Book notes: Free, by Chris Anderson

I read Chris Anderson’s book because it was, well, “Free”. The book’s thesis is simple: Sometimes people profit by giving things away.

I have been, for several years now, making scientific knowledge available for no cost to any readers who care to come by my site. In academic circles, this practice is ordinarily considered to be insane. Therefore, whenever I come across anything explaining why blogging isn’t such a stupid idea, I put it right into my files. That’s for Luddites on future promotion committees.

How do I review the book without making points like a Slashdot comment thread?

Somewhere in the book, Anderson wrote his plan for making money from Free: Get businesses to pay for the Chris Anderson “Free” seminar. The short business profiles and catchy anecdotes in the book were pretty well crafted as advertisements for the seminar. But beneath the chrome, there are some interesting – sometimes wacky – ideas about the nature of human economic interactions. Anderson describes the $10,000 wager between economist Julian Simon and Paul Ehrlich. Simon believed that commodity prices would not rise over the long term, betting that the “substitution effect” would spur people to find new technological solutions to replace expensive raw materials, thus lowering the commodity prices. Ehrlich believed that resource shortages were inevitable as population and economic pressures grew. In 1990, Simon collected on the bet, as the five commodity metals chosen by the two had all fallen, many substantially.

Others have cast this story as a parable about bad predictions, or the inherent fallacy of future pessimism. Anderson gives the story a sociobiological spin:

Humans are wired to understand scarcity better than abundance. Just as we've evolved to overreact to threats and danger, one of our survival tactics is to focus on the risk that supplies are going to run out. Abundance, from an evolutionary perspective, resolves itself, while scarcity needs to be fought over. The result is that despite Simon's victory, the world seemed to assume that Ehrlich, on some level, was still right.
As [Wired's Ed] Regis noted, "Simon complained that, for some reason he could never comprehend, people were inclined to believe the very worst about anything and everything; they were immune to contrary evidence just as if they'd been medically vaccinated against the force of fact." Ehrlich's gloomy predictions continued (and continue) to have influence. Meanwhile Simon's own observations seem to be of interest only to commodities traders (49-50).

If we really want to explain the phenomenon of “Free”, we need to turn to psychology and sociology. At several points in the book, Anderson does connect to these fields – mentioning the “Dunbar number” in the context of MySpace “friends”, Lewis Hyde’s work The Gift in the context of non-monetary economies, and Abraham Maslow’s “Theory of human motivations” in the context of why bloggers write for free. But Anderson’s goal is not to explain, but to popularize. So his use of academic sources is, well, eclectic. The “Dunbar number” is mostly an anthropological urban myth. There’s a very deep literature on the gift in ethnology. Sure, there’s no market for Mauss seminars on Anderson’s lecture circuit, but there are some entertaining classic stories about confusion, gifts, and cross-cultural contacts.

Anderson’s theme simplifies this complexity of social interactions into a binary:

There is a reason why economics is defined as the science of "choice under scarcity": In abundance you don't have to make choices, which means that you don't have to think about it at all (50).

There’s an anthropological claim – that humans are “wired” as a “survival tactic” to perceive scarcity. It makes a good story. But is it true?

Human lives are long. Sure, there are some essential resources so abundant that we don’t need to think about them – air, for example. But most resources vary over time or space. People have always needed to consider whether to stay or move, whether to hunt today or wait until tomorrow, to gather more firewood or risk the cold. It’s the ant and the grasshopper.

We might imagine a version of the Ehrlich-Simon bet during the Pleistocene. Imagine humans occupying a few abundant habitats with plenty of food. As the population grows, they put pressure on these habitats. What happens? On the Ehrlich side, resource scarcity might trigger a demographic crisis, with hunger, warfare, and a population crash. On the Simon side, people might expand their behavioral niche, moving into less favorable habitat with more complex cultural adaptations.

Humans are tricky creatures, and our potential for increasing complexity depends on the level of complexity we’ve already reached. Only some parts of a complex system may be amenable to measurement. Anderson points out this problem from the standpoint of business information technology:

When your phone company tells you that your voice mail box is full, that's artificial scarcity -- it costs less than a nickel to store one hundred voice messages, and the average iPod could store thirty thousand of them (voice messages are recorded at lower quality than music, so they take less space). By forcing subscribers to take the time to delete voice mails, the phone companies are saving a little money in storage costs by spending a lot of consumer time. They managed the scarcity they could measure (storage) but neglected to manage the much larger scarcity of their customers' goodwill. No wonder phone companies are second only to cable TV companies in the "most hated" rankings (191).

Reading this made me think of behavioral science in the role of the stupid phone company. Natural selection optimizes fitness, that much is algorithmic. But how does this optimization process affect any given behavioral trait? That depends how the trait is connected to fitness, how heritable it is, and whether anything else correlated with the trait exerts its own independent negative effect on fitness. It’s a mess, and we generally can’t figure it out. So, we measure what we can. The fallacy is that what we can measure may have little connection to the important output – for the phone company, profit per customer; for the biologist fitness.

Today with an embarrassment of abundance of food and goods, people still agonize over choices. From one point of view, this is just a waste of time – why argue over arbitrary markers of status, when the essential resources are super-abundant?

But from a social point of view, seeking out limited information may be in our nature. This leads me to question whether Anderson is right about the value of information itself. Does it really trend toward free?

Humans evolved to be users (and broadcasters) of social information, but in the past our communication was limited by many of the same constraints that other animals face. Animal communication is not free – it comes with direct and indirect costs. The direct costs are energetic and developmental – animals have to build and maintain the organs of communication, and supply the power to run them. The indirect costs are the perils of advertising: an animal that reveals itself runs a greater risk of predation. Worse, the peril of honest advertising is that potential mates may see what a loser you really are.

The Internet might have enabled more complex systems of information presentation, but for the most part, people use it for old-fashioned reading. At its best, it has enabled a social transformation, empowering millions of people to use very simple means of information transfer – from short-form blogs to messaging in World of Warcraft.

That’s “messaging”, not “massaging”.

If the cost of information appears to be trending downward, it may be that’s because the production of information is increasing with a lot higher slope than the production of money that might purchase it. Consider genomics: What would you be willing to pay for your genome today? Whatever your answer, you can expect that you would be willing to pay even less 10 years from now, unless the health value of that information radically increases.

[T]he more products are made of ideas, rather than stuff, the faster they can get cheap. This is the root of the abundance that leads to Free in the digital world, which we today shorthand as Moore's Law.
However, this is not limited to digital products. Any industry where information becomes the main ingredient will tend to follow this compound learning curve and accelerate in performance while it drops in price. Take medicine, which is shifting from "we don't know why it woks, it just does" (there's a reason it's called drug "discovery") to a process that starts with the first principles of molecular biology ("now we know why it works"). The underlying science is information, while observed efficacy is just anecdote. Once you understand the basics, you can create an abundance of better drugs, faster.
DNA sequencing is falling in price by 50 percent every 1.9 years, and soon our individual genetic makeup will be another information industry. More and more medical and diagnostic services will be provided by software (which get cheaper, to the point of being free) as opposed to doctors (who get more expensive) (84).

Once upon a time, the only diagnostic service was a doctor. Doctors offloaded some of their diagnostic effort as lab tests became more and more important. Nowadays, one of the major reasons for the increase in health care costs is the routine ordering of expensive tests. Doctors order these tests because they reduce risk – risk of bad outcomes, and risk of malpractice suits. Risk is money.

The least satisfactory chapter for me was about science fiction and abundance. Anderson argues throughout the book that humans are “wired” for scarcity; that we just don’t understand abundance. In chapter 15, he turns to fictional worlds – from E. M. Forster to Cory Doctorow – in which some machine (or other invention) had created endless abundance. Invariably, these works describe how society degenerates when freed from scarcity – freed from “striving”, people are robbed of purpose.

Anderson misses a darker connection. The people who worried about the degeneration of human moral purpose in the face of abundance also worried about our genetic degeneration. The eugenics movement was born in the same post-industrial society as science fiction, and for the same reason. Later in the book Anderson references the similarity:

[R]eplace "free" with "steam" and you can imagine the Victorian concern about flabby muscles and minds (229).

I wonder whether there is something inherently dystopian about a society where genetic information is too cheap to meter. In a world where risk is money, and very small risks are increasingly quantifiable, it is not hard to imagine an inexorable process toward removing freedom and imposing control. Certainly that has been the theme of many science fiction works.

But rather than end on that depressing note, I’ll point instead to a happy consequence of free information exchange: the creativity expressed in online communities:

RuneScape, yet another Web-based world of orcs and elves, counts more than 1 million subscribers (out of more than 6 million users) paying $5 a month, creating a $60 million annual business. As a point of reference, that's about the same size as the subscriber user base and annual revenues of the Wall Street Journal's subscription-based Web site, which is the biggest paid site of all the world's newspapers. It's also larger than the New York Times's paid online subscriber base was before the paper dropped the model in favor of Free in 2008. It appears that people would rather pay to cast pretend spells than to read Pulitzer Prize-winning news. (I'll leave whether that's a good thing or a bad thing to others.) (150).

People are using their power to make new things – sometimes frivolous, fictitious things, but things that make them happy. It’s possible that genetic information can serve this purpose, too – a point I’ll return to on a different topic tomorrow.