The Psychology of Free

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Introduction
Not the 60’s rock band . Not free will , or free love , or even free beer, sorry. We’re talking the psychology of free. Free software. Free games. Free music. Buy one, get one … Actually, the point is get one free, buy one ‘ freemium ’. But we’ll come to that. We’re taking a free look at the concept of £0.00 free, the psychology of it as a marketing model, a consumer expectation, the future of commerce.

Everyone knows this expression. But most don’t know when Stewart Brand made it: 1984. The same year Orwell predicted his dystopian future. Brand’s prediction might prove more true. Of course, information as information can’t actually want anything, but go with the idea. And on the great free for the masses superhighway that is the Internet (built on the ideal of free), information has been truly set free, with the result that we are now facing up to the possibility of a truly free market.
But this is not a historical analysis. Let’s focus on the book that has done the best (and most controversial) job of crystallising this free radical of an idea, and which has gone so much further in offering something akin to an Orwellian vision for it (albeit a more palatable one).
“ Information wants to be free”

Free: The Radical Future of a Radical Idea
Chris Anderson, editor-in-chief of Wired , and author of another radical business idea that became a bestseller, The Long Tail (now even longer ) launched Free: The Future of a Radical Price in June 2009. In it, he argued:
Anything ‘made of ideas’ that can be reduced to digital ones and zeros: music, film, pictures, books
That can now be made for virtually nothing: storage, processing, and bandwidth
And spread for nothing too: freely or pirated
Will succumb to ‘economic gravity’ and be free

Free is a big deal, and Anderson gives a lot of big examples, but think music:
Pre Napster , music was an industry
They monopolised the ‘product’ (vinyl, cassette, CDs) so they could charge what they wanted
The music industry got rich
When music was digitized though, things changed
People could freely download and freely share music
Music giants couldn’t charge what they liked – they also couldn’t stop it (though they tried)
Which meant disaster for the industry and artists having to adapt (revenue now from the live tour or merchandise)

Anderson sees this happening to every type of publishing – or any industry where the product can be made for free, shared for free, sold for free. He even sees this affecting real world products too: Google, launching their first real tangible product, the mobile Nexus One , made great pains to point out – it’s a marketing benefit! – that they were selling it at cost to keep up their appearance (they make money from ads and apps) of being part of the free cloud.
According to Anderson, in the near future, the only way to make money from free is to look at what else you can offer that can’t be digitized or copied or pirated or undersold by someone else. He calls these premium add ons and extras ‘ freemium ’.

The ‘F’ word
Anderson sees two typical reactions to the word ‘free’: The born-digital who have grown up with Gmail and open source and free video and networking and ‘expect’ free. And the older people born in the days when physical salesman free was typically met with suspicion, who have an expectation of a hidden fraud or a lock-in into paying for something they never wanted (‘didn’t you read the fine print?’). One generation sees free and thinks, con. The other sees free and thinks, cool.
Free has always been used as a psychological device. Sell something for 99p rather than £1. We all know this (they call it the ‘ penny gap ’). Getting something for nothing activates a human response that's different from a normal business transaction - it feels better. Perhaps it's the novelty value, or it’s hardwired for us to dig freebies. Business knows it well.

The ‘F’ word
As Mac Slocum points out: ‘Understanding this psychology even in a basic way (which is all I claim to know) gives free models more lift. In simple terms: A free product comes with low expectations ("hey, it's free!") and neutral perceptions ("what's the worst that can happen?"). If that product proves useful, expectations are exceeded and perception elevates from neutral to positive ("it's free and it's cool/useful/interesting, etc.").’
Slocum also says: 'the equation of free + good enough = improved chance of success [...] -- and the opportunities that come with it -- is built on the deeper psychological aspects at play in free models, and it's these aspects that need to be examined before any free-related decisions are made. A project's real upside may lie in its ability to create emotional responses, and a free mechanism could be the catalyst for those reactions.' How about that as a topic for your psychology thesis, dissertation or essay?

The ‘F’ word
You’re browsing and a one time offer pops up. Pick either: (a) A £10 gift certificate for FREE! (b) A £20 gift certificate costing £7!
What would you choose? According to their results, you are more than likely to take the first (free) option. This obviously doesn’t make much sense economically, as the £20 certificate is actually better value, because assuming terms and conditions are same for both, you are likely to save £13 instead of £10.

The ‘F’ word
Now what about the following choices. What would you pick now? A £10 gift certificate costing £1. A £20 gift certificate costing £8.
The majority (64%) of participants now went for the £20 certificate. But notice that they merely increased the price of each certificate by £1. The £10 certificate goes from free to £1, and the £20 certificate goes from £7 to £8. It’s as if by simply removing the trigger word ‘free’, most people now come to sudden realisation that the £20 deal is better value. Why is FREE so powerful? Shampan’er and Ariely (2006) argue that the two major reasons are: (1) It makes us feel good (2) It has no downside Or does it?

No such thing as a free lunch
The most respected (and discussed) opponent of Anderson’s vision of free is Malcolm Gladwell , New Yorker staff writer and like Anderson inventor of cool phrases that are now part of the landscape (remember the ‘ The Tipping Point ’?). In Gladwell’s column on July 6, 2009 – stirring up a hell storm of controversy from all the Freeites out there – he said:
"There are four strands of argument here: a technological claim (digital infrastructure is effectively Free), a psychological claim (consumers love Free), a procedural claim (Free means never having to make a judgment), and a commercial claim (the market created by the technological Free and the psychological Free can make you a lot of money). The only problem is that in the middle of laying out what he sees as the new business model of the digital age Anderson is forced to admit that one of his main case studies, YouTube, “has so far failed to make any money for Google.”

No such thing as a free lunch
You might laugh that the 2.0 behemoths of the free new world aren’t making money, or at least haven’t yet (it might be part of the psychology of free that we want Big Brother Businesses to suffer).
But Gladwell thinks this is important: What if Google closed YouTube as a loss making (which it is) company and decided to stick to search? Or Facebook ran out of funding (don’t worry, apparently for the first time it’s making money ) or a new, cooler Facebook came along and all their users jumped? In the digital age, users jump at tweet speed.
Gladwell argues that these companies are investing in free in the hope that they have built your trust – and loyalty – and that somewhere down the line that loyalty will be rewarded with old hard unfree cash. But free means free choice, and choice gets as naturally abundant as the free stuff that powers it. A free mindset might just be the fatal enemy of not just paid models, but also free ones.

Conclusion brought to you by PayPal
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Ok, to sum. In the red corner, Anderson and Google and the Napster generation. In the blue, Gladwell and Murdoch and the soon to be digitosaured publishing industry.
Who will win? Which side are you on? Why pick a side? Because if/when you enter the workplace or set up your own business, you'll need to get this. It’s going to affect education too – education is a business after all, and one made up of easily digitized stuff. You’re not so free as not to care.

Anderson is right that the digital genie is out of the bottle. Content monopolies don’t work online (maybe it’s just the end of monopolies that’s really happening). Barriers either.
The question up for debate is: How do businesses based on the old model survive? How will the people – musicians, journalists, writers, academics - who produce things that can be turned into ones and zeros put food on the table if no one will pay for what they do? Do they work for free? What else can they sell that cannot ever become free?
The Internet is based on free, and the psychological born-digital user expectation of free is not going away. But if we want free, and people can’t afford to make it without getting paid, are we in danger of killing the thing we love? Will it take Facebook or your favourite band disappearing behind pay walls or taking a job at Tesco to make us reach for our wallets? Will free then become uncool?

Perhaps the real change is that we are no longer easily fooled. A good deal can be spread around the Internet just as quick as a bad one.
What we have never liked, but never, collectively, been able to do before is go around or ignore or make honest those companies who have held all the cards and all the power.
Wanting a fair deal is fundamental. Now we have the ways and means to get a fair deal. We hold the cards. Business is squirming. But someone will have to pay. In the end, someone always does.

Free the book
In case you were wondering, Free the book was free for a short period of time, but not now (it was a free Kindle ebook, but the Kindle wasn’t available in the UK at the time). It’s also now free on Scribd , but only to users in the US. So free, if you happen to live in the land of the free.
Oh, but you can listen to it for free here . Recommend Chapter 5 the Psychology of Free if you haven’t got much free time.

The Anderson free press
An interview with Chris Anderson
10 Questions with Chris Anderson
Chris Anderson in The Times
The academic freebie
How Small is Zero Price? The True Value of Free Products (October 2006). FRB of Boston Working Paper No. 06-16. Available at SSRN
Free movies (bring your own popcorn)
Freemium : The First Business Model of the 21st Century

The Psychology of Free

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