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blog: Don Marti

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Open source businesses, meet the real world

25 September 2019

(Update 7 Oct 2019: add link to James Vasile article, minor copy edits.)

Big Tech companies as we know them are mutated versions of the open source software business. This looks like a big cultural win for the open source entrepreneurs of the 1990s. But the problem is that open source business models can be a rational choice in the software business, but in other businesses, not so much.

Nobody is the villain in their own story, and Big Tech managment generally doesn't make decisions that look creepy and evil because they actually are creepy or evil. They're just running the pattern that beat the last few levels.

The problem they're solving is that in the software business, the absolute worst place for a marginal dollar to end up is at another software company. You would rather see money burn up in a fire than see another software company get it. If another software company got it, they would use it to sue you, or build network effects in their own product adjacent to yours to squeeze you out, or whatever. So the pattern you end up developing for self-defense is open source. Open source is a great defensive tool in software. Turn the product categories adjacent to yours into low-profit commodities, and keep money out of the hands of other software people.

If you keep growing the open source model you get today's Big Tech. Decisions that look shortsighted or just plain evil are understandable if you look at them from the Open Source entrepreneur's point of view: Every business adjacent to mine is either a low-margin commodity or an existential threat.

When the business adjacent to the Big Tech company is in individual independent contractor, you get the gig economy and the precariat. Besides the gig economy, though, the biggest example of Open Source patterns influencing other areas is the commoditization of content sites. Surveillance marketing, for the Big Tech platforms, is not about the surveillance. User surveillance is just a commoditization a tool, like an open source software component is. User tracking has value to Big Tech because it makes the content site into a commodity source of the same eyeballs you get get anywhere, and drives ad profits to the platform that enables the tracking.

The problem with the commoditzation strategy is that it works great for software, where it's safe to assume that every company in every area adjacent to yours is run by a douchebag software CEO, but it's suboptimal for types of business in which having a strong company adjacent to you is an advantage. If Big Tech management ran Chevron, they would give out free clones of the 1970 Plymouth Belvedere that get 8 MPG, and everyone would be all on about how there is no money in the car business. Brands, content sites, and ad agencies are an example of a set of businesses in which a viable company in one category actually boosts the companies in adjacent categories. Approaching this kind of situation with the oversimplified view of commoditizing everything is leaving money on the table.

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