If You Live By Free, You Will Die By Free

Hugh Pickens writes "Internet entrepreneur Mark Cuban writes that the problem with companies who have built their business around Free is that the more success you have in delivering free, the more expensive it is to stay at the top. '"They will be Facebook to your Myspace, or Myspace to your Friendster or Google to your Yahoo," writes Cuban. "Someone out there with a better idea will raise a bunch of money, give it away for free, build scale and charge less to reach the audience."' Cuban says that even Google, who lives and dies by free, knows that 'at some point your Black Swan competitor will appear and they will kick your ass' and that is exactly why Google invests in everything and anything they possibly can that they believe can create another business they can depend on in the future searching for the 'next big Google thing.' Cuban says that for any company that lives by Free, their best choice is to run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank. '"When you succeed with Free, you are going to die by Free. Your best bet is to recognize where you are in your company's lifecycle and maximize your profits rather than try to extend your stay at the top," writes Cuban. "Like every company in the free space, your lifecycle has come to its conclusion. Don't fight it. Admit it. Profit from it."'"

Comments

This Is Madness

[eldavojohn]

Someone out there with a better idea ...

You mean I have to compete against innovation?!

... will raise a bunch of money, give it away for free, build scale and charge less to reach the audience ...

And my competitors can undercut me?!

This is madness! I demand protection against people trying to steal my customers with a better service/product and lower prices! Oh well, thank god I'm too big of a player for the government to let me go under.

Be warned fellow citizens, in my lifetime I have seen market after market reach the endstate of an American capitalism: protected stagnation.

Re:This Is Madness

[sys.stdout.write]

Indeed! My favorite part was:

run the company as profitably as possible, focusing only on those things that generate revenue and put cash in the bank

Companies should focus on making money?! Outrageous!

Re:This Is Madness

[hedwards]

I think you're being overly optimistic. We don't protect stagnation we protect and encourage failure. The US government tinkers in the economy more than most other free nations do, and it's almost always in the form of bailouts, protecting failing enterprises, insuring markets without demanding regulator authority. It's been going on for several decades and it's led us from one bubble to the next, and it won't stop for at least one more boom bust cycle.

What he's really complaining about is that there's a competitor that's out there forcing the price he can get to roughly approximate the marginal cost of production. Which is shocking for somebody that presumably believes in capitalism. Shocking because a competitive market pushes prices to just above the marginal cost of output.

OSS is a good example in software, credit unions in banking and hopefully a set of large scale co-op health insurers in the insurance industry. Corporations hate them because they have to compete on both price and quality. If there really were nothing to it they wouldn't be trying so hard to kill it.

Re:This Is Madness

[maxume]

Only if you insist on pedantic sematics.

For instance, you can provide more value for free (say, faster, more accurate results). Not quite undercutting free, because free is free, but you are giving more away, which is similar enough in concept.

Re:This Is Madness

[wjousts]

And my competitors can undercut me?!

Actually, if your services are free to the customer, in order to undercut you your competitors will have to pay his customers for using his service.

Actually, the mistake you are making is thinking that you are the customer from companies like Google or Facebook. You are not, you are the product. The advertisers are the customers.

Re:This Is Madness

[ArhcAngel]

Yeah, it's too bad the blacksmiths and carriage makers of the early 20th century didn't have a government like we have today to protect them from the that evil Ford guy.

Re:This Is Madness

[CannonballHead]

The US government tinkers in the economy more than most other free nations do

It does? You mean the more socalistic a country gets, the less it tinkers with the economy?

I'm a conservative and I don't like the U.S. "tinkering" with the economy. But from what I understood, most other free countries tend to be more liberal (significantly) than the U.S. (and a lot of liberals in the U.S. complain about that. Hence the huge push for a national healthcare system at the moment?). And more liberal countries tend to want to regulate the market more. And regulate other things, too.

I'd be interested in seeing some backup for the claim that the U.S. tinkers more with the economy.

Re:This Is Madness

[mcgrew]

The US government tinkers in the economy more than most other free nations do

[citation needed]

it's led us from one bubble to the next, and it won't stop for at least one more boom bust cycle

Booms and busts are inevitable, especially without regulations. But as long as we have the best government money can buy, you're not going to get any meaningful regulation. For instance, the only reason they're thinking about universal health care now is because the corporations have started to realize that employer-provided health benefits put them at a disadvantage to companies in countries where they don't have to pay those costs. Notice that the insurance companies won't be out of the loop; more likely we'll still have health insurance, only it'll be mandatory and the employer won't be forced to provide it.

Boom and bust
The term boom and bust refers to a great buildup in the price of a particular commodity or, alternately, the localized rise in an economy, often based upon the value of a single commodity, followed by a downturn as the commodity price falls due to a change in economic circumstances or the collapse of unrealistic expectations.

Boom and bust phenomena have existed for centuries. During a "boom" period, buyers find themselves paying increasingly higher prices until the "bust", at which time the goods and commodities for which they have paid inflated prices may end up as valueless or nearly so.

On a broader basis, the phrase boom and bust can also refer to an economy's credit cycles that occur as a result of fluctuations in "fiduciary media" or fiat money. This view is predominant in the business cycle theory of the Austrian School of economics.

[edit] Examples of "Booms and Busts"

• the Tulip mania of the 1630s, in Holland[1]
  towns such as Bodie, California that prospered during the California Gold Rush of the late 1840s and early 1850s then became ghost towns[2]
• the Roaring Twenties in the United States, followed by the Wall Street Crash of 1929 and the Great Depression[3]
• the Dot-com bubble, involving new electronic technology and the internet, in the late 1990s[4]
• the American subprime lending boom in the 1990s and early 2000s, followed by the Subprime mortgage crisis of 2006 and beyond[5]
• The Irish Celtic Tiger which led to massive economic growth in Ireland beginning in 1994 and continuing through to 2007. It was based on exports of Information Technology, Software and financial service up until 2001. The economy then veered of course due to government mismanagement and the economy grew based on Domestic housebuilding up until 2007. In 2008 Ireland's economy entered recession and in 2009 this recession has grown to a full blown economic depression.

Note that this article doesn't list all of history's cycles; there were other panics, such as the one in the early 20th century before the 20s.

Re:This Is Madness

[Anonymous Coward]

One example is Canada. During 'normal operation' Canada regulates its economy a bit more than the US. But that very regulation keeps things reasonably stable. So when the economic crisis hit, the Canadian economy suffered but was remarkably stable. No Canadian banks failed. (Regulations that were in-place prevented many of the things the US financial institutions were doing...) The Canadian government did intervene because of the crisis, but the magnitude of the intervention was small compared to what we've seen in the US (after scaling for the obvious differences in the sizes of the economies).

So the point was that by having constant oversight, it wasn't necessary to engage in massive amounts of intervention (bailouts, subsidies, new regulatory frameworks, etc.) during dire times. So, on average, Canada intervenes in its economy less, because it doesn't need to engage in these massive interventions. (Of course this point could be debated depending on how you scale things like occasional massive bailouts compared to constant low-level regulation.) Despite its support of the free market, the US doesn't let the free market run wild when push comes to shove. In fact the US intervenes substantially.

(This point, among others, is discussed in this interview.)

Re:This Is Madness

[Atlantis-Rising]

Well, for example, I could point you at the Canadian banking system as a contrast to the American banking system. This article talks about it a bit.

By forcing banks to maintain significant capitol reserves on hand, the chances of them collapsing and then requiring point intervention by the government is significantly lessened, and ultimately I think it's a much less significant intervention in the management of their affairs.

Re:This Is Madness

[tb3]

He became one of the world's richest men by sheer blind luck, according to that Wikipedia article. Broadcast.com was just another over-valued dotcom company until Yahoo came along and paid $5.9 billion for it. Cuban was just smart enough to take the money and run. Look at his other business ventures after broadcast.com. They're all massive dogs.

Re:This Is Madness

[Dogtanian]

But from what I understood, most other free countries tend to be more liberal (significantly) than the U.S. (and a lot of liberals in the U.S. complain about that.)

When you say "more liberal", do you mean "more left-wing"? The word "liberal" tends to have connotations within the U.S. political system which don't really apply elsewhere, and it makes it confusing if you use it within both contexts like that.

Re:This Is Madness

[jawahar]

Banks in India also say NO to stock markets

Live free, die hard

[AKAImBatman]

"Like every company [*deleted*], your lifecycle has come to its conclusion. Don't fight it. Admit it. Profit from it."

Fixed that for you. No business survives beyond their normal lifetime in the market. This is particularly true of technology companies which are forced to constantly reinvent themselves or become obsolete. While companies who sell a product can sometimes extend that product out a bit longer thanks to support contracts and BS marketing techniques, this is not sustainable.

What you end up with is the slow death spiral that was the hallmark of companies like SGI, SCO, and Novell. These companies followed the same business model for too long, slowly bled marketshare, and eventually reinvented themselves at the last minute, made a deal with the devil, or went out in a blaze of glory.

The lesson is simple: No matter how much of a cash cow your current product line is, you need to be investing in the R&D to compete in the next generation of products. Otherwise your competitors will get there first and make you ancient history.

Re:Live free, die hard

[MyLongNickName]

Tell that to this company.

Re:Live free, die hard

[MrCrassic]

Zildijan, a very prominent manufacturer of drum cymbals, has been around for 400 years. Source: click

Sumitomo has been around since 1590.

IBM has been around since the early 1900s, and they are still hugely relevant today.

These are obvious exceptions to the rule, but it does show that if a company has a good thing going and can play its cards right, it can survive a long, long, LONG time.

Re:Live free, die hard

[Anonymous Coward]

Interesting, but I am willing to be they reinvented their business several times. I doubt they would have stayed in business using tools an techniques from 578.

Tell that to the Vatican

Re:Live free, die hard

[jeffshoaf]

I think Jobs must have sold his soul to the devil.

I think it was his liver...

Google

[hobbit]

Google doesn't live by free. It lives by selling advertising.

Crazy old witch

[mcgrew]

Rather than attend high school for his senior year, Cuban enrolled as a full time student at the University of Pittsburgh. After one year at the University of Pittsburgh, he transferred to Indiana University's Bloomington, Indiana campus and graduated in 1981 with a Bachelor's Degree in Business Administration.[9]

Aren't these the guys who ruined the economy?

Re:Crazy old witch

[mcgrew]

Yup. And scientists gave us nuclear bombs

Which proves that they know what they're talking about, unlike economists. If economics, sociology, etc were anything at all like physics, there would be no poverty or hunger.

Wall Street is just a big corrupt casino. You don't invest in stocks, you gamble on them.

Re:Crazy old witch

[Truth is life]

There is no luck, just being alert and open to opportunities, having the courage to act on them, and having the intelligence to bend them to your benefit..

This is untrue. Of course there's luck, it's by definition what occurs that you cannot control or influence. For example, if you had lined up a deal to sell your company for a huge amount of money but then the economy crashes around you and the deal falls through...that's bad luck. Or if you're a brilliant engineer whose ideas would be worth millions...but you were born in the Soviet Union. Or your company develops a revolutionary new product...and the lead engineer gets hit by a bus. Luck controls the availability of those opportunities in the first place, and (sometimes) their success.

Isn't this true of almost all businesses?

[Palestrina]

Whether you are selling automobiles or donuts, there is going to be competition, and you are only as good as your last quarterly earnings report. In any case, competition and barriers to entry has more to do with the nature of the technology and lock-in and lock-out factors like propriety interfaces and patents than it is concerned with the business model. Maybe the point is just that with a free model, you have less room for error in your strategy?

Re:Isn't this true of almost all businesses?

[Braedley]

Techdirt has a post saying just this. Cuban fails to realize that all his arguments don't apply to only free models, but rather any business that sells a product or service, regardless of the price (free or otherwise).

Re:Isn't this true of almost all businesses?

[cgenman]

Step 1: Come up with a new idea for making money that nobody has ever thought of.
Step 2: Make as much money as you can, while other people scramble to get into the market.
Step 3: Compete a bit with people, staying in the game as long as you can still make money at it.
Step 4: Move on to something more profitable.

Somehow people have confused getting as big as possible for making as much money as you can. Without making money, big = bad.

Sounds self-contradictory

[GodfatherofSoul]

So, you have to only invest in what is profitable, yet at the same time you have to invest in research (which by nature isn't profitable) to find the next product that will be profitable when your old products are outdone? And, what's so insightful about saying that someone coming along and giving away your "free" product for even "freer" is some inherent danger to free services? If I bake cookies for a living, and some philanthropists starts giving away cookies of a similar recipe for free (with his business logo on them), of course my business will be hurt.

From Mark Cuban? Take it with a grain of salt

[i_want_you_to_throw_]

So he built broadcast.com, sold it to Yahoo! and made a ton of money: what else has Cuban done? I mean really?

I tend to take everything he says with a grain of salt.

Re:From Mark Cuban? Take it with a grain of salt

[192939495969798999]

He's indirectly asking us to learn from his example. Build a free empire, then sell it at its peak, before anyone realizes that it's unsustainable.

STFU, Cuban.

[Anonymous Coward]

You got lucky because Yahoo was dumb and made you a billionaire at the height of the dotcom bubble. There are no remnants of the service you founded anywhere on the Internet. You are the equivalent of a lottery winner and have zero credibility.

You are a stupid fratboy who got rich thanks to an ill-timed power grab by an unwise corporation, not a respected voice whom anyone cares about. Please enjoy your "broadcast.com" (lol) windfall in private and stop talking in the presence of others who might report your idiocy. Thank you.

Re:STFU, Cuban.

[OrangeTide]

AC is right. Cuban's success is at least partially due to serendipity, I would argue that is mostly due to that.

It's not envy that people hate on Mark Cuban. Because many of us respect people who built up their fortunes, even if we hate the things they do. Examples would be Larry Ellison, Steve Jobs, Bill Gates, Warren Buffet, George Soros, etc.

That said, Mark must have some skill in the negotiation room to have sold his company. The ability to market your business to another business is a pretty unique skill. But if he did that trick today he would be in the same position as many of my friends who have done that. Have enough money in the bank to support themselves for a couple years until they sell their next start-up.

Winning it big on one shot is not as impressive as consistent success to me.

Re:STFU, Cuban.

[puppetluva]

+1

Cuban is con man. I heard the sales pitches for broadcast.com when he and Mary Meeker (unethically on her part) were trying to sell that scam. His lies are thick, he relies on bullying/shaming people and he took a lot of money Yahoo could have used to help free software and be a healthier business.

He is not a typical clueless MBA, he is a con-man and should be actively avoided.

I disagree.

[apodyopsis]

I disagree.

I think that when any technology - be that DVD, FaceBook, Internet Explorer - reaches a mass audience and is perceived to be good enough to meet the users needs it is more or less impossible to dislodge even when there are technically superior products out there.

The only way a new product will ever dislodge a entrenched rival is when they offer something unique and compelling or are readily interchangeble with the old one.

I kind of get what they are saying, but I see more evidence of entrenched mass market products that are seen to have reached an acceptable level of functionality and ease of use.

Re:I disagree.

[leppi]

I know that you enfatically said "I disagree." (twice), but I'm not sure that you really do.

He said:

"Someone out there with a better idea will raise a bunch of money, give it away for free, build scale and charge less to reach the audience."

You said:

"The only way a new product will ever dislodge a entrenched rival is when they offer something unique and compelling or are readily interchangeble with the old one."

Sounds like the market forces that he describes are part of this "new economy" where huge amounts of venture capital can be raised and thrown away trying to create the "next big thing". The next big thing in almost all cases improves on what has came before, just as you said "something unique and compelling".

Overall, I think the article is a good one, and his point is pretty accurate. I don't think it's revolutionary, but there are some ideas in there that I have never thought about in quite the way that he is going into.

Really, is that you, Satan?

[Missing_dc]

The summary sounds like a seduction attempt.....

Like bad legislation, they must constantly introduce evil ideas into major corporations and the general subconscious knowing that eventually, bit by bit, we will accept, and thereby do evil.

It is a game of relativities and waiting.

Revenue??

[twmcneil]

I wonder if he'll remember to include a revenue source in his plan this time.

WE live in an art economy.

[tjstork]

WE live in an art economy. That is, at the consumer level, the systems that we use are often judged by their novelty and their entertainment value. I would think most social networking sights ultimately wind up as a sort of a performance art piece, where we are the performers. We get bored with it, and move on. To say that you need to fund R&D is almost besides the point. Social sites need to have R&D, for sure, but what they really need is insight and hitmakers. You have to run them almost like record companies and make stars of the designers, changing things every time based upon the new view of the artist.

Which country do you live in?

[Colin Smith]

ixed that for you. No business survives beyond their normal lifetime in the market.

Well. that's clearly not the case.

Goldman Sachs, Bank of America, JP Morgan etc etc etc. If you have a friend in the government, you can get them to tax the people to guarantee your profits.

 

A bit naive

[xednieht]

Over-simplified. While Free is certainly not a sustainable business model, I'm not sure I see the connection between the topic of the article and the companies that were used as examples. Google, MySpace, and Facebook are not free by any stretch. They offer free services on the consumer facing side of their value model, but on the business end they generate plenty of cash from charging for the eyeballs they bring to advertisers.

Twitter is the only company mentioned that has been reluctant to monetize their traffic. Not because they can't, but more so because of some philosophical reason they choose not to. Yet despite that there are third parties that are monetizing Twitter's traffic, as in:

http://tech.slashdot.org/story/09/07/05/2151220/uSocial-Sells-Twitter-Followers-By-the-Thousand

1998 all over again

[Anonymous Coward]

Cuban's advice is so 1998. Build up mind share, then cash out and let the company crash. It worked for him.

Any company will shrivel and die if it doesn't adjust, even a company that was once at the top of the Fortune 500. Free has nothing to do with it.

If anything, he's got it backwards

[Zigurd]

As others have pointed out, free online services are no more susceptible to a Black Swan Competitor, or even an ordinary competitor, than any other business. If there is a distinction, it is likely to be that free Web services are especially governed by first mover advantage and category domination such that they are less in danger from Black Swans than, say, a trucking company or a chain of coffee shops.

So.....just like all businesses

[imgod2u]

This is different than any other business.....how?
The longer something remains in the market, the more the profit for that item approaches zero. Even paid service. The only time this isn't the case is either in a monopolized market or when government steps in. That's why companies in the free market have to constantly innovate and come up with new things that the competitor doesn't have. This notion that any business model can guarantee that you'll make money forever once you've come up with one idea is a myth.

At first thought he was arguing against it

[Dan667]

But he is making a valid observation. If you sit on your business model you will end up like the RIAA and be clinging to it as everyone else passes you by. Cash in while you can knowing it could die abruptly, and make sure you have enough R&D to have the next product in the chamber. It is the only way to do business (and actually that has very little to do with a free business model).

Re:At first thought he was arguing against it

[PPH]

Right. Because you could just as easily live by free and die by proprietary. Or vice versa. Its all about how you leverage your core competencies, extract the maximum amount of profit, and then either sell out or invest your profits in the next big thing. What 'free' tools buy you is the ability to hang onto as much of your revenue as possible (free as in beer) and be able to move to better platforms as time goes by (free as in speech).

I've seen too many proprietary products priced based on how much revenue the customer has, effectively skimming profits off the top. And then the cost to switch (either to reduce expenses or improve processes) is designed to ensure lock in.

If You Live By NOT Free

[Atreide]

This is absolutely same for non free business.

If you specialize in a niche and it disapears or someone else gets better at it
then no god will help you.
Evolution works against you and you end up in stomach of some competitor.

Look at Microsoft.
Desktop is now only a small part of business.

They went after servers only ~10 years after desktop was launched.
Now they are in office, cloud computing, search, even gaming and a lot more.

Look at Oracle. They develop not only database but also application.

Look at IBM. They went for service years ago.

Look a Dell. They are going for service for a few years now.

Look at Apple. They are selling mp3 and service around it.

This is simply wise corporate development.
That is called diversification.

Taking advise from Cuban

[C_Kode]

I'm not sure I would take to much advise from Mark Cuban. First, he is a hard worker, but with Broadcast.com he was in the right place at the right time. Beyond that he hasn't exactly made a lot of great desciions. The major investment into HDnet hasn't been that fruitful and the major investment into Register.com was a debacle. He traded a rising star point guard for a bad apple 35 year old point guard. Today, he just spent $25M on resigning that bad apple point guard (now 36 years old) that isn't half the player he onces was.

I'll pass on advise from Mark Cuban.

Read more of his blog, good sir

[orthancstone]

Companies should focus on making money?! Outrageous!

I know what you quoted seems like an asinine statement, but if you knew the full context you'd understand the point.

Cuban's been ranting extra hard this year on YouTube, labeling it as an eventual giant bust because the model will eventually fail without profit. He's saying that people, being so used to FREE content, will feel outraged by the concept of being charged to distributed their mundane crap videos online. Thus someone will come along with a better model and replace it (he's right, it is the nature of the Internet, and only the green people who have only been surfing it for a few years now fail to realize this...they don't have the years of knowledge that accompanies seeing sites/concepts being formed and replaced by the next greatest thing).

He's lashing out against these "free" practices because they are extremely difficult to break out of. Once you offer the free content to the people, they demand it stay free. You say "Companies should focus on making money?! Outrageous!" and he's responding, "How will they make it if they don't base their model on that in the first place?"

Re:Read more of his blog, good sir

[BlendieOfIndie]

people, being so used to FREE content, will feel outraged by the concept of being charged to distributed their mundane crap videos online.

Charging a small fee to upload videos is the key to improving YouTube. The reason people upload so many "mundane crap videos" is because there is not a fee. People who are proud of good work would be willing to pay a buck or two to upload their video. The people that upload their friend burping would hesitate to waste money their money. I'm sure you would still have some bad videos uploaded. Maybe google could use the money from bad videos to give small rebates to people with good videos.

Re:Read more of his blog, good sir

[Dogtanian]

Charging a small fee to upload videos is the key to improving YouTube. The reason people upload so many "mundane crap videos" is because there is not a fee. People who are proud of good work would be willing to pay a buck or two to upload their video. The people that upload their friend burping would hesitate to waste money their money.

Careful with that. The people uploading videos are the ones providing YouTube with lots of free content. Yes, much- probably most- of it is crap, but from a financial point of view, that isn't a problem in itself because the cost of *storing* it is likely fairly insignificant on a per-video basis.

And storage isn't the financial problem with sites like YouTube- bandwidth is. So unless those crap videos are getting lots of viewers- and I suspect they aren't- they're a very minor issue, if not a complete irrelevance.

You could, of course, charge people for the bandwidth their video being viewed "cost" YouTube. Which would penalise the producers of popular (and likely good) content, and discourage people from uploading. Not a good idea.

The key to improving YouTube is more likely improving the rating/searching facilities so that the obvious crap falls under and stays under the radar.

Google isn't free

[sesshomaru]

Look, how hard is this, Google isn't selling search services, Email, document publishing software, or the like.

Google is selling eyeballs, just like broadcast tv, broadcast radio, etc. They aren't selling anything to their users, they are harvesting their users and selling them to advertisers. They are able to sell stuff that's pretty well targetted through their search and Email.

The tradeoff of charging for their stuff would be that they would become a lot less valuable to advertisers, and people who are paying to use them would resent the fact that they are "paying for advertising."

So Google's service isn't free, it's just the Mark Cuban isn't their customer. Unless he's buying ad-space with them, in which case he's just not very bright.

THE HORROR!

[greg_barton]

Someone out there with a better idea will raise a bunch of money...

My god, that would be a MERITOCRACY!

THE HORROR! KILL IT WITH FIRE

Good luck with that!

[denzacar]

Maybe google could use the money from bad videos to give small rebates to people with good videos.

Wait... You are suggesting monetary moderation based on taste and tastefulness? On D interwebz?
You are one of those "green people" parent poster speaks of, aren't you?
This site should prove insightful for your further understanding of the nature of the internet.

Re:Good luck with that!

[ShieldW0lf]

1) Be generous
2) Create trust
3) Scale out
4) Betray trust
5) Profit

It's called "Selling out". Also known under such words as "Betrayal" and "Traitor".

Yes, this is a good way to make money.

It's such a good way to make money, it really ought to make us re-evaluate this whole "money" concept as an organizational structure. Betrayal should not systematically lead to power. It should lead to death at the hands of your peers, or if you're a sympathetic sort, it should lead to disenfranchisement and a permanent spot at the bottom of societies totem pole.

How about "If you live off the backs of slaves, you will die by the hands of slaves"?

Yeah, that one holds a lot of appeal.

Re:Good luck with that!

[dkleinsc]

Betrayal should not systematically lead to power.

Good luck creating a political or economic system that doesn't reward betrayal. We've spent all of recorded history trying to figure out how to prevent that, but the problem is that any system that gets set up to prevent betrayal will necessarily get betrayed by the same jerks who was focused on betraying in order to gain power in the first place.

Re:Good luck with that!

[Undead NDR]

1) Be generous
2) Create trust
3) Scale out
4) Betray trust
5) Profit

It's called "Selling out". Also known under such words as "Betrayal" and "Traitor".
Yes, this is a good way to make money.

I don't think so. It's exactly when you betray trust that people will flock to a still-free competitor.

Re:never heard of hudsons bay company eh?

[AKAImBatman]

And I quote (with emphasis added):

No matter how much of a cash cow your current product line is, you need to be investing in the R&D to compete in the next generation of products.

I never said the basic business had to change, only that a company's offerings had to change to remain competitive. IBM may still be in the office automation business, but they sure as hell aren't relying on punch cards and typewriters to pay the bills. Similarly, Hudson may be in a more modern form of their core retail business, but they're definitely not setting up forts and trading posts to acquire, process, and resell fur pelts.

Obsolete yourself before your competitor does

[SpinyNorman]

This has got nothing to do with basing a company off free software, nor is it even limited to technology companies.

No company will stay in business forever - eventually they all seem to get made obsolete by some newer company that did a better job of predicting where the market was heading than they did.

It's possible that technology companies (in the broadest sense of technology) may be more liable to be made obsolete by "black swans" that seemingly come out of nowhere, due to the fast moving and semi-unpredictable nature of technology advances and fads, but again this is nothing to do with basing your business of free software.

Any company that fails to continually innovate and look over their shoulder, and instead just kicks back and milks the cash cow, is going to be made obsolete by a competitor with a better product, paradigm, or change in the market.

The best chance of surviving is business is if you can continually manage to make your existing products obsolete, before your competitors do.

The major danger to Google is that they are basically (at least in terms of generating revenue) a one-product company: web search based advertizing. It's not entirely obvious what their strategy is with GMail, Google Maps, etc, but I suspect that a major part of it is to help prop up their core business - to build the Google brand and customer (or rather fodder - the customers are the advertizers) retention.

Google should be worried though (and I'll bet they are) since there is so much room left to improve web search, and someone like Microsoft with the (certainly not free!) infrastructure in place to roll it out could render Google search obsolete overnight with the right software update. It's also possible that a lot of the adveritising market might switch to handhelds (presumably why Google is developing Android), or maybe to social networking sites like Facebook and Twitter where the kids nowadays all hang out.

nothing to see here

[JackSpratts]

ah cuban. i wish he'd stick to anything but opining. he's been on this rant for years and it's old. taking google for example for those addled about what exactly it is they're up to, consider them the next step in a progression that started in the early 20th century with radio broadcasters. much of the baffling junk google spends its shareholder's money on, like streetview ad-infinitum is programming. if you look at television networks and their obsession with reality tv, google has brilliantly evolved it to the nth degree: no wrangling drama queens for them. all they do is hire camera guys to drive around neighborhoods snapping pics and lo and behold millions tune in and see the commercials.

that's the model. it's venerable and it works.

google is no more or no less vulnerable than any other program distributor working such models, like cbs for instance, still in business after 80 years.

naturally they can founder - like cuban's hd network - or last for generations like nbc but that's execution. the model is sound.

- js.

Re:free markets

[oatworm]

You actually hit the nail on the head - we don't believe that certain political systems will somehow change people. Instead, we assume that the people in government are just as prone to collusion and bribery as your average capitalist. The difference between most capitalists and the government, however, is that people can choose whether to do business with a capitalist or not.

Re:free markets

[TheLink]

> In a free market none of these companies would have been bailed out. Instead they would have been forced to declare bankruptcy

But which country has this mythical free market? The one that has a thriving market in flying unicorns? Or is it the one where legislators and regulators can be bought and sold? ;)

Reminds me a bit of those "True Believer arguments". e.g. "A True Believer would never do X" where X is something bad. Looking through that "lens" you'll find that the real world has rather few "True Believers", and you don't really learn much about what the True Believers actually believe in.

Anyway, to me what is important is not whether a market is free or non-free, but whether the market is well-regulated or not. And we should focus on how to have a well-regulated market, not on how free it is. Quality not quantity[1].

There have been arguments that the regulators should be people from the industry, since they know the industry well etc, and that's why it's ok and inevitable to have the "ex-CEO of Company X" end up regulating "Company X" and stuff like that. Somehow I'm still not convinced by those arguments (especially given the observed results ;) ).

[1] Similarly there's always this popular debate about big vs small government, I find that rather stupid since what seems far more important is the quality of the government, not the quantity of it. But in a democracy I guess that's ultimately determined by the general quality of the voters.

Yes it must, sorry...

[denzacar]

Betrayal should not systematically lead to power.

Betrayal is actually just moral judgment of the action - which if unfavorable to the object of the action, said object considers unfair.
What it is really is simply possession of more information than you are willing to share, possibly favorable to you or someone else, with possibility of action or lack thereof attached.

No malice is needed. You simply know more at the time and you fail to share the info.
You fail to mention to your friend that the milk in your fridge is 5 weeks old before he drinks from the container. Instant betrayal.
You didn't want to do it, you were not even in the room. Your unconscious inaction alone led to your betrayal of your friend.
Not a very serious case, but quite true.

Information is power. Betrayal is just a matter of moral judgment on the use of it.

 
Americans have betrayed their legal ruler and then fought a war when they were faced with their actions.
So did Russians. And French. And many others...
Heck, one of the great stepping stones of democracy and human rights was when Brits betrayed their king and at the tip of the blade forced him to sign a legal document giving them previously absent freedoms.

See? Good betrayal. Favorable to the masses. Leading to power.
Still betrayal though.

Re: If You Live By Free, You Will Die By Free

[initialE]

This has got to be undoubtedly the worst James Bond movie title I've ever heard...