoover Dam times several hundred.) The slope has been moving slowly since 1957, but scientists say it's become an avalanche waiting to happen, maybe within the next year, and likely within 20. When it does come crashing down into the fjord, it could set in motion a frightening tsunami overwhelming the fjord's normally peaceful waters .

"It could happen anytime, but the risk just goes way up as this glacier recedes," says hydrologist Anna Liljedahl of Woods Hole, one of the signatories to the letter.

The Barry Arm Fjord

Camping on the fjord's Black Sand Beach

Image source: Matt Zimmerman

The Barry Arm Fjord is a stretch of water between the Harriman Fjord and the Port Wills Fjord, located at the northwest corner of the well-known Prince William Sound. It's a beautiful area, home to a few hundred people supporting the local fishing industry, and it's also a popular destination for tourists — its Black Sand Beach is one of Alaska's most scenic — and cruise ships.

Not Alaska’s first watery rodeo, but likely the biggest

Image source: whrc.org

There have been at least two similar events in the state's recent history, though not on such a massive scale. On July 9, 1958, an earthquake nearby caused 40 million cubic yards of rock to suddenly slide 2,000 feet down into Lituya Bay, producing a tsunami whose peak waves reportedly reached 1,720 feet in height. By the time the wall of water reached the mouth of the bay, it was still 75 feet high. At Taan Fjord in 2015, a landslide caused a tsunami that crested at 600 feet. Both of these events thankfully occurred in sparsely populated areas, so few fatalities occurred.

The Barry Arm event will be larger than either of these by far.

"This is an enormous slope — the mass that could fail weighs over a billion tonnes," said geologist Dave Petley, speaking to Earther. "The internal structure of that rock mass, which will determine whether it collapses, is very complex. At the moment we don't know enough about it to be able to forecast its future behavior."

Outside of Alaska, on the west coast of Greenland, a landslide-produced tsunami towered 300 feet high, obliterating a fishing village in its path.

What the letter predicts for Barry Arm Fjord

Moving slowly at first...

Image source: whrc.org

"The effects would be especially severe near where the landslide enters the water at the head of Barry Arm. Additionally, areas of shallow water, or low-lying land near the shore, would be in danger even further from the source. A minor failure may not produce significant impacts beyond the inner parts of the fiord, while a complete failure could be destructive throughout Barry Arm, Harriman Fiord, and parts of Port Wells. Our initial results show complex impacts further from the landslide than Barry Arm, with over 30 foot waves in some distant bays, including Whittier."

The discovery of the impeding landslide began with an observation by the sister of geologist Hig Higman of Ground Truth, an organization in Seldovia, Alaska. Artist Valisa Higman was vacationing in the area and sent her brother some photos of worrying fractures she noticed in the slope, taken while she was on a boat cruising the fjord.

Higman confirmed his sister's hunch via available satellite imagery and, digging deeper, found that between 2009 and 2015 the slope had moved 600 feet downhill, leaving a prominent scar.

Ohio State's Chunli Dai unearthed a connection between the movement and the receding of the Barry Glacier. Comparison of the Barry Arm slope with other similar areas, combined with computer modeling of the possible resulting tsunamis, led to the publication of the group's letter.

While the full group of signatories from 14 organizations and institutions has only been working on the situation for a month, the implications were immediately clear. The signers include experts from Ohio State University, the University of Southern California, and the Anchorage and Fairbanks campuses of the University of Alaska.

Once informed of the open letter's contents, the Alaska's Department of Natural Resources immediately released a warning that "an increasingly likely landslide could generate a wave with devastating effects on fishermen and recreationalists."

How do you prepare for something like this?

Image source: whrc.org

The obvious question is what can be done to prepare for the landslide and tsunami? For one thing, there's more to understand about the upcoming event, and the researchers lay out their plan in the letter:

"To inform and refine hazard mitigation efforts, we would like to pursue several lines of investigation: Detect changes in the slope that might forewarn of a landslide, better understand what could trigger a landslide, and refine tsunami model projections. By mapping the landslide and nearby terrain, both above and below sea level, we can more accurately determine the basic physical dimensions of the landslide. This can be paired with GPS and seismic measurements made over time to see how the slope responds to changes in the glacier and to events like rainstorms and earthquakes. Field and satellite data can support near-real time hazard monitoring, while computer models of landslide and tsunami scenarios can help identify specific places that are most at risk."

In the letter, the authors reached out to those living in and visiting the area, asking, "What specific questions are most important to you?" and "What could be done to reduce the danger to people who want to visit or work in Barry Arm?" They also invited locals to let them know about any changes, including even small rock-falls and landslides.

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