The Simple Economics of Open Source

[Raffael Cavallaro]

> So has bashing people over the head and taking all their
> money.

Yes, but doing the moral equivalent in software (closed source vendor lock
in) is legal and even more lucrative.

>> You're conflating separate markets. Unique artworks (paintings,
>> for example) have no real equivalent in the software world,
>> because software sales are based on essentially unlimited
>> identical copies.
> 
> 'Twas your analogy.

No, it wasn't, as I explain here. Did you even bother to read it?

> 
>> My example referred to IP in the art world - secret working
>> methods that allowed artists to produce works their
>> contemporaries could not - methods of bronze casting, for
>> example, or formulas for oil painting media. These IPs are like
>> closed source in that, without them, competitors are shut out of
>> a lucrative market.
> 
> There's very little of that in code. The question "how do they
> do that?" is rarely unanswered for longer than a few months.

Oh really? Then why has no competitor yet figured out a *reliable* way to
read and edit MS Word format documents? Just because the IP involved is
intentional obfuscation, doesn't mean that "there's very little of that in
code." In fact, there's a great deal of that in closed source code,
precisely because that's what needs to be there to prevent open source
alternatives from competing.

 
> You really think MS's "monopoly" is based on IP?

Yes! Remember IP doesn't mean "great innovations in science." It just means
"intellectual property," which ranges all the way from the polio vaccine to
ren and stimpy. MS IP is rather lame, but it's sufficintlly dificult to
reverse engineer that it keeps consumers locked into their product
offerings.



>> I think part of the open source community's problem is this naive
>> belief that just because a certain model (open source) leads to
>> products that benefit consumers more, markets will allow
>> consumers to choose this production model. This belief is naive
>> because it fails to consider that the producers' interests are in
>> no way congruent with the consumer's.
> 
> An indicator that the model is diseased.

>From a moral standpoint, no question. From an economic standpoint, the
closed source model is a big winner. It is the anemic open source model,
which must rely on service revenues for any profit that looks sick when it
comes to profitability.

> They are not "monopolies". They are large companies with a
> lot of money, salesman, distribution channels, lawyers and
> programmers. The competition has quite a few programmer,
> and just started to get a little money.

If they produce software that:

1. cannot be easily reverse engineered

2. achievs sufficient market penetration that interoperability with others
becomes a significant feature

then yes, they are effective monopolies. This is *precisely* how MS got
where they are.

>> BTW, all software is *not* support. This is another open source
>> community bias which comes from living in the server room. Lots
>> of software is *client* software, which requires little or no
>> support from the vendor.
> 
> And client software is often free.

Only as a loss leader, or a monopolist's attempt to undercut potential
competition (Netscape for the former, MSIE for the latter)

>  Where software has client
> and server, the money's all made from the server. If the
> vendor's smart, they'll open up the client side so they won't
> have to waste time developing it.


> Bzzt. A 10,000 seat license complains that X is broken, X will
> get fixed. (And when enterprise learns that Y requires only
> 50% the support costs, they will switch.)

Really. This actually has me laughing out loud. Then why are MS Office, and
Windows98 still so badly broken? Lots of enterprises have 10,000 or more
seat licences. Why haven't they been fixed for them?
Answer: for the same reason that your second point is false - because even
big customers can make no credible threat of looking elsewhere, because of
the need to interoperate with others. Enterprises will *never* drop MS
office, no matter how buggy, no matter how much cheaper alternative Y is to
support, unless Y is seamlessly interoperable with everyone else, who use MS
Office.


> Congress does not understand software. Lawyers and judges
> do not.

Judge Jackson understands software very well. You should read his findings
some time. You might understand how MS got where they are, and why closed
source will be with us for a long, long time.

> Most businesses do not. Most people do not.

Oh, but you do, right?


> They're commanding position has nothing to do with IP. Most
> of the maybe-almost-original things they've done (ODBC and
> COM) are pretty thoroughly documented. Their success is due
> to business practices that are common in, say, the food
> industry or the mega-store segment, but are (rightfully)
> considered evil in the software market.

Again, you confuse IP with great scientific innovation. It's not. It's just
intellectual property, which can be something as silly and trivial as a
company logo, or the intentionally obfuscated MS Word document format.


> 
> The open source model(s) will almost certainly require
> adjustment - they are mostly a reflection of the fact that the
> current model is warped. But the big boys are dinosaurs.

Billionaire dinosaurs, who will be with us for as long as capitalism favors
the capitalist over the consumer. I don't see that political balance
changing anytime soon.

You seem to think that this is a technical issue of the "new" economy. It's
not. It's the same old bias that gave us unsafe, gas guzzling cars and toxic
waste dumps. The political system is biased toward the interests of capital,
because of capital's campaign spending power. The result is an economic
system that is heavily biased toward the capitalist at the expense of the
consumer. Software is just another market where this bias manifests itself.
Specifically, why are we even *debating* UCITA, instead of software quality
waranties with some real teeth? Becuase the consumer can't throw big wads of
cash at candidates, or hire full time lobbyists. I don't think that open
source is going to shift this political balance any time soon.

Ralph

-- 

Raffael Cavallaro, Ph.D.
raffael at mediaone.net