Thursday, August 12, 2004

How to get ahead with open source

What will the new economy be like?

The basic name of the game in capitalism is control of capitalism. The basic name of the game in feudalism is the control of land. The unit of control in feudalism is the state, while the unit of control in capitalism is the person (natural person or corporation). So the state attempts to control land while the person attempts to control capital. As societies progress, these units and goals do not go away. So in capitalist societies, we still have states which control land, but this becomes less important than it did for a feudal society. I.e. capitalist societies are probably less likely to go to war to annex land than their feudal counterparts. States still require land, but expansion and control are less important goals than they were in the past.

Similarly, corporations and individuals in the new economy will still require capital just as states still require land. However the control of capital of the market as we know it today will be lower priority. Expansion will still be important but may take on a different tone. For example, today, the United States is not interested in exanding its borders, but the expansion has taken on a new dimension where the sphere of influence both culturally and militarily are the current replacements for annexing land.

Today, the state exists primarily as a support mechanism for the economy and personal wealth (including corporate wealth), and to provide basic services such as emergency response, law enforcement, etc. These roles will of course remain unchanged.

However, corporations will become support mechanisms for the communities. Today we already see this with major successful open source projects, such as PostgreSQL, Mozilla, Linux, and Apache. Such corporations provide support, further development, and other services for the other members of the community. This is not that different from the current situation where corporations offer services for support of social communities today, except that the community is actually the entity which engineers the goods. Thus actual control over the market must be foregone in favor of control over the direction of development.

How to get ahead:

When controlling the direction of development, a company can attempt to expand the services they offer to existing customers, cut their costs, etc. To understand how this is done, lets look at the structure of the community (as applicable to old economy as new economy thinking).

The community exists as a collection of persons (including corporations) with a single person or small group in the center. Mere users exist on the fringes of the community (think of users being the perimiter of a circle with the core group or person in the middle). The various service providers exist in relation to others within the circle. Service providers which rely on a vendor's services or products exist between the users and those who they rely on.

In this framework, influence is defined by the arc length around the perimeter which exists in the shadow or influence of the entity.

Another way to look at this is to imagine a somewhat conical hill, with the core at the top, and the users encircling the hill. The other suppliers forming a chain between them. These conceptualizations only provide a way of looking at a single moment in the community and neither the circle nor hill metaphores are static.

Gaining influence requres offering services which build a sub-community around one's services. These can include support, feature development, etc. The object of the game is to influence as many users in the community by getting them to use your features. Such influence leads to demand. Demand leads to revenue. The more influence one can have, in general, the more demand there will be for one's services.

What is different about this new economy is that one has the opportunity to influence the development of products to maximize one's revenues in ways which simply are not possible with proprietary products.


Blogger alq666 said...

Without being an historian, I think I would differ on several assertions in your discourse. First of all the name of the game in capitalism is property, land included. Iraq being a fine example of land grabbed for its resources. I do not quite get what "control of capitalism" is. Do you mean control of capital?

The second point is about corporations becoming support mechanisms for communities. Extrapolating the current trend around open source to putting corporations as support for communities is to me wishful thinking. Corporations by design care about their bottom line and the amount of money they can return to their stakeholders. It could be that for a moment they see their interests as aligned with those of the communities, but they are not designed for that. There is probably a way to engineer a form of social organisation that promotes support to social groups, and some examples already exist (think various help NGOs).

And I have to agree with you, quite sadly, that the state has become a mere support for the economy, thereby substituting policy making with various primitive fallacies such as free markets and the invisible hand... Indeed social progress as a goal has been wiped out of the public discourse at least in USA and Europe. What a shame.

August 12, 2004 at 12:22 PM  
Blogger Einhverfr said...

Regarding control of land by companies. Companies require control of capital, not control of land. Land is merely a capital asset. For example, a state will look at choke points to control the land, while a corporation may own land (as capital) but the control is aimed at choke points in the market.

Also, one can argue (I do) that wealth redistribution and social progress do, within limits, support the economy. Wealth is really generated when money is exchanged for something of value which requires labor to produce. As this money is far more likely to be *spent* for such goods (not really sure that stocks count) by lower classes, wealth redistribution should, in theory at least, help the economy.

The government should, in my opinion, not only provide basic services, but also try to act as an entity which builds a legal support structure for the society and economy. I don't think that legislating social or moral values necessarily helps. Instead the focus should be on fair rules, economic and social. These rules should avoid as many arbitrary boundaries as possible.

The sum total of the legal framework created by the state and the market forces do create an invisible hand which does steer the economy towards a dynamic equalibrium. I think that intervention on behalf of spefic players should be avoided, but intervention on behalf of principles should be encouraged. I.e. mandating DRM because Disney says so is a bad idea, but mandating against abuse of the free market by monopolies is a good idea. The idea is to actually create the best invisible hand possible, not to blindly surrender to it or to the market.

August 12, 2004 at 2:39 PM  
Blogger Einhverfr said...

Also it occurs to me that I did not discuss your point regarding the role of corporations in what I call the new economy. I am not going to say that corporations will suddenly become altruistic organizations, but rather that the money is to be made by supporting the community. The very nature of open source enforces a sort of cooperation between corporations that has not generally been common.

Indeed, business will continue to be as combative and backstabbing as ever, but the only way of having substantial market leverage is actually to obtain leverage on the community and control over the direction of development. What I am outlining here is a way of looking at this combat strategy as open source becomes entrenched. In essence, it ammounts to a game of "King of the Hill" or a quest for higher ground.

August 12, 2004 at 10:12 PM  

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