Coté
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Commoditize your condiments, or, open source business models considered
Business models are fascinating. Most business models come down to a type of arbitrage, at least as I understand it. You find something you have that you can sell to someone else, crucially, at a price above what it cost you to make that thing.1 In, let’s call it, The Capatalist Upbrining, there is a major intellectual jump where you understand that the price for a think is not determined by what it cost to make it, the costs of goods sold. No, no - not at all. How much it cost to make a thing has little to do with what price the thing sells for. And there’s the arbitrage: a business model is all about making the difference between the cost of goods sold and the price paid for goods as big, large, and mysterious as possible. Buy low, sell high.
It is because I am so familiar with the business of software that I think of it as The Beautiful Game of business. There is only one product more ephemeral as software, and that’s selling identity, life-style, existential, I don’t know, “affirmation”: Coke, Nike, Patagonia. The margins on selling identity are extremely high and durable over decades. But, software is up there.
Anyhow, this is why connoisseurs of software strategy are annoyingly obsessed with open source startups and business models. It’s like my imagination of studying particle physics: you just load up some stuff into a big torus, wham that stuff together at high-speed to make them explore real good, and look at sparks and charts that follow.
Anyhow, that’s the subject of this week’s Software Defined Talk episode. The theory I put further is that open source is a commoditize your condiments business model. Which is to say, it’s ketchup. You can’t have a business that just giving away ketchup.
You would never eat ketchup on its own: this is widely considered disgusting. Put in your mind the image of someone walking up to a ketchup pump, bending down, putting their open mouth under the spigot, and giving one, swift pump.
Buuuuut: if you put ketchup on something, it is considered delicious. American French fries are not very good on their own: you pay for them as an excuse to eat ketchup.
An open source business without the fries performs poorly.2
There is no free-as-in-catsup in Europe
When it comes to the business of condiments, the Europeans are the clever ones. Usually it’s the Americans who are clever at the business of software, pardon, I mean, of condiments. First, the Europeans eat mayonnaise not catsup. I think they view catsup as something like children’s food, but I’ve never really asked.3 Back to my point: the Europeans never made mayonnaise free. You pay for mayonnaise and catsup. You pay an insulting amount: something 50, sometimes even 80 cents. It is insulting because it is such a small amount.4 Well, insulting to Americans.
In America, pricing obfuscation is politeness. A business should not reveal that it uses “loss leaders” as a net to pull in fish; a business should never let you look behind the curtains and see that they’re selling sugar(free) water at a massive mark-up. The ketchup you get from pumps and packets at an American restaurant isn’t free, the price is included in everything else.
But in Europe, no.
They make you know the price everything you’re buying. Europeans are very open, clear, straight forward, explicit. Transparent.5 They want you to know exactly what is happening, exactly the truth. Everything is catalogued, everything is logged. Do you want catsup with your burger, then, here, I am putting that on the receipt, what you paid for it. Are you behaving in a strange way? Then, here, I am going to tell you. Surely you must know this, and if you don’t surely you will be delighted that I am telling you
Americans have a phrase, “not my circus, not my monkey.” The European equivalent would be something like “our monkey, our circus.”6
Hmmm. I seem to have doorway’ed myself here.
So.
Anyhow! Check out this week’s episode, The Big Blue Burger Buffet.
📼 Lead Time to Schwag
The first thing that’s funny about this talk is that the people who posted it didn’t realize I completely changed the talk. They posted it with the original title. I mean, obviously they weren’t going to watch it, but it’s such a strange editorial non-decision decision.
The second funny thing is, you know, my actual talk. How do you apply developer productivity metrics philosophy (you know, “developer productivity”) to getting free shit at a conference? Also, who doesn’t like a good ITILv3 joke? I didn’t watch it until the end, but who does that in YouTube?
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Back to work tomorrow!
I am speaking in terms of products. There are also services, yes. But I can’t go about listing all of them in each sentences, that would be boring. And there are also financial “products” - insurance, securitized, uh, things. Those are even more fascinating: you’re selling promises, but you’re also selling hopes and stories. I don’t know what the think of financial products: the cynic in me says they’re one of the most conniving products invented (further, they’re a let-down of humanity: all of that intelligence and effort spent to create something that is actually nothing - if only those people applied their efforts to real problems - it’s like tech philanthropists spending their effort on The Paperclip Problem instead of just bankrolling mosquito nets and goats); the realist in me thinks, well, it doesn’t think anything, it just reacts to the cynic’s sentiment like a parent reacting to a 12 year old’s constant quest to tell you what’s fair when you just want them to help you empty the dishwasher, where, conveniently what is unfair is some boring chore they don’t want to do because they’ll have to stop watching people play Minecraft in YouTube (their argument is that their sibling should have to empty the other half, otherwise it’s not fair [there is no time your life when justice is so real, so important as when you are 12]); the flânerie in me enjoys any fiction they have time to slowly walk by.
I realize this analogy breaks down: the users of open source actually do squat down and squirt the ketchup into their mouths. But, stick with me here. I’m comparing open source business models to ketchup, after all. We're not hitchhiking anymore, we're riding.
This is something interesting about European culture. They make a sharp line between childish things and adult things. This is why Europeans dress so well to American eyes. And they’re wearing athleisure they adorn themselves with Prada fanny packs to make you understand that they are not dressing like children. And, really, football-as-in-soccer athleisure feels so much more sophisticated than American athleisure.
American pricing culture would think like this: yes, of course ketchup costs us, but we won’t charge you for the ketchup on a per unit basis. We’ll just raise the prices of the other food to hide that you’re paying for ketchup.
I keep saying “European” here, and by that I mean “Continental Europeans,” which is to say, “largely, not the English.” As ever, the position of the English vis-à-vis Continental Europeans is fun to ponder. When I go to the Netherlands beaches, in my imagination I can just barely see England across the narrow channel. But, you can’t actually see England from here. That narrow channel might as well be as wide as the Pacific. But, maybe they serve HP Sauce with the frites in Calais; I’ve yet to check.
Of course, I should never doubt that the Dutch have a proverb for the sentiment.