Proprietary Software Licensing Produces No New Value In Society

Wednesday 7 July 2010 by Bradley M. Kuhn

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 (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.

Posted on Wednesday 7 July 2010 at 05:45 by Bradley M. Kuhn.

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Both previously and presently, I have been employed by and/or done work for various organizations that also have views on Free, Libre, and Open Source Software. As should be blatantly obvious, this is my website, not theirs, so please do not assume views and opinions here belong to any such organization.

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