There’s been a lot of fuss recently about the upcoming book, Free, by Wired editor Chris Anderson, largely charges that he plagiarized Wikipedia and apparently much more. Like Jonathan Bailey, I wasn’t sent an advance copy of the book so I don’t feel qualified to comment on those charges.

However, whether plagiarized or not, Anderson’s arguments in favor of a digital utopian “free” society are hardly new. He has been espousing them for some time, and while popular among the digirati they are in fact canards, some of which we debunked in our own blog series and resulting paper.

Now one of my favorite authors has jumped into the mix, with rebuttals to Anderson’s thesis far more eloquent than mine. Malcolm Gladwell of The New Yorker, like any top-notch journalist, finds interesting insights by experts and brings them to a general public. Unlike most journalists, however, Gladwell brings a value-added of his own insight that provides his readers not just new information but new ways of thinking about things.

As someone who has read all of his books (and yes, purchased them, old-fashioned me thinking he should be paid for his labor), I see what he has taught me popping up almost daily in life.

For example, he once wrote about an experiment where a small variety of flavors of jam were offered for free tastings in a supermarket, which led to a fairly significant rate of purchases. When they instead offered a couple dozen flavors to taste, purchases dropped tenfold. Consumers suffered choice overload. That very experience was just articulated the other day by shoppers quoted in a Wall Street Journal article about stores reducing their variety on shelves. (Note that WSJ is charging for that story online; Gladwell points out in his review of Anderson’s book that more than a million people are willing to pay for an online subscription to that paper; I have both a physical and online subscription.)

Now to Gladwell’s review of Free. I wish my readers to enjoy his whole review (which The New Yorker has chosen to make available in a free ad-supported model), but here are some brief nuggets to encourage you to read more.

First, while Gladwell does a great job of identifying the major themes of Anderson’s work, let’s begin with this summary Gladwell does of the main thesis:

The digital age, Anderson argues, is exerting an inexorable downward pressure on the prices of all things “made of ideas.” Anderson does not consider this a passing trend. Rather, he seems to think of it as an iron law: “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.” To musicians who believe that their music is being pirated, Anderson is blunt. They should stop complaining, and capitalize on the added exposure that piracy provides by making money through touring, merchandise sales, and “yes, the sale of some of [their] music to people who still want CDs or prefer to buy their music online.”

Gladwell’s reply? “His advice is pithy, his tone uncompromising, and his subject matter perfectly timed for a moment when old-line content providers are desperate for answers.” But:

Anderson’s reference to people who “prefer to buy their music online” carries the faint suggestion that refraining from theft should be considered a mere preference. And then there is his insistence that the relentless downward pressure on prices represents an iron law of the digital economy. Why is it a law? Free is just another price, and prices are set by individual actors, in accordance with the aggregated particulars of marketplace power. “Information wants to be free,” Anderson tells us, “in the same way that life wants to spread and water wants to run downhill.” But information can’t actually want anything, can it?

Gladwell further summarizes the major threads of Anderson’s arguments, which highlight YouTube as an example of how free combined with no limits on participation equal our brave new world:

There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a psychological claim (consumers love Free), a procedural claim (Free means never having to make a judgment), and a commercial claim (the market created by the technological Free and the psychological Free can make you a lot of money). The only problem is that in the middle of laying out what he sees as the new business model of the digital age Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”

Gladwell points out that while the per-delivery cost of one YouTube video may be small, when scaled across seventy-five billion videos it grows. Gladwell quotes Credit Suisse as saying YouTube will lose close to a half-billion dollars this year.

(Interesting sidebar — YouTube owner Google is hosting Anderson to discuss Free at its swank D.C. office Tuesday, July 7th. Click here for more information and to register. Of course the event is free.)

Apparently Anderson builds an argument for almost-no-cost distribution on top of earlier Nirvana claims in the world of energy. Gladwell notes that most of the cost of energy is distribution, not the fuel extraction itself, and that infrastructure costs are very real in the digital world as well. As Gladwell puts it, “This is the kind of error that technological utopians make. They assume that their particular scientific revolution will wipe away all traces of its predecessors—that if you change the fuel you change the whole system.” I’ve always preferred the term “digital utopians,” but same difference.

Again, I encourage you to read the entire Gladwell review. Gladwell, a former newspaper reporter turned magazine reporter turned author, is not an online bomb-thrower. He has nothing personally to gain by sticking his neck out in this debate. And he enters it with street cred that, frankly, is unrivaled. This was a welcome, and civil, critique of a very important subject.

ADDENDUM: Here’s a great review by John Gapper in The Financial Times called “Free Does Not Live Up to Its Billing.” No, Mr. Gapper is not pointing out the fact that Mr. Anderson is charging for his book. Instead, he notes how Mr. Anderson has written a serious book but again has not supported his sweeping thesis. I much appreciate how Mr. Gapper knocks down the marginal-cost argument by noting that “even if the cost of digital distribution is lower than that of physical distribution, the marginal cost of production is not cut to zero. Companies have many costs, from marketing to employing people to make things. Offering things free on the internet is loss-leading just as surely as handing Jell-O recipe books to American housewives was in 1904.”

Loss-leading models abound with creative works. Big-box retailers sell discounted CDs and DVDs (never long-tail works, by the way) to drive traffic into the stores, losing money on those sales in hopes of selling, say, an entertainment system. That is fine; they use their leverage to negotiate a price with labels and studios for wholesale purchase, and that purchase leads to payment for creators. It’s all voluntary, and everyone gets paid.

Again, “free” is fine when voluntary, not when involuntary, as is the case with Anderson’s “gift economy.” (I’m amazed I was able to type that repulsive phrase, it sent shivers down my spine at the very Orwellian nature of it.)

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This entry was posted on Tuesday, June 30th, 2009 at 1:50 pm by Patrick Ross and is filed under copyright opponents, creators, economy, events, internet, market forces, piracy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.