Subject: Re: offering pre-purchases
From: Don Marti <>
Date: Thu, 11 Oct 2007 14:43:32 -0700

begin Stephen J. Turnbull quotation of Thu, Oct 11, 2007 at 09:12:15AM +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.

The Alfresco prices are still in the five digits,
though, well over Joel's pricing dead zone.

>  > (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.

What's a better definition of marketing, and
what do you call the rest of what the "Marketing
Department" does?  I'd be happy to split up the
vague term "marketing" into separate terms for (1)
deciding what to make and what to charge for it and
(2) communicating about it with a view to persuading
people to buy it.

>  > 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.

Your "insider trading" here is a victimless crime
if all particpants know that researchers are playing
the market.

By that definition, me growing a bushel of corn in
my back yard without telling anyone would be "insider
trading" on the corn market.  I can understand if you
want to define something as unethical -- I won't try
to argue per-copy licensed software to GNUistas, or
treyf to people who keep Kosher, or interest-bearing
investments to halal banks.  But the existence of
people who define a business model as unethical
doesn't prevent others from agreeing to do that kind
of deal.

> 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.

A researcher who needs living expenses or money to
cover research costs could form an LLC with silent
partners who would share in the trading gains if any,
and agree to pay the researcher a salary and/or cover
the lab budget.

Sean Park talks about "risk quarks" -- unbundling all
kinds of transactions to let people trade separately
on different kinds of risks, and reaggregate the
"quarks" into other tradeable investments.  What Tom
Bell calls a "SPEX" is one possible quark that lets
you trade on the risk of whether a given technology
will exist independently of the fortunes of a given
company being able to make money on it.

Don Marti