6 ms·

I don't find it strange at all, and looking at a proper classical economist - they would have no trouble explaining it. Most people, when understanding economi

by brc 11y ago

I don't find it strange at all, and looking at a proper classical economist - they would have no trouble explaining it. Most people, when understanding economics tend to make the jump directly to money/cash when explaining prices and market action. But to be correct you have to look at utility. There's little question as to why companies install open source software - the TCO can be lower. But why do people contribute their time in building it? The answer is that the reward of being part of an OSS team brings great utility to a developer, and this is true even for marginally successful OSS projects. So people exchange their time for intangibles like reputation, credibility markers ( the author casually drops in which projects he is involved in) as well as the ability to leverage involvement into actual cash like well paid consultant gigs, books or successful blogs. So there isn't any strangeness going on at all. OSS makes sense from a company point of view, and it makes sense from an individual developer point of view.

danharaj 11y ago
Calling it utility doesn't seem to actually explain what it is.
- brc 11y ago
  Utility is a well-known concept in economics. It's strange at first to the outsider, but it's easy to understand with a little reading.
  - danharaj 11y ago
    I know what utility is in economics, my problem is that you can always just say that the reason why people do X is because they are rational and X maximizes their utility. It doesn't tell you why that is their preference and why X satisfies their preference. It is not like the action or hamiltonian in physics which come with equations of motions that can be checked against experiment. Why is open source good for everyone? You didn't explain it, you just cast it in certain terms, which is useful for distilling the problem, but certainly not for solving it. You gave your guess why it improves the contributors' utility, but you haven't really proved it. It's just a guess. I can guess, too. My guess is that open source software reduces the transaction costs of acquiring and fixing software for corporations, but I could not explain to you with neoclassical economics why developers work on it without being compensated. It should be a tragedy of the commons, but it isn't. Open source software is developed at the fraction of the cost of closed source software and either competes or completely dominates it. I don't believe in Liberal organizations of economy though, so it's not a big deal for me.
    - mikekchar 11y ago
      Open source software is cheaper to produce. In fact it is so cheap to produce that you can use it as a loss leader for advertising job positions. Why is this? Your average software company runs their R&D department on about 10% of their earnings. Yes, I pulled that number out of my nether regions, but in my experience that's about right. If you do a google search for R&D as a percentage of earnings, you will see lists for large companies that range anywhere from 2%-30%, but they tend to be on the lower side in my experience. This means that for a software company to produce, package, market and sell a software product, they have to charge about 9x what it cost to produce it. If we factor in profit, then we're pretty close to an order of magnitude difference. With open source software virtually all of that overhead disappears. If you are writing software that you already needed anyway, then the cost is very low -- even if nobody contributes to the project from the outside. With a traditional software sales model, you divide the cost over many customers. So it might cost you $10 million to create and sell, but if you have 100,000 customers, you can charge $100 each and break even. With an open source model, each actor builds pieces that they want and care about and uses other pieces for free. The advantage to working with the open source model is that the overall cost is an order of magnitude lower because you cut out all the sales, marketing, support and associated management. Not only that, but the pieces you pay for, you get to dictate exactly what they look like (within reason ;-) ). So essentially, you are getting your software at a tenth the price and the bits you care about, you are getting custom made. Of course, you usually have to spend time packaging and documenting, but this cost is quite low. The reputation you get for doing it is often more than worth it (especially if you look at the cost of hiring recruiters). It would be interesting to see a study to see if sponsoring popular open source projects leads to lower attrition for companies. I suspect this is true, but have no data. Of course, this sucks if you are in the business of selling software. If you are in the business of selling services enabled by software, then open source is absolutely king. Individuals still contribute quite a bit to open source projects and have their own internal drivers for doing so. More and more I've seen advice that in order to show your worth to an employer it is best to work on open source projects and to have a portfolio (I admit to giving this advice myself, from time to time). Lately, though, I have found that the majority of important open source projects are funded through commercial entities. The last time I looked, the Linux kernel was about 75% funded through commercial entities. On the web side of things, it's actually getting difficult to find popular projects that aren't mostly funded by one or more organizations. I think the era of running large software projects as a hobby is coming to an end.
  - crdoconnor 11y ago
    >Utility is a well-known concept in economics. It's well known but it still has a circular definition. Why do people spend $X on goods? Because it provides $X worth of utility. Why does it provide $X worth of utility? Because they spent $X on it. Ultimately it therefore ends up being rather meaningless. It's also non-disprovable which makes it non-scientific.
    - digi_owl 11y ago
      Interestingly ol' Marx tried to differentiate between use and exchange. He called it value, but i suspect it could easily translate into the utility of modern economics. Sadly he seemed to have managed to talk himself into circles trying to argue that labor was the source of value, and therefore capitalists were labor exploiters. Because of this he ended up mixing use and exchange value when talking about production machines, to try to show that said machines didn't provide any more value output than was initially put into making it. I suspect that once one correct for that, by for example making machines into labor amplifiers, Marx's writings have, given the circumstances and time it was written, some serious insights into the workings, and pitfalls, of capitalism (most people barely touch volume 1, but volume 3, published by Engels after Marx death, holds a stern warning about the effects of finance capital). Using that as a springboard to bootstrap some other kind of society may well be futile however.
      - crdoconnor 11y ago
        >Interestingly ol' Marx tried to differentiate between use and exchange. Well, of course they're different. It does seem that Neoclassical economics is fundamentally structured upon a series of misdirections that benefit capitalists: * Blurring use and exchange value. * The non-existence of money in neoclassical models. * The non-existence of banks or other credit intermediaries in neoclassical models. * Even the non-existence of profit in neoclassical models ("perfect competition") Pretty much any kind of element of an economic model that could be used to analyze the source of profit, in fact, is just handwaved away under the heading "assumptions".
        11y ago
danso 11y ago
Another part of it is how technology and networking has made contributing to OSS so low-friction that even if there was no possibility of a perceivable return on investment, there's also little cost to the participants as well. I did much less development than I did before Github came along...so I don't know if Github (which of course itself depended on the existence of other OSS and infrastructure advancements) is a cause, rather than just a correlation with my career trajectory. But I can't imagine having the same willingness to work on OSS if the status quo were SourceForge (even before its current bloatware incarnation) or even Google Code, which was a pretty good service. It's not that free software back then was less free than it is on Github. It's just that the barriers for dilettante developers to take that first step into OSS are lowered in very important ways. Without knowing anything about a library other than the part of its API that I use, I can make what I consider to be useful addition to the library and have immediate and reasonable confidence, given a decent test suite, that I didn't break the countless other moving parts in a library. Sure, test suites have existed just fine long before Github, but at least I can _see_ that a library has a test suite before even downloading it. My involvement with OSS could be done there, but I'm literally a short commit message and a couple of button-clicks from giving my work to the library's maintainer as a pull request. If it were any harder than that, I know I would put that pull request in my nice-to-do-someday pile of things and then completely forget about it. On the mainatiner's side, not only does Github provide a pretty nice notification system and workflow for them to organize, browse, and comment on incoming pull requests...but the way continuous integration services have decided to hook into Github means that the maintainer literally has to do nothing to have a first-pass confidence that I didn't break the library in all the ways anticipated by the test suite. This obviously does not ensure that the feature addition is not-shit, or even completely safe...but the maintainer has more time and energy to evaluate those important questions. And then on top of it, if the maintainer accepts the pull request -- within a span of minutes if not seconds, anyone in the world who then downloads the library or updates their copy has what I added to the library, without me having to do a single thing beyond submitting the pull request. Even besides the hope that rising tides lifts all ships...the instant gratification from the OSS process alone could be enough for otherwise disinterested developers.
chadnickbok 11y ago
Its been my experience that there's a second part to the TCO argument that answers the question of why companies allow their employees, on company time, to work on and contribute OSS. Essentially, open source provides a mechanism to share the cost of the long-term maintenance of a project. By contributing back, you can leverage the resources of the community to ensure that your new features continue to work against new and improved versions of the software, without requiring future resources to re-implement and update any changes made.
- gaius 11y ago
  Consider IBM. They want to flog you hardware and consulting. They need an operating system to sit in the middle of it, and right now, riding the Linux bandwagon is more profitable than AIX so thats why. There's no actual ideology involved, it's pure calculation.
  - brianmcc 11y ago
    +1 - if you're selling cars, you want fuel/gas to be free!
crdb 11y ago
You're missing one more on the company side beyond TCO: there's definitely an element of multiplicative productivity from not only avoiding duplication of effort, but getting the stuff everybody does done incredibly well via a collaborative effort amongst those who all share the same problems, such that they can focus on higher value added work. E.g. database, OS, machine learning libraries... A real life example might be a small town in an emerging country [1] where retailers band together and invest in building a road to the big city nearby. This greatly increases their revenue by bringing in a lot of traffic that wouldn't otherwise have bothered, even if the ROI on the road, if measured purely in terms of money in money directly out, is "negative". [1] I read about this happening in regions of Iraq. I saw it in person in the state of Maharashtra in India, where Godrej is building roads and power plants in the region around its factories near Pune.
- paulryanrogers 11y ago
  > such that they can focus on higher value added work. If the trend continues until nearly everything is free+open then there may be less and less work which is considered "value added".
ksk 11y ago
>But why do people contribute their time in building it? Because they get paid a salary to do so. Because commercial companies poured millions of dollars into the OSS projects. Specifically, the projects that people actually think about when they talk about successful Open Source Software - Linux, Firefox, Chrome, etc. >as well as the ability to leverage involvement into actual cash like well paid consultant gigs, books or successful blogs. That only applies if your project is already successful. And if its already successful, chances are high that you're already drawing a decent salary. And, books... Err.. Do you have any idea how little money authors make on those? http://www.techrepublic.com/article/for-50-percent-of-developers-open-source-is-a-9-to-5-job/ http://www.techrepublic.com/article/for-50-percent-of-develo... The vast vast majority of Open Source projects are just that - Source Code. No chance of money. No chance of glory. An itch was scratched. Someone just pasted a bunch of source code onto the Internet. And there is nothing wrong with that whatsoever. However, painting the entire OSS landscape with the success of the extreme minority distorts the picture.
- gaius 11y ago
  The point of books is to leverage the reputation into high paying consulting gigs. Same with conference speaking.
  - xchaotic 11y ago
    So it all boils down to high paying gigs then, which you can wing without contributing to OSS
    - mseebach 11y ago
      No, "you" can't wing them in any generalizable manner (why isn't everyone doing it, then?). For high paying gigs (not merely well-paid ones), you need a reputation. There are several ways to build a reputation, and contributing to a popular OSS project is one such way. An interesting, tangential point is that OSS is probably the most pure meritocratic way to build a reputation -- it does not rely on gaining access to a powerful network (which relies on gaining access to a slightly less powerful network, which relies on ...) or other variations of more-or-less controlled luck.
nickpsecurity 11y ago
A recent conversation with a company selling proprietary hardware with open software gave another angle: fixing stuff. Many, many organizations like having source code so they can investigate and fix problems. Whole projects have been burned by an inability to do this with something they acquired and built on. So, from an economic sense, maybe people discussing this should factor in avoiding liability.

by brc 11y ago

danharaj 11y ago

Calling it utility doesn't seem to actually explain what it is.

brc 11y ago
Utility is a well-known concept in economics. It's strange at first to the outsider, but it's easy to understand with a little reading.
- danharaj 11y ago
  I know what utility is in economics, my problem is that you can always just say that the reason why people do X is because they are rational and X maximizes their utility. It doesn't tell you why that is their preference and why X satisfies their preference. It is not like the action or hamiltonian in physics which come with equations of motions that can be checked against experiment. Why is open source good for everyone? You didn't explain it, you just cast it in certain terms, which is useful for distilling the problem, but certainly not for solving it. You gave your guess why it improves the contributors' utility, but you haven't really proved it. It's just a guess. I can guess, too. My guess is that open source software reduces the transaction costs of acquiring and fixing software for corporations, but I could not explain to you with neoclassical economics why developers work on it without being compensated. It should be a tragedy of the commons, but it isn't. Open source software is developed at the fraction of the cost of closed source software and either competes or completely dominates it. I don't believe in Liberal organizations of economy though, so it's not a big deal for me.
  - mikekchar 11y ago
    Open source software is cheaper to produce. In fact it is so cheap to produce that you can use it as a loss leader for advertising job positions. Why is this? Your average software company runs their R&D department on about 10% of their earnings. Yes, I pulled that number out of my nether regions, but in my experience that's about right. If you do a google search for R&D as a percentage of earnings, you will see lists for large companies that range anywhere from 2%-30%, but they tend to be on the lower side in my experience. This means that for a software company to produce, package, market and sell a software product, they have to charge about 9x what it cost to produce it. If we factor in profit, then we're pretty close to an order of magnitude difference. With open source software virtually all of that overhead disappears. If you are writing software that you already needed anyway, then the cost is very low -- even if nobody contributes to the project from the outside. With a traditional software sales model, you divide the cost over many customers. So it might cost you $10 million to create and sell, but if you have 100,000 customers, you can charge $100 each and break even. With an open source model, each actor builds pieces that they want and care about and uses other pieces for free. The advantage to working with the open source model is that the overall cost is an order of magnitude lower because you cut out all the sales, marketing, support and associated management. Not only that, but the pieces you pay for, you get to dictate exactly what they look like (within reason ;-) ). So essentially, you are getting your software at a tenth the price and the bits you care about, you are getting custom made. Of course, you usually have to spend time packaging and documenting, but this cost is quite low. The reputation you get for doing it is often more than worth it (especially if you look at the cost of hiring recruiters). It would be interesting to see a study to see if sponsoring popular open source projects leads to lower attrition for companies. I suspect this is true, but have no data. Of course, this sucks if you are in the business of selling software. If you are in the business of selling services enabled by software, then open source is absolutely king. Individuals still contribute quite a bit to open source projects and have their own internal drivers for doing so. More and more I've seen advice that in order to show your worth to an employer it is best to work on open source projects and to have a portfolio (I admit to giving this advice myself, from time to time). Lately, though, I have found that the majority of important open source projects are funded through commercial entities. The last time I looked, the Linux kernel was about 75% funded through commercial entities. On the web side of things, it's actually getting difficult to find popular projects that aren't mostly funded by one or more organizations. I think the era of running large software projects as a hobby is coming to an end.
- crdoconnor 11y ago
  >Utility is a well-known concept in economics. It's well known but it still has a circular definition. Why do people spend $X on goods? Because it provides $X worth of utility. Why does it provide $X worth of utility? Because they spent $X on it. Ultimately it therefore ends up being rather meaningless. It's also non-disprovable which makes it non-scientific.
  - digi_owl 11y ago
    Interestingly ol' Marx tried to differentiate between use and exchange. He called it value, but i suspect it could easily translate into the utility of modern economics. Sadly he seemed to have managed to talk himself into circles trying to argue that labor was the source of value, and therefore capitalists were labor exploiters. Because of this he ended up mixing use and exchange value when talking about production machines, to try to show that said machines didn't provide any more value output than was initially put into making it. I suspect that once one correct for that, by for example making machines into labor amplifiers, Marx's writings have, given the circumstances and time it was written, some serious insights into the workings, and pitfalls, of capitalism (most people barely touch volume 1, but volume 3, published by Engels after Marx death, holds a stern warning about the effects of finance capital). Using that as a springboard to bootstrap some other kind of society may well be futile however.
    - crdoconnor 11y ago
      >Interestingly ol' Marx tried to differentiate between use and exchange. Well, of course they're different. It does seem that Neoclassical economics is fundamentally structured upon a series of misdirections that benefit capitalists: * Blurring use and exchange value. * The non-existence of money in neoclassical models. * The non-existence of banks or other credit intermediaries in neoclassical models. * Even the non-existence of profit in neoclassical models ("perfect competition") Pretty much any kind of element of an economic model that could be used to analyze the source of profit, in fact, is just handwaved away under the heading "assumptions".
      - 11y ago

danso 11y ago

Another part of it is how technology and networking has made contributing to OSS so low-friction that even if there was no possibility of a perceivable return on investment, there's also little cost to the participants as well. I did much less development than I did before Github came along...so I don't know if Github (which of course itself depended on the existence of other OSS and infrastructure advancements) is a cause, rather than just a correlation with my career trajectory. But I can't imagine having the same willingness to work on OSS if the status quo were SourceForge (even before its current bloatware incarnation) or even Google Code, which was a pretty good service. It's not that free software back then was less free than it is on Github. It's just that the barriers for dilettante developers to take that first step into OSS are lowered in very important ways. Without knowing anything about a library other than the part of its API that I use, I can make what I consider to be useful addition to the library and have immediate and reasonable confidence, given a decent test suite, that I didn't break the countless other moving parts in a library. Sure, test suites have existed just fine long before Github, but at least I can _see_ that a library has a test suite before even downloading it. My involvement with OSS could be done there, but I'm literally a short commit message and a couple of button-clicks from giving my work to the library's maintainer as a pull request. If it were any harder than that, I know I would put that pull request in my nice-to-do-someday pile of things and then completely forget about it. On the mainatiner's side, not only does Github provide a pretty nice notification system and workflow for them to organize, browse, and comment on incoming pull requests...but the way continuous integration services have decided to hook into Github means that the maintainer literally has to do nothing to have a first-pass confidence that I didn't break the library in all the ways anticipated by the test suite. This obviously does not ensure that the feature addition is not-shit, or even completely safe...but the maintainer has more time and energy to evaluate those important questions. And then on top of it, if the maintainer accepts the pull request -- within a span of minutes if not seconds, anyone in the world who then downloads the library or updates their copy has what I added to the library, without me having to do a single thing beyond submitting the pull request. Even besides the hope that rising tides lifts all ships...the instant gratification from the OSS process alone could be enough for otherwise disinterested developers.

chadnickbok 11y ago

Its been my experience that there's a second part to the TCO argument that answers the question of why companies allow their employees, on company time, to work on and contribute OSS. Essentially, open source provides a mechanism to share the cost of the long-term maintenance of a project. By contributing back, you can leverage the resources of the community to ensure that your new features continue to work against new and improved versions of the software, without requiring future resources to re-implement and update any changes made.

gaius 11y ago
Consider IBM. They want to flog you hardware and consulting. They need an operating system to sit in the middle of it, and right now, riding the Linux bandwagon is more profitable than AIX so thats why. There's no actual ideology involved, it's pure calculation.
- brianmcc 11y ago
  +1 - if you're selling cars, you want fuel/gas to be free!

crdb 11y ago

You're missing one more on the company side beyond TCO: there's definitely an element of multiplicative productivity from not only avoiding duplication of effort, but getting the stuff everybody does done incredibly well via a collaborative effort amongst those who all share the same problems, such that they can focus on higher value added work. E.g. database, OS, machine learning libraries... A real life example might be a small town in an emerging country [1] where retailers band together and invest in building a road to the big city nearby. This greatly increases their revenue by bringing in a lot of traffic that wouldn't otherwise have bothered, even if the ROI on the road, if measured purely in terms of money in money directly out, is "negative". [1] I read about this happening in regions of Iraq. I saw it in person in the state of Maharashtra in India, where Godrej is building roads and power plants in the region around its factories near Pune.

paulryanrogers 11y ago
> such that they can focus on higher value added work. If the trend continues until nearly everything is free+open then there may be less and less work which is considered "value added".

ksk 11y ago

>But why do people contribute their time in building it? Because they get paid a salary to do so. Because commercial companies poured millions of dollars into the OSS projects. Specifically, the projects that people actually think about when they talk about successful Open Source Software - Linux, Firefox, Chrome, etc. >as well as the ability to leverage involvement into actual cash like well paid consultant gigs, books or successful blogs. That only applies if your project is already successful. And if its already successful, chances are high that you're already drawing a decent salary. And, books... Err.. Do you have any idea how little money authors make on those? http://www.techrepublic.com/article/for-50-percent-of-developers-open-source-is-a-9-to-5-job/ http://www.techrepublic.com/article/for-50-percent-of-develo... The vast vast majority of Open Source projects are just that - Source Code. No chance of money. No chance of glory. An itch was scratched. Someone just pasted a bunch of source code onto the Internet. And there is nothing wrong with that whatsoever. However, painting the entire OSS landscape with the success of the extreme minority distorts the picture.

gaius 11y ago
The point of books is to leverage the reputation into high paying consulting gigs. Same with conference speaking.
- xchaotic 11y ago
  So it all boils down to high paying gigs then, which you can wing without contributing to OSS
  - mseebach 11y ago
    No, "you" can't wing them in any generalizable manner (why isn't everyone doing it, then?). For high paying gigs (not merely well-paid ones), you need a reputation. There are several ways to build a reputation, and contributing to a popular OSS project is one such way. An interesting, tangential point is that OSS is probably the most pure meritocratic way to build a reputation -- it does not rely on gaining access to a powerful network (which relies on gaining access to a slightly less powerful network, which relies on ...) or other variations of more-or-less controlled luck.

nickpsecurity 11y ago

A recent conversation with a company selling proprietary hardware with open software gave another angle: fixing stuff. Many, many organizations like having source code so they can investigate and fix problems. Whole projects have been burned by an inability to do this with something they acquired and built on. So, from an economic sense, maybe people discussing this should factor in avoiding liability.