The Visible Hand of OSS

The philosophy and practice of collaboration in open source software forms a win-win model for developers, vendors and users alike. Fundamental economic drivers are changing the nature of competition in the software industry. The competitive landscape is transforming from a few high peaks where monopoly product vendors dominate the market to a more varied terrain of participants collaborating on basic technologies and tools while competing on value-added services.

This transformation to the new economy of the information age is a kind of digital remix of old fashioned capitalism and progressive social experimentation.

The classic capitalist model for free market activity has been one of Darwinian competition between individuals, organizations, and groups. Workers compete for jobs. Companies compete for business. Labor and management compete for control of resources. Adam Smith’s “Invisible Hand” guides a happy coincidence of the aggregation of self-interests: a kind of 17th century trickle-down hypothesis – what benefits each of us, especially the wealthiest and most powerful, ultimately benefits all of us. Today, in our emerging information economy, some would argue that we share the trickle-down benefits from free market giants like Microsoft who combine innovation with commodity computing. The main problem, as we are learning from the SCO money-trail, is that the “Invisible Hand” belongs not to providence but to a convicted monopolist.

What’s more, Adam Smith’s providential “Invisible Hand” becomes a gloomy handicap in a rival argument known as “The Tragedy of the Commons”. This theory predicts that economic ruin is the inevitable result of unregulated privatization and competition: a kind of trickle-away hypothesis – after reaching certain resource limits, that which benefits each of us actually overtaxes and subtracts from the common good.

Modern progressive economic thinking tries to balance these extremes by considering economic activity as an ecosystem of complex partnerships and competitions; a non-zero sum game of sharable rewards. So companies do compete for business, but they also cooperate to make the entire market healthy and grow. Workers compete for jobs but join unions or guilds to protect their collective or professional interests. Labor and management compete for resources but partner in profit sharing schemes and even in wage or benefits reductions when needed. The trick is to avoid destroying the common frameworks which allow parties to compete.

The collaboration inherent in open source technologies provides a framework for parties to compete in the information economy. It is the “Visible Hand” that resupplies the resources and vitality of the commons. Openly sharing knowledge continuously replenishes technology standards, tools, and, in the open source world, the programming code itself. The full availability of programming code is essential to maximizing the health and growth of the technology commons. Standards, together with proprietary tools, cannot alone sustain the commons in the long run. Standards, of course,Th are not physical; they require implementers to build concrete realizations. If standards are public, but their implementations are private, then the commons is fragmented into competing and non-reusable components. Initially only the richest or the most innovative can compete and great wealth can be accumulated as long as profit margins can be maintained. Inevitably, however, when the market matures, shrinking margins and commoditization occasions a replacement tier of cheaper providers and even imitators. This is what is happening in open source today and explains the pressure open source is putting on high-margin companies like Microsoft, Oracle, Sun and SCO.

As the software market matures and commoditizes, high-margin companies are incented to fight to recover value. Some attempt to destroy the growing commons either through litigation or through embrace and extend campaigns. Litigation strikes fear in the entire software community whereas embrace and extend strategies divide the commons and poison the well for all competitors.

Ultimately, the only high-margin business in a mature, commoditized software market is services. Open source, instead of dividing the commons, extends the value of the infrastructure for all to compete in a growing services industry. Open collaboration is the visible hand that deepens the well of information services. In the complex world of the information economy, open source can provide the technology commons needed to sustain the true economic engine.