Subject: Re: offering pre-purchases
From: "Stephen J. Turnbull" <stephen@xemacs.org>
Date: Thu, 11 Oct 2007 09:12:15 +0900

Don Marti writes:

 > There is some stuff in the Matt interview on the
 > actual sales cycle: first, it's shorter: three
 > months instead of 9-18 months, and second, the sales
 > reps don't have to "knock on doors" or deal with
 > unqualified leads.

He's not talking about $75,000 software, though, is he?  Joel makes
exactly the same kind of comparison for his inexpensive proprietary
software against the expensive proprietary software.  I put it to you
that Matt is not seeing the effect of his software being open source;
he's seeing the effect of it being relatively inexpensive.

 > (On a long-term level, much of marketing costs are
 > transaction costs, because they're the costs of
 > gathering information on what the customer wants and
 > what you can sell.

Sigh, I guess that definition is common enough, but it really hinders
communication because it becomes hard to talk about "pure" marketing.

 > You could just do a prediction market on will the project
 > accomplish some goal -- but we had that thread already.

No, you can't.  First, Tom is barred from trading in the usual way in
that market, it's insider trading.  Even if there's no legal
restriction, it would kill his rep.

Second, both buying and selling suck from his point of view.  The
market is going to equilibrate at everybody else's estimate of the
probability that Tom is actually going to satisfy the prepurchase
contract.  Tom, being the hacker extraordinaire, knows that the price
is too low; he's definitely going to deliver.  So he wants to buy, not
sell.  But the point of prepurchase is smoothing income, he's hungry
*now*, he can't afford to speculate.  He's also poor; suppose he has a
life crisis and doesn't deliver?  Then he spent his prepurchase income
in the prediction market, has a rep for nondelivery, and no prediction
market payoff.