How many kinds of free? Indirect generosity as a business model
We are talking here about free price, not free speech.
Chris Anderson’s book offers a triarchy of three kinds of free:
“The cross-subsidy model: the razors-and-blades model, as well as loss leaders of all sorts, from “free gift inside” to “free toaster for opening an account
The media business model ranging from free-to-air broadcast radio and television to all ad-supported content online today
The Freemium model: “The third is the new one, enabled by digital markets where the marginal cost of production and distribution is close to zero. This is the one that allows the “freemium” business model, where 90% of the users get the basic product for free and 10% chose to pay for a premium version.”
It is glaringly obvious that something is missing here, the kind of exchange that takes place through couchsurfing for example … which has variously been called the freeconomy, the adventure economy …
(it also does not cover state-subsidized free services)
This is well explained by the Digital Extremist blog, which insists on this fourth kind of free, and calls it “IASCT” which stands for Indirect Abundant Synergistic Cooperation Theory.
“It is both another economic structure and a fourth model in the antique models in use today. The premise is abundance (where the premise of the systems today is scarcity) and its methodology is indirect (where the model’s today use direct cooperation).
Even when indirect cooperation is simulated in present forms of economics they are still direct. For example, in Chris’ Free 2 & 3 at least one person directly pays for the others. So it is really direct for one and “non” cooperation for other participants in the exchange.
IASCT is similar to the “pay-it-forward” idea where a person carries out a certain number of acts which are seemingly unreciprocated generosity.
The thing is though, we have this feeling of scarcity and risk which causes us to be fearful about giving away much. People give away their goods in Free 2 and Free 3 because they are not giving them away at all. They experience remuneration on the back-end from one big fish rather than many little fish. The premise of IASCT is that the universe is not a closed system and it has participants which are undeclared, or at least unrevealed, but who nonetheless catalyze transactions of a certain kind. That is where the Synergistic aspect comes in, and it takes place on a grand scale.
It takes a degree of faith, yes; but it is valuable to list because it is truly and legitimately Free #4
I would also like to remind our readers of the very valuable typology of open and free business models developed by Steve Bosserman.
Here is my summary of Steve’s quaternary typology:
“Differentiating between open and closed content/code/design, and free/paid approaches, yields for quadrants:
a) Quadrant 1 = Open and free: you can download content, software code or open designs for free; and the more successful of these initiatives will derive income from advertising, selling the attention. The problem remains that many will not be able to do this
b) Quadrant 2 = Open and paid: why would you pay for open code? The short answer is you wouldn’t, unless it is augmented by differential value that is scarce and also useful in your particular context; in this context you are paying for these added value practices that come together with the free code, not the code itself
c) Quadrant 3 = Closed and free: this is a classic commercial strategy; you give the primary commodity for free (say, free cell phones), because it helps you to sell secondary commodities (say mobile phone connectivity)
d) Quadrant 4 = Closed and paid: the classic business model that we are all familiar with and which relies on state-protected intellectual rights monopolies. This is the model that is being most severely undermined by the free replicability of information. This means that it is not just the hackers and consumers that threaten such a business model, but your own competitors. In any sector, there will always be a pioneering company that decides to give the primary commodity for free, or gives away the source code, deriving income from secondary modalities, leaving the traditional closed rights holders in the cold, and making this model unsustainable in the long run.”
September 12th, 2008 at 12:04 pm
Thanks for citing me. I am developing this further with systems which are P2P in economic structure - substantiating IASCT. Ongoing dialog would be nice. //de
September 28th, 2008 at 5:28 am
[...] Michel Bauwens mentions the know 3 kinds of "FREE" business models: “The cross-subsidy model : the razors-and-blades model, as well as loss leaders of all sorts, from “free gift inside” to “free toaster for opening an account [...]