The Free Beer Economy

Why is FREE! the world's best-selling noun, verb, adjective and adverb, yet so hard to credit as a foundation for business in the Internet Age? And what will happen when business folk finally grok the abundant opportunities that FREE! provides?

Dictionary.com lists 49 meanings for the word free. Here in the World of Linux, there are two main ones: 1) the presence of liberty, 2) the absence of price. Or, as Richard M. Stallman drew the distinction, free-as-in-freedom and free-as-in-beer. Both kinds contributed enormously to the development not only of free and open source code, but to the Internet —  the place where most of that code was written and on which most of it runs.

Within the Net's vast environment is an abundance of free and open building materials, all growing in number and quality. There is plenty of infrastructure you can pay for here, of course (with most of the money going to your cable or phone company), but the Net's nature is essentially one of abundant liberty and minimal cost.

Still, a decade and a half have passed since the first graphical browsers appeared, and most of us still barely understand what all this freedom and abundance does -- and can do -- for our economy.

The Internet itself could hardly be more widely used yet less well-understood. Here we have a form of infrastructure that embodies both free-as-in-freedom and free-as-in-beer, that has much in common with the purely public goods we call gravity, sunlight and atmosphere, and is still seen by those who bill us for it as a valved "service", on par with call waiting and premium TV channels.

Way back in the Web's Paleozoic, I wrote my first piece for Linux Journal (actually for its short-lived sister/insert, WEBsmith). It was titled "A Bulldozer Through The Intersection". The title played off a Newt Gingrich line: "The key to a monopoly is to get in the middle of an intersection and charge rent." Today no sentiment could hardly be more Old Skool. Yet the New Skool is barely in session. Urges to valve abundance and package it as scarcities still run strong. In some cases this makes sense. It really does cost money, for example, to connect homes and businesses to the Net's backbones, and ways must be found to pay for that. (Not saying the carriers have found the right ways, just that they have capex and opex, both of which need to be covered, somehow.) In other cases, such as with free and open source software, no "business model" is required. Yet the absence of one is still hard for many to grok.

For example, all of us encounter folks in business who understand the warm and fuzzy reasons why developers write free and open code — for the esteem of peers, for example — while missing the plain practical purposes, and their cumulative effects.

This is why a mountain of free and open code has grown in our midst, and people can still say they don't understand how you can make money with it. They miss the central point: that you make money because of it. Your business is not selling software. Your business is something else that is made possible by software produced in liberty and free for the taking. (And for you to improve, if you like.)

Several years ago Steve Larsen of Krugle (a code search engine) told me there were already more than half a million open source code bases in the world. I asked Steve recently what the number is today. He said he had no idea. The sum is beyond estimation.

So we have an ecosystem of abundant code and scarce imagination about how to make money on top of it. If that imagination were not scarce, we wouldn't need Nicholas Carr to explain utilities in clouds with The Big Switch, or Jeff Jarvis to explain how big companies get clues, in What Would Google Do?

So, to help close that same gap, we here at Linux Journal came up with an idea for a panel at SXSW in Austin, which starts tomorrow. The title is Rebuilding the World with Free Everything, and it'll happen at 3:30 next Tuesday, following a keynote conversation between Guy Kawasaki and Chris Anderson, Editor-in-Chief of Wired, and author of both The Long Tail and (most significantly for our purposes) Free: The Future of a Radical Price. I first met Chris many years ago when he was an editor for The Economist. Since then I've come to know him as an economist who gets tech, a techie who gets economics, and an original thinker who breaks both molds.

Chris will be joining our panel, along with Katherine Druckman (webmistress here at LinuxJournal), William Hurley of Invisisoft (and much more), Dave Taylor (of FilmBuzz, Linux Journal and intuitive.com), and yours truly, who will serve as the moderator. Also joining us will be everybody in the group we used to call "the audience". And you: Readers here who can get a jump on the conversation.

Here are a few questions to help get us started...

• Why is it that people find "free" so hard to understand?
• What are the connections between free code and free beer?
• What are the advantages, in a crashing economy, to free?
• Yes, it's not "free everything", but it's still free lots-of-stuff. How do we decide which forms of free we take advantage of?
• How is the abundance of both free-as-in-freedom and free-as-in-beer changing the field of economics?
• What, if any, investors out there understand the opportunities with free?
• What does all this do both to the concept of "intellectual property" and what wisely can be done with it?
• Where are the engineers (besides Google's founders) who have leveraged understanding both free-as-in-freedom and free-as-in-beer into big-as-in-business?
• What are some of the Big Business opportunities that are yet to be exploited by those who know the real value of free?

More fodder:

• Chris's The Economics of Abundance
• Mike Masnick's The Grand Unified Theory On The Economics Of Free, which also includes a long list of other posts on the subject.
• Chris and Mike's The FREE! Summit.
• Dave Winer's How I made over $2 million with this blog
• JP Rangaswami's Random musings on open source and The Economics of the Customer, plus this interview.
• In Linux Journal:
• • Building a Relationship Economy
  • Greater Goods
  • Is free and open code a form of infrastructure? How about the humans who write it?
  • Disrupting the VC Business and Exploring the Because Effect
  • Starring in Your Own Constellation

Look forward to seeing you there — in spirit if not in the flesh.