Open Source

Nice article by Umair Hacque on the shift in platform economics as the underlying technology moves from closed to open, and as the convergence / consolidation increases:

Today, platform wars ain't what they used to be. On the one hand, there's Facebook - playing a textbook game of platform strategy, but slowly suffocating the utility of its own network. On the other, there's Apple - ignoring many of the rules of platform strategy, but radically redesigning the long-suffering mobile value chain with the iPhone App Store.

I think calling Apple an "open" market is a misnomer - the iTunes end to end value chain is pretty locked down, which is Apple's traditional approach - an iConic consumer device with a locked down supply chain behind it. Nonetheless, I think Umair is directionally correct when he notes that:

Let me advance a simplifying proposition: platforms are markets. The most useful way to think about platforms today is simply as markets.

The App Store's name is revealing: it tells us that Apple doesn't see a platform to be manipulated, but a market to be made. It is that understanding that's at the heart of Apple's furious domination of the mediascape.

We have done quite a lot of work with various clients in the last year or so on how platforms can best be operated as market ecosystems, but (frustratingly) are bound by NDA's in various areas - but one can always nod vigorously (albeit raising the eyebrow to temper the Apple-o-philia) when Umair notes that:

- Markets alter the basis of competition. Apple took something terminally closed - the mobile value chain -and pried it radically open. Facebook - still thinking in yesterday's terms - took something radically open - the www - and is trying to make it a little bit more closed.

- Markets cause strategic domino effects. Markets are strategically radical: once the basis of competition has been altered, an economic tsunami is unleashed, often unstoppable. The dynamics of competition shift irrevocably.

- Markets atomize the value chain. The App Store is radical, ultimately, because it atomizes the value chain: where once a handful of scale-driven players could produce and distribute mobile apps, today, any number of players can enter. What was once monolithic is shattered into a million pieces. If the market can coordinate those millions of pieces effectively, the new value chain is hyperefficient.

(As an aside, this is also our view with approaches such as VRM - until they create new market forms, we think it will be hard for it to get traction).

[ Update - I think its necessary to make clear that market here - in my view - does not imply just a simple buy/sell relationship. More that it is open to trading, in a range of models, from a variety of players. I think the word ecosystem - where eco is also for economy - is possibly the better word, which is what I tend to use - but Umairs' phrase is more pithy]

As we also showed in our work 2 years ago on Advertising models for Telcos, the convergence also forces different business models onto hitherto safe platforms - so media ad -based models start to impinge on Telco rental models (hence Blyk, for example).

I'll let Umair end off this post with another point, which I will discuss in more detail in a later post and at the O'Reilly Web 2.0 Expo in Berlin.

This conclusion also helps us answer another critical question on the minds of today's investors, entrepreneurs, and would-be revolutionaries: when will today's crop of startups start making serious cash? The answer: when they shift from platform logic to market logic.

Quite - ending FreeConomics and charging money will create an Akerlofian revolution, and allow quality to chase crap out of so many of the digital 2.0 markets.

I was reading Confused of Calcutta's post on Open Source Leadership (or its lack), and was struck buy these paragraphs: Firstly, an excellent definition of Open Source:

Opensource is about democratised innovation, about creating value faster than via traditional models. It is about better code, about Linus’s Law, Given Enough Eyeballs All Bugs Are Shallow. It is about lowering the cost of failure by its peculiar compartmentalisation. It is about creating affordable operating systems and software for the millions, the billions, that are underconnected because of closedsource operating models and business approaches. Opensource is about choice, choice shown in the very way the community moves and adapts and forks.

But the issue was that:

As leaders [of Open Source], we allowed ourselves to be drawn into the wrong debate. As Richard Stallman said, opensource was never about free as in gratis; it was about free as in freedom. Yet supporters of opensource were quickly labelled as pinko lefty treehuggers, and we allowed that meaning to persist. Very quickly, opensource supporters were anti-capitalist idealistic utopian dreamers, while the rest of the world churned out the stuff that mattered. Apparently.

With the result that:

Yet for years we left so much of the value of opensource on the table, value that was denied everyone, from the BRIC individual to the large corporation. Those of us who call ourselves leaders have only ourselves to blame for that.

JP is correct imho when he says that this reflects badly on the movement's leaders, in that:

Leadership is about taking the risk of managing meaning

But, and with all respect to JP, I see the origin story of Open Source slightly differently - I think Andrew Orlowski of The Register was more on target when he noted that the Web 2.0 memeplex (Open Source being a big part of it) was initially largely supported by people who probably did want to believe in pinko treehugging utopias etc in that it:

makes enough sense to get past your analytical faculties, is all embracing and unspecific enough for loads of people's dreams, fantasies and so on to be projected into it

And the movement's leaders let that happen in the early days as it needed to get its core of supporters etc (and if that was the idealism that drove many people to spend their "free" time writing code, so be it). The problem then being that when it has to think about how to capture the value on the table, there is a huge amount of baggage.

If I can paraphrase this in Geoffrey Moore's "crossing the chasm" terms - its not just individual technologies that go through that painful readjustment when they have to move from Early Adopter to Early Mass market - I think philosophies and movements have to do the same.

And to JP's points on the same issues facing IPR and Identity (and Net Neutrality to boot), I think the risk is the same - the early leaders in these segments are again letting the core principles of Next Gen IPR and Identity be hijacked by the idealists who are cleaving to it in its Early Adopter phase. I've written quite a bit on the risks of getting hijacked by the "Freetard" community before ( Freetards are those who conflate Free rights and identity with Free goods - i.e. paying nothing ) - start here with this article on the Limits to Freeconomics - so there is also a risk of these ideas being hijacked by the Utopian Fringe.

The problem of course, is that many of these Utopians are the dreamers and idealists who got in early and inspired so many others to join the movement in the first place. Without these enthusiastic early adopters, these ideas would never get off the ground to be in a position where the leaders do have to grasp the nettles.

So what to do?

I think JP is right - it behooves the leaders of these communities to come clean early, learn the lessons from Open Source's travails, and start to disown, gently but firmly, the more impractical views of the utopians some time before the Chasm looms on the Event Horizon. And if the current crop of leaders won't or can't (as frequently they are too close to the Idealists) then another cadre must.

To take back the management of the meaning......

Success or failure in this task probably determines whether a movement crosses the Chasm, or crashes in the attempt.

An afterthought - maybe the largest amount of courage ever shown is by early leaders to realise they are not the people to take things forward?

From Larry Lessig's Blog, good news for the Creative Commons type of licences - the US "IP Court" has upheld open source copyright licences:

In non-technical terms, the Court has held that free licenses such as the CC licenses set conditions (rather than covenants) on the use of copyrighted work. When you violate the condition, the license disappears, meaning you're simply a copyright infringer. This is the theory of the GPL and all CC licenses. Put precisely, whether or not they are also contracts, they are copyright licenses which expire if you fail to abide by the terms of the license.

So, for those who scrape this blog and on-sell for profit..... you are now a copyright infringer and...we can sue!