The latest tale of cyber-riches involves the Linux crowd. A recent string of IPOs earned shareholders obscene amounts of money. Red Hat, a distributor of the Linux operating system, is worth about $15 billion. VA Linux, a company that sells computers that use Linux, made history: Its shares leaped 700 percent, making the company worth about $10 billion. Not bad for a firm with 153 employees, $17 million in sales and about $3.3 million in gross profits
Linux is a curious story. It is an “open source” operating system, meaning that no one owns it, and no one in particular developed it. The code was put on the Net and anyone who wanted to work on it, could. At the same time. And did. And added to the final product, which is still evolving.
The open-source model has been touted as “the most powerful movement in the software industry.” Today, Linux is estimated to run on about 17 percent of all servers and its popularity continues to grow; last year, it was growing by 40 percent a year.
Linux poses an interesting moral dilemma. (I’d hate to think they got all that moolah without dirtying their consciences.) Thousands of anonymous geeks hacked away at code without any hope of reward because they believed in the “open” ethos. Still, the Red Hat and VA Linux folks just cleaned up.
A debate has been raging about the IPOs in the open-source community. Some people think nobody should be making money: The open-source mentality doesn’t square with personal piles of cash.
Let’s leave that debate to those directly involved. It doesn’t bother me; this is a capitalist world and there comes a point when you have to make money to survive.
Rather, let’s focus on squaring accounts with people who toiled unpaid; in other words, making sure that the right persons get paid. Other people exploited (a deliberately inflammatory word) that effort and made a bundle. That seems harder to reconcile with the open-source philosophy.
To their credit, both Linux companies offered shares to some of the hackers who had made the riches possible. But the unease is palpable. Eric Raymond, a member of the VA Linux board whose 150,000 shares are worth about $26 million, noted in the Economist that “fairness to the hackers who made me bankable demands that I publicly acknowledge this result and publicly face the question of how it’s going to affect my life and what I’ll do with the money. Megabucks are power and with power comes an obligation to use it wisely.”
Give the guy credit for saying that. Give him more when he lives up to those words.
Raymond is on the right track, though. Individuals who profit from a movement founded on the notion of “community” seem obliged to put some of those gains back into the community. Call it karma or whatever, but I’d like to think some debts could use repaying. And this is the time of year to be thinking about that sort of thing.
Curiously, e-boomers have a reputation for being a bit stingy with their wealth. Until recently, Silicon Valley residents were decidedly tight when it came to charity. A few recent studies suggest that if that was once true, it no longer is. In the United States, about 69 percent nationwide give to charity; in the Valley, it’s 83 percent, and they give about the same portion of their income as everyone else: 2.1 percent of annual earnings.
The research shows that computer folks give differently than most mortals do. They give more money to entrepreneurial funds and education. Not too strange, since they come from a culture that prizes both.
In addition to the different focus of their giving, there are signs that the Silicon sugar daddies act differently. Some of them make their money, cash out and then devote themselves to doing something socially conscious. They don’t just give to charities, they set them up and run them.
The city of Seattle has been especially blessed by this new activism. The burgeoning class of Microsoft millionaires has set up new funds, joined boards, become activists.
James Fallows has argued that Net money is “young money,” that is, money to “be burned in irrational spending sprees.” It’s used to satisfy simple desires. Why not? A lot of e-millionaires are young pups, who haven’t had much time to spend, especially since they have devoted their lives to their companies; the windfall is both an opportunity to make up for lost time and a chance to indulge.
Fallows contrasts “young money” with “old money,” which “reflects a darker, old-world sensibility, in which my satisfaction results from a combination of what I can do and what you can’t. Old money does things to other people. … Economists call these ‘positional’ goods; if you possess them, some one else can’t.” In those terms, young money sounds much better than its predecessor.
It’s never that simple, though. Fallows notes that “the interest in shaping other people’s reality also leads old-money folks to buy public facilities (sports teams, publications), become involved in politics, and eventually immortalize themselves with charities …”
Maybe the new-money folks are maturing, but donations from a growing number of e-millionaires (and a few billionaires) are on the rise. You may consider Bill Gates the devil incarnate, but the Bill and Melinda Gates Foundation seems to give away tens of millions of dollars every few weeks. Many other Net execs and most big companies either donate money or set up their own foundations.
I’m eager to see what Mr. Raymond does. He clearly doesn’t consider his new money mere play dough. It would be something to watch the open-source movement ripple across the real world in the same way it has moved through cyberspace.