Obama, global recession, proprietary software and pigs


When I heard Barrack Obama use the proverb 'lipstick on a pig' the other day it got me thinking about language, and how it can be used to deceive as easily as to explain.

Whilst listening to an elaborate theory full of jargon have you ever had the impression that it seemed completely out of touch with the real world?

I usually work on the premise that if something can't be explained in plain English there's a good chance that the person using such language is either bluffing, trying to keep you in the dark, or trying to pull a fast one... maybe even all three...

To my mind, the elaborate economic theories and abstract analysis used to explain the causes of the recent global economic crisis are classic 'lipstick on a pig'.

Banks and other financial institutions have spent the past decade dressing up the 'pig' of bad debt using jargon such as 'structured products' as the 'lipstick'.

So convincing was the illusion that they were able to transform loans that would never be repaid into triple A rated financial packages that came to underpin the entire global economy. The transformation was achieved by ignoring reality and building a tower of great sounding, but actually nonsense, theory.

But like the emperors new clothes, when you strip away all the elaborations you arrive at the simple truth – bad debt is bad debt however you dress it up and believing it has any real value has left us all deep in the proverbial without a paddle.

So what can this tell us about the proprietary software market?

Is proprietary software simply a pig skillfully dressed up to make the unwitting think it has intrinsic value?

The answer is 'yes' and here's why.

In any free market the price of a commodity over time falls close to that of it's marginal cost of production. A number of things can interfere with this process, the most damaging being the existence of a monopoly, but in the absence of market distortion this is always the case.

And what is the marginal cost of production of software? The marginal cost of any product is the cost of making the next copy. If you stop for a moment and consider it, you'll easily see that the cost of making the next copy of any piece of software is... well, almost zero, perhaps a vanishingly small amount for electricity. This, of course, is precisely the same phenomena challenging the current business models of the music and film industries. The equilibrium free market price of software is nothing.

Free Software acknowledges this fact. Proprietary software does not. Instead, like the banks, proprietary software vendors have had to justify the cost of their wares by constructing complex arguments about value. Again, 'lipstick' terms such as 'software patents' and 'intellectual property' have been applied so successfully that they have entered the vernacular. Yet even a cursory examination of their real meaning show them to be spurious, existing only to perpetuate the dominance of monopolists.

Yes, we are living in a proprietary software bubble and just like the bursting of the easy-credit bubble, this one is about to burst too... it's a matter of survival.

Until now most organisations were happy to go along with softly purred words like 'industry standard' and 'best-of-breed', even if it cost them eye-wateringly huge sums for their hubris. But with the huge cuts in IT budgets on their way, and company survival on the line, the time for such pride is over. Proprietary vendors will be protecting their margins, and if you are locked-in you must pay.

By the end of this recession, the companies left standing will be those using a massive amount of Free Software. The proprietary software bubble is over.

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