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Home / Academics / Economics / There Is Free Lunch

There Is Free Lunch

Times have changed since 1975 when Milton Friedman popularised the understanding of the illusion behind free offerings. Economists have since used the expression “There is no such thing as a free lunch” on a wide range of situations. It is, after all, nothing but natural to assume that people will always behave economically with interest of appropriating direct value over their offerings.

Counter-rationally, though, the knowledge economy finds ways to encourage and enforce that goods and services are indeed offered for free. Tight, sophisticated markets and increased competition bring to emergence the need for new (and existing) providers to renunciate direct revenue from certain goods and services in order to be able to compete. As marketing efforts are stronger and more innovative than ever, and information is easily accessible (either lawfully or illegitimately), industry players need to compromise and run the extra mile in order to earn a rightful place in competition.

It is no longer sufficient to offer “good products” – adjacent and supporting services must enhance the user experience. Even further, providing a satisfying experience at a time is not competitively feasible on its own – there is an increasing need to build a sense of relationship between the consumers and the brand. Service providers and content publishers, on the other hand, may have to abdicate initial earnings and prove themselves worthy of competing through solid demonstrations of their advantages and their commitment to the market.

As one free offering emerges, more and more free products take place as a cascade in order to compete. As so, more robust and intricate business models, with unusual and innovative revenue streams, become imperative.

More rudimentarily, the knowledge society instills different kinds of motivations to produce. Beyond the pursuit of economic returns, individuals produce in order to satisfy their needs and desires to belong, to be recognised, to be praised, or even to contribute to the community to which they pertain.

Production in the society thus increasingly involves more non-economical (or at least not initially or directly economical) rationales. Notwithstanding, production and distribution imperatively spill additional benefits, often appropriable at a lower cost than before.

Yes, competition is hard, and it gets harder every day – every month, every year, every decade. In the end, though, it guarantees us a free lunch.

 

Image source: Flickr

Nelson Adoglio
Entrepreneurship & Strategy

One comment

  1. an interesting read! good stuff and keep it up! 🙂

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