Linked by David Adams on Mon 16th Aug 2004 17:44 UTC
I read something in one of the comments for an OSNews posting a couple weeks ago that sent me thinking. It wasn't an original or profound thought. In fact, it's a rather commonly-held opinion that happens to be quite misguided. It's an opinion summed up by the "open source = communist" meme that gets thrown around in thousands of flamewars all over the internet. In this essay, I will explore why this idea is wrong and demonstrates a fundamental misunderstanding of economics.
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Firms have a responsibility to maximize the return on their investors' money, so every company asset must be leveraged to its utmost. This means that if you have developed a program that can be sold for $1,000,000 to four people in the world or $100 to three million people, it is your solemn duty to keep the price at $1,000,000, even if that means that 2,999,996 people who need that software will have to go without.
Well, first if all, for that example to work, it should be $1 (not $100) to three million people. Change it.
Secondly, that example is wrong: maximizing return on investment means selling a program for $1M to four people AND for $1 to 3 million people, making:
$4,000,000 + $3,000,000 = $7,000,000
How one can do that? Well, get to American business school to learn that.
Want examples? Here they are: Microsoft Windows XP Home for $50 (OEM) and XP Pro for $150 (OEM).
More? Red Hat Advanced Linux Server for $1,500/year and Red Hat Workstation for $300/year.
Even more? A car with manual and stereo or same car with automatic and CD for $2,000 more (hint: in many cars auto and stick have same production cost, or auto even cheaper).
These all are examples of slight variation of the same product targeting different customer groups.
Oh, yes, almost forgot: Red Hat Linux for $14,000/year for really rich folks who could afford IBM mainframe to run it on.:)
See, it is easy: you charge every customer as much as he/she can pay. Not more, but not less. This is business. The one the author has very naive understanding of.
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As for other observations in the article, they are mostly good and interesting. For example, the observation of Socialism built on promise of Communism and ended as a corrupted state governed by the 'servants of the people.'
Now, ask yourself where did you heard about 'stewards' and 'gentle dicators.' Oh, right: in relation to Linux, Linux kernel, OpenSource projects.
Thes 'stewards' promise eternal happines of working for community. They are paid, directly or indirectly, by for profit corporations. They preach volunteerism but sure don't make money flipping burgers after volunteer work promoting OpenSource.
It smells very much like Soviet Union and OpenSource will end like it did.
Do not expect free society at the end: just 'stewards' selling themselves to the higher bidder and trying to take biggest piece of community pie with them.