Subject: Re: FW: Why would I pay for Ximian software?
From: Ian Lance Taylor <ian@airs.com>
Date: 03 Jan 2002 13:14:38 -0800

"Perry E. Metzger" <perry@wasabisystems.com> writes:

> Not quite. I more or less noted that the conventional theory of public
> goods doesn't work, but neither does an analysis that fully ignores
> issues such as "free riders" -- we don't yet have a reasonable
> economic model of what's going on, which makes it difficult to make
> reasonable predictions of behavior. This is a significant problem if
> you're trying to run a business.

I disagree.  There are some cases where an economic model can help.
But most of the time it is more important to understand how your
customers consciously view the world.  Their conscious concerns may be
irrational.  But if you don't speak to them, you won't sell.

An economic model can help identify unexploited opportunities, if
there are any.  But other than that, it won't help you sell, and it
won't help you cut costs.

So I don't agree that the lack of an economic model is a significant
problem.  It's a nice-to-have, not an essential.

> As one example, one could easily imagine that if a group of companies
> all needs a feature one could get them to pool their resources to get
> the feature developed, but in practice this never happens.

I would say that it happens fairly often--it's called an industry
consortium, or a standards committee, or an IETF or W3 technical
working group.

> Such effects are conventionally invoked to explain the reason we have
> firms in the first place rather than much looser pools of contractors
> -- because the costs of setting up the web of relationships in the
> pool of contractor case exceed the benefits, so it is easier to get an
> in house monopoly provider of a service with known quality and cost
> than to contract for it. As information flows improve and the cost of
> setting up relationships drops, we end up with much smaller
> organizations being viable, and in many ways this has happened. Some
> industries (like filmmaking) have actually become webs of contractors,
> and certainly the largest firms in the world have shrunk dramatically
> in size. IBM is a fraction of the size it was at its peak, although it
> produces far more than ever before.

Your analysis is only part of the story.  Contractors also became
popular because the labor movement became much weaker, downsizing
became morally acceptable, and companies dropped their implied
commitment to provide lifetime employment for good worker, with
pensions and medical care after retirement.  With these changes,
companies realized that there were many inessential positions for
which employee turnover was not a significant issue, and for which it
was better to not pay a permanent employee.

> Can we similarly reduce the information costs of participating in
> pools sufficiently to allow better transfer of resources from
> consumers to producers? I don't know, but the entire area is in
> desperate need of study.

The area doesn't need study.  It needs experimentation.  The studies
will follow--economics is largely the study of existing institutions,
not descriptions of hypothetical ones.  (There are counterexamples
like the Bretton Woods institutions, but I think that even those were
created as much for political purposes as part of the Cold War as they
were because Keynes and others argued that they were required.)

SourceXchange was an example of an experiment in building the pools you
mention.  There have been others.  None have been successful so far.
Look at why they failed, and figure out how to do it differently.

An example of a successful pool in the free software community is gcc.
The gcc steering committee has 14 people at the point.  The members
are employees of at least 7 companies.  They help coordinate gcc
development efforts from a number of paid and unpaid contributors.

Ian