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The strange economics of open-source software

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Re: The strange economics of open-source software

#61

Post by Retra »

crdoconnor wrote: post #37
brc wrote: post #22

Earlier quoted context omitted.

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.

>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.

Utility is that what is optimized by a moral algorithm. Money only represents an (arguably weak) approximation to it. But someone trying to make economic decisions needs to use a moral algorithm to do so, and money is one of the more relevant quantifiable metrics in that domain.

And it's perfectly scientifically sound idea. It's just too complex for us to solve very accurately. (Like a lot of important problems in science.)

Re: The strange economics of open-source software

#62

Post by gaius »

ksk wrote: post #43
brc wrote: post #5

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 contribut…

>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, bo…

The point of books is to leverage the reputation into high paying consulting gigs. Same with conference speaking.

Re: The strange economics of open-source software

#63

Post by crdb »

brc wrote: post #5

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 contribut…

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.

Re: The strange economics of open-source software

#64

Post by crdoconnor »

BraveNewCurency wrote: post #58
crdoconnor wrote: post #37

Earlier quoted context omitted.

>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.

Utility is a unit of accounting that works much better than money. It's actually called a "utility function" because the utility varies depending on the inputs, including time, number of units, etc. For example, let's say you've always wanted to go skydiving. You pay $500 and go skydiving. It's a great value to you. But when you get back to the ground, would you pay $500 to do it again? Probably not, since the utilit…

You're still defining it circularly. How much utility does sky diving give? $200 the first time and $20 the second time, apparently. Why did the skydivers pay $200? Because they got that much or more utility from doing it.

Re: The strange economics of open-source software

#65

Post by crdoconnor »

Retra wrote: post #61
crdoconnor wrote: post #37

Earlier quoted context omitted.

>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.

Utility is that what is optimized by a moral algorithm. Money only represents an (arguably weak) approximation to it. But someone trying to make economic decisions needs to use a moral algorithm to do so, and money is one of the more relevant quantifiable metrics in that domain. And it's perfectly scientifically sound idea. It's just too complex for us to solve very accurately. (Like a lot of important problems in sc…

Picking a metric because it's easy to quantify is like a drunk looking for his keys under the lamp post because there's more light there.

Re: The strange economics of open-source software

#66

Post by gaius »

chadnickbok wrote: post #34
brc wrote: post #5

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 contribut…

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 n…

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.

Re: The strange economics of open-source software

#67

Post by teddyh »

jlarocco wrote: post #21
nickpsecurity wrote: post #3

I'm not sure I agree with the notion that OSS is where all the innovation is happening. There's certainly plenty of innovation there. But most innovation still seems to be privately funded developments (esp startups) which get open sourced. Or not. Has there been any empirical work on assessing it in recent times? Maybe post 2010?

I agree. Innovation in open source is all on commodity computer stuff that developers understand, like operating systems, compilers, web browsers, and databases. For almost everything that requires other expertise the innovation is still done in closed source software. Stuff like photo editing (LightRoom, Photoshop, Capture One), video editing (Premiere, Flame, DS), high end rendering (Renderman, 3Delight), CAD (Cati…

You list things which proprietary software does way better than free software. I remember when the list was the other way around – i.e. people would list things that free software could now do, which were not very many at the time. It’s interesting that this relationship has now been reversed, and people, like yourself, now instead list the things which proprietary software can do better.

Re: The strange economics of open-source software

#68

Post by rejschaap »

crdoconnor wrote: post #64
BraveNewCurency wrote: post #58

Earlier quoted context omitted.

Utility is a unit of accounting that works much better than money. It's actually called a "utility function" because the utility varies depending on the inputs, including time, number of units, etc. For example, let's say you've always wanted to go skydiving. You pay $500 and go skydiving. It's a great value to you. But when you get back to the ground, would you pay $500 to do it again? Probably not, since the utilit…

You're still defining it circularly. How much utility does sky diving give? $200 the first time and $20 the second time, apparently. Why did the skydivers pay $200? Because they got that much or more utility from doing it.

Money is a rather leaky abstraction for utility

Re: The strange economics of open-source software

#69

Post by iwwr »

BraveNewCurency wrote: post #58
crdoconnor wrote: post #37

Earlier quoted context omitted.

>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.

Utility is a unit of accounting that works much better than money. It's actually called a "utility function" because the utility varies depending on the inputs, including time, number of units, etc. For example, let's say you've always wanted to go skydiving. You pay $500 and go skydiving. It's a great value to you. But when you get back to the ground, would you pay $500 to do it again? Probably not, since the utilit…

>Utility is a unit of accounting that works much better than money. It's actually called a "utility function"[...]

That is just a sometimes useful abstraction and money does allow for quantizations of value. But utility is a broader idea. It means 'subjective value' and can differ from person to person, time and circumstances.

There is no unit of value, there are only personal preferences and those preferences can be comparable, but not necessarily quantifiable. How many 'utils' of value do you gain if you exchange $3 for a sandwich when hungry?

Re: The strange economics of open-source software

#70

Post by xchaotic »

gaius wrote: post #62
ksk wrote: post #43

Earlier quoted context omitted.

>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, bo…

The point of books is to leverage the reputation into high paying consulting gigs. Same with conference speaking.

So it all boils down to high paying gigs then, which you can wing without contributing to OSS
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