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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 9 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 9

There’s no such thing as a free lunch – you always pay for “free” items one way or another.

In the nineteenth century, New Orleans saloon bars struggled to attract drinkers during the daytime. So they began to offer free lunches, luring in customers who would pay for drinks. This practice spawned the saying “There’s no such thing as a free lunch”: even supposedly “free” lunches are actually paid for in drinks.

Giving items away free has always been a popular marketing gimmick.

But if you think about the free items you’ve been offered in your lifetime, say a recipe book or a razor, you’ll notice that they don’t work alone, they always oblige you to buy something else. The free razor is useless unless you buy some Gillette blades, and you can’t use the free Jello recipe book unless you buy some Jello. The cost of the free product is simply moved to another item, which must be paid for. The free item is known as a loss leader: though sold at a loss, it leads the consumer to pay for other products that subsidize it. Sometimes the subsidy can also take the form of a subscription. A mobile operator, for example, may give you a free phone but charge you a monthly fee to use it.

In some cases it is not you, the consumer, who ends up directly paying for the free item but rather a third party. This is how free media, newspapers, magazines and radio work. Advertisers subsidize the broadcaster or publisher and in return you are exposed to advertisements. It is merely a different form of “cross subsidy.”

When it comes to supposedly free products, someone always pays in one way or another, whether it’s you buying another product (the Jell-O), you paying for it later and over time (the phone fees) or by a third party paying to get your attention (the free newspaper).

There’s no such thing as a free lunch – you always pay for “free” items one way or another.

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