3a.+Lerner+and+Tirole+(Ec.+of+Open+Source)

__**Some Simple Economics of Open Source **__  Josh Lerner and Jean Tirole  Published in The Journal of Industrial Economics, Vol. L, No. 2, June 2002.

 In order to bring perspective to the concept of Open Source Software, the following video clip provides an historical timeline of the people, actions and events relating to Open Source as an operating system.

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__**Summary **__

 Three factors spur the sharing of code to develop and refine software: 1. the quick dissemination of open source software, 2. the capital investment in open source projects, and 3. the organizational structure of open source development. (p.197-198)

 The authors try to outline key economic patterns that influence the open source development of software. (p,199)

 The nature of open source software development is one of sharing and cooperation. (p.200)

 Three time spans for development of Open Source (OS) were reviewed: (p.200-204)

 -accelerated with diffusion of Usenet  -informal network  -problem in 1980 - AT&T enforcing IPR relating to Unix ||  -formal licensing procedures developed; developers agreed to make code freely available  -distinguishing shareware from public domain software ||  -interactions between open source and commercial companies became commonplace  -alternative approaches to licensing developed cooperatively <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -development of Open Source Definition <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -new challenges develop - forking; development for high end users; less emphasis on documentation and support as well as backward compatibility <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -greatest diffusion is in areas where end users are sophisticated technology users ||
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">First Era || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">1960's to 1980's || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-commonplace sharing of code
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Second Era || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">1980's to 1990's || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-MIT working on Artificial Intelligence in labs; finding ways to disseminate wide variety of software without cost
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Third Era || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">1990's to present || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-onset of internet use and access accelerates open source activity - Linux begun

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">The origin of four Open Source software programs were reviewed: (p. 207-212)

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Apache - 1994, Brian Behlendorf, modular development, first commercial internet server, unix based network computer system <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Linux - 1991, Linus Torvalds, done from intellectual curiosity rather than pressing need, commercially attached firms include VALinux and Red Hat <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">PERL - 1987, Larry Wall, stands for Practical Extraction and Reporting Language, responding to repetitive system admin tasks with Unix <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Sendmail - late 1970's, Eric Allman, created a standard method of routing email

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Who contributes to Open Source and what are the motivations - many do a little, few do the most, quite elitist, core group as key contributors (p.206)

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">**Motivations** - the net benefit = immediate payoff + the delayed payoff (p.212-215) <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Immediate costs - programmers forego monetary compensation; opportunity costs when not focusing on the primary mission <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Immediate benefits - improve rather than reduce performance in the primary mission; more fun than the routine programming tasks

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Delayed costs - career concern incentive - possible future job offers from work done now <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Delayed benefits - ego gratification incentive - desire for peer recognition <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -from an economic perspective these are similar and fall under a single heading 'Signaling Incentives'; this is stronger if performance is visible, the higher impact of the performance, if performance is seen as talent, audience sees it relative to 'fad


 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Comparison between Open Source and Closed Source motivations (p. 216-219) **
 * || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">OPEN SOURCE || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">CLOSED SOURCE ||
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Short Term || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-alumni effect

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-customization and bug fixing benefits || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">- prorgrammers get salary || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-outsiders can see what is being created
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Deferred Compensation || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-better performance measurement

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-full initiative; programmers take responsibility for their own work

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-greater fluidity; knowledge is transferrable to new environments

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-sophisticated users see it as a part of entry, signaling talent to peers, <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">showing talent to possible employers || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-outside evaluation not possible in any detail

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-boss driven rather than individually driven

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">-knowledge not transferrable; proprietary || <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Individual Incentives include - motivation to solve problems they encounter in day to day work, giving credit to authors providing for accrued reputational benefit, possible access to venture capital

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Characteristics of organization and governance of Open Source projects - production is modular with distinct components, provides for fun and challenging work, leaders assemble critical mass of code but do not perform too much of the job on their own, members identify challenges (p. 220)

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -there is strong centralized authority <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leaders are programmers who develop initial code <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leaders' initial experience establishes their credibility in the community <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leader has no formal authority but has substantial 'real' authority <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leader makes recommendations that includes the initial vision <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leader updates goals as the project evolves <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leader certifies quality of the work <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leader is not driven by ego, commercial or political bias <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leader needs to be charismatic <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -leader clearly communicates goals, procedures and evaluations
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;">Nature of Leadership in Open Source environments (p.221-223) **

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -attempts to emulate some of the incentive features of open source processes <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -try to mix open and closed source processes to get the best of both worlds <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -option to list people working on specific projects <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -try to share/promote code sharing within the company <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -commercial companies benefit indirectly in complimentary proprietary segments eg. Red Hat <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> -act as intermediaries between open and closed source
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Reaction of commercial to open source (p.223-227) **

<span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> 1. characteristics of projects that make it a good open source option <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> - role of applications and related programs (will it permit synchronization of upgrades and backward compatibility <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> - infuences of competitive environments <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> - project lifespan - longer duration of projects <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> 2. optimal licensing - hijacking of projects, middleware producers, GPL license tested in court <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> 3. coexistence of commercial and open source -symbiotic, altering programmers incentives <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> 4. open source process transposed to other industries?
 * <span style="font-family: 'Times New Roman',Times,serif; font-size: 120%;"> Questions remaining (p.228-231) **