Progress Daily

Until recently, most “free” commericial products were the result of a “cross-subsidy”: You’d get one thing free if you bought another, or you’d get a product free only if you paid for a service.

The costs of products on the Web are falling fast.

Offering free music proved successful for Radiohead, Trent Reznor of Nine Inch Nails,etc. The fastest-growing parts of the gaming industry are ad-supported casual games online and free-to-try massively multiplayer online games. Virtually everything Google does is free to consumers, from Gmail to Picasa to GOOG-411.

Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster.

40 years ago, the principal nutritional problem in America was hunger; now it’s obesity, for which we have the Green Revolution to thank. Forty years ago, charity was dominated by clothing drives for the poor. Now you can get a T-shirt for less than the price of a cup of coffee, thanks to China and global sourcing. So too for toys, gadgets, and commodities of every sort.

Digital technology benefits from these dynamics and from the 20th-century shift from Newtonian to quantum machines. We’re just beginning to exploit atomic-scale effects in new materials — semiconductors (processing power), ferromagnetic compounds (storage), and fiber optics (bandwidth).

Last year, Yahoo announced that Yahoo Mail, its free webmail service, would provide unlimited storage.

Storage now joins bandwidth (YouTube: free) and processing power (Google: free) in the race to the bottom. Basic economics tells us that in a competitive market, price falls to the marginal cost, and every day the marginal cost of digital information comes closer to nothing.

Give a product away and it can go viral. Charge a single cent for it and you’re in an entirely different business.

In the traditional media model, a publisher provides a product free (radio & television), or nearly free (newspapers & magazines) to consumers, and advertisers pay to ride along.

There are dozens of ways that media companies make money around free content, from selling information about consumers to brand licensing, “value-added” subscriptions, and direct ecommerce. Now an entire ecosystem of Web companies is growing up around the same set of models.

The priceless economy can be broken down into six broad categories:

1. “Freemium.” What’s free: Web software and services, some content. Free to whom: users of the basic version. (Think Flickr and the $25-a-year Flickr Pro.) A typical online site follows the 1 Percent Rule — 1 percent of users support all the rest.

2. Advertising. What’s free: content, services, software, and more. Free to whom: everyone. Examples: pay-per-pageview banners, pay-per-click text ads, pay-per-transaction “affiliate ads,” site sponsorships, paid inclusion in search results, paid listing in information services, lead generation (where a third party pays for the names of people interested in a certain subject), product placement (PayPerPost), pay-per-connection on social networks, etc.

3. Cross-subsidies. What’s free: any product that entices you to pay for something else. Free to whom: everyone willing to pay eventually, one way or another. Expensive wine subsidizes food in a restaurant. In any package of products and services, the price of each individual component is often determined by psychology, not cost. Your cell phone company may not make money on your monthly minutes — it keeps that fee low because it knows that’s the first thing you look at when picking a carrier — but your monthly voicemail fee is pure profit.

4. Zero marginal cost. What’s free: things that can be distributed without an appreciable cost to anyone. Free to whom: everyone. (Best example: online music.)

5. Labor exchange. What’s free: Web sites and services. Free to whom: all users, since the act of using these sites and services actually creates something of value. When rating stories on Digg, voting on Yahoo Answers, or using Google’s 411 service, the act of using the service creates something of value, either improving the service itself or creating information that can be useful somewhere else.

6. Gift economy. What’s free: anything & everything, be it open source software or user-generated content. Free to whom: everyone. From Freecycle (free secondhand goods for anyone who will take them away) to Wikipedia, money isn’t the only motivator.

Thanks to Google, we now have a handy way to convert from reputation (PageRank) to attention (traffic) to money (ads). There is a limited supply of reputation and attention in the world at any point in time. These are the new scarcities — and free exists mostly to acquire these valuable assets.

“Free! Why $0.00 Is the Future of Business,” by Chris Anderson

According to research by Warren Sanderson et al., (”The coming acceleration of global population ageing“), the mean age of the world population is 30, with 44 years left to live on average. By the end of the century, the mean age is expected to be 45, with 41 years left. So both measures, mean age and average years of life remaining, show aging.

In North America, the average age will go up through the end of the century, (from 37 to nearly 50), but the average years remaining also will go up (from 43 to 48). North America is the only region to show that pattern.

The increase in average age is caused by people living longer, and also fewer babies being born.

As longevity has increased, people have invested more in education (presumably since they’ll have more time to reap the benefits).

The researchers’ model shows an 88% probability that world population growth will end before the end of the century.

“Getting Old, Faster and Faster,” by Julie J. Rehmeyer

As human societies grow richer, people have fewer children. In most species, such an increase in available resources leads in the opposite reproductive direction. What makes the “demographic transition” even more paradoxical is that in less developed times and places, the rich do not have smaller families than the poor.

Most explanations of the demographic transition are social, and none is really satisfactory.

A study by Agnar Helgason, of deCODE Genetics, has recently provided a new explanation: that the mixing-up of people caused by the urbanisation which normally accompanies development is, itself, partly responsible — because it breaks up optimal mating patterns.

Iceland’s records since its founding by a few Vikings are so good that the antecedents of today’s inhabitants (apart from a handful of recent immigrants) are known with precision. Its medical records are also good, and most Icelanders have given genetic samples to deCode.

The study’s principal finding is that the most fecund marriages are between distant cousins. The optimum degree of outbreeding (measured in terms of the number of children and grandchildren produced) lay somewhere between cousins of the third and fourth degrees.

(”Kissing cousins, missing children,” The Economist)

Icelandic women born between 1800 and 1824 who mated with a third cousin had significantly more children and grandchildren (4.0 and 9.2, respectively) than women who hooked up with someone no closer than an eighth cousin (3.3 and 7.3). Those proportions held up among women born more than a century later when couples were, on average, having fewer children.

Despite the general pattern for reproductive success favoring close kinship, couples that were second cousins or more closely related did not have as many children.

With close inbreeding — between first cousins — there is a significant increase in the probability that both partners will share one or more detrimental recessive genes, leading to a 25 percent chance that these genes will be expressed in each pregnancy.

Mating with a relative might reduce a woman’s chance of having a miscarriage caused by immunological incompatibility between a mother and her child. Some individuals have an antigen (a protein that can launch an immune response) on the surface of their red blood cells called a rhesus factor. In some cases — typically during a second pregnancy — when a woman gets pregnant, she and her fetus may have incompatible blood cells, which could trigger the mother’s immune system to treat the fetus as a foreign intruder, causing a miscarriage. This occurrence is less probable if the parents are closely related, because their blood makeup is more likely to match.

It may be that the enhanced reproductive success at the level of third and fourth cousins (who on average would be expected to have inherited 0.8 percent to 0.2 percent of their genes from a common ancestor) represents a point of balance between the competing advantages and disadvantages of inbreeding and outbreeding.

(”When Incest Is Best,” by Nikhil Swaminathan)

Within a few months China will overtake America as the country with the world’s largest number of internet users. For the past three years China has also been the world’s largest exporter of information and communications technology. It already has the same number of mobile-phone users (500m) as the whole of Europe.

According to India’s telecoms regulator, half of all urban dwellers have mobile- or fixed-telephone subscriptions and the number is growing by 8m a month. India produces more engineering graduates than America.

The World Bank’s recently released its Global Economic Prospects. Between the early 1990s and the early 2000s, the index that summarises the technology adoption indicators rose by 160% in poor countries (with incomes per person of less than about $900 a year at current exchange rates) and by 100% in middle-income ones ($900-11,000). The index went up by only 77% in industrialised countries (with average incomes above $11,000). Poor and middle-income nations, the bank concludes, are catching up with the West.

The main channels through which technology is diffused are foreign trade (buying equipment and new ideas directly); foreign investment (having foreign firms bring them to you); and emigrants in the West.

In the past ten years the ratio of poor countries’ imports of high-tech products to their GDPs has risen by more than 50%. The ratio in middle-income countries has increased by over 70%. Capital goods (mainly industrial machinery) often embody new technology, and imports of these have increased faster in middle-income countries than in rich ones.

Emerging economies’ share of global trade in high-tech goods rose by 140% between the mid-1990s and the mid-2000s.

Relative to GDP, inflows of foreign direct investment to developing economies have increased sevenfold since the 1980s. In some countries, such as Hungary and Brazil, foreign firms account for half or more of all R&D spending by companies.

Nearly half the ($40 billion-worth of) foreign direct investment in China in 2000 came from Chinese abroad. Remittances have doubled in the past ten years and now account for roughly 2% of developing countries’ GDPs — more than foreign aid.

The World Bank looked at how much time elapsed between the invention of something and its widespread adoption (defined as when 80% of countries that use a technology first report it). For 19th-century technologies the gap was long: 120 years for trains and open-hearth steel furnaces, 100 years for the telephone. For aviation and radio, invented in the early 20th century, the lag was 60 years. But for the PC and CAT scans the gap was around 20 years and for mobile phones just 16.

In the World Bank’s database, there are 28 examples of a new technology reaching 5% of the market in a rich country; of those, 23 went on to achieve over 50%. In other words, if something gets a foothold in a rich country, it usually spreads widely.

In emerging markets this is not necessarily so. The bank has 67 examples of a technology reaching 5% of the market in developing countries — but only six went on to capture half the national market.

Technology use in developing countries is highly concentrated. Almost three-quarters of China’s high-tech trade comes from just four regions on the coast. More than two-thirds of the stock of foreign investment in Russia in 2000 was in Moscow and its surroundings. Whereas half of India’s city-dwellers have telephones, little more than one-twentieth of people in the countryside do.

Rich countries spend 2.3% of GDP on R&D, East Asians 1.4%, and Latin America 0.6%. In East Asia and the West companies spend most of the money and do most of the research. In eastern Europe and Latin America the government is the largest source of finance, and in Latin America universities do the largest share of the work.

“Of internet cafés and power cuts,” The Economist