[NH LoCo] I'm writing an opinion piece for the Concord Monitor -- care to weigh in?

Jon 'maddog' Hall maddog at li.org
Fri Feb 26 17:15:48 GMT 2010

>The only `issue' I have in reading your response is where you write:
>> Who loses in a true FOSS environment?  The investors.

Jason, I really do not want to start a discussion of "capitalism" here,
but I do want to answer your question.

I will be more careful in the upcoming document addressing this
particular issue, but from your question above, the real question is
what is "loss", and what is "an investor"?

This is another area where software differs from other things, and where
(unfortunately) capitalism needs a bit of "tuning", in my humble

Here "loss" means that "investors" typically make less ROI OVER TIME on
a service company than a product company.  In IPOs a software service
company is typically 1.5 times revenue.  A "product company" can be five
times revenue, or more.  A service company takes time to grow and
mature, a "product company" can grow much faster, so an investor CAN
make a lot of money over time from a service company, but they typically
can make more over time from a product company, and particularly in the
"short" (1-5 year) run.

Let's face it, Microsoft became the world's largest and most profitable
software company because they sell product, not service.  A friend of
mine from DEC visited them early in their career, and compared what they
were doing to "printing money", taking a blank floppy disk (paper) and
and putting bits on it (ink in a certain pattern), then magically having
it worth 5,000 time what it cost to do that (in variable costs).

Granted, they had other costs...research, distribution, marketing, etc.
But Microsoft generated three very rich people (Gates, Allen and Balmer)
as well as probably more millionaires than any other company.  And the
money came from someplace.....your pocket, perhaps?  And even if you
never bought any Microsoft software, you still pay for it, in the
products you buy, the services you use, the government you use.

Venture Capitalists love product companies.  Go in, get the company off
the ground, get the product out there, then sell off or go IPO.

This is what I mean by "Wall Street" losing....they lose the ability to
make that "quick kill", and they resent it....and they fight it.

As to my second statement about "tuning capitalism"....oh boy, where do
we start?

First of all, let me assure you that I am a great fan of capitalism.  I
believe in private enterprise.  I would not have it any other way.

But let's look at the person who bought stock in a company a long time
ago so that company could buy machinery and expand.  That company
expanded for a while, but due to economic downturns, bad choices by
management, etc. etc. that machinery that the stock bought is rusted
away and the stock share that the person bought is (in effect)
worthless.  But that person still expects "their piece of the pie", and
if other investors buy more stock, re-invent the company, that first
person is still there with their hand out.

To be sure there are mechanisms around this, and lots of companies
follow them, but I love it when management talks about retirement plans
and Medicare and Social Security which I have contributed to my whole
life, and call these "entitlement", but ignore those old shares of stock
that are, in effect worthless.

I value the shareholder that investigates a company, believes in it,
buys stock so the company expands and is more competitive.  I do not
like the "day trader" who just sees a trend in a stock, knows nothing
about the company, and tries to "buy low and sell high".

I would like to see more stress on asset values and stock dividends
(reflecting current value of the company) determining value of the stock
and more use of bond sales to generate investment...but that is just me,
and will not be part of my arguments for this current case.

However, as we all know (and to bring this back to Free Software), there
are companies that are making money with Free Software, true Free
Software advocates do respect the IP laws of a country even if they do
not agree with them, and there is no reason to try to "punish" a foreign
power because they chose to follow one method of "marketing" and
"purchasing" software over another.

This will be the core of my argument.


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