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How Today’s Smartest Businesses Profit by Giving Something for Nothing

By Chris Anderson
15-minute read
Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing by Chris Anderson

Free (2010) explains how, with the advent of the digital marketplace, our understanding of traditional economics is turned on its head. It shows how twenty-first century business has changed in an unprecedented way, and how in order to succeed we need to totally rethink our understanding of the flow of money. It explains why we need to let go of our old beliefs and accept this new business model, where free must be the starting point. Most importantly, the author shows how there are still plenty of ways to make money from ‘free’.

 

  • Anyone wanting to see the workings behind various free offers
  • Anyone interested in consumer psychology
  • Anyone who wants to understand how the digital revolution is changing the concept of “free”
  • Anyone wanting to know the best way to use the concept of “free” in their own business

Chris Anderson is the author of three successful business books, has been editor in chief at Wired Magazine and editor at The Economist, and is also an enthusiastic entrepreneur. Passionate about remote-controlled technology and hardware, Chris founded an open-source 3D robotics company, for which he famously offers the instruction manuals free online. In 2007, Time Magazine named Chris as one of the Top 100 thinkers. He lives in Berkeley, California, with his wife and five children, with whom he spends his weekends trying to build flying robots!

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Free

How Today’s Smartest Businesses Profit by Giving Something for Nothing

By Chris Anderson
  • Read in 15 minutes
  • Contains 10 key ideas
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Free: How Today’s Smartest Businesses Profit by Giving Something for Nothing by Chris Anderson
Synopsis

Free (2010) explains how, with the advent of the digital marketplace, our understanding of traditional economics is turned on its head. It shows how twenty-first century business has changed in an unprecedented way, and how in order to succeed we need to totally rethink our understanding of the flow of money. It explains why we need to let go of our old beliefs and accept this new business model, where free must be the starting point. Most importantly, the author shows how there are still plenty of ways to make money from ‘free’.

 

Key idea 1 of 10

Companies used to think that if they kept their product scarce, they could make more money.

In the 1930s, record labels faced a problem: as the radio became a household item, hundreds of thousands of people started listening to music for free on the airwaves rather than paying for live shows and buying records. The labels’ response? They actually tried to ban the radio stations from playing their records.

This reflects the twentieth-century perspective on free products. Businesses worried that if their product was available for free in some form, like music played on the radio, consumers would have no interest for paying for it in another form, such as live shows.

By trying to stop people from satisfying their craving for music by listening to the radio, they were hoping to protect demand for the live shows. To keep products scarce in this way was considered good business sense; they controlled supply to protect demand.

This policy wasn’t limited to record companies. Many other industries felt the same way, and one of the most important tools they used to create scarcity was copyright. Copyrighting a product prevents other companies from producing it, thereby holding off the competition. When Microsoft released their Office software, their copyright gave them a monopoly, allowing them to charge a whopping $300 per disk. As a consumer who wanted office software, you had to pay whatever Microsoft asked.

Scarcity is artificially created by ensuring consumer demand is never fully satisfied and competition is held at bay. This was the way of thinking that dominated business in the twentieth century.

Companies used to think that if they kept their product scarce, they could make more money.

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