Free to be, Bill Gurley

Bill Gurley gives Chris Anderson’s Freeconomics book a tentative thumbs up.

Gurley, a noted Silicon Valley venture capitalist, also gives it a context. He writes, “If a disruptive competitor can offer a product or service similar to yours for “free,” and if they can make enough money to keep the lights on, then you likely have a problem.” (emphasis his).

He sees ‘free’ as something for most businesses to defend against, not build upon. Here we see savvy borne of years of Internet investing — how many ‘free’ business models blew up after the Internet bubble burst? Gurley’s post is good for the links it gives to criticisms of Anderson’s book, and for the context he provides. It does seem to treat the book too generously by calling it quintessential reading for entrepeneurial set. I respect Gurley’s taste in books (he recommended both Startup and Complexity to me)

But let’s look at some of Anderson’s examples: Gillette gives away razors so it can sell razor blades. A nice promotional gimmick, but a trope for businesses since long before the Internet (and have you seen a free Gillette razor lately?). Transistors are practically free. In fact, it costs billions of dollars to produce them and it costs money to put them into useful formats. Prince gives away CDs and sells out tons of shows in London. C’mon. This is Prince. He would likely have sold out those shows without a single giveaway. Show me an unknown artist who gives away CDs and sells out a tour.

Where the freeconomics argument seems powerful is the whole idea of ‘freemium,’ which extends the original Gillette idea in a new direction. It’s a good insight and well described. The rest qualifies as entertaining chicanery.

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