Self-Motivation
David Goggins
Former Navy Seal
Career Development
Bryan Cranston
Actor
Critical Thinking
Liv Boeree
International Poker Champion
Emotional Intelligence
Amaryllis Fox
Former CIA Clandestine Operative
Management
Chris Hadfield
Retired Canadian Astronaut & Author
Learn
from the world's big
thinkers
Start Learning

The Poster Child of Free

Question: What are examples of businesses built on the notion of free?

Chris Anderson: The cathedral of free, the poster child, is Google. Now Google is an interesting form of free. We all use Google yet it doesn’t show up in our credit card statements unless you happen to be an advertiser. Google has 300 plus products and counting and almost all of them are free to consumers. This is possible for two reasons. The first is that Google uses the classic – there are two forms of 20th century free: one was fake free; buy one get one free. Free gift inside: razors and blades. Not really free. You are paying sooner or later but you can invoke the word free.

The other was the real free, but the media model where radio was free to air. TV was free, much of the media was free, but it was supported by a third party: the advertisers, so that we the producers create content, give it free to consumers. This creates a pool of attention. We give this pool to advertisers. Economists call that a two sided market. One side, the advertiser, supports the other side. Google invented a new form of advertising designed for the internet: small to small. You know, focused ads against focused content and it’s incredibly measurable. That created this economic engine that was so profitable that they could then create all these other products with no monetization what so ever.

Google maps and calendar and chain mail and Google Earth and docs and spreadsheets, all these kind of things do is offer consumers products that are free to them that are created with almost no marginal cost to Google but increased your attachment to the Google network. Someday, somehow, they will make money from you even though they are able to offer you these products for free right now. This ability to create products for free recognizing that the connection between the usage of the product and payment for the product is incredibly diffuse. The old model was, you’re paying, sooner or later. The new model is somebody’s paying but it’s probably not you. That’s what’s unique about digital products and that’s what defines new 21st century free versus 20th.

Topic: The three horseman of the zero sphere

Chris Anderson: I’m saying nothing that Nicholas Negroponte didn’t sort of touch on and Gilder as well, but it’s worth saying again because this is so profound it’s going to take a generation to really understand. There’s the world of atoms and the world of bits. The world of atoms is the world we live in most of the time. It’s the world where things have real cost and the costs tend to grow over time. It’s an inflationary world. Limited land, limited resources, limited people, etcetera, so things tend to get more expensive over time. The world of bits is deflationary. Everything tends to get cheaper. On one level, this is nothing new. It’s Moore’s law. It’s been running for 50 years. Moore’s law was really about processing and we saw Moore’s law on our desktop but we didn’t see Moore’s law anywhere else.

What happened with the Internet is that it took computers and storage and bandwidth, silicone chips, spinning metal platters, and fiber optics and put them together. It turns out that Moore’s law falls in price 50 percent every 18 months. Storage and bandwidth fall in price every 14 and 12 months, each by 50 percent and they’re accelerating their race to zero even faster than Moore’s law. You put all three together and you have this general rule that anything you do on the internet, whatever it costs today, it will cost half as much a year from now. This has relatively profound consequences. First, it makes zero – It makes free not really a marketing gimmick but kind of an inevitable price. Not to say that everything is going to be free. The greatest misunderstanding of free is that everything’s going to be free. What it says is that everything’s going to be available in a free version. You will have free and paid coexisting. The music industry obviously experienced this. We went from silver discs, which were atoms, well in fact they’re digital but coded on atoms, to MP3s which are bits, we saw the industry essentially – that part of the industry, demonetize. Music became free. The companies that just sold silver discs were in trouble. Those were the labels. A huge ecosystem grew up around that, which thrived. Apple. I mean, what is Apple but a company that has built a huge business, with iPods and such, around free music. You know, 10,000 songs – They’re built around 10,000 songs which is fantastic unless you have to pay for 10,000 songs.

You know, the only way we can utilize this vast capacity is with free music. At the same time, they have iTunes, a very successful way to sell music. In that case, what they’re selling is convenience, not music. Yes, music is free yet we are able to exist in a world – We are able to compete with free by offering ease of use, reliability, security, and all of that kind of stuff. What we are seeing is a huge incentive to move things from the atoms business to the bits business because then free becomes an option. You can use free for what its best at, which is reach, exposure, virility, you know, form of marketing in a sense. People can sample the product, then build businesses around converting a fraction of the samplers into paying customers.

Recorded on September 30, 2009

It’s Google. Surprised? Wired’s Chris Anderson describes what the universe would look like in this new way of doing business.

LIVE ON MONDAY | "Lights, camera, activism!" with Judith Light

Join multiple Tony and Emmy Award-winning actress Judith Light live on Big Think at 2 pm ET on Monday.

Big Think LIVE

Add event to calendar

AppleGoogleOffice 365OutlookOutlook.comYahoo

Keep reading Show less

The mind-blowing science of black holes

What we know about black holes is both fascinating and scary.

Videos
  • When it comes to black holes, science simultaneously knows so much and so little, which is why they are so fascinating. Focusing on what we do know, this group of astronomers, educators, and physicists share some of the most incredible facts about the powerful and mysterious objects.
  • A black hole is so massive that light (and anything else it swallows) can't escape, says Bill Nye. You can't see a black hole, theoretical physicists Michio Kaku and Christophe Galfard explain, because it is too dark. What you can see, however, is the distortion of light around it caused by its extreme gravity.
  • Explaining one unsettling concept from astrophysics called spaghettification, astronomer Michelle Thaller says that "If you got close to a black hole there would be tides over your body that small that would rip you apart into basically a strand of spaghetti that would fall down the black hole."

Your emotions are the new hot commodity — and there’s an app for that

Many of the most popular apps are about self-improvement.

Drew Angerer/Getty Images
Personal Growth

Emotions are the newest hot commodity, and we can't get enough.

Keep reading Show less

Scientists see 'rarest event ever recorded' in search for dark matter

The team caught a glimpse of a process that takes 18,000,000,000,000,000,000,000 years.

Image source: Pixabay
Surprising Science
  • In Italy, a team of scientists is using a highly sophisticated detector to hunt for dark matter.
  • The team observed an ultra-rare particle interaction that reveals the half-life of a xenon-124 atom to be 18 sextillion years.
  • The half-life of a process is how long it takes for half of the radioactive nuclei present in a sample to decay.
Keep reading Show less

Study details the negative environmental impact of online shopping

Frequent shopping for single items adds to our carbon footprint.

Photo by George Frey/Getty Images
Politics & Current Affairs
  • A new study shows e-commerce sites like Amazon leave larger greenhouse gas footprints than retail stores.
  • Ordering online from retail stores has an even smaller footprint than going to the store yourself.
  • Greening efforts by major e-commerce sites won't curb wasteful consumer habits. Consolidating online orders can make a difference.
Keep reading Show less
Quantcast