Bits for Sale
On a recent episode of FLOSS Weekly (an episode initiated by yours truly), entrepreneur Bre Pettis exclaimed "bits should be free, atoms you should pay for". He was referring to the his open source 3D printer business, Makerbot Industries, but I think this concept applies at a much wider scale.
By profession, I am a computer programmer, and I work at a company that sells bits. I am one of the people who actually creates the bits we sell, and I do so by writing code, compiling it, and packaging it into installer applications. I produce bits for sale, but that does not mean that I don't question the method by which I earn my livelihood. Bits are easily copied, and copied perfectly at that. Furthermore, bits are extremely easy to transport geographically, and you can give them away without having to give them up yourself. If we were to consider bits to be a natural resource, they would be worthless, and certainly nothing to use as the backing of an economic system. That much said, I sell bits.
If you couldn't tell, I harbor some uneasiness about the legitimacy of my profession. One would think that there isn't much money in being a bit producer like myself. However, over the last 30 years or so, bit producing has been considered a high income profession. I think it's worth looking into how this could be, when basic economic laws of supply and demand would suggest that bit producing is a valueless task. Let's look back at history.
When computers first started being used in industry, they were large calculating machines that could run reports for large corporations and institutions. The crunched numbers quickly, and in a more accurate and cost effective way than humans. These were the number crunchers. Creating bits for number crushers was profitable, because all bits were created to process a specific task at a specific location. All the bits an organization had were kept within the confines of a single room. It was of great value to these organizations for someone to keep their bits calculating correctly, and storing safely.
When personal computers came out, they were useful (as the name suggests) on a more personal level. They could store and recall business records, be used to type letters and memos, and store recipes. They could be used for simple graphical applications, and do complex engineering calculations as needed, where the number crunchers were best used for doing lots of calculations in bulk. These were the productivity machines. During this time period, bits were hard to come by. The medium that bits came on were large, slow, and unreliable. Piracy occurred, but was neither easy nor profitable. Data was generally not shared outside of an organization. The input and output of the organization itself was still the same as always, only the way the company worked internally changed. The bits allowed productivity to soar, and therefore bit making was profitable.
When the internet first started getting big, computers were now put to the task of creating content for the web. Search engines were invented to be able to find the information you were looking for. Communication was now possible between great distances, at very low costs, yet it was not yet assumed that everyone had access to communication in this way. This was the age of internet publishing. In this economy, bits started to be more heavily used as a communication medium. Publicly available bits were put out on the web as advertising materials, catalogs, and order forms. Partner organizations could now share data as bits, and the traditional transports mediums (memos, blueprints, photographs, etc...) started to be replaced. Computers were still expensive, and there was certainly less than one per household, so there was still a large barrier of entry to becoming a bit producer. In this economy, bits were more useful than ever, and were still being produced mainly by organizations, not individuals. Bit producing was extremely profitable.
After a while, the internet started to acquire more and more user created content, breaking down the previous writer/reader model. Now, readers and writers of content are indistinguishable in what has been called Web 2.0, and sharing information is much more commonplace. Computers also got smaller, and internet connections more available. It is now extremely common for even the poor and middle class to have internet access literally in their pocket. Every minute of every day, average people are creating lots of bits on inexpensive computers. Tools for software creation are free, and run just fine on the type of computers you can find in the trash. The majority of software being produced is now being offered as a service online, whether for free or for a fee. The most popular applications encourage and enable online colaboration, and data is considered useless if it cannot be shared. In this economy, we are competing for attention more than for usefulness.
So where does this leave a bit producer like me? It leaves me thinking about selling atoms. It's not that writing software has no value, it's that the software itself has no value without something attached to it. For examples, look to the big players in the software industry right now.
There's Microsoft, which makes money because computer hardware comes with it installed. Very few people rush to the store to buy Windows, people just "coincidentally" pay for it when they buy a Dell or a HP. They use this as a foot in the door for other bit-selling ventures, but that's another rant.
There's Apple, who sell their own software bundled with their own hardware. Sure, they also make money selling musical bits on iTunes, and there's-an-app-for-that bits on the iPhone store. However, that is only profitable because Apple made the hardware those bits get bought to, and they made sure to control the market on both.
There's Google, who barely sell any bits at all, and make their money as an advertiser. In Google's case, the more bits given away for free, the better, and the more usage of their free services, the more they can charge for ads. That's why they get into businesses like smart phone operating systems, video sharing sites, free email, document editing services, collaboration tools, web browsers, and a ton of other things I can't remember. I hear they also have a search engine. Google uses the free-ness of bits to its advantage.
So what about companies whose sole revenue comes from the sale of bits? To be honest, I'm not sure if there's a future in that. It seems that anyone who's making headway in today's bit-heavy economy is doing so by not relying on selling bits alone.
Makes me want to get back to work on my 3D scanner project.
