Omni Podcast: Chris Anderson on "Free"

I didn't expect, when I came to post my BookExpo interview with Chris Anderson, that the pre-publication discussion of his new book, Free: The Future of a Radical Price, would be all about a series of passages from Wikipedia and other web sources that he failed to properly credit in the book. (I'm sure he didn't expect it either.) But any discussion of the book should acknowledge those discoveries, and his responses. It started when Waldo Jaquith at Virginia Quarterly Review noticed a significant series of passages that were identical, or nearly so, to passages from Wikipedia and elsewhere on the web. Anderson replied by email acknowledging the errors, saying that the attribution or rewriting of the passages had been sloppily neglected in the final rush before publication and that they would be corrected in electronic and further print editions of the book. There's an extensive and interesting conversation in the comments section of Jaquith's original post, including comments by Anderson, Jaquith, and Edward Champion, who posted some further examples of possible plagiarism from the book on his own blog. Anderson also made a reply on his own blog.

I'll leave the evidence-sifting and the judgments up to you, along with, posted here, the interview Anderson I did on May 28 at BookExpo. That was before all this came up, but some of the things we discuss--the levels of editorial authority (and error correction) at Wired versus Wired.com, Anderson saying that he's less interesting in selling his book than propagating his ideas and establishing a platform that he can charge a premium for in other ways--are certainly relevant to what's happened since. (My one speculation to add would be to wonder, not particularly originally, to what extent Anderson's sloppiness is related to his sense of his own words as "free".)

And then there are the ideas themselves, which can rise and fall on their own merits, whether or not you want to attach Anderson's name to them. You can listen to our interview below, and read the full transcript after the jump. (And finally, one disclosure: Amazon.com has invested in a side project startup of Anderson's, BookTour, a connection I was unaware of until he mentioned it when I met him.)

Audio: Chris Anderson on Free

Amazon.com:  We're talking with Chris Anderson, who in his busy life is the editor-in-chief of Wired magazine and also the author of a book that has become a modern business classic, not to mention a bit of a bible in the cubicles of the company I work for, Amazon.com, The Long Tail. His new book, which comes to stores, including ours, in July, is called Free: The Future of a Radical Price.

We were just talking about that word, "free," and you said this book is really about, in some ways, the history of a word or the perception of a word.

Anderson:  It is. It's about the change in meaning of the word, "free"; the misunderstandings of the word, "free." It's about, in some sense, partly the economics of the word but also the semantics of the word. "Free" has basically changed meaning from the 20th century to the 21st century and also has the dual meanings of "freedom" and "free of price," the sort of trusted meanings of "I want free" and also the suspicious meanings of "free is usually a trick." All this gets kind of mushed together in our brains, which causes this sort of strange psychological reaction to it.

Amazon.com:  So what is the 20th-century version of free and the 21st-century version?

Anderson:  From an economic perspective--now we're talking about free as an economic model of price--free in the 20th century was pretty much a trick: you know, buy one, get one free; free gift inside; razors and blades. One way or another, you are going to pay--now or later, one pocket or another. So, free is kind of a marketing device in the 20th century.

In the 21st century, as products become digital and digital goods get cheaper in cost every year, as opposed to physical goods which get more expensive in cost every year, you can then shift from a marketing trick to an actual economic model where things really can be free. It's not a gimmick. It's not a con. It's like Google, where Google doesn't show up on your credit card even though you use it every day.

Amazon.com:  You describe it in the book as the difference between atoms and bits.

Anderson:  Exactly. Atoms economics, which is basically the economics of the stuff, of the 20th century, is largely an inflationary economy. Things get more expensive over time: commodities, scarcer land, labor, et cetera.

Bits follow the rules of Moore's law, which is that every year they fall in price by 50 percent--bits meaning anything digital: goods, services, content, you  name it. In this digital economy where everything gets cheaper, effectively the price goes to zero. It's like the force of gravity. If price follows cost and the cost goes to zero, then price must inevitably go to zero as well.

Amazon.com:  And you say that if anything is digital, then eventually the price will go to zero. Even if it's not now, you might as well prepare for that time when it does.

Anderson:  Exactly. But the biggest misunderstanding of the 21st century form of free is that this implies that everything must be free. What it actually means is that the price of zero will be out there in the marketplace as one price for a product.

Now, it won't be the only price for the product. You see free existing with paid. You see this quite often with premium services. It's called the freemium model: the free basic version of Flickr and then the premium pay version, Flickr Pro, and you see this across the board.

What you're seeing is basically that you are going to have to compete with free in the marketplace. If you don't offer this product, content, service, whatever, for free somebody else will. The question is: can you use free as a form of marketing to attract a minority of your users to pay for a superior form.

Amazon.com:  I think your last book could be called your Amazon book and this book is your Google book. Do you think of it that way?

Anderson: I think so. Actually, Google was a pretty good model of the Long Tail as well, Google being the long search, advertising, et cetera. But Amazon is the best example of the Long Tail, because it was really this sort of aggregation of variety, allowing people, both technically having choice and also the ability to make those choices easily with recommendations, et cetera.

So Amazon is sort of the poster child of The Long Tail, and yes, Google is the poster child of Free. It's the company where of its 300-plus products, 290 of them are free. The people who pay for Google and make it one of the most profitable companies in the country are a tiny minority of its total user base. It's basically: the advertisers pay, and some people use the premium services and pay, so that all the rest of us can get it for free.

Now, I should note that there is nothing new about that model. You have just described the media business. The media business is another example where you have three players in the marketplace. There's us, the content providers. I run a magazine. Television and radio are all free to air. There's the audience, who gets the content for free, and there's the advertiser who pays for access to the audience.

There's nothing to do about that model. What you're seeing there from an economic perspective is actually a conversion between monetary and nonmonetary economies. So what you're paying for when you watch a television ad is your time and your attention. That's worth something--time is money, et cetera--but you're not directly paying for it. What the advertiser then does is they buy your attention, and the money goes to the content creators. Google has just extended that beyond content into services and software.

Amazon.com:  I wanted to ask about a couple business models that you know well, both as a writer and as a magazine editor, like you said. I'm especially curious about Wired, you know, old physical media, but then you have Wired.com. You talk about it a little bit in the book--they are two different business models, they're two different identities.

How do you balance the two, and what's the role of free in both of those models?

Anderson:  So the general premise is that price follows cost, and so you have scarcity economies and you have abundance economies. The physical stuff is the scarcity economy. There are only so many resources you use, and everything costs money, and so the magazine, which exists in dead trees, is a scarcity economy. It costs money to produce it. It costs money to make it and distribute it, and therefore, we have to recoup those costs pretty quickly. The website, of course, is the abundance economy. It costs close to nothing to push a page out there, and that price falls every year.

I think most companies now have to coexist in both worlds. You have to have an abundance model, which is basically use digital economics as best you can, which means use free whenever possible as a form of marketing to reach as many people as possible. That's what Google calls the max strategy. Use free to maximize your reach.

And then, as anyone who remembers Econ 101, you can only make money from scarcity. So in that case, you use the scarce thing, either the physical product in our case, or some premium services not available for free to everybody to bring in their revenues.

With the magazine what we do is we give away the web content for free, and we make some advertising money from that. But it's also designed, too, as a marketing vehicle with the print magazine, which we do not give away for free. We subsidize it highly, but we charge a lot for the advertising in it. It's very much designed to add value to the Internet to be a unique experience in a web world in the same way the book is a unique experience in a web world. So what we do is we give away the abundance and charge for the scarcity.

Amazon.com:  As a fellow editor, I was curious how you manage the professional writing--because we were just talking about the incredible fact-checking that goes on at Wired for the magazine. Wired.com, you say in the book, is more open to a wider range of writers, a looser editorial standard. How do you balance your brand among those two platforms?

Anderson:  You mean my own personal brand or the Wired brand in general?

Amazon.com:  The Wired brand.

Anderson:  The Wired brand in general? Well, this is something that we in the media industry have to deal with because we had a monopoly on the 20th century. We had a certain monopoly ownership of the tools of production. Those are the printing plants, factories. We had a quasi monopoly--and I don't mean collectively. We in the professional media had a quasi monopoly over the tools of distribution, the newsstands, and the ability to push out millions of copies through the mail. With that came some obligations. There were some expectations of quality. Also, because this is physical media, you couldn't change it. So we had legal obligations, and if you made a mistake it just sat out there stinking up the issue forevermore.

Then you move online, and two things happened. First of all, we lost our monopoly. Now everybody has access to the tools of production. So we had infinite competition, which really challenged the business model. You basically could not invest the same amount into each element of content if you were up against an infinite number of bloggers, Twitters, Facebookers, MySpacers, whatever, who were competing for attention.

By the same token you didn't have to invest as much into the, let's say, fact-checking elements, because you had the miracle of correcting your errors. To my mind the strikethrough is the symbol of the 21st century because what it acknowledges is the imperfection of the human endeavor but also this perpetual willingness to correct, improve, acknowledge your errors, and move on.

We can do that online. Because we can do that online, we have a very different editorial process. So in the magazine, every page is golden. Every page is expensive. It has to be perfect. I say no to almost everything.

On the website: an infinite number of pages. Every page can be fixed. If we make an error, we correct it. We can say yes to everything. That means not just yes to the articles but yes to who will contribute, who the writers will be. Not necessarily professionals. More and more amateurs.

One of the blogs that I've started within the Wired umbrella is something called GeekDad, which is about geek parenting. GeekDad is now I think our fifth most popular blog. It does more than a million page views a month. It is run entirely by amateurs, dads. The editor, a guy named Ken Denmead, is a civil engineer working on the BART subway extension in the Bay Area by day. By night, he now runs a little media empire around geek parenting.

We don't edit them. We don't fact-check them. We don't tell them what to do. We just promulgate some very general standards about quality, good blogging--more how to be effective than responsible, although we also expect them to be responsible. They then propagate those standards to all the volunteers--and they are all volunteers--and out comes this miracle. It's great.

Amazon.com:  And then on the other side, what's your business model as a writer, both with this book and your career as a writer, in which there are so many amateurs out there?

Anderson:  My own philosophy, which I violate all the time--all philosophies must be violated at all times, or else they wouldn't be practical-- my own general principle is to give away all my words. I give away my writing, and I sell other stuff. So the writing is the free in the freemium equation.

What I sell depends, in different places. So we give away our writing in the magazine and we sell advertising. So we sell advertisers the attention that comes to that writing. My books--you know, we sell the book--

Amazon.com:  So do we.

Anderson:  --because I want to make sure that my partners, my publishers and retail partners make money, but I don't really care about selling the book. I want to make sure all our interests are aligned. But what I care about is propagating my ideas. So why would I propagate my ideas?

Well, I propagate my ideas, to be completely honest, to market myself, which I will then sell in various ways. I'll sell by having brand equity accrued to Wired--we'll make money through advertising. I give speeches--we'll make money that way. I have other side projects. I can use whatever celebrity I build in one domain in another domain.

Then finally, I think a really interesting 21st-century model is one that we're starting to see in China, which I write about in one of the last chapters in the book. Piracy has rendered it impossible to sell content. So what they do is they use piracy--musicians or filmmakers or anyone--to create celebrity. Then they turn celebrity into money their own way. Some of them do endorsements. Some of them do ads. Some of them do corporate appearances. Some of them do store openings. So what they realize is that they're really in a celebrity monetization market.

And I think in a very, very geeky, nonglamorous way I'm also in the celebrity monetization market, where I propagate my ideas using free as much as possible, and then find ways to turn that celebrity into money. I found a few. Some day I'll find more.

Amazon.com:  I wonder how that works with different kinds of writers. I think someone who can consult like you, that's a pretty obvious route. I think of a fiction writer and what the models are for someone like that--

Anderson:  Obviously, for business book writers it's easier: speaking and consulting, board seats, and all that stuff. I don't do all of that, but some do. I think for fiction probably you would go to the music industry for example. So the analogy in music is, give away the recorded music to sell the performance, to sell the show, et cetera.

And that works really, really well for those who want to perform. Not everybody wants to spend their life on the road, but for those who do--as you know, the Rolling Stones make 95 percent of their money from touring. I just saw a calculation yesterday that all of the Eagles' sales on iTunes over their entire history were the equivalent of two hours of revenue as a concert. Not even one whole concert, just two hours of that concert.

So that is the model. The model is that you give away the abundance, that's the thing that can be distributed for free, and you sell the scarcity, and that's the thing that can't be distributed. So what would that mean for fiction authors? Well, you're not going to have a concert. With the exception of David Sedaris, I think very few authors are going to be able to get revenues that way. You know, I don't know what the--I mean is there merchandise analogy, is there a licensing analogy, how do you monetize celebrity? I'm not sure.

It might just be that the celebrity you build on your first book because you maximize these free tools of marketing allows you to get a bigger audience for your second book, which you sell the traditional way.

Amazon.com:  And people still do want that book as an object that means something to them.

Anderson:  Exactly. As long as the physical book is a superior object for most people--I believe it is--I think there will be demand for the physical book. I think that's the big difference between books and music. The CD was what we call a value-subtract object. It's worse than the mp3.

Amazon.com:  It needed a player.

Anderson:  It needed a player. You want it on your iPod, which meant you had to rip it onto your iPod. You lost the metadata. You had to buy it in units of 15 songs when you really only wanted one. It was expensive, etc.

The book is a value-add medium. In that it's portable, great battery life and great screen resolution, and you can scribble on it and all this kind of stuff. The Kindle is really introducing a very valid secondary model for some people. But I suspect that the majority of people in the near term at least are going to also or preferentially want the physical book.

Amazon.com:  We were talking about Google as your poster child. As you mention in the book there are some other very well known, ubiquitous free sites that are having a little more trouble figuring out their revenue model, like Facebook. Is there a revenue model for every form of free? Do attention and reputation always turn into revenue?

Anderson:  That's a great question. No there is not a revenue model for every form of free. Almost all free--if I had to guess, I'd say 90% of the free out there--has no revenue model and really doesn't expect to have a revenue model. In the same way that 90% of music played doesn't allow people to quit their day job. 'Twas ever thus, right? Creativity is rarely compensated and the ones we think about are the exceptions rather than the rule.

So most content online, including services, are basically given away. They're given away for nonmonetary benefits. Attention, reputation. Some people may eventually convert that into something, into a job. You know, use the reputation you build on Twitter to promote something else including yourself. But in general there's no direct revenue model.

As for the companies like Facebook and Twitter, which are companies built on free, who don't have a clear revenue model yet, that will come. I don't think Twitter and Facebook have a problem turning on the revenue engines. Facebook does have a revenue model, it doesn't happen to be profitable yet, but I think it could be. The question is are they willing to potentially screw up their relationship with their users to become profitable?

Twitter's incredibly cautious about turning on--you know Twitter could turn on a revenue model tomorrow. But it's so delicate, this relationship between people and a site, that they don't want to kill it until they have to. Now it could be that they'll find a revenue model that doesn't kill it, in fact enhances it.

Google has managed to do that, and Facebook is finding through its more cleverly targeted advertising ways to do that. But for companies like that the question is not can you make money from free, it's should you do so and when and how, so as not to ruin the magic of what you have.

Amazon.com:  And last I wanted to talk about free the idea and Free the book. So we obviously--Amazon--and you, we're selling, we have a lot of preorders for, the physical book. But it will be available free as well?

Anderson:  So we're going to try to walk the talk in every way possible. So what is a book? You know, I'm holding the hardcover. That's the classic form of the book in physical form. It will also be available as a soft cover. There's a paper back edition that would traditionally come out two years after the fact, but there could also be a paperback edition that came out at the same time but was sponsored by some company and distributed by that company. And so we're talking about clever ways to do that.

You can then move to the digital forms of the book. So what are the digital forms of the book? There's the e-book obviously, and I believe we'll have a Kindle exclusive that will be free for awhile. We'll have other e-books that will be free for a while. Then there is the web version of the book. This is sort of a page view model. And we'll continue to do that online, I think using Google Books. Then there's the iPhone, Scribd model. That will probably be free as well, maybe over a limited length of time.

Then you've got the audio book, which is another form of the digital book. That actually is going to be available in two forms. There is the unabridged and the abridged, the six-hour audio book and the three hour audio book. One of those is going to be free and the other is going to be free only to the buyers of the hard copy, of the hardcover.

Now the question is which is the superior form of the audio book? The unabridged, the whole thing, or the abridged, the three-hour shortened one? Well, we think actually the shorter one is the superior form. So what we're going to do is we're going to charge more for less. For those people who buy the physical book, they get the short form of the book. For those who don't buy the physical book, they can have the long form of the audio book. And so we recorded both and the physical book has a--I'm looking at it right here, I believe it has a code in it somewhere which I will find... And the people who buy it from Amazon will be able to--there it is. It's on the--I won't tell you which back page, you have to actually purchase it. And so the people who buy the physical book from Amazon will have access to every other form of the digital book as well.

Amazon.com:  Well, good luck with your revenue model. Thanks for talking, Chris.

Anderson:  Thanks very much.