Sabio Column

By James H. Choi
http://Column.SabioAcademy.com
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In the last article, I discussed how pricing something as free when demand exceeds supply not only benefits unintended beneficiaries but also shifts where the money ultimately goes—and, in the end, the consumer will pay for it somewhere, somehow.

But what about the digital economy, where supply is infinite? In that case, prices truly are free. Engineering courses at MIT and philosophy courses at Harvard are available for free on edX, and you can read encyclopedias at no cost on Wikipedia. Beyond that, there are free products of all kinds, from the most basic operating system, Linux, to word processors and spreadsheets. Today, you can accomplish almost anything using free software.

You might be wondering, “Why pay for something when you can get it for free?” But all free things come with distortions. For example, if you donate large quantities of wheat, bicycles, or shoes to a poor neighborhood, the local wheat seller, bike shop, or shoe store will go bankrupt and may struggle to restart their business. Likewise, when an expert donates their talent for free, others with similar skills—or those aspiring to enter the field—are affected. This effect is especially pronounced in the digital economy, where products are infinitely replicable. Unlike wheat, bicycles, or shoes, a single digital contribution can be used and reused globally, amplifying its impact.

Consider word processors as an example. Currently, Microsoft Word is the only widely recognized paid word processor. Beyond that, many excellent word processors are available for free. While this benefits consumers, it also raises questions about the future. If our children, who will one day need to work and contribute to the economy, aspire to make money from word processing software, that path is already closed. If they insist on staying in that field, their only option is to join volunteer teams contributing to the improvement of free alternatives. Of course, the software world is vast, but nearly every type of software now has a free counterpart. Just think about how many paid apps you have on your smartphone—if you’re like me, you likely use free versions. In today’s world, the only way to succeed is to create a paid product that surpasses its free competitors.

Of course, one can contribute to humanity without prioritizing financial gain, offering their work for free. But to do that, one must first secure an income. Take Wikipedia, for example. We admire the contributors who write and share knowledge, but behind the scenes, financial support is always present—whether through direct sponsorships or through employers who pay these contributors enough in their regular jobs to afford working on Wikipedia without financial strain.

If a company were to offer its products for free, as Wikipedia or edX do, competitors worldwide would protest, and courts would likely rule it as dumping. Yet, when knowledge and talent are “dumped” in this way, they are praised rather than condemned. Regardless of whether it is praised or criticized, the economic effect remains the same. For instance, a professor at a second-tier university might find themselves at odds with administrators who would rather stream recorded lectures from Harvard professors than pay for local instruction. The current generation may fight to hold onto their positions until retirement, but for the next generation, opportunities are shrinking, and barriers to entry are already high. Of course, one can also take advantage of this landscape. In fact, success depends on doing so. Nearly all the necessary server software, databases, and programming languages are now free, meaning what once required a $100,000 investment in the early 2000s can now be accessed for just $50 a month. While the barriers to entry have risen for the average student, for those who understand this new infrastructure, know how to utilize it, and have innovative ideas, the world has opened up to unprecedented opportunities. Barriers and opportunities create polarization, and I hope, dear reader, that you will prepare yourself for this new economic era—so that you can position yourself on the favorable side