Innovation in Software

Back in February I had a little rant about business models in the news industry. A couple of things have prompted me to come back to this story. I want to be more positive and less ranty this time.

First, let’s get the something out of the way. Before this continues one more stupid, misguided step, I want to address the “linking is theft” attack being supported by some newspapers. Even my brother-in-law is starting to get worried about this, and he rarely shows an interest in the inner politics of online business.

Richard Posner has stipulated that linking to copyright content without compensating the publisher who paid for the content to be created, is the culprit of newspapers failing.

At first read, his argument seems almost sound. Almost.

It roughly breaks down like this:

1. Newspapers have fixed costs (staff salaries) that must be reduced if advertising revenues fall
2. Online news websites (as well as general economic conditions), are taking a slice of advertising revenues, thereby harming newspaper revenues
3. These new-comers are only able to operate because they piggy-back on the newspapers content
4. Ultimately this means newspapers go out of business, and the online operators will rake in the cash as consumers have no other source

The flaws are subtle and hard to spot unless you understand a couple of key points:

1. Online, linking is the only currency that counts
2. Linking is currency. It’s like cash. It’s why we trade it.
3. Linking to somebody is like paying for their advertising
4. Currency, online? It’s called linking

I had never heard of Richard Posner before he posted his article. Many of you won’t have, either. Yet there’s a link to his website up there. If you click on the link – the link I gave him in my blog article, without permission and without charging him a penny for advertising his content – I am sharing my readership (you, my valued friend!), with him. He gains. You may choose to subscribe to his blog. He may offer to sell you a t-shirt with a witty motto on it that you buy. I have given him the first thing you need to succeed in business online: audience.

He may choose to ignore that opportunity, but that’s his right.

Handily, as he has a trackback URL, some of his audience might discover me as well. See how this works for everybody? Incidentally if you’re reading this after clicking a link on Posner’s blog, would you like to buy a t-shirt? No? OK, back to business models of newspapers then…

It’s reckoned that Google through its search and news operations drives between 30%-50% of traffic to online newspapers. Imagine what would happen if it switched that traffic off tomorrow, unable to find a way to pay the fees newspapers demand of it. Imagine if the only way you could enter the news industry online was to pay for advertising. Imagine if not one piece of your archive would be available through traditional search. Imagine if in addition to your staff costs, you now had to pay out a couple of hundred thousand a month in advertising on Google, on billboards, on TV, or wherever you could. How does a sharp increase in costs help a business facing sharp decline in revenues survive?

Well, it doesn’t, does it? Quite.

What is worrying is that according to the Guardian he is well respected on the legal scene, and somebody, somewhere, might think this is a good idea. I have a horrid feeling newspaper owners are amongst the crowd cheering him on. I sincerely hope they fail – not only would it kill off online news, it would kill off news, period. I am constantly left astonished at how bad the thinking behind major institutions is. These guys help form societal opinion on major issues? Time to step aside…

Imagine my pleasure then, when another story came along that suggests, somebody, somewhere has got a clue.

Chris Anderson – editor of Wired magazine – was cited as stating:

With newspapers debating their future, the argument has been pitched as free versus paid-for models, but Anderson argued the real decision was free versus “freemium” – not about whether to charge, but choosing carefully which specialised content people will pay for.

[...]

Instead of working on growing the audience more, he believes publishers will need to grow their offerings. Right now, Wired provides three pricing tiers: free content on the web, about $5 for a magazine and 80 cents for subscribers. In the future, he believes Wired will have many tiers.

Even so though, the linking-is-evil campaign was stalking around at the back of the room:

Guardian editor-in-chief Alan Rusbridger asked about Google’s role in this freemium world; 40% of the traffic to its sites comes from Google.

Anderson said: “I consider that a gift, but papers consider it theft.” Newspapers could exclude Google from indexing their sites or could band together and charge Google to index their content. But it might be a self-defeating move.

“Newspapers need to be part of the conversation” on the net, he said. In the end, Anderson thinks that the democratising effect of the internet is a good thing, which will lead to a richer society, but, he added: “I don’t deny that it will get messy.”

Messy? Sounds good to me. Revolutions that have lasting impact normally involve guillotines and blood. Sorry newspapers, but your middle management strata are starting to look a little like the French royal court sometime around 1789, and we peasant revolutionaries are eyeing up your Bastille.

So, freemium, what does that look like?

Well, to be frank it’s going to be a bit strange for newspapers to get used to. Getting rid of most of their ad sales team is going to hurt, and to those working there I am sorry, but the bubble has burst and it’s time to move on. Advertising might bring in some revenue over time, but it’s likely to be more cost-effective to outsource that sales component to an external agency dedicated to online ad sales.

They then need to start thinking about what content they can get away with charging for. Strong candidates include going deep on content, say something like a standard news story of 400 words is available free, the longer 1,500 word version is available to paying subscribers or on a per-story charge basis. Content people are genuine fans of like crosswords could bring in revenues too.

However, there’s more than just content, there are service limitations to lift too.

For example online software applications normally give a free option away with limitations and then offer to remove those limitations in return for cash. It may be a project management tool where you can – for free – have one project and 2 users, but if you want to move all your projects and team onto it, you stump up the cash.

If the future of online news is to become more interactive and newspaper business models become more like those of applications, the limitations are available to exploit all over the place. For example, plenty of people would pay a small charge just to guarantee they’re getting the latest content: delay it for an hour to free users and see what happens.

Online applications have been playing this game for years. If you’re a newspaper exec, go and take a close look at the adult film industry online: they’ve perfected making money in a world of competitive free content. Follow their lead, and you have a proven model. Yes, it might seem distasteful, but that sector are masters of exploiting the audience into paying money without playing tricks on them or insisting nobody ever links to them.

I’m amazed it’s taken so long for an industry insider to spot it. I thought it was obvious, but didn’t mention it because I assumed everybody else had realised that this was the way to go. Boy, do I feel dumb right now.

Perhaps I’m wrong, I’m biased: it is this freemium model that is the basis of the Kagtum business model

We’ll aggregate, link and provide the ability for you to add/edit stories for free. But there will be areas you want to go into a little deeper or tools we can provide to make your life easier that will be available for a small fee. We think you’ll be compelled to want to hand over some cash for those tools and content because of their quality, and then we become your news source, not our advertisers.

“Ah”, you say, “but Kagtum isn’t live yet, is it? Come on, Paul, when is it launching?”. My lips are sealed. Sooner than you might think, but not as soon as I want. Watch this space.

Many years ago I did some freelance writing. Some of it was painfully dull (filler articles for free magazines), some of it bizarre and seedy (your suspicions about readers’ letters in porn mags are well-founded: they are sometimes written by paid writers), but the biggest lesson I got from it was that it’s hard to make a decent living with that as your main gig.

When you need to rely on artistic output to pay the rent, it doesn’t take you long to realise that unless you’re going to get picked up by a large publisher or music label, you’re going to need another job.

Recently I’ve been thinking about this problem and the related crisis in the music and film industries in some detail. At its simplest, the problem is this:

People want to consume entertainment, but they do not wish to pay for it.

Artists do not have the right to be paid whatever they feel they are worth, they must compete in a market and persuade people to hand over cash just like any other industry. Punitive measures such as taxing consumer products in order to force payment of artists is in my opinion pure idiocy. We need to think instead about encouraging people to pay for the entertainment they love. I think that requires a few things:

1. Consumers should not have to fork out more money than they feel comfortable spending
2. More of that money needs to land in the artist’s pockets rather than distributor’s, so that artists on the ‘long tail’ can make a living off a smaller fan base
3. Artists need to find new ways to grow and engage with their fan base

Thankfully, the Internet makes all of these much more practicable than ever before.

One solution to the first problem has recently been played out with mixed results by Radiohead, but wouldn’t it be interesting if we had some sort of “tip jar” system in place for all artists? You download something via P2P, like it, and you can make a donation – of whatever size you want – to the creator. Well somebody is working on that but the question is whether it will ever work.

One artist working with a non-digital medium (paintings) has given this a whirl and it seems to be working. Ali Spagnola will – when it’s your turn – paint a picture just for you based on a theme you suggest and then send it you free of charge anywhere in the World. It’s not a con. I know this, because I’m currently staring at this picture painted for me sometime last year. Payment is completely voluntary. I’m ashamed to admit I still haven’t got around to throwing some money into the tip jar, but I’ll rectify that mistake this week. The painting has grown on me. I would miss it if I lost it. Ali deserves to be able to eat for giving it to me.

Does Ali make money? Perhaps. Do Radiohead? Definitely. So, it’s a model with potential.

As for the distribution problem, well I think it’s clear now that the current relationship with artists and the distribution chain is going to die within a matter of years. A band or a writer can now distribute directly via their website, and even authors can publish books cost-effectively without the need to get men in suits and lawyers involved. There is an issue of how to manage all this and as Kevin Kelly discovered when researching this, being your own tour manager, promoter, lawyer and roadie can be a gruelling and unprofitable exercise.

And then we get to audience engagement. The Internet has blown that apart as well – artists can now have a direct conversation with their fan base via blogs, social networking websites and video sites. It doesn’t scale (how do you stay personal with fifty million fans in 150 countries?), but that would be as they say “a nice problem to have”. Most artists don’t know how to do this well – they’re musicians, writers and film directors, not PR specialists – which suggests there will exist a niche industry helping bands do this very cost effectively within a few years. The current promotion and PR industries are not a good fit for where the industry is heading, they need to change.

As for growing your fan base, I agree with Robert Rich’s words in his message to Kevin Kelly:

Companies can use demographic models and track people’s search patterns to pander to their initial tastes and to strengthen those tastes, rather than broaden their horizons. This problem doesn’t lie within the technology of the internet, but within the realities of capitalism and human psychology.

There is a problem here with collaborative filtering – it’s locking us into tastes, not broadening them. However, it can also be the most powerful tool an artist can have working for them.

Four months ago I had never heard of The Courteeners and yet last Saturday was in the crowd at their sell-out gig at Manchester Academy having paid several times face value for the tickets off eBay. That only happened because last.fm algorithmically said “you should listen to these guys, because you like James”. So far The Courteeners and their label, promoters and distributors have directly received at least £30 off me they would never have got without that technology helping them. I expect they will get hundreds off me over the next decade providing they keep doing something I like.

However, I’d like to share that music. I’d like to say to my friends “look, listen to this, you’ll like it” and give them a copy. DRM and the law prevents me. It is working against them, because I know for a fact I could recruit at least another half dozen fans for their next tour and album release. They are working against me by insisting I do not put their album up on a website for anybody to download and listen to. I will happily work as their unpaid promoter and recruit whoever I can into giving them money, but that little circled “C” prevents me. They could have licensed it under a creative commons license, but they chose not to.

This one act alone has probably cost them a couple of thousand pounds in future lost revenue just through me. Scale it up to the 2,000 people who were at that gig the other night, they’re probably losing millions. Not millions in five years when they try and break America: millions of pounds right now, this week.

So, we need to find more new ways to openly and cheaply distribute art and leverage a fan base so as to be able to make a decent living – perhaps even an indecent living – for artists and fans alike. I have more ideas on how to make that happen, but I will share those with you tomorrow.

If you need any proof that we’re in a bubble around Web companies, the valuation of Facebook at $15 billion thanks to the $240 million Microsoft just paid for a 1.6% share, must be it. Even the TechCrunch guys seem a little flummoxed by it – the comments are worth a scan.

To put that into perspective, if we assume $150 million in revenues next year is solid we’re talking about 100:1 price-to-earnings ratio there. If you’re the kind of person who normally yawns when hearing about P/E, here’s why it’s important.

There are lots of reasons a company might be valued with a high P/E. The six most common are:

• The market expects earnings to rise rapidly in the near future. This is normally the case with oil or gold companies who have little in the way of earnings right now, but who have secured income in terms of drilling/mining rights
• The company makes piles of cash normally but has had to take a one-time hit on something showing earnings being lower for this year
• The company has a business advantage that guarantees revenue for low risk. Think “monopoly”.
• Investors need to shove a large amount of money into the market to get it out of other vehicles, so the law of supply and demand means prices go up
• High demand for a particular share for some reason, for example a takeover bid
• The company is hyped, and we’re in a bubble

Going through each of these in the case of Facebook:

• Facebook’s revenues are not going to rise dramatically any time soon. They have not suddenly secured a huge pot of advertising revenue they have yet to “mine”, and my P/E is based on next year’s optimistic revenue figures, not past figures.
• They’re not making a lot of cash at all, and they’re not taking any major hits in terms of infrastructure, so that’s not it.
• Whilst everybody is raving about them, they don’t have a monopoly. It would be relatively easy to replicate the Facebook platform in open source (in fact, that’s an idea going onto the site tomorrow – unless you now put it up first and claim credit), so it’s hard to see how this sticks. The value is in the user base, but talk to MySpace if you want to hear about how fleeting they can be.
• Microsoft are in no hurry to diversify risk or in need to get money out of other “vehicles” – they might need to show their shareholders they’re hitting hard with their new advertising-driven model, but that doesn’t justify the expense
• 1.6% is no basis for an immediate takeover bid

That leaves us with…

• We’re in a bubble

It’s not like Microsoft are going to miss $240 million. It’s not that we’re in big trouble if this doesn’t hold up when Facebook floats in a couple of years.

It’s the mindset that bothers me.

People are no longer looking at figures. They’re thinking irrationally. They’re buying shares because they want to hold a chip. I’m not an IFA or your banker, but I suggest you make sure you don’t pay too much for any chip you want to hold on to yourself.

I’m currently reading Wikinomics and finding it incredibly engaging. I’ll write a fuller review when I get to the end of it sometime later this week, but I’m that enthusiastic I had to give people a bit of a heads-up before the weekend. The full review is likely to be long. This post won’t be.

To date, the only truly successful wiki has probably been Wikipedia – it’s probably the only one that the mythical ‘man in the street’ can name. In Wikinomics, Don Tapscott and Anthony D. Williams document an emerging trend and show that it’s not just wiki software that is describing the new spirit of collaborative development, but blogs, UGC sites like YouTube and social networks. It is the interactive element that adds value into the business, not the technical definition of what a wiki actually is.

Where the really interesting things are going to happen though are where collaboration happens between end customer and producer, and the middle men who connect half a dozen businesses to a single customer desire.

Outsourcing has reached a point where an industrial designer and a marketeer can design a product over coffee, firm up designs overnight, have prototype units being developed by a Chinese company within a matter of weeks, and support provided by an Indian company the day the unit goes on sale. The flexibility of this kind of out-sourcing is allowing start-ups to get very big, very quickly.

Some are beginning to realise they can even outsource the product design to the customer. It’s not just small companies either – major companies are seeing the value of a porous membrane between internal R&D and the rest of the World.

Vagueware obviously has a vested interest in this model. I haven’t quite worked out the dynamics, the money side of things and how we go about making developers take notice, but I’m hoping that others who like the idea of open collaborative design in the software industry will help work that out with me. I’m currently toying with ideas on how to reward those outside my business who directly add value to it. If you have ideas on how that can happen, you know what to do

I’m not alone. We’re about to enter an era of real businesses with real products being built this way. The knowledge economy is going to be very flat, with each of us having the ability to act as independent agents working on the ideas that interest us. Economically, this is going to be fascinating.

From what I’ve read so far, Wikinomics is a good introduction to how this new World is starting to unfold, and I think if you’re interested in these new models or if you’re interested in what the next 2-3 years of web application development is going to look like (if you’re a bespoke developer or designer, your future clients are either reading this book already or will do soon), you need to grab yourself a copy.

You can buy it from this link if you’re in the UK or this link if you’re in the US. Enjoy!

Service Level Agreements are a must-have for Enterprise clients and it has surprised me that so few web companies have used them as a route to making money: if you don’t need an SLA, take the app for free. If you do want an SLA (because say your entire email operation is running on our web service, say), then you need to pony up some cash. It’s worked in open source, so I think it’s a no-brainer for an industry that is service-orientated at its core.

Good news then that Amazon S3 has today announced an SLA which means if they drop below 99.9% uptime per month you can have some cash back. You get even more money back if they drop below 99% uptime. They also agree to give you 60 days notice if they want to get rid of you for any reason – but don’t have to give that reason.

It’s a step in the right direction, but they could make even more money by offering even better SLAs if customers are prepared to spend more money to get them. That money would be capital Amazon would be free to invest in infrastructure which not only enhances S3, but Amazon’s core systems and business.

Brian MCallister argues quite convincingly that “Popularity, in technology, is shit. Seriously.”

He has a point. When we aim to make something popular we are doing so for reasons of ego, and therefore attempt to compromise what it is we’re trying to achieve. We can’t do complex and useful to niché audience if we’re worried about being popular.

One version of this internal corruption of objectives is sometimes known as the “What would your mother think?” test in development. Would your (presumably technically illiterate, possibly senile) mother make of the gizmo you’ve just made? If the answer is “she wouldn’t understand it” then the trend is to simplify and to make things better.

But your Mum probably doesn’t care about your widget. What’s more useful is whether the people who are going to use it can. And that’s why, so the argument goes, that commons-based peer collaboration might be a better design practice than what we currently do.

It’s also why I think the future of innovation in software is going to be governed by companies making money whilst putting the source code out into the open. They quietly execute, iterating out improvements, making things better with each step, and then eventually the larger market catches on. The market catches on quicker if the source code is out there, resulting in better revenue streams.

Alas, we’re still in an age where the “intellectual property” myth still permeates our society, and trying to produce popular software seems more important than producing useful software. Sometimes it’s like the last decade was a dream…

Reading Wired these days is a bit like being punched in the eyeball by a lack of self-identity. I don’t really know what that means, but if you remember what Wired used to be like, you’ll get what I mean.

This month one of the first interesting articles I’ve seen from them in a while has appeared, discussing how Second Life really isn’t working the way advertisers wanted it to. Quel surpise.

Second Life is not what the hype says it is. It is not the future, it is just the latest incarnation of the MUD games those of us who meet a certain demographic once wasted our teen years trying to work out. This reality is slowly dawning on the people putting the most money into the place. From the article:

Then there’s the question of what people do when they get there. Once you put in several hours flailing around learning how to function in Second Life, there isn’t much *to* do. That may explain why more than 85 percent of the avatars created have been abandoned. Linden’s in-world traffic tally, which factors in both the number of visitors and time spent, shows that the big draws for those who do return are free money and kinky sex. On a random day in June, the most popular location was Money Island (where Linden dollars, the official currency, are given away gratis), with a score of 136,000. Sexy Beach, one of several regions that offer virtual sex shops, dancing, and no-strings hookups, came in at 133,000. The Sears store on IBM’s Innovation Island had a traffic score of 281; Coke’s Virtual Thirst pavilion, a mere 27. And even when corporate destinations actually draw people, the PR can be less than ideal. Last winter, CNET’s in-world correspondent was conducting a live interview with Anshe Chung, an avatar said to have earned more than $1 million on virtual real estate deals, when Chung was assaulted by flying penises in a griefer attack.

Just what you need as an advertiser – doing a PR launch where giant penises attack your in-World presence would make Janet Jackson getting her norks out family-friendly in the eyes of the demographic most advertisers are chasing.

What’s more, the underlying architecture can not scale – they’ve built the system so that it will never reach the potential that self-titled futurologists have envisaged for it:

One of the things you never see in Second Life is a genuine crowd — largely because the technology makes it impossible. In Stephenson’s Metaverse, corporations established their presence along a bustling, almost infinitely long street that residents could cruise at will. Second Life is different. Created by an underfunded startup using a physics engine that’s now years out of date, Second Life is made up of thousands of disconnected “regions” (read: processors), most of which remain invisible unless you explicitly search for them by name. Residents can reach these places only by teleporting into the void. And even the popular islands are never crowded, because each processor on Linden Lab’s servers can handle a maximum of only 70 avatars at a time; more than that and the service slows to a crawl, some avatars disappear, or the island simply vanishes. “It’s really the software’s fault,” says Andrew Meadows, Linden Lab’s senior developer. “Way back when, we used to say, ‘This is not going to scale.’”

There is of course another way forward: embrace the limitations and the spirit of what the World is all about. Advertisers aren’t keen on doing that though – you’re the one meant to be embracing them, not the other way around.

That leaves them with the other rather obvious conclusion: advertising in MUDs, like advertising in games, isn’t going to work. Save your money and find something better to do with it. Advertisers are loathe to do this however. They saw what happened to MySpace, Facebook and the rest and they’re convinced that this time they’re going to be ahead of the curve. They don’t care if it isn’t popular, as long as it looks as though they’re doing something interesting. However, if I were a shareholder, articles like this would make me nervous:

The Coke build is expansive, elaborate, and of course empty. But Coca-Cola has a plan. It’s sponsoring a contest to create a Virtual Thirst vending machine that it hopes will become ubiquitous in Second Life, just as Coke machines are everywhere in real life. Jaffe professes to be overwhelmed by the number of entries, which he characterizes as “well north of 100.”

Suddenly, another avatar materializes. “Ah, there you go,” Jaffe exclaims. “Someone’s just arrived! I think she’s from Japan.” As he speaks, Dapto starts air-typing in the weird way that Second Life avatars do, trying to chat up the new Japanese girl. She looks around, then teleports someplace else.

Want to know how expensive? If you hire Jaffe there to sort it out for you, maybe put a couple of staff on the case of looking after it you’re going to need a budget of $500,000/year. Just think about that. This is a platform where if you get 1,200 people turning up, you’re a rave success. When your Madison Avenue crew is defining a cost of reach at $416/head as reasonable value and the audience leave within seconds, you know somebody, somewhere, is grasping at straws for new ideas.

via Erick Schonfeld

In the current Web-wacky-world, money is a curious talking point. Everybody, at some point, needs to think about ‘monestisation’. It’s not even a real word, but the general plan for most companies seems to go something like:

1. Get funding for an idea
2. Build it
3. ???
4. Profit!

The fact that this is a business plan stolen from Slashdot shows you just how weak it is. Slashdot remains (to its credit?), a bastion of unprofessionalism.

Step 3 – making money – is something I believe should actually be in there at step 1. You should have a plan right before you start. Most developers are so excited by the idea they want to build that they take the easy route out: “we’ll put some ads on there”.

Big mistake.

Firstly, advertising is what I rather emotively call “brain rape”. It has no other intention than to disrupt users so their emotions can be manipulated into working with your advertiser. The idea Google had for Gmail is to my mind insane: I want to read my e-mail when I check my e-mail, not be distracted into doing something else.

Secondly, advertising is about to get a great deal more innovative, and the truth is: advertisers don’t need you any more.

Steve Bowbrick has written a great article this morning inspired by a trip to a bunch of creative types experimenting with online media campaigns.

The point is this: it is no longer enough to stick a 30 second ad spot in between your favourite shows, or to place a banner advert on a site they don’t control. The next generation of advertising is to build online media presence that people hunt down. A series of videos on YouTube, a wiki, a group on Facebook discussing the product.

Advertisers have talked for generations about establishing a relationship with the consumer. This has been to date complete poppy-cock. It is only in recent years with the advance of loyalty cards that they’ve really been able to get under our skins and look at what brand of sanitary towel or condom we prefer (in order to establish a correlation, if any, with our choice of toothpaste and breakfast cereal), but the plans for the future are ones for direct audience participation. It will not be enough for them to tell us what we should think of their product: we will, as a form of passing the time, be helping tell them what their product means to us.

Never before has this been possible, because never before have we had the means to be able to allow media to be consumed, shared and ‘user-generated’ the way we have now. The innovators were the artists, and now it’s getting mainstream it’s time for the ad men to get involved.

I shall leave it for another day to point out just how debased we become as a civilisation when we seek out sales people as entertainment, but for now I just want to point out one thing: unless you’re building something advertisers can use as a platform in itself like video or social media, they’re planning to cut you and your app out of the loop within 3-5 years. They don’t want to give you money unless they have to, and right now they’re starting to think there may be a way out.

Out of all the areas that I research for this blog and the site (at the time of writing, down for a week awaiting a new build of some code), the one that intrigues me most is the economics of software. I have watched – painfully at times – as we have turned from an industry dominated by license fees and support contracts into one trying to find a way of announcing that washing machines are half price this weekend next to our elegant user interfaces.

I for one welcome the anticipated shift in advertising away from banner ads and disruptive behaviour. I think it will completely destroy entertainment, but that’s another problem to be solved when people get there. What intrigues me right now, is how are we going to get software development funded.

• Open source doesn’t have a real business model outside of the FUD enterprises hear, that goes away when you dual-license your code
• Users don’t want to pay subscription fees
• We are no longer in an age where license fees have a viable future, particularly with web software
• Advertisers are getting ready to avoid as many people as possible

All of this points to something that could burst. Not a bubble, not something where there is an inflation that is out of synch with reality. But an adjustment. A shift of priorities. Something which we need to start thinking about now, because within a few years we won’t have any way to make money from this industry with 95% of the apps out there and that means we’re going to need to rethink everything.

In the last few weeks, as I’ve been firming up ideas for cashflow around Vagueware, I’ve come to the conclusion that it’s not entirely right to suggest this is about “Open Source Software” (OSS for short) and how it is delivered. Specifically, I need to drop that middle word.

Open Software is more than just source code. It’s about the design, documentation, support, and improvement of the product. It’s about saying “we own this” instead of saying “I own this, but you can use it”. I’m trying to work out ways of being able to make that mean something real, and for there to still be a cash-flow at the end of it all.

The services model is definitely one way forward, but I’ve also been thinking about an idea mentioned a few months ago where I allow sponsorship of features, documentation or other parts of projects at a small level.

It may be that the feature set I come up with for a project is all well and good for 99% of people, but if there was something missing for the other 1%, that group (or individual, even) could put some money in the pot to encourage its development. It might only be $10, but it’s $10 in the pot. Six months later somebody else comes along and decides they really need that feature too, and they add $50. We now have $60 in the pot, and if the feature is something that can be bitten off in less than an hour, it makes economic sense to just get it done. Of course other features might need thousands to make them economic, but allowing for lots of small donation, it’s more likely those features will get funded.

The idea of a code bounty is not new or original, but I’m wondering how best to structure it from day one and whether the bounties should be claimable by Vagueware alone, or whether to open it up to other developers and if by doing so I would be changing what my company is fundamentally about.

I really get a gut feeling that where I’m heading with this is new territory in some way, but that I’ve seen all the components elsewhere. Whenever I think about whether this is going to work – if I’m going to be able to make a living from this – I start getting a sick feeling in my stomach, and that’s how I know it’s worth trying.

When I first started to write software, it was a hobby to me. I am privileged in many respects that today I can call it my job. In the past, very few people got to do for a living something that they had previously done purely for the pleasure it gave them. Musicians, writers, artists and the like were lucky enough to say they loved their jobs, that it was more of a vocation than a profession. They were lucky – most people felt work was a chore.

I was prompted into thinking about this by a TV programme called ‘What makes Britain Rich?’. It was about the economy in the UK, its structure, the different components of UK PLC, etc. A key point made was that in the past the manufacturing sector of the economy was dominant but in modern Britain it is the knowledge and service sectors, combined with the finance industry that make up the bulk of the economy.

I think they missed something though. It’s not just the money that has moved around, it’s our perception of work itself.

In the past, people were expected to turn up to a job they didn’t enjoy as work was a scarce commodity. As a result evenings, weekends and holidays were cherished and the Ultimate Goal of retirement was something to which a lifetime of dreams would be hung: work hard enough doing something you don’t like, and when you’re 65 you get the rest of your life off. This was, I should point out, at a time when life expectancy was around 67 years.

As we shift into a service and knowledge economy all of this is in massive flux. It no longer applies that we have to do work we don’t enjoy.

Whereas my parents thought of work as a chore that needed to be done, I see it as just another leisure pursuit. If I were doing menial labour in a factory because software development didn’t pay, in the evenings I would come home and boot up a code editor in much the same way my parents might turn on the TV and open a bottle of wine. I know this is true, because when I was at school ‘working’, all I wanted to do was get in front of a keyboard in the evening. During my fourth year (now known as ‘year 10’) the entire Thursday afternoon was dedicated to GCSE Computing, and to me spending the afternoon writing BASIC on an Archimedes was more like a long lunch than an afternoon of work.

One analogy that might help explain this better is the sandpit at nursery. When I was 5 years old, I went to a school that had a very simple rule: you got to play in the sandpit and in the playground as long as you did your writing, reading and other work first. No work meant no play. You got the work done, you got the gold stars, you got the reward of play. What I do for a living now is a bit like spending the entire day in the sandpit but getting the gold stars anyway as if I had been working at my desk all day long.

If I try and explain this to somebody who doesn’t enjoy their job, they still seem to have a hard time grasping it. When I question them about their jobs, their complaints normally fall along similar lines: they don’t enjoy the work, because it doesn’t challenge them; it doesn’t pay enough; the people they work for are not people they would choose to spend time with if they had a choice; the rules within the workplace are inflexible, and to the individual’s mind, pointless.

I then try and explain that because I grabbed the knowledge economy by both hands, by deciding to take the skills and knowledge that I enjoy using and capitalising on them, I got to change the rules for my work: I do work I find challenging and enjoyable, and avoid work I don’t; whilst pay is below what I want right now, my maximum salary is in my own hands and if I want it to be larger, I just need to work smarter; I work with people I like working with, and nobody else; I set my own rules, my own hours, and everything is aligned towards the objective of me enjoying it.

It is also important to realise that variety is the spice of life. Whilst I enjoy working long hours, I also enjoy theatre, reading, going to classical music recitals, art galleries and museums, cinema, crashing in front of the TV or even just hanging out with friends. That’s all part of life as well, and should not be excluded just for the domination of one pursuit, no matter how much I enjoy it.

I’ve had to remind myself of all of this in recent weeks, because the end of 2006 turned into a horrible trudge. I was over-committed to a few jobs I didn’t really enjoy. I think my work suffered as a result – how could I produce quality work when I had forgotten that my work was meant to be fun, challenging and interesting. My professional New Year’s resolution is to try and re-engage with that.

There is an interesting side-effect of this ‘work as leisure’ concept, too. If I enjoy my work as much as I do, why would I ever want to stop doing it? Why would I want to stop it all at the age of 65 if I am still loving it? It would be like me saying that at 65 I won’t go to the theatre or art galleries any more. It may be that within a few years I stop enjoying writing code, but the beauty of the knowledge economy is that I can adjust merely by finding a way to make a living from another set of skills I have. There is, in theory, no reason why I should feel that I have to work at something I hate.

If I get to 45 years of age, and suddenly I enjoy reading books more than I enjoy writing software, all I have to do is find a way of making reading books pay. Off the top of my head, I can think of four or five ways to do that. The knowledge economy is an enabler, and the Internet has made the cost of a context switch close to zero. It’s going to get better in the future. In effect, the scarce commodity is no longer paid work but knowledge. It is therefore the skilled/informed individual who is in control, as opposed to the factory owner.

If the knowledge economy grows as much as I expect it will over the next 20 years, this mode of thinking is going to become more prevalent, and it will do something interesting to the pensions industry. I know my grandmother (88 years old) would love to be active, but she worked in a services industry that required lots of running around (nursing), ditto for my Mother. I’m not in the same boat, and I think that is going to make it easier to explain why I’m not pouring 40% of my income into a pension fund right now.

Another interesting factor is the ‘useless’ degrees people are taking – over the last 20 years, if somebody went to study something that they enjoyed but had no clear vocational path, they were mocked. What good is a degree in Art History you might ask? Well, as we move into this new economy, quite a lot of good if you’re prepared to work at making it pay and you still enjoy it. In fact, the deluge of people taking Media Studies and related subjects at A-level and Degree level is probably the reason why the UK is the largest exporter of cultural goods (in dollar terms) Worldwide. As more people decide they want to work in the media, the media economy grows. We’re breaking all sorts of rules along the way.

In terms of the software industry, I think this means there is plenty of opportunity for people who really love coding to build a thriving industry around themselves. By taking hold of what we love and finding a way to financially capitalise on it, we can make a living. Thanks to the knowledge economy, those of us who enjoy gaining knowledge are going to have the ability to create a secure future whilst also having a lot of fun.

I think what I’m trying to say here is that this is a truly amazing industry and it sits within a sector of the economy that has to be the most comfortable to work in. Lower stress levels, potentially bigger rewards, life-long income combined with enjoyment. Just something to think about, that’s all.