Why should free software have to earn a profit?

by Andy Oram

The main complaint I hear about free and open source software from
people in the computer field is that "You can't earn money from it."
Sometimes the claim is thrown about with the superior air of those who
consider themselves versed in the ways of the world--essentially
accusing free software proponents of being economically soft in the
head. At other times the claim is made petulantly, an anxious cry
welling from the breasts of those who have lost jobs in high-tech
fields and spent months looking unsuccessfully for work.

I got a new perspective on this question recently when I read the book
Innovation and Entrepreneurship: Practice and Principles,
published in 1985 by the much-celebrated business researcher Peter
F. Drucker. It discusses, among other things, the sources for new
ideas. One passage that can prove significant in discussions of free
software comes from Chapter 9, titled Source: New Knowledge:

The world's computer industry began in 1947-8. Not until the early
1980s, more than thirty years later, did the industry as a whole reach
break-even point. To be sure, a few companies (practically all of them
American, by the way) began to make money much earlier. And one, IBM,
the leader, began to make a great deal of money earlier still. But
across the industry the profits of those few successful computer
makers were more than offset by the horrendous losses of the rest; the
enormous losses, for instance, which the big international electrical
companies took in their abortive attempts to become computer

And exactly the same thing happened in every earlier "high-tech"
boom--in the railroad booms of the early nineteenth century, in the
electrical apparatus and the automobile booms between 1880 and 1914,
in the electric appliance and the radio booms of the 1920s, and so

In other words, during the entire careers of most people who begin
technology revolutions, their industries are losing money.

To understand the promise and meaning of free software, we have to
look beyond it as a business to see it as an element of a larger
society and economy.

What this passage by Drucker tells me, in effect, is that dynamic
societies are willing to sink money into new technology for the benefit
of the larger public, even if it means the ruin of the first people
working in the field. To be true, these industries eventually start to
make a profit--but in a very different form from the first start-ups,
and in vastly different social environments. Why should free software
be held to a standard that other technological innovations cannot

It just so happened that, during the same weekend I read Drucker's
book, I also read Dostoevsky's Gambler. And I thought about
how investment in new technology is itself an awful gamble. A thousand
investments will vanish utterly while a few succeed big. But investors
delude themselves that their money won't enter the black hole along
with the rest of the cash that society, as we've seen, loses in the
gamble on new technology.

What's hard about free software is that it makes the necessary losses
more explicit. On the other hand, investing in free software is made
easier because its benefits flow more immediately and obviously to the
same ultimate beneficiaries as the other technological

What economics are involved in the shift to free software?


2004-02-11 11:56:00
Free software and innovation
First, I wouldn't say that "societies are willing to sink money into new technology for the benefit of the larger public." The entrepeneurs forging ahead with new technologies might have betterment of the society as a goal, but making a profit is also a goal. Just because it doesn't work out that way doesn't mean that wasn't their aim and hope.

But more important is the implication that while starting an industry is expensive, continuing that industry gets progressively cheaper. It's the second wave of entrepreneurs, whose wheels track the ruts laid by the trailblazers, who are able to profit, in large part because they do not need to pay for innovation.

The majority of open source projects are probably not the trailblazers, but the followers. This isn't to say that open source cannot be innovative. I merely point out that open source projects are commonly based off of some earlier work. Linux:UNIX; OpenOffice:MS Office; KDE:Mac, Windows, etc.

The open source community should neither deny nor be ashamed that they learn and create through imitation. Imitation is not only the sincerest form of flattery, but it can be a prudent business strategy. Heck, look what it's done for Microsoft.

2004-02-11 12:05:37
Clarification on KDE
I meant to say that KDE is based off of Mac and Windows and other GUIs. Upon reading my post, I see that that could be unclear.
2004-02-11 23:32:08
people still need to eat and pay the rent
It's all very fine not making a profit if you're working for a university or if your company is running your project as a sideshow to something else which it will make more profitable, but if your project is to be the core revenue maker of the enterprise it'd better make a profit or the company goes under and you're left sweeping streets and standing in the soup line at the Salvation army shelter.

Indeed in the early days of computing there were few profits being made, but everything was either R&D or investment towards the future.

The idea that is alive in parts of the OS world that the word 'money' and especially the word 'profit' as relating to software being somehow evil is outright dangerous.

If for some reason all customers were to stop paying for software and expecting programmers to work for free most of those programmers would be instantly out of a job.
They'd then have to do other work, leaving them no time to hack together their free software (which most do now as a hobby on the side).

The incentive to learn programming would largely disappear (after all, you can't make a living doing it) which in turn would lead to the end of software development (or at least a severe slowdown) until companies started hiring people again to do programming in order to fix and expand that free software and finding that there's noone answering the call.

2004-02-13 06:35:22
Not affected
DO not forget that over 90% of all IT related work is _not_ related to selling shrinkwrap software. Almost all is about doing custom solutions or one-off development for one customer, or in-house design and development in companies whose business is not about selling software at all. This is all business that can just as easily (or easier) use open source component as closed stuff.

To put it another way: even if _all_ closed source disappeared, it would affect at most 10% of the IT population. For the vast majority, it would make little difference - well, apart from the lower cost and far better adaptability of their tools and components.