Can Linux billionaires carry the free-software torch?

As dot-com mania sends shares in open-source companies soaring, the movement searches its soul.

Published December 23, 1999 5:00PM (EST)

Talk about your sore winners. Before the first day of trading for VA Linux had even ended, free software programmers were already kvetching about whether the astonishing stock market ascent of the company might spell eventual doom for their world. Never mind that VA Linux, which specializes in selling hardware pre-installed with Linux-based operating systems, was on its way to the most successful public offering ever, with a 698 percent gain on opening day. In the world of free software -- a world in which money was never the primary motivation for hacker labor -- a billion dollars here and a billion dollars there do not automatically add up to happiness.

As we come to the end of free software's most amazing year ever (at least as measured in terms of market capitalization), angst is in the online air. Questions are being asked that can't easily be dismissed. Will the huge financial worth of the founders of companies like Red Hat and VA Linux end up disillusioning small-time developers? These companies must now keep their shareholders happy -- will the goal of keeping stock prices high interfere with code design decisions that used to be based on purely pragmatic factors? And what happens if Red Hat and VA Linux stock goes down in flames? Will free software's rise to world domination be derailed?

Substitute whatever phrase you want for "free software": "open source," "GNU/Linux" or even just "Linux" will suffice. Indeed, the easiest observation to be made about this most recent outbreak of IPO madness is that the word "Linux" now enjoys the same semantic status as previous Internet economy buzzwords like "push" or "portal" or everyone's favorite: "dot-com." Just whisper the magic incantation and the venture capitalists, investment bankers and day traders will come a-running. Many, if not most, of these bandwagon jumpers can hardly be expected to have much faith in or even knowledge of the potential technical superiority of the open-source software development model. They don't care that the source code is freely available to all comers -- they just want to get their buy orders in on time.

Even if reasonable answers can be offered to the questions posed by worried skeptics, rational observers can be excused for thinking that today's delirious Linux euphoria might not necessarily be a good thing. Sooner or later, dot-com mania must be headed for a fall -- whenever you see this many lemmings gathered together in one place, you just know a steep cliff has got to be nearby. Could the rush to invest in companies which base their business models on free software be the last straw? Certainly, many observers who have long looked askance at the last few years of Internet insanity have seized upon the VA Linux IPO as just the latest, freakiest example of how crazy things are getting. So why not be nervous? Free software, once the domain of anonymous geeks concerned only with their code, has been sucked into the vortex of the dot-com maelstrom. How can it possibly come out unscathed?

The short answer is that it just doesn't matter. Free software can take care of itself. But the long answer starts like this: Sure, Wall Street and the day traders are absurdly overhyping Linux, but they are also unwittingly hyping the deep structure of what makes the Internet work for all of us -- they are pouring billions of dollars into the principle that great things can happen if you share your source code with the general public.

If, in the long run, Red Hat and VA Linux never earn a dime, and stockholders start pulling their hair out and analysts begin announcing downgrades, the world in general still stands to benefit immensely. That's because, right now, companies like Red Hat and VA Linux are substantially increasing the amount of software that belongs to the whole world. Software that solves problems, leverages creativity and intelligence, and, bottom line, is free. The companies may go away, but the software won't. What we are currently seeing, in essence, is the largest-scale bilking of the "free market" ever perpetrated, for the purpose of creating a common infrastructure of software tools that will be to the lasting benefit of all humanity. Merry Christmas, everyone.

The day after VA Linux went public, the headline in the New York Times read "tiny company with dim prospects goes public with a bang." A financial commentator on PBS noted that the company was "unknown." Fair enough -- from their perspective, yes, VA Linux wasa complete stranger, just another dot-com jumping on the gravy train. When Red Hat went public, at least it had the virtue of having received reams of press, and enjoyed ownership of a leading market share position in the United States. But VA Linux sold computers with Red Hat installed on them. So do a bunch of other companies -- more every day. What made this little start-up so special?

Reading the New York Times' gape-mouthed astonishment, I recalled the first time I became aware of VA Linux, nearly two years ago. I was chasing down open-source evangelist Eric Raymond for a profile. The only number where he could be reached was at VA Linux -- then housed in tiny offices just outside the shadow of SGI's massive multi-building complex. Raymond did not work for VA Linux, but it served as an unofficial West Coast headquarters for the peripatetic hacker. It was where he plugged in to get his e-mail, and it was where I picked him up to take him out for lunch one day.

Heady from the excitement of Netscape's recent announcement that it would release the source code to the Navigator Web browser, Raymond told me that day that "for my culture and my people, this is the moment we've been waiting for for 20 years."

His culture? Raymond was referring to his "tribe" -- the hackers who labored away in the recesses of the techno-economy, administering their lives according to their own rules and rituals. It soon became clear that VA Linux was an integral part of that culture -- although it would be hard to imagine two people more different than the grandiloquent, attention-grabbing Raymond and VA Linux's smooth, buttoned-down founder Larry Augustin.

But the differences failed to obscure their similarities. Both Augustin and Raymond are believers in something called "the gift economy" -- a way of organizing labor in cyberspace that runs counter to the normal business practices of, say, a company like Microsoft. The gift economy, as understood by hackers on the Net, mandates that if you give (your labor, your code, your intelligence) to the greater community, the community will not only flourish, but you yourself will benefit from gifts contributed by other members of that community.

VA Linux, I soon learned, adhered to gift economy principles in ways both little and big. On the little side, VA once gave Raymond a new monitor to replace one of his that had blown up. It had also authorized a VA employee, Sam Ockman (who went on to found another pre-installed Linux hardware company, Penguin Computing), to set up an online home for the then completely non-commercial Debian distribution of Linux. Later, once VA's hardware sales began to climb, and it started attracting significant venture capital, VA began hiring scores of prominent Linux hackers to work on enhancing Linux, and even took the symbolically dramatic step of naming Eric Raymond to its board of directors (a move that has made Raymond a very wealthy man today, with 150,000 shares of stock that is commanding well over $200 per share.)

Why should we care about this corporate generosity? Because the gift economy helped build the Internet. Free software, or open-source software, is the gift economy as applied to the creation of working code. Vast portions of the Net, its mail transport mechanisms, bulletin board discussion forums, even the Web itself, owe their creation to the willingness of programmers to write code, contribute it to the general public and reap the benefits thereof.

The clear result of years of gift economy behavior on the Net has been the creation of a huge publicly accessible infrastructure that facilitates cooperation and collaboration -- a giant tool lending library stocked with useful items of all description. In a world that is increasingly run by and dependent on software, the creation of this library is of incalculable value. But up until very recently, the production of these tools occurred on a more or less uncoordinated, haphazard basis, according to the energy and enthusiasm of hackers working in their spare time.

The ballgame is different now. Companies like Red Hat and VA Linux, steeped in the tradition of the gift economy, now have the capital to hire hundreds, even thousands, of hackers, and put them to work creating even more publicly accessible software. Tools that once were hard to use are being made easier, projects that were once considered purely the domain of the proprietary software world, like word processing applications and graphics manipulation programs, are now being added to the public library arsenal.

The nexus of hype and hard-coded reality that has been created by Wall Street's love affair with Linux is fascinating. Red Hat and VA Linux are benefiting enormously from a kooky stock-market that has seized upon Linux as the latest way to make a fast buck. But these companies aren't your average dot-com scams, with no real compelling product to speak of, unlikely to ever be heard of again a year from now. These companies are adding value to the software universe that will never go away. They are providing leadership and capital investment for the advancement of the gift economy.

Do investors realize this? Some do, certainly -- especially those hackers who have been given early access to investment opportunities via special programs set up by Red Hat and VA Linux. But it's a safe bet that many investors do not realize what they are part of -- a grand, world-class giveaway that may be more likely to benefit a budding entrepreneur in Indonesia or Paraguay than an investment bank or venture capital firm.

So what happens if five years down the line, VA Linux still hasn't turned a profit? Perhaps its core market will have been overwhelmed by a giant like Dell. Or maybe a Microsoft version of Linux will have swept the world. Some free-software fans worry that such a denouement will undermine the credibility of free software -- that once it is proven that businesses can't make money in the free software sector, further development will dry up.

But what's far more likely is that free software development will slow down, not disappear altogether. Hackers who wrote free software before it became a big business will continue to do so -- that's what they like to do, after all. The sheer number of users of Linux and other free software tools is also likely to ensure that developer interest will continue. In the meantime, the current golden age of free software will have bestowed upon the universe of software users a plethora of advanced tools that can be used for manifold purposes. For those without the resources to buy expensive software, there will be another path available -- the free software path.

In yesterday's world, a go-getting start-up hustler in China might have taken a chance and simply pirated some Microsoft or Oracle or AutoCad software in order to take care of business. And then, ultimately they may have paid a hefty price as a victim of a flushly bankrolled anti-piracy campaign. But in tomorrow's world, they'll just log on and download what they need, without having to agree to onerous license terms or cough up cash that could be better used elsewhere.

Those entrepreneurs of the future should blow a huge kiss to the day traders and Wall Street investors speculating up the stock price of free software companies. The gift economy hasn't ever seen anything on this scale before, and it may not be likely to again. But in the meantime, it sure seems worth celebrating.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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