About economics of open source projects

I am surprised how many advocates of open source software actually don't know why and how the open source development model works. Even some highly educated persons with a PhD in computer science who have been using and promoting Linux for more then a decade, do not understand how the contributors get motivated to work on such projects.

I am a strong believer in swarm intelligence (as it is expressed by bees, fish, birds or crowds of people). People are not willing to work for free or just for benefits of others. When that happens I call it slavery. Even volunteers working for red cross or other organizations, do want to create a better world for all of people - there is definitely benefit of living in a better world, so that implies they are working free of charge, but not selflessly.

Egotistical individuals use, abuse and exploit others. Smart people build a better world for all. Including themselves.

Corporations do know that collaboration is more effective then competition. That is why the management of a company is forcing people to work together. They also fear it the most. Efficiency is enemy of profit. Every human need that is properly taken care of in the society does have very slim profit margins. Efficiency of production does bring down the costs and increases availability of goods. And since we all know that high supply is the worst enemy of profit, efficiency internally in a corporation is praised as a good thing, but outside of a corporation efficiency is the worst thing there is for any company.

The greatest argument for collaborative work that I can think of is the example of Wikipedia's success. People from all over the world are contributing to its growth free of charge - but we have to admit, that having unlimited access to the largest encyclopedia in the world is a far greater value then the effort that is needed to build one. And since collaboration is one of the most efficient ways of production, the effort contributed by any individual is far less then the value he (and any of us) benefits.

Let me rephrase the wikipedia example in more generalized way:
Wikipedia is a tool, and the benefits of creating such a tool provide us with new and more effective everyday processes. If those new processes provide us new products and services with greater value then the invested effort or just save us more effort that what was needed to create it, we have created new value. The produced value (not talking about money, but real value) is even greatly boosted by the product being widely adopted. For an example: the more hammers we use in our everyday life, the more important the tool and the invention of it are.

What I believe I am noticing is the demise of proprietary software and closed development model. Sure I am biased, but I do see people turning away from too expensive products and bad business practices (ie. vendor lock-in).

I was always guessing that the rise of Microsoft is due to high levels of piracy of Microsoft Windows 3.1, 95, 98 and XP and their flagship product Microsoft Word since version 6.0. As soon as they started to enforce anti-piracy policies, the alternatives (MacOS, Linux, OpenOffice / LibreOffice) became more attractive. I believe the biggest problem Microsoft has is the customer discontent because of their power abuse.

Let me list the benefits of open source development model:

• it does lower the needed effort of an individual or organization trough mechanics of collaboration
• there is lower barrier to acquiring the product (usually download for free), thus the bigger acceptance and value of that product
• it empowers the user to actively shape the product for their needs - thus maximizing its perceived value
• it is inclusive to all who can contribute some value
• the product allows and encourages infinite upgrades, improvements and extensions

To sum up: open source contributors are not working for free, they are investing resources and effort into creating new value that everybody will benefit from including themselves. And they do it in a very smart way, by sharing and collaboration they reduce the costs of development and maximize produced value. And due to openness of the process, that value is permanently available for use and also available for expanding it too.

Most of software that is produced by concepts of freedom and openness either has greater value than proprietary software, it is more cost effective or combination of both.

There is now open source hardware for farming and civilisation too,  open source for architecture, books and much, much more.

Next topic I want to talk about is: individual and collective prosperity - how to get there and what are the obstacles.


EDIT:  30.9.2011 
I completely forgot to mention the big sponsors. Those are the companies that support open and collaborative development for higher quality and lower costs of tools and products. As an example here are links to sponsors pages of linuxfoundation.org, sponsors of apache.org and sponsors of eclipse.org .

Sorry about that.

It is time to grow up

I have been watching news regarding the movement named occupy wall street. Those people are angry. I can perfectly understand why they are angry and I am too, but what is their goal, what do they propose?

People don't like the current state that the world is in but they rely on ma's and pa's - the government, the banks and whoever to solve their problems. I am sorry to tell you, but it is not going to work.

We have to have goals, a plan how to reach that goal and of course make it happen!

Why the government or banks or wall street can not help us?

Transferring the ability to manage our lives to institutions of government and banks creates concentration of power. Those institutions then start to calculate various statistics that de-humanize the society. What % of people without health insurance is acceptable? What is the acceptable child mortality rate? (US dropped from 26th position to 41st position in the world in child mortality according to WHO.) Such concentration of power and de-humanization are preconditions for systematic abuse of weaker parts of society. It is not corrupt individuals (stop dreaming of an honest politician or empathic banker) - the abuse is systematic.It happened in soviet Russia, in dictatorships like Egypt or Libya and in capitalistic US. A psychologist does explain this far better then I, so please take time and watch that video:

We do not need banks and politics to decide what we can or want to do. We can do it right now without asking those guys.

This blog is a start of my project of improving the way we trade and fix some of the aspects of the money system. Please do read the post about the goals and do contribute and help out.

Next I am writing a post about economics of open source projects which is almost done. The fight for software freedom has been a huge influence on me and I do consider projects like Wikipedia, Linux and Apache as incredible proof of concepts.

The goals of the new value system

Let us look at what money is, how does it work, what are its shortcomings and list goals of a new system of value exchange.

In short money is an abstraction of value, effort, resources and influence.

Money is a very useful invention:

• by mechanism of abstraction it enables trade between people who otherwise would not be able to trade
• it allows to store value for later use
• it is a mechanism to influence people to do, what they normally would not do
• it is an approximation of direct democracy (each dollar counts)

The problems of the current monetary system:

• supply of money is limited and thus represents an artificial barrier to trade
• people who have no money, have no influence on the society (exclusivity)
• people do terrible things for money
• money is hard to trace

That is why I set myself on a mission to create a software that will improve the current monetary system.
My goals are:

• the value in the new system has to be unlimited, but it also has to retain value
• the new system has to be inclusive, it has to let anybody to participate
• the new transactions will always be traceable, thus easing crime and abuse detection
• the value in new system has to be immune to stealing
• the new system has to prevent unnecessary global financial turbulences
• the new system has to increase personal freedom of participants
• the new system has to reduce systematic abuse by enforcing direct and personal responsibility

You will say: this sounds nice, but such a system is impossible. 20 years ago I would have agreed with you, but I do believe the computing and communication technologies have advanced so much, that such a system is possible today.

I have found many enabling technologies on the web, that allow us to build a better economic systems. But those are scattered amongst  many projects. So my task is to integrate those technologies into a working system. Let me name some of those concepts and technologies: the economics of open source projects, time banks, ripple pay distributed currency, social networks, and others.

The discussion on all of these points will follow soon.

Why? What is wrong?

When we look around we can see people being pushed to the edge and out of society.

Unemployment is rising, crime rates are rising, the environment is degrading. These and many many other problems are not new, but it seems we are not solving any of them. Seems like we are not able to solve it with the old tools.

I believe that communism and capitalism are two inverted extremes of the same evil. They both promote concentration of power (central planning or banks and corporations) which is inevitably abusing the population that is weak. The problem of idealized communism is that it squanders personal freedoms for common good. And the problem of idealised capitalism is that it squanders common good for the personal gain.

The promoters of free markets do promote individual freedom, but they forget that the profit oriented individual is rewarded for creating imbalances in supply and demand. The less balanced the system the more profit there is to make. This leads to power abuse and downfall of morality.

Many will argue that, we can prevent abuse by enforcing rule of law and high moral standards - however I believe this is a naive approach and in long term it can not work. Concentration of power is a mechanism that enables even more concentration of power, thus sooner or later those institutions or individuals are so strong that they can submit the law making processes to their own selfish goals (lobbying, campaign sponsoring) and even starts to pervert the moral values ("greed is good").

As soon as we have concentration of power (corporation, government) and dehumanization processes (abstraction trough statistics) we tend to do awful things. For example: cutting down founding for first aid emergency service which leads to "a negligible increase of unnecessary deaths". The morals used to teach us that unnecessary death is unacceptable, they used to teach us that if we know that our actions can endanger health or lives of another, we are committing a crime. Seems that moral rules do not apply to our governments or corporations.

Here is a psychologist very well explaining how and why systematic abuse happens, take a look:
http://www.ted.com/talks/lang/eng/philip_zimbardo_on_the_psychology_of_evil.html

Introduction

Hello all!

I am starting this blog which is intended to refine and fine tune of a transition from monetary economics to economics of personal line of credit.

A peer-to-peer (some say friend-to-friend) currencies were not practical (or easy to implement) 20 years ago, but I believe the advances in communication and computing technologies made it possible.

With the help of critical thinking mass I hope I can fine tune the methodology and together we can create a new and better world for us all. Once these ideas are refined enough and accepted by big enough audience, I am hoping to transfer the content to wikibooks as a manual on how to free society.

So please do write comments, be it good or bad, supporting or opposing. Thank you.