The emerging gift economy

A friend sent me this video. (Strangely, Wired does not seem to have figured out how to make their videos embeddable on WordPress!)

The basic premise of this 3 minute presentation: Lewis Strauss once predicted that nuclear technology would make electricity so inexpensive that it wouldn’t be worth charging for it. He was wrong, but today, we’re seeing other resources become that cheap: bandwidth, digital storage, processing power. Successful companies like Google and Yahoo offer all their products for free. What is this strange new economy we’re moving toward?

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4 Responses to “The emerging gift economy”

  1. Mike Welch Says:

    Hi Pete, hope you’re well :)

    Whilst we all like things that are free I think Chris Anderson is missing the point a little. Google and Yahoo are not strictly giving away their product for free, they’re cross subsidising one of their products from another. Google is profitable because they have the dominant share of the advertising market and the reason for that is that they’re effectively paying people to see those adverts by giving them a free web search/free e-mail/free toys, toys which they can co-opt to generate better advertising targeting based on our usage of them.

    When it comes down to it bandwidth will never be free because it costs an absolute fortune to build and maintain the infrastructure. There’s always going to be a cost to having some guy lay fibre along your street and that cost needs to be passed on to someone.

    The further undermine Chris’ argument backbone network providers are making moves to limit the bandwidth used by consumers (by throttling P2P applications, imposing usage caps etc) precisely because bandwidth is not free but rather costing them far more than they can sell it for. Rather than seeing the free-economy emerge I suspect we’re about to see the end of the “almost free economy” and a return to the “pay for what you get” economy.

  2. Well Mike, what a nice surprise to find you ’round these parts!

    You make good points. Its’ true that Anderson is not terribly clear about the differences between Wikipedia (no advertising) and Google (cross-product subsidies, as you point out.) But, even though he exaggerates to some extent, I think there’s some interesting stuff in there.

    Bandwidth is paid for in bulk, by end users, and I’d guess it’ll stay that way for some time to come. I think the point here is that some uses by service providers, and presumably an increasing number, will be offered for free, because in that context it is “too cheap to meter.” But to extend your point, that “cheapness” is in that case subsidized by the end user, not “truly” cheap.

    Here in the States, there are some nasty politics surrounding this issue lately. The big ISPs are using arguments like yours, but twisting them in unreasonable directions — in order to justify charging for bandwidth at both ends — both end users and service providers. The response has been an uphill battle to legislate “network neutrality” — essentially, enshrining the status quo in law, in order to prevent this kind of behavior.

    Are you familiar with all this? Anything similar happening in your neck of the woods?

  3. Dylan Amo Says:

    It’s funny. When I first viewed the video and had some time to think about it .. and specially the closing line “Every industry that becomes digital eventually becomes free.” I thought of “free” from a rights or liberty perspective and not from an economic definition and looking back at it clearly my interpretation it’s the intent of Chris. But I guess they might intersect.

    To me the power of the Internet and the growth of e-commerce is rooted in it’s innate ability to draw people together. And people are congregating online and building online communities like Wikipedia, Craigslist, and ActBlue because yes bandwidth and storage has become cheaper. But more importantly, people enjoying a personal autonomy exempt (or at least perceptually exempt) from external authority, interference, restriction, etc. Independent and unrestricted with infinite creative potential …. Now that is free!

    And when THAT freedom exists people congregate. And where people congregate Madison Avenue will want to advertise. And that congregation creates the economically free/gift economy.

    But beyond that … the community building structures of web 2.0 is creating an infinite number of truly free open source applications. And clearly I am not smart enough to give a psychological justification why online communities congregate for the common good. (Common Good could be as large as wikipedia … or the size of Kos and BlueOregon were ideologically similar individuals come together to share ideas and build) Regardless of the size .. a similar ethic exist … and is growing.

  4. A good analysis, Dylan. Summing it up: freedom attracts builders, builders make content, content attracts an audience, an audience attracts advertisers.

    Seems like, in traditional model, the next chapter is that the need for advertisers begins to squeeze the “freedom” that attracted people to begin with. But with a medium like Wikipedia that values its independence from advertisers, and has the means to stay independent, we’re in uncharted territory.

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