Subject: Re: FW: Why would I pay for Ximian software?
From: "Perry E. Metzger" <perry@wasabisystems.com>
Date: 03 Jan 2002 11:12:05 -0500


Ian Lance Taylor <ian@airs.com> writes:
> "Perry E. Metzger" <perry@wasabisystems.com> writes:
> > Remember, I'm someone who enjoys hacking on software I give away, and
> > I do it regularly. I understand psychologically what's going on, but
> > that's different from understanding the entire phenomenon well enough
> > to try to keep a business sustained.
> 
> I guess I don't see why.  Your earlier message implied that you didn't
> fully understand the incentives which led to the creation of open
> source software.

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.

> Connect the dots for me: why would a better understanding of those
> incentives help sustain your business?

As just one reason it would be valuable: understanding the economics
well would mean one could make predictions, and business planning
requires the ability to make reasonable predictions (if only very weak
ones) about how economic actors will behave. The actors I'm most
concerned about are not the developers but the consumers, and I'm
especially interested in problems like information effects.

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 suspect
this is because of information cost effects -- it is easy in the case
of proprietary software, because they are in effect pooling their
resources by making the purchase decision. However, in the case of the
open source development situation, there are a number of issues,
including lack of knowledge about the timing and quality of the
software development process and the costs of simply organizing the
pool.

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.

The open source community is in many ways an example of this issue of
information effects being reduced as a barrier to participation. The
fact that open source is possible at all is because of the low cost of
becoming a participating developer that the internet has created --
before the internet, you couldn't have had the efficiencies we've been
able to achieve now (although there certainly was open source software
before, it didn't operate on the modern scale).

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.


--
Perry E. Metzger		perry@wasabisystems.com
--
NetBSD Development, Support & CDs. http://www.wasabisystems.com/