On The Linux Culture and Money

Andrew G. Feinberg writes "The latest Andrew Leonard piece on Salon.com deals with whether our favorite corporations will still be true to the community while having to keep shareholders happy. Excerpt is below: "Will the huge financial worth of the founders of companies like Red Hat and VA Linux end up disillusioning small-time developers? These companies must now keep their shareholders happy -- will the goal of keeping stock prices high interfere with code design decisions that used to be based on purely pragmatic factors? And what happens if Red Hat and VA Linux stock goes down in flames?" "

Comments

Re:Some good questions and partial answers

[Suydam]

I'd like to thank you for being one of the few people who actually READ the article before posting. Nice job.

My thoughts with regards to small-developer dissolusionment (or lack thereof):
Money and greed corrupt....sure, we all know that. But we also know that money is a reasonably successful motivational factor, and a very appreciated reward system. Small developers will become more plentiful with the allure of money now dangling from the stick. And some existing developers (as well as the new ones lured in by $) will be more motivated to turn out great code. Those that aren't driven by money will stay the same. There will be a select few that are corrupted by the greed...but I don't see them gaining the upper hand in Linux development any time soon.

Something to think about:
Was it the allure of money that sent the windows world from a primarily free-ware model in the late 80s to a primarily shareware model in the 90s? Because that is something I would hate to see in linux. The abundance of shared, free software and the helpful community attitude toward it would be somethign I'd hate to lose. My own gut tells me that the spectre of the GPL and the momentum of the community as it currently stands will help to thwart the shift...but you never know.

Re:Why?

[Suydam]

Why?!
Because that is what publically owned companies do. When you sell your shares, you are saying "Buy part of me, and I'll lead you to riches." If people buy your shares and then you thumb your nose at them, your overall value as a company will decline.

Most shareholders with any sense will be aware of the GPL and the -different- nature of Linux. Those who aren't are going to get burned, but it's their fault for buying shares purely for profit.
WRONG. Most shareholders buy shares of a company PURELY for profit. Our feel-good Linux companies are no different. You doin't shell out $5000 for Red Hat shares just because you like them. You do it for one of two reasons....which both have the same result. Either you buy Red Hat because it's the hot thing (in which case you have ZERO knowledge of the GPL) and hope to make money. Or, you buy Red Hat because you like their corporate stance, think they are headed in the right direction long term, and hope to make money. The stock market is about only one thing: dollars. Shareholders want them, and Red Hat is obliged to provide them to the best of their ability.

Re:Small Developers

[Jon Peterson]

I beg to differ:

"For one thing, it's a great motivational boost to know that what you are doing could make you mega-rich. Some people like that kind of incentive. "

Yes, and more's the pity. So there is AN hacker working hard on his new app, and he thinks to himself 'Well, I reckon I should use libfoo becuase that's a well made library - but - gee MegaDistro, the most populat Linux distro has gone down the libbar path. So, If I make my app use libbar in stead, my app might get included in the MegaDistro distribution, and they might employ me or give me little sweetners or 'goodwill stock options' so yeah, I reckon I'll dump libfoo.

Lovely.

"Secondly, it is clear that the open source movement as a whole will benefit from the injection of cash and corporate credibility that these kind success stories bring. It's a necessary step in maintaining the progress of free software."

Rubbish. Your definition of progress is not the same as everyone else's. I write free software to make people (not least myself) happy. I don't do it to crush MS, I don't do it so I can become one of the high priests if the OS cathedral like ESR and AC, and I sure as hell don't do it for the fucking silicon value mickey mouse money stock options.

"But most importantly, it is clear that the business model of firms like Red Hat rely upon the goodwill of the open source community."

No. RH has not been in existence long enough to prove a business model one way or another. RH is currently a vapour company. It makes losses. MASSIVE LOSSES AND INCREASINGLY LARGE LOSSES. Its stock rides on publicity and vibe. I'll readily admit that good publicity and good vibes rely upon the goodwill of the OS community. But as for the business model, we'll wait and see.

Re:All I care about is products & GPL

[Jon Peterson]

I would not go so far myself, but it is a GREAT FALLACY to say that the GPL ensures the survival of good OS projects in the face of money (or any other threats).

There are many reasons OS projects die out, here are a few:

1. Too hard
2. Too boring
3. A key developer leaves
4. LACK of PUBLICITY
5. Infighting
6. A rival project

Now, how many of these factors can be easily influenced by any corporation with alot of free cash?

1. No, a hard task is still hard
2. Not per se, but a salary can make up for dull coding.
3. Absolutely. I doubt that a KDE hacker will leave to work on Gnome just because RH offers a fat cheque, but a similar situation is quite easy to imagine.
4. Currently the biggest. Who wants to work on a litte backwater project when you can work on Teh GIMP and brag to all your friends about it? Publicity has a massive effect on the momentum of OS projects - And lets see now:
linux.com (commercially owned)
slashdot.org (commercially owned)
freshmeat.net (commercially owned)

Looking just great :-(

5. Not especially. There's nothing like an ego to rise above cupidity :-|
6. Very definitely. A little project that's been chugging along fine can be killed off in a flash if a company decides to throw a few full time developers at it. Sure, if everything is GPL then the little project can take code from the big new one - but as we all know that's rarely how things work. Lots of NIH syndrome.

Now, you ask, why would our loverly OS company like RH or VA linux want to kill off an OS project? Well, pretty damn obvious I'd say. Are you going to tell me that RH has no interest in seeing, say, harmony bite the dust*


*Yes I KNOW harmony isn't around, and no I'm not making any conspiracy theories, but as we see different companies go down different architecture paths like this, you MUST realise that they have vested interests in alternative OS projects failing.

Since this is in reply to TC, I'll leave conjecture on financial backing for Perl vs Python as an excercise for readers :-)

Why?

[jd]

Why should Red Hat, or VA Linux, care what their shareholders think?

• The shareholders combined have less than 50% of the shares, so there's no risk of the management being out-voted in shareholder meetings.
• The software Red Hat and VA Linux uses is (almost) all GPL, so there's no real cost involved in obtaining it.
• The hardware is the only real cost, and both Red Hat and VA were doing fine, long before they started trading on the stockmarkets.
• Most shareholders with any sense will be aware of the GPL and the -different- nature of Linux. Those who aren't are going to get burned, but it's their fault for buying shares purely for profit.
• The -different- nature of Linux is what gives it a clear, fresh market. The "traditional" software market is cluttered and poised to collapse. Moving into an overcrowded, dying market is not going to make any shareholder happy, no matter what their reason for investing.
• The GPL constrains any changes Red Hat or VA Research might want to make.
• Closed software is expensive to buy or write, and expensive to maintain. Red Hat want to be in the black soon, if they want to keep investors happy, and that means moving deeper into GPL-land.

Re:Hm.

[Syberghost]

It is my belief that an Open Source programmer is far less likely to be "corrupted" by money that they're paid for working on Open Source projects than they would be by money that they're paid for for working on closed-source projects.

If you can work on Open Source full time and still eat, that's a good thing.

If you have to work on closed-source to eat, there's a powerful incentive for you to concentrate on that closed-source work.

Additionally, some companies make their employees sign contracts basically stating that anything they write while working for the company belongs to the company. Now, of course you can always choose not to sign that kind of a contract and work for that kind of a company, but that's not good unless there are alternatives. Open Source companies are the best alternative.

Bottom line: we've been telling companies for years now that they should open their source. Are we now going to berate the companies that do so successfully? Are we going to hurt their sales with boycotts, so that they fail, causing the established companies to say "see, Open Source doesn't work, we're closing our stuff again."?

It's not the money that matters but the means ...

[LL]

Profit may seem to be incongruous with free (speech) software but in fact it is intrinsic to the system when you consider it as a proxy measure for the efficiency of delivering a final good/service. For example instead of hiring 100 water carriers to hustle bottled water, I borrow a billion dollars and build a pipe network maintained by 5 engineers and charge people a lower cost for bulk water, then the profit is a measure of freeing up 95 people to do more useful tasks. Thus profit is a complex formulae combining risk (entrepreneurship) + talent (skill at creating a more efficient business system addressing a market need) + management (motivating everyone and keeping out competitors). The point is not that you can cook a better hamburger than McDonalds (not very difficult) but that they can provide fast food at an affordable cost at a consistent level of standard (no comments about quality please) and franchise it globally.

Why should OpenSource be profitable? Because ESR pointed out very clearly that software is a service, not a manufactured good and the bulk of programming time is spent in the maintenance phase. One big problem with corporatism is they have this habit of externalising negativities, what people commonly call privatising the profits but leting risks get lumped on the public. One obvious example is the tobacco industry which has caused ripple efects on the public health system. Hence the domination of a company in addicting the rest of the world on an endless cycle of unnecessary upgrades has got the rest of the industry feeling the impact of the technology arms race and stressed out and aggravated at the code quality. OpenSource can be seen as a natural reaction by the intermediate customers (who are not the hardware manufacturers) but the developers who want a stable and cheap platform in creating new internet services for their end-customers.

Now most people don't object to profits fairly gained and in fact if they are very successful they eventually dominate their market niche and become a natural monopoly. However, bad business practices can easily erode goodwill such as

1. bundled packages with forced tying
   
2. depressing and deprecating competitor's products to force a buyout at lower than market price
   
3. deliberate obfuscation of standards/APIs create barriers to subsitution
   
4. consistent history of providing bogus delivery dates for non-finished products
   
5. defining and imposing in-house specifications rather than common interoperable standards
   

Fundamentally a company operates in a network of trust (simply to avoid getting expensive lawyers in to guard every silly thing) and creating a toxic wasteground of relationships as a result of dubious activities, no matter how currently profitable in the short term, is fatal to long-term success. Thus it is not so much the profits that annoy people but the means of achieving those profits and the fact that larger organisations carry their fair share of the social consequences of their actions (e.g. oil companies with their environmental policies, manufacturing with their sweatshop practices, software companies with their founder's personality cults.

If OpenSource is successful as a profitable business model then it must indicate that it satisfies the necessary conditions for a sustainable industry. The point is that with the code being freely available, then the only distinguishing factor is the value of their associated services, reputation for sales support and means for attracting skiled staff with a combination of lifestyle and long-term mission/purpose. One obvious analogy is why do doctors volunteer to work for organisations such as Medici Sans Frontiers? Because they believe in the cause. Profits are an interesting metric of value but they can't measure everything.

LL

Re:opinions, nothing more.

[surajrai]

I totally agree with you here. Stock prices are definitely overvalued here. Look at VA-Linux..what is the difference between VA and Compaq? They are both hardware vendors that sell machines configured with Linux/Windows. How come VA linx's share price is in the hundreds and compaq at 20 something? Dooms day is coming and when it comes, watch the people jump out of their high rise penthouse offices...

Some good questions and partial answers

[dsplat]

I was impressed. Here is a piece about the open source IPOs that showed a knowledge of what open source is about. He asked some good questions and partially answered them. I think Leonard's conclusion that free software will be here 5 years from now is valid. Regardless of the sucess or failure of open source business models, the reasons that many of us do it aren't going to change. Whether Red Hat and VA Linux will conquer the world or wither and die remains to be seen. I wish them both well.

Re:Success=Commercial success?

[G27 Radio]

I see all the advantages of open source, I just dont think theres enough money in it to make a second Microsoft. (unlike what long term VA/RH investors seem to think)

I hear ya... Not even a kindler, gentler Microsoft. The model doesn't seem like it would support a huge monopoly does it? No complaints here.

At the same time, though, I think the OSS software development model has a great chance of crushing Microsoft--well, as much as M$ crushed IBM. Microsoft CAN produce good software, but I don't think that's been their primary goal--maybe we'll see more of it from them when it becomes essential to their survival again. Back to the point, it's not RedHat or VA that I see doing the "crushing" -- it's everyone that's involved in Open Source.

The only big money in Open Source is from suckering investors :)

Heheh, well I guess that all depends on what you consider to be big money. The money is probably going to end up spread out over as many companies as it takes to get it right. I can't picture a single company dominating over open source--how could it happen? (That's not rhetorical--there certainly could be something I haven't thought about :)

I really think the biggest, most successful OSS companies in the long term are going to be those that give the most back (not just monetarily) to the OSS movement. It seems that RedHat and VA Linux feel this way too. They're making huge investments in the trust and goodwill of the OSS community with good reason. Reputation is going to make or break OSS companies.

Maybe they've decided that they can be inlets to OSS from the sea of money that that is floating around out there. They could try to take advantage of this situation, but then they'll lose support from the OSS community. If they lose the community's support their products become less effective. I'm hoping there is enough of a natural balance here to keep things going well.

I'm hoping there will be a natural balance between the investors and the OSS community as well. By pressuring OSS companies into purely greedy options they (investors) will get burned. By nurturing the flow of money and resources into OSS they will themselves profit.

I realize that all my comments are really just speculation, particularly that last paragraph--I really know next to 0% about finance/investing/economics. I don't know a whole lot about meteorology either (like even how to spell it) but I can still tell from which direction the wind is blowing.

numb

Won't happen.

[bero-rh]

There are a couple of reasons why this won't happen.
Let's assume for a moment that Microsoft managed to assimilate Red Hat management (which won't happen, they're neither assholes nor idiots), and they'd decide any further Red Hat development would be closed-source where possible.
What would happen?

1. A lot of customers would change distributions because they want to support open-source.
   
2. Because of (1), stock prices would drop, making shareholders more angry.
   
3. Many of the developers (myself included) would leave because they don't want to work against the community. It would be difficult to find new qualified developers who would work on proprietary crap.
   
4. Because of (3), the product would get worse, causing customers who don't care about the open-source idea to leave, consequence see (2).
   
5. Red Hat's reputation in the community would be ruined, we wouldn't get the same amount of help from the developers of various packages we're getting now, so the product would get worse.
   
6. Because of (5), customers who don't care about open-source would pick a different distribution, go to (2).
   
7. The former Red Hat developers would be hired by other distributors, making the other distributions better products.
   
8. Because of (7), customers would pick a different distribution, go to (2).
   

So, even if we didn't care (but we do), there would be no reason to go closed-source. Instead, it would mean the pretty much immediate destruction of the company trying to do it.

Small Developers

[mikera]

The big Linux IPOs are a good thing for small developers.

For one thing, it's a great motivational boost to know that what you are doing could make you mega-rich. Some people like that kind of incentive.

Secondly, it is clear that the open source movement as a whole will benefit from the injection of cash and corporate credibility that these kind success stories bring. It's a necessary step in maintaining the progress of free software. Small developers with their eye on the ball will do well in the open source consulting and bespoke development businesses.

But most importantly, it is clear that the business model of firms like Red Hat rely upon the goodwill of the open source community. Thus, Red Hat will have a big incentive to keep the small developers onside through sponsorships, awards, share handouts etc.

These kind of activities don't cost much for a multi-billion pound company. By cultivating small developer support for their systems, Red Hat et al. will probably get better press and actually increase their share price.

All in all, I don't think there is too much to worry about. Red Hat can't renege on open source principles precisely because the market won't look kindly on any company that chucks it's mindshare out of the window.....

opinions, nothing more.

[bons]

I really don't see the value of Linus (or other Free[speach] software) related stocks as changing a thing. Some programmers work for free out of a sense of Bucky Fuller style economics while others want to be the next Bill Gates.
What I think will happen is the stock will fall, and people getting wiser about overvaluing stocks.
Let's face it. We already had an example of getting rich through programming through Bill Gates. Linux IPOs doesn't change that. What Linux changed was the realization that Free[speach] (I like the way that looks...) software works as a distribution model much more effectively than propriatary software. (I find it Amazing that AOL deals with Netscape and Instant Messenger with such different philosophies. Unless it's a "screw Microsoft any way you can" philosophy...)