Gee, I really feel like the new, new world has truly arrived, when one of the most visible conversations in the places I frequent is about Malcolm Gladwell’s New Yorker review of Chris Anderson’s Free: The Future of a Radical Price. Chris Anderson responds to Gladwell, continuing the conversation.
But you know that it’s game on when you attract the attention of the digerati, including Anil Dash (focused on the methodology of argumentation from anecdotes vs. data) and Seth Godin (focused on the marketing-related implications of using “free” to capture scarce consumer attention). And, of course, our own Tyler Cowen, although he is circumspect and offers only a pointer to the discussion.
I, too, remain circumspect until I have read the book, but I have read some of Anderson’s articles on the topic. I see the core of Gladwell’s criticism as this: how do we know that “free” is the future when it doesn’t generate revenue streams, and is therefore not a sustainable business model? That’s where I think Godin’s comments are useful — free can be a way to get attention in a crowded retail space, although the firm will have to incur costs to keep that attention in the face of relentless innovation and rivalry. But there are also products for which “free” reflects the marginal cost of producing an additional unit of output, and in that case, to be sustainable the business model has to bundle that free good with others for which consumers are still willing to pay. The changing music business model, evolving toward “free” music and higher prices for concerts, t-shirts, etc., is an example of this type of model.
I won’t wade into the thicket of whether Gladwell is sensitive to Anderson’s argument because of the decline of old-school journalism, although that is definitely part of this debate. Follow the above links if you want to participate.
BTW, when I put “free” in quotes it’s not because I’m necessarily skeptical of Anderson’s argument, but because of my economist pedantry — I prefer to think of goods as having price=0 instead of being “free”. But “zero-price” is a less felicitous word than “free”.