“Predatory pricing” is powering disruption by IT

Marco Arment has been very successful in creating Instapaper and more recently The Magazine app. Arment has been experimenting with new business models for electronic publishing. In his recent blog-post “Free works” at Marco.org he is pointing to a very disruptive force: “free services”.

Free is so prevalent in our

[tech; RPD] industry not because everyone’s irresponsible, but because it works. In other industries, this is called predatory pricing, and many forms of it are illegal because they’re so destructive to healthy businesses and the welfare of an economy. But the tech industry is far less regulated, younger, and faster-moving than most industries. We celebrate our ability to do things that are illegal or economically infeasible in other markets with productive-sounding words like “disruption”.

Much of our rapid progress wouldn’t have happened if we had to play by the rest of the world’s rules, and I think we’re better off overall the way it is. But like any regulation (or lack thereof), it’s a double-edged sword. Our industry is prone to many common failures of unregulated capitalism, with the added instability of extremely low barriers to entry and near-zero cost per user in many cases.

As long as the disruption due to free service offerings as a business model would be confined to the tech industry itself Marco’s reasoning goes that it would be fine. Even within the confines of IT it is questionable if in the long run it is a healthy development from a societies perspective. But all these IT driven free services are not confined to the tech industry but fuel disruption in many an industry. Part of the disruption is shaking up rusted status quo’s. But part of it will also cause real damage to our society.

In an earlier post (Dutch) I pointed to the disruption (IT) scalability could cause the middle classes as jobs are replaced by software to a massive extend. “Free” sounds nice but comes at a big cost to us all.

2016-11-16T10:46:51+00:00March 20th, 2013|Categories: Against the tide, Below the surface, Collaborability|Tags: , , , |

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