Is It a Free Future?

I haven't read Chris Anderson's "Free: The Future of a Radical Price," but I have been thinking about the Jobs of the Future, as you know. Thankfully, Virginia Postrel has read it for me, and I trust her insights more than my own. Here's what she says: (bolding added)

Unlike tangible commodities like T-shirts or plastics, most digital content doesn’t generate much new demand as its price falls toward zero. Even with no admission fee, videos, blog posts and online games soak up users’ time, and time has a hard limit. So as the supply of cheap content expands, it can’t simply fill ever-growing closets (or garbage dumps). Instead, the competition for time and attention becomes ever fiercer, and the market ever more fragmented. Any given producer will find profits elusive, especially since it’s so easy for amateurs to enter the market.

Faced with collapsing business models, today’s journalists-in-denial rail against Anderson’s message. Free contentcannot be the future, they say, because content is valuable. Fixed costs must be covered. We have bills to pay. The problem, they argue, is that we’re giving our work away. ...

The book is certainly good advertising. “Free” is a successful business speech between two covers, pleasant, upbeat and full of anecdotes and bullet points. ...

But what about the competition? What about the time-saving, risk-lowering, beloved alternatives somebody else is offering free? Opponents of the free-content argument too often reject the idea that free content is the future simply because they don’t want it to be true. Even Anderson himself equivocates, flinching at the implications of almost limitless competition.

After all, the last thing a business author wants to suggest is that we’re entering a new age of amateurism. But there are hints throughout the book that the future of this radical price is to be found in the past, when satisfying work was what one did on the income provided by less satisfying toil, or by investments, patronage or marriage. “Doing things we like without pay often makes us happier than the work we do for a salary,” Anderson writes, adding, “No wonder the Web exploded, driven by volunteer labor — it made people happy to be creative, to contribute, to have an impact and to be recognized as expert in something.”

“No man but a blockhead ever wrote except for money,” Samuel Johnson said, and that attitude has had a good two-­century run. But the Web is full of blockheads, whether they’re rate-busting amateurs or professionals trawling for speaking gigs. All this free stuff raises the real standard of living, by making it ever easier for people to find entertainment, information and communication that pleases them.

Business strategy, however, seeks not only to create but to capture value. Free is about a phenomenon in which almost all the new value goes to consumers, not producers. It is false to assume that no price means no value. But it is equally false to argue that value implies profitability.

Anderson asks about the implications of price trending towards zero, not the value. I've been thinking about the implications of productivity trending in the other direction. Agricultural production is rising because two factors are trending: output (quanitity and quality) is rising over time, while labor (L) input is declining over time. Other factor inputs are rising, right? Ag capital (K) and technology (T). And if you think of ag capital is simply a comination of technology and hardware, then the only real change is an increase in T replacing L.

Is there a real trend toward zero for labor inputs? Maybe not, but does it matter? The difference between 90 percent of the population working in the fields and 2 percent working in the ag sector is about the same as 90-to-0. There remain 88-or-90 percent of the population with time on their hands.

Now if you posit that the price of content and material things are similarly trending down towards, if not to, zero, the larger implication is hard to fathom.  People pay lower prices for things and it takes fewer people to make those things. There is a massive amount of value being generated and consumed, but few people making the value who get paid in bulk. What does the remaining mass of people DO? Makes me think this whole idea of human progress is like a magic act where the magician makes himself disappear.

Comments

[Keith Mays]

Tim -- Anderson was pretty much forced to walk the walk on this one, so the book is available (for free) on Scribd: http://www.scribd.com/doc/17135767/FREE-full-book-by-Chris-Anderson-Read-in-Fullscreen for those interested. People who value a more tactile reading experience will have to buy the physical book.

[Sluf]

I see the problem as labor quantity is increasing at a lower labor cost. Capital requirements to enter the market are falling (thanks to Freeware). Given this low capital risk, you can still see modest return on investment even at near-free rates.

Sluf

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