My partner Brad Burnham, with whom I started Union Square Ventures, thinks as much about the markets we invest in as anyone I know, but he doesn't share his thoughts as frequently as I do. But when he does, it's always worth reading.
Yesterday Brad posted his thoughts on the freeconomics debate that Chris Anderson and Malcolm Gladwell had a while back. Brad thinks they are both wrong.
I'm going to tease you all by giving you three quotes from Brad's post and then I hope you go read it in its entirety. It's a quick read, a few minutes is all it will take.
Here are the three quotes. Enjoy.
Ultimately the debate veered into a
discussion of the economics of abundance, pitting overly enthusiastic
cyber utopians against cynical and perhaps self interested defenders of
current media business models.
Free is not a pricing strategy, a marketing
strategy, or the inevitable consequence of a market with low variable
costs. It’s a symptom of a much more fundamental economic shift. Until
we agree on what resources are scarce and have a framework for how they
will be allocated in the future we are not just talking past each
other, we are talking about the wrong things.
Services are not offered for free at all.
There is an exchange of value between users, the creators of the raw
material - data, content, and meta-data, and the network where that
data is converted into insight. This exchange is still governed by the
basic laws of economics but the currency is not dollars, it’s
Update: Nik thinks I missed a good one, so I'll add a fourth:
Since all these services require a large base of users for their
filtering techniques work, you could just as easily ask why the
services are not paying their producers. Debating whether to charge
these same producers make little sense.