Re: "Bill makes all the important decisions here."

Mike Masnick (
Tue, 20 Jan 1998 20:40:33 -0500

At 03:23 PM 1/20/98 -0800, Seth Golub wrote:
> writes:
>> I was thinking of the cost of paying the tech support staff. If
>> someone calls in with a tech support question, then suddenly one
>> less tech support person is available to help someone else - making
>> this a depletable and excludable resource, which can be charged for.
>How is this different from a web server? Each has a maximum number of
>simultaneous connections and ignores requests until a server is
>available. If you want to be able to handle more simultaneous
>transactions, you hire/buy more technicians/servers. HTTP
>transactions typically don't take very long compared to service calls,
>each server can handle more than one at a time, and the servers are
>much cheaper than people, but it still seems like the same sort of

But servers don't cost by how much time they are used. Once I've bought my
server, I can handle x many new customers without adding any additional
cost to me. With technicians, I need to pay them per hour they work, so
it's an incremental cost for how much I need them. The same is not true
for web servers. I don't pay for the web server based on how much it is
used, right? I pay an upfront fee. So, the marginal cost to the end user
is zero for a server.

>> Example (sorta): Linux is free, right? However, plenty of people
>> will go out and buy a big book for documentation and a CD-ROM copy
>> to make installation easier. Linux, the software, is really being
>> given out free. The book and the CD-ROM are the depletable,
>> excludable goods that are being sold since they add value to the
>> non-depletable, non-excludable software.
>That's a pretty goofy example. You could also argue that automobile
>companies are spending billions (by selling cars) on advertising for
>beaded seat cushions.

No. I couldn't. An automobile is a tangible good. I'm not claiming that
anyone should give out tangible goods for free (though there are some
instances where that makes sense too). I'm saying that anything that is
effectively non-depletable and non-excludable, in the case of competition
will need to be priced at zero. It's just going to happen. Linux is
priced at zero, but people are making money off of it. How? By bundling
Linux with tangible goods and/or services that add value to it. And what
happens as a result... things like SCO Unix have to cut their prices
(didn't we just see a post about that?). The marginal cost is zero. As
competition gets better, the price to the consumer will be driven down to

>While the existence of Linux makes a Linux book far more attractive to
>consumers, it's not advertising. Putting "Buy a book" in the Linux
>docs would be advertising.

Okay, this becomes semantics. I didn't mean that Linux was "advertising"
in the traditional sense, but I was trying to get you to think beyond Linux
being a product that was developed and should be paid for by the consumer.
I just think that items like web pages and many forms of software have a
marginal cost of zero, and need to be sold at such a price (or will be
forced to if the competition shows up).

I guess what I'm saying is that these types of goods fall somewhere between
advertising and regular private goods. You have to admit that Linux drives
demand for books about Linux, right?

>They're both examples of creating a market (deliberately or not), but
>I think advertising is a narrower category.

As I said: semantics. Most people say that software and web pages are
private goods, and I say *that's* a narrower category. And, I would claim,
that they're closer to advertising than private goods because they drive
demand, like advertising.

>Does the sun advertise for Levalor, or does it increase the demand for
>their product through methods other than advertising? I claim the

I apologize, but I have no clue what you're talking about here. However, I
never meant to claim that advertising was the only way to drive demand.
I'm saying that products that are non-depletable and non-excludable really
should be used to drive demand. I put the word advertising on it, because
that generally has been the best way to get people to stop thinking about
these things as products that need to be sold.