This morning's newspaper arrived full of bad news. January was theDow's worst in 113 years. More and more goods are building up as consumer confidence continues to dive. There's rising economic xenophobia around the world with British oil refinery workers trying to throw foreigners out of the workforce. Even Peggy Noonan, usually the most optimistic of optimists, wrote that "we've had it too good for too long". The party is over, Reagan's once cheerful cheerleader said, the "bill is coming due."
But the worst news of all, the veryworstest, was emblazened on the top of the paper. The revolutionary business model called "free", championed by Chris Long Tale Anderson, is in trouble. In a shockingly frank confession in this morning's WSJ, Anderson acknowledges that "free is not enough" and that "it has to be matched with Paid." As Anderson acknowledges, the free business model has driven the Web 2.0 economy over the last ten years:
Over the past decade, we have built a country-sized economy online where the default price is zero -- nothing, nada, zip. Digital goods -- from music and video to Wikipedia -- can be produced and distributed at virtually no marginal cost, and so, by the laws of economics, price has gone the same way, to $0.00. For the Google Generation, the Internet is the land of the free.
As Peggy Noonan recognizes, the bill is now coming due. And the bill for free is going to be massive. Free has hastened the destruction of the newspaper and recorded music businesses as well as building an entire generation of technology "companies" without viable business models. Like Detroit and Wall Street, contemporary Silicon Valley -- which, to quote Noonan, has had it too good for too long -- has been built upon a series of economic fallacies about profit and loss. Anderson is right. For the Google Generation, the Internet is indeed the land of the free. The challenge now, for the next wave of Silicon Valley entrepreneurs, is to transform the Internet into the land of the paid.