The Generous Pusher, or, Understanding Kelly's Law of Generosity

by Felix Stalder

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Note: This text was written for REWIRED, and appeared on December 10, 1997 on their webpage. If you are interested in distributing the text in any way, you have to get in contact with me first.

Kevin Kelly wrote:

"If services become more valuable the more plentiful they are (Law #2), and if they cost less the better and the more valuable they become (Law #6), then the extension of this logic says that the most valuable things of all should be those that are given away."

The most valuable things are those that are given away? Isn't it deep wisdom to embrace and understand paradoxes? Well, at least in this case, no!

A much more unglamourized picture of economic trends can be appreciated at the fringes, in the shady backrooms, where new technological developments and unconventional business models have always been adopted expediently. Drug money, for example, looking for new unregulated channels, fueled the growth of the financial markets early on. A decade later, the entire sector was among the frist to reinvent itself based on wireless technology. Moreover it has developed, albeit for other reasons, patterns similar to what is now becoming mainstream as the network economy. In both of these areas, on the Internet and in the backrooms, it is service, or the maintenance of a continuous relationship, that produces wealth. In the drug business, the raw materials are dirt cheap. What really makes the business is the service part of it, i.e. the pusher's ability to deliver the goods punctually and reliably.

Under network conditions, where everyone can easily copy and distribute, selling and giving away are strikingly similar acts. Once released, it is impossible to control the product's further dissemination. In such an environment, to sell a finished product which could itself maintain its value would be economic suicide or true generosity. What the savvy businessman wants, on the contrary, is a product that can not stand on its own but instead remains tied to its creator irrespective of where it ends up or how often it is copied. Copying can, like giving something away for free, even become desirable, since the more people that use the product, the more the greater the number of those who become economically tied to its creator.

Now, let's in comparison return to the shady backrooms of the economy. How generous may we say is that pusher lurking at the edges of the school yard as he hands out the first fix without charge? I would not call that act generous, but rather a promissing, although cynical, business strategy, since the pusher knows that whatever he gives away now will be easily repaid once the habit forms and the kid's life becomes reorganized around the constant supply offered by the no longer generous pusher.

In the era where "Return on Investment" and "Shareholder Value" have readily become familiar household words, "generosity" -- a concept related to unselfishness and munificence -- does not exist in the ever convulsing and expanding business world. It arguably never did, if Kelly's biological metaphors of constant change and competition have any more meaningful extent than merely deifying the ideology of unfettered financial capitalism. Giving away samples of a product, then, is a precisely calculated strategy aiming to build a relationship that provides not singular but rather constant commercial exchange.

It is impossible to rule over space under the new conditions of networks because inevitably information will leak everywhere into the network. Time, then, as Kelly rightly states, becomes the ultimate scarcity that needs to be controlled. But how? The answer to this problem is to produce goods and services that have a half-life time so short that only those who have immediate access to it can in fact profit from it and are therefore willing to pay for the privileged, real-time access as close to the source as possible. Virus software is the classic example in this case. Yes, it is given way for free in the beginning, but clearly this has little to do with generosity. The logic underlying the act is simple: old virus software is worthless. For virus software to be effective, it needs to be the most recent version; and once you have integrated the so "generously" provided product into your operation system, it is pretty obvious where you are going to spend your money buying upgrades.

The essential task in the network economy is to maintain relationships to the customer base. The best way to establish such a relationship is to give away at first without charge whatever is soon to be worthless anyway. However this is not so much different from the car dealer giving away free candy in order to lure customers into his showroom. Evidently, the proportions are drastically different in scale, i.e. you now need more than a candy to turn heads; and what you then can sell may be fairly small -- a $20 upgrade -- but this can be more than compensated by the dependence this relationship induces. From the seller's point of view, the relationship is kept alive by a small but steady stream of money bleeding in tiny drops slowly but steadily into his pockets. From the buyers point of view, relationship is the live line that maintains the value of her previous investment. Under the conditions of a scarcity of time, the time invested in installing and learning a "free" software is already a major investment in itself. At a certain point, one can not afford anymore the extra time to continually search for and install alternative free versions which might be out-there, somewhere, untested or wait for the soon to be out-dated illegal copy of the upgrade to appear free on the Net.

New technologies change the patterns of the commercial game. So obvious, but so true. The acts of selling a car in Kansas City and of selling software on the Internet is something very different. However, this does not change the goal of the game, namely, the allocation of money through the allocation of power, or, for the more politically minded, vice-versa. This is not bad in itself. However, let's be under no illusions here, this has nothing to do with generosity, not even in a remote, metaphorical sense, neither in the bright light of the mainstream economy nor in the shady junkyard behind the school.

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