The Open Source Economy
There’s been a lot of talk in newspapers, and even Slashdot about the potential for Open Source principles to aid the current economic crisis. Hype aside, one thing is sure; there are more than superficial overlaps between the Open Source system and the real economy.
How can this be? In any economy, the basic units of analysis are markets, exchanges, values, and products. In Open Source, though, almost every one of these “concepts” has an analogy...
So this means that the system of Open Source isn’t so different from the real economy – at least in theory. Both involve the production of a thing, or output, they involve coordinated effort on top of systems or exchanges, and there is an implicit or explicit value to things. So there’s a translation between both systems, probably a little like the chart above.
But what makes each system work? What is the “WD-40” of each system, that allows any analysis or meaningful production happen? In the real economy, some would argue it all comes down to money. There is some notion of economic value that all activities, behaviors, or contributions can be expressed. In the Open Source system, it’s not as clear. Some of the “conceptuals” would say that trust is the underlying unit, and that the whole system only works because people value trust, and because there is an exchange in trust. On the other hand, from a practical note, speaking from my own experience, Open Source Software feels a lot like time. When contributing to a project, people are making a conscious decision to spend time on one project over another. Projects take a lot of time to make and complete, whereas the economy takes a lot of money to operate.
And that brings us to Open Source Hardware. The problem is, OSHW requires a lot of time and it takes money too. It can’t work with only one, and not the other. If you throw a lot of time at making a project schematic, it doesn’t become a real thing unless you also throw money at it. Likewise, you can’t just throw money at building a project or paying someone to build it, without also taking the time to design it, architect it, and eventually code it and debug it.
Here are some theories that might need to be tested in order to really understand the differences between the Open Source Software time-based economy, and the Open Source Hardware time and money-based economy:
- Maybe Open Source Software works because people dramatically undervalue their time when contributed to causes
- Maybe Open Source Software can work but Hardware can’t because the same reasons why people might donate time are different when it comes to money
- Maybe the same reciprocity or “pay-it-forward” mentality of time doesn’t hold true with money?
Where do Time and Money Come From?
If Open Source Hardware takes time and money, where do they come from? Currently, time comes from individuals (like me) that have faith in the system, and believe that Open Source Hardware means something. So I spend my time hacking away at gadgets and projects making them work, just because.
Meanwhile, the money comes from a number of places. One place it comes from is companies and stores. Other times (like all the stuff at the liquidware store), it comes from individuals that pool their money together just for fun. It can also come from grants, donations, or institutional causes.
When money comes from individuals, it needs coordination mechanisms to make sure individuals are repaid, or get their money’s worth. When it comes from institutions, it often needs to support a cause or mission. And finally, when it comes from companies, it usually needs to make a profit. This last one is particularly nagging in the Open Source Hardware economy, because it suggests someone is making money off of Open Source. This tends to contradict the notion of the “free as in beer” ideas of Open Source. But is it necessary? Open Source Software can work without the presence of a profit-making corporate entity. Can the same be true for hardware?
Assuming for a second that it’s not true, and companies are required, then I’d put forth a simple framework for when it’s appropriate for someone, anywhere in the ecosystem, to make a profit from Open Source Hardware:
By this framework, profit-making is a good thing when it’s maximized and re-invested back to the community. On the other hand, profit-making is a “bad” thing (or “less good”) when it funds traditional business model reasons, like mitigating risk, distribution, portfolio, or scaling. Why? Because each of these business models involve taking advantage of the efforts of others to make profit. The profit doesn’t make its way back to the individuals who contributed, so it’s “less good” than a system that directly rewards and incents individuals and their time. This assumes that the end-state desired outcome is a system in which individuals are directly contributing to a shared community, and collecting as many of the benefits of their time as possible.
Clusters in an Open Source Economy?
While we’re talking about Open Source economics, I’m not taking anything for granted. Just because there are companies and stores in the real economy, doesn’t really mean you need them in the Open Source Hardware economy. To put it another way, if you were going to build an economy from scratch around Open Source ideals, what would it include?
I’ll start by describing what I imagine is the Open Source Hardware process. Like a chemical reaction, Open Source Software starts with people who contribute time, a “reaction” occurs, and the output is a set of source code that does something. Meanwhile, Open Source Hardware starts with people who contribute time, and money, a “reaction” occurs, and the output is a set of physical, tangible hardware products.
As groups of people contribute, eventually they coalesce into “clusters” in which there is a critical mass, center of gravity, and a formal “project” is created. Sometimes there is a single, large cluster, like Linux, Firefox or Wikipedia. The field of Open Source Hardware, however, is far from mass-centralized, and instead there are groups and clusters of mini projects. One could argue that today there is a central Open Source Hardware project, the “Arduino” platform, surrounded by a set of smaller communities. It might look something like this:
This “cluster”-based theory of Open Source Software and Hardware treats the Open Source Economy as a collection, or centralization of time and money. To have Open Source Software, you need clusters of time. To have Open Source Hardware, you need clusters of time and money.
Well, we all know where the time comes from – it comes from nights and weekends when you’re not working, and you decide to work or play on a project. You learn the project architecture, formulate an opinion, and decide to contribute to it. Actually, on a personal note, that summarizes my experiences with Open Source Software quite nicely!
But now that we want to do Open Source Hardware, I have to answer a more difficult set of questions:
- Where does the money come from?
- What is the best way to coordinate and centralize money?
- How can the money be best structured so that the community reaps the benefit?
- Can money be sourced from a distributed group of individuals or institutions, or does it have to come from one party?
- Does money always need to generate interest through profit?
- Are there other ways to sustain money in a community?
- Who is incented to contribute money, and why?
- What are good and bad reasons to contribute money to Open Source Hardware?
- Does money always have to be structured in a corporate form?
- Should Open Source Hardware have companies that make profit, or are there other ways?
- What are examples of successful production economies that didn’t involve profit-seeking corporations? Can they provide lessons or motivation for Open Source Hardware?
Clearly, this is far from over. I guess I should have expected it, but it left me with more questions than answers. At the minimum, however, I feel satisfied knowing that the questions I’m confronted with now are much more precise than the ones I started out with. I now know my next challenge: solving the Open Source Hardware financial structuring problem.