Rory Sutherland

The hidden cost of free technology

The hidden cost of free technology
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Back in late 2019 I met someone from Zoom who was visiting London. The company, then as now, offered free video-conferencing calls for up to 40 minutes, but charged a fee of around £10 a month to users who wanted longer calls.

Towards the end of the conversation, I flippantly asked what I thought was a hypothetical question: ‘How much would you charge to give full Zoom access to the whole UK population?’ I didn’t think much more about it, but to my surprise they came back to me a few days later: ‘If you know anyone in the government who’d be interested in this, we’d like to talk.’

In the end, I never got round to doing anything, and then the pandemic hit, which solved their adoption problem overnight. Nevertheless it remains an interesting thought experiment. Firstly, why might this have been a good idea? And why did I never bother taking it further?

One reason I was interested was because Zoom was not Google, Amazon, Facebook, Apple or Microsoft. When regulators turn their fire on these network-effect oligopolies, the criticism usually focuses on their pricing power. Maybe so. But often these companies perform their profitable work quite well.

Instead, a less visible cost of their market dominance may come from services where they don’t make money: things like FaceTime, Skype, Teams, or the various email clients given away with the ‘main product’. These defensive offerings can trap innovation in a slough of mediocrity where they are capable enough (and free enough) to prevent new entrants entering the market, yet where nothing significantly improves. Yes, it’s wonderful we don’t have to pay for email software, but the hidden price is that email technology has barely advanced in 20 years. I love Google Maps, but I don’t know how good mapping software might be had it never existed. And perhaps Skype, by spending decades without ever crossing the ‘threshold of non-crappiness’ as Zoom finally did, delayed the adoption of video-calling by years.

The resulting profusion of incompatible free video platforms also prevented hardware manufacturers from improving things further. Perhaps had government encouraged the UK population to align on a single platform, we might not have needed a pandemic before we converted some physical meetings into virtual ones.

Earlier adoption of video-conferencing could disproportionately have benefited an English-speaking country on the Greenwich Meridian with a huge surplus in professional services, more than a new runway at Heathrow. Now let’s imagine Zoom had offered the UK a price of £1 per adult citizen per month. For reference, £45 million buys only one-and-a-half miles of new motorway or 258 yards of HS2. Yet if this technology had achieved — as we now know it can — a 20 per cent reduction in peak-hours use of roads and rail, its benefit might be far greater than many billions spent on physical infrastructure.

So why didn’t I take this idea to government? Simples. It would have taken years. Large organisations, public and private, are very bad at solving problems obliquely, since the very act of redefining a problem disrupts the intricate web of reductionist metrics and incentives on which bureaucrats depend to justify their existence.

Could you get the Transport Ministry to adopt this solution? To do so would require it changes its entire outlook. The clue’s in the name: it’s called ‘The Department for Transport’ not ‘The Ministry of Getting People Not to Move About Quite So Much’.

As Keynes once wrote: ‘Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.’ Chasing targets is easy. Changing targets is hard.