a roadmap to socially-responsible, sustainable economic and technological growth

Ingredients of advance for any social and economic system

Social capital

Humankind has progressed because of its ability to collaboratively solve problems and share risks
We need modern rather than traditional and open instead of closed forms of trust
Vital to encourage institutional and entrepreneurial innovation and joint risk-taking
Self-organisation and reciprocal co-operation in pursuit of innovation and change in an open social system

Knowledge

Know how to:
- Design institutions that foster social and economic growth and innovation
- Satisfy community, individual and, market needs
- Turn scientific invention and discovery and technological change into both useful products and services
Dilemma: Who should own knowledge - Ownership rights?
- Ie. Human Genome Project - Who do you trust?
- Organisation(s) or the government(s)?

Financial Markets and Trade

Debate: Globally interconnected (fragile) and deregulated trade and investment or state-regulated, defensive nationalism and protectionism?
From shareholders to stakeholders
From financial engineering and creative accounting to financial and management accountability towards the surrounding community and environment
- Ie. Enron & Arthur Andersen
- Ie. Monsanto and GM food

What about Technological Innovation?

Market-pull or Technology-push?
Disruptive or sustaining innovation?
Europe vs. America?
Awe at technological change commits one to deliver constant change to awe at...
Helpful or dynamic and confusing?
Constant demand for the newer version of CD players and MP3s or Napster as environment's savior?

Organisations and Determinants of Organisational Structure

Why Organisations exist?

Organisations work more efficiently than a group of independent contractors?
- The issue of co-ordination and trust
Closed and centralised mindset?
Organisations are repositories and distributors of commercially valuable know-how
- Organisational memory: routines and procedures
- Organisation aids knowledge

Determinants of Organisational Structure

Industrial-organisational structure dependent upon market characteristics as defined by
- communication, transaction and
- transportation costs, and
- production technology and social needs
Ie. from craft production and merchants to mass markets, mass production and, economies of scale and scope
Ie. "Argaunauts": project centric organisations that disbanded once the "mission" had come to an end
Contemporary analogy: Hollywood and Silicon Valley

Introduction to Organisations

Hierarchy

Hierarchy is built on three assumptions:
- The environment is stable
- The processes are known
- The output is given
Do they still hold true?

Organisations

Army and Church were the first multi-layered organisations
Of course hierarchic and centrally planned
- Why? Knowledge should not flow out of the system boundaries

F.W. Taylor

He realised that the crucial asset of business "knowledge" was well guarded in the heads of workers and strived to empower managers to understand the production process
Ironically, the man who realised the power of communicating knowledge and had tried to do exactly that, had formulated a mindset that regarded the organisation as a machine and the workers as cogs

H. Fayol

Dual lesson:
- an organisation needs rules
- Hierarchy results in communication breakdown
The former got well accepted but the latter goes still unknown

Employee E needs to contact employee O but cannot go to O directly due to hierarchic (bureaucratic) impediments. So by following the line of authority, the ladder must be climbed from E to A and then descend to O, stopping at each rung and, then back all the way again

M. Weber

He maintained that bureaucracy is the most efficient organisational design as long as the economic and social environment do not change radically
This was in year 1924. Have things changed since then?

H. Ford

Fordism and the assembly line
- "Any colour they want as long as it is black"
- Workers regarded as cogs, incapable to think, improvise, and stop the production process
Outcome: US automobile industry seriously damaged by Japanese competition (and management practices)

Japanese management at Toyota

Close relationships with suppliers (Just-In-Time) to minimise costs and boost innovation
Personnel and ideas move freely within the subcontracting network and the network is built on trust
Employee empowerment (Job-rotation and self-managing teams that were encouraged to improve the production process)
The production model seeks to ensure product quality and satisfy the customers' needs

Libre Software

Why Libre Software has anything got to do with organisations and management styles?

LS is more than software and the LS development model is more than another way of developing software. In stark contrast to what most people think, libre software development is neither an anarchy nor it is a miracle that its model is successful and sustainable

Why should we be concerned with the paradigm shift demonstrated by organisation of LS projects?

Libre Software development presents a fundamentally different perspective on co-ordination and organisation of production activity
The software industry is an invaluable source to identify emerging changes and trends

What is Libre Software?

Use the software as you wish, for whatever you wish
Be able to improve it, fix its bugs, augment its functionality and, studying its operation
Redistribute it to other users who can use it according to their own needs. This can be done for free or at a price, not fixed beforehand
Condition: Access to source code

Logic of Libre Software

Liberty of Information
Software is not a manufacturing industry
"Tragedy of the commons" is irrelevant - diminishing returns are not applicable because software is a network product
New business models and sources of revenue enabled
- ie. Give away the razors, sell razor blades

Software Industry: Development Models - The Cathedral & The Bazaar

The Cathedral

Closed system
Nearly all product development at one site
Central planning - co-ordination by hierarchy
Quadratic complexity
Relatively homogeneous actors
Proprietary knowledge (IPRs)
Limited parallelism and limited scope for self - organisation
Users producers separated

The Bazaar

Open evolutionary system
Emergent co-ordination
Self organisation around ethical rules
Massive parallelism
Highly diverse actors
Evolutionary management
Quadratic complexity doesn't hold
High modularity
Public ownership (copyleft)
Users producers overlap

The Bazaar

Release early and often
- Stimulate the community
- Reward developers (credit attribution)
Self selection of tasks
- Efficient allocation of resources
- (Programmers' time and work)
Work done of superb quality
- (if work is not of quality, another hacker will fill the gap)
Management accountability
- Transparent decision making
- (mailing list - virtual roof)
Trusted lieutenants
- Natural selection by the community
- Community level management?

Modularity
- Enables parallel development
- And decreases the need for co-ordination
Peer review
- Given enough eyeballs, all bugs are shallow
- Quality - security

Parallel release structure

Exploration vs. exploitation trade-off defied
- Whenever resources are allocated to the search for future innovation, resources dedicated to the exploitation of existing capabilities are sacrificed and vice versa
- Interdependent R&D process
- Efficiency and innovation (both disruptive and sustaining innovation ensured)
- No forking

The Bazaar

Innovation
- Treating your users as co-developers is your least hassle route to rapid code improvement and effective debugging

Unprecedented growth
- Potential parties to a shared infrastructure can rationally trust it more if they can see how it works all the way down, and will prefer an infrastructure in which all parties have symmetrical rights

Advantages of Libre Software

Availability of source code and the right to modify it

Enables unlimited tuning and improvement
- Port code to new hardware
- Adapt to changing conditions
- Reach a detailed understanding of how the system works

The right to use the software in any way...

Combined with redistribution rights, ensures (if the software is useful) a large population of developers-users, which helps to build up a market for support and customisation which can only attract more developers...

There is no single entity on which the future of the software depends on

A company chooses not to upgrade a software product for an old platform
It went bankrupt...

Free it to save it

To make sure it remains supported in the future
Logical strategy for software developed for in-house purposes

No black boxes are possible

By having the source code, it is possible to perform a thorough inspection and verify the correctness...
Critical to the advancement, diffusion and transfer of technical knowledge especially to developing countries

No per copy fees can be asked for modified versions

Because working knowledge can be gathered at minimal cost, anyone can use the current code base to start new projects
- Internet software systems
- People were able to adopt and integrate them immediately
Also ensures fast diffusion - adoption

Fewer conflicting priorities due to bureaucratic constraints

Under centralised mode of software development, progress is determined by economic and bureaucratic restraints
Ie. the marketing department may have decided that a specific feature is vital to their ad campaign but that no actual users care about

New democratic forum

The collective desires of the community determine the direction of progress without obliging anyone

Total Cost of Ownership reduced

TCO: 6 stages
- Information gathering
- Acquisition or creation
- Deployment
- Training
- Common use and maintenance
- Abandonment and transition to new tech.
Clear advantages in acquisition, maintenance, transition

Many more are realised...

Enables the creation of new markets and business opportunities
Developing countries enabled to adopt advanced technologies at a low cost and leapfrog into the Information Age
Customisation to suit local needs and cultures
- ie. KDE is translated into 42 languages

New Business Models

Loss leader/market entry

ie. Mozilla project
Build brand loyalty
Enlist the effort of developers
Sell peripheral related products and services

Widget frosting

Companies selling hardware can make LS a value-added part of their offering and differentiate with brand and functionality
- ie. VA Systems
Accessories
- ie. O'Reilly and Associates
Service Enabler
- ie. Quake and Doom are popular games with open APIs that empower customers to create their own versions
Infomediary
- Provide consulting and searching services related to the selection of LS applications for specific needs

Brand licensing

ie. Although the code is open, only Netscape/AOL can call future versions Communicator
ie. Cygnus's trademarking of eCos and sourceware name
ie. Red Hat's compatibility certification program

Band-Wagoner

Provide the context for LS projects to take advantage of the LS phenomenon
- ie. VA Linux's stewardship of Linux.com site
- ie. O'Reilly and HP's sponsorship of SourceXchange
- ie. O'Reilly support for Perl community with community web sites
Why: give and take goodwill (encourage reciprocal relationships) and promote related products and services

When, why and how-to "open code" a project

When LS is a rational organisational design

To avoid market fragmentation - vendors offering incompatible versions of the same product
To dethrone a product or vendor lock-in
To manage the industry in a way that all participants will be well equipped to seize benefits - keep the market competitive
When the users' contribution is sought (direct interaction between users and implementers)
Bring together a global community - industry on equal rights to discourage political maneuvering
When the project has over reaching consequences that demands for intra-industry co-operation and/or massive knowledge

Competitive Advantage

Customer empowerment
Efficient collaboration work techniques
- Internet enabled communication
- LS leverages the Internet to access a larger community of the best and brightest - increase development cycle times whilst reducing interaction costs
Unity of vision and continuous innovation
- Inherent culture of innovation
Knowledge: creation and exploitation

Re - inventing management

From hierarchical management by objectives to collaborative management by community consensus
From corporate governance and central planning to community governance and networking of knowledge and human resources

The glue that holds the network together

Sustainability
- Healthy competition within and between LS projects
- Decentralisation
- Parallel development
Accountability
- Transparent decision making
- From management to leadership
Emergent self-organisation around ethical rules (community ethics)
- ie. Forking must be justified
- ie. Distributing changes without the leaders' approval is frowned upon

Old economy paradigm

Creative companies sponsor creative projects and attract creative people
Creative companies beget creative industries and careers

New economy paradigm

Creative people enact creative projects
Creative projects mobilise creative communities
Creative projects generate creative companies, industries and careers

Starting a LS project - prerequisites for growth

Aggregation points (virtual roof)
- community building/awareness
Scratch an itch: market pull
Not anything boring
Modular and simple
License ensures collaboration within and between LS projects
Trust - meritocracy - transparency
Delegate everything you can
Exploit the power of parallel situations
Release early and often

Extending the Boundaries

Implementing Libre Software development methods and principles to other domains of economic and social activity

Applicability of LS to other industries

Education (decentralised web-enabled learning environment)
Music industry (online content production and Internet distribution)
Automobile industry (collaborative R&D and "zero-emission" vehicles)
Banking (Community Development Banking, ie. ShoreBank in Chicago)
State Organisation (ie. Free State Project)
Human Rights
Telecoms (pervasive and wireless computing - P2P)
Pharmaceuticals (collaborative R&D and ownership rights ie. Human Genome Project and Open Source Bioinformatics)
News Sources: OS Intelligence, weblogs and online self-organising social systems (ie. Slashdot, NoLogo)
TV content (ie. NerdTV)
Others?

Education becomes life-long Learning

From MIT OpenCourseWare Pilot...to decentralised (P2P?) & modular Web-based learning environment
Open Code the base technology (platform) - infrastructural layer and close code the (G)UI or/and the end-user applications that sit on top of it
- Condition: Well-defined interfaces between the OC platform and the proprietary end-user part

Deconstruction of the Music Value Chain

Most of the money consumers pay for CDs covers costs not directly associated with the production of the master pieces. Two thirds of the delivered cost of a CD comes from activities directly threatened by digital distribution over the Internet
Until recently, record companies had to build factories where CDs are pressed, depend on physical distribution for their products and promoted their "merchandise" over traditional media that face a trade-off in reach or richness, unlike the Internet
Whereas music conveyed over the Net renders these assets - activities obsolete. Money previously wasted can be saved since the reduction in CDs produced, apart from reducing manufacturing costs, results in fewer CD retailers, with their overhead, marketing and inventory costs
In this way, 60% of the delivered cost of today's CD can be saved, instead of being wasted on manufacturing, retailing and marketing that so far has failed to deliver but it was the sole way to generate consumer awareness of new acts
The future: Subscription fee based model
whatever, whenever, wherever
- "Jukebox in the sky" - "eat all you can" model
Economic Logic: Today's average consumer spends $70 on CDs. If consumers instead paid a subscription fee, say $10 a month, for unlimited access to music and therefore spend twice as much a year, the global industry revenues could well double

Automobile Industry - "The Open Source Development Model"

In the automobile industry, each company does its own R&D. Every innovation is patented before it ever reaches the public, which may take five years for the improvements to be incorporated in an actual car after they were originally developed. If the automobile industry started taking on an open source development model with sharing across companies and countries, the cost and prices would eventually drop, innovation and development would speed up and exceptional features would be shared across many makers and models. The auto industry could finally come up with the safe, clean energy car. The problem is that the car companies do not seem likely to support something that they perceive could put them out of business, even though this would not happen since nothing stops them from developing on their own and incorporating developments from their "open design shop" into their own products...

By Dan Barber accessible at http://mojolin.com/articles/open_source_model.php?session=vTVi4tc1GfTb

"Zero Emission" Cars

Californian Iniative: 10% of cars offered for sale would be zero-emission vehicles by 2003
50:50 vehicles: Honda and Chevrolet have small cars with hybrid, battery and petrol engines, which have ranges of 700 miles
Problem and Opportunity: Innovation is/won't be limited in scope and scale
"We will solve our environmental problems when industry has innovated solutions which consumers have an incentive to buy"

Financing Social Capital Shorebank (in Chicago)

Community Development Banking

We viewed a disinvested community as a failing market...revitalising such a community requires recognition that disinvestment is a market phenomenon and can only be reversed by reinvigorating local markets. Permanent, self-sustaining community renewal results from creating an environment in which private investors inside and outside the community are confident that their investments will be rewarded as healthy community dynamics are restored

by Ron Grzywinski, founder of Shorebank

The Free State Project

The Free State Project is a plan in which 20,000 or more liberty-oriented people will move to a single state of the U.S. to secure there a free society. We will accomplish this by first reforming state law, opting out of federal mandates, and finally negotiating directly with the federal government for appropriate political autonomy. We will be a community of freedom-loving individuals and families, and create a shining example of liberty for the rest of the nation and the world

http://www.freestateproject.org/

Human Rights & Free Software

Accountability and verification
- (also goes for public and governmental functions,
- ie. software used for elections)
Conformance to scientific requirements
Quality
- (ie. systems have to stay running for human rights workers taking notes in mountains and rain forests, far from any source of technical support)
Fitness for users (inequality and illcontrol by governments and copyright-holders/corporations)
http://www.oreillynet.com/pub/a/network/2002/10/11/platform.html by Andy Oram

The Future of Telecoms

Pervasive/ubiquitous computing
- "any information service to any device over any network"
- P2P is clearly the future...
- First emerging example: MMS
  - From SMS (text-only messaging) to MMS (multimedia messaging services)
  - First step is photo messaging: people demonstrably like to exchange photos - p2p drives growth

Global p2p messaging revenue (US$m)

Can new generation devices and MMS revitalise the mobile industry?

http://www.ovum.com/events/speakingevents/default.asp?doc=july5.htm

For More Detailed Information on Pervasive Computing...

Human Genome Project

There is no MS Word equivalent...it's the scientific process...

In biological research it's not the software that's important -- it's the data. Since the actual data matters much more than the tools used to process it, there's a big benefit in sharing software. A researcher can get great advantage by getting access to other datasets, which can be achieved by sharing the software tools. Bioinformatics companies are never going to make money by selling their software. They're going to make money by making drugs or other products that come out of their research.

Molecular biology/medicine will be most advanced by the creation of a common infrastructure -- and this is something best done with open source tools

http://www.oreillynet.com/pub/a/network/2002/01/28/bioday1.html

Open Source Intelligence Online Self-Organizing Social Systems

OSOSS are facilitated by a particular type of software infrastructure, one that is generally web-based and characterised by management decentralisation, such as the "weblog"
The day-to-day tasks of creating new content, adding commentary, evaluating the quality of submitted material, providing user support and answering questions, and other tasks are distributed across the entire community via the weblog infrastructure
http://www.firstmonday.dk/issues/issue7_6/stalder/
http://wiley.ed.usu.edu/docs/ososs.pdf

NerdTV by Robert X. Cringely

NerdTV will still be downloaded, not streamed, and a single technical standard will be used for all viewers no matter what kind of Internet connection they have or what operating system they are running. The show will appear each week in a dizzying total of five versions. Of the three video versions, one will be for nerds, one for suits, and the third version will be all the raw footage so you can edit your own version and make fun of me at parties. There will be two audio-only versions -- one MP3 and one Ogg Vorbis

Viewers will be free to share and redistribute the shows under the General Public License, which is something no other TV network in the world is doing. So there!

http://www.pbs.org/cringely/pulpit/pulpit20020912.html

Variability, Customisation and Responsiveness by David Stark

For goods, technologies, and services that are 'patchy' such as software, there is no reason to implement bureaucratic organisational designs since the flexibility-responsiveness and customisation that end users ask for (in other words the nature of technological change demonstrated by the Internet) requires flexible models of economic organisation

The key word is variabiltiy

Variability produces organisational flux. When the challenges of responsiveness are too great for institutional routinization, organisations' bureaucratic structures are destabilised. Heterarchies-flatter organisational structures with distributed accountability, decentralised decision making and multiple, often competing goals emerge... From product design to organisational design, "permanently beta" settings have this potential to be participatory...

Ie. slashdot and plastic.com as "permanently beta" websites that 'recycle the web in real-time'

http://opensource.mit.edu/papers/neff-stark.pdf

Open Coding Innovation

a roadmap to socially-responsible, sustainable economic and technological growth