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The Almighty Buck

On The Linux Culture and Money 107

Andrew G. Feinberg writes "The latest Andrew Leonard piece on deals with whether our favorite corporations will still be true to the community while having to keep shareholders happy. Excerpt is below: "Will the huge financial worth of the founders of companies like Red Hat and VA Linux end up disillusioning small-time developers? These companies must now keep their shareholders happy -- will the goal of keeping stock prices high interfere with code design decisions that used to be based on purely pragmatic factors? And what happens if Red Hat and VA Linux stock goes down in flames?" "
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On The Linux Culture and Money

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  • by Anonymous Coward

    These companies could disappear today and I would
    still be (relatively) happy because I still own
    the software and know that there is a community
    who is also using it.

    As long as people are focused on the product and
    give a strong preference to GPL'd software, there
    is no way to hurt the "community"...

  • One fear some people have is that the new-fangled linux companies, in efforts to keep their shareholders happy, may make future developments proprietary, and ultimately stifle open-source sharing. Thus, they can supposedly maximize profits, by disallowing others to take the code they worked on to develop. As bad as this sounds, this is what many businesses do, because they're required to keep their stockholders in their primary interest.

    But, cannot they also justify keeping their code GPLed for the good of their shareholders? This is pretty obvious for us open-sourcers, but hoepfully the businesses can see it this way. If a company takes their super-cool linux installer, for instance, and modifies it to make it more-super-cooler, than the first company can take these modifications back, to sell an even better product and thus earn more cash, making the shareholders happy. I hope this sort of thinking permeates the shareholders and company's minds, rather than just thinking of short-term gains (questionably) made by keeping things proprietary.

    just my $0.02

  • Forget giving into greed.. When will these companies make a profit? I bet it's hard to make a profit when you're selling free software. Egad, what a concept.

    If you think about it, what differentiates distributions is the installer and documentation. God help them if Linux suddenly develops a half decent interface and becomes as easy to install.

  • That's the beauty of Red Hat and VALinux going public. You have a shot at a piece of the pie now. Granted, it's the same shot that my dad has, and lord knows he's never coded any GPL linux-ware....but still, you have a chance now. I think that a class action lawsuit would be 1) against the spirit of the linux community and 2) Shot down pretty fast. You never coded your GPL software with the expectation of getting paid, and even Red Hat offers it for they're not making money directly at your expense.

  • by Suydam ( 881 ) on Thursday December 23, 1999 @03:43AM (#1450264) Homepage
    I'd like to thank you for being one of the few people who actually READ the article before posting. Nice job.

    My thoughts with regards to small-developer dissolusionment (or lack thereof):
    Money and greed corrupt....sure, we all know that. But we also know that money is a reasonably successful motivational factor, and a very appreciated reward system. Small developers will become more plentiful with the allure of money now dangling from the stick. And some existing developers (as well as the new ones lured in by $) will be more motivated to turn out great code. Those that aren't driven by money will stay the same. There will be a select few that are corrupted by the greed...but I don't see them gaining the upper hand in Linux development any time soon.

    Something to think about:
    Was it the allure of money that sent the windows world from a primarily free-ware model in the late 80s to a primarily shareware model in the 90s? Because that is something I would hate to see in linux. The abundance of shared, free software and the helpful community attitude toward it would be somethign I'd hate to lose. My own gut tells me that the spectre of the GPL and the momentum of the community as it currently stands will help to thwart the shift...but you never know.

  • by Suydam ( 881 ) on Thursday December 23, 1999 @03:47AM (#1450265) Homepage
    Because that is what publically owned companies do. When you sell your shares, you are saying "Buy part of me, and I'll lead you to riches." If people buy your shares and then you thumb your nose at them, your overall value as a company will decline.

    Most shareholders with any sense will be aware of the GPL and the -different- nature of Linux. Those who aren't are going to get burned, but it's their fault for buying shares purely for profit.
    WRONG. Most shareholders buy shares of a company PURELY for profit. Our feel-good Linux companies are no different. You doin't shell out $5000 for Red Hat shares just because you like them. You do it for one of two reasons....which both have the same result. Either you buy Red Hat because it's the hot thing (in which case you have ZERO knowledge of the GPL) and hope to make money. Or, you buy Red Hat because you like their corporate stance, think they are headed in the right direction long term, and hope to make money. The stock market is about only one thing: dollars. Shareholders want them, and Red Hat is obliged to provide them to the best of their ability.

  • "If you have to work on closed-source to eat, there's a powerful incentive for you to concentrate on that closed-source work."

    Otherwise known as a contract of employment. I do believe even OS companies have contracts for their staff.

    Sure, BigEvilCompany may not be very thrilled about me working on OS projects in my own time, but...

    Do you think RH looks kindly on its core developers deciding that frankly SuSE is more interesting and doing work on SuSE in their spare time? I doubt it very much. Sure, I don't suppose that's much of a problem at the moment, but it will be once more companies are open source. At the end of the day you spend your working time doing what your company wants you to do. The GPL may or may not help that time be of use to others.
  • The point is (I think) that while everything you say is true, it is still true if you simply replace 'GPL' with 'Artistic License' or 'BSD license'.

    If everything RedHat did now were under the BSD license, and RH were bought up by MS, then all the BSD stuff would be ours to continue working on and with. Sure, MS might do a close fork, but that's a whole other issue.
  • by Jon Peterson ( 1443 ) <> on Thursday December 23, 1999 @03:56AM (#1450268) Homepage
    I beg to differ:

    "For one thing, it's a great motivational boost to know that what you are doing could make you mega-rich. Some people like that kind of incentive. "

    Yes, and more's the pity. So there is AN hacker working hard on his new app, and he thinks to himself 'Well, I reckon I should use libfoo becuase that's a well made library - but - gee MegaDistro, the most populat Linux distro has gone down the libbar path. So, If I make my app use libbar in stead, my app might get included in the MegaDistro distribution, and they might employ me or give me little sweetners or 'goodwill stock options' so yeah, I reckon I'll dump libfoo.


    "Secondly, it is clear that the open source movement as a whole will benefit from the injection of cash and corporate credibility that these kind success stories bring. It's a necessary step in maintaining the progress of free software."

    Rubbish. Your definition of progress is not the same as everyone else's. I write free software to make people (not least myself) happy. I don't do it to crush MS, I don't do it so I can become one of the high priests if the OS cathedral like ESR and AC, and I sure as hell don't do it for the fucking silicon value mickey mouse money stock options.

    "But most importantly, it is clear that the business model of firms like Red Hat rely upon the goodwill of the open source community."

    No. RH has not been in existence long enough to prove a business model one way or another. RH is currently a vapour company. It makes losses. MASSIVE LOSSES AND INCREASINGLY LARGE LOSSES. Its stock rides on publicity and vibe. I'll readily admit that good publicity and good vibes rely upon the goodwill of the OS community. But as for the business model, we'll wait and see.

  • I would not go so far myself, but it is a GREAT FALLACY to say that the GPL ensures the survival of good OS projects in the face of money (or any other threats).

    There are many reasons OS projects die out, here are a few:

    1. Too hard
    2. Too boring
    3. A key developer leaves
    5. Infighting
    6. A rival project

    Now, how many of these factors can be easily influenced by any corporation with alot of free cash?

    1. No, a hard task is still hard
    2. Not per se, but a salary can make up for dull coding.
    3. Absolutely. I doubt that a KDE hacker will leave to work on Gnome just because RH offers a fat cheque, but a similar situation is quite easy to imagine.
    4. Currently the biggest. Who wants to work on a litte backwater project when you can work on Teh GIMP and brag to all your friends about it? Publicity has a massive effect on the momentum of OS projects - And lets see now: (commercially owned) (commercially owned) (commercially owned)

    Looking just great :-(

    5. Not especially. There's nothing like an ego to rise above cupidity :-|
    6. Very definitely. A little project that's been chugging along fine can be killed off in a flash if a company decides to throw a few full time developers at it. Sure, if everything is GPL then the little project can take code from the big new one - but as we all know that's rarely how things work. Lots of NIH syndrome.

    Now, you ask, why would our loverly OS company like RH or VA linux want to kill off an OS project? Well, pretty damn obvious I'd say. Are you going to tell me that RH has no interest in seeing, say, harmony bite the dust*

    *Yes I KNOW harmony isn't around, and no I'm not making any conspiracy theories, but as we see different companies go down different architecture paths like this, you MUST realise that they have vested interests in alternative OS projects failing.

    Since this is in reply to TC, I'll leave conjecture on financial backing for Perl vs Python as an excercise for readers :-)
  • by jd ( 1658 ) <> on Thursday December 23, 1999 @03:39AM (#1450270) Homepage Journal
    Why should Red Hat, or VA Linux, care what their shareholders think?
    • The shareholders combined have less than 50% of the shares, so there's no risk of the management being out-voted in shareholder meetings.
    • The software Red Hat and VA Linux uses is (almost) all GPL, so there's no real cost involved in obtaining it.
    • The hardware is the only real cost, and both Red Hat and VA were doing fine, long before they started trading on the stockmarkets.
    • Most shareholders with any sense will be aware of the GPL and the -different- nature of Linux. Those who aren't are going to get burned, but it's their fault for buying shares purely for profit.
    • The -different- nature of Linux is what gives it a clear, fresh market. The "traditional" software market is cluttered and poised to collapse. Moving into an overcrowded, dying market is not going to make any shareholder happy, no matter what their reason for investing.
    • The GPL constrains any changes Red Hat or VA Research might want to make.
    • Closed software is expensive to buy or write, and expensive to maintain. Red Hat want to be in the black soon, if they want to keep investors happy, and that means moving deeper into GPL-land.
  • You may be right about Most shareholder's reason for buying RHAT and LNUX. But neither of your two reasons.... apply in my case.

    One of the unexpected consequences from the IPO craze has left me puzzled. How do you explain why a letter was sent to you? It is difficult to express my value system to someone who only sees the monetary reward. I actually found it easier to joke about losing $11,000 on that Thursday. A few people actually recognized the stock must have been worth more than that before it fell.

    Too many people think about making money in the stock market and forget that it also is a place for investment. I seem to have some vague memories from school about it being the place where capital is put to productive use ;-)

  • Funny, that. Because some certain "fucking silicon value mickey mouse money stock options" just paid for the rest of my Stanford education. While I didn't write the programs that ended up netting me this money for any financial incentive (or even hope of it), I am certainly rather grateful to the company that offered me these shares.

    I'm going to make a bit of a leap here. I'm going to suggest that it is a good thing to make money on Open Source. It is a good thing because that means that the market sees value in it, that the market is willing to bet that Open Source will work in the long run and will indeed prove the most effective business model for most software projects. If entities A and B both write some program (say, to let you browse newsgroups) and A's program is proprietary and B's program is Open Source, if I need some piece of added functionality (the ability to view HTML messages, say), I now have 4 options:

    • License the source from entity A for thousands of dollars and add it myself.
    • Ask entity A to do it, possibly paying him a good deal of money for it.
    • Pay entity B to add the feature to her program.
    • Change B's source on my own.
    To the business man, option #3 is likely to become increasingly appealing: I don't need to maintain the fix (because the changes are being examined by hundreds of other eyes) and I can probably "bribe" the developer a relatively small amount to get the feature added. Ultimately, this makes it viable to make a living off of Open Source programming.

    I sincerely hope that many good programmers become very comfortably wealthy in this way. Companies get better, cheaper code, developers get to pick out the projects they want to work on on a contract-style basis, and everybody gets robust, fully-functional programs.

    If Open Source really does work, then it will prove itself in our capitalist economy and will subsequently receive its economic due -- which could be staggering: we haven't even begun to see what kind of cash infusions will come to the community! The capacity to create, organize, transmit, and display information will be the primary cause of economic value in the near future; and Open Source software may lead the way...

    Better duck, there's a bar of gold flying at you!

    David E. Weekly (dew, Think)

  • The problem with Red Hat et al. is not what they will do to Linux. The problem is not even that they cannot make money. The problem is they cannot make the kind of money Wall Street assumes they can make.

    People who think Linux may beat Microsoft are hedging their MS portfolios by buying Linux stocks. What they fail to understand is that the reason Linux has been taking market share away from Windows is because MS charges $85 to $200 for an operating system that's worth about two bucks.

    The only way they can get away with this is the network effects and the fact they hide the APIs. Once the public realizes they should never put software on their computers unless the APIs are openly published (even if they never understand the value of open source), no one will be able to rip off the computer-buying public again.


    Not Microsoft, not VALinux, not Red Hat.

    OSes will cost $2 to $15. Word processors will cost $8 up to a high end of 80 or 90 bucks for a full-fledged desktop publishing system.

    A lot of people are just trying to get on the next gravy train. Well, the thing about Linux's success is that there shouldn't be a gravy train. People should not be able to take money from others by encrypting their files (that's what a non-open file format is) and holding them for "upgrade" ransom.

    Codeslaves unite!
  • by Kid Zero ( 4866 )
    We know money can corrupt easily. It just depends on who the person is. I think most programmers won't really worry about how much their options are worth, they are just paper anyway. You'll stil have to pay someone who does really good work good money, otherwise they will go elsewhere.
    besides with the GPL, everyone can see your work and make snide comments anyway.
  • Stock price is an arbitrary measure of value. The market capitalization of a corporation is the price per share MULTIPLIED by the number of shares. Thus, VA LiNUX Systems, with a stock price of $199 has a market capitalization of $7.9 billion, wheras Compaq Computer, with a stock price of just $28 11/16, has a market capitalization of $48.57 billion.
  • Andrew Leonard is one of the most underrated technologoy journalists I know. He has always written balanced, well-researched articles that demonstrate both a sound understanding of the technologies and issues involved, as well as an insightful (+1!) eye towards social, cultural and political consequences. In this article, for example, he demonstrates a clearer understanding of the GPL than many /. denizens can boast.

    I know that he occassional posts and reads here, to, so if you read this, Andrew, know that your work isn't going unappreciated.

    Cmdr, Hemos, etc: Any chance of letting him author some pieces around here?

  • LL makes lots of good points here. My $0.02 into the pot is as follows . . .

    There are three cost/profit points with software:

    1) writing it;
    2) maintaining it;
    3) supporting it.

    Microsoft's model is based on charging for the first point, & pushing the cost of the third onto a third party (e.g., you contact Compaq or Dell for help with Windows). Due to their policy of ignoring or thwarting backwards compatibility, they evade the cost of maintaining their code.

    ``Enterprise level" models charge a token amount for the first point, with the idea of making money on the second & third points. (Last I heard, Sun charges $250K a year just to talk to someone on the phone. I have a hard time comprehending that the average company can use that much support, even if we calculate it as $500/ an hour.)

    The Open Source model is that an individual invests her/his time on the first point, then shares the software with the general public in hope that they will repay her/him with help with the second point. And in theory, both parties make money charging for the third point (e.g., teach classes, do consulting, etc.)

    As LL points out, the first model is inherently broken: we pay for software that ends up imperfect, & we have no way of fixing -- either by ourselves or thru the company. The second model has a proven track record -- the software is more reliable, & companies make money -- but the price to users in that model is far greater than the one Microsoft uses.

    The Open Source model promises a way to meet both desires: reliable software at an affordable rate. The question now, though, is if this model can fulfill this promise.


  • Look at it this way -- if it weren't for RedHat and Mandrake and Caldera and maybe Corel, would there be as many Linux users in the world today?

    I installed Linux on my own machine starting with RedHat 5.1 (having used it before on a machine belonging to someone else for quite some time). They went to the trouble of collecting, packaging, and distributing that CD so I wouldn't have to do all that work myself -- consequently, I have more time to program and to contribute free software.

    Now not everyone who downloads packages or buys a CD will write software that belongs to the whole world (I kinda like that phrase), but if a hundred people try free software because of RedHat, and if only one of those people writes something that other people can use, then we're still ahead.


  • Dissent != damage. Competition is what keeps the community strong, and all camps will be better for it. The friction between the movements helps keep the fires hot, and that's not a bad thing.
  • 9. Since the software is GPL'd, if Microsoft was to ursurp it, the last GPL'd version would forever be available. Thus, the developers moving to work on other distributions (3) could continue to develop it (under new names if necessary).
  • Yeah, tell yourself that you're maintaining your principles while you're flipping those burgers.
  • by Syberghost ( 10557 ) <syberghost@sybergho[ ]com ['st.' in gap]> on Thursday December 23, 1999 @03:37AM (#1450282) Homepage
    It is my belief that an Open Source programmer is far less likely to be "corrupted" by money that they're paid for working on Open Source projects than they would be by money that they're paid for for working on closed-source projects.

    If you can work on Open Source full time and still eat, that's a good thing.

    If you have to work on closed-source to eat, there's a powerful incentive for you to concentrate on that closed-source work.

    Additionally, some companies make their employees sign contracts basically stating that anything they write while working for the company belongs to the company. Now, of course you can always choose not to sign that kind of a contract and work for that kind of a company, but that's not good unless there are alternatives. Open Source companies are the best alternative.

    Bottom line: we've been telling companies for years now that they should open their source. Are we now going to berate the companies that do so successfully? Are we going to hurt their sales with boycotts, so that they fail, causing the established companies to say "see, Open Source doesn't work, we're closing our stuff again."?
  • Suppose, given one car, you could press a few buttons and have an exact duplicate of the first, at no real cost to yourself. Would you still feel this way? If this was how the physical world worked, Chevrolet wouldn't be selling cars: They'd be selling warranties on cars.

    This is completely beside the point. Software is the *reason* that companies like Red Hat have such enormous value. Without the software, there's no Red Hat. The *problem* is that those who created Red Hat's very foundation, aren't the ones making the money.

    Another thing to consider: Red Hat can't require volunteer developers to dress in a particular way, be present in a particular office at particular times, deal with people they dislike, or work on a piece of code that does not interest them.

    If a developer becomes contractually involved with a Red Hat-funded project, they can be required to endure any of these.

  • Look at VA-Linux..what is the difference between VA and Ma+Pa's Korner Klone Store?

    VA makes some nice boxes, but face it, so do quite a few other screwdriver shops. Oh, and VA refuses to support anything but Linux, which makes them popular among Linux users, but not-so-popular among the people who buy the other 98% of Intel servers.
  • AOL "volunteers" agreed to work for compensation (free time, etc). They had standing to sue when they were overworked and denied the compensation due.

    Linux and related GPL/BSD developers included with their product permission to use it for gain without compensating the developers. Therefore, you can sit back and let someone else profit from your labor because you said they could. That's part of the Free Software movement. Ask any three-letter-acronym'd personality ;-).

    The pie belongs to those who take the risk to make a company, and those who invest. They're the ones who will be sued if they fail to enhance shareholder value or if the company fails to give away what it produces with GPL'd code. The rest of us do it for no risk, no pie. Just for fun and satisfaction.

  • I think that nothing will stop open-source software. The success or failure of publicly traded companies who deal in or build upon open-source software is not linked with the future existance of that sofware (though the reverse may be true).

    However, it is simple to reason that publicly traded companies will do whatever they can to increase value for the shareholder. They may or may not stick to "open source values"; "open source values" are irrelavant in that if the executives of these companies will be fired by the shareholders unless they perform. I think we'll see lots of cases of these "linux" companies doing things that shock and disgust the community of developers who got them going. I think it isn't a big deal. Keep on developing forgot the stock the market. It has nothing to offer to the realm of software.

  • Salon had better watch out! The dude who wrote this piece's name was Leonard. That's only one letter less than Leonardo - which as we all known has been copyrighted by that french firm. I bet Salon's going to get sued over having Leonard write articles.

    Kinda offtopic, but I thought it was funny.
  • They're selling support for their Linux distro, not the software itself. Red Hat offers a perfectly functional and (objectively speaking) complete install for download from their FTP site and any mirrors.
    The biggest difference between the free download and the store bought version is what? Support. When you purchase Linux from the store or even from Red Hat itself, it comes with X number of days of support. (My favorite, Mandrake, is no different.)

    Digital Wokan, Tribal mage of the electronics age
  • For all the good that Silicon Valley money earns you if you are forced to live in a revamped homeless shelter. I would bet one of ESR's dollars goes much further than a Silicon Valley dollar does.
    Digital Wokan, Tribal mage of the electronics age
  • Software will have ZERO bearing on the cost of hardware (other than open source drivers offsetting the need to hire driver authors), so HP will remain. So to more precise, we will have superior server SOFTWARE which will not step on HP's, IBM's or Sun's toes.
    And if a superior database system comes out for Linux, and Oracle decides to drop support for Linux... WHO CARES???? We'll have a superior database anyway.
    On the bright side, it is nice of you to remind us that in the end our superior software will force the improvement or dissappearance of commercial software. (Basically they must evolve or die. Software Darwinism at its finest.)
    Since approximately 95% of coders get paid to write software not for resale, but instead for internal use, the existance of OSS makes their job easier. If they can give their boss the desired results by fixing a couple of bugs or adding a feature to an already existing piece of OSS instead of having to author an application from scratch (aka: re-invent the wheel), don't you think that's more likely to earn them a raise rather than the bosses ire for not doing all the work themselves?
    My boss knows my mentality and my methods. I got a great Christmas bonus this year. Know why? Because I got the job done in minimum time and delivered the results ahead of schedule. Know how? By using OSS software. Since they were free, I didn't have to tangle with getting the Financial or Operations Officers to approve it. Since they were GPL, I created as many copies of it as I needed to process the difficult tasks in a shorter amount of time.
    The results of that labor were viewed very often throughout this Christmas shopping season. And those results remained stable and operational the whole time. It was probably the company's most profitable Christmas yet. Good thing I had OSS available to have it ready to go on time.

    > This open source economic "bubble" will surely
    > burst, and I can't wait to see when it does. For
    > open source to thrive, you need the deep
    > pockets of Oracle, Sun, and IBM--the
    > anti-Microsoft crowd. However, once open source
    > starts inflicting on their territories--superior
    > "free" databases and superior low cost servers,
    > the open source guys won't have a leg to stand
    > on. So, it's best that they make as much money
    > now while they can, because it won't last long.

    Digital Wokan, Tribal mage of the electronics age
  • by LL ( 20038 ) on Thursday December 23, 1999 @06:11AM (#1450291)
    Profit may seem to be incongruous with free (speech) software but in fact it is intrinsic to the system when you consider it as a proxy measure for the efficiency of delivering a final good/service. For example instead of hiring 100 water carriers to hustle bottled water, I borrow a billion dollars and build a pipe network maintained by 5 engineers and charge people a lower cost for bulk water, then the profit is a measure of freeing up 95 people to do more useful tasks. Thus profit is a complex formulae combining risk (entrepreneurship) + talent (skill at creating a more efficient business system addressing a market need) + management (motivating everyone and keeping out competitors). The point is not that you can cook a better hamburger than McDonalds (not very difficult) but that they can provide fast food at an affordable cost at a consistent level of standard (no comments about quality please) and franchise it globally.

    Why should OpenSource be profitable? Because ESR pointed out very clearly that software is a service, not a manufactured good and the bulk of programming time is spent in the maintenance phase. One big problem with corporatism is they have this habit of externalising negativities, what people commonly call privatising the profits but leting risks get lumped on the public. One obvious example is the tobacco industry which has caused ripple efects on the public health system. Hence the domination of a company in addicting the rest of the world on an endless cycle of unnecessary upgrades has got the rest of the industry feeling the impact of the technology arms race and stressed out and aggravated at the code quality. OpenSource can be seen as a natural reaction by the intermediate customers (who are not the hardware manufacturers) but the developers who want a stable and cheap platform in creating new internet services for their end-customers.

    Now most people don't object to profits fairly gained and in fact if they are very successful they eventually dominate their market niche and become a natural monopoly. However, bad business practices can easily erode goodwill such as
    1. bundled packages with forced tying
    2. depressing and deprecating competitor's products to force a buyout at lower than market price
    3. deliberate obfuscation of standards/APIs create barriers to subsitution
    4. consistent history of providing bogus delivery dates for non-finished products
    5. defining and imposing in-house specifications rather than common interoperable standards

    Fundamentally a company operates in a network of trust (simply to avoid getting expensive lawyers in to guard every silly thing) and creating a toxic wasteground of relationships as a result of dubious activities, no matter how currently profitable in the short term, is fatal to long-term success. Thus it is not so much the profits that annoy people but the means of achieving those profits and the fact that larger organisations carry their fair share of the social consequences of their actions (e.g. oil companies with their environmental policies, manufacturing with their sweatshop practices, software companies with their founder's personality cults.

    If OpenSource is successful as a profitable business model then it must indicate that it satisfies the necessary conditions for a sustainable industry. The point is that with the code being freely available, then the only distinguishing factor is the value of their associated services, reputation for sales support and means for attracting skiled staff with a combination of lifestyle and long-term mission/purpose. One obvious analogy is why do doctors volunteer to work for organisations such as Medici Sans Frontiers? Because they believe in the cause. Profits are an interesting metric of value but they can't measure everything.

  • Is this 'irrational exuberance'? Or is this a new phenomenon?

    Suppose these companies never turn an accounting profit or share holders never see a dividend. Would that be money lost? Or might it reflect a non-tax, non-government method of funding society's infrastructure?

    Complicated question. There is certainly a huge potential for future growth here. RedHat's capitalization, while seemingly huge, is still only 2% of Microsoft. Is Linux worth that? I think it is worth MORE. But can Redhat generate the profits that Microsoft does? Doubtful. It is a different biz.

    When you buy a stock, you are generally buying into the idea of future growth. This is why some companies are selling at 50 times REVENUES while others are selling at 10 times PROFITS. Amazon is priced high not because of what they are doing today, but because of their growth prospects. When the growth rates of these new companies slow, their valuations will mirror those of more conventional companies.

    As to the question regarding dividends, these are not anywhere as important as they used to be. Very few technology companies issue dividends. If a company has a lot of extra cash, they typically return the money by buying back stock which drives up the value of the stock remaining in the market. IBM is a master of this game. Companies like this strategy because it is much more flexible than dividends.

    Is it a way to fund infrastructure? You bet. This is in fact the essence of capitalism in action. There is no more compelling story than what is happening here today with the funding of the future in these capital markets. It is the palpable action of the invisible hand of Adam Smith operating to remake the world.

    Is it irrational exuberance? This is the hardest of all questions to answer because it is something you can only fully determine in hindsight. There is a lot of economic debate as to exactly how rational or irrational the stock market is in setting prices.

    My own opnion? There is a lot of extrapolation going on here. While the value in say the internet sector as a whole is probably justified because of the demonstrated impact it is already having on the economy, it is very hard to pick out which companies are going to be the long term beneficiaries of this. You are betting on a horse in a race that has just started. Who knows if your horse will be the winner?

    There have been parallels in US history. Two of the best are the railroads and the development of the automobile industry. If you invested in the winners, your decendents are rich today.

  • Why should Red Hat, or VA Linux, care what their shareholders think?

    Even though the RedHat Founders still own the bulk of the company, the minority shareholders can sue if they think they were misled into losing money.

    I don't think RedHat is going to close anything any time soon for the following reasons:

    1. People would just switch to an open distro.
    2. Many key RedHat employees are OSS evangalists.

    So long as Redhat describes their OSS business model and the risks thereof clearly in their prospectus I think they are pretty safe from threats from minority stockholders that would force them to close their future work.

  • it is a GREAT FALLACY to say that the GPL ensures the survival of good OS projects in the face of money (or any other threats).

    But of course. GPL has nothing to do with success of a software project. All it does is govern what could be done with it after it already became useful.

    Now, you ask, why would our loverly OS company like RH or VA linux want to kill off an OS project? Well, pretty damn obvious I'd say.

    Well, you are basically saying that good brains are a scarce commodity, so companies like RedHat would be able to collect them for their own pet projects and thus deny these brains to other worthy open-source projects. Yes, so what? Unless you want to somehow centrally allocate people to projects what someone thinks worthy, that's the way the world works. I don't see anything particularly bad about it.

  • if red hat and va linux dont do well who cares ?

    would it effect any of the other linux groups ?

    probably not.

    va linux is very small, incredibly overvalued and
    hyped and has so much bigger better competition its incredible what they have done with their stock.

    its the individuals who actually spend their time changing and making things better that are important not some lame alternate excuse for them such as a corporate behemoth which aims for only satisfying shareholders which is a bunch of bullshit since in order to make it well you must not limit anything to an incredibly small group.

    so, stop hyping linux stocks as if they were so great when the stock (or any other) doing well will not change the quality of what is actually made in the short and long term.

  • I tend to think that being (public) shareholder driven provides a very strong anti-quality force.

    I don't believe it's possible for a short-term profit driven company to produce good quality complex goods. It doesn't matter whether it's open source or proprietary.

    Linux programmers who don't like the decisions of RedHat or VA are quite likely to move to other environments like Debian or similar.

    I don't see this as being a threat to Linux at all really. Only the public perception of it (which I don't really count as important).
  • hmm..actually stallman recognises that everyone has to eat -- he doesnt discourage commercial software but actually encourages it. read his statements on the subject on his website under the article about "motivation to write free software".
  • They shoud sue James Cameron, too - after all, a search for Leonardo brings up DiCaprio on the Titanic websites (all 200 gajillion). Or just sue Leo and his parents - they should have known better 8^)
  • The real problem with the Linux IPO madness is the same problem with the Internet IPO madness. The people investing in these companies at such outrageous pricess are not doing so because they feel the company is a good buy but because everyone else thinks they are a good buy. This type of mentality is the worst kind if you want a stable economy. It is what keeps Allen Greenspan up at nights. It is the same kind of mentality that leads to bank runs, y2k panics, and the Great Depression.
    I am not that worried about Jake and Jane work at home day trader. The direct effect they have on the economy is insignificant. I am worried about the indirect effects. I worry about professional fund managers saying things like (from CNBC):
    Fund Manager:(In response to why these companies are sky rockecting) I don't know. It's crazy. There is no sound financial reason to pay prices this high for a share of these companies.
    CNBC: Yes, but did you get in on these IPOs?
    Fund Manager: Well...I couldn't afford not to.

    How comforting it is to know that the guy who is managing my retirement is just picking the same thing as everyone else. Gracias for the hard work you did in researching these companies...if you did you do anything at all.
    It seems no one really believes that these firms are good companies but everyone believes that everyone else is dumb enough to think they are. These companies current stock prices are part of a self fulfilling prophecy if I ever saw one.
    All the market needs is the smallest sign of weakness and the stocks could come tumbling down. What is worse is that one companies weakness (like LinuxOne) could bring down the more legitimate companies (RedHat, at least have revenue and big time backers). Guilt by association.
    How could this hurt the Free Software world? Stability is very important to the business world. They need solutions that will last as long as their company will. Big IPOs may get Free Software into many boardrooms but fantastic failures may just as well lock them out. LinuxOne is the next big IPO and they seem very suspicious. If this one falls flat on its face look for the snowballs to start rolling down the mountin bringing the prices of every Linux company with it. This instabilty will cause big business to shy away from it and go to companies that have so much money they could never go out of business (like Microsoft).
    On the home market people go with brand name recognition and with follow the herd trends. People buy what other people buy and people buy what they have at work. Lastly, young people may buy what they had in school. The big oems will run from free software as fast as they came to it. People might not like Windows but if their company uses it they will use it at home.
    The result of all this ranting is that I feel that Linux IPO madness could be very bad for Free Software and possibly bad for the whole economy.
  • I don't think so. The only ways I can think of to make a living and use only Open Source code is to work either as a sysadmin/network admin, to produce internal use only software (even that can be tricky) or to work for an Open Source company. These are just the ones that I can think of. Anyone that knows of more please feel free to tell me.
    I like to work on things that will be used on a large scale. I am currently writing device drivers. In order for my company to pay me they must sell the hardware. In order to sell the hardware it must do things better than its competitors. It must do things that its competitors can't. In order to do that the driver must be written to exploit these features. In order to prevent every other company from copying the features that make it better than the competiton the source to this driver must be closed, at least in the start. This is how I get paid. If the drivers were released the product would be copied, not sell as well, and my group would be sent packing.
    How are people who want to write software for a living suppose to earn a living? While I find administration fascinating, I do not want to do it for a living. I want to create products that many people can use not just Joe Pharmaceutical Comp.'s employees. Working for an Open Source company would be very neat but I there are not too many in my area and I like where I live. I don't think that I am alone in these sentiments. I often wonder how many /.ers do not need to work? Are they in college and have someone else paying the bills? Must be nice... I had to program my way through college and although my company at the time used some open source software I spent a lot of time writing financial software for the platforms that traders and accountants use. This meant writing Excel and Access Addins, Windows Stand Alone Apps, and a little Solaris work. Was I wrong? Perhaps some have jobs they hate during the day and do what they love at night. That doesn't sound healthy and I know that I couldn't do it. Maybe they have one of the jobs mentioned. What about the rest of us that don't want to or can't do those things for a living?
    Finally, what is wrong with being paid for a service or product? If I spent hours building something no one would see anything wrong with me selling it. How come if I spend hours writing code to build a software product, there is something wrong with me for selling it?
    I am not against Open Source. To the contrary, I think that it is pretty amazing what people have done for free. It is admirable. On the other hand, I think that there is nothing wrong with working hard and getting paid for it. If you have the resources, go write and use only Open Source. That is fine. But if you do not have those not feel any shame in writing closed source and making a living doing what you love. Heck, you can still write Open Source in your free time!
  • Yes, and I was a bit amazed at the comment -

    > companies like Red Hat and VA Linux are
    > substantially increasing the amount of software
    > that belongs to the whole world

    Really, I don't think so. All of it existed way
    before they did. Sure Rad Hat is adding, but it
    hasn't add not even 1/100th to the number of lines
    of code that everyone else has.

    Maybe in the future, they will, but that's yet
    to be seen. At the moment, and in the very near
    future, they haven't added any significant amount.
  • What a great thought. Second the motion. I enjoy Jon Katz's writings on /. but AL combines insightful social commentary with a solid knowledge of the technology and coding.
  • The GPL already damages the community. The proof is simple and compelling: look at the dissent it sews.
  • Even if Red Hat goes bankrupt tomorrow, all their code will be around for anyone to use. And just as importantly, their code will not be used in a way that is harmful to the Open Source communitiy, such as in a closed source distro by Microsoft or another giant corporation. Why? Because of the GPL.
    Your point has genuine merit. Let's look at real-world cases that might apply.

    The commercial BSD vendor, Berkeley Software Design, Inc. [], and Eric Allman's companym, Sendmail, Inc. [], share several characterics. (Note: I may be wrong about some of the following. Corrections welcome) They both started with free software. They both added proprietary enhancements. The both sell their value-added product as a revenue source. Both give you source code to the product you bought. And both forbid you from redistributing that source or changes to it to those who don't hold a licence.

    Two critical questions are:

    1. What's the current technology transfer? To what extend do corporate BSDI enhancements return to the free BSD distributions?
    2. If these companies go down, what happens to their code? Licence holders still have the source, but so what? Is it dead?
    I think these two cases are worth looking at because they did not start with GPL'd software, and thus were free to create a traditional fee-for-licence business model for their software systems. Are your points cited above relevant to them? Do companies like that matter to free software--and if so, do they help or hinder it? Or is that too facile a question; perhaps they help some things, hinder others?

    To add one more pair of companies to the stack, consider John Ousterhout's TCL-based Scriptics [] company, or the Canadian Perl-related firm, ActiveState []. My understanding is that there's more technology transfer between these two companies and their core free software roots than might be immediately obvious with the previous pair. I cannot really speak of the TCL world, but in the case of the Perl one, that firm funds not only the salary of the Perl release manager, they also fund development for porting to non-free systems. For example, they've made Perl's fork() call work "right" on Microsoft systems (actually, Microsoft paid for that work!) and have immediately returned those corporately funded enhancements back to the world of free software.

    Yes, that means that the current developer release [] of Perl, version 5.005_63, supports fork(2) with Unix semantics even on Microsoft. Hurray!

    If you want other mixed-mode business models, think about Alladin Ghostscript []. The interesting issue of licensing is covered in the FAQ []. There's also Sleepycat Software [], whose database product, Berkeley DB, was used in Netscape with neither credit nor compensation, thus triggering a good bit of bad blood on the authors' parts because of lack of public recognition and appreciate for their work. The resulting `poison pill' licence seeks to avoid a repeat of this unpleasantry.

    Now, we have in contrast to those situations, look at companies that are making a business, or trying to make a business, out of GPL'd software. The two most obvious examples, RHAT [] and LNUX [], are hardly typical cases due to their current market valuations, which are obviously astronomically overvalued. But even in their cases, you'll find things that aren't what you would call "free software". In fact, they aren't even open source; look at the way Redhat ships "demo versions" of things without source. Now, I would be willing to argue that this is in fact a good thing because it shows people that Redhat's operating system is a viable platform for traditional licensed software. Others, however, dispute this, pointing out that that software would be orphaned if the company who produces it were to die.

    My point is that I believe we now have a sufficiently long list of corporate endeavours which are based, at least with respect to some definitions of the term, free software. That means we have actual cases to look at, not hypothetical cases. I'm sure I've only named a couple of them here. What about other companies? I'm not talking about simple packagers and distributors. I mean firms that do serious development work based on free software. (I would mention Cygnus [], but they've recently become an acquisition by Redhat.)

    Do we have examples of companies that have died or otherwise abandoned their work in these areas? The university Ingress experience and Britten-Lee? Can we come up with other examples to look at? What has happened to the product of their work? Has it truly gone the way of all things, or did humanity derive some benefit from it?

  • Yes, fracturing is bad. Just look at what happened to the Unix of old, with millions of forks. (No, I'm not talking about fork(2) :-) In the Freenix world today, look now at the dissent between the BSD and the Linux camps. Look at the hundredfold, massivly disorganized, subtly variant Linux-based operating systems and the skirmishes and name-calling that ensue amidst them.

    These incessant internecine squabbles are not only completely self-destructive; they also obliterate our reputation in the world beyond our little community. They make us look like whining children, not measured adults. We become our own worst enemies. We discredit ourselves and all we do before the serious business community, as well as before the scientific one.

    With the support of neither, we die.

  • I begin to wonder whether the reason that these Linux operating systems are such a hodge-podge is because they're open source!
    Pure FUD. Just look at OpenBSD as a counter example. It's open source, and is nothing like what you're complaining about.
  • We must understand that when someone buys stocks from a company he surely is thinking only in terms of how much he will gain in the long term. But this money is in turn transformed in an investment to the company who receive it. The huge sums of money invested in open-source and free software projects are used to contract and put to work a great number of programmers in full time. This is a great opportunity to enhance and produce a great array of softwares. We only must put pressure in these companies so they mantain the licenses GPL'd.
    But now imagine that Red Hat, VA and other companies who are basing their profits in the open-source softwares break. Things will continue to develop, not at the same pace, but we still have many developers who work with open-source for the love and idealism that it brings.
    This is our power, the power of flexibility. So come to us, Almighty Buck! We are very proud to receive and use you, but when you go away we will mantain our aim to develop good, free and open-source software. Now that we proved the taste of heaven we shall not fall back in hell(i.e. Micro$oft software!).

  • Why don't the developers get together for a class action lawsuit and at least get a slice of the pie?

    Didn't the AOL volunteers do such a thing? It seems to me there's a precident here.

    It's one thing to bust your ass for your own greater glory, but how can you sit back and watch someone else profit handsomely from someone else's labor?
  • The bottom line is: Linux developers are building Red Hat's product for them for free. You may be having fun doing it, and it may make you many things, but one thing for sure that it makes you in my mind: a chump.

    I like working on cars, but I'm going to go down to Chevy and build their cars for them.
  • by surajrai ( 61661 ) on Thursday December 23, 1999 @03:24AM (#1450310)
    I totally agree with you here. Stock prices are definitely overvalued here. Look at VA-Linux..what is the difference between VA and Compaq? They are both hardware vendors that sell machines configured with Linux/Windows. How come VA linx's share price is in the hundreds and compaq at 20 something? Dooms day is coming and when it comes, watch the people jump out of their high rise penthouse offices...
  • Is this 'irrational exuberance'? Or is this a new phenomenon?

    Suppose these companies never turn an accounting profit or share holders never see a dividend. Would that be money lost? Or might it reflect a non-tax, non-government method of funding society's infrastructure?

    Are we witnessing the birth a new type of charity? One that yields slightly more direct returns than traditional charities?

    Has anyone the The Leisure Theory of Value [] by Michael Miller []? I think there may be some ideas in it that are very important as we become more of a service-based economy than an manufacture-based economy.

  • The market doesn't see the potential of open source. The market sees the potential to make profit because of overhyped words and the endless flocks of bleeting sheep.

    If they were really thinking about the viability of open source, they would have noticed that many of these companies' business models aren't exactly sustainable.

    Of course, with billions of dollars, they should hopefully be able to work out some scheme to eventually turn a profit.
  • I doubt that most open source programmers do it for the money, at least not initially. There's the canonical motivation of []
    scratching the developer's personal itch. There are others. Eric Raymond has rightly called open source a gift culture. That is not the only facit of open source economics, but it is an important one. There are some of us, myself included, who want to be heard. That is, to help shape the future directions of software in general. Open source is the single biggest lever out there. If you can offer enough help to see your own good ideas get into a project, there are plenty of open source projects that will gladly have you. And there is glory. I don't mind finding my name on a project web site.

    I wouldn't turn down an offer of shares in a new open source company, and I certainly wouldn't mind if it made me independently wealthy. But I don't expect it. Smaller amounts of money from open source companies can still do a lot to motivate me. They can host project web sites, mailing lists and CVS servers. They can give credit to contributers on web sites and in manuals. They can send CD ROMS, t-shirts and bumper stickers. Or even, as the above mentioned article says about VA Linux and Eric Raymond, they can provide a location for open source developers to use to stay in touch and maybe occasionally provide a necessary piece of hardware to keep some person or project going. The bottom line is that I am unlikely to get a big pile of cash for anything I do. So what? Host my project and send me a copy of your distribution. It costs less and funds the goals we share.
  • by dsplat ( 73054 ) on Thursday December 23, 1999 @03:34AM (#1450314)
    I was impressed. Here is a piece about the open source IPOs that showed a knowledge of what open source is about. He asked some good questions and partially answered them. I think Leonard's conclusion that free software will be here 5 years from now is valid. Regardless of the sucess or failure of open source business models, the reasons that many of us do it aren't going to change. Whether Red Hat and VA Linux will conquer the world or wither and die remains to be seen. I wish them both well.
  • It's great that open source software is getting this opportunity to prove that it can be competitive. About a month ago Slashdot posted an article about SourceForge and it kinda slipped by me. I just checked SourceForge out after someone mentioned the site on (no relation :)

    VA Linux is NOT joking about making open source work. If open source fails--turns out unable to compete in the long run (quite unlikely IMHO)--it will not be for lack of effort or commitment on VA's part.

    I think the SourceForge FAQ [] offers a lot insight into VA's vision, as seen by the guys at SourceForge. If you haven't checked this out, do it. The SourceForge site may be the OSS "killer app" of 2000. (once again MHO)

  • by G27 Radio ( 78394 ) on Thursday December 23, 1999 @06:23AM (#1450316)
    I see all the advantages of open source, I just dont think theres enough money in it to make a second Microsoft. (unlike what long term VA/RH investors seem to think)

    I hear ya... Not even a kindler, gentler Microsoft. The model doesn't seem like it would support a huge monopoly does it? No complaints here.

    At the same time, though, I think the OSS software development model has a great chance of crushing Microsoft--well, as much as M$ crushed IBM. Microsoft CAN produce good software, but I don't think that's been their primary goal--maybe we'll see more of it from them when it becomes essential to their survival again. Back to the point, it's not RedHat or VA that I see doing the "crushing" -- it's everyone that's involved in Open Source.

    The only big money in Open Source is from suckering investors :)

    Heheh, well I guess that all depends on what you consider to be big money. The money is probably going to end up spread out over as many companies as it takes to get it right. I can't picture a single company dominating over open source--how could it happen? (That's not rhetorical--there certainly could be something I haven't thought about :)

    I really think the biggest, most successful OSS companies in the long term are going to be those that give the most back (not just monetarily) to the OSS movement. It seems that RedHat and VA Linux feel this way too. They're making huge investments in the trust and goodwill of the OSS community with good reason. Reputation is going to make or break OSS companies.

    Maybe they've decided that they can be inlets to OSS from the sea of money that that is floating around out there. They could try to take advantage of this situation, but then they'll lose support from the OSS community. If they lose the community's support their products become less effective. I'm hoping there is enough of a natural balance here to keep things going well.

    I'm hoping there will be a natural balance between the investors and the OSS community as well. By pressuring OSS companies into purely greedy options they (investors) will get burned. By nurturing the flow of money and resources into OSS they will themselves profit.

    I realize that all my comments are really just speculation, particularly that last paragraph--I really know next to 0% about finance/investing/economics. I don't know a whole lot about meteorology either (like even how to spell it) but I can still tell from which direction the wind is blowing.

  • How come VA linx's share price is in the hundreds and compaq at 20 something?

    This is a non-issue. The absolute price of the stock has nothing to do with valuation. For one thing stocks split, so you could have had half as many shares of Compaq available at twice the price for example.

    When people refer to IPO frenzy, "bubbles" about to burst etc. they are referring to market capitalization which is roughly number of shares multiplied by the price of each. New companies with no quarterly earnings (and in some cases such as Amazon, plans to operate in the red for the foreseeable future) have capitalization in the billions of dollars. This is what the orthodox Wall Street logic considers ridiculous.

    From this perspective VA Linux and RedHat are clearly overpriced stocks. On the other hand the high-tech stock market has been operating in a very different model. Natural sciences dictate that you cannot create energy or mass-- only exchange between systems. In the stock market so far everyone has been collectively getting richer as if money is being pumped into the system out of nowhere. This is another good reason why people suspect that the bubble will deflate eventually-- it will not burst, we will not have another "Black Monday" but it will all come down.


  • Tom, he was talking about the GPL as relevant to this story.

    The article talks about how, whether or not the stock of the big Open Source corporations crashes, whether or not the massive popularity of free software cools, the current contribution of companies such as Red Hat will remain. Why? Because of the fact that their source code is released under the GPL.

    Even if Red Hat goes bankrupt tomorrow, all their code will be around for anyone to use. And just as importantly, their code will not be used in a way that is harmful to the Open Source communitiy, such as in a closed source distro by Microsoft or another giant corporation. Why? Because of the GPL.

    Myself, I think a little dissent is worth it.

  • I think I understand where you're coming from. There have been a number of companies that have taken code released under more permissive, BSD style liscences and used it for commercial purposes, while still giving something back to the community in terms of code contributions.

    I think that this is a nice thing for everyone involved. In fact, I think it is nicer and more generous to release your code under a BSD-ish liscence than the GPL. There's fewer strings attached, and I understand that.

    The GPL says "Here's my code, but I'm going to restrict what you do with it because I don't trust you one bit!" That's not as nice as just giving your code away. Unfortunately, though, I fear that it is necessary, to keep Microsoft or another commercial establishment from closing, altering, and profiting from someone else's code without giving anything back.

    If every person and business were generous and ethical and kept high moral standards, then we wouldn't need the GPL. But then, we wouldn't need policemen either. However, we live in an imperfect world, and so the GPL serves a useful purpose.

  • I don't think that IPOs like VA's and money coming from OSS can repel hackers from doing it. And, even if there will be less people doing it, the code remains. All this stuff on Metalab/SunSITE is not going to disappear. I don't do much OSS these days (I've almost burnt my flame out back in the Amiga days), but I'm official translator of GnuPG to Polish language - I did it when this was a lunatic project to write PGP from scratch, (and I was making $100/month as a student), and I'm gonna continue it when it goes as government sponsored project (and I got a Real Job). There is this anecdote about one of the founders of Sun Microsystems (whatwashisname) who as a company president still would come to office to hack compilers at night. When asked why is he doing this - he had hordes of programmers in company's salt mines, he simply said "I like writing compilers". And that's the way it is.
  • How come VA linx's share price is in the hundreds and compaq at 20 something?

    Well, for one, there are currently 1.66 Billion shares of Compaq (out of 1.69B total) released on the market, as opposed 4.4 Million shares of VA Linux (out of 39.7M).

  • Are we witnessing the birth a new type of charity? One that yields slightly more direct returns than traditional charities?

    If the companies never make a profit or pay a dividend, then the shareholders have unwittingly financed infrastructure creation for nothing, because they made an incorrect assessment of the potential rewards.

    This isn't new -- lottery tickets have been used to fund schools for some time.

    Both lotteries and non-profit IPOs cna be considered a tax on poor judgement -- the IPO lottery at least has the advantage that it is a progressive rather than regressive one (the incidence of the tax falls on people who can afford to pay it). However, it has the feature that in the interim period between IPO and winding-up, money is transferred back and forth between speculators (and to stockbrokers). Some might consider this a disadvantage -- I personally don't care.

  • They are going to have a little while as the stock falls to expected levels, but in order to keep it from bottoming out, they are going to have to start showing some decent profits. A whole lot of people have invested in VA and Redhat, many not out of support for the Linux movement but out of the belief that they are going to get paid. Also, they are put in the unenviable position of showing that there will be lasting support for Linux to the commercial sector. Let's face it, a lot of companies base part of their equipment decisions on how established a product is. While we here know that Linux is reliable and well supported, Joe CEO only knows that there are a truckload of companies that have been doing business for years developing applications or providing support for Microsoft Windows, and Linux is some computer buzzword that occasionally pops up in the Journal. How well VA Linux and Redhat do over the next year will really set the pace for the integration of Linux into the enterprise. Although a large part of the burden still rests on applications developers, it is vital that Linux-centric businesses make a positive showing to establish Linux as a serious platform to operate on.

  • by bero-rh ( 98815 ) <> on Thursday December 23, 1999 @03:59AM (#1450324) Homepage
    There are a couple of reasons why this won't happen.
    Let's assume for a moment that Microsoft managed to assimilate Red Hat management (which won't happen, they're neither assholes nor idiots), and they'd decide any further Red Hat development would be closed-source where possible.
    What would happen?
    1. A lot of customers would change distributions because they want to support open-source.
    2. Because of (1), stock prices would drop, making shareholders more angry.
    3. Many of the developers (myself included) would leave because they don't want to work against the community. It would be difficult to find new qualified developers who would work on proprietary crap.
    4. Because of (3), the product would get worse, causing customers who don't care about the open-source idea to leave, consequence see (2).
    5. Red Hat's reputation in the community would be ruined, we wouldn't get the same amount of help from the developers of various packages we're getting now, so the product would get worse.
    6. Because of (5), customers who don't care about open-source would pick a different distribution, go to (2).
    7. The former Red Hat developers would be hired by other distributors, making the other distributions better products.
    8. Because of (7), customers would pick a different distribution, go to (2).

    So, even if we didn't care (but we do), there would be no reason to go closed-source. Instead, it would mean the pretty much immediate destruction of the company trying to do it.
  • by mikera ( 98932 ) on Thursday December 23, 1999 @03:32AM (#1450325) Homepage Journal
    The big Linux IPOs are a good thing for small developers.

    For one thing, it's a great motivational boost to know that what you are doing could make you mega-rich. Some people like that kind of incentive.

    Secondly, it is clear that the open source movement as a whole will benefit from the injection of cash and corporate credibility that these kind success stories bring. It's a necessary step in maintaining the progress of free software. Small developers with their eye on the ball will do well in the open source consulting and bespoke development businesses.

    But most importantly, it is clear that the business model of firms like Red Hat rely upon the goodwill of the open source community. Thus, Red Hat will have a big incentive to keep the small developers onside through sponsorships, awards, share handouts etc.

    These kind of activities don't cost much for a multi-billion pound company. By cultivating small developer support for their systems, Red Hat et al. will probably get better press and actually increase their share price.

    All in all, I don't think there is too much to worry about. Red Hat can't renege on open source principles precisely because the market won't look kindly on any company that chucks it's mindshare out of the window.....
  • Why don't the developers get together for a class action lawsuit and at least get a slice of the pie?

    Thanks for identifying yourself as a newbie not only to Slasdot but also to Linux as well. A quick intro is necessary...Firstly I'd like to know what grounds you want them to sue Redhat on?
    Due to the nature of the GPL [] the developers that have contributed to the linux kernel and the Redhat distro have no beef with Redhat. Redhat has not violated the GPL in any way so that cannot be a reason to sue.
    Secondly Redhat hires/supports a couple of the core kernel developers and thus these people have no more reason to sue Redhat than an employee of Dell, eBay, Microsoft or any other multibillion dollar company who draws a salary. Does this mean we can all sue our employers because our company's make millions in revenue while most of us make less than $100k a year? Thirdly Redhat did let developers get a slice of the pie with the about this here [] and here [].

    Now the only question I have to ask is; exactly how and for what reasons are developers going to sue Redhat?

    It's one thing to bust your ass for your own greater glory, but how can you sit back and watch someone else profit handsomely from someone else's labor?
    If you got the letter you have profitted handsomely since the IPO. If you didn't get the letter, I remember Redhat hovered between 40 & 80 for a few weeks, this would have been a good time to show solidarity for linux and invest in yourself (assuming you're an OSS developer for linux)....and you'd be profitting handsomely as well.

    Finally and most importantly, OSS developers i have met were not and are still not in it for the money. I write code and give it away because I like writing code and I want people to use it and if they find any bugs and fix them whooopeee .
    Lawsuit, paaah.

    Bad Command Or File Name
  • That is the question, isn't it? Once upon a time, stocks were valued on the idea that the company profits would grow, and would be paid out as dividends, which have the great feature that they allow you to make money without selling the stock. (These stocks are "income stocks")

    But today, almost all valuations are based on the expected future value of the stock: an investor is going to buy stock that finds the right balance between being likely to go up in price a lot, and unlikely to go down. Here the payoff is made when the stock is sold. Note that companies that want to maximize this approach to valuations do not ever pay dividends (e.g. Microsoft), so that they can put the profit into additional growth of the company. (These stocks are "growth stocks".)

    But what can you measure to know that a "growth" stock will go up? Nothing! It is the ultimate example of "perception is reality." Whether a company is or will be big or profitable does not matter, all that matters is whether investors think the stock price will rise.

    So, could you make a hot stock in an inherently money-losing activity? Yes, as long as, by some means, you convince investors that the price will go up. However, this bubble must eventually burst, as the only way investors can take home this profit is by selling, so you'll have to keep convincing new buyers that the price will rise, at a faster rate than current stockholders become convinced it is time to sell.

    Of course, some companies (Microsoft, again) have been able to keep this game up consistently, with great success, for an astonishingly long time...

    BTW, for those who wish for a stock market based on income rather than growth, the following policies could work:

    Make capital gains taxes high, as they discourage selling.

    Make the capital gains tax even higher for those that sell quickly (currently, after a stock is held for a year, the lower rate kicks in.)

    Require a certain percentage of profit be paid out as dividends, or tax the post-dividend profit higher than the paid-out profit. Even if this were small, it would reward profit over growth, and give investors a reason to seek out profitable companies.
  • You've made the first leap: profit (by itself) is potentially a force for good. Profit is just money efficiency, which should translate into resource efficiency. Thus profit can actually encourage conservation, worker education, satisfaction, and autonomy, and technological improvement.

    The rest of the story is that our economy also (maybe usually) rewards SIZE, not profit. While size can be a force for good, (economies of scale, gathering of resources for investments that benefit all, stability, etc.) it inherently subverts the efficiency-motivation of profit: while I can be profitable if I use 1 acre to produce 100 bushels, rather than 10 acres, I can be BIG if I use those 10 acres to produce 1000 bushels! And if I don't care to figure out how to be more efficient, I can still be BIG if I use 100 acres of the rainforest next door to produce the 1000 bushels. And, if I concentrate on burning my competitor's crops, or buying his land, I can charge 10 times the price, and be more profitable, too (which will help me get BIGGER!).

    The good news is that free software encourages the profitable efficiency (share your code, and you'll have less work to do to fix it, upgrade it, or find other code); but EXPLICITLY discourages (bans, even) consolidation, market-cornering, and hoarding.

    Indeed, what's interesting about the free software movement is that it achieves the good of economic consolidation (economies of scale, etc.) without needing the evils (concentration of power, growth for growth's sake.) It achieves this by enforcing cooperative creation and use of the infrastructure of production (general-use software), while allowing competition over providing the products (support of the software, the services the software provides, special-use software).

    Profits are a good measure of value, but, unfortunately, it's size that usually gets measured in today's economy: witness the use of GDP growth as the measure of economic health. Shouldn't we use worker productivity and resource-conversion, instead?
  • by bons ( 119581 ) on Thursday December 23, 1999 @03:17AM (#1450329) Homepage Journal
    I really don't see the value of Linus (or other Free[speach] software) related stocks as changing a thing. Some programmers work for free out of a sense of Bucky Fuller style economics [] while others want to be the next Bill Gates.
    What I think will happen is the stock will fall, and people getting wiser about overvaluing stocks.
    Let's face it. We already had an example of getting rich through programming through Bill Gates. Linux IPOs doesn't change that. What Linux changed was the realization that Free[speach] (I like the way that looks...) software works as a distribution model much more effectively than propriatary software. (I find it Amazing that AOL deals with Netscape and Instant Messenger with such different philosophies. Unless it's a "screw Microsoft any way you can" philosophy...)

  • The bottom line is: Linux developers are building Red Hat's product for them for free. You may be having fun doing it, and it may make you many things, but one thing for sure that it makes you in my mind: a chump.

    I like working on cars, but I'm going to go down to Chevy and build their cars for them.

    Suppose, given one car, you could press a few buttons and have an exact duplicate of the first, at no real cost to yourself. Would you still feel this way? If this was how the physical world worked, Chevrolet wouldn't be selling cars: They'd be selling warranties on cars.

    This is in essence what Red Hat does. Linux is not their product.

    Quit trying to apply values from the physical world to the world of software. The rules are different here, and values from the physical world don't make sense.

    Maybe Red Hat will make a huge profit from the efforts of open source developers, but I doubt it. The sort of services Red Hat offers will very easily become commodified: Anyone who wants to can put together and sell service for a Linux distribution, so the barriers to entry are quite low. A similar situation will hold for any company that builds a business around OS-related services. The current insane stock prices for RHAT and LNUX are a result of irrational exuberance on the part of investors who don't understand this. Your view of volunteer OS developers as 'chumps' is also partly a result of your failure to understand this.

    Another thing to consider: Red Hat can't require volunteer developers to dress in a particular way, be present in a particular office at particular times, deal with people they dislike, or work on a piece of code that does not interest them. My company doesn't pay me to write software: Rather, they pay me for the amount of control I permit them over how I spend my weekdays.

  • If, in the long run, Red Hat and VA Linux never earn a dime, and stockholders start pulling their hair out and analysts begin announcing downgrades, the world in general still stands to benefit immensely. That's because, right now, companies like Red Hat and VA Linux are substantially increasing the amount of software that belongs to the whole world.

    Wraps up the positive aspects rather nicely.

  • The article assumes that the companies new top priority is to maintain their high stock prices. While it is always nice to have a high stock price, many technology companies strongly feel their stock prices are overvalued, Microsoft included. I remember a quote from Steven Balmer a while back actually urging people to consider the price of Microsoft when making investment decisions - he actually said Microsoft's stock was heavily overvalued, and should be corrected (That is of course not verbatim). I strongly doubt that RedHat and VA Linux will be too concerned with their respective stock prices. They all realize if they do not support GNU completely, etc, the community will not support them. I also don't see the publicly-held Linux distributors gobbling up their competition. I can't foresee a lot of mergers in the sector. Just my take though:)
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The best book on programming for the layman is "Alice in Wonderland"; but that's because it's the best book on anything for the layman.