Tuesday, November 27, 2007

Cable will Evolve or Die

Cable companies have an obnoxious way of providing channels in inflexible bundles, giving customers the channels they want with the channels they don't want for themselves or for their children. The CNET News article "Can the Internet really compete with Cable TV?" looks at the recent proposal for FCC regulations that would force cable companies to offer channels separately. The article also explores the possibility that competition from the Internet makes such legislation unnecessary. With satellite TV and seasons of TV shows on DVD, there's hardly a need to bring up Internet TV as evidence that cable has competition.

Nevertheless, TV-like Internet services have the potential to be contenders. The hardware is already in place to bring Internet television on a level playing field with cable TV. When I watch a DVD with my friends, it's as often on a widescreen computer monitor as it is on a traditional TV set. The services themselves that come along more slowly. Large, long-established networks take a few years to use the latest technology, but those who catch on most quickly will have the edge. If Hulu.com flops, someone else will do Internet TV better. Meanwhile, cable TV had better adapt to what people want, or its present and future competitors will run it over.

Tuesday, November 13, 2007

The Zero-Sum Myth

With so many manufacturing jobs being offshored to China, many blue-collar Americans fear for their jobs. Likewise, outsourcing to India has brought many white-collar Americans to realize how easily they can be replaced. At first glance, it looks perniciously selfish of companies to take jobs away from Americans just because foreigners can do them for less. It would seem that U.S. unemployment would skyrocket...but it doesn't. As Thomas L. Friedman points out in Chapter 3 of The World is Flat, the layoffs of hundreds in the U.S. due to outsourcing are offset by companies hiring increasing numbers of Americans, few by few. Jobs are leaving America, and yet America hasn't suffered a net loss of jobs.

Let's remember that this isn't the first time we've seen the economy give us a nonzero sum. The very rise of civilization is a powerful argument for a positive sum being possible. Recent decades have shown us tragic examples of self-inflicted negative sums. Mao's and Castro's regimes, though located amid adequate natural resources, imposed an inefficient command economy that had citizens waiting in breadlines for equal pieces of a distressingly small pie.

So how are the U.S. and its business partner countries turning up a positive sum? Efficiency and invention. Friedman argues that there are always marketable ideas waiting to be conceived, so the number of "idea-person" jobs in the world is limitless. I would add that, due to the innovator's need to mass-produce, the unskilled job market is also expandable. Simply put, innovators create jobs.

And they're creating jobs in China, where wages are a minute fraction of the U.S. minimum wage. This is a shrewd move, but is it ethical? They're getting a relatively small piece of the pie, but with increased efficiency, that pie is getting bigger. Furthermore, as more companies turn to China for labor, they will compete for workers by offering better wages and benefits. Before globalization, China was poor; with it, China is poor but it's being pulled up by more developed nations.

The U.S., as a prosperous nation, holds a position of responsibility in the global market. Since we have high wages, we'll need to start earning them or lose our jobs to lower-paid work. Since we have opportunities for education, we have not only a need but a duty to use them. Then we can set our minds to invent ideas that will lead the world to greater prosperity.

Consider the vast numbers of poor and illiterate people in the world, people who desperately need help to rise above their condition. Is there any shortage of work that ought to be done? With the economic merits of capitalism, the spark of innovation, and a healthy dose of altruism, much can be done. The world has risen this far; let's not limit ourselves now.

Tuesday, November 6, 2007

How does open source make money?

When open source software entered the mainstream, it brought new advantages and new questions to an economy formerly built upon copyrights and licenses. The advantage: open source developers build upon one another's innovations in ways that would be against the interests of proprietary developers. The question: since open source software's distribution is not restricted by copyright, how can developers make money off of it? Good open source applications are available for free, so where's the profit?

Trademarks are a big part of the answer. Robert Young's book Open Sources: Voices from the Open Source Revolution compares selling open source software to selling ketchup. Anyone can make and sell ketchup without worrying about copyrights. Heinz ketchup sells the best not because some trade secret makes it better, but because it has marketed its brand name successfully. This illustrates that good marketing is profitable, but the analogy breaks down. Each unit of ketchup requires raw materials and manufacturing costs, but copying software is essentially free.

Software, then, is not a good; it is better viewed as a service. Open source developers don't sell licenses, but they still manage to sell software packages with their trusted brand name. They also sell tech support, books, and other services related to their software. For more open source marketing strategies, see Manageability.org's list of not quite 101 Ways to Make Money off Open Source. Proprietary companies make money by being software owners; open source distributors make money by being software experts.