>> so the "free" is not about yourbook is not about your the moralize we're told, the level our own lies increases. clinically depressed people have more accurate views of themselves than powerful people who tend to maintain a façade of strength in order to maintain their ambition. so it uncovers all these things -- like i was saying, it was not like these small lies but how to handle lies in the office, lies in your bedroom, lies at the dining room table. but we published this -- it's a psychology book, it's a book about business, becoming a more honest person yourself. >> how far in advance do you plan your twelve books a year? >> well, we've acquired -- we've got books scheduled until next august, so we have -- >> august 2010. >> sorry, august 2010. we're target to think about the following fall. not all the manuscripts have been delivered but we know what's coming up. >> as an acquire editor and an editor, what do you do? >> 90% of my job is spent promoting the books but i also have the opportunity to edit about a book a year. edited one novel last summer but most of what i do is look at the proposals coming in. i'll weigh in proposals that our publishers are reading. and let them know whether i think we can spend a full month promoting these books. it's not just great writing first and foremost, singular books which there aren't other books out there in the market and is this a writer and a subject we can really focus on for a full month beyond review covera coverage. twelve books.com is the website. >> here's a look at some upcoming book fairs and festivals over the next few months. >> chris anderson editor and chief of "wired" tackles more issues of interest which is producing books for free. the idea is to get one addicted to the stolen free product then charge for it. the google offices in washington, d.c. hosted this event. it's an hour. >> it is my great pleasure to be here with you this morning. i am a huge fan of your work and of the magazine so it's a true pleasure. that said -- >> uh-huh. >> free, you got to be kidding me. >> it's technically got to begin with h. >> i know it took you 250 pages to write the book. >> but my children when i told -- that dad's written a book about how stuff can be free on the internet, they're like, you didn't? dad, duh, it's bits. they're free. and when i tell my peers, people my age, you know, that chris anderson has written a book about how things can be free on the internet, they're like chris, you didn't. don't you know there's nothing as a free lunch i think free is the must understood four-letter word in legal issue which is the others which are well-well understood. very basically it's not really free-free, though. well, sometimes it is. see, this is -- you know, what i've learned about this was one little word is just how it's changed in meaning, how it twists our mind and we're drawn to it in equal amounts, how it has different meanings even today but the big difference is 20th free is a trick. it is -- it's not really free. you're right to be suspicious. it belongs in quote marks. and 21st century digital free really is free. google does not show up in your credit card statement. and that's based on the underlying -- what's different about the underlying economics of digital stuff which is that it costs almost nothing and whatever costs it gets cheaper. >> but what we're doing really and google is a great example because i'm a huge user of the product. i'm on docs and maps and whatever it is i'm on it. somebody should be paying for it. >> i shouldn't to have tell this radio guy here that it's possible for things to be really free. radio is free to air. television is free to air. the enact an advertiser pays for it doesn't make it any less free to you. you could argue, you know, by the way in fairness to the phrase there's no such thing as a free lunch it did understand the concept of monetary and m nonmonetary. and we go out for lunch he's paying me with his time and attention and reputation and he's going to tell me of all the awesome things and it will be of value to me. so the radio audience will pay for airtime and their reputation. you're absolutely right that you are paying for google with your time and attention, et cetera. and that, you know, if you click on an ad and then buy that product, you'll pay more for the product and, you know, the books will balance in the end. but it is -- but it's not like buy one get one free or razors or blades and free gift inside, odds are you're not going to pay. somebody else will. just a for the historical background, give us the razors and blades story with which this whole thing came to life for you. >> can i go through three years earlier and tell the story? >> yes. >> 20th century free is what economists called a cross-subsidy you get one thing for free and you pay for something else. and the classic model is razor and blades. king gillette never gave the razors but he told them as a deep discount to banks and the banks gave them away as a save and shave campaign. shave and campaign. but the consequence was the same that, you know, you were hooked on one thing which is useless without the blades and then you pay for utility forevermore. he did not invent that. the guy who invented that was frank woodward who in 1896 the beginning of the -- of the packaged goods business, stores were largely fresh goods. you had fresh products and mates and things like that. you didn't have many things in boxes and aisle or anything. if there was anything in boxes they were behind the counter and you had to call for them by name. so the original packaged foods were all powders. there was yes, it is, baking soda and because you had to call them by name you had to introduce the concept of brand. fleischman's yes, it is, arm & hammer baking soda and it became possible to take gelatin and take it into powder and it was gross before like boiling capsules all afternoon. it was a really alien concept and the brand jell-o was unknown. they said how are we going to get this brand out there? they had a fleet of trucks and they would go for the merchants. nobody has heard it and nobody is here. at the time you needed a traveling license to sell door to door and the loophole was you didn't need a license to give away things door to door and this was to allow religious pamphleteers. and the recipe book. so they created this beautiful jell-o recipe book and norman and rockwell and others illustrated and it was gorgeous and they were 5 million of them. they said -- people coming in the door asking for jell-o. we have a bunch of boxes in the back and you can stock it. they gave away something which was attractive and enticing but useless without the ingredient creating demand for the ingredient. you give away one recipe book and you create a demand for jell-o forevermore. the notion that, you know, you're giving away one product has a dependency on a paid product then led to the 20th marketing marketing model and you give the phone away and you pay for freedoms. it's not really free but an effective use of the word. >> fast forward, though, 100 plus or minus use. mountain view california they start a search engine company create this market where the internet gets better so do their sear searchs gets better -- if anything out and get the acme search company i'm not going to make 12 cents. free works if you're number one, right. >> there are winner take all markets. and winner take all markets are the ones that work. facebook benefits hugely like network effects. google benefits on network effects. you know, if you're going to advertise you're going to want to go to the place where the ads are most effective. if all the traffic is on google, that's where the ads is going to be and you're going to run the guy who has the most ads. the ads will be the most effective so there are winner take all markets but not all businesses are winner take all. there are thousands and thousands of businesses who have much narrower. their swear as a service and games and content. we're in the media business and we had this fantastic winner take all monopoly over the 20th. we owned the broadcast towers, the printing plants, the fleets of trucks, et cetera. you know, because we had these huge audiences we got the advertising, it was great. along comes the internet and, you know, the problem with the internet from a media perspective is not that it's free. it's got infinite competition and the problem with the competition is that they don't doe dowhat we do. they're not attempting by and large to do glossy magazines or national magazines. they are very narrow. they do the fine slice, the laser focus of things. so, you know, the way you compete with google is you don't do what google does. you don't create a search engine. what you do is you say we're going to have to twitter, it's a perfect example. three years ago twitter was -- it was just an idea 140 characters. today twitter has, what, 40 employees? >> yeah. >> they don't have any revenues. they don't need any revenues it's so cheap to invent. you can invent twitters and more to come. is twitter winner take all for a short time? how long is that going to last. monopolies online pop into existence and disappear. remember before facebook there was myspace and before myspace there was friendster and so on. i think google rightly believes their monopoly if they would use the word is not guaranteed and not set in stone and they are more likely to lose it ton retain it. how do you compete with free, not if you're an up and coming internet bit economy company but if you're an old line maybe even what you make can be given away on the internet but what you are is, say, microsoft. how do you compete with free? >> microsoft has had forty years of competing. microsoft was one of the first swear companies -- in the 19 '70s when it was created, the computer company was a hardware company. it was ibm. you buy the hardware and the software was free. and then microsoft -- bill greets wrote this famous letter to hobbyiests say you should pay for software and we won't continue to pay for it if it get for free and they intellectually competing people and the next step is piracy which is a form of the economy of the marketplace economics. the music industry if you don't make the market free the marketplace will do it for in the digital space. microsoft said about piracy especially in china, okay, but it's not the end of the world because you're a developing company and as you -- you know, right now you can't afford software but as you develop you will. if you're going to get hooked on software i'd rather get hooked by software be free we may encourage the adoption of computing and along microsoft lines. we know this model as the drug dealer. the first taste is free. but it works. and unlike the drug dealer model which does not increase your productivity lower the cost of computing does. and sure enough it does, as china develops it developed faster. and many chinese businesses do pay for their microsoft software. and then they competed with open source it's not about the software it's about the service level contract and the guarantee that's going to work. the coolest bit they're coming full circle and yesterday i think they announced microsoft office, 2010 is, going to be free online competing with free google docs. that their entire software will have a under 3 years is free. they've come full circle. they've realized that the chinese pirates model today are the internet entrepreneurs. same deal. you're developing. some day you'll develop faster or more if you're going to use free software, we would like to you use our free software and you may develop faster and some day you'll be hooked and you'll be able to pay us. >> there's an element of this book that requires to you wrap your head around the notion of price because despite what we as american consumers think, the price is not necessarily what the sticker says when you walk in the store and we were talking earlier about your magazine and how really functionally it has three prices. >> yeah. yeah, price seems so obvious to us and yet it's so mysterious. you know, talk about how stupid we are about price. $2.99. we've been to college we know that's $3 and yet it works. how does that work. >> i'm saving a penny. >> we round it down to 2. how does that happen? adam smith spent two years spinning his wheels about price. is it based on the intrinsic qualities of the product. eventually it came down to the market, prices what people will pay but it took us is long time for us to figure it out. so the good news about price in economic terms is that it's signaling. price is a consumer signal that says this is what i think it worth and there's some value in that. if someone pays you, you know they want a product. if you give something for free you don't know whether they want the product or not. so the problem with free you remove that signaling of commitment. the reason -- when we give away our magazines -- we do our magazine we have a zero on the website. we have $4.95 on the newsstand and if you subscribe it's $10 a year and it's 85 cents per issue. it costs us like $100 a year so why to we subsidize you by 90 why don't we go 100% and make the magazine free? because writing us is check for any amount you are signaling a commitment which we can then deliver to the advertisers and say they really wanted this. so if you write a check for one penny we can charge maybe twice as much to the advertiser because you acted -- you made this active volition that showed a sense of true engagement. >> free does not imply no value. >> well, here's the problem. we're seeing the adams world and the bits world. in the adams world free may imply no value. if you pick up a free newspaper on the street corner do you value it as the new york timing that you subscribe to? maybe not. we can't test that. online, unfortunately, where the price has been sort of taken off the table, you don't value google any less because it's free. you value it based on other factors. the way we measure that is with your time, your attention, your usage patterns, et cetera. the problem with it is that we don't know how tight that is. take twitter, for example. twitter is a free service. why doesn't twitter -- twitter could make money tomorrow. they could make money with one click of a button. they'd turn on the ad level. why don't they do it? because they're afraid it's going to screw it up. they ton know how tight their hold on these people is because they're not paying because it's a free relationship. how much can they screw it up? by introducing monetary case without it disappearing. >> 7 out of 10 people who started a twitter account which i am twit -- tweet, whatever it is four times and they go away forever so there is a cost benefit thing that you have to do. >> well, i don't know whether that's a high ratio or a low ratio. i'm a big twitter user. if they charged me, i would still use it. >> why? this is a twitter conversation which i didn't mean to get into it. >> why do i tweet? because i'm lazy. you know, i used to blog a lot. it's easier. we're finding the minimum publishing unit and maybe the next service will be 40 characters. >> how about no characters. how about you and i get a business together, no characters and we just sell ads and see how it works. >> it's our faces. >> those google guys think they have something, right? you say several times in the book a certain thing is close enough to free to be free. one one thousandth of a pen or something. as you saw in a review in the new yorker, he makes the example of youtube. youtube and google and how they're giving away this bandwidth and that's great but with, you know, 75bajillon uploading things -- >> he suggested youtube could qualify for t.a.r.p. funds? he's a very good writer and a smart guy but completely wrong. >> i'm shocked. my colleague is my sister publication of condi nast. but he knows nothing at youtube. i was at google last week. let me -- let us count the errors. first of all, nobody knows how much youtube -- youtube by the way is a subsidiary of google for those who don't know. but it does lose money but there's speculation but the hundreds of billions of dollars. google is a little wonky -- google doesn't buy bandwidth retail. they buy dark fiber. google owns a good fraction of the internet. they're not paying comcast or their isp. google has server farms that make like the, you know, river rouge plant look small. we don't understand the scale at which they work. their costs are nothing like what malcolm said. he's off by like an order of magnitude. second point, google makes money from youtube. youtube doesn't have to make money. google makes money from youtube because what google -- google has 300 services of which maybe 290 are free. what google wants you to do is exactly as you said in the beginning. google wants you to use the internet and you'll leave traces of information your actions let google make more money by selling ads. the attachment to the google network will ultimately benefit google. and whether it's that you, you know, switch from youtube to one of the other services they monetize or whether the information between the videos you upload and the videos you watch allow google to create smarter businesses elsewhere. and in economics it's called a compliment. you give away the mustard for free to make the hot dog for attractive. no one says that mustard sasays can get t.a.r.p. funds. never in human history or never in the history of advertising, same thing, really, have advertisers not found a way to follow the herd, you know, to follow the audience. when we invented the car, advertisers very quickly invented the billboard and as we moved to television, maybe that static picture could be a moving picture. it took them a while to get that static picture move. as the audience moves to youtube we will find a way for video advertising as well. the reason we can't take television advertising to youtube because it's mass to mass. coke add against "american idol." what do you put against a cat video, what do you put against my favorite tutorial. coke ad against tutorial not a good combination. >> deconstruction of malcolm gladwell aside what about the notion cheap enough to be considered free still costs somebody snmoney. this is near marginal cost costs -- >> hold this entire conversation is predicated on this idea of marginal cost going to zero. >> marginal cost going down and being close to zero. they never go entirely to zero but they get close to zero but you can ignore them. >> close enough to zero marginal costs how does that quantify as free in this economy? >> it's free to the consumer in that you choose not to charge. so for those -- marginal costs, just a little econ 101. costs are fixed costs and marginal costs. the original model was your business, sir, radio. when you set up a broadcast tower in the 1920s -- you set up a tower and you put up a signal and unlike all previous forms of media where every book you read required to you print a book and the marginal cost was not zero and you could reach a million people for the price of one. the cost of reaching one more person on radio was zero or close enough to zero or you could ignore. maybe you could push your power out and a little bit more. the marginal cost was zero. that was so profound that we realized what you need to do sergeants the maximum audience. economically it worked best as one to many. it was broadcast. it was a mass audience. we had content we need to invent, you know, a product that would suit this unprecedented ability to aggregate millions of people around the same thing around the same time so we invented the blockbuster and commonality of tastes the lowest common denominator and everybody loves raymond. >> which is a fine show. >> not to put you on the same spectrum. >> there are places you can't go 'cause they're too wonky and this entire conversation would be too wonky for this show so that's what near zero marginal costs created. it created mass media. now again we have a new medium and this has the advantage of reaching everybody at the same time and be narrow. it can be mass and niche at the same time. that's the unprecedented thing about the internet is that it's scale agnostic. what that requires you to do is use free for what free is best at which is to attract -- to get to maximize your audience to h-to get the maximum number to sample a product and then, you know, free does that in a way that one penny doesn't. this is called the penny gap. you charge a penny for your product and it's like you got a tiny, tiny little audience and you get a tiny amount of revenue and you charge nothing for your product and you have the potential to make money. >> talk about the scarcity conundrum economics as you quote in the book the study and the science of choice under scarcity. if you can't have everything you have to figure out what you want to have. in this era of marginal costs going to zero and bandwidth being cheap and computational power. we have everything in those fields and we can waste it. explain how that factors into this book. >> so scarcity is a good thing if you happen to own the scarce commodity. you know as gold miners know very well. you know, we the media industry had a monopoly in the 20th century. we had these scarce things. you had a broadcast license. i had the printing plants. you know, there was a day when newspapers had -- were, in fact, the way to get the news. if you needed to get the news in your town, the newspaper, you know, was the only way to do it. and so they had this monopoly on consumer tension and the only way you can make money is scarcity. given of economics. so what's happened -- the internet destroyed scarcity. now there's an infinite number of producers out there. there's an infinite of number of channels. there's more competition and our prices go down. that's a bad thing. our cathedrals of commerce that we built on our monopoly rent, you know, we're not going to get another one of those. we need to run more leanly because we don't have scarcity anymore. but a good thing about the fact that anyone can publish is that everyone is publishing. and youtube is a great example. youtube is the future of television. you know, one would have thought that somewhere in this city, you know, in a room, you know, not unlike this people not unlike us are figuring out the future television, wrong. what's happening is that a million people uploading their own videos is collectively figuring out the future of television. everyone says youtube but isn't it full of crap? and the answer is yes. and that's what makes it so great. because your crap is not my crap. >> no, but it's all crap. >> the way nature approaches evolution is that like we're going to try everything. we are going to -- the dandily lion seeds will land but one might find this new place. mammals are very unusual. we as mammals are unique because we have few offspring and we treasure them. >> we treasure them most of the time. >> i'm trying to ensure that they reach adulthood. [laughter] >> a tuna will lay 3 million eggs. it does not ensure that its children reach adulthood. and in economic terms you're fully exploring the potential space by throwing a lot of crap at the wall, by throwing a lot of crap at youtube every video can be made will be made. any videographer who can make a video and we may discover that the future of television is not raymond but instead of lonely girl 15 or soldering videos or all the above. >> or we watch susan boil sing "i dream a dreamed" 2 million times. >> you have a problem with that. >> no, it was a lovely song but that was the future of television? >> here's the dirty secret, right? we're not all alike. when i was a kid, when i came home from school -- and you're the same as me. when you came home from school there was four channels and one of the shows was gilligans island. >> i had mchale's navy. >> i watched gilligan's island if you watched the nielsen statistics of 1977, it turns out 14-year-old boys love gilligan's island. it was the number one show. we have found the perfect show. well, turns out if you only give people one show to watch they'll watch that show. we want to watch television. some of us wanted to watch gilligan's island but had we been given the internet maybe we wouldn't have watched gilligan's island. in the book i tell the story of -- my wife is a very tough mom. and she allows the children two hours of screen time a weekend, two hours. >> total for saturday and sunday? >> i read it two hours saturday and two hours sunday. >> you know, there are times when they're really annoying but they get more. it's weird how that works. the more annoying you are the more we make you watch television. >> i haven't figured that out. more than you care to know about our kids. >> you could have two hours of "star wars." you can watch "star wars" as george lucas only dreamed it, you know, upscaling dvd on the projector, surround sound we're going to make popcorn, any one of the six or you can go on youtube and watch "star wars" stop action, animations made by 7 years old with lego figures and they're like youtube. they had no interest in "star wars" as george lucas imagined it. what they wanted to watch what you and i would consider crap. "star wars" stop animations made by 7-year-old. they put their fingers in the screen. [laughter] >> the voice acting, but it's relevant. it's what they want. as a matter of fact, they actually -- they started watching "star wars" -- they actually are not that interested in "star wars" they wanted to watch toy soldiers animations made by 7 years old. so by any normal definition of quality, it's crap. and yet that's exactly what they want. we never knew it. no committee, no board room, no team ever realized that the perfect television for 7 years old was television made by other 7 years old. >> and it all happens because of this abundance which lets us get to free. >> because we let 7 years old waste storage bandwidth and processing we discovered the future of transition. -- television. >> horrifying. how much time do we have. 9:15 or 9:30. >> 9:30. >> think of your questions and we'll bring the microphone over. since you brought it up a moment ago, i have to ask you about the media model of free these days and you have -- i saw you in a web video and you said it's the bane of your existence because people ask you about it all the time. newspapers, how do you keep newspapers in the economy when they themselves are giving away their product for free and now saying, wait, we can't make any money? >> yeah, this is part of the meta-bane of my existence which is print dead which people love asking the editor of "wired" magazine who runs a magazine about the digital space. anyway, let's talk about newspapers. >> it's a new book, right? >> yeah. let's talk about newspapers in particular. you know, what we're discovering is that, you know, there's two problems with newspapers. the news and the paper. right? so the first problem is news. what's news? well, we don't really know anymore. when you look at what people are consuming in terms of information, a lot of it is news is created by professional journalists and some created by amateurs. the news my daughter scraped her knee on the school yard is news to me. which is more important to the news there's been another car bombing in baghdad. not -- i'm not expecting my local newspaper to report on that but it is news and there's my community and my hobbies and my professional interests and my friends, et cetera. facebook is news, right? this is news about your world. now, it's not news as we professional journalists define it but it counts -- it fills that news gap. then there's the problem of paper. in general all of our jobs is to add value to the internet. if the internet is already doing it you should do something else so the question is does your product add value to the internet. let's start with the "new york times" because, you know, all newspapers are not created equal. let's start with the "new york times." do journalists at the "new york times" add value to the internet? absolutely. does the paper of the "new york times" add value to the internet? well, you could argue that it's -- i'm interviewed in the "new york times" this coming sunday, and it's out already. i just read it online on wednesday night and it's out already. you know, when you get -- when the newspaper lands on your -- when you read this morning's newspaper is there anything on there that's news at this point you've read already. so paper makes the news be 18 hours late and leaves ink on your fingers. so the question is, okay, so what's still valuable? so let's say some of the reporting is valuable. but valuable most in a medium where we can't make as much money as we did with print so we need to find a way to make money. we'll talk about that in a second and then there's the other stuff that actually, you know, how many reporters do you need at the michael jackson memorial service? . >> more -- you need more journalist. >> if the "san francisco chronicle" sends one of their papers, how much value is that reporter is doing. i'm going to talk about the difference between the "san francisco chronicle" and the "new york times." the "times" will be fine. they will figure it out. maybe they'll be smaller but what they do still has lall maybe they'll charge for the weather iphone app or charge for content and invent a form of advertising -- they'll figure it out. my local newspaper -- my local, local newspaper the east bay express, they are probably be pretty good covering my local paper. "san francisco chronicle" i'm not sure it has a paper. it turns out my interest -- imagine a line of geography, right, that goes one mile, 100 miles, 10,000 miles, right, so i've got intense interest in what happens a mile from my home and i have interest what happens globally so i'm interested in like berkeley and baghdad. i live in the bay area. i couldn't give a crap from san jose. san jose could be san juan. i mean, i don't have that -- but it turns out the newspapers -- the city newspapers are built around the notion around the metropolitan area and i have this kind of interest in the italian -- metropolitan area. there's a guy who has a company called outside in and what they've discovered is that it's the pothole phenomenal. you're interested in the pothole six blocks from your house but not eight blocks from our house. if we all sort of had that six-blocks radius how do we scale it down to cover six blocks. we have to let the amateurs cover their own communities. i think the bottom scale we're going to be -- we're going to be sort of coaching amateurs. it's community management, right? at the top scale it's going to be traditional journalism in baghdad, et cetera. the middle scale covering san jose, i don't know what's going to happen there. i think it will be worse before it gets better. >> there's a journalism question that passages were taken without a attribution from other sources such as wikipedia. what were you thinking. what happened. >> there's two things going on here. one is the sort of question whether you should cite wikipedia and i believe you should. >> should you use wikipedia. >> i think you should. i believe you should cite wikipedia and i do cite it in the book, but in the book industry, there's a lot of debate about how to cite wikipedia and they are uncomfortable -- unlike citing wikipedia which is status they change it all the time they want the time stamp on it. you know read on july 8th, 2008. i railed against it this is crazy what happened -- what have you been doing for the last year. am i going to have to go back and retime stamp everything at the eleventh hour so i killed my notes and then i decided i was going to reintegrated all the transactions into the script and we fixed it and the edition is fixed and i messed up that last hour, you know, reintegrating of the attributions. so nowth question should you cite wikipedia. wikipedia is not all entries are excellent but some are. and you need to be discriminating. you know, we think of wikipedia and amateur and untrustworthy. some of the people creating wikipedia entries are the best scholars, you know, in the field. now, maybe not the entry on quantum mechanics since einstein wrote that on britannica but the entry, you know, on the particular passage i was talking about which is the history of the free lunch as it were was actually written by some really smart scholars on the subject. the problem is you need to check the original sources and the problem is that it does change over time and the problem -- and the third problem is that you can't actually cite the individual but the industry but it's a collaboration of many individuals and some are authoritative than others. what we decided to do with this book and we'll do going forward is that all the notes are online. it's a url and if you want to find the notes, go to the -- go online and go to the url and you can see the history of your entry and you can make up your mind whether it's a good source or not. >> get your questions ready and ted will come over with the microphone. to wrap up the wikipedia if our kids brought hispanics with wikipedia entries i would make them sit down and get out the world book. >> when you cited wikipedia at the bottom where it says what the sources were did you go to the sources and read those as well? and if they said absolutely. wikipedia was the beginning of my -- so there's two reasons to cite wikipedia one it's an entry point to the original source material and the other because the actual analysis of the wikipedia entry is useful. and prove to me you clicked on those links at the bottom and read the original material. >> how would you assess the situation with myspace? you know, two or three years ago this was the winner take all of social network site. where did they go wrong or not do? >> we should fail like that. myspace is the third largest site on the internet today. i'm not too worried about myspace. you know, myspace -- you know, if you look at myspace you can see your eyes or my eyes it looks terrible. there are no uglier pages, aside from craigslist is no uglier pages. and that's what people wanted. you could argue that facebook by having authentication as, you know, originally starting had an educational address and it had a noise ratio and less messy but facebook will have its problems as well. i would argue that, you know, myspace's biggest problem is not finding an advertising model that worked as well as the service did for consumers. you know, there's been some analysis that suggest it was a class thing that facebook was kind of, you know, a college, you know, phenomenon facebook and myspace was not a college phenomenon and there was age differences, et cetera. i think myspace ad has a very music component. it's differentiating quality in the beginning but got blurred. i like the fact they're returning music roots and going to do a better job of that. i would say that their biggest problem was the problem that all of us had they got a little complacent. after the site was successful they probably thought they won the lottery and that was it and they didn't innovate fast enough and facebook invatedd -- inovated faster. they should have been a true music resource portal, et cetera faster. i know they struggled to hire the myspace music head. complacency is always the answer. >> does a free economy make innovation easier or harder? >> free economy makes the innovation much, much easier for two reasons. the first is that this is both free as -- free as the -- >> yes. >> let me give you an example. one of my side products is a robotics company. we do open source hardware, not open source software, open source hardware. >> do you put the blueprints online? >> the schematics, the circuit board we put it all online. open source hardware -- this will terrify you, we do open source drones unmanned aerial vehicles, predators, right. little predators but they're free for all. >> everybody can have one. >> darken the skies. you know, we're competing with the military industrial complex by giving away stuff to anybody. >> how is that going? >> it's going great. the air force is really, really interested in what we're doing. so this is what we do. we give away our stuff. we give away all our intellectual property and in return, people make it better. this is classic open source models, right? with many -- with many eyes all bugs are shallow. i'll give you an example. the other day we had some of our code had this bug -- we had a bug in our drone code, think about that for a second. they had a bug and we were busy with something else and we couldn't fix it and people were hassling us and we just opened it up. we said here's the code seven hours later the community had fixed it. the problem is we don't have enough time to think all the various applications so what's happening is like i don't want to make a drone or a helicopter or a balloon or rocket or whatever and they take our code and they evolve it to suit these other markets. we're like you know do that what you want. give us credit if you want so how can we make a business out of this? >> yeah, how do you make our money. >> if you take all our stuff and make your own -- if you're a chinese company you can rip us off and make the products and sell us and you don't have to pay us a penny. if you want to buy it from us we'll charge you 2.6 times from us. and why would anyone buy from us. we built a relationship with trust. we built a community by opening the quo and building a community around this open code, people feel they understand us. they feel they want to support us. they trust, you know, that the products are what we say they are. and they pay us. they pay us 99 point whatever the people choose to pay us to make a product rather than to make it themselves. >> next question, raise your hand. >> do you think this concept will change the way that higher education works in that long ago there were books you wouldn't have to go to college you could read everything in the library but still universities are very important and valuable. do you think as more universities put their content online, that will change things? almost like in this space, a lot of people maybe don't need to come because they'll be able to watch it somewhere else eventually? >> a lot of universities are -- so mit has open course where their entire curriculum is online. harvard and others are putting their lectures online. you know, it really asks the question what is the university for? is a university for the curriculum and the lectures or is the university for something else? what we're realizing is the university is not about, you know, the you sit, we talk sort of thing but it's rather about the interactive, you know, communications -- it's the collaborations with the other students, it's the one-on-one collaborations with the professors. it's the contact that you make. it's a little bit of the accreditation just the fact, you know, you got in the door and got out the door, you know, says something about you. but the content itself can be opened up to all. and it doesn't seem to hurt the universities and it doesn't seem to diminish the personal contacts. i'll give you one more example. >> uh-huh. >> my robot jics company i was looking for a cto and, you know, i went to our boards and i found this one guy who was just awesome. and he was clearly the world's expert. he made a helicopter with our equipment. so i started talking to him and he agreed to do a project with me and we started working together and we set this company up together. i'd like to know more about you. and so he told me he was a 19-year-old high school student living in tijuana. he's now 21 years old and lives in l.a. but he got himself a google ph.d., right? he had the initiative and the intelligence and the ability right now to give himself a ph.d.-quality education by learning himself. just self-started. now he's getting a degree because it turns out, you know, some companies like to see college degrees but he doesn't need it. actually that's not true. he's learning some of the basics, some of the kind of foundational skills that he had not picked up with google. but the fact that the editor of chief of "wired" magazine -- when he went looking for the best cto in the world ended up with a 19-year-old kid in tijuana is the most inspiring story about what the internet can do that i've experienced. >> you hired him. >> hell yeah, he's my partner, 50/50. >> hi, i'm roderick and my question is -- cloud computing is the next thing in the business sector. what do you see is the next thing in the private market sector? in the digital age? >> i'm not sure i understand the question. personal private market in what way? >> facebook is very popular and youtube and so what else would you see -- and twitter, of course, is very popular and what else do you see like the next thing? >> i have no idea. everyone always asks me what's the next thing. nobody knows. i didn't know twitter was the next big thing until it was the next big thing. my crystal ball is as bad as everybody else's. we never attempt to predict things. what we attempt to find is weak signals. so i think it was william gibson the science fiction writer said the future is here but it's unevenly distributed. the next thing is already big somewhere. it might be big in korea or china or it might be big, you know, with the kids these days. but, you know, i have no idea what the next big thing is after twitter. you know, nobody does. >> i think we came up with it, zero characters and you and me making a lot of money. >> twit. it's short. >> my question is about human evolution and continuing to re-enforce consumerism. if it isn't free, somebody is going to pay for it as an advertiser. and there's a paradox in bebehaviori -- behavioral science the happier we are and how does this fit in the model that we're continuing to have consumerism? >> we only talked about the advertising form of free -- actually the book is book about free. the inversion of the free sample rather than you give away a tiny fraction of your goods is a free sample to sell the rest and you give almost everything a free sample and you sell 10% of the audience and the video game is moving to freeium. it's really quite the best form of marketing because when you convert to a paid user you're doing so not because you were suckerd with advertising but you're happy to pay. that does not address your question but i wanted to make that point. consumerism, i mean, you know, in a nonmonetary economy what does consumerism mean? i mean, you're not paying, right? you know, as, you know -- if you're getting free content online, you know, blogs, facebook, whatever, are you a consumer? i mean, are you a customer? these are the wrong words. so, you know, we're consuming more. it's absolutely true we're consuming more because it costs less, right? so we're getting more information -- my kids are exposed to an extraordinary abundance of information and content and entertainment, all of it free, et cetera, does that make them value stuff more or does it make them value stuff less. does it make them consumerists or anticonsumerists because they're not paying for anything. does it make them happy or less happy, you know, these are all good questions but it's not like they're at the mall buying more jeans. this is -- they have an infinite supply of stuff in front of them. they can -- everything they want is a click away and everything they want is online. you know, they still ask me for the credit card as often as, you know, club penguin, right? anyone who has kids with club penguin. the request for a credit card and it's free to play the game but the request for the credit card is free for their pet for the penguin. they value it even though it's free but it's not like, you know, plastic crap they got, you know -- they got, you know, for their birthday. >> it's a great question. what happens in a generation when we're all used to this economy stuff, right? >> last question. [inaudible] >> chris' first book. >> yeah, that's a great question. thank you. so the long tale was an extension of the gilligan's island. we thought we wanted blockbuster's top 20 and that's all we were offered and it was all different and it was the recognition of the diversity and variety that was latent in our culture all along but suppressed by limited distribution channels. we greatly enrichend our culture and, you know, changed the world with infinite shelf space and the only way it can be infinite is if it cost nothing. free shelf space changed our culture and changed the world. that made me think about free and then i realized not only did that -- did the free shelf space, you know, do that but also we created a country-sized economy online around the price of zero. we never had an industrial economy of this size based on zero before. i figured there should be an economic model. went looking for it and couldn't find one and wrote the book, you know, the free and the long tale are connected around free shelf space. >> i'm going to take the questioner's prerogative of the last question. this might not be the opportune time to ask this but when is the next book? >> i preannounced this but i'll talk about it. i think i'm not going to write about the internet next time. i think i'm going to write about the real world. you know, my experience at the robotics company and my experience as a hardware company built on software grounds, there's a make magazine, there's a diy -- a cottage industry growing up around sophisticated electronics today because manufacturing technology is now as democratized is atoms or new bits and a new industry. can we fix the detroit problem, america doesn't make stuff anymore. by using these same kind of, you know, democratized bottoms-up grassroots innovation with software i will apply them to hardware as well. >> thank you. [applause] >> chris anderson is the editor-in-chief of "wired" magazine. he's the author of the long tale why the future of business is selling less of more. visit wired.com. ♪ >> this summer book tv is asking, what are you reading? >> hi, i'm governor ed rendell. i don't get a chance to read many books. the last one i read was team of rivals but this summer i'm going to try to read the life story of alexander hamilton. i love history and i love reading about leaders of the past. it always gives more insights. >> to see more reading lists and other program information, visit our website at booktv.org. ..