Chris Anderson Reponds To Malcolm Gladwell On Charlie Rose

In this video, Chris Anderson discusses his new book with talk show host Charlie Rose. Anderson explains the models of free that he has discovered and describes how we will do business in digital world.

In terms of what ‘free’ is, he explains:

“Free” is the perhaps most misunderstood four-letter word beginning with f in the English language… It has changed in meaning from the 20th century, razors and blades, the 21st century, information wants to be free.

It’s got these kind of dual meanings of “free” as in freedom and “free” as in no price. And then there’s the kind of, you know, the imagining what a book called “Free” would be, would say, which is like everything should be free.

And then there’s the reality of what the book actually does say, which is very much not that everything should be free or that advertising will support everything, but that the underlying economics of digital stuff allows your cost to be in so low that a tiny fraction of your audience can pay for everybody else.

He also responds to Malcolm Gladwell‘s suggestion is that free is a bubble and that ultimately businesses like YouTube will not make money as the costs are too high:

Malcolm would say it’s all a Ponzi scheme, it’s all a bubble, and that sooner or later, you know, bandwidth bills are going to come in and all these companies are going to go bust.

And I would say two things. First of all is the digital companies is the first deflationary economy in history. Adam’s economy, the world of manufacturing, everything gets more expensive every year. Bits, everything gets cheaper.

So, whatever cause you, whatever YouTube costs that it has to pay to stream the video today, it’s going to cost half as much a year from now, and half as much again the year after that. Never before in history have we seen an industrial economy get cheaper every year.

So, you know the old joke you lose money on every one but you make it up in volume?

It actually works with digital stuff, because what volume gets you is audience, because retention, gets your reputation. And the actual costs — so you may lose money this year, but you won’t lose money next year.

Malcolm doesn’t understand is that Google doesn’t buy bandwidth retail. They have wholesale, they’re buying dark fiber. They have server farms the size of printing appliances. They’re massive… I suspect they’ll break even with YouTube this year.

So, not only is not a bubble, but I think that as the advertising industry learns to take the video ads that work so well on television and fine slice them so their super granular the way the video is on YouTube, that were going to see a [powerful] economic engine.

Charlie Rose
Chris Anderson
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