Subject: Re: a model of competition between free and proprietary software
From: Tom Hull <thull@kscable.com>
Date: Sun, 20 May 2001 23:47:01 -0500

Russell Nelson wrote:
> 
> Seth Gordon writes:
>  > The number of developer-hours that F can attract is roughly
>  > proportional to F's quality,
> 
> Only tangentially true.  The investment that a piece of software (F or
> P) can attract is dependent upon its payback.  Nobody but nobody
> invests money unless they anticipate getting more value back than the
> current value of the money.  Why?  Because people prefer consumption
> today over consumption tomorrow.  An investment is deferred
> consumption therefore in every case someone making an investment wants
> to get more than their investment back.  (Note to Ian: Economics IS a
> rigorous discipline, provided you stick to the parts that are subject
> to rigorous analysis).
> 
> An entrepreneur (or a person playing the role of entrepreneur) has
> anticipated the onset of a problem which his software will solve.  The
> capitalist (or a person playing the role of capitalist) defers
> consumption by loaning capital to the entrepreneur.  The entrepreneur
> spends the capital on a worker (or a person playing the role of
> worker), who will only work if paid concurrently with the work.
> 
> In the case of P, the investment is spent paying developers even when
> there is no income, maybe even for years.  This investment is
> justified by the entrepreneur to the capitalist because the software
> is proprietary.  In the case of F, the developer is often acting as
> entrepreneur, capitalist, and worker, all rolled into one.  The
> developer has a problem worth solving, defers consumption, and works
> on the software.

I don't think these are really analogous. The capitalist's money is
always investible, and always consumable, so there is a clear either/or
choice there. But the F developer's time is often not investible (i.e.,
convertible into deferred value, especially in kind). It is interesting
how much F has been developed by people when they are not acting as
entrepreneurs, capitalists, or [wage] workers.

I don't doubt that if one starts with the assumption that all human
action is fundamentally economic, one can come up with economic
rationalizations for F. However, F developers may have trouble
recognizing such theories: a simpler alternative may be that they
find F development to be a welcome respite from the economic treadmill.

> In each of these separate decisions, they are made using the same
> criteria regardless of whether the software is free or proprietary.
> They only appear to be different because the F developer plays all
> three roles at the same time.

-- 
/*
 *  Tom Hull * thull at kscable.com * http://www.ocston.org/~thull/
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