Proprietary Software Licensing Produces No New Value In Society

Post Syndicated from Bradley M. Kuhn original http://ebb.org/bkuhn/blog/2010/07/07/producing-nothing.html

I sought out the quote below when Chris Dodd paraphrased it on Meet
The Press on 25 April 2010. (I’ve been, BTW, slowly but surely
working on this blog post since that date.) Dodd
was quoting Frank
Rich, who wrote the following, referring to the USA economic
system
(and its recent collapse):

As many have said — though not many politicians in either party
— something is fundamentally amiss in a financial culture that
thrives on “products” that create nothing and produce nothing
except new ways to make bigger bets and stack the deck in favor of the
house. “At least in an actual casino, the damage is contained to
gamblers,” wrote the financial journalist Roger Lowenstein in The
Times Magazine last month. This catastrophe cost the economy eight million
jobs.

I was drawn to this quote for a few reasons. First, as a poker player,
I’ve spend some time thinking about how “empty” the gambling
industry is. Nothing is produced; no value for humans is created; it’s
just exchanging of money for things that don’t actually exist. I’ve
been considering that issue regularly since around 2001 (when I started
playing poker seriously). I ultimately came to a conclusion not too
different from Frank Rich’s point: since there is a certain
“entertainment value”, and since the damage is contained to
those who chose to enter the casino, I’m not categorically against poker
nor gambling in general, nor do I think they are immoral. However, I
also don’t believe gambling has any particular important value in
society, either. In other words, I don’t think people have an
inalienable right to gamble, but I also don’t think there is any moral
reason to prohibit casinos.

Meanwhile, I’ve also spent some time applying this idea of creating
nothing and producing nothing to the proprietary software
industry. Proprietary licenses, in many ways, are actually not all
that different from these valueless financial transactions.
Initially, there’s no problem: someone writes software and is paid for
it; that’s the way it should be. Creation of new software is an
activity that should absolutely be funded: it creates something new
and valuable for others. However, proprietary licenses are designed
specifically to allow a single act of programming generate new revenue
over and over again. In this aspect, proprietary licensing is akin to
selling financial derivatives: the actual valuable transaction is
buried well below the non-existent financial construction above
it.

I admit that I’m not a student of economics. In fact, I rarely think
of software in terms of economics, because, generally, I don’t want
economic decisions to drive my morality nor that of our society at
large. As such, I don’t approach this question with an academic
economic slant, but rather, from personal economic experience.
Specifically, I learned a simple concept about work when I was young:
workers in our society get paid only for the hours that they
work. To get paid, you have to do something new. You just can’t sit
around and have money magically appear in your bank account for hours
you didn’t work.

I always approached software with this philosophy. I’ve often been
paid for programming, but I’ve been paid directly for the hours I spent
programming. I never even considered it reasonable to be paid again for
programming I did in the past. How is that fair, just, or quite
frankly, even necessary? If I get a job building a house, I can’t get
paid every day someone uses that house. Indeed, even if I built the
house, I shouldn’t get a royalty paid every time the house is resold to
a new owner0. Why
should software work any differently? Indeed, there’s even an argument
that software, since it’s so much more trivial to copy than a
house, should be available gratis to everyone once it’s written the
first time.

I recently heard (for the first time) an old story about a well-known
Open Source company (which no longer exists, in case you’re wondering).
As the company grew larger, the company’s owners were annoyed that
the company could
only bill the clients for the hour they worked. The business
was going well, and they even had more work than they could handle
because of the unique expertise of their developers. The billable rates
covered the cost of the developers’ salaries plus a reasonable
profit margin. Yet, the company executives wanted more; they wanted
to make new money even when everyone was on vacation. In
essence, having all the new, well-paid programming work in the world
wasn’t enough; they wanted the kinds of obscene profits that can only be
made from proprietary licensing. Having learned this story, I’m pretty
glad the company ceased to exist before they could implement
their make money while everyone’s on the beach plan. Indeed, the
first order of business in implementing the company’s new plan was, not
surprisingly, developing some new from-scratch code not covered by GPL
that could be proprietarized. I’m glad they never had time to execute
on that plan.

I’ll just never be fully comfortable with the idea that workers should
get money for work they already did. Work is only valuable if it
produces something new that didn’t exist in the world before the work
started, or solves a problem that had yet to be solved. Proprietary
licensing and financial bets on market derivatives have something
troubling in common: they can make a profit for someone without
requiring that someone to do any new work. Any time a business moves
away from actually producing something new of value for a real human
being, I’ll always question whether the business remains legitimate.

I’ve thus far ignored one key point in the quote that began this post:
“At least in an actual casino, the damage is contained to
gamblers”. Thus, for this “valueless work” idea to
apply to proprietary licensing, I had to consider (a) whether or not the
problem is sufficiently contained, and (b) whether software or not is
akin to the mere entertainment activity, as gambling is.

I’ve pointed out that I’m not opposed to the gambling industry, because
the entertainment value exists and the damage is contained to people who
want that particular entertainment. To avoid the stigma associated with
gambling, I can also make a less politically charged example such as the
local Chuck E. Cheese, a place I quite enjoyed as a child. One’s parent
or guardian goes to Chuck E. Cheese to pay for a child’s entertainment,
and there is some value in that. If someone had issue with Chuck
E. Cheese’s operation, it’d be easy to just ignore it and not take your
children there, finding some other entertainment. So, the question is,
does proprietary software work the same way, and is it therefore not too
damaging?

I think the excuse doesn’t apply to proprietary software for two
reasons. First, the damage is not sufficiently contained, particularly
for widely used software. It is, for example, roughly impossible to get
a job that doesn’t require the employee to use some proprietary
software. Imagine if we lived in a society where you weren’t allowed to
work for a living if you didn’t agree to play Blackjack with a certain
part of your weekly salary? Of course, this situation is not fully
analogous, but the fundamental principle applies: software is ubiquitous
enough in industrialized society that it’s roughly impossible to avoid
encountering it in daily life. Therefore, the proprietary software
situation is not adequately contained, and is difficult for individuals
to avoid.

Second, software is not merely a diversion. Our society has changed
enough that people cannot work effectively in the society without at
least sometimes using software. Therefore, the
“entertainment” part of the containment theory does not
properly
apply1,
either. If citizens are de-facto required to use something to live
productively, it must have different rules and control structures around
it than wholly optional diversions.

Thus, this line of reasoning gives me yet another reason to oppose
proprietary software: proprietary licensing is simply a valueless
transaction. It creates a burden on society and gives no benefit, other
than a financial one to those granted the monopoly over that particular
software program. Unfortunately, there nevertheless remain many who
want that level of control, because one fact cannot be denied: the
profits are larger.

For
example, Mårten
Mikos recently argued in favor of these sorts of large profits
. He
claims that to benefit massively from Open Source (i.e., to get
really
rich), business
models like “Open Core”
are necessary. Mårten’s
argument, and indeed most pro-Open-Core arguments, rely on this
following fundamental assumption: for FLOSS to be legitimate, it must
allow for the same level of profits as proprietary software. This
assumption, in my view, is faulty. It’s always true that you can make
bigger profits by ignoring morality. Factories can easily make more
money by completely ignoring environmental issues; strip mining is
always very profitable, after all. However, as a society, we’ve decided
that the environment is worth protecting, so we have rules that do limit
profit maximization because a more important goal is served.

Software freedom is another principle of this type. While
you can make a profit with community-respecting FLOSS business
models (such as service, support and freely licensed custom
modifications on contract), it’s admittedly a smaller profit than can be
made with Open Core and proprietary licensing. But that greater profit
potential doesn’t legitimatize such business models, just as it doesn’t
legitimize strip mining or gambling on financial derivatives.

Update: Based on some feedback that I got, I felt it
was important to make clear that I don’t believe this argument alone can
create a unified theory that shows why software freedom should be an
inalienable right for all software users. This factor of lack of value
that proprietary licensing brings to society is just another to consider
in a more complete discussion about software freedom.

Update: Glynn
Moody
wrote
a blog
post that quoted from this post extensively and made some interesting
comments
on it. There’s some interesting discussion in the blog
comments there on his site; perhaps because so many people hate that I
only do blog comments on identi.ca (which I do, BTW, because it’s the
only online forum I’m assured that I’ll actually read and respond
to.)

0I
realize that some argue that you can buy a house, then rent it to others,
and evict them if they fail to pay. Some might argue further that owners
of software should get this same rental power. The key difference,
though, is that the house owner can’t really make full use of the house
when it’s being rented. The owner’s right to rent it to others,
therefore, is centered around the idea that the owner loses some of their
personal ability to use the house while the renters are present. This
loss of use never happens with software.

1You
might be wondering, Ok, so if it’s pure entertainment software, is it
acceptable for it to be proprietary?. I have often said: if all
published and deployed software in the world were guaranteed Free
Software except for video games, I wouldn’t work on the
cause of software freedom anymore. Ultimately, I am not particularly
concerned about the control structures in our culture that exist for pure
entertainment. I suppose there’s some line to be drawn between
art/culture and pure entertainment/diversion, but considerations on
differentiating control structures on that issue are beyond the scope of
this blog post.