The Cost of Free Doughnuts: 70 Years of Regret(npr.org)
npr.org
The Cost of Free Doughnuts: 70 Years of Regret
https://www.npr.org/sections/money/2012/07/13/156737801/the-cost-of-free-doughnuts-70-years-of-regret
306 comments
Pricing things can be strange.
Back in the old Zortech days, we included full library source for free with the compiler. Library source wasn't even available for other compilers. Nobody particularly cared that we did that, and it was never mentioned in compiler reviews in the press. One day, Borland decided to package partial (not including floating point) library source for their compiler as a separate product. The press went ape over it with headline articles about how great this was. (Philippe Kahn was a marketing genius.) Naturally, we at Zortech found this annoying.
What we did was separate out the free library source into a separate package, and put a price on it. When people called up to buy the compiler, we'd ask "do you want the library source package, too, for an additional $XX?" They almost always said yes. So we made an extra $XX on each sale, leveraging the expectations Borland had set in the market.
Of course, these days expectations have changed again. We give D all away for free.
Back in the old Zortech days, we included full library source for free with the compiler. Library source wasn't even available for other compilers. Nobody particularly cared that we did that, and it was never mentioned in compiler reviews in the press. One day, Borland decided to package partial (not including floating point) library source for their compiler as a separate product. The press went ape over it with headline articles about how great this was. (Philippe Kahn was a marketing genius.) Naturally, we at Zortech found this annoying.
What we did was separate out the free library source into a separate package, and put a price on it. When people called up to buy the compiler, we'd ask "do you want the library source package, too, for an additional $XX?" They almost always said yes. So we made an extra $XX on each sale, leveraging the expectations Borland had set in the market.
Of course, these days expectations have changed again. We give D all away for free.
I didn't know about the Red Cross and its donuts. The example I've always used for this is helping a friend move.
If the friend asks "hey, will you help me move? I'm buying pizza and beer afterwards!" I will more than likely say yes, even though I can buy my own pizza and beer.
If they instead say "hey, will you help me move? I'll pay you $21.58 for your time," I'd probably bristle. Even though that might be the equivalent price of a few slices of pizza and a beer, the category has changed from showing appreciation to placing an actual value on my time, at which point working all day for $21.58 stops making sense.
If the friend asks "hey, will you help me move? I'm buying pizza and beer afterwards!" I will more than likely say yes, even though I can buy my own pizza and beer.
If they instead say "hey, will you help me move? I'll pay you $21.58 for your time," I'd probably bristle. Even though that might be the equivalent price of a few slices of pizza and a beer, the category has changed from showing appreciation to placing an actual value on my time, at which point working all day for $21.58 stops making sense.
I witnessed something like this when I worked at a Six Flags amusement park (wasn't 6F at the time) that had a decent size water park. They did exit surveys every night, asking as many people as they could if things were ok, and one year they also asked people "Would you pay extra for the water park", it was free as part of admission. So they wanted to know if people would pay extra. People said yes. Something like 90% of people said yes. So, of course, the bosses all thought "hey we can make some extra money and people won't mind!"
So fast forward to the next year, they charged the same for people to get in and something like $10 to get into the water park. Something like 101% of people were ANGRY. Not just a little angry, VERY angry. It was a HUGE change that people didn't expect. There were VERY few people that paid. I can't remember if they made it free that year or waited until the next.
So fast forward to the next year, they charged the same for people to get in and something like $10 to get into the water park. Something like 101% of people were ANGRY. Not just a little angry, VERY angry. It was a HUGE change that people didn't expect. There were VERY few people that paid. I can't remember if they made it free that year or waited until the next.
It's true - charging for something that was once free can be risky, but it isn't always bad as some might believe. I have great respect for businesses that charge for a service that provides real value - even if it was once free. Often times (especially in the startup world), companies start out offering a free product (operating at a loss) to gain market share. It's not often the best strategy, but in some markets it's one of the few ways to break in and gain traction. Obviously, you can't sustain operating a business that way forever, so you eventually have to make up for it somehow.
Unfortunately, a lot of tech companies have (perhaps unintentionally) conditioned consumers to expect software to be free. The terrible consequence is that in response to that pressure, many companies choose ethically-questionable ways to make money when they need to, rather than simply charging a fair and honest price for their product (this includes selling users' data, overwhelming the user experience with ads, in-app purchase shenanigans, etc). Paying fair prices for things we use isn't the most appealing idea in the world, but (in my opinion) we probably need more of it, not less.
Unfortunately, a lot of tech companies have (perhaps unintentionally) conditioned consumers to expect software to be free. The terrible consequence is that in response to that pressure, many companies choose ethically-questionable ways to make money when they need to, rather than simply charging a fair and honest price for their product (this includes selling users' data, overwhelming the user experience with ads, in-app purchase shenanigans, etc). Paying fair prices for things we use isn't the most appealing idea in the world, but (in my opinion) we probably need more of it, not less.
See also: monkey grape experiment
https://www.npr.org/sections/13.7/2014/02/27/283348422/that-...
I heard a related story (I'll add source if I find it) where monkeys received 2 grapes every day. This was increased to 3 grapes per day for one week. When they returned to the normal 2 grapes per day, the monkeys threw poo at the experimenters.
https://www.npr.org/sections/13.7/2014/02/27/283348422/that-...
I heard a related story (I'll add source if I find it) where monkeys received 2 grapes every day. This was increased to 3 grapes per day for one week. When they returned to the normal 2 grapes per day, the monkeys threw poo at the experimenters.
This is a good cautionary tale and one I've seen played out in the tech industry with food. Even in the 80's it wasn't uncommon for a tech company to have a "beer bust" on Friday's where drinks and snacks were served as a social gathering for employees at the end of the work week. It was a turning point in employee relations when the VP of HR at Sun cancelled the weekly beer bust. Similarly at Google when they decided to scale back the legendary "mini-kitchens" full of snacks, "healthy alternatives" that were slowly pared down.
One sociologist I read wrote, and I'm paraphrasing, "Sharing food with another is an action of great significance. Evolutionary, the sharing of food by hunter gatherers was more significant than sex in establishing a mutually bonding relationship." They went on to discuss the importance that meals played in our history and why we "throw a feast" to welcome heroes, and the Jesus' "big reveal" happened at a meal.
The main point was that when you share food with someone you trigger a very ancient and well established mechanism. Conversely, when you stop sharing food with someone, you signal their ancient brain "I don't trust you any more, we aren't friends."
Now whether or not that thought/emotion comes to the surface, it's very clear that the for many people the change from "sharing food with you" to "not sharing food with you" changes how they see their relationship with you. What is perhaps worse is that the damage is instant and irreversible. Even if you start sharing again, the people you stopped sharing with, even temporarily[1], will no longer feel the same trust that they felt before.
At tech companies those people leave and eventually you have all employees who only remember the current system and so you're at a new "normal."
Bottom line, taking away "free" food is waaaay more impactful on company morale/relationships than you would ever imagine unless you had researched it. Thus, it happens over and over again. And even though I know a company is just trying to make me like it by giving me free food, I can't keep myself from being positively effected by it. That response is buried somewhere deep inside my head that doesn't allow for excision.
[1] Yes, there are ways to temporarily stop and not disconnect but that involves messaging before one stops sharing to both provide the external reason for the change and the conditions on which the change would revert back to sharing.
One sociologist I read wrote, and I'm paraphrasing, "Sharing food with another is an action of great significance. Evolutionary, the sharing of food by hunter gatherers was more significant than sex in establishing a mutually bonding relationship." They went on to discuss the importance that meals played in our history and why we "throw a feast" to welcome heroes, and the Jesus' "big reveal" happened at a meal.
The main point was that when you share food with someone you trigger a very ancient and well established mechanism. Conversely, when you stop sharing food with someone, you signal their ancient brain "I don't trust you any more, we aren't friends."
Now whether or not that thought/emotion comes to the surface, it's very clear that the for many people the change from "sharing food with you" to "not sharing food with you" changes how they see their relationship with you. What is perhaps worse is that the damage is instant and irreversible. Even if you start sharing again, the people you stopped sharing with, even temporarily[1], will no longer feel the same trust that they felt before.
At tech companies those people leave and eventually you have all employees who only remember the current system and so you're at a new "normal."
Bottom line, taking away "free" food is waaaay more impactful on company morale/relationships than you would ever imagine unless you had researched it. Thus, it happens over and over again. And even though I know a company is just trying to make me like it by giving me free food, I can't keep myself from being positively effected by it. That response is buried somewhere deep inside my head that doesn't allow for excision.
[1] Yes, there are ways to temporarily stop and not disconnect but that involves messaging before one stops sharing to both provide the external reason for the change and the conditions on which the change would revert back to sharing.
It is interesting to me how much free givaways people get in America.
In Austria (and maybe some other parts of Europe, not sure), not only that free refills are unheard of, you even get charged for ketchup sauce at McDonalds. (The minimal allowed food quality is higher, though, so there might be economic reasons on top of, I believe, primarily societal reasons.)
It is charged somewhere around 40 to 50 Eurocent per 25ml.
In Austria (and maybe some other parts of Europe, not sure), not only that free refills are unheard of, you even get charged for ketchup sauce at McDonalds. (The minimal allowed food quality is higher, though, so there might be economic reasons on top of, I believe, primarily societal reasons.)
It is charged somewhere around 40 to 50 Eurocent per 25ml.
Once you lower the price of a product, you can never raise it again.
I heard that on/around HN at some point and I haven't seen it proven wrong yet. There's a reason why chip bags get smaller, why new versions that seem identical to the old come out, why Tommy Hilfiger will never be a prestige brand again. And it's because customers don't tolerate raising prices.
I heard that on/around HN at some point and I haven't seen it proven wrong yet. There's a reason why chip bags get smaller, why new versions that seem identical to the old come out, why Tommy Hilfiger will never be a prestige brand again. And it's because customers don't tolerate raising prices.
Interestingly enough I used to work at a company where the one any only benefit was occasional doughnuts on Friday (we did not get health insurance/dental/vision/retirement). And honestly we would all be pissed on the days when Doughnut Friday was cancelled.
As an aside, I am really, really surprised and happy to see a plain-text website available, if you decline cookies. That's a neat approach.
Is there anybody alive that holds this grudge? Even with the article from 2012, I don't know
Was this grudge instilled in children?
Was this grudge instilled in children?
It's not about "used to be free." The Red Cross regularly shows up wherever there are people in need and charges them for things of negligible value. Years ago I was in a natural disaster where the power was out. The Salvation Army was handing out free blankets and hot meals but the Red Cross was charging for cups of coffee.
They are still like that to this day. No deep historical knowledge required.
They are still like that to this day. No deep historical knowledge required.
Sounds particularly relevant given the recent Wink pivot that's being called 'ransomware'.
> "Imagine, for Thanksgiving, you go to your parents' for dinner and after a nice dinner they say, 'That's going to be $10 per person,' " Simonsohn says. "You would be upset."
LOL, my first ex-wife's mother would charge $40/person for hosting the mandatory Thanksgiving dinner, after people also contributed in the way of co-ordinated sides, fixings, beverages.
By the way, $40/person in the 90's.
And no she was not poor, and nobody in the family was flush with cash.
LOL, my first ex-wife's mother would charge $40/person for hosting the mandatory Thanksgiving dinner, after people also contributed in the way of co-ordinated sides, fixings, beverages.
By the way, $40/person in the 90's.
And no she was not poor, and nobody in the family was flush with cash.
Both of my grandfathers retired SMSgts and I have two veteran flag cases above the monitor where this was typed.
According to my late paternal grandparents, who went through WWII, Korea, and Vietnam on active duty (and arguably the wives did as well), the American Red Cross had not-so-nice aspects to it that didn't get much press.
Perhaps national governments should support apolitical, non-religious volunteer nonprofits more, but I can also understand the need for nonprofits to survive (which may often entail charging small fees). Charging people for doughnuts who don't make much money to begin with, are first-responders, active-duty military, or individuals who just went through a disaster seems kind of uncool where I come from.
It's difficult to say how good they are today without first-hand and multiple accounts of experience. The available data shows they presently spend 3.5% ($104m) on admin and 6% ($177m) on fundraising. https://www.charitynavigator.org/index.cfm?bay=search.summar...
As an example, Feeding America, although they pay their CEO 16% more ($100k+), is a mostly better charity on paper.
According to my late paternal grandparents, who went through WWII, Korea, and Vietnam on active duty (and arguably the wives did as well), the American Red Cross had not-so-nice aspects to it that didn't get much press.
Perhaps national governments should support apolitical, non-religious volunteer nonprofits more, but I can also understand the need for nonprofits to survive (which may often entail charging small fees). Charging people for doughnuts who don't make much money to begin with, are first-responders, active-duty military, or individuals who just went through a disaster seems kind of uncool where I come from.
It's difficult to say how good they are today without first-hand and multiple accounts of experience. The available data shows they presently spend 3.5% ($104m) on admin and 6% ($177m) on fundraising. https://www.charitynavigator.org/index.cfm?bay=search.summar...
As an example, Feeding America, although they pay their CEO 16% more ($100k+), is a mostly better charity on paper.
I tend to make all my stuff open-source and free. I have no intentions of ever charging for it.
I do this for a couple of reasons:
1) "Brand-building." I'm developing a "personal brand," and I do it for a similar reason as companies give away free T-shirts with their logo.
2) Lead by Example. I have a beef with the quality of most software, these days. I have decided not to whine about it.
Instead, I just write my own software the way that I think it should be written, and leave it out there. Since quality isn't really a coefficient in most developers' minds, these days, it doesn't get much attention; which is fine by me.
So...sort of "virtue signaling," but in an even more passive-aggressive way.
I also have a personal policy of making all my work public, because I am used to it, and I think that it helps me to write better software. You always vacuum before the in-laws visit.
I would never charge for my open source (MIT-Licensed) work, but I also put the source up there for the stuff I do charge for (a tiny pittance). It isn't licensed for reuse, but it's out there.
If someone hires me to write proprietary software, then I won't put it out there (unless that's what the customer wants). I did a great deal of "behind the firewall" work that is likely to never see the light of day (indeed, much of it was in products that were never even officially released).
Otherwise, I'm likely to keep putting my work out there for free; whether or not anyone else cares.
I care.
I do this for a couple of reasons:
1) "Brand-building." I'm developing a "personal brand," and I do it for a similar reason as companies give away free T-shirts with their logo.
2) Lead by Example. I have a beef with the quality of most software, these days. I have decided not to whine about it.
Instead, I just write my own software the way that I think it should be written, and leave it out there. Since quality isn't really a coefficient in most developers' minds, these days, it doesn't get much attention; which is fine by me.
So...sort of "virtue signaling," but in an even more passive-aggressive way.
I also have a personal policy of making all my work public, because I am used to it, and I think that it helps me to write better software. You always vacuum before the in-laws visit.
I would never charge for my open source (MIT-Licensed) work, but I also put the source up there for the stuff I do charge for (a tiny pittance). It isn't licensed for reuse, but it's out there.
If someone hires me to write proprietary software, then I won't put it out there (unless that's what the customer wants). I did a great deal of "behind the firewall" work that is likely to never see the light of day (indeed, much of it was in products that were never even officially released).
Otherwise, I'm likely to keep putting my work out there for free; whether or not anyone else cares.
I care.
Same is with Free Software. On one hand it is nice that you are receiving so much value for free, on the other all business models revolving around it contradict basic sales principles and are wildly unsuccessful.
So for example, I use horrible debuggers like GDB in 2020, because there is no company that is willing to put that much effort and take that much of a risk into developing a better tool debugger, since there are no profit incentives around it. You cannot really expect developers to pay for their tools in 2020 and that is both good and bad.
So for example, I use horrible debuggers like GDB in 2020, because there is no company that is willing to put that much effort and take that much of a risk into developing a better tool debugger, since there are no profit incentives around it. You cannot really expect developers to pay for their tools in 2020 and that is both good and bad.
If you have a service where the free deal was too good to be true, then it works. I am not salty at the New York Times. I pay for the subscription and it is well worth it.
Also, now I want a coffee and a doughnut, goddamn it. Is Dunkin still open in quarantine?
Also, now I want a coffee and a doughnut, goddamn it. Is Dunkin still open in quarantine?
I didn't listen to the audio version of the posted link, but it's 5 minutes long and seems to be an excerpt of this 20 minute episode of Planet Money:
https://www.npr.org/2020/01/08/794592539/episode-386-the-cos...
Transcript: https://www.npr.org/transcripts/794592539
https://www.npr.org/2020/01/08/794592539/episode-386-the-cos...
Transcript: https://www.npr.org/transcripts/794592539
NPR’s headline is misleading—the problem was not free doughnuts, it was charging (briefly) for doughnuts. In any case, fascinating; thanks for posting.
I volunteered for the Red Cross for about 3 years in the 1990s and probably heard this two dozen times from from random people when they saw the logo.
Reminds me of the Google situation with Reader.
Anyone remembers the drama that happened when JetBrains announced they're switching to subscription model with their IDEs? That's also a categorical change: from a product, to a service.
After a deserved backlash, they fortunately backtracked and allowed people to buy perpetual licenses. But it left a bad taste.
After a deserved backlash, they fortunately backtracked and allowed people to buy perpetual licenses. But it left a bad taste.
It may be irrational, but I have a visceral hatred for people who make something free online and then take it down after they find a way to charge for it, especially if the community they were posting it on collaborated with editing, feedback, and suggestions.
One of the most demotivating experiences I had as an employee was when my employer put me on a commission scheme then did everything they could to wriggle out of paying the commission. They would have been better off not offering it in the first place.
One nit-pick.
Per Wikipedia, "member stations derived 6% of their revenue from federal, state and local government funding, 10% of their revenue from CPB grants, and 14% of their revenue from universities"
NPR is most certainly not 'free'.
Per Wikipedia, "member stations derived 6% of their revenue from federal, state and local government funding, 10% of their revenue from CPB grants, and 14% of their revenue from universities"
NPR is most certainly not 'free'.
I am amazed at how good the no-cookie experience is. You get a readable, basic-HTML formatted article, and nothing else. And that is - go guess? - exactly what you wanted for reading an article. +1
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I think this is the first time I thought TSNM; Too Short, Need More
There was a time when they charged for data points/performance traces ingested into the system. At our scale, we were paying around $100/month. We were prepared to scale that to their, I think it was, $550/month plan when our usage got that high.
They relatively recently changed their structure to charge per registered user. This would have raised our bill to around $1500/month at our current scale, to get all of of the stakeholders in there.
This is a cost incongruent with the value we were getting out of it. Even a ~$500/month price tag does not correlate with the value received, at our scale. It would one day (its a great product), but not today. So, today, we have two employees who have access to that, keeping our spend the same.
Here's the key component of this pricing change though: They will, no longer, be able to grow revenue with us. A pricing change forced us to make organizational changes. Those organizational changes mean that fewer people are seeing any value the product could deliver. When fewer people see the value, then the product has fewer advocates within the organization; its fungible utility will eventually be rolled into a competing product we already pay for, like Datadog, even if the experience is worse, because when we discuss Engine its always prefaced with "Oh, I think Dave in ops uses that, no one else does".