How did I get here?

The troubles began two weeks ago, when E-Trade started to turn away hundreds of developers whom Red Hat had invited to participate in its IPO, to buy shares before they passed through other hands and their price swelled. The demographics of the typical Linux hacker ensured that roughly half of the invitees would not pass an eligibility test required by E-Trade. The programmers who had constructed the Linux kernel at the core of Red Hat’s product simply did not fit E-Trade’s profile of an attractive investor.

The free-software-loving masses raged. On sites like Slashdot, hackers began posting invective. They began with an electronic “Boycott E-Trade!!!!!” chant and things escalated from there. Many developers felt they had been misled into sending E-Trade $1,000 checks to open accounts, and then cheated when E-Trade would not refund their money immediately after declaring them ineligible to participate in the IPO.

Stung by the harsh words following its attempted generosity, Red Hat was hamstrung by the “quiet period” restrictions that follow any company’s registration for an IPO, and it could not speak. But predictably, someone posted on the Net a complete set of “correct” answers to the E-Trade eligibility test. E-Trade even offered all the rejected developers a chance to retake the test. By hook or by crook many hackers either squeezed past the eligibility requirements or decided that their ethics would not permit stooping and retired gracefully, if not quietly.

I badly wanted in. I’d been supporting Red Hat since soon after I discovered Linux, and I felt that stockholder-coders like me were vital if Red Hat was going to be able to fight off Wall Street’s bottom-line pressure. And I had written some of the code. My name was in the credits. I held out as long as I could; I wanted to be recognized for my contribution, not for my net worth. But eventually I retook the eligibility test and, with a little financial help from my family, passed.

We crossed our fingers, and the countdown to the Aug. 11 start of trading began. We placed what are called “conditional offers” — if there was a “large expression of interest” in the offering by the general investing public E-Trade reserved the right to sell us fewer shares than we requested, or none at all. The likely price was supposed to be between $10 and $12 a share, but there were no guarantees.

Typically the final share price for an IPO is set the day prior to the start of trading, which gives investors and brokers some time to reassess and prepare. That would have put pricing on Tuesday. Tuesday passed without any word of a fixed price; instead we received warning of a price range change: an increase to $12-$14 per share. E-Trade accompanied this news with a cryptic note: If the IPO priced above $10-$12 a share, E-Trade would require would-be investors to go through all of the offer paperwork again. This baffling requirement came with no explanation at the time. Most investors had explicitly stated an upper limit to their conditional buy offer — 1,000 shares at up to $15 a share, for example — and so had already specified (they thought) their opinions on a price increase.

The next morning, at 10:05, E-Trade announced that Red Hat was pricing at $14, and that it required everyone to resubmit their offers. But less than 40 minutes later, E-Trade announced that the “window had closed” and it was no longer taking resubmissions. Anyone who wasn’t online to receive the warning was just plain screwed.

Predictably, hackers phoned E-Trade and complained. We learned several things. First, we were officially now considered members of an “affinity” program (not developers, or coders, or even the old “open-source community directed shares program members”). Second, E-Trade was not in the habit of telling you anything useful unless you talked to an E-Trade staffer directly. The message declaring that the time window for resubmission had closed was the last public information that the supposedly Internet-savvy E-Trade posted on its Web site. And the “Smart Alert” e-mail sent out by E-Trade to tell investors about the new resubmission requirement was in most cases received by users after the window had already closed.

If you were a loyal, frequent-trading, ordinary member of E-Trade just trying to get in on an IPO, you were out of luck at this point. Unless you caught the 40-minute window, your previous planning was for naught. Caveat emptor.

But if you were an “affinity” member, it was all right. Not that you knew this, of course. E-Trade could take your reconfirmation over the phone … but only if you had already been told that it was taking such reconfirmations over the phone. I had been online when the first resubmission window opened, and I phoned E-Trade immediately. I reconfirmed my conditional offer and reassured the apparently forgetful E-Trade system that I hadn’t changed my mind about $14 being a fine price to purchase the stock. I then posted to Slashdot to tell others the secret. And I took a deep breath.

Red Hat stock began trading an hour later, around 12:30 p.m., at an opening price of $46, a steep gain from the initial $14 price. I sat at my terminal, vainly trying to do real work, as the stock price initially dived. At $40 it leveled out.

At 1:17 p.m., I received another “Smart Alert” from E-Trade: “We were unable to allocate shares. Possible reasons: Offering priced above limit or high demand for shares.”

So I’m a loser. Great.

I called E-Trade to find out exactly why I was being denied shares. I had to tell folks something when they asked — I’d been talking about this all week. The E-Trade rep wasn’t able to tell me. No one knew anything.

I changed my strategy. At 1:32 p.m. I decided to place a buy for 50 shares of Red Hat at the current market price: $46.56. I didn’t care any more about getting in on the bottom floor. I just wanted to hold some Red Hat stock for the long term. Unfortunately, at the $40-plus price, 50 shares was all I could afford. But I got ‘em.

A few minutes later, I surfed over to Slashdot.org to commiserate with the other unlucky E-Traders. Soon a disturbing pattern began to emerge: We couldn’t locate a single person who had been allocated shares. The E-Trade documents stated that shares would be distributed “width-wise”; that is, everyone in the affinity program would get 100 shares before anyone got 200. But not one person had reported receiving even 100 shares. Something smelled fishy.

1:40 p.m.: Tipped off by a Slashdot rumor, I got a hold of a customer rep at E-Trade who said that the first “no shares” message had been an “error.” An automated program had fired the alerts off before E-Trade noticed. Every single affinity program member had been falsely told that he or she wasn’t getting any shares. Some had responded to the message by immediately closing the account. Apparently, they now had no recourse. Some, like me, had spent our account money in other ways. But there was still something I could do about that.

1:45 p.m.: I sold my newly purchased shares of Red Hat at $46.94 in order to have funds to cover my affinity program offer. I almost covered my brokerage fee with the three-eights gain. The stock price continued to rise.

Throughout the afternoon rumors raged. The affinity members were getting their shares. No, they weren’t. Whenever I managed to get two customer service reps in a row who’d tell me the same thing, someone would e-mail me saying they’d been told the opposite. Finally I was told that the affinity shares allocation was “under way.” An hour later, it was still “under way.” Red Hat closed on the market at $52.06. If I’d known that E-Trade was going to dally so much, I could have held onto the stock I purchased and sold it at closing for a 13 percent gain. I didn’t have enough money to care, but I was sure someone would be pissed. All I could do was keep hitting the reload button on the Web page with my E-Trade account information, hoping against hope that something would finally happen.

And, at last, it did. At 9:30 p.m., after slapping reload one more weary time, I found an alert waiting. I had been allocated 400 shares. Hallelujah, praise be.

At 10:43 p.m. E-Trade sent out another “request for reconfirmation of conditional offer.” Does this mean they’ll take away my shares if I don’t jump through more hoops? The e-mail offers three different means to confirm; I do all of them, phone, e-mail and Web. Also, it mentions a 3 p.m. Friday deadline for reconfirmation. I can’t figure out whether this is generosity or incompetence.

As midnight passed, many friends of mine still hadn’t received notification of any kind. But my adventures were completed, at least. I got 400 shares. A nice piece of cash. But at what cost?

Red Hat’s original offer was intended to be a community-solidifying gesture. If you’re cynical, it was intended to strengthen community support in order to improve Red Hat’s bottom line. It did neither. The initial windfall quickly became a huge hassle. The developers who didn’t make each successive hurdle erected by E-Trade became more and more embittered. And, as many members of the community focused on the strategies that would enable them to participate in the offer, the complaints of people who hadn’t been invited to participate grew ever more shrill. Instead of a big love-fest, with hackers celebrating a few more days of not having to worry about who would be buying the Chinese food, the scene turned ugly, with the hackers locked in constant negotiation with E-Trade drones who seemed intent on making the gift as hard as possible to attain. And those, like me, who had to pull on our relatives’ net worth to be included at all had a bitter taste in our mouths.

Red Hat’s offer to the open-source world was intended to be empowering: Ordinary developers would be able to take a financial stake in a company we helped create. Instead, our alienation from the system became more obvious with every passing day. We had no power in this world; no one cared to listen to what we had to say. No developer got more than 500 shares from the affinity program; none of us were going to retire early or change our lifestyle.

But money is not why we write code all day, and hang out on in chat rooms with other developers on the weekends. I can’t explain what makes us write code any more than a poet can tell why he or she writes. But perhaps Free Software Foundation founder Richard Stallman is right about the promise of reward being no real motivator. Certainly this IPO did little to further the goals of free software. Perhaps the next free software company to go public will learn from Red Hat’s mistakes.

This is the story of how that gold turned to lead for about 400 software developers passionately devoted to Red Hat Inc. — a story from the front lines of a battle between the idealistic world of open source and the real world forces who run this country.

Starting July 20, Red Hat sent at least 1,000 e-mails to a group of software developers who had contributed to the products Red Hat sells, in particular a Linux-based operating system. The e-mail began: “Dear open source community member: In appreciation of your contribution to the open source community, Red Hat is pleased to offer you this personal, non-transferable, opportunity.”

“Red Hat couldn’t have grown this far without the ongoing help and support of the open source community,” the letter continued. “Therefore, we have reserved a portion of the stock in our offering for distribution online to certain members of the open source community. We invite you to participate.”

The letter also stated that that the stock distribution would be made via E-Trade Securities, and that you needed to establish an active trading account with E-Trade, pronto.

Six hours after receiving the e-mail I was on the 11 p.m. train from Boston down the eastern corridor; 14 hours and a sunrise later I was in New Jersey where my savings bonds, earmarked for repayment of college debt, lay in a safe-deposit box. A meeting with a friendly bank officer, a cashier’s check and a signature — and my application for an account on E-Trade was on its way. E-Trade required a minimum deposit of $1,000 to open a trading account, and Red Hat’s shares were to be sold in 100-block lots, at an opening price of around $10-$12 a share, so I had to find at least $1,200. As a typical Linux hacker I didn’t have much ready cash. But I scraped together enough for 200 shares.

Why was I, and at least a thousand other Linux hackers, so excited? Red Hat does have detractors — the open source movement that gave birth to Linux owes a lot to Richard Stallman’s idealistic Free Software Foundation, and commercial ventures have always been viewed by the free software world with some suspicion. “Information wants to be free” is a cardinal principle and rallying cry — and by “free” I mean the freedom to republish, reproduce and refine the code we write. But Red Hat has adhered to these principles, allowing no-cost downloads of its crown-jewel software from its Web site. If you choose to pay Red Hat for their product, you not only pay for support, but you also get a general feeling that you’ve given back to the community that brought you this kick-ass product.

The word “community” is what’s important here. Open-source software is produced by a community of mostly altruistic developers, who seem to enjoy the visceral speed of chasing code. I entered the fray as a college student, working on a thesis project. I installed Linux, and was awed by how easily I could make the few tweaks I needed for my research. The addiction grew. I found bugs in the software I needed, downloaded the source and fixed them — then released the fixes to the Internet for the use of others. I became so good at finding and fixing bugs, in fact, that I was asked to take over maintenance of CUP, an open-source compiler tool. In time its brother Jlex followed. My thesis-time dabbling led to fixing some obscure bugs in the Linux kernel — the central engine of code at the heart of the Linux-based operating system — and soon I was adding missing features to that as well. It wasn’t long before I made it a condition of employment that any code I wrote be released under the free-forever-to-everyone GNU General Public License, because of the thrill I got from knowing others were using my code.

All of this took a good deal of time, of course — time that could have been spent doing any number of other things. Yes, the stereotypes are often true: Sometimes it is more fun to pound away on the laptop in the dark than to go out dancing. Especially when you’re writing a piece of code that Net luminaries might praise you for the next day. I got e-mail from Linus Torvalds! From Richard Stallman. Ken Arnold — the author of the definitive book on the Java programming language — uses my software! Who wants to go out drinking, when one is brushing shoulders with giants?

Of course, this is an alternate universe I’m talking about. None of these names means a thing to my mother, bless her computer-phobe soul. Nor to most of my friends. But, sometimes, when the sun is down and the electrons are wild, I’d sequester myself in the basement of the computer science building for a night of hacking code, in the company of 20 or so of what I considered the finest minds on campus … all of whom would be impressed by my name-dropping. I had achieved fame, importance, honor. My patches were in the Linux kernel: I could code with the best of them.

All that was validated when my e-mail from Red Hat arrived, promising me tangible financial rewards for my efforts on behalf of the community. Sure, I deserved it. How many millions of people use the Linux operating system? Hadn’t I written part of the code each one of them uses every single day? And how many hundreds or thousands of students used my compiler tools each semester? The time I spent was worth something, and Red Hat recognized it! Of course, I had no idea how my name ended up on their list. We hackers keep so many lists of who contributed what to which project that it’s impossible to know for sure how Red Hat came up with their own selection. But in any case, all of us who had received the invitation now had a shot at real cash money. It’s patently obvious to the Linux faithful that Red Hat is poised to make moolah hand-over-fist. The company’s public offering was bound to soar to record levels: And I was being offered stock at the initial price!

I wasn’t alone in my excitement. From the discussion that ensued on Slashdot, the “News for Nerds” site, every Linux hacker in America was breaking his or her piggy bank to get in on Red Hat’s IPO. A flood of $1,000 and $2,000 checks were winging their overnight-courier way toward E-Trade.

My mental calculation went like this: one day to collect my money, one day for FedEx to deliver the application. Three to five days for E-Trade to process the application. Seven days before the July 28 cutoff date — if our accounts weren’t funded by July 28, the mysterious letter threatened we’d be left out of the IPO. Tight reckoning all ’round — had I smashed poor piggy for nothing?

Then a miracle: The deadline was extended to Aug. 4. Hallelujah! I never saw an official explanation for the sudden generosity, but the word on the Web was that Red Hat had pulled strings. All hail Red Hat! Hackers of the world, unite!

But tragedy followed. In the fine print on the golden spam-cum-invitation was the disclaimer:

“All applicants for public offering stock will be required to submit and pass an online eligibility profile at the E-Trade Web site. Public offerings are considered speculative investments and therefore you will be required to answer a series of questions about your investment experience, goals and your financial background.”

I can answer questions with the best of them. No problem. But the reports started filtering into Slashdot: People were being denied access to the IPO based on the “eligibility criteria.”

What shit was this? The open-source community places great value on ideas and knowledge. We figured we knew as much about the prospects of Red Hat’s IPO and the risks involved as any — probably more, in fact. Hadn’t we watched and participated in open-source battles involving IBM, Sun and Apple? Wasn’t the specter of Microsoft always over our shoulder? If you invested and the stock tanked, you would have learned a lesson — but it was probably worth it because you did the right thing: expressed confidence in a company brave enough to bring our work — our code! — to the unwashed masses.

On Tuesday, I filled out the eligibility questionnaire myself. I knew they were trying to weed out inexperienced investors, so on every question that related to experience, I asserted the maximum possible. I knew what I was doing. And it was my money, anyway — I had a God-given right to risk it on as foolhardy a venture as I liked.

But I had to sheepishly admit (to the unblinking electronic form) that my net worth wasn’t all that much. Experience is something you can get from a book, but money isn’t found in libraries. And a grad student doesn’t make a heck of a lot of salary. But then again, I wasn’t investing much, really — some $3,000 at most. All I had to give, and losing it would hurt, sure, but it would just mean a couple more years paying off Uncle Sam for my education.

My profile was denied.

So I wasn’t going to be rich after all — even by my modest measure. This was a slap in the face. All my open-source work was worthless, then. It takes money to make money, as they say, not skill, not talent, and certainly not altruism. I was going to be shut out of the world of the big boys because I couldn’t come to the table wearing the proper suit.

Fuck them! My hair is long and my sandals are worn. That’s who I am. That’s who all of us are. And we fucking wrote the software that Red Hat sells. We own the company in a far more real sense than any of the moneyed lords with sufficient “liquid net worth” to take part in the IPO. They’re auctioning my software off on the New York Stock Exchange to the highest bidder, and I can’t take part!

We coders had been abruptly disenfranchised, after having had silver carrots waved in front of our noses. I’d opened my first money-market account just now, in order to take part in the commercial future of something I believed in — and the door had been slammed in my face.

An hour later, an article titled “Barred from Red Hat IPO?” was posted on Slashdot and the floodgates were unleashed. In the first five minutes nearly 40 posts from all over America came pouring in, with hackers telling stories like mine. Most were pissed off. Some were mad at Red Hat, some at E-Trade, most at The Man, for dissing us once again.

The online community is built around words, not appearances, and ideas, not muscle. The most valuable currency is knowledge, and respect goes to the providers. In our world, we own Red Hat. We know all there is to know about its product, its strengths, its possible weaknesses. And if code to patch those weaknesses is to be written, we will be the ones writing it. On this battlefield, E-Trade’s refusal to credit us with the knowledge we have is outrageous. Stooping to meat-space metrics like “liquid net worth” is bullshit. We know Red Hat, and we believe in it. We’ve created it. We know the stock will do well, and if it doesn’t, it is a failure of our knowledge and therefore our own problem. We deserve to partake. It’s absurd that we be banned.

A real sense of outrage has sprung up. Why offer us riches if you’re not going to let us have any? This is real money we’re talking about here. By my best estimate, at least $400,000 was sent to E-Trade over the last 11 business days by developers who flunked the eligibility requirements. (About 400 people responded to a poll on Slashdot, saying they had been denied participation because of the eligibility requirements.) None of us expected that the innocuous-sounding “series of questions” from the invitation e-mail would result in over half of us being denied access; there was no explicit indication that a Net Worth was required. Our trust was abused.

Will Red Hat stand up for us this time? They’ve been our heroes thus far, persuading suits to ditch Microsoft for the work of our hands, convincing major business partners to embrace open source and our community and offering us, the little guys, a chance at fiscal rewards through their stock.

The Net’s legend-spinners are whispering that the financial world was miffed at Red Hat for offering us so much of their stock. Whether the story’s true or not, that’s what I believe. I did get a note from Red Hat’s spokeswoman, Melissa London, but it didn’t say much: “Red Hat is working closely with E-Trade to work through investor profile problems. I cannot comment on what the plans are, etc., of course.”

Red Hat is our challenger, our proxy in the fight for respect. We believe that if Red Hat succeeds on Wall Street, our cause everywhere will be furthered. Now these eligibility requirements have thrown up a barricade against us. We cannot let nothing be done — won’t someone stand up for the penny-ante idealists encountering The Man on his turf for the first time?

This isn’t about hackers wanting money for code they gave away for free. We hack for love — and respect. The eligibility requirements took away that respect, and tarnished Red Hat’s empowerment of the giants on whose shoulders it stood. According to some reports, E-Trade has started mailing letters to rejected invitees, offering to let them retake the questionnaire. On Slashdot, hackers are encouraging each other to fill in false answers that will ensure that we pass the test. But we don’t want to participate in borrowed clothes, as fictional millionaires with stated trillions in net worth. We want to win this battle on our terms, as ourselves.

We created the revolution. We want recognition. Is that too much too ask?