If you’re over 30, you think there’s no such thing as a free lunch; if you’re
under 30, you assume all lunches are free. Look at your children: they know
ways of getting movies, music and television free. They make phone calls
free. They set up social networks or blogs using expensive software systems
handed out free. They have free word processors, free web browsers, they can
search every web page in the world for free. Over-thirties ask: “What’s the
catch?”; under-thirties shrug and say: “Nobody pays for this stuff, do they?
Duh!”
Why is all this stuff free? Because it has to be. The cost of the internet —
band width, processing speed and storage — halves every year or so. This
process has been going on for 52 years since the birth of the transistor,
probably the most influential invention of our time. There is no sign of
this unprecedented deflationary process ending. Transistors started out
costing hundreds of pounds each. Now the two computers and the mobile phone
on my desk contain billions if not trillions of transistors. Each costs, in
effect, nothing. Following the technology, market values plunge towards
zero. Now Google gives you all its “cool stuff” for nothing.
How? Why? The “go-to guy” on all such matters is Chris Anderson whose new book
— Free: The Future of a Radical Price — anatomises the free economy of the
internet. The book will be huge and, online at least, it will be free. “I
try to walk the talk,” he says. For the generation that still pays for
stuff, the hardback costs £18.99, although there is a possibility of a free
hardback paid for by sponsorship.
Free is a new capitalist cult. It begins with an idea — hook somebody to your
product and then make money on keeping it going. Gillette sells cheap razors
so you will be tied into buying expensive blades. Brita water filters tie
you into a lifetime of buying new filters. Anderson lists 50 examples. There
are casinos that give away drinks but sting you on the slot machines, strip
clubs that give away the show to sell fabulously overpriced “champagne”. Let
people into museums free but charge for all the extras. Let women in free to
your bar and charge the men. Radiohead, the rock band, gave away their album
as a download and made money on higher sound quality box sets of CDs. And so
on. The new cool price sticker says £0.00.
Anderson’s last book — The Long Tail: How Endless Choice is Creating Unlimited
Demand — turned him into a superstar of the global ideas circuit, up there
with Malcolm Gladwell and Richard Dawkins. The Long Tail pointed out that
because of the storage capacity of the internet — the “unlimited shelf
space” — every product can be on sale to everybody all the time. As a
result, big sellers, blockbusters, would no longer dominate the market.
Millions of small sellers would account for at least as much of the net
economy.
“The Long Tail is an expression of a network effect on a marketplace of
infinite capacity,” he explains, “that is unique to the internet. Previously
our culture was dominated by limited distribution channels; the internet is
the first unlimited distribution channel.” Or, in English, everything and
everybody is connected online.
He admits now it should have been called The Fat Tail. Last year research
showed that of the 13m tracks available to download on the internet, 10m
never found a single buyer. The tail was not as long as Anderson had
claimed. But it was, he points out, fat. Beneath the blockbusters there was
a big bunch of tracks selling that would never have sold without the
internet. Sceptics, however, continue to doubt.
Free arrives with another controversy. An American reviewer spotted passages
from the book that were lifted from other sources — primarily Wikipedia —
without attribution. Anderson found himself charged with plagiarism:
“Basically, I screwed up. It was sloppy and inexcusable and I feel sick
about it. We are making it right as best we can.”
The problem, he says, was his decision not to have footnotes. This is fair
enough, as far as it goes. It doesn’t explain the presence of word-for-word
lifted text in parts of the book. The affair leaves the Anderson brand
slightly tarnished.
However, his ideas are the heart of the matter and to understand these you
have to understand something of the man. He’s 47 and married with five
children. He was born in Britain to journalist parents who moved to America
when he was five. After school, to use an old rock term, he “scuffled” —
working as a bicycle messenger and playing with punk rock bands. In the DIY
punk tradition, they created their own labels and printed their own
magazines. The music was terrible but it gave him a glimpse of a
countercultural form of capitalism.
“Punk was very much a grassroots, bottom-up thing. It was not so much ‘stick
it to the Man’ as ‘who needs the Man?’ I realised most people in the world
were not well served by the tools of production — industries, factories,
broadcasters. None of us was going to get signed to record labels, get
published or get on TV. None of us was going to get access.”
Now, of course, they could play to the world on MySpace or Facebook.
Finally, at 25, he went to college and studied physics. On learning he wasn’t
a great physicist, he took up science journalism and joined The Economist.
This taught him economics — “Unlike real economists, I read the textbooks” —
but, more importantly, endorsed his old punk awareness that the libertarian,
let-it-all-hang-out ideology of the counterculture could become the new
capitalism. The tool of that transformation was the internet and, from 1993
to 2000, Anderson covered the web’s birth pangs at The Economist. As a
result, in 2001 Condé Nast gave him Wired magazine to edit.
It couldn’t have been a worse time. The dotcom bubble had burst and the stock
market had written off the new technology: “There was a lot of schadenfreude
about the internet, a feeling of ‘oh good, that’s gone away’. But the stock
market didn’t change the fact that this was not a gradual change, this was a
fundamentally different industrial model.”
In 2004 he wrote an article outlining the long tail theory and, two years
later, it became the book and the book tours. He is said to earn $60,000
(£36,000) for a lecture.
Both that book and Free are products of Anderson’s punk capitalism. But is he
right and does it work?
People do make money out of free stuff. Google makes a fortune from
advertising; it’s the same model as TV companies that charge nothing for
their primary product. Other sites — Club Penguin, the children’s game site,
Skype, the internet phone company, certain newspapers — make money by
offering most of what they do free and then charging for an upgraded
membership, a model Anderson calls “freemium”.
It is, as he says, a huge development in economics: indeed, he claims, the
free economy is as large as Germany’s. But, I object, isn’t his book just a
description of the way things are now? The future may be different and Free
will be just one more passing delusion.
“I’ll be fighting people about that for the rest of my life — to what extent
is this moment a fad? I’m arguing that this is a natural and unstoppable
outgrowth of the forces that were put in place by the invention of the
transistor. Once we moved into the quantum realm and invented industrial
machines that operate at the quantum level, we created a deflationary
monster.”
The second big issue is: isn’t he overstating his case? Like many of the
internet’s gurus, Anderson tends to write as if the economy and the net were
the same thing. But they are not. However much time we spend in cyberspace,
people will still need to put up buildings, dig up roads and harvest crops.
He calls this the world of “atoms” as opposed to the “bit” world of the
internet. And here Free doesn’t work. Atoms — tractors and bricklayers —
form an old-school inflationary economy.
“As the old inflationary economy gets more expensive over time you see a very
strong incentive to move things from atoms to bits ... Ten years ago my
stockbroker was a person, so was my tax accountant and my travel agent; now
they’re all software and they’re all free. Software turned people into
algorithms and these jobs were moved from an inflationary to a deflationary
economy.”
But, I point out, people don’t like that. “Neither do I. We will have to
figure out what we value — economic efficiency or quality of service and
decide if we can afford quality.”
Quality is the big one — and, for me, the personal one. Newspapers are
threatened by the land of the free. I point out that, to write this piece,
I’ve read both his books and hundreds of cuttings, got access to him, talked
at length, transcribed the conversations and then settled before a keyboard.
I get paid. But there are millions of others bloviating for free and if
nobody puts much value on the difference between me and them, then what I
bring to this party will be deflated to the point where it won’t be worth
doing. And if serious journalism dies, democracy will be next.
“A lot of people,” he says unconsolingly, “are writing for free and sometimes
they are writing better. What it all boils down to is: what can I do that
the internet can’t or doesn’t? You’re bringing a lifetime of experience to
this, a lot of smarts, a good bit of research, access to my time. You’re
doing something no blogger could do or won’t do. But the question is: in the
future will they reward you enough? I wish I could tell you the answer.”
This quality crisis applies across many sectors — it’s all very well saying
cheap or free music downloads are cool and the artists may find a way to
make a living from it, but what happens to the composers, writers, musicians
and so on? Quality is threatened by Free.
Anderson says he now thinks relevance is more important than quality and he
talks about new ways of making talent profitable, about ways of “monetising”
celebrity. In China, piracy — Free by another name — is the norm; the
companies have given up the fight. So a pop star doesn’t make anything out
of a recording but can profit from concerts, appearances, endorsements,
whatever. Piratical China, in this as in many other things, may be our
future. This may not be pretty — what, for example, happens to non-pop
musicians deprived of a financially viable recording industry?
I’m afraid the under-thirties are wrong: there is no such thing as a free
lunch. And this one is beginning to look terrifyingly expensive.
www.bryanappleyard.com
Free: The Future of a Radical Price is published by Random House Books at
£18.99 and £12.99 in paperback
