After being on the road for a week or more I always return home (wherever that may be in a given year) with a wealth of new ideas on my mind. It’s a timeless tradition for the weary traveler as the myriad airports and jets provide plenty of time (usually more than we’d like) for reading, thinking, and if we’re lucky: a little writing.
One of the articles that has stuck in my head since I read it on my flight in to Austin, TX prior to SXSW was this month’s WIRED cover story by Chris Anderson entitled “Free! Why $0.00 Is the Future of Business.”
Though Andersen focuses almost entirely on the application of “free” for business (i.e. how Ryan Air can sell you a ticket for $20 and still make money, or how Comcast gives a DVR away, or how you can get a free cell phone, or…you get the idea), his underlying premise should theoretically extend beyond it. That premise: As an entity or commodity (eg bandwidth, storage, phones, processing power etc) goes digital it inherently moves ever closer toward being free.
My thoughts have been stuck on how this concept applies to the social sector and global issues like hunger, homelessness, or HIV/AIDS.
My perspective is thus far very underdeveloped, and I’m an in-the-moment thinker, so I’d love some back and forth.
I can see the many ways technology is moving from inaccessibly expensive and bulky to being widely available and free for social services and nonprofits, but what about very tangible and basic items like food (and in particular nutritious food)? What about shelter? What about medicine? Are these things also moving towards “free?”
I look at the prices of antiretroviral drugs in Sub-Saharan Africa and my tendency is to say yes. I look at how the United States’ largest health problem has moved from lack of food 50 years ago to obesity today, and that makes me want to say yes.
But I’m not so sure. Something doesn’t feel right. These trends also contradict each other.
How do (or can) Freeconomics apply to things like food and shelter? How can we translate the possibilities of free into more dignified, freer lives in a scalable manner?
Let’s get the conversation going.
7 responses so far ↓
1 Jared Goralnick // Mar 17, 2008 at 7:41 pm
(first off, didn’t know you were at SXSW–guess I missed you there!)
But I was thinking something similar when reading that article. Economies of scale (and arguably generosity, take your opinion) are pushing prices down on certain medications abroad, but the reasons are different than Andersen’s–Andersen talks mostly about loss leaders and market share builders (like Yahoo’s properties or Gillette razors).
With technology, I think there is progress being made at bringing it to those less fortunate. But with medicine, I don’t know that “Freeconomics” applies the same way–as there isn’t much financial reward for “free medicine”–short of good will and potential loyalty (but to what and from whom?).
I’m not at all suggesting that there shouldn’t a lesson in here somewhere, but I’m still not yet sure how it could be applied to food/shelter/medicine. I’m curious though to hear your readers thoughts…
2 Kyle Buffenmyer // Mar 17, 2008 at 11:06 pm
I was thinking how a consumer products company will have one product, vary the packaging, market it to two very different market segments, and have the prices be different. For example where I live, one ice cream company produces and packages the same product for three different companies who compete in the same and different markets and have different price points. The whole idea of what price can the target markets sustain?
Drugs are a product that cost very little to produce, but we pay for the R&D. Some argue, “Why don’t drug companies distribute the same drugs at a reduced price that local economies can sustain, but is still profitable.” Drug companies say they would lose money and control of their patents. Copies would circulate back from developing countries to developed(creating a black market) or people would seek treatment in developing countries cause the same drug is cheaper.
I wonder how practical it is to have a responsible third party(NGO, IGO, UN) administer the treatment, like an antiretroviral for HIV, while maintaining direct control of the supply. I know many antiretrovirals are administered daily which would require a huge and complex distribution network. It would be more applicable for drugs administered weekly, but the idea is that the third party gives the injection so the patient isn’t able to get a product sample for copying.
The “clinic” would operate for profit. It may even be possible, if designed properly, for the private sector to be involved. The workforce would be expats from developed countries who are less likely to sell the drugs to possible pirates for personal gain. One employee would administer drugs in an assembly line fashion creating an economy of scale.
I don’t know how realistic it is, but I do know that drug companies will never trust third world governments to protect their drug stocks and patents.
3 Flor // Mar 18, 2008 at 7:43 am
Hi. “Freeconomics” seems to be the way of digital trade. In the “material world”, however, freeconomics would be simply another word for socialism. Think about it.
4 Jake Brewer // Mar 18, 2008 at 10:48 pm
Jared and Kyle, I really like your thoughts. Funny thing is though is that you’re both confirming what I know to be some hard challenges. I just simply don’t know how to demonstrate return on something like food or shelter in the same way you can make a nice neat graph over time for providing a DVR.
My first thought goes something like this:
More nutritious food=> better individual health => (correlation) improved performance in school => better education/creativity/entrepreneurial energy => improved contribution to a community => greater purchasing power => company sells more other product.
One of the problems I recognize is that the timeline on this is so long that it’s hard to make viable (whereas a DVR or cell phone takes less than two years to break even), and it’s also not in any way guaranteed.
Essentially I recognize my own over-simplification of the problem. Am I just totally off the mark in developing that thought out further?
(Just to be perfectly transparent, I’m feeling like I’m just more confused than anything else at this point. It’s a bit like my hope is conflicting with my reason and business sense.)
5 Leyla Farah // Mar 19, 2008 at 1:08 am
The underlying reason that free is the new currency in business is that value flows from credibility. Since the internet has shifted credibility into the public, rather than the private, arena, establishing credibility now requires massive public exposure - which can only be done without charging for access.
An expert (Jeremiah Owyang is a great example) now establishes credibility in his/her field by giving away expertise in the open market to demonstrate credibility. Once credibility is established, dollars follow from those who wish to consult privately with the guru.
For non-profit organizations, the question is how to similarly establish credibility in the public arena - and similarly profit from providing consultation services in the private one.
For example, if your non-profit could establish itself as the undisputed expert in the public arena for - say - distributing resources to the homeless, couldn’t you sell those services to private buyers looking to do the same outside of your organization’s reach? NGOs and city governments pay consultants for those services now - why not pay your organization for its insights and advice?
——-
Leyla Farah
Cause+Effect - Public Relations with a Purpose
http://www.causepr.blogspot.com
6 Angeline // Mar 23, 2008 at 11:56 am
In today’s global economy, low prices on products (such as clothing, appliances, etc.) often mean that somewhere down the production line, someone is not getting paid/paying fairly for the work they are doing, the land that is being exploited, or the environmental destruction that is happening to produce the product. (Check out http://www.storyofstuff.org for a long but interesting video that addresses this.)
This fact makes me wary of cheap/free products. In our current system, it seems better to pay more for our basic necessities so that we ensure that those producing them have enough money to buy their own basic necessities. But I realize that will never fly in America since we are used to paying little for the basics, relative to how much we spend on other things. So I’m not sure how we can transition to a more just system…
7 Nick H // Jul 21, 2008 at 1:44 pm
You do have a good point about products becoming cheaper and cheaper here in developed markets. You have touched on the main point of this a few times, that in order for “free” to be profitable, is if it, and it alone, guarantees increased profits in the future which more than offset the cost of supplying the free items.
The problem I see with Food and Medicine in developing societies is that the risk is very high, and the returns on investment will be very long term. But I think the main reason is that the returns on investment are not guaranteed to come back to the company that invested. In the phone business, if you give out free phones, you give out phones that only work on your network. If you offer free bandwidth, you draw people to your site specifically.
If P&G invest in free medicine, or Cisco in free technology, it is much more likely that companies like McDonalds and Coca-Cola and Wal-Mart will be the ones who profit in the end.
It would take a very large unilateral corporation which controlled multiple segments including medicine, food and consumer goods, and an exclusive distribution/licensing agreement with the local government to make it profitable. But even then it would be very risky.
Leave a Comment