Arnold Kling  

Chris Anderson Podcast on Economics of "Free"

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There are several interesting topics covered in this podcast between Russ Roberts and Chris Anderson. The general topic is the disruptive impact of computers and communication technology, and in particular the tendency for prices to fall to zero for things like email accounts. My favorite interchange comes late in the podcast, when Anderson quotes an unnamed entrepreneur to the effect that it's great to turn a $4 billion industry into a $4 million industry. That is a pithy way to summarize what Schumpeter called creative destruction.

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COMMENTS (7 to date)
Matt writes:

I would listen but they want me to download 57 Mbytes for Apple quick time. That is software inflation, as I have seen podcast systems that use 100 kbytes.

Besides, if I downloaded, Apple will tell me that I need an OS fix to my XP OS, but I lost the product key and Vista is a piece of crap.

Software has not gotten cheaper, they simply use a different method of payment, inflated lines of code.

Hi, Matt.

You comment:

but they want me to download 57 Mbytes for Apple quick time.

I'm not sure who "they" refers to. The Anderson podcast itself is just under 33 Mbtyes. You can download it as a standalone mp3 file from the EconTalk page and play it with any software you own that plays mp3 files.

Even 33 Mb is pretty big, though. We originally tried to keep the mp3 files much smaller, but we ended up trading off a little, increasing the size in exchange for improved sound quality. We plan to reevaluate periodically, as technology improves over time.

P.S. We actually put a lot of thought into the size/quality tradeoff. The EconTalk sound engineer prepared samples at different sampling rates and using different filters. Not only did Russ and I listen, but we also benefited from the advice of two students from the Eastman School of Music--friends of my daughter's--who graciously evaluated and compared the samples with their more discerning ears. They also did a second evaluation with high quality listening devices. The conclusion was unanimous that the improved sound quality with the middle size range was worth what we did understand would be a loss--that the larger file sizes would deter some listeners.

Brandon Berg writes:

Why not put up different versions? Disk space is cheap, so I'd think that the cost of offering, say, a 24kbps version in addition to the 64kbps would be negligible.

Lauren writes:

Hi, Brandon.

We did consider it. Disk space may be cheap, but the time involved for the sound engineer to produce two versions, the various uploads and downloads for each version, the one-time listen-through Russ and I each do to assure nothing is completely incomprehensible, listing each separate option on each webpage (including if we offer it in iTunes creating the appropriate xml feed), answering email and blogs about why we offer two different versions but yet not another version, etc., is not.

We do have some higher priorities we'd hope to offer in time, such as snippets at specific time marks. That's on our ultimate to-do list, and it would partly address the desire for some shorter downloadables.

Matt writes:

Right button click, save as. Use Windows media player. worked.

The Lauren was right.
Somehow my Mozilla browser tagged MP3 as Apple QuickTime

Ajay writes:

That quote is by John Roberts, SugarCRM CEO (they make an open source CRM), and it's from Businessweek: "We're turning a $10 billion market space into a $1 billion market space." I remember being a bit blown away when I read that years ago and it's one of the quotes I sometimes mention when I talk about the changes open source is bringing.

[Thanks, Ajay! I've added the link to the Anderson podcast webpage.--Lauren]

Matt writes:

All right, if I have to.

First, software does not depreciate in the normal sense. Like literature, there is no decay.

Second, software is already very close to minimal message length in its self description so it has little room to improve.

Wait, but hasn't software kept improving in functionality over the years? Yes, but it was mainly repeating the same basic algorithms faster and more often in different contexts. Still in use is Donald Knuth, the Art of Computer programming, now 40 years old.

The Open Software Foundation was created to grapple with the surplus of computer code that duplicated the same functionality. The foundation reduced labor costs by lowering the cost of using the existing code rather than have developers do a line by line re-creation each time.

We have reached a point such that Microsoft's new OS Vista is just a rehash of the old algorithms will little new functionality. Apple was able to generate a new OS for itself when it switched to Intel machines, but Apple simply did a cut and paste of Open Software Components.

The nature of software, over time, has greatly reduced the need for software engineers and greatly enhanced the need for experts in particular fields where software is deployed. The number of keywords used in the most common programming language is about 20.

So the new formula says that value is obtained by presenting data in ways that match the particular application, but the delivery and storage of the information remains basically the same, an assembly line of pre-existing software routines and mass produced hardware.

The new formula bodes ill for Microsoft and Apple. But Intel should continue to rise in value. Apple is faced with Ipod competitors who use the same hardware and free software, they just lack Apple's marketing channel. Microsoft has an uphill battle justifying the legions of software gurus when experts in particular fields can deliver value using the web and HTML. Cisco will be in an imtermediate situation. The TCP/IP communication protocol is public domain but there is still hardware value that Cisco provides. However, even Cisco is facing cheap foreign competition for routers.

I quit the field when I began to hear the same lame requirements for software engineers. "5 years in C++", they would say, or "knowledge of SQL". Yet any high school kid with a passion for puzzles could learn these languages to efficiency in six weeks.

This is all great news, it puts the experts in a field very close to the user.

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