Employee Owned Source Code

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= sharing equity on software projects

URL = http://codesolid.com/employee_owned_source_code.html


Developed by CodeSolid:

"Employee Owned Source Code is a new way to organize software projects that is designed to allow designers, software engineers, QA engineers, and other software builders to collaborate and share equity on software projects.

We believe that venture capital is superfluous to our goal of building marketable software products. Companies like 37 Signals have already demonstrated this point, though they may have organized differently in other respects. We are working for ourselves, not someone else.

We build equity by a commonly agreed metric. On the Goalboost project, we use the metric of "one hour per share", which mean that a time and billing application was the perfect way to simultaneously dogfood an app we can sell with a tool that helps us manager our equity model. Everyone contributing to the project gets a share of the product equal to the number of hours contributed / total hours contributed. That's not the only metric we could use, but it's a useful one.

The flatness of the equity arrangement means that certain skills such as QA may end up being better compensated relative to development than they might in other organizations. However, given that the only capitalists on the team are we builders, development still plans to do quite well.

All shareholders get one vote on hiring decisions and other common decisions we need to make, so although shares may be distributed unevenly (according to hours contributed), our group consensus is not an oligarchy, but a democracy. See the "one worker one vote" discussion in What is a Worker Cooperative? (pdf).

It is a software licensing model. Currently for Goalboost our source is available on Github to allow others to decide whether to contribute, but we may decide at some point for to make our code proprietary and available to contributors only.

* What It Is Not

  • Employee Owned Source Code is not open source. The goal is to build marketable products for profit. Our work is copyrighted and proprietary, just as it is on any closed source project. The difference is, the owners of it are we who created the value.
  • It is not centralized. We work where we live.
  • It is not a software development methodology. We do what we agree is right to build the software."


Why Employee Owned Source Code is a Problematic Solution

Michel Bauwens:

(see: http://codesolid.com/employee_owned_source_code.html)

Once in a while, we are confronted by initiatives which elicit contrary feelings, especially if they come from what you consider as ‘your own side’.

An example of this would be my perplexity towards encountering CodeSolid and their proposal for Employee-Owned Source Code, originating as it does from a cooperative, which Nathan Schneider considers to be a platform cooperative. As he writes about them in a Facebook exchange:

“ I do view it as a platform cooperative because a) ownership is shared through the company's online platform, not behind it (as in a tech worker cooperative); b) membership is open to whoever contributes; c) governance is handled according to one-person-one-vote.”

(but let me note that it is not clear to me that this is actually the case; I read the description as being a closed cooperative shop)

So here is a labor initiative based on shared property, we should rejoice right ?

I’m afraid I can’t, and this for a number of reasons:

first of all, in their presentations, they explain their motivation as a critique of open source, which they say is ‘free’ and cannot generate incomes.

This is a strange argument, since for the last 20 years, the free software movement has insisted that ‘free is not gratis’, i.e. free as in free beer, not free as in gratis.

Of course, the two aspects are often related, but it is important to see why. Software is a resource that is subject to near-zero marginal cost of reproduction. This is true independent of whether a software is open or closed. Current technology simply allows for the very easy sharing of any software available in the market, an aspect which is very strong for me personally as I live in East Asia, where hardly anyone ever pays for commercial software. This is the reason that companies like Microsoft now give their Windows 10 software for free, not because they are kind-hearted, but because they realized it was a lost battle.

So indeed, open source is not free because it is subject to a shared license. But that of course doesn’t mean at all that open source provides no income. First of all, open source is hyper-productive, i.e. entrepreneurial coalitions aligned around these shared pools have access to quantum leap in resources, compared to entrepreneurs who choose the path of private proprietary software, and this is both why open source is becoming standard amongst developers (see the 29m software projects on GitHub), but also for venture and other investors. While proprietary software is far from dead, it is a steadily declining part of the code pool.

Open sourcing software leads therefore to competitive outcomes, and thus income, to vast reductions in infrastructural investments, which can be used in other productive ways by participating entrepreneurial entities. Finally, while the open source software is often free (as is a lot of proprietary software), it also generates substantial incomes for developers, which are actually a ‘aristocracy of labor’. Fair use pools not only generate 1/6th of U.S. GDP (according to a 2011 study) and emplloy 17 million workers, but developers are generally well paid for their work on software. Labor for open source is only ‘free’ if the motivation of the workers is to develop such software either for their own use, or to contribute to common projects they believe in.

Making money from an abundantly shareable resource that is kept artificially scarce through repressive laws like the Digital Millienium Act is actually properly a form of rent extraction.

With these arguments in mind, what can we say about the decision to collective enclose software in a cooperative ?

First of all, in terms of income, it will make little difference, since their labor will be paid regardless, and even as a startup, it’s a good bet that they will have to develop a lot of the software for free anyway, as companies will not buy a cat in the bag.

Secondly, it makes them uncompetitive, since they cut themselves of from shared development. As a company, you’d have to think very seriously in order to buy proprietary software that will likely evolve much more slowly and with much less support than open source software. It is more likely you would work either with a private company participating in open source, or with a free software based labor cooperative. If you choose the first, you have dedicated service, likely to be reliable, if you do the second, you participate in the creation of al alternative ethical economy.

Working with closed proprietary software has indeed a number of ethical challenges:

the first is that you are deliberately withholding useful knowledge from humanity, and depending on the criticality of your sector, that could be a major problem

second is that it aligns you with legal and technical repression, since abundant resources can only be made artificially scarce at that price; this is certainly uncomfortable for ‘progressive’ entities

third, it aligns you with liberal ideology, i.e. the belief that private selfish behaviour, even in a collective form, will automatically general public benefit, instead of explicitely aligning yourself with social and environmental goals

fourth, it aligns you exclusively with an exchange-driven economy, instead of a use-value driven economy.

fifth, by charging rent from a abundant resource, you align yourself to a game of the democratisation of rent exctraction, rather than changing the rules of an unequal and iniquitous social and economic system; the only different is that you do this as a collective owner rather than individual shareholders. Granted, that is of course a big difference.

We also have to seriously challenge, apart from the increased lower competitivity of proprietary software over time, whether ownership in a artificially scarce immaterial resource, will actually work in any way to create “equity”, which presumably would be gained from licensing fees. But for these licensing fees, as open source companies have proven, you don’t need to privatize your software, it suffices to create value added services that the market is willing to pay for.

So for me, there is only one good argument for choosing the path of CodeSolid, apart from a purely pragmatic argument that it may be justified to use temporary limited proprietary software in a context of competitive realism, i.e. avoiding that third parties take immediate advantage of one’s open source work.

It is the argument of exploitation, i.e. the fact that, in capitalist open source companies, i.e. the private shareholders extract private rent, which is for me the only serious justification for collective artificial enclosure of software by the “good guys”; though as I argue for all the reasons above, I do not believe it will work.

The main objections are however also strategic.

As open source software and all open knowledge, has proved to be hyper-cooperative and hyper-competitive, the question indeed arises, who will profit from that extraordinary productivity, where will the freed surplus go ?

Clearly, SolidCoop does not like that, but paradoxally, by removing themselves from that hyper-productive advantage, they are leaving it to capital to profit exclusiely from these gains. I believe in this context, that the proposed choice literarlly condemns progressive social change by leaving the appropriation of that enormous surplus value to capital.

Is there an alternative from retreating towards collective privatisation of abundantly shareable resources ?

I believe there is, and it has two aspects. One is the notion of open cooperativism and the second is the one of commons-based reciprocity licensing.

How does open cooperativism differ from platform cooperativism ? Platform coops decide to mutualize plaftorm ownership, and this could be either private common ownership, or a commons. So certainly, platform coops that decide to include the user community in their governance and property arrangements, could be open cooperatives.

Open cooperatives are cooperative arrangements whereby the goal of the entity is the production of a social good, with the aim to create livelihoods around this social good, i.e. they are not-for-profit (but not ‘non-profits’); second, they agree to actively construct shared resources for humanity, i.e. they co-produce commons with the productive communties and ethical entrepreneurial coalitions they are aligned with or belong to; third, they go beyond collective private ownership towards multi-stakeholder forms of property and governance that include user communities.

One of the issues however with open coops, i.e. coops that actively co-produce commons, is the issue of captation of value by outsiders. In my view, this is much less a problem for software, but become a serious problem when it is linked to physical production, and its necessary investments in places, machines and raw material. In such a context, the use of the open source software by much stronger capitalist forms, especially if they do not contribute to the common effort, represents a huge issue of value distribution and fairness.

Here is where the commons-based reciprocity licenses come in, such as the CopyFair license we have proposed. In this scenario, commons are still produced and shareable by other workers and citizens, but commercialization is forbidden by non-reciprocal players. In this scenario, the hyper-productive advantages of open-sourcing are fully taken on by participants, and the surplus value only goes to the co-producers, not to any freeriders.

But what about equity in this scenario. Can participants obtain equity ? Yes, in everything that is not a abundantly shareable resource. A mutualized commons fund, that collects ownership and investments in land, machine-parks, and represents the immaterial equity from the collective expertise of the entity (as capitalist firms do, since only 20% of their worth can be traced back to material resources).

Since we live in a time period where equity in software no longer functions, this model only represents a gain. As the cooperative of platforms gains since, the commons funds grows and can start paying out an extra basic income to all participants (see the ideas of Dmytri Kleiner in that respect).

Voila, I made my points here I believe, explaining why I believe Employee-Owned Software is a pragmatic and strategic mistake for progressive forces and the alternative economy.

For an example of a successful commons-based ethical entrepreneurial coalition, look at the practices of Enspiral.org which combines the co-construction of commons (loomio, co-budget), ethical entrepreneurial forms, common governance of the common infrastructure (Enspiral Foundation); and very clever proposed ways to coopt external funding (capped returns, etc ..).