Economics of non-free "Open Source" (was: RE: Open Source menu system)

<from Tech List thread>

| -----Original Message-----
| [mailto:midrange-l-bounces@xxxxxxxxxxxx]On Behalf Of Hans Boldt
| Sent: Wednesday, April 07, 2004 2:31 PM

| Hmmm, where to begin...

Yup...  And where to end follows.  (In my case, real quick today as
supposedly taking a "short" break.  (After semi-proof-reading.. thaz a big
Ooops...)  Probably can do no more on the subject (if any follow-up
questions/answers) until tomorrow...)

| jt wrote:
| > Hans,
| >
| > I've noticed a pattern on some M-L lists past couple weeks:
| When someone
| > says "perfect sense"..
| > a)  They use an incredibly marginal definition of "perfect"
| > b)  And immediately follows with something that makes very little sense
| >
| > First of all, there was an implication (to some) that this was solely
| > intended to bypass ERP licenses.
|
| That has already been addressed. The original poster was not trying to
| get out of paying the required licences.

You missed the point, Hans.  Question is (and who's gonna admit this??)
whether those who thought he WAS trying to get outta paying the required
licenses STILL had the same KNEE-JERK reaction they always have on this
subject???

| >
| > Now, Hans or anybody, correct me on any of the following points if I'm
| > wrong:
| > 1)  You work for IBM ToroLabs
|
| Correct.
|
| > 2)  You get your paycheck by selling software
|
| I don't sell software. I get my paycheck for developing and testing
| software. What my employer then does with that software, is its
| business. It may choose to sell licences, or it may choose to give it
| away and sell support. But that decision is out of my hands.

Please don't insult me, Hans.  You are taking an Extremely Convenient pov to
make out like it's just your "lame managers and employers" fault that they
don't give the products you develop away.  That is disingenous and false.
You KNOW your software IS sold.  And even IF it was given away for "free"
(cough, an outrageous fantasy, btw), you KNOW you wouldn't GET a paycheck
unless there were revenue streams from hardware, consulting, or SOME other
derivative source, right?  RIGHT?!?

And the reason it'd be "given away" is primarily FOR those revenue streams,
so it's not actually being given away "for free" in the first place!

Either way, the Fact that the decision IS out of your hands, changes nothing
in regards to my statement.  You get your paycheck by selling something,
whether you close the deal or not!!

| > 3)  There is some good and bad in everything that occurs
|
| Correct.

(Whew!  I thought That was gonna be The toughee...;-)

| > 4)  People that actually believe Open Source is all good have
| NOT cornered
| > the market on altruism, idealism, and sharing
|
| I can't disagree. ;-)

Well, I thought That was gonna be Even tougher...  And it probably is.

(I'm guessing, as I study your "economic" analysis in detail, this is gonna
raise it's head somewhere...;-)


| > 5)  Open Source encourages GREEDY companies to get by on least cost (but
| > sometimes greater TCO, btw)
|
| If they want, sure that's possible.

"Possible"...?!?  Have you looked around, and SEEN this is not only
Possible, but GOING ON!?!

| One condition of freedom is that the
| concept must apply equally to all,

(Gimme a break, Hans...)-;  All ANYbody has-ta do is incorporate "freedom",
"democracy", "open", "empowering" in their theory somehow or another, and
that theory SELLS.  Sign-a the times, but it's Pure Crap.  It's taking
advantage of people's gullibility to use these terms to SELL a theory,
Especially if that theory is bogus.

I REALLY don't wanna get into a discussion of the "free as in speech, not as
in beer" FALSE MARKETING, because it is so pointless.  I'll just say this:
Can you give me even ONE example of Any "freedom" which IS.. (and this is
the key, IN ACTUAL FACT) applied equally to all??  Voting?  Job opportunity?
Eating?  I can give SO Many Plenty of exceptions to Any of these, that it's
obvious the "rule" is a great theory, in the abstract.

| even to those whose values you might
| disagree with. (That said, one advantage of working on the RPG compiler
| is knowing that the software I write will probably not be put to use in
| developing things like missile guidance systems!)

(Yeah, glad I don't write those kinds-a apps!  But, seriously, I'd trust the
RPG compiler more than any other language I've seen.)

| > 5a) Open Source has played a large part of steering companies towards
| > off-shoring, btw
|
| Not proven. And even if it were true, well so what? Don't forget that in
| 1981, IBM Rochester moved a big chuck of software development to a
| foreign country! ;-)

Heheh...;-D  That's literally true.  "Off-shoring", afaik, (is ENTIRELY
different than "out-sourcing" and) is related to jobs going from
US/Canada/Europe elsewhere.  Technically, I get by in life because
cost-of-living is cheaper in the Midwest, so my work has been off-shored
from the coasts.  My clients COULD get the work done by other's in the
States, but it would almost certainly cost them more than what I charge.
(Personal note:  I'm NOT one-a these guys that charge 3 to 4 times what
employees make, and actually charge LESS.)  Anyhoo...

| > 6)  Passion is usually inversely proportional to logic (not always)
|
| If it's "not always", then the point is irrelevant.

As I posted previously.  This is factually incorrect.  Sure, it Does help
your argument to view things this way.

| > 7)  If you actually believed THAT strongly in Open Source,
| Hans, wouldn't
| > you be in a different line of work??
|
| I believe that open source works in some situations, and not others. For
| example, I believe it is in the best interests of RPG IV programmers
| that the RPG IV compiler be kept as closed source.

Based on what??  I ask you seriously.  This is my conundrum, as well.

You recall David Gibbs' sig quote?
"If you have an apple and I have an apple and we exchange apples then you
and I will still each have one apple. But if you have an idea and I have an
idea and we exchange these ideas, then each of us will have two ideas."

It's not that I see absolutely no value in this meme!  However, as a
practical matter in the above case, the each of the two HAVE NO APPLES TO
EAT.

(You may recall, I've suggested OS/400 be "Open" Sourced, but it's a toughee
HOW to do this properly and avoid the pitfalls.)

| >
| > Which goes to point #0)  The economics of Open Source, like
| most, basically
| > comes down to a zero-sum game.  Somebody wins, then somebody
| loses.  I can't
| > go through all Scott's contradictions and mis-statements at this time.
| > Mebbe later (and that'd be assuming, which I don't, that this
| post won't get
| > the axe)...
|
| I'd be very interested in seeing your detailed evaluation of what you
| think are "all Scott's contradictions and mis-statements". Very
| interested indeed.

As I posted on the Tech List.  Feel free to follow-up on that one on this
list, if you belong Hans.  (Or ANYbody, 'course.)


| But regarding the economics of open source (and F/OSS in general),

You've just shown your ignorance of Economics 503, Advanced Realities in
Economics.  In Economics 101 and such, they (apparently, because so MANY are
confused on this point) teach that there IS such a thing as "free".

I haven't studied the following in detail.  (Skimmed, but will study as I
type.)  But I really don't know that I can make an adequate case for the
FACT that "there is no such thing as a free lunch", and all there is is
cost-shifting.  Unless you have some economic common-sense to begin with, or
an advanced class that doesn't teach a bunch-a crap.


| that
| is nicely covered by standard economic theory that has already been
| explained elsewhere much better than I could here. (Note that I am not
| an economist!)

I'm not either, nor a marketer (nor a degreed Software Engineer for that
matter...;-).  I have, perhaps, some experience which may be useful,
nonetheless, just as you may have.  However, based on previous replies by
you and a few others, there's a LOTTA folks on M-L who've "drank the
kool-aid" of "Free"/"Open" Source.

| But it all boils down to the marginal costs for a
| commodity that costs next to nothing to reproduce and distribute.

Right there, you've blown your entire economic theory, Hans.  You left out
the cost to create, and the cost to risk failure.  So whatever you write
that follows has NOTHING to do with software production, but only covers
software distribution.

Which do you think is MORE IMPORTANT, Hans:  What's the product DOES that is
ON the CD, or what quality CD a product is distributed on?  (You get ONE
guess!...;-)

| In a
| nutshell, the costs of developing a product are what's called "sunk
| costs", and don't figure into the retail price of a product.

Again, a Very Convenient misconcepted pov.  Did you happen to "drink the
kool-aid" that young 16-year-old boy semi-genius (my words not his, afaik)
Mr. Aaron Swartz drank??  He posted similar nonsense on this thread: "Kids
on Piracy"
http://www.docuverse.com/blog/donpark/EntryViewPage.aspx?guid=7a592614-ff21-
4817-b7c0-3ea9a7007122

Lemme explain some economics to you Hans, and anybody else that agreed with
your pov:

Cost   = Dollars spent.  Doesn't matter what it's spent on.
Retail = Cost-plus, for an enterprise making money (Cost-minus, for an
enterprise that loses money)

Example:  It costs Transmeta $x "bazillion" salary for Linus Torvalds.
Transmeta pays for some of the development of Linux, in return for
"whuffie".  Overall, they make it up someplace else, or they go out of
business.

Linux does NOT cost "free" to produce.  It is wholesaled for "free", yes.
See the difference??

| The retail
| price of any product depends primarily on what buyers are willing to
| pay,

Which, in current marketspace conditions, is tending directly towards zero.
(This is due not only to Open Source but, in large part, to the Napster
generation that never learnt that stealing is wrong.)  Iow, the tail CAN wag
the dog, in certain circumstances.

| which is related to the prices of the competitive products.

In part.  You obviously know that marketing and pricing are not mathematical
sciences.

| Now
| then, if the price that people are willing to pay is less than what it
| costs to manufacture it, then the manufacturer loses money and can't
| stay in business.

True.

| But in the case of software, companies can generally
| give it away and not lose money, and instead make money on ancilliaries
| like support, training, and books.

Yeah, this is the THEORY.  Works out well for some (Linus Torvalds gets to
live in a mansion in Hollywood, I understand.)

Not well for others, which some-a you Conveniently JUST OVERLOOK, so may not
have noticed.

| But shouldn't the authors of software be compensated? Well, for the
| authors of F/OSS, in many cases they are.

Sure, they're compensated by ego-strokes.  They're compensated in POWER.
(They get hot dates from what I gather...;-)  You tend to look at
compensation as merely money?  Then you have a partial understanding of
economics.

| Even if they don't receive a
| dime for their efforts, they may gain in other ways: Admiration from
| their peers, royalties from books, etc.

Oh.  Ooops.  But this is way UNDERemphasized.  This admiration of peers is
greed of a different kind.  But greed is greed, Hans.

| In many cases, a programmer
| writes something that satisfies a specific need, and then makes it
| available to others simply as an act of generosity with no expectation
| of any recompense.

This is MUCH rarer than is commonly perceived.  Iow, most people are
generous for some self-motivated reason, ime.

| In some cases, it may well be that there's no
| business case anyways in trying to ask money for the software, and so
| the programmer loses nothing by giving it away.

Yeah, and BECAUSE of non-F/OSS this is generally been the trend.


| As I said earlier, all this is covered by standard capitalist economic
| theory, and is not some massive socialist conspiracy (like some might
| suggest).

Guess again.

| F/OSS is not the answer for all software, but fits in quite
| nicely in many situations.

Works out well for hardware manufacturers, SO FAR.  But with high-end gear
facing commodity-level pricing, that might not continue to be the case for
them either.

| To put it an different terms, if there were flaws in the whole concept
| of F/OSS, then it wouldn't be a multi-billion dollar business! ;-)

Give me another break, Hans!!  MicroSoft is a multi-billion dollar business,
right?  Can you name even ONE SINGLE multi-billion dollar business that does
NOT have any flaws...?!?

C'MON, HANS!!  ;-D

(And answer me THIS:  If it's so "free" as is claimed, how's come it's a
multi-billion dollar business run like it's a bunch of guys just goin out
havin' a FUN time coding "just 'cause they luv-ta code"...??? Iow does this
not, in large part, explain why "Linus Torvalds, Inc" is such a POORLY run
biz...?  Why is Linux lagging so FAR behind?  Because it's the WORST of both
worlds, imo/o...)

| To get back to your original point, sure, there are winners and losers.
| The losers are those who can't compete. But again, the cold hard reality
| is that that's always been the case in free market capitalism.
|
| >
| > Now, disagreeing about core values in a person's belief-system
| sure CAN seem
| > like a personal attack.  Sorry about that.
| >
|
| No apology needed. Disagreement alone is not personal attack.
|
| Cheers! Hans

Thank you and Cheers! again, Hans.  Dunno if you're on this list, probably
not as their are so few, so I'll cc: ya (and James Rich, 'cause his address
wuz handy).  (I think that's why David allows all Your opinions (and all the
others who Support non-Free/OSS) to go on the Tech List, but then mine
aren't, btw.

Oh well.)



PS  I would guess that there are some that agree, and some that don't
understand one word of what I've written.  So I'll boil it all down to these
2 questions:

1)  Of all the occupations in the universe, why were programmer's singled
out??  If a programmer writes good, solid, reliable code BUT:
a)  doesn't have the credentials/skills to write articles and books
b)  doesn't have the credentials/skills to go on the lecture circuit
c)  doesn't have the luck to land a BOD position or some such
d)  doesn't sell hardware
e)  is not greedy for admiration

Why were these programmers singled out that what they do for a living should
not be paid for??  It's, in actual fact, been called literally "immoral" to
sell code for money.  That's the meme goin' round...  Okay to "sell" code
for power, tho.

(And surely someone's gonna say to themselves, "well nobody's FORCING you to
work for no pay"...  But when enough people program for little to no money
(for whatEVER compensation) then who IS gonna pay money for said
programmers?  Ie, nobody.  "Competitive disadvantage"...)-;

2)  And if that's too esoteric, then is there ANYbody that doesn't think
that software production is (like in 80's, STILL) THE BOTTLENECK?!?  And is
there ANYbody that doesn't think that Operating Systems and Tools can be
Vastly Improved on?!?

Then, can anybody give a logical reason why Operating Systems and Tools have
been declared a commodity market, BY FIAT, when this is plainly and
obviously ONLY the case because it's been declared a commodity market,
rather than because it is one in reality???

I ask these questions seriously, not sarcastically.  I will entertain
serious discussions with Open Source advocates who can answer either of
these two questions, btw.  (And semi-serious discussions with anybody else,
as time permits, which ain't today...;-)