Table of Contents
1. Indistinguishable From Magic
2. Beyond Geeks Bearing Gifts
3. The Manufacturing Delusion
4. The ``information wants to be free'' Myth
5. The Inverse Commons
6. Reasons for Closing Source
7. Use-Value Funding Models
7.1. The Apache case: cost-sharing
7.2. The Cisco case: risk-spreading
8. Why Sale Value is Problematic
9. Indirect Sale-Value Models
9.1. Loss-Leader/Market Positioner
9.2. Widget Frosting
9.3. Give Away the Recipe, Open A Restaurant
9.4. Accessorizing
9.5. Free the Future, Sell the Present
9.6. Free the Software, Sell the Brand
9.7. Free the Software, Sell the Content
10. When To Be Open, When To Be Closed
10.1. What Are the Payoffs?
10.2. How Do They Interact?
10.3. Doom: A Case Study
10.4. Knowing When To Let Go
11. Open Source and and Strategic Business Risk
12. The Business Ecology of Open Source
13. Coping With Success
14. Open R&D and the Reinvention of Patronage
15. Getting There From Here
16. Conclusion: Life After The Revolution
17. Bibliography
18. Endnotes
19. Acknowledgements
20. Appendix: Why Closing Drivers Loses A Vendor Money

The Magic Cauldron

Eric Steven Raymond$Date: 2000/08/25 05:11:44 $Copyright © 2000 by Eric S. Raymond

Copyright

Permission is granted to copy, distribute and/or modify this document under the terms of the Open Publication License, version 2.0.

Revision History
Revision 1.1825 Aug 2000Revised by: esr
DocBook conversion. Minor updates for Summer 2000.
Revision 1.1722 Oct 1999Revised by: esr
This version went into the first printed edition.
Revision 1.168 Aug 1999Revised by: esr
New section, ``Future-Proofing, Market Pressures, and Strategic Business Risk''
Revision 1.159 Jul 1999Revised by: esr
New appendix on hardware drivers, and a better explanation of rivalrous goods due to Rich Morin.
Revision 1.1425 Jun 1999Revised by: esr
Added e-smith, inc.
Revision 1.1325 Jun 1999Revised by: esr
Corrected 13% claim about Netscape revenues; added better treatment of free-rider effects, corrected list of closed protocols.
Revision 1.1024 Jun 1999Revised by: esr
A better name for the `Razor Blades' model.
Revision 1.924 Jun 1999Revised by: esr
New material on `future-proofing', the `Free the Future' model, and a new section on exclusion payoffs.
Revision 1.724 Jun 1999Revised by: esr
Minor update; clarify criterion (e) in payoff analysis.
Revision 1.524 Jun 1999Revised by: esr
Minor update; point at definition of `hacker'.
Revision 1.524 Jun 1999Revised by: esr
First public release.
Revision 1.218 Jun 1999Revised by: esr
First private review version.
Revision 1.120 May 1999Revised by: esr
Initial draft.

This essay analyzes the evolving economic substrate of the open-source phenomenon. I first explode some prevalent myths about the funding of program development and the price structure of software. I then present a game-theory analysis of the stability of open-source cooperation. I present nine models for sustainable funding of open-source development; two non-profit, seven for-profit. I then continue to develop a qualitative theory of when it is economically rational for software to be closed. I then examine some novel additional mechanisms the market is now inventing to fund for-profit open-source development, including the reinvention of the patronage system and task markets. I conclude with some tentative predictions of the future.

1. Indistinguishable From Magic

In Welsh myth, the goddess Ceridwen owned a great cauldron that would magically produce nourishing food -- when commanded by a spell known only to the goddess. In modern science, Buckminster Fuller gave us the concept of `ephemeralization', technology becoming both more effective and less expensive as the physical resources invested in early designs are replaced by more and more information content. Arthur C. Clarke connected the two by observing that ``Any sufficiently advanced technology is indistinguishable from magic''.

To many people, the successes of the open-source community seem like an implausible form of magic. High-quality software materializes ``for free'', which is nice while it lasts but hardly seems sustainable in the real world of competition and scarce resources. What's the catch? Is Ceridwen's cauldron just a conjuring trick? And if not, how does ephemeralization work in this context -- what spell is the goddess speaking?