The Price of Free in the Internet Age

I've been reading an intriguing book, Free: The Future at a Radical Price, by Chris Anderson.  In the book, Mr. Anderson explores the economic and social history of offering things for free and paying for one's work in different ways.  In our information age, the marginal distribution costs of bits representing products and services has begun to approach zero. These changes will have profound effects on our models of business and society in the coming years.

To introduce my CIS 470 students to this topic, I asked them to prepare for class by reviewing an earlier (and more condensed) version of Mr. Anderson's thoughts in his Wired article "Free: Why $0.00 is the Future of Business and to share what they learned.  A wide variety of lessons came from students readings. Some focused on business opportunities identified in the article. Others pointed out the difference between free and nearly free.  A third group of students focused on the ways that free and nearly free resources can change our behaviors.  During our class discussion time, I focused mostly on this last group of ideas.

Free Food
We started by talking about free food. Everyone in the class likes free food (these are struggling undergraduate students). Of course the class recognized that often free food comes with a price. I recalled the old English saying "There's no such thing as a free lunch."  Everything has a cost; some costs are just hidden or passed on to others.  In the case of free food, I asked "What's the catch?" Often food is given out as free refreshments after an event (a church fireside presentation,  a guest lecture for a university club,  or a pushy marketing presentation). The free food is subsidized by others who are using the food to further motivate your participation.

I then lead the students through a thought experiment. "What if," I asked, "we could really make food free? What if there really were no strings attached, and I didn't ask for anything in return?" What would happen?  One student pointed out he probably wouldn't have to work anymore.  I shared my experience visiting American Samoa in 1989 and my memories of hearing my parents describe the different attitudes some islanders had about work in an environment where land is owned by the family / community, and food is abundantly available growing on breadfruit trees or as available fish.

I said if we could provide free food for everyone (like the food replicators in Star Trek: The Next Generation), we could solve a lot of problems. Hungry people on this planet tend to do one of two things: either they suffer and die, or they get angry and start a war.  Providing free food would eliminate lots of these types of problems.

Source: http://blogs.hardindd.com/?p=348

But taken to an extreme, we can envision some negative consequences of limitless free food (and presumably shelter).  With food abundantly available at zero or near zero cost, some people would find themselves over-consuming--spending their entire day eating food and watching YouTube videos. Over time, my stereotypically skinny student from Japan starts taking on the appearance of a sumo wrestler.  Thus, by removing the cost and scarcity of food, I change behavior and create different costs (in the form of health problems and potential idleness.

The relationship between food and work in our culture goes back thousands of years. In the Book of Moses, we read

 25 By the sweat of thy face shalt thou eat bread, until thou shalt return unto the ground—for thou shalt surely die—for out of it wast thou taken: for dust thou wast, and unto dust shalt thou return.

Thankfully, we don't have any societies on earth wherein food is both abundant and cheap (at least for certain segments of the population.) We won't dwell on the fact that in the United States over 35% of adults and 17% of children and adolescents are obese. (Note: these number are from the United States Center for Disease Control and Prevention and are more accurate than the figures I reported in class). Thus, when we make one resource free, we create a cost somewhere else in the system. In operations management, this is like fixing one process bottleneck only to move the bottleneck downstream.

Free Gifts
An important insight came out of one student's bringing up the role of free in gift giving.  Although gifts are free to the recipient, they normally require sacrifice on the part of the gift giver.  In many ways, the meaning of  gift is tied to the sacrifice required for it.  You can imagine a man asking a woman to marry him and giving her a priceless ring. She says "You shouldn't have!" His response: "Don't worry. It was free." would change the meaning of the exchange.  If nothing required sacrifice either on our part or the part of others, the meaning of its worth would be harder to convey.

Frictionless Purchasing
 I then directed the discussion toward another way in which products or services can be free--in terms of time.  I shared my experience yesterday of viewing a book recommendation from my friend Jesse Stay. Between Jesse's recommendation and the great title and book blurb, and the nearly free price, I thought I'd like it.  Within two minutes, I had clicked over to Amazon, and purchased the kindle version of the book.  Within less than 30 seconds from my purchase, I was reading the book in my web browser. (I really enjoyed it by the way, and it it did take about 90 minutes).  Looking back on it, I'm amazed at how little time was spent actually evaluating and buying the product.

Amazon has stated they're trying to make this entire purchase process frictionless, that means they want to make the steps from attention to impuse to buying decision to completing the purchase as quick and simple as possible.  That's why they patented their 1-click purchasing process.

Think about this for a minute. Between the 1-click purchase process and the instant availability of electronic goods through devices like the kindle, that means I have very little time between the time I decide to buy something and my completion of the purchase. There's little opportunity for me to get my cortex involved to rationally deliberate whether I really want this book or not. It's frictionless. It's free of time costs, and it's increasingly free of thought. And for Amazon the marginal cost of distributing one more electronic book (as compared with one more physical book) is near-zero.

Free Processing
I told my students their job as Information Science professionals is to find ways to make things free. To illustrate, we discussed Moore's Law. Gordon Moore, working at Intel discovered the trend that the number of transistors they were able to fit onto a single chip was doubling approximately 18 months. In very loose terms, that means the processing power of a microprocessor had been doubling every 18 months.  Interestingly, that trend continued for about 40 years.  (Today's advances in CPUs from companies like AMD are using other techniques like multiple cores to keep the performance improvements coming even as we're reaching physical limits as to how small we can make the transistors).

As an analogy for what Moore's Law means for computing, I set up a fictitious scenario in which I bought the nearby Turtle Bay Resort and hired a single student to mow all the grass on the golf course at the resort.  Pulling numbers out of the air, I suggested it would take him about 8 hours of hard work to get all the lawns mowed. But James, our student, is a fast learner because of this great education he got at BYU Hawaii, and he's figured out some process improvements. So when I check up on his work in about a year and a half, I discover that he's now getting the whole job done in 4 hours instead of 8. Since I pay James 7 dollars per hour, my cost for getting the grass mowed has dropped from 56 dollars to 28 dollars.  A year and a half later, I discover that James is now getting the grass mowed in just 2 hours, bringing my costs down to 14 dollars. In another year and a half, my costs are down to 7 dollars for the entire lawn.  My cost to mow the lawn is quickly approaching zero.

James is such a fast and low cost worker, I start finding other jobs around the resort for him to do.  In each case, the pattern is the same, in a small number of years, his productivity begins to grow exponentially and the cost per job that I ask him to do approaches zero. Meanwhile he's putting many of my other employees out of work.  Thus, the next lesson for my students: in making more things digital and marginally free, your job is to put people out of work. 


I told my students that we're rapidly approaching a time--at least in some parts of the world--where a lot of people are going to be unemployed. We're going to have to figure out as a society what we should do about that. With increased productivity, do we make everyone work only four hours a day. Or do we only employ half as many people?  What else are people going to do with their time? What other bottlenecks will we create as computers become more productive and jobs become scarce. Will our ability to create work be able to keep up with our ability to destroy work by making it digital and nearly free?

Free Education
I raised the question about my own employment prospects.  Knowledge industries (including entertainment and education) are increasingly becoming digitized.  Movie studios can duplicate video footage thereby converting 20 extras dressed up as orcs into an army of thousands. (Incidentally, I just read that the Orcs in the Two Towers film were entirely computer generated).  Studios are also experimenting with synthespian technology in which actors' words and facial expressions can be digitized and remixed to create new scenes. In education, lectures and exams can be digitized allowing a single educator to oversee potentially thousands of students. Where does that leave the future of my career? Will I be educating thousands? Or will I be unemployed?

Of course, making educational materials free doesn't make education free.  We've just shifted the cost. You may be able to access all of the information contained in an undergraduate education for free over the internet, but now the cost is your time. Will you have the self discipline and to take that time without the structure of a classroom environment? As educational content becomes free, how do we ensure that students and faculty perform the necessary cognitive exercises so that our minds continue to be active and our educational efforts yield lasting benefits.  These are questions we need to consider as we move into the future.