The Open Source Price-Warp

It’s hard to recall exactly when it started, but ALL THE BULLSHIT IN THE WORLD seems to be justified by the notion that corporations should do everything because when they compete, the prices are better.

I think it started with Reagan – or at least it came out of the closet under Reagan… but Thatcher did the same, and here in New Zealand a Labour govt was hell-bent on selling assets owned by everyone, so people who were rich, could the rent them out to people who were poor. This ideology was used to rape and torture South America (under the aegis of the IMF, who now admit they were wrong)… and the same austerity and insanity is being inflicted on the EU, resulting in the highly predictable return of Nazism.

Corporations do not compete on price, they compete on profit. This may be achieved by driving prices down, or by innovation… but is just as likely to be achieved by lowering the value of their output, or by shifting their business into areas where they can extort monopoly rents. Or crime.

Enter Open Source.


Something I’ve noticed is that open-source is driving prices down far faster and steeper than corporations ever did. That little helicopter (which is smartphone controllable, and has streaming video) is mooted to be sellable for $49. I’m mildly suspicious of the company that’s selling it – because they’re not selling it… and won’t, because although they claim to be open-source, they’re only interested in licensing the their “products”… which as far as I can tell ain’t that open…

… and then there’s the Leap interface. Also not open, although it is created to be a development platform… but $70? If that was being sold as a consumer item it would be triple that at least. Again it’s something that isn’t actually available yet – which is another pattern I guess. Maybe that’s a factor – using really low price as a marketing driver – and if you’re doing it with pre-sales you’re not in the risk-aggregation business.

So item 1 and 2 – dubious openness, but far far cheaper than expected – but then there’s the Kickstarter effect on 3D printing… the price has nose-dived far faster than equivalent corporation-built machines. I think video camera accessories are seeing a similar pressure, from a similar direction. The Video DSLR blogs constantly go on about “affordable” products… by which they mean $700. Open, mail-order based variants are knocking the legs out from under them.

I think there’s a bunch of things going on here. Namely:

1) Mail-Order

Selling mail-order only, automatically halves the price. If you’re intending to wholesale, you need to double your online-price, because bricks and mortar retailers generally want to put a 100% markup on top.

2) Micro-business

Tiny businesses, often run out of residential premises do not have the red-tape and expense that businesses with employees, commercial premises, loan repayments, insurance etc etc. Upstream efficiencies multiply downstream savings.

3) Transparency

If everyone can see what your materials and labour costs are, you can’t quite so easily “just make up a price that the market will stand”… because people will just make their own.

4) Not in the risk aggregation business

Big corporations do not make products that solve problems that they themselves have. Their model is based on sinking A FUCK OF A LOT of money into development, market-research, marketing etc etc… the costs of which are all up front, with the risk the product might not sell.

Because of this, the products that do, are covering the costs of those that don’t – so need to be milked for all they’re worth. This creates a bias towards incremental innovation…

risk aggregation businesses have a bias towards incremental innovation

… open-source on the other hand has a bias towards disruptive innovation. Open source is all about changing the rules of the game, or of not playing to rules at all.

This is why big corporations so desperately need copy-monopoly laws… and why open source does not give a flying shite about them.

5) Crowd-funding to achieve economies of scale

Still can’t do economy of scale like major corporations… but pitching it to the web as a pre-sale is leveling the playing-field, and relieving innovators of the pressures that career-lenders tend to impose.

6) China

Or more accurately, Ali-Express, which radically lowers the costs of (some) components. Similarly Ebay – although what’s cheap on Ebay and what’s available on Ali-Express is often coming from the same people.

7) Rapid-fabrication techs

… primarily laser-cutting, followed by 3D printing and CNC milling. These lower the cost of prototyping, and more often than not, allow you to create parts for production without having to lay out $$$ for injection molding etc etc.

And again – upstream efficiencies multiply downstream savings.

So… in a nutshell… all roads are not leading to, but are leading away from, risk aggregation. That’s the key factor I think.


And that’s probably enough for now I think.

2 Comments » for The Open Source Price-Warp
  1. Rafael Carrascosa says:

    I has been a year more-or-less that I read every post you do.

    And that doesn’t mean I unconditionally cheer your posts, I don’t always agree with you.

    But *this* post, in my opinion, it’s quite an accurate reading of what’s going on. I totally agree with you. Great post :)

  2. Nick Taylor says:

    Thanks :)

    FWIW – I don’t always agree with me.

    Blogging is really good for teaching yourself what you think – and I’ve been flat wrong about quite a lot in the past. Asking questions is one of the highest human virtues I think – providing answers is mere vanity :)