Early last year, I heard a similar line from Anderson when I obtained a free ticket (how appropriate) to a Communitech conference in Waterloo. At the time, well before the recession hit, Anderson laid out his ‘not-so-radical’ vision for an economy that embraces free. The future, he contended, would be lead by those who created new business models to adapt to information wanting to be free.

Anderson’s book is the hot topic in various circles right now given its potential implications for online and traditional business. Newspapers, for example, could reverse their precipitous decline by embracing new mediums such as the Kindle and charge for the premium service of having their content available on the revolutionary e-reader. Walking his own talk, Anderson himself said that his book would be available online for free and that he would earn money from subsequent speaking gigs.

In a recent book review of Free, Malcolm Gladwell agrees with Anderson’s central argument that “the cost of the building blocks of all electronic activity – storage, processing, and bandwidth –has fallen so far that it is now approaching zero”. Despite this reality, Gladwell argues that there are far too many other inputs to consider and that the way consumers respond to free things (very very well), makes the idea of charging nothing less palatable. It might cost Youtube, $0.25 to stream one hour of video to one person but it’s still estimated that the company will lose close to a half a billion dollars this year. There is no doubting Youtube’s success as modern medium but as a business, the jury is still out. As Gladwell said, “if it were a bank, it would be eligible for TARP funds”.

Truthfully, I remain torn on the idea…or at least, how Anderson frames it. In a 2008 article he used the Gillette model of giving the razor away but selling the blades at a premium as a non-tech example of how his vision plays out. This example made the free argument actually harder to fathom. By paralleling what’s going on now with Gillette, ‘free’ is just a marketing and sales tactic. It’s like the samples they offer at Costco which somehow always makes the grocery shopping experience more exciting. It is not a pricing model.

I’m torn because the ‘free’ argument can be dangerous if it seeds the idea to an entire generation of new entrepreneurs that being popular (and free = popularity) is a larger priority than making money (read: Twitter). So much attention has been paid to the recession being a great opportunity for new businesses but how impactful can these businesses be if they are approaching free incorrectly? To be fair, this is not exactly what Anderson is saying but this is the impression he leaves audiences with especially by using Youtube as his free proof of concept.

With Gillette, getting the razor for ‘close to free’ allows you to try it, but you immediately start paying for it via the razors. With Youtube, I could conceivably go on forever without ever giving the company a dime. Even if Youtube can make money via other methods like advertising, is this really good business? Would we really all leave Facebook if it started charging an annual fee of 5.00? Would Twitter be as successful if it more closely resembled the cost of text messaging?

I don’t necessarily know the answers but at this point, I’m not convinced of free. Why can’t the New York Times charge for subscription fees on the Kindle and for their normal online content? This is exactly what the Wall Street Journal does and they seem to be doing all right.

At this point, all we can really conclude is that free is compelling as a word and idea. It might make online entities into superstars overnight, but it might also be the very reason they, like many others, cease to exist five years later.