Dear readers, I promised a couple of days ago I’ll link the new long-form written piece that I’ve put together, once the Medium publication released it.
You can find it under this link:
And, as always, I will have the body written here as well for the sake of keeping the blog post on my end as well.
I hope you’ll enjoy it, but, more importantly, I hope you do something with it.
The name of the game, if you want to win in the (first half of) the 21st century, is pretty clear:
As much “free” as possible for as long as possible.
The #1 example of the sentence highlighted above is the Chinese Alibaba group’s way of doing business—give everyone free access to:
- their e-commerce store
- their media channel
- a payment method…
… and you will be repaid for it. Given their $500B valuation is based mainly on offering a lot of value for free, we can easily agree that it played out well.
There are dozens of other examples as well. Facebook and Instagram are way too overused for us to go any deeper than just mentioning them.
Intercom is publishing free books for their users — and that’s a match made in heaven, since their user base (business professionals) are into the written medium of communication. The fact that it’s free just makes it better.
SoundCloud rappers are the epitome of what happens in the music industry — and let’s go a bit meta about it: SoundCloud in itself is proof for the statement above.
Where will this movement go? There is one destination I can point out along this journey: free phones will be handed out.
Free phones will be handed out…?
Yes, no one is giving away free phones at the moment. But at one point in the future, it will happen. There will be a time when smartphones will be handed out for free.
Naturally, the free phones won’t be the topmost luxury version.
In other words: in those days when this will happen, the free phones that will be handed out won’t be what today’s iPhone XS Max is.
But the math will add up one day for someone.
It sounds as strange as this may have sounded some decades ago:
“People will give out information about themselves so that they can instantly chat to anyone in the world from any place and at any given hour. Oh! And they will also have access to 99% of the knowledge ever recorded in human history”.
And yet this statement above is true at a global scale today. A free phone in exchange for “be on our platform”? It adds up, but it will only happen when the standard is pushed higher and higher.
This standard will be firstly pushed by companies selling phones at a loss, the same way Sony sells the PlayStations at a loss. Why do they do that? There’s more value for them in another area.
Slowly but surely, this trend will advance until we’ll reach the bottom: free phones in exchange for whatever value will be found in that area.
Whether the value will be in crowdsourcing intellectual efforts, data or something else — that I don’t know.
But the thing I do know is that in the future world where we imagine flying cars and all those other futuristic thing, there are things more valuable than money or other physical assets. Those more valuable assets seem to be intellectual.
Today, the more important intellectual asset is data. That may be subject to change.
The big picture
This was just me going slightly down the rabbit hole of what will be given out for free at some point in the future.
We can think of 20 more crazy examples, but let’s take a step back. The bigger picture is this:
More and more freemium will be given. Data and user acquisition is more valuable than many things. But, just like a lot of marketing concepts, this freemium practice will be depeleted one day.
We’ll deplete it one day and we will look back at the freemium ideology and call it an “old-school technique”.
We do that already with a way of executing freemium, but not with the whole concept. Go on a certain website and you’ll get that annoying pop-up with: “Hey! If you want to read this beautiful ebook, just give us your email, name and phone number!”
Eyes are rolled when that happens — it’s an old-school technique. The same way “ABC — always be closing” is. A free phone or the freemium ideology in itself might be obsolete one day.
We find a mine full of gold, then we exploit it until it’s empty, just to move to the next thing.
The question this statement begs is obvious to me:
What branch of this tree will you pick, just before this mine is depleted? In other words, there are still many areas to be disrupted (or micro-disrupted).
A Goliath is there today, but a David (hopefully you) comes in tomorrow and offers the same thing, but better and for free. In which area will you make that happen?
I said it will be depleted one day and there’s good news in that: we’re still early in the process.
In the next paragraphs, I will go ahead and say some stuff you might already know.
I will simply re-instantiate some basic truths that will make us see the fundamentals better.
The “genius ideas” of Uber or Airbnb were possible because those people were looking at the fundamentals, so let’s look at the core principles of why freemium works.
Why is this freemium revolution possible?
The math is easy to be looked at, in retrospective. It’s also easy for me to write this out because I’m only pointing out at things that happened so far.
The hard part is on you — I will repeat these sentences at the end of this article, as I’ll have something to add then.
Let’s see the “math”: the internet comes through a couple of decades ago. Internet means that now information travels almost instantly anywhere on this planet (and soon, outside this planet ?).
The average cost for broadband is, in 99.9% of the cases, virtually a bargain for what it can give you. Whether you make money or not through this internet connection, it still is a bargain.
Think about it this way: even if you spend all your days entertaining yourself, it’s still cheaper than your average TV cable connection.
Education, thankfully for us as a civilisation, became cheaper and will continue to be cheaper and more distributed thanks to the internet (still a very warm area for disruptors, by the way).
Let’s see what we have, taking a step back. Information travels instantly for some double digits per month expenditure. Education is more accessible.
What’s the consequence of that? Mankind plays the game it has always played, but at a bigger scale now.
What’s the game, you might ask?
Picture this: whether it was saving some mammoth meat for later or inventing water tanks — our ancestors liked one thing which made us able to be here today: playing the optimisation game.
This game consists of taking pieces that are out there and arranging them in a perfect sequence so that something works better. The proof is obvious: we even made a game called “puzzle” which is based on that.
Puzzles are a simulation of our natural tendency (of those who will thrive, at least) to optimise things, to make things more efficient and to have them flow smoothly.
In fact, many other games are a simulation of that. We might be tired from the day-to-day game of trying to arrange things in a sequence that makes things better: so we might as well make a micro-version of it.
Puzzles, Scrabble, Crosswords, Tetris — even Candy Crush. They all satisfy our need for putting things in the right sequence.
What’s the correlation between our natural tendency to do this and the internet?
As you might have seen (and you did, since you’re on Medium right now), this game is also played in a different environment: software products.
Whether it’s open-source (think WordPress) or a proper business, pieces are sequenced so that everything works more efficiently. And it’s no wonder why Uber is so talked about: it’s a very good execution of a puzzle.
Something that was so obvious to everyone, yet most didn’t see it.
Getting back to my information + education thread from before, the cost of a lot of things is reduced dramatically, since $10 to $100 per month (internet connection packages) is the entry point for many things.
No matter whether you send an emoji or the nuclear codes that can destroy the world, the way information communicates is no different. That has huge implications, because a lot of what we do as humans is about information.
Think for a second about Instagram/Facebook Live.
Think about how many huge pieces of equipment were needed in 1990 to broadcast something live. And then think about how many clicks it takes one to download Instagram and do that today.
Why did that happen? Yet again: information travels instantly for a double-digits-per-month investment.
Let me highlight this again: on one end you’ve got information, no matter how much and no matter what form it comes in. On the other end, you’ve got a huge mess, within which lies opportunity.
Stripe arranged this information in a way which values what they do at $20 billion.
Square arranged this information in adjacent areas where Stripe did it, and what they do is valued at $35 billion.
Alibaba arranged pieces of information in multiple fields and offered these packages for free — and still managed to capitalise on it.
These are all good executions of a puzzle.
But let’s look at some other periods of time when humans discovered new puzzle pieces — or rather, a new board.
You can be a conquistador
Just like when ships were more broadly available than before, there was one thing left to do: explore every single corner of the planet and see what’s there.
And the Spanish civilisation capitalised on that puzzle game.
It’s 2019. Today, most corners of the planet have been explored and charted. The puzzle game of planetary exploration is close to completion.
Does that mean you can’t play it anymore? You can, but you won’t be called a conquistador.
Yet it’s the same story all over again with the internet — it’s just that the puzzle game is not close to completion. Because not every corner has been explored, the puzzle game is still going on.
So you can play it and be called a… founder, that’s what we call a conquistador these days.
And “corner” in this metaphor means one thing: every single industry must be optimised and adapted to today’s status quo, which is the aforementioned internet = information travels instantly almost for free.
When I said earlier that you should do it properly, here’s what I meant. Some industries have been adapted, but not fully — they’re just waiting to be disrupted again in a few years by those who go even deeper.
In other words, by those who arrange this information in a better way — and don’t take this as a metaphor for just quality of code.
You probably know the story about Yahoo! and Google. Yahoo! had the edge and Google was the David that eventually won. Why? Because they implemented the freemium properly.
What happens when you implement it properly? It looks to me like you develop an edge that’s so thick that other competitors can’t really outrun you anymore. Look at Google today — or at Alibaba.
Because Alibaba executed it properly, you can’t undercut them at the moment. Their optimisation of the free-and-fast information flow is pretty damn strong.
Yahoo in 1999? Not really well optimised, it seems.
Maybe there’s a better way of implementing Uber or Airbnb and they will be undercut at some point — we’ll see how that plays out.
But one thing is clear: if you want to stay in the game for long (which is not for everyone, by the way — some just want to quickly sell their company after a couple of years), you must go for…
As much “free” as possible for as long as possible.
Alibaba set a standard that’s so high, it seems quite unlikely they’ll lose it anytime soon.
And since Alibaba’s armour is so thick, it’s highly improbable that there will be a disruption within a disruption, i.e. someone undercutting their solutions.
The way they developed this armour is by offering it for free. Indeed, it requires investment in most of the cases — but that’s not a drawback.
The music industry lost to Spotify’s freemium. AOL lost go Google. MySpace lost to Facebook. Both AOL and MySpace did not raise their standards as high as they should have — thus Google and Facebook were able to disrupt a disruptor.
And they learned how to do it properly, because now their armours are thick enough so that they won’t become what their predecessors were.
But that’s the past… in the present, now, it’s about you.
So show us what you’ve got.
Show us how you play the puzzle game — and we will reward you and probably listen to you.
But if you want to play it properly, you’ll give away as much free value for as long as possible.
If it is possible for you to do it and you won’t do it, a hungrier group of people will come in either 1, 5 or 10 years and they will have conquered your previous conquistador raid.
Don’t do it the inefficient way, which is what everyone does.
The standard is only raised higher and higher.
The free phones will be handed out one day, you might as well not disrupt so that you will be disrupted yourself in a couple of years.
The math is easy to be looked at, in retrospective. It’s also easy for me to write this out because I’m only pointing out at things that happened so far.
The hard part is on you — picking that area which you like, but which hasn’t been charted properly yet (or not charted at all). Going into e-commerce — maybe too many ships have sailed for that destination.
But this is the point of this article: there are so many destinations for which no one has sailed. And the more you wait for it, the higher the chances that someone will start building their ship for that place.
Show us how you play this puzzle game.
About Ch Daniel
I’ve updated this signature in July 2020, so older mentions of the signature might not make sense.
I currently don’t write on this blog anymore. I wrote daily for 9 months on this very blog, but now I’m focused on building the CH Group.
If you want to follow my newer articles, check out the CH Group’s blog.
See everything I do here: Chdaniel.com
