Eric Raymond, “The Magic Cauldron”

Read the article at https://edtechbooks.org/-oXHM


Eric Raymond, a substantial contributor to the theory and conversation in the open source community, strikes again with his paper “The Magic Cauldron.” The essay, he claims, will “begin by exploding some common myths about software production economics; then continue the line of analysis of these essays into the realm of economics, game theory and business models.” Though written in 1999 before the rise of the many of the open education resources and businesses currently seen, Raymond lays out clearly the most plausible business models that could work to sustain open-source or open-content companies and the usefulness of each model.  Understanding this article will provide an ability for comprehensive analysis of the rise and fall of companies that used one or more or none of his models to capture the money in the markets and create sustainable businesses.

Key Points

Raymond first points to the differences between “use value” and “sale value.” To be clear, software production is in many ways dissimilar from traditional manufacturing. In many businesses, software (and to a lesser extent, content) can be extremely valuable to a company, but not sellable. In this case, this means the software has “use value” but not “sale value.”  This theory of “use-value” is the driving reason why companies can open-source their software without ruining their business.  With open-source, they are increasing the efficiency and effectiveness of their code—improving the “use value”—without losing potential future earnings.

The remainder of the article deals with different models that might help companies turn the open-sourced use-value resources into possible financial resources.

Use-value Funding Models

Models that create open-source products that are so valuable because of their open-source-ness that they actually attract money to create a sustainable business.

Indirect Sale Models

Strategies and Ecosystems: In the remaining sections, Raymond speaks of strategies to apply the above models.  In the “When to be open, when to be closed” section, he gives examples how companies have balanced the return of open source against the return to proprietary source to decide which one they wanted to use or when to switch from one to the other.  He also explores more examples about how companies have stayed ahead of competition that has access to all the same materials and code produced.  All in all, Raymond sees open source as a wonderful thing for companies and the market because it brings out the best strengths and services.  Companies can collaborate to become stronger and then compete to provide better service for the customer.  Of course this is not easy for businesses to do so Raymond spends time discussing more about how a company should deal with these challenges.

In summary, the following discriminators push towards open source:

(a) Reliability/stability/scalability are critical.

(b) Correctness of design and implementation cannot readily be verified by means other than independent peer review.

(c) The software is critical to the user’s control of his/her business.

(d) The software establishes or enables a common computing and communications infrastructure.

(e) Key methods (or functional equivalents of them) are part of common engineering knowledge. 

Discussion Questions

  1.  Is this list of open-source business models comprehensive? What other models exists in the world?
  2. Which models can be mixed together? Are there synergistic strengths from combing different models?
  3. How would open-source businesses affect the average, non-hacker consumer?

Additional Resources

Raymond mention’s Digital Creation’s move to open-source their “secret weapon” product.  Here is an article by Paul Everitt, Digital Creation’s CEO, on why they made the decision.

“How We Reached The Open Source Business Decision” https://edtechbooks.org/-LBL

This content is provided to you freely by EdTech Books.

Access it online or download it at https://edtechbooks.org/openedreader/the-magic-cauldron.