The Open Source Business?

Ted wonders: "Being an advocate of the open source software movement for some time, I'm wondering how and if the principles of open source software could be applied to a new type of open source business. In a world where people slave away for the sole profit of a board of directors and merciless shareholders, is there room for a new type of organization that throws away the archaic and monolithic organizational structure of today and from there form a company that has its direction dictated by all of the members that run it. An organization where everyone has an equal say in what goes on. There isn't any limit on how many people can be involved (the more the better, in fact) as long as they can be useful. Could this be the way of the future?"

Comments

hm.

[GregoryD]

Sounds like communism... heh heh heh.

Re:hm.

[surfbass]

I was just wondering if he was reading the Manifesto...

Re:hm.

[Millenniumman]

By choice? So if a communist worker wants to start a business so he can buy a nice house and car, the community won't have a problem?

Re:hm.

[rohan972]

I'm not sure how you think you have discerned my understanding of industry by my post. However, your assertion that workers under communism are in the positions they are by choice flies in the face of everything I've ever heard or read about communism.

I note that you live in a former communist country. Funny how that really doesn't seem to fit with Marx's view of the inevitability of communism. As far as I am aware, every communist regime so far has required to keep people from escaping. Doesn't say much for your position that they were there by choice.

Good luck with that

[nelsonal]

Open source works mostly because the distribution costs are very low relative to the initial costs of creating software. Very few other industries work that way (power generation and distribution are one).

Leadership by committee? Doubtful.

[XorNand]

One of my network support customers is a tiny township of a few square miles, it's about the smallest form of government in modern-day America. Almost every single decision has to be approved by their board of trustees of about six-seven people. It takes absolutely *forever* to get anything done and is frustrating beyond belief. Yes, it's even worse than corporate America. I can't possibly imagine to run even a small company like that and still remain competitive.

Re:Leadership by committee? Doubtful.

[shmlco]

"...where (presumably) every employee is intelligent, educated about the company, and has a personal and very material stake in the company."

Anyone remember the story of the kids who found a cat and when asked the sex, immediately voted that he was male and his name was Johnny? Two weeks later "Johnny" had kittens.

Unfortunately, too many people think they have a equal and valid opinion on any subject. Even when there are in fact educated in a given field, they think that makes them an "expert" in other, non-related fields. Do I really want, for example, a technology company in which the janitors have an equal vote with the engineers? No disrespect, but in all likelyhood if the janitors were intelligent and educated... they wouldn't be janitors.

Look at all of the companies where the workers voted themselves higher and higher wages and more benefits... and then went bankrupt or out of business because they were no longer competitive. Heck, most people can't even run a lemonade stand successfully, much less a large organization.

Now, I do think companies, CEOs, and boards need a higher level of accountability. But IMHO, counting runny noses is probably one of the worst ways possible to run a company. Heck, more than six people can't even decide where to have lunch.

Re:Leadership by committee? Doubtful.

[ignavus]

(begin sarcasm)
Yeah, I mean America would never work if everyone had a vote for the legislature and for the national president.

Only the rich people, who own a share of the country, can really run the country. And the richest should get even more votes than the others.
(end sarcasm)

Um ... how is it that huge nations (and India is much bigger than the US) can be run democratically, but a firm with only a fraction of the size of the nation's population on its workforce could not run democratically?

Why not just change the corporate law: instead of stockholders voting for the board of directors, let the workforce vote for the board of directors, one person one vote?

At the moment, democratic governments are faced with a plethora of non-democratic institutions (business corporations) with enormous powers. The corporations are governed the same way that America (and England, etc) were governed long ago: those with property had a vote (and those with the most property, the aristocrats, were represented in person in the English Parliament); those without property had no vote. This system is called plutocracy - rule by the wealthy. We got rid of it in politics ... but now it is time to get rid of it in the economic world. America campaigned against decisions (like taxation) being made without the Americans being represented in the decision-making body. Why should employees - the owners of human capital - take second place to those who only invest financial capital in the business? The "human capitalist" (the employee) has more at stake in the business - usually their whole human capital is invested in the one business - it is hard to work in more than two or three businesses at the same time. But the financial capitalist (stockholder) can split their money capital up among hundreds of companies at the same time, to hedge against something going wrong in one company.

Business requires money and human effort. How come those who contribute the money control the business; and those who contribute the effort get no say? Does that sound fair or democratic? Isn't it putting money above people? Isn't it contrary to the whole basis of a democratic society?

Re:Leadership by committee? Doubtful.

[bhmit1]

Business requires money and human effort. How come those who contribute the money control the business; and those who contribute the effort get no say? Does that sound fair or democratic? Isn't it putting money above people? Isn't it contrary to the whole basis of a democratic society?

If you contribute human effort without getting paid, you should be given a share of the company or a partnership. Otherwise, I think it's considered slavery or really really bad negotiating skills. Or were you hoping that you would get rewarded when the business does well and still get paid when it doesn't?

People who put money into a business are investors that know there's a risk they won't see that money again. They are rewarded for that risk with a share of the company that goes up in value when the company does well. The bigger the risk they take, the more that share should be valued if the company actually succeeds.

Employees, on the other hand, take absolutely no risk. If you work, you get paid. If you go working for a startup, they often give you options to reward you for taking the risk that you'll be out of a job in a year and may not have a huge starting salary.

Gordon Gekko said it best, greed is good (up to a point). If you're upset by all those CEO's and business owners that are making all the money, then start your own business or become a CEO (unless you have connections, you're better off trying the former). If you choose to stay an employee, then you get exactly what the company offered in exchange for your services and nothing more.

Re:Leadership by committee? Doubtful.

[An Onerous Coward]

Can you name some examples of companies that went out of business because the employees had too much say in how the company was run? You say "Look at all of the companies..." but frankly most of the people who are nodding their heads in agreement with you probably couldn't name one company organized this way, much less one that follows the pattern you describe.

Also, I take issue with your "runny noses" barb. Frankly, this smacks of the same sort of paternalism that neo-cons are constantly accusing liberals of. Only, instead of saying "only government can competently manage the affairs of the infantilized lower classes," conservatives have decided that only the brilliant, noble capitalist can run anything more complex than a lemonade stand properly.

You're right when you say that six people can't decide where to go for lunch. But if "lunch" is a daily event, they can certainly figure out that their current system isn't working, and choose a more efficient decision-making process. I'd start off with a rotating benevolent dictatorship. That is to say, "it's Monday, so Bob gets to decide." You're a bit lacking imagination if you think that every person needs to be directly involved in every decision, and even moreso if think a janitor shouldn't be involved in IT decisions.

Here's how it ought to work: The IT people ask the janitors what they need to do their jobs more efficiently, then work with them as they would work with any customer to get those needs filled. Meanwhile, while the janitors might not have any say in the architecture of the software the company sells, they might have worthwhile input about other aspects of the business, like how the company treats its customers. They'll also have contacts in the community that could be valuable.

The simple fact is, if you treat labor like a commodity where all you do is provide it certain inputs (mops, brooms, and wages) and expect certain outupts (a clean building and no pesky opinions) then these are the only outputs you're going to get. If you treat them like adults who have eyes and ears and powers of observation, and provide means and incentives for collecting that knowledge and spreading it around the rest of the company, then you get invaluable information about the company. Possibly more important, you get an employee who is less likely to treat his job like a commodity where all he does is provide certain inputs (time and effort) in exchange for certain outputs (money).

Cooperative

[John Hasler]

This is called a "cooperative". These have been common in the US for over a hundred years.

Re:Cooperative

[plopez]

I wish I could mod you up. To expand on the topic, coops are very common, some examples include:
-Credit unions
-Insurance compaines
-Religous communes
-Rural coops, including telephone, electric, water and sewer coops.
-Mutual benefit corps. such as fraternal organizations.

What is blowing the minds of many of the posters is the concept that there is no strict heirarchy of control. There seems be be a propensity of some people to disbelieve that anything can get done without a strict military/fascist type table of order.

And yet very successful examples are all around us.

Re:Cooperative

[John Hasler]

> What is blowing the minds of many of the posters is the concept that there is
> no strict heirarchy of control. There seems be be a propensity of some people
> to disbelieve that anything can get done without a strict military/fascist
> type table of order.

There does not exist a human organization in which everyone is equal (though some groups try to pretend).

Re:Cooperative

[markdavis]

Generally, co-ops only work well with a relatively homogeneous collection of people. In a business, it is less likely that all the employees will be in such equal mindsets.

I wouldn't think that co-ops would scale well. It is not all that hard to get 2 to 5 people to agree on a course of action. Much harder , but still doable with 10. But it is nearly impossible with 100 or 1,000. So it will just be a "majority rules".

Without some type of heiarachy, decision making can be much too slow in an "everyone is equal" environment. You need specialization and sub-grouping to focus on particular issues in depth. And some specialization will, inevitably, put some employees on different authority levels than others. For example, hiring and firing... with 1000 employees, there is no way that such an on-going staffing task could be done by "majority rules".

Another example is financing. How many of those employees will really understand finance enough to participate in the voting/control of the spending? Buying? Information Systems? Marketing? Etc.

Re:Cooperative

[davmoo]

Besides sales, marketing, IT, etc, there is also the other end of the scale...how many of those employees will volunteer to clean the toilets and empty the trash cans every day. Sooner or later, every "we're all equal" business is going to have trouble with the proverbial (and now politically incorrect way to say it) too many chiefs and not enough indians. Nobody aspires to be a grunt.

Re:Cooperative

[automatix]

Fonterra is the world's largest dairy company, and its a producer's co-operative. Now, the producers (farmers) own 100% of the Fonterra shares, and they're also the company's suppliers. A co-operative doesn't neccessarily mean everyone is equal, just that everyone is an owner/stakeholder and that the company acts in their collective interests. In which case co-op's can scale.

Re:Cooperative

[shmlco]

So? In any organization there are "scut" jobs that no one wants. Look at the problems Open Source often has with maintenance and bug fixes, as most developers would rather be implementing new features than fixing old ones.

With a vote?

[MarkByers]

You mean a direct democracy? In a democracy the majority tries to take privileges away from the minorities for their own advantage. This works OK for countries where it is very difficult to leave but it's hardly a good way to run a company. A company is supposed to be a team that works together. The people that get taken advantage of can easily quit and then you end up with a smaller company with the same problem.

Re:With a vote?

[Billly Gates]

Then if the upper guys quit (The ones the average worker will take advantage of) then it will no longer serve the average employee and it would hurt them.

Unless of course you think the average worker is not qualified to make such decisions and they can shoot themselves in the foot?

Yeah your supposed to work together as a team but guys with clipboards and 4 function calculators have no bussiness telling MBA educated CEO's and board of directors business decisions. Apearently this is whats happening and many big companies have no long term plans because these silly CPA's walk in and tell them what to do or even fire them. Thats not right either.

Reminds me of wall street punishing Sun for first missing out on the pc market eating into workstation and server sales. So sun becomes profitable again by making cost effective systems and then wall street punishes them again and fire Scott mcNealy for not concentrating on selling big mainframes that bring in all the dough and ignore the market disinterest in such systems.

Re:With a vote?

[shmlco]

"... wall street punishing Sun..."

Oh please. The people at Sun made decisions as to what products they wanted to make, how they were going to develop and market them, and what price points they were going to hit. Tens of thousands of people in other companies examined those decisions and decided if those products and that direction was right for them, and purchased accordingly.

Know what? They guessed wrong. People didn't want expensive, proprietary OS's (Solaris) and expensive, proprietary hardware (Sparc) that often provided no significant benefit over commodity software and hardware. They also spent a ton of dough on a system (Java) they had no way to monetize.

Bottom line: the "market" was disinterested in their products, sales flatened out, then dropped, and then, and only then, did Wall Street "punish" Sun.

And what THIS reminds me of is why I don't want a bunch of uneducated people with no business sense running a company.

Use OS as byline.. free pass..

[Tracer_Bullet82]

If you're asking for an organiztion where everyone has "equal" say that's just running for disaster.

There's a valid and powerful reason for hierachy and divison of power(yeah, yeah I know it can get corrupted and all, that does not detract from my point!), because if everyone can go on willy nilly and do whatever they want, then what's to ensure something or heck anything get's done. It's get thing done.

Anyways OP's analogy is flawed, when is in a OS project everyone has equal say?

The project manager certainly has more say than a contributor, and there's nothing wrong with that.

And as much as I love OS and the prevailing spirit here.. can we stop granting aticles based on it just using /bots favourite flavor of the weak?

Re:Use OS as byline.. free pass..

[c0d3h4x0r]

Anyways OP's analogy is flawed, when is in a OS project everyone has equal say?

You accidentally stumbled upon the key issue.

Open-source projects are not democracies, but meritocracies. Participants who contribute better results naturally arise as leaders and therefore enjoy playing a larger role in decisions. The things a participant needs to do to move up the chain are perfectly aligned with the results the project needs to deliver to succeed. You don't get leaders who are more interested in their success than in the project's success, because they are one and the same.

Businesses are not meritocracies. People get hired, promoted, and fired based largely on factors that have nothing to do with the results they've contributed. The things an employee needs to do to move up the chain are almost never aligned with the results the business needs to deliver to succeed. You get tons of middle-managers and even CEOs who are more interested in their own success than in the company's success. Not only do those definitions of success not align, but they almost always directly conflict. (See Enron)

This is why so many businesses ultimately fall apart. They increasingly spin their wheels (while increasing numbers of employees jockey competitively for position) while producing lackluster results. (See Microsoft)

This is also why so many open-source projects keep improving despite inner turbulence and leadership changes. Any changes or competition that occur are motivated not by self-interest, but by interest in the success of the project. Therefore, any changes that occur always result in a better (not worse) alignment with the results the project needs to succeed. (See XFree86 -> X.org transition)

Employee Owned Corporation

[xplenumx]

I was under the impression that 'open source' meant that the code was freely available - not that the project had no leader or organizational structure. What I think you're dancing around though is the concept of an employee owned company - where, in theory, the employees become the 'merciless shareholders.

A.K.A.: Employee Buyout of a Corporation

[reporter]

The article at the top states, "...is there room for a new type of organization that throws away the archaic and monolithic organizational structure of today and from there form a company that has its direction dictated by all of the members that run it."

Such an organization already exists. It is an employee-owned company, which often becomes employee-owned through an employee buyout. There are numerous examples of employee-owned companies.

The most famous example is United Airlines. It operated as an employee-owned corporation from 1994 until 2002.

The lesson here is that sometimes employee-owned companies succeed. Sometimes, they fail. There is nothing magical about being open source or about being a company structured on the open-source process. Such software and such companies are subject to the whims of the marketplace and can succeed or fail -- as determined by the invisible hand of the free market.

Nice idea... now try it

[mfriedma]

It sounds like a wonderful idea.

As an initial dry run, let me suggest that you get together with 15 of your closest friends and see how long it takes to decide where to have lunch.

I predict one of two results:

1. One or two strong personalities take over and make a decision, or

2. You take longer deciding where to eat lunch than actually eating lunch.

In contrast, in my company (which I happen to be the boss of) I decide where to have our weekly lunch. It therefore takes 30 seconds. Other people get input - they tell me what they like and don't like - but since I'm picking up the check I decide.

Seems to work OK.

Now imagine your happy little company making a hiring decision. Worse yet, a firing decision. Cringing yet?

Yeah, but...

[rickb928]

..TFA makes this assertion:

"In a world where people slave away for the sole profit of a board of directors and merciless shareholders"

Um, I work for a large, and very recognizable corporation, and I don't slave away for the sole profit of the board of directors nor merciless shareholders, or even an overpaid criminal CEO.

I get paid. And after my expenses are paid, I have a modest profit to show for my efforts. So do all of my coworkers, worldwide.

And most corporations function the same way.

would an open-source corporation function differently in this area?

But I can imagine an open-source consultancy. Common knowledge base, share the work, blah blah blah. Same formula lots of Big-Eights used. Served them well.

How would an open-source corporation handle compensation, In an open source way.

?

rick

Alternate scenario

[raftpeople]

Honestly, who is really facing the greatest risk? The venture capitalist who invests a few million in a startup, knowing that his other, less risky investments guarantee him high income for life? Or the person who takes a minimum wage job knowing that she could be fired in a couple of weeks and be unable to make rent, or spend the next two years working for a manager who likes to feel her up, or injure herself on the job and have to fight her employer tooth and nail to get her medical bills paid?

Honestly, who is really facing the greater risk? The small business owner that put his/her life savings into the company and has the house mortgaged to the hilt to make payroll? Or the worker whose spouse is already making enough to pay for the house and a boat and is only working because he/she doesn't want to stay home?

Although both of our examples exist in the workplace, neither is representative so they add no value to the debate.