If that’s not creative destruction, then what is?

Oh, and the superior product is available for Free, as in Beer…..

If that’s not creative destruction, then what is?

Oh, and the superior product is available for Free, as in Beer…..

Your post is really non-responsive. Let me explain further items that I thought would occur to you. The TCO is a very small part of my overall point.

Compare two Companies: Microsoft and SuSE. (I understand that SuSE is now a division of Novell, but that’s a tangent here to my point) SuSE (Or the SuSE divison of Novell, if you prefer) has about 400 employees that produce SLED and SLES, their workstation and server Operating Systems.

Microsoft however has about 61,000 employees, and reportedly about 41,000 are involved on the development of Windows Workstation and Server.

When a company can compete in an R&D; intensive field, dramatically lowering the barriers to entry, and produce a better product with about 1% of the work force of its competitor, I have to ask:

If that isn’t Creative Destruction than what is?

…the powerful lever that in the long run expands output and brings down prices is in any case made of other stuff.

Yes, made of other stuff

Your post is really non-responsive. Let me explain further items that I thought would occur to you. The TCO is a very small part of my overall point.

Compare two Companies: Microsoft and SuSE. (I understand that SuSE is now a division of Novell, but that’s a tangent here to my point) SuSE (Or the SuSE divison of Novell, if you prefer) has about 400 employees that produce SLED and SLES, their workstation and server Operating Systems.

Microsoft however has about 61,000 employees, and reportedly about 41,000 are involved on the development of Windows Workstation and Server.

When a company can compete in an R&D intensive field, dramatically lowering the barriers to entry, and produce a better product with about 1% of the work force of its competitor, I have to ask:

If that isn’t Creative Destruction than what is?

Yes, made of other stuff

TCO was a much debated issue, and having spent some time on it I’ll say there’s no clear determinations of systems costs over the long run. You’re looking at higher upfront costs (proprietary) compared to sustaining costs (open source). There might be differences that depend on what part of the system you use open source v proprietary technologies for. Without clear indication of total cost of ownership advantage, or other benefits to increase/offset costs considerations, your pharma company doesn’t approach Schumpeterian Creative Destruction for proprietary software or the scenario you describe as: the rest of the economy has figured out a way to reduce the price of something to very close to its marginal cost of production.

It is important for open source skeptics to realize that most of the anti-business rhetoric eminates from the “free software movement.”

Mike, here’s where a lot of fundemental misunderstanding takes place. The fact that you say “it is important for… skeptics to realize” indicates that you admit the potential confusion on open source.

I write about some of the “rhetoric” here: http://weblog.ipcentral.info/archives/2006/08/bad_open_source.html http://weblog.ipcentral.info/archives/2006/07/why_would_all_s.html

Given that even Mike admits open source is abstract, and Tim states its an analogy, I do find it important to define at least a baseline of terms when discussing open source. I write of this here http://weblog.ipcentral.info/archives/2006/08/open_innovation.html http://weblog.ipcentral.info/archives/2006/06/intellectual_pr_1.html

If I am a large pharma (or even if I am a small pharma) company, I use lots of software. The software is a means of producing my primary product, not an end. If I spend money on this software, it takes away from my bottom line. What’s worse, if it’s closed source, distributed in binary only format, I can’t change it to make it better. Recall that I have a lot of very smart people who would like to make those changes, and many of them are very well-paid and are also seeking the esteem of their peers. So, doesn’t it make a better business sense for me to use FOSS, donate some back to the community, because I know that I can get better software and at a lower cost. So there is a business model for using FOSS. The same business model applies to all users of software more or less. Noel Please respond to this.

There is only one catagory of that doesn’t like this development: software companies, that sell shrink-wrap software.

The fact is: the rest of the economy has figured out a way to reduce the price of something to very close to its marginal cost of production.

This is in fact the death knell for shrink-wrap software, but so what?

The rest of the economy will benefit, with companies not having to pay for software. Sounds to me like the classic example of a Schumpeterian Creative Destruction, to wit:

The first thing to go is the traditional conception of the modus operandi of competition. Economists are at long last emerging from the stage in which price competition was all they saw. As soon as quality competition and sales effort are admitted into the sacred precincts of theory, the price variable is ousted from its dominant position. However, it is still competition within a rigid pattern of invariant conditions, methods of production and forms of industrial organization in particular, that practically monopolizes attention. But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance)-competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives. This kind of competition is as much more effective than the other as a bombardment is in comparison with forcing a door, and so much more important that it becomes a matter of comparative indifference whether competition in the ordinary sense functions more or less promptly; the powerful lever that in the long run expands output and brings down prices is in any case made of other stuff.

If I am a large pharma (or even if I am a small pharma) company, I use lots of software. The software is a means of producing my primary product, not an end. If I spend money on this software, it takes away from my bottom line. What’s worse, if it’s closed source, distributed in binary only format, I can’t change it to make it better. Recall that I have a lot of very smart people who would like to make those changes, and many of them are very well-paid and are also seeking the esteem of their peers. So, doesn’t it make a better business sense for me to use FOSS, donate some back to the community, because I know that I can get better software and at a lower cost. So there is a business model for using FOSS. The same business model applies to all users of software more or less. Noel Please respond to this.

There is only one catagory of that doesn’t like this development: software companies, that sell shrink-wrap software.

The fact is: the rest of the economy has figured out a way to reduce the price of something to very close to its marginal cost of production.

This is in fact the death knell for shrink-wrap software, but so what?

The rest of the economy will benefit, with companies not having to pay for software. Sounds to me like the classic example of a Schumpeterian Creative Destruction, to wit:

The first thing to go is the traditional conception of the modus operandi of competition. Economists are at long last emerging from the stage in which price competition was all they saw. As soon as quality competition and sales effort are admitted into the sacred precincts of theory, the price variable is ousted from its dominant position. However, it is still competition within a rigid pattern of invariant conditions, methods of production and forms of industrial organization in particular, that practically monopolizes attention. But in capitalist reality as distinguished from its textbook picture, it is not that kind of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization (the largest-scale unit of control for instance)-competition which commands a decisive cost or quality advantage and which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives. This kind of competition is as much more effective than the other as a bombardment is in comparison with forcing a door, and so much more important that it becomes a matter of comparative indifference whether competition in the ordinary sense functions more or less promptly; the powerful lever that in the long run expands output and brings down prices is in any case made of other stuff.

So, if you run a business, you produce some goods and services, which you sell, and hopefully turn a profit on. These goods exist in a larger market, and are substitutes for some other products, and complements for some others.

Now, recall the definition of a “complement good”. A complement X for a good Y is one for which buying more of X will *increase* the amount of Y bought — think french fries and ketchup. If I buy french fries, I’ll also want to buy ketchup to put on them.

A company like IBM makes most of its money on consulting services for other corporations, and from selling hardware. For them, software (like operating systems, web servers, and Java compilers) are complements — if this stuff is free then people will be more willing to buy integration services from them, and hardware to run that software on.

And since software has a close-to-zero cost of reproduction, they can pay the fixed cost of development and send the price of software complements to zero for ALL their customers. That’s often going to be a no-brainer from a business perspective. (The reason for open source rather than “give away proprietary for zero price” has to do with path-dependency, which I’ll skip to keep this post short.)

Next, consider that there are hundreds of thousands of firms in the market, and for every single one of them someone else’s software is a complement….

All that the moderates, and we are many, ask is that you policy and law-making types leave us alone. That’s it. You are fighting something that is simultaneously a hobby and a profession because it is so abstract. Do you now see how ludicrous it is? You are making policy against hobbyists because you want to promote business.

So, if you run a business, you produce some goods and services, which you sell, and hopefully turn a profit on. These goods exist in a larger market, and are substitutes for some other products, and complements for some others.

Now, recall the definition of a “complement good”. A complement X for a good Y is one for which buying more of X will *increase* the amount of Y bought — think french fries and ketchup. If I buy french fries, I’ll also want to buy ketchup to put on them.

A company like IBM makes most of its money on consulting services for other corporations, and from selling hardware. For them, software (like operating systems, web servers, and Java compilers) are complements — if this stuff is free then people will be more willing to buy integration services from them, and hardware to run that software on.

And since software has a close-to-zero cost of reproduction, they can pay the fixed cost of development and send the price of software complements to zero for ALL their customers. That’s often going to be a no-brainer from a business perspective. (The reason for open source rather than “give away proprietary for zero price” has to do with path-dependency, which I’ll skip to keep this post short.)

Next, consider that there are hundreds of thousands of firms in the market, and for every single one of them someone else’s software is a complement….

All that the moderates, and we are many, ask is that you policy and law-making types leave us alone. That’s it. You are fighting something that is simultaneously a hobby and a profession because it is so abstract. Do you now see how ludicrous it is? You are making policy against hobbyists because you want to promote business.

See Doug’s comments. Is that the kind of support you want for your writings Tim?

I haven’t followed the MA situation closely enough to comment on it, but Mike’s view of the MA state govt as a market consumer would lend support to the file format initiative. I’d be more intersted in how the initiative will affect the way MA trades records with other states and the federal govt, and whether that will have policy implications or draw similar initiatives elsewhere.

I don’t have a hard time grasping open source although some of the analogies Tim cites are amorphous. Mike speaks in more comprehensible terms.

I see potential in open source, but look on it mainly as a perhipheral strategy that can sustain a company when a strictly proprietary model meets limitations, or as one in hybrid with proprietary technology. Mike sees it more as a development process or activity. Tim seems to take an electic approach putting it into no single paradigm, while attempting to discard the political dimensions. Tim draws different perspectives to his blogs, some more serious and steady than others. Yet I find a lot of blanket opposition to the proprietary industry under blog title terms like monopoly, rent seeking, perpetual motion machine- which are highly suggestive.

You might cite AOL, Apple or other companies as being interesting examples of hybrid strategies. IBM is probably the better one to watch.

What you and DeLong don’t get is that for many developers, the thrill of taking down a big company with an open source project…

Well, first of all, I only speak for myself. But regarding your comment, here’s where we depart. Of course having a small company beat a big company is interesting. The competitive advantage of the small company is usually something the big guy never sees despite mass amounts of investments in strategy, planning and development. The small company did something right, by introducing something new and innovative, by outsmarting the incumbant. But I wouldn’t frame the concept simply in terms of open source vs big companies, it happens on a broader scale. Its just doing better business.

People have different perspectives, and gather information from different sources. A programmer will hold views separate from an economist or lawyer. Knowing that most of you are open source supporters, rather than make definite points, I tried to draw out the issues by speaking of different kinds of Libertarians, replying line-line to posts, and asking folks to clarify their views, etc (only to get some random comment about AOL).

I must be an adolescent seeking identity because I regularly use PHP for web-based tasks and I love Python. Maybe I’m barely pushing on puberty because I’m posting this from Firefox, use OpenOffice at home (MS Office ain’t worth $500 to me no matter what else is on the market) and have XAMPP on my home laptop.

You can’t make snarky comments like that without just stepping into it big time.

What you and DeLong don’t get is that for many developers, the thrill of taking down a big company with an open source project comes in the same spirit as seeing an indie sci fi movie knock Star Wars down a peg. It’s not ideological, it’s just good fun and quite frankly, knowing how bad a lot of OSS code is, if it happens, they deserve to lose.

If Tim doesn’t understand your point, it’s probably because you haven’t made a coherent one yet. I see a lot of asking for definitions, but not a lot of actual desire to understand beyond satisfying your seeming a priori hatred of non-business-oriented development.

As I have said before, if you see it as a divide between OSS and commercial business, you have just demonstrated that you don’t get it yet. How do you explain companies like Apple that build half of their platform on OSS or companies like Id that use it to build games outside of Windows? They’re just tools, Noel. Most programmers get that, and most OSS zealots are neither sysadmins nor decent coders in my experience.

Look, I’m trying to not like my “inner Rat” (think Pearls Before Swine) take over, but you’re making it very hard. What we want, Noel, is to be left alone and to be able to tinker, share our toys and be unmolested by multi-national corporations and the government. The essence of open source software is closer to anarchism than socialism.