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Money from nothing

The digital era is decimating old businesses and inventing new ones, says Anderson, who expertly navigates us through the world of “free”, but can’t figure out the future.

Author: Chris Anderson
Publisher: Random House
Pages: 274
Price: Rs 460

Consider the world that you live in. Some of you probably wake up in the morning, check your free e-mail and read an online newspaper and cricket website for no cost. Using a popular free digital file delivery service, you send your mother two songs from Abida Parveen’s latest album, which you illegally downloaded using a torrent software (also free), and then head for work.

The above scenario is a world that dominates editor-in-chief of Wired magazine, Chris Anderson’s new book, Free, where he heralds an entirely new economic model that businesses have to contend with, namely an era of a radical price driven by a digital age. That price is zero, and it is turning economic models on their heads and revolutionising the way businesses are morphing, dying or being invented. Business leaders can ignore this development at their own peril. “Whether through cross-subsidies or software, somebody in your business is going to find a way to give away what you charge for,” says Anderson.

The drive towards free “pricing” has old roots. Jell-O—made of powdered gelatin—was a product that was a resounding failure until the Genesee Pure Food decided to print thousands of free recipe books revolving around Jell-O and distribute it to American households. Two years later, the company hit a million dollars in sales. King Gillette was a frustrated inventor whose “eureka” moment was, in fact, his decision to sell razors at cheap bulk rates to banks who gave them away free to their customers. Almost overnight, practically everyone owned a razor, was hankering for a blade and the Gillette fortune was born.

The culprit for today’s “free” is a world in which the price for computer processing, storage and bandwidth has plummeted almost to the point of zero. Anderson points out that in 1961, a single transistor was 10 dollars. By 1968, the price had dropped to one dollar.

Today, it is approximately 0.000055 cents. This has had a devastating effect on some industries, specifically those that produce content. Several newspapers in the US have collapsed and pre-eminent ones like The New York Times are flopping about for survival as they try in vain to survive in an era of free newswires. The music industry is in even an worse shape as sucking up digital content, like music files, from someone else’s hard drive or website, has become a breeze. “In the digital realm you can try to keep ‘free’ at bay with laws and locks, but eventually the force of economic gravity will win,” says Anderson.

Savvy artists, like Radiohead and Wilco, have found a way out by being counterintuitive— distributing some albums for free, resulting in a big expansion of their audiences and jampacked, money-spinning concerts. In the business world, companies like Google have built entire empires on “free” whereas others like Microsoft are being forced to adapt by “freeware” champions such as Linux.

While Anderson gives us an engaging, comprehensive account of “free”, he stops short of providing concrete ways in which companies can devise new economic models in order to stave off extinction. Perhaps Anderson isn’t all that interested in doing this. After all, he was accused by the editor of the Virginia Quarterly Review, amongst others, for plagiarising chunks of this book from the free online encyclopedia, Wikipedia, for which he apologised and cast blame on sloppy editing— whichever way you look at it, an emphatic underscoring of the thesis of his book and a sign of the times to come.

Bookmarks

The New Empire of Debt

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Financial writers Bonner and Wiggin give us a glimpse into the US’s precarious economic and financial position today, which has been plagued by massive deficit spending and unbridled consumption.

A Fine Line
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Price: Rs 1,438
Esslinger, having helped build the world’s most famous brands such as Microsoft and Apple, shows how creative designs can be built into the framework of an organisation’s competitive strategy.