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Who's in the Video
Jason Fried is the co-founder and President of 37signals, the Chicago-based web-application company. He has co-authored all of 37signals' books, including the upcoming, "Rework," as well as the 'minimalist manifesto,'[…]

When companies have a “free only” business model—thinking they’ll make money later—they’re usually betting that “there’s going to be this magic switch they can flip.”

Question: Where do you see free playing into the business model?
Jason Fried:  Freern is fine.  So we have some free stuff.  We have free versions of all of rnour products.  We have a couple of free products.  We gave away one of rnour books for free.  But, we also charge for stuff.  And we charge for rnsome of the things that we also give away for free.  So you have to be rncareful not to give away too much.  We like to liken it to emulating rndrug dealers, basically.  So, drug dealers give people a little taste, rnthey get them hooked and then people buy more.  And, you know, I hope rnour products are as addictive as crack.  They may not be, but I hope rnthey are.  But the idea is that, that model works really well.  And so rnour products, you can try them for free.  You can try them as long as rnyou want for free.  And then if you need some more of our products, morern features or more capacity, then you can pay for them.  The problem I rnhave is when companies, like their business model is free only, and thenrn they say, "We’ll figure out how to make money later."  As if there’s rngoing to be this magic switch they can flip.  And it gets back to one ofrn these original things I was talking about that if you’re not practicingrn making money, you’re not going to be able to flip that switch and just rnknow how to do it really well, you need to have some time.  You need to rnhave some experience at making money.  And so, free is like... Ruby on rnRails, we open sourced. So that’s free.  That’s a framework that anyone rncan use to develop products.  And the reason we did that was because we rnthink infrastructure in general should be free.  A lot of the things we rnbase our products, our infrastructure on are free.  You know, my XQL arern for database, you know different free servers and Ruby’s an open rnlanguage that's open.  There’s a lot of open source that we depend on torn build our products and we wanted to give back that as well. So, that rnwas really important to us.  And even more so, we knew Rails would get rnbetter if hundreds or thousands of people were using it and contributingrn back to it than if we held it to ourselves and had to make all the rnimprovements on our own because that wasn’t our core competency.  We’re rnfocused on products.  Not our infrastructure.  So by open sourcing our rninfrastructure, other people can make it better for us and make it rnbetter for them.  And I think that’s a really valuable way to do it.

Recorded on July 22, 2010
Interviewed by Peter Hopkins