What can be made free? A better question is what can't be? My friend Shai Agassi, who until recently ran technology at SAP, got a load of press this week about his new venture, which aims to create the largest electric car company in the world. Details won't be announced until December, but the basic concept is that you'll pay for the electricity, not the car. Think razors and blades, or companies giving away free cellphones to lock you into a monthly contract of minutes.
He's got a blog, cheekily called The Long Tailpipe, and here's one mind-blowing fact from his most recent post on the effect of current oil prices:
The cost of the average used car in Europe is now cheaper than the cost of gasoline to drive it for a year.
That's why "free" cars make sense: because the purchase price is now a small fraction of their lifetime costs. Shai's company is taking a bigger view of the business they're in--rather than selling cars, they're selling personal transportation, and charging a rate proportional to use. When fuel seemed nearly free compared to price of the car, companies sold cars. Now cars seem nearly free compared to the cost of the fuel. Thus an opportunity for a car company that thinks different.
(Picture taken by me on a tour Shai and I took earlier this year of the Sacramento Municipal Utility District electricity control center, part of our ongoing effort to understand the economics of electricity better.)