02/26/2008 | Joshua Gunn
There is a lot of chatter lately about the “Free Economy” and building business models based on giving things away. It’s been kicked off by an excellent article by Chris Anderson, the editor-in-chief of Wired: Free! Why $0.00 Is the Future of Business.
The most important passage, for me, is deep in the article:
In the digital realm, as we’ve seen, the main feedstocks of the information economy — storage, processing power, and bandwidth — are getting cheaper by the day. Two of the main scarcity functions of traditional economics — the marginal costs of manufacturing and distribution — are rushing headlong to zip. It’s as if the restaurant suddenly didn’t have to pay any food or labor costs for that lunch.
Surely economics has something to say about that?
It does. The word is externalities, a concept that holds that money is not the only scarcity in the world. Chief among the others are your time and respect, two factors that we’ve always known about but have only recently been able to measure properly. The “attention economy” and “reputation economy” are too fuzzy to merit an academic department, but there’s something real at the heart of both. Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). Anything you can consistently convert to cash is a form of currency itself, and Google plays the role of central banker for these new economies.
There is, presumably, a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and the world of free exists mostly to acquire these valuable assets for the sake of a business model to be identified later. Free shifts the economy from a focus on only that which can be quantified in dollars and cents to a more realistic accounting of all the things we truly value today.
In other words, online media should not even bother with building instantaneous revenue streams, it should compete to be the best in terms of quality, value, and the attention of viewers — so-called “externalities”. And just what is “that business model to be acquired later” — after the viewership and “reputation” are established? I look no further than CommonCraft for the answer to that one.
Here’s CommonCraft’s Lee LeFever with a very cogent take on the article, as well as a compelling outline of the business model that emerged from CommonCraft’s emphasis on free.