(Working Draft)
Alternative for financing Open Source? Or just a pyramid scheme?
Aldo F. Castañeda
October 7, 2004
Medfield, Massachusetts
I. INTRODUCTION
I contend that the efficiency of the Open Source Development process is impeded by a lack of ready access to capital. Resulting largely from a failure to recognize the efficiency with which the global electronic digital network provides a means to attribute economic value to the hierarchy of self-selecting and self-organizing interrelationships that Open Source Development implies.
I base this concept on a number of as yet unproven assumptions.
FIRST, at their embryonic stage Open Source Projects begin as an idea in an Author’s mind, an idea sufficiently compelling result in code. (NOTE: While I propose that this financial concept is most readily applied to Open Source Development, I suspect that if it is valid in this context it might well be abstracted to the financing of other collaborative creative endeavors based on common spoken non-machine language (text/voice.)(SUB-NOTE: Perhaps it’s worth developing the idea that the shift in the cost of the means of production to relatively inexpensive together with low cost real time communications is at the heart of this entire concept?)
SECOND, Authors who manifest their ideas in code validate their ideas, whether or not motivated by profit, will seek validation by sharing their code openly. (Is this particularly true of source code? My hunch is that because source code is always basically functional in that it instructs a machine to perform a given set of functions, the Author’s of a piece of code will only really understand the validity of their concept through it’s wide spread adoption).
THIRD, when shared the value of the Author’s concept is reflected by the degree to which other’s choose to participate in the author’s core concept. A critical distinction here is that in the online world, unlike its physical analog, the sharing of the author’s concept and the adoption of it can be efficiently measured throughout it’s lifetime. I can not say at this point what a good yardstick might be, I merely suggest that “sharing stage” and throughout the life cycle of the “code/concept” it would be possible to measure the value of the concept, by such attributes as how many coders add their own code to the creators original concept, how many users download the code, how many organizations employ the concept to profitable ends et cetera. (Note: I am neither an accomplished coder nor a learned economist therefore I believe that defining a metric that reflects the value of a concept is something that will require much input).
FOURTH, if other’s adopt the author’s concept/code and presuming that the Author maintains an ongoing role in the evolution of the concept, I assert that in doing so the Author’s investment in the concept is proportional to the time invested in it. I assert further that this is also true relative to the other “participants” in the evolving concept, I am referring here to the other coders that have chosen to add their own code to that of the Author.
FIFTH, it is this web of self-selecting, self-organizing relationships around a core concept that creates a community of aligned interest i.e. manifested in code. The total value of which is measurable as a function of the community’s size (number of participants) and each participant’s commitment to it (Note: Is commitment a purely subjective measure defined by those most invested in the concept?). Visually this concept might be envisioned as a web of links radiating from a center, however unlike a spider web one should envision a hierarchical web, just imagine that you are pulling at the center of the web so what was once flat is now a cone or hierarchy of interconnections. The concept of a cone is important because it reflects the concept that the author of the concept has relative to the rest of the participants the greatest sense of ownership in the concept and therefore the most interest is channeling the efficient application of resources to the evolution of the concept.
If that that assertion is accurate, the Author, is optimally situated to select those individuals in this self-selected community who have, relative to all other’s contributed the most to the evolution of the core concept (while there may be some subjective criteria, I think it is important to balance objective criteria as well so as to diminish the imposition of impropriety). The number of individuals that the Author can select should be a function of the size of the total community, so that as the community around the core concept grows, the Author can assign more “key contributors” as it grows.
Continuing this visualization, looking next at the group of individuals who represented the first set of connections (those that the Author recognizes as most committed to the core concept), those individuals by their very presence near the center by definition have contributed and most invested to the concept relative to the entire world save only the Author. Therefore they too, like the author are allotted the right to select a number of individuals (based on the same formula as above) who they deem to have contributed the most to the project. Again the number of individuals they can pick is a function of the overall size of the community but because they are not the Author that “right” is diminished to some degree relative to the center.
This notion of establishing a hierarchy of relationships established by individual who represent relationships one level closer to the center continues until all the participants are represented. One might envision at the farthest points, participants whose main contribution is writing a bug report i.e. a very limited investment in their time.
SIXTH: Theoretically once described this hierarchy of relationships establishes a means to assign quantitative values to both the relative contributions of each individual and by means of the number of participants and the adoption of the code to the group as a whole. The predictive accuracy of this model results in large part from the efficiency with which the strength of these relationships can be measured dynamically. Arguable the frequency and composition of the code revisions themselves, to the degree that they accurately reflect contributions from the community could be used as a means to automatically update each participants relative contribution. Distribution of each code revision to the degree that it could be recorded could provide a measure of the value of the total value of the community’s productive effort.
II. THE FINANCIAL SIGNIFNICANCE
As with any projection into the future, subjective judgments must be made. Therefore the system that I have described is not by itself predictive of the economic value of an idea. Instead, it is a method for ascribing value to the commitments of a community of actors each of whom perceives value in contributing their resources to the development of what in the final analysis boils down to an idea. It would be absurd to suggest that group commitment to the development of an idea is proof of it’s value, at the same time the quantifiable commitment of a community to the development of an idea by definition is at least descriptive if not in some respects predictive of it’s value. Value that has, as far as I know, remained financially unavailable to the very individuals who most perceive it.
To that end, I believe a financial model exists to enable the participants of Open Source Development projects to gain financial leverage from their commitments to these development efforts, while offering financial incentives to those who seek to employ their financial resources profitably.
(Should consider here that this is a lending model and therefore does not include a concept of a residual owner (like a stockholder in a Corp) who seeks to maximize profits. Therefore this system will likely be funded by creditors not “investors”. (Note: Make sure to change “investor” to “creditor”…maybe the concept of a residual owner should be addressed so as to allow development community participants the greatest financial flexibility?)
III. GUIDING PRINCIPLES
What follows is a brief description of some of the core principles of the financial model that I propose:
Provide access to capital, to the Open Source Community in a manner that in NO WAY impedes but in fact draws stability from the self-organizing, open and distributed nature of Open Source development process itself.
Access to capital provided in a way that neither hinders the informal connections between Open Source developers nor impedes the free sharing and distribution of the source code (For example lending of capital would not in any way restrict rights as defined under GNU copyright)
Provide access to financing to a large number of the active open source development coders and projects
IV. Some Features for Describing Risk
V. (continue here next……)
Other Notes:
- Describe the self-reinforcing properties of this system more clearly.
- What about opportunities to “microfund” the project community via a “PayPal” type system? Then the lending can be many to many – this touches upon the limitations of a model where a single coder produces the code and then just sells it. This actor will likely just start a regular for profit organization, this proposal provides a means to distribute payments among all participants without constraints associated with working in a more formalized business structure.
