Actually it’s a post asking why there are no Open Source billionaires. (And no fair mentioning Monty!)
Is this an interview with Marc Ewing (briefly a paper billionaire)? No. Is it an interview with the twits imposed on him by VCs; Bob Young and Matthew Szulik? No. Is it an interview with Red Hat’s current … well, it doesn’t really matter, does it? Lightning often strikes more than once, but the Loon Lottery is a fickle mistress.
The big question this article asks of Jim Whitehurst, CEO of Red Hat, is this:
“But when, I wanted to know, would Red Hat reach that $5 billion turnover – and why was it taking so long?”
Well, Jimbo is no fool. He started peddling management bullshit for the renowned Boston Consulting Group and went on to serve as COO of Delta Airlines, leading them out of bankruptcy. (I believe the technical term for this procedure is “I’ll take Chapter 11, please, Vanna!”)
He’s certainly bright enough to recognise that the helium has leached out of this particular balloon. So, what went wrong with his prediction that “When I look at the quality of our existing technology, and the incredible brand that we have and the markets we play in, we should be a $5 billion company or more?”
You’ll never guess. You’re not as smart as Jimbo. This is his answer:
“He said that he did think that Red Hat could get to $5 billion in due course, but that this entailed 'replacing $50 billion of revenue’ currently enjoyed by other computer companies.”
There are so many stupidities embodied in this statement that I’ll leave it for others to pick apart. However, just one question: and this is a man with a BSc in CS and Eco, a “general course degree” from the LSE — I’m guessing 50m breast-stroke in soggy underwear — and an MBA from Harvard Business School.
Just one question.
In the $1 billion-plus turnover market for IT companies, which ones have an operating margin of 90%?
Don’t worry. We can wait.
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Oh yeah, the hero-worshipping Glyn Moody’s response to this?
“I think this is the first time I’ve heard someone as senior as Whitehurst admit something rather profound: that open source solutions save money for customers by doing away with the fat margins for existing computer companies – and thus shrink the overall market. Opponents of open source like to paint this as 'value destruction’ that takes money 'out of the economy’ – as if free software went around burning down offices and warehouses.”
So profound. And so not a straw-man. (To be fair, my title is a straw-man, too; but then I like to have a laugh every now and again.)
Comments
The most fascinating thing about the article is actually reading the comments. It boggles the mind that these people think that the destruction of value is a positive thing.
Point taken. Added the comments TM.
They’re all gold, but I think this one is the best:
“Billion dollar Free Software companies: Google? IBM? Ebay? Amazon? Facebook? Apple? all big businesses completely dependent on free software and making a lot of money from it. It doesn’t show on their balance sheet because it’s free!”
Completely dependent? I spy a new distro called Methadone Linux in the near future…
Although who can resist the seminal Sage of the Age, Eric “Shallow Bug” Raymond, with this pearl:
“Glynn, you and Jim Whitehurst should have been paying attention ten years ago when I pointed out that the shift from a pseudo-manufacturing to services-centered business model implied a large drop in in the multiplicative effect of capital.”
Ah, Sweet Baby Jesus … and then we come to Henrik Ingo, late of MySQL, who turns the entire argument on its head (whilst confusing Sun and Oracle), with the following unimpeachably stupid comment:
“This means that if a proprietary sw company is buying an open source company (apple or microsoft buying red hat, say), it can pay up to 10x more than a normal owner would value the company.”
SolidGoldComments™ indeed. Rough diamonds from the slag-heap of history.
hm, seems that the link doesn’t work anymore. Was this a whole blog entry about the highly philosophical topic why you don’t become a millionaire when you work for free? sometimes i wonder
It’s a conspiracy, I tell you! Altered to link to the Google cache.
Meanwhile, enjoy 7 open source applications on the cutting edge.
Well, I’m the one who complains about pasting links. Try this.
This is quite funny, too.
The “replacing $50 billion of revenue” will happen only if Linux somehow manages to pose as a substitute good for other operating systems. There are different interpretations of the term “substitute good” in both macro- and micro-economics, but none of them is indeed suggesting that Linux is, given the current state of affairs, posing as a perfect or even a good substitute for anything except itself (one distro for another, in other words). Anything talks of Linux substituting other operating systems, thus, is just purely hypothetical if not downright wishful thinking. Moreover, RHEL is not free, and CentOS/Scientific Linux are, ipso facto, not its perfect substitute. This means that consumers are expected to pay the support fee upfront for the real deal, for every machine they own. If, even given this reality, Linux can only rake $1 billions of revenue, theoretically, for every $10 billions it takes from its competition, then one must seriously question as to how competitive Linux actually is in the market overall, and whether consumers are in fact willing to replace simply anything with it.
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