A Model of Free Software Success

Last week I helped organize the Open and User Innovation Conference at Harvard Business School. One of many interesting papers presented there was an essay on Institutional Change and Information Production by Fabio Landini from the University of Siena.

At the core of the paper is an economic model of the relationship between rights protection and technologies that affects the way that cognitive labor can be divided and aggregated. Although that may sound very abstract (and it is in the paper), it is basically a theory that tries to explain the growth of free software.

The old story about free software and free culture (at least among economists and many other academics) is that the movements surged to prominence over the last decade because improvements in communication technology made new forms of mass-collaboration — like GNU/Linux and Wikipedia — possible. "Possible", for these types of models, usually means profit-maximizing for rational, profit-seeking, actors like capitalist firms. You can basically think of these attempts as trying to explain why open source claims that free licensing leads to "better quality, higher reliability, more flexibility, lower cost" are correct: new technology makes possible an open development process which leads to collaboration which leads to higher quality work which leads to profit.

Landini suggests there are problems with this story. One problem is that it treats technology as being taken for granted and technological changes as effectively being dropped in from outside (i.e., exogenous). Landini points out that software businesses build an enormous amount of technology to help organize their work and to help themselves succeed in what they see as their ideal property rights regime. The key feature of Landini’s alternate model is that it considers this possibility. What comes out the other end of the model is a prediction for a multiple equilibrium system — a situation where there are several strategies that can be stable and profitable. This can help explain why, although free software has succeeded in some areas, its success has hardly been total and usually has not led to change within existing proprietary software firms. After all, there are still plenty of companies selling proprietary software. In Landini’s model, free is just one of several winning options.

But Landini’s model raises what might be an even bigger question. If free software can be as efficient as proprietary software, how would anybody ever find out? If all the successful software companies out there are doing proprietary software, which greedy capitalist is going to take the risk of seeing if they could also be successful by throwing exclusive rights out the window? In the early days, new paths are always unclear, unsure, and unproven.

Landini suggests that ethically motivated free software hackers provide what he calls a "cultural subsidy." Essentially, a few hackers are motivated enough by the ethical principles behind free software that they are willing to contribute to it even when it isn’t clearly better than proprietary alternatives. And in fact, historically speaking, many free software hackers were willing to contribute to free software even when they thought it was likely less profitable than the proprietary alternative models. As Landini suggests, this group was able to build technological platforms and find new social and business arrangements where the free model actually is competitive.

I think that the idea of an "cultural subsidy" is a nice way to think about the important role that ethical arguments play in movements like free software and free culture. "Open source" style efficiency arguments persuade a lot of people. Especially when they are true. But those arguments are only ever true because a group of ethically motivated people fought to find a way to make them true. Free software didn’t start out as competitive with proprietary software. It became so only because a bunch of ethically motivated hackers were willing to "subsidize" the movement with their failed, and successful, attempts at free software and free culture projects and businesses.

Of course, the folks attracted by "open source" style superiority arguments can find the ethical motivated folks shrill, off-putting, and annoying. The ethically motivated folks often think the "efficiency" group is shortsighted and mercenary. But as awkward as this marriage might be, it has some huge upsides. In Landini’s model, the ethical folks can build their better world without convincing everyone else that they are right and by relying, at least in part, on the self-interest of others who don’t share their principles. Just as the free software movement has done.

I think that Landini’s paper is a good description of the critically important role that the free software movement, and the FSF in particular, can play. The influence and importance of individuals motivated by principles can go far beyond the groups of people who take an ethical stand. They can make involvement possible for large groups of people who do not think that taking a stand on a particular ethical issue is even a good idea.

5 thoughts on “A Model of Free Software Success”

  1. The whole of this perspective is based on shareholder maximisation theory. Shareholder maximisation theory is dead. Money is not the only utility. People get value from many different things. Game theory teaches you to examine things from the consumers perspective.

    So for example where you claim that the free software is worse than commercial software. This is clearly only true when measured in cash returned to shareholders.

    Free software creates numerous other utilities besides cash, such as a community of like minded individuals, friendships, contributing to a greater good, an opportunity to learn a skill from people who are more skilled than you; and the ‘ethical’ factors you mentioned.

    When you start to look at all the utility created it becomes abundantly clear that commercial software has been completely demolished in terms of overall value created.

  2. I don’t think there’s anything about the paper that assumes that money is the only utility that is trying to be maximized. The papers analysis game theory based (Landini is a micro- and organizational economist) and I think he understands this well.

    I think it is much less clear that proprietary software (which you call commercial) has been completely demolished. Free software is still pretty marginal in most of the areas that proprietary software has been dominant historically.

    Saying that free software has won just doesn’t seem to square with the reality of most programmers professional lives.

  3. So, software production exists between the ‘cultural subsidy’ of programmers who provide time and knowledge and skill, and the ‘legal subsidy’ of the state which provides property rights regime.

  4. I read the Landini paper (thanks Mako!) right around the same time I read this essay called “Why Valve” (http://blogs.valvesoftware.com/economics/why-valve-or-what-do-we-need-corporations-for-and-how-does-valves-management-structure-fit-into-todays-corporate-world/), which is about a “commercial” software company that organizes their production in a more “open” way than most others.

    There’s a lot of nice theoretical snippets in the “Why Valve” essay about how that works.  Including some references to Marx: in particular, this swirled together with the Landini paper to get me thinking that it’s not just a “cultural subsidy” that FAIF hackers/products/ethics supply, but maybe also a “cultural surplus” that these folks can enjoy — if they’re lucky.

    In other words: when you put something out there under a free license, you stand a much chance of getting downstream contributors adding something to your project than you would without the license.  Your project starts to become more “firm like” in this sense — and yet you may not have to pay wages at all.

    I know, many free software projects do not attract contributors, but clearly, many do.  So “rational” actors in this space may be trying to maximize their “surplus” — which, in this context, is what they exchange for the “subsidy” conveyed to others.

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