Sunday, December 06, 2009

Chris Anderson, Malcolm Gladwell And A Look At Free by Michael Masnick

July 1, 2009

from the might-help dept

Malcolm Gladwell is an interesting guy. He's an amazing writer and storyteller—perhaps the greatest storyteller of this generation. And, as such, he's amazing at taking complex ideas or research and making it seem simple and easy to understand. I have to admit that I really enjoy reading almost anything he writes for the pleasure of seeing how it's written. That said, I've found his books to be unsatisfying in the end. Great, fun reads at the time, but I kept feeling like I was waiting for more. I was waiting for the actual substance to back up the amazing thesis. It's amusing then, to see him basically suggest the same thing about Chris Anderson's new book, Free in his review of the book in the New Yorker. That review has kicked off quite an online conversation—with a response from Chris, and other "luminaries" like Mark Cuban and Seth Godin weighing in as well (Godin agrees with Chris, Cuban doesn't).

A few people asked me if I was going to respond to Gladwell's review, and at first I wasn't sure if it was worth digging in to it, but at the same time, I did want to put up something of a review of Free myself. So, I might as well kill two birds with one stone here. First: a bit of disclosure: I know Chris. Not well, but we've been known to email and talk on occasion, and we sat down and got lunch a year and a half ago when he was first planning out this book, during which I made some suggestions (some he took, some he didn't) though I doubt my words really had that much of an impact (I'm sure he heard similar things from others, and that they were much more clear and eloquent than I was). Also, Chris does mention me in the acknowledgments section of the book, noting that my daily writings here "informed and inspired" the book. Thus, take anything I say with a grain of salt.

There have already been some attacks on Free that have really missed the point. There are plenty of points to attack, but it seems that the problem is that (once again) people get stopped by the big zero, and forget to keep working through the rest of the details. Like I said last time, it's as if our brains have a "divide by zero" error message that prevents all additional thinking on the subject. Nearly all of the attacks on the concept of free seem to focus on the fact that not everything is free (this is what Cuban does, for example). Except... no one ever claims that everything is free. The whole point is that "free" is simply a part of a larger business model, and the fact that you charge for some stuff doesn't take away from the idea of embracing "free" where it makes sense as a part of that business model.

Gladwell, to his credit, stays away (mostly) from this type of mistake, but he makes a few other ones in the process. For example, in responding to Anderson's recognition of the value of non-monetary rewards as a part of the larger economic ecosystem where some business models involve "paying people to get other people to write for non-monetary rewards," Gladwell's retort is:

That said, it is not entirely clear what distinction is being marked between "paying people to get other people to write" and paying people to write. If you can afford to pay someone to get other people to write, why can't you pay people to write?

The answer to Gladwell's question is simply one of economic efficiency. You can pay people to write—just as Encyclopaedia Britannica does. Or you can get other people to write for non-monetary rewards—as Wikipedia does. The latter is a lot more efficient a solution, and the difference in productivity and output is quite evident. It's not saying that there is no business in paying people to write, but it's a very different business than the indirect business model, and it's the economic efficiencies that come into play.

Money, at times, is a transactional lubricant. It helps us make transactions faster than bartering three pigs for two trees, a goat and a bushel of corn. At other times, though, money can be friction. It can limit transactional effectiveness by acting as a kind of crutch. That's where non-monetary benefits can suffice (or do a much better job) in rewarding people for their actions. In those scenarios money gets in the way and actually makes a transaction less efficient.

A more efficient solution is a good thing. It helps enlarge markets, increase productivity and make the net of society better off. Much of what Chris discusses in the book is that end result. The process may be messy, but economic growth through efficiency is undeniably a good thing—and Gladwell seems to miss that point entirely.

That said, Gladwell's comment actually does bring to light my biggest complaint with Anderson's book. I think it's a fantastic read, and quite educational and (at times) thought provoking. But I don't think it goes far enough in diving into the meaty details, which is where folks like Gladwell are led astray. So while I think that Anderson is correct, I'll also say that Gladwell is correct in suggesting that Anderson doesn't clearly answer that question. That doesn't mean that Anderson cannot or that the failure to answer that question means that Anderson's thesis is wrong, even though Gladwell implies the failure to answer such questions calls the entire work into question.

My second issue with the book is related to this, in that while it outlines why "free" is so important and how it's being used and how it plays out in other areas, it really doesn't explain much of what to do about it. This, too, is echoed in Gladwell's questions. He feels that there should have been more about how do you actually apply such things—and I agree that the book comes up short here as well, though I believe it is on purpose. It lists out examples and business models that are certainly useful to read about, but does little to suggest how you actually apply them. This is speculation on my part, but I remember in our discussion before he started writing the book, Chris explained his goal was to make the book more descriptive than prescriptive, recognizing the difficulties in making a prescriptive book on a topic where there are so many other factors that it's often difficult to outline specific prescriptions. I recognize that challenge, but it does leave the book open to many attacks from people who read it and are left saying "ok, but what do I do about this?" On that, I think the book comes up a bit short—though, it should provide plenty of consulting fodder for Anderson (and other consultants who jump on the bandwagon, probably without understanding it too much).

The big problem here is that not only will people among the critics misinterpret the lessons of the book, but so will businesses. They'll implement bad business models that have "free" as a component, but that won't be economically sound. No one claims that "free" solves everything, but some will undoubtedly interpret it this way. Then, when they fail, they'll blame "free" and claim that it was wrong, rather than the fact that they implemented a bad business model. This, in fact, is what happened in some areas with The Long Tail, Chris' earlier book. They assumed it said stuff it did not, and then got upset when their improperly created business models failed.

From there, however, Gladwell then goes on to bring up some other criticisms that don't pack much of a punch. He knocks Anderson for using YouTube as an example of using "free" as a part of a business model, noting that YouTube is losing money (though, Gladwell relies on debunked numbers to assert those losses). Similarly, he talks about how the WSJ can charge, Apple can charge for iPhone apps, and cable TV can charge—but his mistake here is taking a static picture and (often) removing the context. The WSJ can charge, but there are questions about whether that strategy really can last—and the publication has been opening up more and more stuff as "free" to try to draw people in to that subscription model. The Apple example is quite misleading as well. Estimates suggest that Apple makes very little on iPhone apps, but has really nice margins on the iPhone.

But beyond shoddy research by Gladwell, the bigger issue is not recognizing the dynamic nature of these things at work. Using a little game theory economics wouldn't hurt. By looking at how business models play out when goods have a marginal cost of zero, you quickly learn how opportunities to be more efficient via a well-placed use of free expands the size of certain markets. The trick is recognizing that things that are "free" stop being products that are sold, and become resources—inputs—into other products... for free. Thus, you get markets where increasing marginal returns carry the day, rather than diminishing marginal returns. This seems especially odd, given that Gladwell's claim to fame is his ability to pick up on trendlines. To then look at Chris' book and compare it to a static picture of the world is quite unconvincing.

Furthermore, it misses the main point of the book: which is that competition happens, and when it does, price gets driven to marginal cost. You might not like it. You might wish it didn't happen, but arguing against the fact that it's how markets work is like arguing that the sun won't rise tomorrow. No one said that it didn't make economic sense when other businesses had margins squeezed. Yet when that big "zero" shows up, people seem to forget that it's just a number and the basic lessons of the book aren't new or radical—but the same economics we've always known. It's just that it's applied to markets where marginal cost is zero, something that's become more common thanks to technology.

Gladwell's review, then, does Anderson's book a disservice. It criticizes it because it doesn't answer questions the book didn't set out to answer, and then attacks the picture today without acknowledging the trendlines and the direction that they're moving in. And, finally, it ignores the actual nature of the argument (this is happening) with a moral discussion (is this good?). That's unfortunate. Where Chris' book shines quite frequently is in laying out these trendlines clearly and in a way that will get you thinking. It may not answer all the questions about free, but it should certainly help those who don't stop thinking at the zero to at least recognize the trendlines and get them thinking about how to deal with them. And that is, unquestionably, a good thing.

As Chris did with The Long Tail, he's taken complex economic theory and made it easy to understand in a compelling and highly readable format. While my own personal complaint (above) concerns how much of that economic theory may have been left on the cutting room floor, that's a critique that probably only applies to folks like myself who spend way too much time reading, talking and thinking about these issues. I'm guessing the mass audience this book is targeted for doesn't care so much about understanding the deeper economics, even if it answers the basic questions raised by Gladwell. If you read Techdirt frequently (and enjoy it), then you're quite likely to enjoy reading Free. It certainly complements and adds to the material we write about here frequently, and presents it in a great package.

I did want to bring up one separate issue, because I get the feeling it will be raised in the comments. There was a lot of attention paid recently to charges of plagiarism in the book. Chris has admitted to the basics of the charges, and explained it as sloppy editing in an effort to deal with concerns about how to cite online content. I have to admit that sloppy editing seems like a weak excuse here, and a bit disappointing. It seems a bit lazy.

That said, I've discussed at great length my position on "plagiarism" in the past—and, amusingly, much of it is inspired by Malcolm Gladwell's own discussion on plagiarism, where he recognized that someone taking his own work and adding value to it and doing something different wasn't such a bad thing after all, and that it could actually represent an inspiration. So if I were actually "plagiarized" by Chris or anyone else (and I don't believe I was), I'd actually find it something of an honor to have my works as a part of something better and more interesting. I don't think it takes away from the quality of the overall work at all. I would have preferred that such mistakes in attribution did not happen, mainly because it's a distraction, but the issue is a minor one. If Chris can take the works of others and make it into something more valuable, aren't we all better off because of it?


This article is part of a series called The Filmmaker's Roadmap to Free. You may read the entire articles by clicking here, or the other articles here:
The Filmmaker's Roadmap to Free: An Introduction
Free: The Future of a Radical Price by Chris Anderson
PRICED TO SELL: Is Free the Future? by Malcolm Gladwell
Dear Malcolm: Why so Threatened? by Chris Anderson
Malcolm is Wrong by Seth Godin
Free vs. Freely Distributed by Mark Cuban

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