The meme of “Free” is one again making the rounds. I expect it reignited when Chris Anderson’s new book Free: The Future of a Radical Price (available on Amazon for $17.81) quickly followed by Malcolm Gladwell’s semi-scathing review in the New Yorker titled “Priced to Sell.  Is Free the future?” (I kind of feel like Gladwell wimped out on the review, even though I like Anderson’s point of view better than Gladwell’s.) This then created a predictable tussle in the blogosphere, the kind of which I find tedious and dull, so I avoided the rest of it.

Over the weekend I saw two more blog posts on this meme. The first – by Fred Wilson titled Freemium and Freeconomics – is clear and well written (and free). It’s then followed by an excellent comment thread. The second – by Marc Cuban titled When you succeed with Free, you are going to die by Free (also free) is a muddy as Fred’s is clear (and the comments are much less interesting). Nevertheless, both are relevant and insightful.

Whenever I see this meme rise its head, I think of a line I use whenever I consider an investment or an acquisition of another company. “Would You Want It If It Were Free?” I learned this from Len Fassler, one of my early mentors who acquired my first company (fortunately he decided it was worth more than free). Before I made an investment, or support an acquisition, I sit quietly and ask myself “would I want this if it were free?” By this, I don’t mean as a customer, but rather “would I invest in this at a $0m pre-money valuation” or “would I want 100% ownership of this company if it cost me $0.” 

Over the past 15 years, I’ve found my answer to this question to be “no” more times than I can remember. It often surprises me when I realize this, as up to that point in the conversation, investigation, or negotiation I’d been focusing on “the deal” rather than “whether or not I perceived any value in the company being discussed.” When I reflect on some cases that I remember, I realize how my internal rationalization machine had kicked into high gear as I got excited about “a transaction.” By taking the transaction out of my thought process, I could focus on the essence of value (or lack thereof).

Of course I’ve been wrong (both directions) plenty of times. But I can think of a bunch of situations where asking myself this question saved my ass or that of the company I was involved with that was considering an acquisition.

I realize this is a different version of free than the one Anderson, Gladwell, Wilson, and Cuban are discussing. But, if you step back and think hard about it from a customer perspective, it magically becomes relevant. Certainly lots of people “would try it if it were free,” but do they actually want it?



Link to original post