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Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
Lefkowitz Innovation
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Lefkowitz Innovation

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  • 1. <ul><li>Robert M. Lefkowitz </li></ul><ul><li>a/k/a the røml </li></ul>Protecting the Innovation Premium
  • 2. <ul><li>The opinions expressed are unrelated to employers: </li></ul><ul><ul><li>past </li></ul></ul><ul><ul><li>present </li></ul></ul><ul><ul><li>prospective </li></ul></ul><ul><ul><li>future </li></ul></ul><ul><li>I am just a bozo </li></ul>Disclaimers
  • 3. <ul><li>What should it mean for software to be “open source”? </li></ul><ul><li>What is the value (money) of open source to the producer of software? </li></ul><ul><li>What is the value (money) of open source to the consumer of software? </li></ul><ul><li>What is the value (money) of open source to the distributor of software? </li></ul><ul><li>How does one prevent the openness of source from interfering with making money? </li></ul><ul><li>Who should ( pay for / benefit from ) open source code? </li></ul><ul><li>How can we encourage open source code to be great code? </li></ul><ul><li>Can we ignore the non-financial value of open source? </li></ul>What is your Quest?
  • 4. <ul><li>Philanthropists </li></ul><ul><ul><li>People who believe . </li></ul></ul><ul><li>Governments </li></ul><ul><ul><li>Society (a/k/a taxpayers) </li></ul></ul><ul><li>Producers </li></ul><ul><ul><li>People who write code. </li></ul></ul><ul><li>Distributors </li></ul><ul><ul><li>Organizations (and individuals) seeking to profit from compiling, annotating, illustrating, and correcting the work of others. </li></ul></ul><ul><li>Consumers (users) </li></ul><ul><ul><li>Organizations (and individuals) seeking to use the software. </li></ul></ul>Money flows
  • 5. <ul><li>What prevents the Distributor from profiting from the work of the Producer? </li></ul><ul><li>How can we raise barriers to entry for distributors? </li></ul>Distributor
  • 6. The Innovation Premium
  • 7. <ul><li>Yea, I hated all my labour which I had taken under the sun: because I should leave it unto the man that shall be after me. </li></ul><ul><li>And who knoweth whether he shall be a wise man or a fool? yet shall he have rule over all my labour wherein I have laboured, and wherein I have shewed myself wise under the sun. This is also vanity. </li></ul><ul><li>Therefore I went about to cause my heart to despair of all the labour which I took under the sun. </li></ul><ul><li>For there is a man whose labour is in wisdom, and in knowledge, and in equity; yet to a man that hath not laboured therein shall he leave it for his portion. This also is vanity and a great evil. </li></ul>Ecclesiastes 2:18-21
  • 8. <ul><li>A useful working definition of authorship for a variety of historical periods permits a gradation of meanings between the poles of authority and originality. Thus Neil Hathaway observes that in antiquity honor was accorded individual authors, so that the uncredited use of their works was regarded as theft, whereas in the medieval period the auctoritas of texts themselves predominated, so that compilatio , the compilation of authoritative texts, proceeded without concern for accurate credit to authorship. -- Pamela O. Long: Openness, Secrecy, Authorship </li></ul>Compilation
  • 9. <ul><li>It is a legal offence to wrongfully use the ® symbol which indicates that a trademark has been registered. </li></ul><ul><li>Some assert that compilations called Linux™ should credit GNU™. Does that not imply “ownership” of “intellectual property” of which uncredited use is “theft”? </li></ul><ul><li>So why should compilations called Pink Tie™ Linux™ not credit Red Hat™ Linux™? </li></ul><ul><li>http://www.cheapbytes.com </li></ul>Compilation
  • 10. <ul><li>Freedom to Copy. ( free software -- free as in ride ) </li></ul><ul><li>Freedom to Study the Source. ( visible or transparent software ) </li></ul><ul><li>Freedom to Modify -- this is the problematic one. It creates a conflict in assigning ownership, it permits defeating any audit or control mechanisms. ( mutual software ) </li></ul><ul><ul><li>Usage Note: Mutual is used to describe a reciprocal relationship between two or more people or things. Thus their mutual animosity means “their animosity for each other” or “the animosity between them,” and a mutual defense treaty is one in which each party agrees to come to the defense of the other. Source: American Heritage Dictionary </li></ul></ul>Freedoms
  • 11. <ul><li>Creative Accounting </li></ul><ul><li>Manufacturing Process </li></ul><ul><li>Craft Guilds </li></ul><ul><li>Liability Insurance / Warranty </li></ul><ul><li>Recycling </li></ul><ul><li>Education / Patronage </li></ul><ul><li>Privacy </li></ul><ul><li>Sharing / Monopolies </li></ul>And the Answer Is ... Consider changing the definition of “ Open Source” as well as the business model
  • 12. <ul><li>If you are trying to sell something that you are not allowed to sell, what do you do? </li></ul><ul><li>Pretend that it is something else that you are allowed to sell. </li></ul>Creative Accounting
  • 13. <ul><li>Ijara </li></ul><ul><ul><li>The financial institution purchases your chosen property. </li></ul></ul><ul><ul><li>Whilst you live in their property you make payments to the financier to repay them the exact purchase price, which can be spread over up to 25 years. </li></ul></ul><ul><ul><li>During your payment term you are also charged rent for living in the property that the financial company owns. </li></ul></ul><ul><ul><li>Once you have repaid the money they spent on the property purchase the property is sold to you. </li></ul></ul><ul><li>Murabaha </li></ul><ul><ul><li>The finance company purchases your chosen property from the seller at their original price, they then sell it immediately to you at a higher price. </li></ul></ul><ul><ul><li>The amount of the higher price can be paid back monthly to the financier over a period of up to 15 years. </li></ul></ul>Sharia-compliant Mortgages
  • 14. 10Q’s, 3 months ended Borland Red Hat March 2003 March 2002 May 2003 May 2002 Licenses (and other) 56809 47668 17397 19656 Subscription Services 17561 9409 9785 8866 Services Total Revenue 74370 57077 27182 28522 Total Revenue Cost of licenses 3099 3520 3103 1989 Cost of subscription Cost of services 6599 5035 5649 5280 Cost of services Sales, general, admin 46247 31033 13486 14323 Sales, general, admin Research and development 17971 11949 6019 5143 Research and development Restructuring 17872 1522 Cost as % of services 38% 54% 58% 60% Cost as % of services R&D as % of revenues 24% 21% 22% 18% R&D as % of revenues R&D as % of licenses 32% 25% 35% 26% R&D as % of licenses R&D as % of sales&admin 39% 39% 45% 36% R&D as % of sales&admin R&D as % of expenses 28% 28% 31% 26% R&D as % of expenses Services as % of revenues 24% 16% 36% 31% Services as % of revenues
  • 15. <ul><li>Claiming that the mutual version is inferior, and sell an identical, similar or enhanced non-mutual version (dual-license, enterprise edition). Jabber, CollabNet, MySQL, Aladdin, Trolltech, Apple. </li></ul><ul><ul><li>To all commercial organisations we do recommend the commercial licence. Not only does this free you from the far-reaching requirements of the GPL licence, it also gives you a licence letter from MySQL AB where we assume responsibility for our product . The GPL licence is an &quot;as is&quot; licence with no warranties whatsoever. </li></ul></ul><ul><li>Ensuring that it only runs on your hardware. EMC?, LinkSys, Apple. </li></ul><ul><li>Make your shared software a prerequisite to running some proprietary software. Obtain a privilege from a proprietary software vendor that only warrants their software in conjunction with yours. Hence a purchase of that proprietary software requires a purchase of yours. </li></ul><ul><li>Contractually tie modification to other services (e.g. the warranty is void if modified). </li></ul>Turn Mutual into Proprietary software by
  • 16. <ul><li>4. REPORTING AND AUDIT.    If Customer wishes to increase the number of Installed Servers, then Customer will purchase from [Company] additional Services for each additional Installed Server. During the term of this Agreement and for one (1) year thereafter, Customer expressly grants to [Company] the right to audit Customer’s facilities and records from time to time in order to verify Customer’s compliance with the terms and conditions of this Agreement. ... [Company] shall give Customer written notice of any non-compliance, and Customer shall have fifteen (15) days from the date of such notice in which to make payment to [Company] for any additional Installed Servers, such payments to be determined by the number of additional Installed Servers multiplied by the applicable annual fee for Service per server. If Customer is found to have underreported the number of Installed Server by more than five percent (5%), Customer shall, in addition to the annual fee for Service per Installed Server, pay a penalty equal to twenty percent (20%) of the underreported fees. </li></ul>License for GPL software
  • 17. <ul><li>What increases your competitive advantage if your product is less defective than your competitors’? </li></ul><ul><li>Product Liability Lawsuits. </li></ul>Liability Insurance / Warranty
  • 18. <ul><li>Technology Review </li></ul><ul><li>Why Software Is So Bad For years we've tolerated buggy, bloated, badly organized computer programs. But soon, we'll innovate, litigate and regulate them into reliability. By Charles C. Mann July/August 2002 </li></ul><ul><li>Bertrand Meyer points out (http://www.apostate.com/programming/bm-freesoftware.html) that there is virtually no difference between proprietary licenses and the GPL -- if one is concerned about quality. </li></ul>Quality
  • 19. <ul><li>6. DISCLAIMER OF WARRANTIES .MICROSOFT AND ITS SUPPLIERS PROVIDE THE SOFTWARE &quot;AS IS&quot; AND WITH ALL FAULTS, AND HEREBY DISCLAIM ALL OTHER WARRANTIES AND CONDITIONS, EITHER EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO ANY (IF ANY) IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, OF FITNESS FOR A PARTICULAR PURPOSE, OF LACK OF VIRUSES, AND OF LACK OF NEGLIGENCE OR LACK OF WORKMANLIKE EFFORT. ALSO, THERE IS NO WARRANTY OR CONDITION OF TITLE, OF QUIET ENJOYMENT, OR OF NONINFRINGEMENT. THE ENTIRE RISK ARISING OUT OF THE USE OR PERFORMANCE OF THE SOFTWARE IS WITH YOU .   7. EXCLUSION OF ALL DAMAGES. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, IN NO EVENT SHALL MICROSOFT OR ITS SUPPLIERS BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, DIRECT, INDIRECT, SPECIAL, PUNITIVE, OR OTHER DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR ANY INJURY TO PERSON OR PROPERTY, DAMAGES FOR LOSS OF PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, FOR LOSS OF PRIVACY FOR FAILURE TO MEET ANY DUTY INCLUDING OF GOOD FAITH OR OF REASONABLE CARE, FOR NEGLIGENCE, AND FOR ANY PECUNIARY OR OTHER LOSS WHATSOEVER) ARISING OUT OF OR IN ANY WAY RELATED TO THE USE OF OR INABILITY TO USE THE SOFTWARE, EVEN IF MICROSOFT OR ANY SUPPLIER HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS EXCLUSION OF DAMAGES SHALL BE EFFECTIVE EVEN IF ANY REMEDY FAILS OF ITS ESSENTIAL PURPOSE.   8. LIMITATION AND RELEASE OF LIABILITY . The SOFTWARE was provided to you at no charge and Microsoft has included in this EULA terms that disclaim all warranties and liability for the SOFTWARE. To the full extent allowed by law, YOU HEREBY RELEASE MICROSOFT AND ITS SUPPLIERS FROM ANY AND ALL LIABILITY ARISING FROM OR RELATED TO ALL CLAIMS CONCERNING THE SOFTWARE OR ITS USE. If you do not wish to accept the SOFTWARE under the terms of this EULA, do not install the SOFTWARE. No refund will be made because the SOFTWARE was provided to you at no charge. </li></ul>Proprietary Disclaimer
  • 20. <ul><li>11. BECAUSE THE PROGRAM IS LICENSED FREE OF CHARGE, THERE IS NO WARRANTY FOR THE PROGRAM, TO THE EXTENT PERMITTED BY APPLICABLE LAW. EXCEPT WHEN OTHERWISE STATED IN WRITING THE COPYRIGHT HOLDERS AND/OR OTHER PARTIES PROVIDE THE PROGRAM &quot;AS IS&quot; WITHOUT WARRANTY OF ANY KIND, EITHER EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE ENTIRE RISK AS TO THE QUALITY AND PERFORMANCE OF THE PROGRAM IS WITH YOU. SHOULD THE PROGRAM PROVE DEFECTIVE, YOU ASSUME THE COST OF ALL NECESSARY SERVICING, REPAIR OR CORRECTION. 12. IN NO EVENT UNLESS REQUIRED BY APPLICABLE LAW OR AGREED TO IN WRITING WILL ANY COPYRIGHT HOLDER, OR ANY OTHER PARTY WHO MAY MODIFY AND/OR REDISTRIBUTE THE PROGRAM AS PERMITTED ABOVE, BE LIABLE TO YOU FOR DAMAGES, INCLUDING ANY GENERAL, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OR INABILITY TO USE THE PROGRAM (INCLUDING BUT NOT LIMITED TO LOSS OF DATA OR DATA BEING RENDERED INACCURATE OR LOSSES SUSTAINED BY YOU OR THIRD PARTIES OR A FAILURE OF THE PROGRAM TO OPERATE WITH ANY OTHER PROGRAMS), EVEN IF SUCH HOLDER OR OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. </li></ul>GPL Disclaimer
  • 21. <ul><li>With clauses 11 and 12 removed, and replaced with clauses requiring the distributor to provide a warranty, a revenue stream appears. One wouldn’t be “licensing” the software, one would be “warranting” it. </li></ul><ul><li>After all, this whole FSF/GNU thing started because of a defective printer driver. If the AI Lab had called up Xerox with the printer under warranty, and they had fixed it, none of this would have happened. </li></ul>GPL modification
  • 22. <ul><li>Offer real warranties -- if the software is more reliable, the equivalent warranty should be cheaper. </li></ul><ul><li>Lobby for laws requiring liability -- if the software is more reliable, it will be at less risk. </li></ul><ul><li>Sharing the source leads to sharing the risk. </li></ul><ul><li>The business model is the insurance business (shared risk). </li></ul><ul><li>Given large enough liability, only a shared code base will be viable. </li></ul>Liability
  • 23. <ul><li>that there aren’t that many trained eyeballs. </li></ul><ul><ul><li>In May 2003, 19,208 successful breaches were recorded against Linux based systems, compared to 3,801 against MS Windows based systems, mi2g claimed. </li></ul></ul>Of course, the risk is ... http://www.theinquirer.net/Default.aspx?article=9845
  • 24. <ul><li>If my 100 line program does exactly the same thing as your 1000 line program, is it better? </li></ul><ul><li>Of course. The less code, the better. (By induction, No Code is the Best Code.) </li></ul><ul><li>What do you call stuff that, the more you have of it, the worse it is? </li></ul><ul><li>Garbage. </li></ul>Recycling
  • 25.  
  • 26. <ul><li>The only truly valuable container collected by curbside programs is aluminum cans. All other beverage containers cost far more to collect and process than they generate in revenue. But the expectation that aluminum can revenues will “carry” the collection of other less valuable containers is misguided. Aluminum can market share of soft drinks is being eroded by plastic (PET) bottles -- a trend that poses a far greater threat to municipal curbside revenues than deposit laws. </li></ul>Container Recycling Institute
  • 27. <ul><li>In order for manufacturers to justify purchasing recycled resin for use in their products, the cost of recycled material must be at least the same (assuming that quality is comparable) or lower than the cost for virgin resin. Right now, the approximate price paid for recycled general purpose polystyrene resin, also shown in the chart, ranges between $.38 to $.45 per pound. However, the cost to sort, clean, and re-manufacture recycled polystyrene ranges between $.10 to $.50 per pound depending on the quality and cleanliness of the material. In addition, any applicable capital costs and margin for profit must be factored into the total cost. As a result of the above market factors, it is generally not economically feasible to use recycled food service polystyrene resin at this time. </li></ul><ul><li>Recycling aluminum saves significant amounts of energy. However, processing of recycled aluminum generates a salt cake waste stream consisting of aluminum, salt and oxide residue (non-metallic product [NMP]). The increasing cost and environmental concerns associated with salt cake disposal threaten the economic viability of the aluminum recycling industry. </li></ul>Recycling Economics Argonne National Labs -- http://www.es.anl.gov/htmls/pe9-saltcake.html Polystyrene Packaging Council -- http://www.polystyrene.org/environment/econ.html
  • 28. <ul><li>The costs of &quot;choosing green&quot; Recycled papers, especially if they contain a high proportion of post-consumer material, can cost slightly more than their non-recycled counterparts. The extra cost of a more environmentally responsible paper is often not significant. Ask for a cost comparison. </li></ul>Recycling isn’t free Canadian Environment Operations for Governments Resource Centre (www.ec.gc.ca)
  • 29. <ul><li>How To Buy Recycled Establish a Policy The first step to setting up a buy-recycled program is to establish a buy-recycled policy for your business. It will lay the groundwork for all your purchases. In addition, this commitment will convince manufacturers that a consistent, long-term demand exists for recycled products, which encourages investment in recycling equipment. Your policy can include all or some of the following elements: </li></ul><ul><ul><li>a general preference for recycled products </li></ul></ul><ul><ul><li>a price preference, whereby your business is willing to pay a higher price (such as 5 or 10 percent) for recycled paper or recycled products </li></ul></ul><ul><ul><li>a set-aside or goal where a certain percentage of total purchases must have recycled content </li></ul></ul>How to Buy Recycled Maryland (Montgomery county) department of public works and transportation
  • 30. <ul><li>Reduce the use do things manually </li></ul><ul><li>Reuse containers use programs for different purposes (spreadsheets for databases) </li></ul><ul><li>Require producers to take back resins legislate no end of life for software </li></ul><ul><li>Legislatively require recycled content require the use of “open source” software </li></ul><ul><li>Standardize labeling and inform the public W3C and other standards bodies </li></ul>REPORT OF THE Berkeley Plastics Task Force http://www.ecologycenter.org/plastics/report1996/PTF_1996.pdf
  • 31. <ul><li>Who cares about the nature of the Source? </li></ul><ul><li>Programmers. </li></ul>Craft Guilds
  • 32.  
  • 33.  
  • 34. <ul><li>Approximately 10 million IT workers in 2001 </li></ul><ul><li>92% of IT workers work for non-IT companies </li></ul><ul><li>Software Programmers and Engineers constitute 21% of IT workers. </li></ul><ul><li>Overall, certification has grown in significance for each of the job categories. </li></ul><ul><li>2 million programmers in the U.S. is less than 1% of the population. </li></ul>Who’s a programmer? Information Technology Association of America (itaa.org)
  • 35. <ul><li>Which is better? </li></ul><ul><ul><li>A binary program that I didn’t pay any money for which will install itself (or run) if I double click on it? </li></ul></ul><ul><ul><li>A binary program that I didn’t pay any money for which will install itself (or run) if I double click on it, and will also put a bunch of mysterious text files in some folder, reducing the free space available for MP3’s. </li></ul></ul><ul><ul><li>A source tarball that I didn’t pay any money for, which I can use to build a working executable assuming that I learn how, and have all the right developer tools, libraries, and header files installed, and the patience to wait. </li></ul></ul>If I’m not a programmer (99%)...
  • 36. <ul><li>Your pilot needs a license to fly an airplane? </li></ul><ul><li>Cab and truck drivers need a license to drive? </li></ul><ul><li>The surgeon needs a medical license to perform surgery on your child? </li></ul><ul><li>Your lawyer needs to pass the bar to practice law? </li></ul><ul><li>You need to have a ham radio operator’s license to broadcast on Amateur Service frequencies? </li></ul><ul><li>You need to have a programming license to have access to the source? </li></ul>Is your freedom restricted if... And the benefits to society?
  • 37. <ul><li>Technician Class Hams enter the hobby as Technicians by passing a 35-question multiple-choice examination. No Morse code test is required. The exam covers basic regulations, operating practices, and electronics theory, with a focus on VHF and UHF applications. Technician Class operators are authorized to use all amateur VHF and UHF frequencies (all frequencies above 50 MHz). Technicians who pass a 5 WPM Morse code examination are entitled to limited power outputs on certain HF frequencies. &quot;Technicians with HF&quot; may operate on the 80, 40, and 15 meter bands using CW, and on the 10 meter band using CW, voice, and digital modes. General Class The General Class is a giant step up in operating privileges. The high-power HF privileges granted to General licensees allow for cross-country and worldwide communication. Some people prefer to earn the General Class license as their first ticket, so they may operate on HF right away. Technicians may upgrade to General Class by passing a 5 WPM Morse code test and a 35-question multiple-choice examination. The written exam covers intermediate regulations, operating practices, and electronics theory, with a focus on HF applications. In addition to the Technician privileges, General Class operators are authorized to operate on any frequency in the 160, 30, 17, 12, and 10 meter bands. They may also use significant segments of the 80, 40, 20, and 15 meter bands. Extra Class The HF bands can be awfully crowded, particularly at the top of the solar cycle. Once one earns HF privileges, one may quickly yearn for more room. The Extra Class license is the answer. General licensees may upgrade to Extra Class by passing a 50-question multiple-choice examination. No further Morse code test is required. In addition to some of the more obscure regulations, the test covers specialized operating practices, advanced electronics theory, and radio equipment design. Frankly, the test is very difficult, but others have passed it, and you can too. Extra Class licensees are authorized to operate on all frequencies allocated to the Amateur Service. </li></ul>Amateur Radio Relay League
  • 38. <ul><li>Software is used in life-or-death situations (medical equipment, air traffic control). </li></ul><ul><li>NIST estimates software bugs cost between 20 and 60 billion dollars/year. (http://www.nist.gov/director/prog-ofc/report02-3.pdf) </li></ul><ul><li>London-based market intelligence firm Mi2g said that the worm (Slammer) caused between $950 million and $1.2 billion in lost productivity in its first five days worldwide. That puts the worm at No. 9 on the company's list of the most costly malicious code, behind the likes of the Code Red worm, with its average of $2.6 billion in productivity loss; the LoveLetter virus, with $8.8 billion; and the Klez virus, with $9.0 billion. </li></ul>Licensing programmers
  • 39. <ul><li>1. You may copy and distribute verbatim copies of the Program's source code as you receive it, in any medium, </li></ul><ul><li>only to licensed practitioners of the art of programming, </li></ul>GPL
  • 40. <ul><li>In the Magic Cauldron, Eric Raymond asserts that open source threatens only sale value, not use value. Therefore use value can sustain open source software. </li></ul><ul><li>What if the future is a world where all software is sold, and there is no use value? </li></ul><ul><li>Then there’s not much value in open source software. </li></ul>Manufacturing Process
  • 41.  
  • 42.  
  • 43. Revenues in $billions US Census Bureau Prepackaged software Data processing Computer services Total pkg% Exports 1985 45 1986 51 1987 56 1988 68 1989 79 1990 16 18 54 88 18 1991 18 19 57 94 19 1992 21 20 64 105 20 1993 25 23 69 117 21 1994 28 27 79 134 21 1998 72 33 140 245 29 14 1999 81 37 164 282 29 17 2000 88 42 185 315 28 20 2001 91 47 184 322 28 20
  • 44. <ul><li>According to the Census Bureau, in 2001, Information Sector Services had $870 billion in revenues, of which Software Publishing was $90 billion (percentage constant since 1998). </li></ul><ul><li>And professional, scientific, and technical services brought in $937 billion, of which Computer Systems Design and related services contributed $184 billion. </li></ul>Software, a tiny piece of IT
  • 45. <ul><li>In his cost sharing example (web server), Eric Raymond suggests that there are three alternatives: </li></ul><ul><ul><li>Buy a proprietary webserver </li></ul></ul><ul><ul><li>Roll your own </li></ul></ul><ul><ul><li>Join the Apache group </li></ul></ul><ul><li>He doesn’t mention the most common: </li></ul><ul><ul><li>Buy an open-source webserver from a commercial distributor and never look at the source. </li></ul></ul>The Magic Cauldron (cost sharing)
  • 46. <ul><li>In his risk sharing example (print spooler), Eric Raymond suggests that open sourcing the internally developed print spooler mitigates maintenance risk. </li></ul><ul><li>What large firms prefer is to outsource the maintenance to a CMM Level 5 or ISO 9000 certified off-shore consultancy. </li></ul><ul><ul><li>The certification alone provides risk mitigation. </li></ul></ul><ul><ul><li>The service level guarantee provides risk mitigation -- whereas the possibility that a community will fail to spontaneously arise is a rather large risks. </li></ul></ul><ul><li>Then, we(they) realize that for the next project, the development would be better done off-shore as well ( $40/hour development cost instead of $80-$120/hour). </li></ul>The Magic Cauldron (risk spreading)
  • 47. CIOInsight Research IT spending allocations (%) 2001 2002 Staff 36.9 37.8 Hardware 18.3 17.1 Software 14.9 14.9 Services 13.6 13.2 Maintenance 12.2 12.9 Training 4.2 4.0
  • 48.  
  • 49.  
  • 50.  
  • 51. <ul><li>The Federal government workforce is coming to grips with Circular A-76 -- the requirement to justify not outsourcing. </li></ul><ul><li>“The future of IT in government is contract management.” </li></ul>Outsourcing
  • 52. <ul><li>In an interview with Steve Jobs in 1989, he was asked why he used surface mount technology in the NeXT manufacturing process. What was the benefit? </li></ul><ul><li>The answer was along the lines that “surface mount” was considered the cutting edge, all the best engineers wanted to do cutting edge work, and if he committed to using cutting edge technology, we would be able to hire the best engineers. </li></ul><ul><li>When the technology changed, he’d change manufacturing techniques. But he’d still have the best engineers. </li></ul>Steve Jobs
  • 53. <ul><li>Those who can, do. Those who can’t? </li></ul><ul><li>Teach. </li></ul>Education / Patronage
  • 54. <ul><li>Sophists initially offered instruction in spoken form for a fee; they also distributed written versions of their lessons as a way of enhancing their reputations, upon which their livelihood depended. </li></ul>in the 5th century B.C.E.
  • 55. <ul><li>“ Amid a plethora of openly illustrated and explained devices Taccola occasionally alludes to secrets that, he intimates, he will reveal upon being employed by a patron.” </li></ul><ul><li>Taccola is the earliest representative of the &quot;new&quot; engineer-authors who produced illustrated technological texts, in which images were treated as an essential communication medium. </li></ul><ul><ul><li>Wow! The inventor of multimedia presentations. </li></ul></ul><ul><li>“ Let it be known that one cannot explain each and every detail. Ingenuity resides in the mind and intellect of the architect rather than in drawing and writing.” </li></ul>Mariano Taccola (1382-1458? A.C.E.)
  • 56. <ul><li>Purchasing JBG services is a value added investment in your people and your IT infrastructure. It is transfer of real information from our teams to your teams. Spend your money on knowledge not empty licenses. </li></ul>JBoss
  • 57. <ul><li>Make the source available in PDF or other non-build-able format. </li></ul><ul><li>The source is open for study and peer-review -- it just isn’t executable. </li></ul><ul><li>Like MIT’s Open Courseware, the materials are available, but it is not a distance learning initiative. You have to pay for that. </li></ul><ul><li>Numerical Recipes (nr.com) </li></ul><ul><li>Knuth’s Literate Programming -- it’s about understanding and explaining. </li></ul><ul><li>Section 3 of the GPL: The source code for a work means the preferred form of the work for making modifications to it. For an executable work, complete source code means all the source code for all modules it contains, plus any associated interface definition files, plus the scripts used to control compilation and installation of the executable. </li></ul>Human, not Machine Readable
  • 58. <ul><li>What’s the difference between a “commons” and a walled garden? </li></ul><ul><li>A commons is public. </li></ul>Privacy
  • 59. <ul><li>Is it unreasonable to instrument the free software so that it collects usability data and transmits it back to the authors? </li></ul><ul><li>Is that more or less unreasonable than forcing the viewing of advertising? </li></ul>Usability Lab
  • 60. <ul><li>What if your product were unarguably superior to all your competitors’? </li></ul><ul><li>Everybody would buy it. </li></ul>Sharing (Monopolies)
  • 61. <ul><li>In 1503 glassmakers on Murano, a small island in the Venetian lagoon, claimed that they had perfected the process of manufacturing the world’s first absolutely pure, clear, and uncolored glass in large, thin sheets free of imperfections. The announcement convulsed their competitors and began a 200-year monopoly that may still be the greatest monopoly on a luxury product that Europe has ever experienced. </li></ul><ul><li>It is no surprise that the Venetian doges immediately limited access to the island and implemented drastic countermeasures, declaring that anyone divulging the secret or defecting to a foreign glassworks would be hunted down and killed. </li></ul><ul><li>This just increased the penalties in place since 1271 (the Capitulare de Fiolaris) </li></ul>The birthplace of intellectual property
  • 62. <ul><li>Government information security leaders would love to see a credible model for the value of monoculture vs. diversity for security and portability. </li></ul><ul><li>Large firms choose to standardize on a single implementation rather than multiple compatible ones in order to achieve cost savings. </li></ul><ul><li>Because reducing operational costs dwarf reducing software licensing costs. </li></ul><ul><li>I would love to see a credible model for the cost implications of standardizing on 1 vs. 2 vs. N solutions -- are there consumer advantages to monopoly? </li></ul><ul><li>Patents and copyrights grant limited monopolies -- in order to promote a community benefit. </li></ul>Are Monopolies Good for Consumers?
  • 63. <ul><li>The Magnificent and Powerful Lords, Lords Magistrate, and Standard Bearer of Justice: Considering that the admirable Filippo Brunelleschi, a man of the most perspicacious intellect, industry, and invention, citizen of Florence, has invented some machine or kind of ship, by means of which he thinks he can easily, at any time, bring in any merchandise and load on the river Arno and on any other river or water, for less money than usual, and with several other benefits to merchants and others, and that he refuses to make such machine available to the public, in order that the fruit of his genius and skill may not be reaped by another without his will and consent; and that, if he enjoyed some prerogative concerning this, he would open up what he is hiding and would disclose it to all; And desiring that this matter, so withheld and hidden without fruit, shall be brought to light to be of profit to both said Filippo and our whole country and others, and that some privilege be created for said Filippo as hereinafter described, so that he may be animated more fervently to even higher pursuits and stimulated to more subtle investigations, they deliberated on 19 June 1421; That no person alive, wherever born and of whatever status, dignity, quality, and grade, shall dare or presume, within three years next following from the day when the present provision has been approved in the Council of Florence, to commit any of the following acts on the river Arno, any other river, stagnant water, swamp, or water running or existing in the territory of Florence: to have, hold, or use in any manner, be it newly invented or made new in form, a machine or ship or other instrument designed to import or ship or transport on water any merchandise or any things or goods, except such ship or machine or instrument as they may have used until now for similar operations, or to ship or transport, or to have shipped or transported, any merchandise or goods on ships, machines, or instruments for water transport other than such as were familiar and usual until now, and further that any such new or newly shaped machine, etc. shall be burned; Provided however that the foregoing shall not be held to cover, and shall not apply to, any newly invented of newly shaped machine, etc. designed to ship, transport or travel on water, which may be made by Filippo Brunelleschi or with his will and consent; also, than any merchandise, things, or goods which may be shipped with such newly invented ships, within three years next following, shall be free from imposition, requirement, or levy of any new tax not previously imposed. </li></ul>The first patent
  • 64. <ul><li>There is little incentive to collaborate between open source projects. One can’t establish partial ownership. </li></ul><ul><li>E.g. if I create a derivative work by combining two or more GPL’d projects, and then wish to relicense the derivative work, who “owns” it? What is the decision mechanism? </li></ul><ul><li>Corporations can have multiple fractional owners, and a governance process exists for a non-unanimous majority to effect change. </li></ul><ul><li>Free software needs a governance scheme for assigning and tracking fractional IP ownership -- like shares in a corporation. </li></ul><ul><li>It is easier to merge proprietary products than open source ones. </li></ul>Sharing
  • 65. <ul><li>A GPL variant that requires the release of the source code after a certain delay has elapsed . </li></ul><ul><li>For any project with a single contributor (or an IP landowner with sharecroppers) this is a “dual license” game. </li></ul><ul><li>How to implement such a scheme with multiple contributors? </li></ul><ul><li>It requires some kind of fractional ownership accounting. </li></ul>Time Bombs
  • 66. <ul><li>Can shares (partial ownership) be calculated for software? </li></ul><ul><li>Existing open source projects rely heavily on copyright assignment. </li></ul><ul><li>Is the only recourse forking because sharing is impossible? </li></ul>Are Monopolies Inevitable?
  • 67. <ul><li>The productivity of these companies was usually tied to gigantism, which also raised barriers to market entry. The only way to compete with one of the huge companies was to build a huge new company of your own. Even if you could raise the cash and recruit the right managers, you risked introducing so much new capacity onto the market that the whole market would crash. This, rather than anything to do with collusion, remained the underlying reason why a handful of huge companies dominated their respective industries from the 1880s to at least the 1940s. -- John Micklethwait and Adrian Wooldridge, The Company </li></ul>Economies of scale cause scale
  • 68. <ul><li>There had also been a boomlet in the creation of small new companies, many of them set up to exploit government-granted patents, which in turn had spawned a new sort of person who traded their shares -- the stockjobbers who frequented the coffeehouses around Exchange Alley (London, 1720) </li></ul><ul><li>Lowe’s 1856 act (the Joint Stock Companies Act) allowed businesses to obtain limited liability with “a freedom amounting almost to license.” </li></ul><ul><li>John Stuart Mill argued that limited liability would help the poor to set up businesses... Christian Socialists also rallied to limited-liability firms, seeing them as a way of both enriching the poor and reducing class conflict. </li></ul><ul><li>Wouldn’t limited liability just impose the risk of doing business on suppliers, customers, and lenders? And wouldn’t it attract the lowest sort of people into business? The majority of established manufacturers, most of whom were located far from London, were against the new measure. So, according to Walter Bagehot, were the rich, who thought the poor would reap the biggest rewards. </li></ul>The Limited Liability Company
  • 69. <ul><li>By 1900, four clear structural differences were apparent between the German corporate model and its Anglo-Saxon equivalent. The most obvious was Germany’s tolerance of what Anglo-Saxons would regard as anticompetitive practices. German law did not prohibit “combinations in restraint of trade” like British law. Nor did it possess any antimonopoly legislation like America’s Sherman Antitrust Act. In 1897, the year that the American Supreme Court ruled that the Sherman Antitrust Act was constitutional, its German equivalent ruled that contractual agreements regulating prices, output and market share could be enforced in courts of law, because such agreements benefited the country as a whole. They were, in essence, a form of “cooperative self-help.” </li></ul><ul><li>Interessengemeinschaften or “communities of interest” were coalitions of firms that pooled profits and coordinated policies on everything from patents to technical standards. </li></ul><ul><li>The interesting question with Germany is how much this markedly different idea of the company helps to explain its undoubted economic success. </li></ul>Open Source is more like German capitalism?
  • 70. <ul><li>Both the IBM and Microsoft antitrust cases were about the illegality of giving away free software. </li></ul><ul><li>What if a large software company were to fund/enhance open source projects to make them fully compatible with their competitors’ products. Could that be construed as “cutting off their oxygen”? </li></ul><ul><li>What is the intellectual property equivalent of joint stock limited liability? </li></ul>Making Open Source Legal
  • 71. Suggestions? Clarifications?

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