A long time ago (At least a year ago). I saw a clip from a news spot in which a couple of young, popular, stylish progressive commentators were discussing the free economy and making fun of an older lawmaker who "Just didn't get it." They spent a couple of minutes lambasting the out-dated fossil who just couldn't seem to come to grips with how all these internet services could be free.
Problem is, they didn't explain how it worked. They just made fun of the fossil for not getting it. I was left feeling perhaps they didn't get it either.
I thought about trying to unpack it, but just wasn't quite motivated enough.
Recently I watched a Ted Talk presentation by Amanda Palmer Titled "The Art of Asking".
(You can find it here, if you wish to watch it. "Parental warning" I was dividing my time between two other tasks, so I don't know if there was mature language, I do know there is a photo of her - rear-oblique angle - Head to just above buttocks - with no clothes, being drawn on by a crowd of fans.)
The key takeaway: As an artist she has largely stopped selling her music. Instead she gives it away free, encourages people to share it, then asks for donations. (essentially the classic street musician model, enhanced by the global reach of the internet.
It is an interesting business model. She seems to be making a decent living doing it. She isn't rolling in cash like the Beatles ($2 billion+), Metallica ($820 million) or Eminem, ($230 million), or Ariana Grande ($100 million), but she definitely isn't starving ($18 million). Even better in my opinion, The RIAA protection racket, er.. I mean... legal team doesn't get to leech off her work.
This isn't free economy as previously mentioned. It is actually a derivation of capitalism, using an optimistic, abundance mindset, (as opposed to the pessimistic, scarcity mindset used by - as an example - Disney, who historically placed their videos in the vault at regular intervals to create an artificial scarcity of product, thereby artificially keeping the price high), and placing the negotiation power solely in the hands of the buyer. She performs the work/service of creating and publishing her art, and trusts that the general population is mostly good and trustworthy and will of their own free will, with no coercion, pay her a fair wage for her effort. She also gets money from endorsements, which I assume utilize more balanced negotiations, and it is unclear what percentage of her wealth comes from this vs fan... donations?.
So, I maintain a bit of skepticism, but I think It is actually a cool business model, particularly well suited for artistic endeavors, I think. It allows everyone to see the art, and then those who appreciate can pay what they feel it is worth, according to what they can afford. I am working on writing a book (a bucket list item of mine). I am approaching two years working on it - just about done with the first draft, and I have been wanting to publish it using this model.
Sorry, wandering a bit there.
None of that is really about the free economy, just what motivated me to try and unpack it.
The free economy the commentators were discussing was specifically centered around Digital tools (Such as google docs, Facebook, Trello,...) and games (Candy Crush, Empires and Puzzles...). You can use/play them for free. You aren't required to pay to play.
But...
People invested time/calories to build/design these things. Don't they need to be paid, so they can provide food, clothing and shelter for themselves and their families? These applications run on servers. Lots of servers. Someone has to pay for the hardware, and for the power to run them, and for the power to cool the rooms they are in, and for the network connections. And while some of those services might be overpriced in the market. I believe it is fairly obvious they can't be absolutely free. They all require labor to research, design build, and maintain.
So if those services aren't in fact free, and you aren't paying for them, who is?
Many utilize a "Freemium" model. That is; you can use the app in a basic or limited form for free, but there are advanced features that you must pay for. Trello is a good example of this. The basic features of this organizational/project management/collaboration tool are free. But if you want the tools that allow you to automate things, or have more than just a handful of boards, you will need to subscribe to one of the premium versions - approximately $10 per user per month.
Still, it allows anyone to use at least the basic features, by having the more affluent users subsidize the free accounts.
Others - specifically the games - use micro-payments in a somewhat similar fashion. You can play the game for free (and you might be subjected to ads, but we'll get to that later), but you will frequently find yourself making very little progress. To overcome this, you can purchase power-ups, or boosters, which will give you a better chance (not a guarantee) of faster progress. This turns out to be a ridiculously good model, by exploiting human characteristics (impatience, addiction). Once upon a time, a high quality game with cutting-edge graphics, hours of unique game play, complex story line, quality voice acting, etc... was a $50 investment for the player. Today, many of the successful games are simple three-matchers, with an occasional novelty introduced. They're trivial to program, largely unimaginative and incredibly repetitive. Yet in some cases people have paid thousands of dollars per month!
So again, the rich and/or stupid subsidize the poor and/or patient. (there are other problems with these games, but that might be another post).
What about the Facebook's and Google doc's? They rely on marketing revenue (Many/most of the games leverage this stream as well, in the form of in-game ads). One aspect of this is simply putting ads in front of your eyes.
Another is research into your habits. By learning more about you, they can be more efficient with advertising dollars, by showing you ads for the things you are actually interested in. The more sinister aspect of this is the deep-learning that the social media platforms utilize to help marketing firms. They essentially experiment on you; try to understand what makes you tick, so they can figure out how to more effectively influence you to buy their stuff.
Does this work? Certainly seems to. Coca Cola, as an example outspends Pepsi by nearly double, and Dr. Pepper by four times, the second and third highest spenders on marketing. Coca Cola owns 42% of the market share. Repetition of a message is very effective in influencing your attitudes and opinions, whether you believe it or not, whether you like it or not. Repeat a lie enough times and it becomes the truth for all intents and purposes. That is the power of propaganda.
But, Coca Cola doesn't pay for their marketing campaigns. The consumer does. Coca cola spends roughly 12.5% of it's revenue on marketing, and that cost is included in the price of the product. For every dollar you you spend on Coke products, twelve cents of it is a micro-payment for those "free things" you use, so that Coca Cola can propagandize you into giving them more of your money.
So there you have it; the "free" economy unpacked. It would be more accurately described as the indirect economy, or perhaps the sneaky, manipulative economy.
There is a saying "If you are not paying for it, you're not the customer; you're the product." Turns out, you are the product, and you are paying for it too.
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