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What to do if the model does not fit reality

Many people sympathetic to the free market are not at all sympathetic to open source. I used to be one of these people. It seemed to me that open source was doomed to failure: it cuts against the idea that innovation is more likely to occur when people exclusively own something. Yet the success of Wikipedia, Firefox, Thunderbird, and now the newer, more user-friendly versions of Linux means the old skeptical economic model is difficult to keep up. The open source world has upped its game, producing high-quality products that often beat closed source and more traditionally-designed products. Some will no doubt put their fingers in their ears, close their eyes and deny the reality. But it seems to me that when the economic model does not fit reality, it is time for a new model.

34 comments to What to do if the model does not fit reality

  • A system can be for-profit and open source at the same time. This means you can provide a service which increases in value _because_ it is open, and vulnerabilities and problems can be identified and fixed faster.

    In addition, there is something to be said for increased customer interaction. Compare an option mail-back survey on some consumer product, verses hundreds of knowledgeable and self-interested people helping to improve your product.

    Also, some components of software can be open source, while a tiny portion can be hidden.

    This all, to me, shows that it isn’t as simple as “open source == communism”, as some opponents of Richard Stallman and the like would have us believe.

    Also, there are literally thousands of worthless open-source software packages out there. Perhaps the user base didn’t get large enough to self propel. Perhaps the underlying idea is worthless. Perhaps a closed source product came out that beat the open source version. Just because it is open, does not mean it will be good or better.

  • Johnathan Pearce

    Alex, your final sentence is dead-on.

  • Bernie

    I understand the sentiments as I was once turned against open source because it’s proponents were so anti Microsoft and appeared to be anti free market. But I think it has grown up somewhat. Just as some early internet users decried it’s “commercialisation”.

    But I’m not sure a new “economic model” is needed. Which one is broken?

  • fiona

    Volunteer work has always been a large part of my life. I don’t see why a volunteer sector in software is so different, or how it somehow breaks the model.

  • Perry E. Metzger

    I’m a rabid free market advocate, and also an open source advocate. The two are not incompatible. Open source software is based on people getting together on a voluntary basis to meet common needs. It is not based on coercion, and is not imposed upon anyone.

    One reason it is successful is because software is not like most goods. More specifically, software is more like the design of an object than an object. A chair can only be used by one person at a time, but the idea of a chair, or the design for a chair, can be shared freely without making anyone less well off.

    Why would any rational individual participate in an open source project? Because it is rewarding for those involved to participate. That’s the same reason people participate in any sort of economic activity — because participating makes the participant better off.

  • Bruce Hoult

    I’m a programmer and an individualist and I totally do not understand the “Open Source == Communism” claim.

    Open Source is all about free exchange of value for value. No one is forced to do anything they don’t want to, and the multiplication factor is huge.

    Is it communism to voluntarily get together to help build your neighbour a barn?

    Open source is like that, except that when you’re finished *everyone* somehow has their very own barn which starts out just like everyone else’s but you can then customize it how you want.

  • I think part of the issue with intellectual property in general (not just as it applies to software) is that there are two sides to it. The first part is property rights and the way in which the grant of them encourages innovations, which free marketers instinctively think is a good thing, and the other side is that the granting of intellectual property rights also constitutes the government grant of the monopoly to produce something, which is something that free marketers generally think is a bad thing. Too few intellectual property rights means not enough of the first (good thing) and too many means too much of the second (bad) thing. The trouble is that where the correct balance between these things lies is a point of great disagreement, so people who are otherwise in agreement that free markets are a good thing can have wildly different views on what is right with respect to intellectual property.

    That said, regardless of where you stand in the argument, I don’t see the slightest problem with open source. People are choosing voluntarily to create software and are voluntarily choosing the terms under which they licence it. That is a free market position. Open source products provide competition to Microsoft and other companies, and competition is good. (The open source model also allows people at multiple smaller companies to work together to compete with larger companies, which I also think is good). The question is whether the resultant software is useful, and in my opinion much of it is.

    (By the way, in addition to the products Alex mentioned, another open source tool I would recommend to be used on the desktop is the media player VLC. Its user interface is decent (there are widely used commercial products with better interfaces, and there are widely used commercial poducts with worse interfaces) but it is far more flexible than any commercial product I am familiar with. If you have a video file encoded in almost any common codec, and packaged in almost any common container format, VLC will likely be able to play it. (It’s an excellent DVD player, but it is much more than that). It saves me a lot of hassle).

  • Alan Peakall

    The point to keep in mind is that Open Source is not public property; it is collectively owned private property. The legal instruments, most importantly the GPL, function as the articles of association of the collective. A crucial attribute of property (the right to exclude) is available for deployment against those who violate their obligations only through the existence of intellectual property as captured in copyright law.

    Among Open Source propagandists there appear to be two attitudes towards intellectual property. One, which is quite consistent with minarchism, approaches it with an attitude that the burden of proof is on the defenders of monopoly to show that it is in the public interest. The other attitude is one of absolutist opposition which often seems to be rooted in a taboo on rent regardless of the economics of production.

  • There exists in the software market a thing that free marketeers cannot abide – a monopoly in the form of Microsoft. Google’s decision to promote Firefox can be explained by their desire to ensure Windows don’t use IE to dominate the search market. Equally, building a $200 linux machine is a way to make sure all PC users don’t have an MSN search-bar on their desktops.

    The same goes for people like IBM and SUN embracing open-source software – they have a rational self-interest. Without the embrace of such large businesses, open-source would proably be less prevalent. As for the programmers who produce the stuff for free, well some of them manage to make money of it (including Linus Torvald) while others do it for the same reason bloggers blog, commenters comment and idiots play football in the rain on a Sunday morning – not all work has negative utility.

    There isn’t actually a single economic model. The prevailing neo-classical synthesis is too mechanistic in it’s approach but if you take into account the fact that there is not a proper free-market in operation – it doesn’t do a bad job of explaining the software market.

  • Nothing’s broken. The free market is good, software is good, they are good for each other. There is no need for a new model, though perhaps a new interpretation.

    My interpretation is that open source is rabidly free-market, its just that the participants recognise that enforcing IP is difficult, costly and harmful to product quality and market size. Having recognised those facts they exercise their free-market choice to go earn money some other way. In practice, open source software is a free market for services including documentation, training, support, customisation etc. The openess creates the market and the “communist” GPL protects it from monopolisation while also ensuring that users retain full control of their physical property in the form of computing devices.

    The reason many open sourcerers dislike Microsoft is that they are a monopoly that distorts the free market, takes large amounts of tax from government customers and which has sucessfully dodged the rule of law on many many occasions.

    In fact, based on the preceding paragraphs, open source people are more like libertarians than communists.

    Eric S Raymond is a good example of a right wing gun-toting open sourcerer and has written good economic interpretations of the phenomenon.

  • Jacob Rideout

    The problem is not bad economic models, but a misidentification of how opensource fits into the current model. This is because open source companies have different business models from closed source companies.

    One must not think of software as a product. Software must be viewed as a standard. Companies offer services and customized products based off these standards. Most these companies and increasingly proprietary software companies market solutions, services for companies that work regardless of the tools used to create them. Viewed in this manner software is like any other industry where standards are pervasive and important. Differently though, from other industries, the low cost of market entry and participation as well as distributed labor allow non profits groups or philanthropic individuals to supply solutions that can rival commercial services.

  • J

    “The point to keep in mind is that Open Source is not public property; it is collectively owned private property.”

    That’s a rather sweeping statement. Many open source programs are indeed in the public domain. I don’t see how the remainder count as collectively owned private property, either. It’s true that individual authors may retain copyright on portions of code that they contribute, but there is no organisation with copyright of the whole, nor is there a licensing authority. So I don’t see how there is either a collective, or property. Importantly, if a group of people write an open source program, that program does NOT belong to them (although certain related things such as the name of the program, or some graphics used in the program, may).

    In some cases the Free Software Federation is trying to become the legal owner of certain software packages in order to be able to enforce licensing agreements (generally against commercial entities, which tend to abuse them). But this is a tiny % of open source software as a whole.

  • J: “I don’t see how there is either a collective, or property.”

    There is a collective, though not in the communist sense necessarily, since the group of contributors each retain part ownership, however, they all have the benfits of the whole. So, yes the ownership is fractured but that doesn’t make “collective” a bad description.

    Also, even though exclusive rights are licenced the fact of ownership under copyright law doesn’t change. This is how licence terms are enforced – of ownership were lost enforcement would be impossible.

    No open source projects are public domain, by definition. If its public domain there is no ownership and no exclusive rights under law. If there are no exclusive rights then there is no licence of any kind whether proprietary, OSD compliant, GPL whatever…..

    The FSF ask for copyright assignment as a practical measure which makes it easier to enforce the exlusive right of ownership for the greater good of mankind, such is their want. Usually contributers are happy with this since they get the same material back under the GPL which will often have placed identical restrictions on them anyway. This is an individual choice of the FSF and its volunteers.

  • chuck

    Andrew Morton, who is the co-maintainer of linux 2.6.x, has said that open source works best in areas where the ip has already been wrung out. I think he is right. What, after all, is new about operating systems? At some point these things just become infrastructure, like roads and generic drugs. The public benefits from the cheap and widespread availability of the generic product while innovation moves on to other areas and builds on the common foundation. It is an efficient way to do things.

  • A slight clarification around what chuck was saying, as quoted:

    “Andrew Morton, who is the co-maintainer of linux 2.6.x, has said that open source works best in areas where the ip has already been wrung out”

    I read the same, I think on Groklaw, but interpretted it differently. I think what Andrew was saying is that Open Source works best where there is consensus about how to do things. The ideas he refering to I think date from the 70s so patents that last 20 years would have expired but not copyrights which last what? life + 70 years?. So, the material there would need to have been written in the 1930s perhaps 15 years before computers were invented.

    Of course if copyrights had expired there would be no need to write a new open source version anyway since there are no exclusive rights by that point. That this happens so slowly is the problem with copyright IMHO.

    No disagreement on the rest of your points, OSS does make ecomonic sense in the manner you describe.

  • Chris Harper

    I don’t see that there is a conflict anyway. The issue of profit seeking vs collective good is a non issue in a free society.

    My objection to collectivism and communism being imposed on a society is that they they are imposed, on everyone, even those who don’t want them or are temperamentally unsuited to that environment.

    When people who wish to indulge in collectivest actions do so out of choice, and don’t require everyone else to join them, whether by the gun or the ballot, I see no reason to either object or claim in advance that it can’t possibly work.

    Collectivest models can work, provided they are voluntary.

    The issue is only one of whether people have the freedom to try different models as they see fit.

  • Michael Taylor

    There is a first-order market failure embedded in the software industry, which is the inability of the market to set a proper price for Microsoft products. In this case, “intellectual property rights” have to be asserted in the crudest possible way against those “pirates” who recognise that it’s possible to distribute products for the cost of a writeable CD and act on it. For example, the software industry persuades the US govt to lobby the Chinese govt to go after “software pirates” in, say, Shanghai. In practice, this means the supply of Microsoft products, complete and perfect, is curtailed at gunpoint. In these circumstances, how can anyone claim there’s a proper market in Microsoft software?

    In the circumstances, seems to me that the open-code response is the only one possible for those believing in the free market. Its principle benefit is to get government, power-politics and the gun out of the global software business. More power to them.

  • John Thacker

    How does it break the economic model, Alex? Free and open source software have existed for a long time, just as have academic journals. It makes sense any time your main business isn’t in selling software, and makes sense for tons of applications and areas.

    it cuts against the idea that innovation is more likely to occur when people exclusively own something.

    Bzzt. Wrong again, Alex. You’re implying that there aren’t copyrights on open source software. Totally wrong. The GPL is a very strong form of copyright that assigns very strong property rights to the authors. All the successful products you listed use similar licenses that legally bind anyone who uses their source to keep their derived products free and generally to give some sort of attribution. Wikipedia, for example, is under the GNU Free Documentation License.

    There is an enormous difference between open source licenses and putting something in the public domain, to let anyone use it however they want, even taking their changes closed source and selling them. The rights holder still holds very strong property rights, and is choosing to make the source available with the proviso that other people will not take the source and then sell their own closed-source version with their own add-ons.

  • John Thacker

    Many open source programs are indeed in the public domain.

    Not legally, no. Even something without a clear owner is not legally in the public domain. Public domain has a very clear legal meaning which includes being subject to no licensing restrictions. Yes, there is a question in certain cases of who would enforce the particular license on a GPLed piece of software, but you shouldn’t misuse the term “public domain.”

  • John Thacker

    I should point out that there are a few exceptions, examples of public domain open source. Anything created by an agency of the United States Government is public domain upon inception; e.g., the Security Enhanced Linux extensions created by the NSA and contributed to the Linux kernel.

  • Anaximander

    The only thing that is “broken” was people’s understanding of the nature of the beast, methinks… plus it suited some people’s pecunary interests to “misunderstand” open source.

    What Alex’s change of mind shows is simply that he is rational and thus not dogmatic. When a better theory came along, he ditched the old one and went with the better one.

  • lucklucky

    So old fashioned thinking. Models? Against open source? Open source is great to make Microsoft move instead of sleeping. How a libertarian can be against open source?!

  • Bombadil

    The only thing Microsoft has a “monopoly” on is the sale and distribution of its own products – which it should.

    Any notion that Microsoft has a monopoly on the software market in general, or even the OS market in particular, is (at best) preposterous. MS doesn’t put out a single product for which there doesn’t exist a free, easily downloaded competitor. What kind of monopoly is that?

  • pdcoleman

    Working as a software engineer for the last 35 years I have I only recently owned any IP. The corporations that I have worked for own most of my creative efforts. Most compensation contracts I have had have become worthless because the cost of maintaining them exceeds their value.

    I believe one of the most discriminated crafts is software developement. It has reached the point that the discrimination is government sanctioned.

    Most discussion of open source takes place in the central currency model that corporations and monopolies operate in while neglecting the local currency model that open source creates. This local currency and its value allow the individual software developer/solution provider to compete against large corporations providing the same solution. And for the first time the local provider has an edge, he is local (and for some the possibility of barter).

    The IP I now own is GPLed so as to increase the value of local currency around the world. Remember local currency is more efficient and empowering.

  • monoptius

    I believe that the “success” of OS software is that it takes advantage of what Techcentralstation has called “the long tail”. There are a lot of people who would love to have X. X is expensive, much more so than most people can/will pay. Building Y and sending it out for free lets you build X’ which is fairley cheap, and X’ together with Y accomplish the same thing as “X”. So, you foot the bill for Y because you know you will it back and then some on X’, because even though no one IN the tail has a lot of money, there is more money in the tail than in the slim few who could afford X. Its a new model, just like loss leaders (Laser printers or hybrid cars), banking on making up the difference by letting more people in up front. Sometimes the advance of X’ is not monetary (say I want a huge MMOG community for a game that doesnt exist, I could build it and ship it for free so the community will grow up around it – in this way I have spent sweat equity to build a value that I couldnt otherwise get).

  • It is funny that you say that you used to see these two incompatible, because one of the leading Open Source essayist, Eric Raymond, is as libertarian as you can get. Perhaps you should read some of his essays: http://www.catb.org/~esr/

    In fact a lot of libertarians oppose at least some ideas of “intellectual property”. Check out http://en.wikipedia.org/wiki/Libertarian_perspectives_on_intellectual_property

    I’m a libertarian as well, and I contributed code to several dozens open source projects. Apart from that, I have my very own open source Linux distribution, for which I also provide commercial installation and support and that makes most of my income. I see no contradiction. In fact optimising my profits was the main idea behind it.

  • cprise

    I wrote what turned out to be a mini-essay in response, but thought twice about handing it over to become your private property.

  • Big Al

    Jacob Rideout hit the nail on the head…. Companies like Microsoft and Oracle are desperately trying to convince people that their software is the “secret sauce” that will make your company profitable and slay your competitors.

    Well, when’s the last time you won over a customer because you used Outlook or Word (or Windows)? People are slowly realizing that most software is just a part of the infrastructure and we no more need “name brand” software than we need “name brand” sewers, roads or power lines.

    What’s amazing about open source is the development model (not the economic model)… while we need bloated organizations to provide physical infrastructure, it is possible for high-quality software to be produced cheaply in a distributed manner without much organization.

  • If you’re looking for a new model, an excellent start at sketching one is provided by law prof Yochai Benkler in his excellent essay “Coase’s Penguin.”

  • Bombadil,

    There is one problem with Microsoft. While you are right in one sense that people have a choice, the nature of the standards they use make it difficult to create choice.

    The Word document format is kept secret and as it is dominant, it means that choosing an alternative product is hard if you want to collaborate with others. It’s more restrictive than something like choosing your supermarket, where it’s all down to you.

    The path I choose is to run OpenOffice.org. In part because it’s free. But also because I want open file standards that encourage competition and freedom. The work they’ve done of trying reverse-engineer the Word format has meant that it’s close enough for me.

    If you want free markets, choose software that works on open standards. Proprietary extended formats are rarely good as they can eventually create dominance for those formats, and it’s hard to break away from them.

  • Bombadil

    The Word document format is kept secret and as it is dominant, it means that choosing an alternative product is hard if you want to collaborate with others. It’s more restrictive than something like choosing your supermarket, where it’s all down to you.

    Why shouldn’t Microsoft keep their file formats proprietary? Nothing is stopping people from using other file formats, as you have done. Choose a different format if you like it better, and then let the people with whom you collaborate choose it as well. That is the market in action.

    Or use plain-text, hypertext, or xml. The fact that Microsoft has dominant market-share doesn’t make it any sort of monopoly – because there are no barriers to the alternatives. OpenOffice is free, many Linux flavors are free, there are at least hundreds of text editors and html editors available for free.

    The continued dominance of Microsoft is due to revealed consumer preference, however much that makes MS haters gnash their teeth in anguish.

  • > Why shouldn’t Microsoft keep their file formats proprietary?
    From THEIR point of view it makes perfect sense. However, from the point of view of their CUSTOMERS, it is a disadvantage. I am assuming that most people are not employed by Microsoft.

    Yours sincerely,
    Peter

  • Bombadil,

    you really miss the point of even your own arguement. Without Open Source, there would be *no* free competitor to the M$ domination. For one thing, every time they get any stiff competition, they simply buy out the company, or they build a competitor product, or, perhaps worst of all, they “break the code” and give the product away free, all to hold onto market share.

    If it were just a choice between Apple and M$ (I can’t think of any other paid-for OS providers who both charge money and have a decent market share) would you still think it was fine, because “anyone” could switch to Apple at twice the price, with zero compatability?

    (Yes, M$ produce Office for Mac, but only because they had to.)

  • Bombadil

    Bombadil,

    you really miss the point of even your own arguement. Without Open Source, there would be *no* free competitor to the M$ domination.

    Tautologous. Without other sodas, there would be no competitor to Coke. I am not arguing against the existence of Open Source software – I am pointing out that Microsoft in no way has a monopoly on the OS market. You seem to agree.

    For one thing, every time they get any stiff competition, they simply buy out the company, or they build a competitor product, or, perhaps worst of all, they “break the code” and give the product away free, all to hold onto market share.

    Which of those things do you think a company should not be allowed to do? The rules seem to be different when Microsoft is the company being discussed … if I made a suggestion that Coke not be allowed to discount or give away their product people would think I was insane.

    If it were just a choice between Apple and M$ (I can’t think of any other paid-for OS providers who both charge money and have a decent market share) would you still think it was fine, because “anyone” could switch to Apple at twice the price, with zero compatability?
    (Yes, M$ produce Office for Mac, but only because they had to.)

    Yes.

    By the way, using “M$” to refer to Microsoft is the rhetorical equivalent of using “Zionist” to refer to Jews or “Amerikkkkan” to refer to someone from the United States. It gets in the way of your argument by making it appear to be based on hatred (or at least dislike) rather than reason.