Tuesday, September 15, 2009

FREE by Chris Anderson

Mark Twain once said, “The difference between the right word and an almost right word is the difference between lightning and the lightning bug”. Somehow, I felt it was a hyperbole just to make a point. On similar lines, author seems to say, difference between FREE and charging some paltry amount (say one dime or one paisa) could be that much.
Perhaps, on thinking hard, I would agree for I have seen at least one episode of this occurrence. For long, Railways reservations forms used to be FREE. Ever since they started charging very nominal amount most of the problems vanished.

Chris’s main point is that, FREE is a viable biz model in the overall scheme of things. He gives plenty of examples and case studies as well as a good appendix on how it works. When you look at things which are done and deemed as “successful”, it takes some hard work and imagination to explain it in case of business. In case of science, eventually you can come up with a model like benzene rings, but it may be lot harder (like Feynman explanation on Super fluids, Einstein’s Theory, Darwin’s Evolution theory). In all these cases, they themselves took the trouble of telling what it takes to disprove their model. They also tried hard to disprove the model. Likewise, I would love to see, where and when FREE model was employed with lots of potential upside, but it bombed and why? No such examples were to be found in this book. I later reconciled myself saying that for a $30 book, it is too much to expect since it would prove very valuable.

In social systems, there is a concept called “light house effect”. If you build a light house based on the contributions from the community members and if some of them did not contribute in any form to the project, there is no way to deny them the use it brings. Most of the focus in such studies would hover around what is minimum set of people or percentage of people in the group who would have to chip-in so that, the project takes off. If numbers are too less it gets abandoned very quickly. Chris’s point is that, in the “electrons world” unlike “atom world” percentage of contributors required seems to be as low as 1%. He calls that as “FREE RIDER NON-Problem” and gives Wiki as a solid example.

Theodore Levitt, in his landmark article “Marketing Myopia” remarked “If Railways defined their business as Transportation business instead of Railways, they would have certainly taken advantage of the Airways”. A similar sentiment is expressed here about Ryan Airways,” they have defined their business not as an airline seats biz but as travel biz”. Certainly, it is a good observation but only in retrospect, like taking the same question paper for second time after preparation.

His views on piracy are worth re-reading. Also, his examples of Craigslist, Encarta, Roomba vacuum cleaner, Jell-O-o, Gillette, and radio broadcasting are impressive. For sure, he is a master in providing solid examples with a good story line.
There are special sections on “How can …………..be FREE” where the dotted lines represents Air travel , Car, DVR etc . Totally there are 14 examples. Most of the case studies are worth giving a thought for it may bring in some crucial insight to pricing decisions in the area we operate on.

Last chapter (Chap-16) focuses on doubts about the model. There, he takes head-on some of the myths and misconceptions of FREE model as quoted by some famous folks and tries to confute it. This section too deserves a closer reading.
Author recounts his experience with a friend who works for Google in his office. When he explained what he does as an editor of “WIRED” magazine, he witnessed a “mounting disbelief” from his friend because his friend was doing exactly the opposite. It was a good example where one’s poison could be other’s food.
When the availability/resource model moves from scarcity to abundance, it appears humans have not yet developed a good strategy to take advantage of the situation. His observation on Google and its CEO’s worry is worth pondering. FREE as a model works too well for few folks leaving others in dust.

FREE as a pricing concept has been there for ages. But, when to apply and how to get most of it is still an art (to the point of black magic) rather than an exact science. So, I would modify the standard Prayer like this.

“Oh God, Give me the serenity to give things which I have to give FREE anyway; courage to charge for the things which I can – and the wisdom to know the difference
Well, you would get plenty of examples for gaining serenity and courage from this book. 

As to wisdom, you would have to try for yourself : )

Thanks for reading thus far.

Regards,
madhu

5 comments:

Mukund S said...

A great start, Madhu-san. "Never be afraid to try something new. Remember, amateurs built the ark. Professionals built the Titanic"

vivisa said...

I like the modified 'prayer' :) Would you be doing a post on Gladwells's critique of FREE?

பகலவன் கிருஷ்ணமூர்த்தி said...

Your blog is a long overdue. But thanks to listen to us :-) I am sure you can contribute a lot. I am a fan your anecdotes and interesting quotations that you refer to. FREE review is too good, I can not wait to read it..

Madhu Parthasarathy said...

sAgar,
I went thru:
http://www.newyorker.com/arts/critics/books/2009/07/06/090706crbo_books_gladwell

He compares Pharma/Biotech with HiTech. Much detailed study can be found in the work done by GARY P PIASANO (Ref Science Business)

As I was hinting in prayer part, hardest part is which to give free.
Another hitch seems to be imitating may not help much b'coz what worked for one may not work for another.

Kiran said...

Good start Madhu san; Your “Free Commentary “ is quite interesting. You have installed “light house” for FREE!