>> charlie: welcome to the broadcast. tonight ideas for the digital age. first politico. it is the place to go for news and politics. we talk to the editors and the publisher. >> what you used to matter about you as a journalist is the way you work >> joe: i'm john harris of the washington post and that's what mattered what came after your name. you needed the institutional platform in the web it does not matter as much. what matters is the distinctive abilities of the reporters to recognize a good story, promote a good story and use the phrase i often use drive the conversation. >> there was talk for a long time about rolling your own newspaper and clip from various locations into a certain degree that's already here, that's called the internet. you simply go to the sites you

wish to go to. >> and i thought from day one that what will define the presidency the first years is the big bang theory of taking a crisis and thinking you can do big things and a lot of things simultaneously. it doesn't look at sound brilliant right now doing cap and trade and health care reform simultaneously. >> the place so watch is the white house the circle around the president and foreign policy there are a few peoples whose names you haven't heard and dennis mcdonough and i think this is a true of a lot of administrations that policies being made in the white house. >> charlie: and chris anderson the editor and chief of wired magazine who's new book is called "free."

>> there's free as in freedom and no price and the imagining what a book called "free" would say and what the reality of the become does say which is very much that not everything should be free or advertising will support everything but the underlying economics allows your cost to be in so low. >> charlie: politico and chris anderson, next. funding has been provided by the following. çó

captioning sponsored by rose communications from our sdios in new york city, this is charlie rose. >> charlie: politico is a website and newspaper dedicated covering all things politics. during last year's historic presidential campaign it emerged as a symbol of the changing face of media. today it has more reporters covering the white house than any other news organization and you may have seen and heard the reporters on television and radio where they make over 100 appearance as a week. >> executive editor of politico jim vandehei. good morning. you wore a jacket. >> once i learned there's a dress code an morning show i was happy to adhere to it. >> let's talk health care. we got into it a little bit in the last segment.

nancy pelosi drawing the ire of some democrats. >> the house came out with the bill that the cvo said does not cut health care costs and adds to the deficit and nancy pelosi is under a tremendous amount of pressure from moderate and house democrat. >> charlie: joining me is robert allbritton and executive editor, jim vandehei and the senior politico correspondent. this is an interesting show to mr. so i'll start with the publisher. how does this get started? >> it was a publication we intended to do separately called capital leader when we first started under different management. we already started to hire a staff for the publication and it

became obvious to us we were unsuccessfu unsuccessful in finding a good editor and we were not happy with the direction it was taking and a distinctly waking unin the middle of the night and turning to my wife and saying we need to make changing and need to make them now? >> charlie: what did she do? >> she said to go back to sleep. we started to look around and we encountered jim and john through mutual acquaintances and the idea clicked between us quickly. >> charlie: had you been think of do this leaving the post for an oonline job. >> we were thinking where journalism was going and saw she web transforming and people in traditional newspapers are in a defensive crouch that wasn't how we wanted to live our lives and what's more as we were brain

storming there was a huge opportunity in the web that that could be a good thing and as we were having brain storms we had no ability to pull them off and through good luck or serendipity we met robert allbritton and this whole deal came together within a few days. robert's ideas where media was heading synced perfectly to what we were thinking having an impact in the subjects we love which is politics and government and it was one of those times in life where the key unlocks perfectly within a couple days we decided to leave pretty darn good jobs at the washington post and never looked back and we're having a blast. >> charlie: what was the mission? >> to dominate the coverage of washington pol washingto washington politics and like espn. as people had a niche area we could have a bright future and

we thought what if we put together the best reporters we knew and i came from the work journal and washington post and john was at the post 20 years. we worked with everyone in washington and knew not all reporters were created equal and if we could get ten or twelve of the best and someone that worked with us at time magazine and ben smith that were up and coming and expertise in presence and put them in one place and focus intensely on politics we were pretty confident we could move to the front of the line and start to dominate coverage of washington if we were focussed. >> charlie: it was politics not government or can you make that statement? >> i think to begin with it was campaign because that was the huge story of 2008. that's what i spent my time covering but people we covered on the campaign are now rung the country and the pocies and government. >> at the time we put the whole thing together in about three

months because we knew there would be intense interest in that campaign and knew you'd probably see hillary clinton, rudy guiliani and b barack obam and at that time we focussed mostly on campaign and now it's a period of governance and the politics and personal dynamics and the gossip which makes it a fun publication and important. you need to be both. >> charlie: where are you going? what's the goal now? >> we want to dominate the space. if you care about politics and government in washington and i think as we continue to brain storm beyond washington we want to be the place. >> charlie: your competition is everybody. the washington post, new york times, it's the wall street journal, washington post -- >> some days it's somebody on sunday it may be a blogger working out of his living room some where pulling on a good

thread or story and we want in on that. >> charlie: how do you get in on that? >> the thing with the web and this is the big difference for somebody like me who grew up in an institution. what used to matter about you as a journalist is the place you worked. i'm john harris of the washington post and tom of the new york times. that's what mattered was what came after your name and the platform and in the web the platform does not matter as much. what matters is the distinctiv abilities of the reporters to promote a good story and use the phrase the one i use, drive the conversation. when i was making hiring decisions at the washington post i ran a blog and that's the kind of guy we would hire.

>> he hadn't covered the government like i had. he hadn't come from the philadelphia inquirer and the traditional staff that used to be important to journalists as they try to work their way in the institutions. what he did have and he was one of the first people he hired was the ability to drive the conversation in new york. people who were following politics and did you see what ben posted today or we got to get this to ben or can't believe what's up in ben's column. he worked for the new york observer but people weren't coming in into the new york observer but tuning in to what ben wanted to do aren't my firm belief in this web era is jim said not all reporters are created equal. some reporters drive in this arena and have a pe hgs per

ceptiveness. >> is there going to be one politico that's going to emerge as a dominan dominant force onl? >> i don't think so. the nature of the internet is to have multiple forces out there. i think it comes down to a matter of quality and the quality of the reporting and writing involved and that's what differentiates us from other publications out there. there was a lot of talk for a long 250i78 of being able to roll your own newspaper and clip from various locations and to a certain degree it's already here it's called the internet. you go to the sites you want to go to so you'll be judged by the quality of the reporting and writing of each individual publication. >> and we're making a different bet. the huffington post is trying to become a mass body and we think the future is in having niche

sites. find the people who have the same onniveness for politics and it turns out it's a huge audience and feed that and make sure you're better than your competition on this. i think there will always be a ton of areas of competition and we've seen more change in journalism in the last two or threes that we saw in the next 30 years before and in the next three years i think we'll see more than the past three years. it's an amazing period of transformation that all of us will look back on 40, 50 years from now and say wow. >> charlie: what's interesting to me and maybe this is not important, it is like this program, you guys -- it's the depth of the reporting, the mediacy of the reporting and not just the video clip that makes a difference. >> right. in some ways we have a luxury of writing for the highest common denominators and not the lowest

and assuming your readers know as much as you know and that's incredibly fun. >> >> give me a report card on the president. >> in the spring and late winter maybe as new presidents do but more dramatically got what he wanted, ran the table, everything seemed to be going well and that has worn off and things have gotten hard and he's sweating, things are hard, he's had rebuffs at home and abroad. >> charlie: let's stay with health care for example, do you think he's going get it done? >> most think there's a better than even chance he'll get it done and the democrats on the hill controlling majority and want to get it done. >> i'm very skeptical he'll get it done and i thought from day one what will define this presidency the first year or first couple years will be his

so-called big bang theory of taking a crisis and knowing people are uneasy and thinking you can do a big thing and lots of things i' simultaneously and doesn't look to brilliant doing cap and trade and health care reform and the economy one thing at a time. congress has a hard time doing one thing well and efficiently and doing three things when you only have a couple months to do it is very difficult and he's trying to do it now when you see the polls starting to shift and independents and moderate democrats have numbers going up. >> you don't think he'll get it and not by august 7th. >> i think it will hard because members of congress will go home in august and there will be millions of dollars targeted for

those voters they're already uneasy with the health care plan before it gets demagogued. imagine their reaction when they come back in september, if they're rattled it will be difficult to get anything that resembles the plan he set out to get four or five months ago. >> charlie: should he have delayed it and fixed the economy first? >> we live in the moment in the politico and we'll see it's brilliant if he does it and i don't agree with jim. with this congressional arithmetic they can get something that's a victory even the details have changed. democrats own the city for better or for worse they own the city and we'll find out if it's for better or for worse in succeeding elections i think there will be health

care and i think, to me the big question hovering over barack obama is what happens when democrats take back congress and 2008 huge majority in a historic presidential election and was that a reaction to bush or has this country fundamentally changed and shifted on his axis and we're just a different ideological country that's a much bigger believer in government and similar to europe in our attitudes about the roll of government and the private economy. my guess is we have made that shift >> charlie: you think we made the shift to a roll of attitude. >> the very fundamental way we're not living in a reagan or clinton era that in some ways obama is as far from clinton as he is from reagan. >> wale save our arguments for off-camera. there are 70 house democrat has

it hold seats that bush won in 2004 i think would disagree and don't think the country has fundamentally shifted or think they want big deficits or quick fast government action. >> charlie: do you have a fundamental shift without big deficits? >> the barometer are the conservative to moderate democrats because the conservatives won't work with obama and those 70 people are still saying the country has not shifted. john could be right. he could be smarter. >> he's are legislators that could be bought. if you have something like a majority you can say hey, texas represent you can still keep poluting in your district and get the vote. i think they have a fighting chance which is remarkable. >> charlie: with 60 members a fighting chance. >> even but that's a big step if they do it. >> charlie: give me a sense of

this administration in terms of tension and fighting within. >> i look at from the point of view of a cocktail party as anything else and they tend to leave those things as anything else. you can imagine how the staff meetings are. >> charlie: when you got washington as the center really of the world, the financial world has moved from new york to washington and all these major questions have moved to washington. we kind of like that as a washington newspaper that depends on people for advertising trying to influence the washington debate. >> charlie: who are you trying to reach? >> we're trying to reach washington influentials and shape policy and think we do a good job. >> charlie: if you can convince a bunch of add ver tide adverti online to read you are the

people that make the decisions it. >> and we have if not the most one of the most influential people reading us and to our advertisers -- >> charlie: number of times of day? >> reacting to our stories and understand we're up in the morning and trying to own the morning and driving a conversation of what people are covering on cable and at other newspapers and people want to be -- it's not easy to reach those people. they're busy and we offer them the most effective and efficient way to reach the audience and it works for us. >> charlie: everybody talks about the content and what's going to happen to content and newspapers and what do you think? what's the model for the future? >> i think the most interesting is the democrat in little rock and there's a paper down there where they gave away free classified advertise which is

effectively capped craigslist and those people out of the market and he does not allow free access to the website you're a subscriber you get the website and paper. and it's kept that newspaper in that market much more the center of the conversation of what's going on in the news and more relevant. >> charlie: are serious looking at that. >> there are lots of different models for the future. for larger metropolitan newspapers it's a more difficult process because there's an incredible cost structure. manufacturing newspapers is a business pursuit ands the a huge infrastructure to maintain in place to physically deliver the hard copy product on the ongoing basis. >> charlie: will the washington post survive? >> the changes will be painful to make but when they make them

the end result will probably be more vibrant than today. >> charlie: and they have to do what to survive and be more vibrant. >> they have to decide the topics they own. the sears robuck model with sports here and mens wear here is over. you i'm sure have a sight to check out financial news, politics i hope is us and sports, people establish individual relations with the sites we decided to put our chip in the particular space. the post and any other metropolitan newspaper can't own multiple spaces they have to died what they're about and go deep and that matters more, i think, than whether you're distributing news on print or on e-mail or mobile device. the point of the matter is do you own editorial space and can

you monitize it. >> charlie: are you? >> yes. >> the first six months are defined if the world can like you more and they hated george bush so anyone could have come in and the countries would have reacted better he's handled hill self marvelously especially overseas understanding the various audiences. he hasn't been tested yet. he's got threes great relationships what do you do with them when push comes to shove and you need to stay in iraq longer can you push them to keep troops there or the criticism down low? what about when you need more troops routed to afghanistan because things get worse or stare down the iranian government. i think he sets the stage to have more leverage than george

bush will have but we don't know until the true test comes. >> charlie: and it may come probably where? >> what's scary from the world now it can come from koreans and they're worried about afghanistan and worried about how long to keep public and most liberals in the house did not want to provide additional funding for afghanistan and this year when obama's flying high and everybody wanted to give him what he wants boy does this get harder this year and if things get as bad as everyone thinks it will it will be harder to fund it and do what he wants is is a surge and have an aggressive posture towards afghanistan. >> charlie: what's biden's role

in this government? this administration? like any other vice president. >> like most. the office itself has a shadow over it. and all vice presidents -- there's a tension built into it. i think biden suffers that and all vice presidents have to -- al gore did and he had a first-rate staff and a good relationship with most of the press is a with clinton. >> charlie: walter mondale. >> dick cheney is the only one who hasn't vying for access and influence and credibilit credib the role that almost by definition is held up to some ridicule. i think he's doing fine and i think it's real they make fun of him and condescend to him. i've heard it myself. >> charlie: they do? >> yeah, they do.

but it doesn't mean they don't give him serious works. >> charlie: gaffs? >> neediness. >> charlie: neediness? >> all vice presidents have to vie for time. >> charlie: that's a new term. who are the emerging stars in the obama administration? >> in the administration -- i think it's true of many white houses but the place to watch is the white house the circle around the president and i think in foreign policy there's a small circle of people who's names you haven't necessarily heard, tom donnalin and jeff mcdonough and i think it's true of a lot of administration has it policies are being made in

the white house and people at the agencies and secretary clinton have to work hard to get to be heard. >> charlie: what about geithner. >> he's certainly survived and recovered which is -- after i think they had entirely sought through the fact he hadn't done television appearances before he was on the line and i think he learned on the job but i think he certainly is a treasury secretary which was not absolutely clear he would be a couple months ago. >> charlie: i keep hearing about rohm and his centrality and how the president leans on him more and more as a reliance factor that goes beyond the role of chief of staff. >> it's stunning. move who watched dating back to the 1990, i think at one time he was considered so aggressive and

so angling and now you have recognize he's probably one of the most influential cheifs of staffs in the hift of the modern presidency because he has such tremendous energy and accounts. he handles the legislative account and always central when they're cutting the deal and handles to a remarkable degree the press and media. >> charlie: he and axelrod. >> and the political account. how are we doing. what are our numbers doing. what's the long term strategy. >> charlie: is he accessible. >> one says that at your peril. sometimes i can't get him when i want him and sometimes i get him i don't want him. >> charlie: have we passed the tipping point of the dominance

of online. >> i don't think so. >> that's what's interesting about supported media, they're still superior to the dollars going into internet media and when you look at companies like google and the search engines profiting from it's remarkable there are sites like ours that are profitable off advertising dollars. we have no subscriptions. >> charlie: and what about this person? >> one interest thing about her is she has emerged -- i mean she's somebody people like it read about in america and not true of many congressional leaders. she's not just a washington figure. she's really -- although i think he's proven more resistant to caricature and republican attack, there's an attempt to cast her as this sort of wacko,

san francisco character. >> charlie: and more baltimore democrat than san francisco democrat. >> her approval ratings are low or lower than dick cheney. >> charlie: it it means what she has an approval ratedings so low? >> the republicans have not turned her into the democratic version of newt gingrich who's name was linked to any r&b republican a democrat was trying to run against but that's a problem when one of the faces of your party is as popular as dick cheney. the didn't finish that popular at the end of the bush years. >> i'm a power guy not a popularity guy. she has power that newt gingrich would have killed for because she's stuff and disciplined and rules that place with an iron fist and has the chairman the

wants and the position she wants and gets what she wants and people fear her and seem to respect her. she's totally unpopular especially with republicans and with a lot of democrats but she seems comfortable letting her own moderate democrats take shots at her. >> charlie: they like her more than they love her? but she couldn't get it done with merta. >> but got everything else. got waxman in the key position and knows how to maneuver and use the institution. >> charlie: what's the core of competence. >> it's an understanding of how power works. if you look at rom emanuel why was he so successful? the understand congress and the needs of members. why was tom delay effective he understand the power of fear and what members need. she learned that and watched it and been in leadership and becomes speaker and applies all of that and puts the other

people who she knows have the same understanding and passion around her and it's worked for her. >> charlie: what is the most interesting question you'd like to see answered and what's the most interesting thing about president obama? >> most interesting thing from president obama from my point of view how he has transformed race relations in the country simply by him being in office. i had somebody turn to me saying if this is the quality of the first african-american president in the united states then race relations, while they have a long way to go, have come further than they have to go for there fob a level of harmony in the united states. question i would like answered, quite frankly, when will this paper wind up winning a pulitzer prize. the thing i want to know i guess

about the obama white house mostly is you never really know how these things work in real time. there was a myth about the bush white house and how darn confident were and dick cheney and karl rove and they loved it each and karen and karl were working all the time and dick cheney was doing what he wanted to do. i would like to know how much of that is mythology and reality and is axelrod the rove of this white house? does he have the broad portfolio and influence he has. >> the whole obama presidency i think depends on growth. people are ready to have a much bigger role for government but not if it means low growth and huge deficits. it will and that's an -- if the

economy lags the whole thing drags on that. >> charlie: people tell me inside the white house those that talk to me that they understand. they have an awareness of the window and an awareness of the risk they face. >> but they don't really control as self-confident and poised as barack obama was. >> charlie: what do you think the mistake was giving too much power to congress to write legislation -- >> maybe small tactical mistakes but what we have a huge strategic gamble. we don't know if it was mistake. they went with a big bang theory and it may be disasterous. >> charlie: will they have another plan? >> i doubt it. the conservative democrats the people that won in 2006 and 2008 by beating republicans from very conservative areas are not enthusiastic about it. >> when you talk about the

biggest mistake it mayçó turn o to be the stimulus bill and a small percentage has been spent so far and if you look at the coverage it's portrayed as being spent inefficiently and one of the are reasons the people are calling into question the health care and cap and trade and saying wait you asked to us rush in to do stimulus bill and now we'll have unemployment over ten percent. >> charlie: his argument is it's necessary for the sustainability of the economy. >> and the thing that struck me on the campaign as the most interesting thing about him is his tendency so go big in response to a crisis and to broad enrather than narrow the field and i guess i think the interesting thing will be when he hits his first failure. right now he responds to that. >> charlie: thank you all. pleasure to have you here. >> great being here.

>> charlie: chris anderson is here the editor-in-chief of wired magazine and has a new book called "free, the future of a radical price" saying businesses can make money giving things away, free. i'm pleased to have you back at this table. have you them up and arms. you just saw me do a show with them and here comes a guy who says have you to give it away and hope for advertising support and said that's not as easy as chris thinks. what don't we understand about what chris thinks? >> free is the most misunderstood four-letter word in the english language. it has changed in meaning from razors and blades and 21st century, free as in freedom and free as in no price and then

there's the imagining what a book call free would say which is like everything should be free and then what the reality of the book does say which is very much not that everything should be free or advertising will support everything but the underlying economics of digital stuff allows your cost to be so low that a tiny fraction of your audience can get it. >> charlie: it's free for most but not all. >> it's defined as not so much the product is free for all but free for you. google doesn't show up on your credit card statement. we're aware of what they're enjoying now and there's a new model called freemium giving one percent of your brownies as an example. >> charlie: as a lost leader. >> you give out 99% of your

product digitally for free. so think flicker or flicker pro or if you're a g-mail user and want extra storage you'll pay for that. that's only possible with digital stuff and when you look at the are vcs saying i'm not going support an advertising supported business model i agree but increasingly moving to freemium like maybe here's a free version and here's the pay version. the free version is a great sample and if you convert to paid is because you used it and liked it and you're loyal and the best form of advertising around. >> charlie: that's the premium. >> that is the way free -- the first wave of the internet was build a big audience, use the low marginal cost and throw ads

against it and the second wave of the internet was we're going to have a new kind of add and it's more effective and that's google and the third wave of the internet is building a big audience to sample product and upsell ten percent of them to the paid version and that's like the video game world as it goes from a box you buy for fifty bucks to a free to pay online game think penguin or second life and then it becomes free to pay and you want a pet for your penguin, you want a hat, you want to play on the cool glacier over there you have to pay. >> charlie: the premium model is the one going forward. >> the first really new business model it's not easy. have you to think of a two products a free and paid one and people are paying you money but only a ten percent or twenty percent.

>> charlie: what's the conflict between you and malcolm that wrote the review and you responded. >> i didn't respond onwire that would be abusing my position i respond in my own blog. malcolm owners that if the poster child of free is google in video form that would be youtube his mind was if youtube was a bank it would qualify for tarp funding. he says free is a bubble and the fact that xrou had youtube is not making money is the chickens are going to come home to roost and this is another subprime scenario waiting to happen. >> charlie: what does the think is going to happen that youtube. >> ultimately that businesses like youtube are not going to make money and the revenues you can get maybe advertising. >> charlie: do you think the same for facebook?

they're spending money to have another friend. >> malcolm says it's all a ponzi scheme and a bubble and that soon or later band width bills are going to come in and the companies will go bust and in adam's economy everything gets more expensive every year and bits, everything gets cheaper so whatever youtube cost it will cost half as much a year from now and half of that and never have we seen an in dus industri economy get cheaper and what volume gets you is attention and reputation and the actual cost so you may lose money this year but won't lose money next year. what malcolm doesn't understand is google doesn't buy band width

whole sale. they're buying dark fiber and printing plants. >> charlie: they go the world putting up these. >> they're losing a lot less than people think and i suspect they'll break even youtube this year and not only is not a bubble but as the advertising model learns to find licenses the way video is on youtube we'll see an economic engine as powerful. >> charlie: the argument is people don't want to be next so some of the things that are on youtube or next to some of the things on facebook. >> the beauty of text is that you have an infinite diversity of text and narrow knitting blogs and you can create knitting ads and the ad and the content are perfectly matched and relevant and when they're perfectly matched, everyone's happy. the users -- it's content and

the advertisers feel it's effective. the problem with video is you can't make as much video as advertisers as the users can create and you need a soddering tutorial ad. we haven't figured it out. the small to small. the internet is the first small to small medium and broadcast was easy. big audiences, big ad. great for coke and cars. the internet allows the content to be broad or narrow. we figured out the broad ads, we haven't figured out the narrow ads when the do the television industry is going to restructure. >> charlie: how are newspapers and prints going to restructure >> would you think we'd know the answer by now. some print is dead and some is not. the question is does your print

add value to the internet and the audience wants it now and not 18s hours from now and the problems is there's nothing wrong with newspaper news but the print and the ink on your fingers and we're monetizing at at one-fifth and newspaper journalively is being read more than before. we like what they make. that's good. >> charlie: we like the product of newspapers. >> we like the product and value journalism and don't know how to charge for it. >> charlie: so you're the new york times. >> they'll be fine. you know. >> charlie: because they have such an international classy brand that in the end if they can get it they'll pay for it because it's that valuable. that's the argument is if not?

>> the number ones in every sector will be fine. >> charlie: and the question is how can they come up with enough revenue to pay for expenses which made it a quality product in the first place. >> exactly. >> charlie: what's the answer. >> let's say the costs fall by half as you move online. > as you switch from printing paper to online maybe half your costs go away but your revenues fall by four-fifths. little problem there. i think the wall street journal and papers like them and the new york times will be fine. not quite yet. the wall street journal has a good model where it's free versus freemium. >> charlie: you get some free and some you pay. aren't they prepared to do that -- they had something called

select. >> the question is not free and pay. of course it's the answer free and pay but what's free and what's paid. the first time they said the columns wants to be free because you want to be in the conversation and if you're not present if you're not easy to get to you'll lose your influence. your videos are free online for exact that reason. one reason is so the conversation -- >> charlie: i don't know who would pay for they will. >> it's important for your place as a public intellectual. >> charlie: someone came know and said the other day you have to figure out a way you'll do something about this remarkable archive and property you have and that's continuing this stream not only continuing but

more rich than it's ever been and you do something value-added that make it premium product whatever that is. >> there is for all of us. the audience wants free. we need paid. so what's the pet for our penguin. so the question is not how do we go down in price, how do we go up end price. so we're wired. we have three pricings, zero the website and 80 cents an issue and the news stand. what's the other versions. >> charlie: what do you think it is? >> if you're radio head you're giving away you're music for free and get you a big audience in sampling and then say so with they will $100 version is the

box set and then the vinyl and then the $350 version is the front row seats at the concert. the question is for media so you can stick to some of your contend and maybe the new york times can charge for the iphon app. >> charlie: do you think that will be enough? >> no. >> charlie: so there is a weakness in the argument right there? >> well, we don't have the answers yet. we know free is here to stay. we have not figured out -- we demonetized one industry. >> charlie: the answer we go free and i don't have an answer with a revenue stream to allow you to survive. that's where you are? >> we figured out free is here to stay and very to replace the revenues we lost with something else and everything business has to figure it out differently. google answered that and makes

lots of money. >> charlie: selling information for advertising. >> that's a good answer. i suspect facebook will answer in the next year or two? >> charlie: how do you suspect? >> with better ads and twiter will do that with premium service and the wall street journal seems to have answered it pretty well already and new york time times not yet. and everyone has to figure out who their pet for the penguin is. >> charlie: i'm not sure the wall street journal could survive based on the revenue they get. >> among newspapers? who's figured it out? >> charlie: anybody. who gives away their product. >> software companies. that's another business that up the physical box and as it moves

online they're with the service with 2.0 companies. once upon a time come april 15th you go and buy the product, turbo tax and now it's online and you go to turbo tax.com and it's now free, however, once you've typed all your information and it's like oh, i live in the state. state's not free. state's the pet for the penguin. >> charlie: what if someone says federal and state free so go with me rather than tur rather . >> people will race you to the bottom and if you have more compl complicated text you keep segmenting the audience and find people price insensitive and when i they're in they stick.

>> charlie: what's important to me is the argument for free. wal-mart did. they were able to offer for good quality products things that most people wanted at a cheaper price, a, because of volume, buying power, b, because of efficient is an of inventory and how to sell things and what happened is people poured in to see them. price as always been an indicator of demand or has it not? >> price is terrific because it's signaling. price tells you what people value. take software off the table, how loyal are they. twitter has they of the same question, how loyal are customers. >> charlie: as long as quality is there this is not talking about buying something that the product is not as good. and you chief efficiency and

other things. >> that's all these cliches and scale. like you get what you pay for. sometimes thanks to globalization, china or whatever, you can get higher quality at a lower price and there's a great example of how stupid we are about price. free is about psychology. not about price because the price is zero. >> charlie: is this a more important lesson for the book? >> free is a bigger theme. theme predates thpredates the i it's ubiquitous. i think every industry will have to have a strategy and it's not neat. it's messy. we're midway. >> charlie: there are a lot of

unanswered questions which freely suggest you don't know what the answer will be. >> because the internet is deflashry we'll demonetize end industries before we fix them. what we're seeing in the newspaper industry is just the beginning. we'll go through this on television and it may go through this as products become software and switching from physical goods to online things it becomes inevitable and it will you're competing about free or using it and the consequence is the first wave is that you nuke the business. looks like no one's making money or get a winner take all in the case of google and then over time or craigslist has done to the newspaper industry for every value they take out of the newspaper industry it keeps making one million. the rest, where does it go?

vaporized. it will get worse before it gets better. it's not my choice or ideology. it's just an is. free has been around ten years and it's growing and what the internet enables. the question is not free or not free but how do we find business mol models to make money. >> charlie: eric schmitt said with the cost of distribution driving toward zero he's driving toward the next big thing. >> the two most dangerous keys on the keyboard, control, d. >> charlie: this is true. people have to be careful. >> we're in a cut and paste era. i just screwed up. i think you should site wikipedia. it's not uniform in quality but

some of the en entries are the t around and i messed up the attributions but it's all fixed. the digital form by the way the book is free online and the digital forms are -- >> charlie: you go to the your website or how do you get the book free? >> it's free on the kindle or iphone app and skrib. >> charlie: the book is "free, the future of a radical price" and questions remain about how it will play out. it's a critical idea people are trying to find their way out of. thank you. thank you for joining us. see you next time.

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