Defending Against the Weaponization of Trust (Software Industry)
In the mid-1990’s a series of essays regarding the open source phenomena were written by a software developer named Eric Raymond (commonly referred to as ESR), much of it compiled and released into a book titled The Cathedral and the Bazaar.
Eric approached the domain from various perspectives, one of which included the “soft sciences” of sociology and anthropology, helping readers come to understand why software developers would invest so much time and effort into writing software “for free.”
If you’ve managed software engineers you come to realize that more money doesn’t necessarily unlock a higher level of programming quality or creativity. There are other factors which are ultimately transcendent of money, which (for the purposes of this post) is an example of “hard capital.”
In effect, ESR’s essays helped deconstruct what is generally referred to as a “gift economy,” which (as Ruth Glendinning and I discuss on The Anti-Fragile podcast) is one application of “soft capital.”
Think about our interactions with one another:
- we spend time with other people
- we pay attention to one another
- we build relationships
- we earn trust
We: spend, pay, build, and earn forms of soft capital, which (again) are what’s necessary to launch and sustain a gift economy.
Consider for a moment that some forms of soft capital have value that transcends the power of hard capital (money).
For example: trust.
Trust is impossible to buy, can only be earned, and is lost in an instant, and once that happens, can massively diminish the value of hard capital.
In effect, trust (as a form of soft capital) is an economic “weapon of mass destruction” in the hands of a skilled practitioner.
Allow me to offer a simple example:
In his essays, Eric Raymond (ESR) observed the following regarding the perceived difference of value between hard goods and software.
Consider a chair. Generally speaking, the perceived value of the chair is derived from the chair itself.
Value (within our culture) is typically expressed in monetary terms, and so a discussion regarding a particular chair’s value would be reflected in statements like:
“I’ll pay you $25 for that chair”
or:
“I am selling this chair for $35”
Software is different: ESR observed that the value of software isn’t rooted so much in the utility provided by the software in its current form, but in the promise that there will be a pipeline of new features and consistently-delivered maintenance in the future.
For example: Adobe Photoshop, used to edit digital images, and originally released 32 years ago, in 1990. Currently on sale for the retail price of $239 (plus maintenance).
Let’s assume that later today, Adobe announced an “end of life” for the Photoshop product. “End of life” (or “EOL” in industry parlance) means that the product will no longer be supported beyond a stated date.
The retail value of a software product plummets and eventually flatlines as soon as that product is declared “EOL,” and again, this is because the company has indicated that they will no longer support the maintenance of the product, nor will they release any new features.
There’s a lot of really important stuff to consider here, so I ask that you pause and digest what I’ve just shared.
Generally speaking there are two forms of pricing:
- cost-plus
- value-based
Cost-plus pricing takes the total cost of a product and adds a few dollars to determine a price that the person considers fair.
Most modern products and services don’t use cost-plus pricing; the use “value-based” pricing, which is a practice rooted deep in the application of psychology.
Generally speaking, people don’t understand money, and they don’t understand value, which makes them (as a consumer class) generally easy to manipulate into paying $1,040 for a product or service that actually cost $0.07 to make.
- cost-plus pricing: $0.07 + mark-up
- value-based pricing: $1,040
The pricing of software is entirely based upon perceived value, not cost, and the domain of “pricing, packaging, and positioning” is a black art that plays off applications of social science to identify the perfect nexus of all “three P’s” to zero in on the ideal value-based price.
Do you know what? Trust, as a form of soft capital, has the power to completely destroy all of that perceived value, which is why I say that there are forms of soft capital which have value transcendent of that provided by money.
Example:
Let’s assume you are working for TECH INC, and your competitor is a company called ACME, both providing software-based services to corporate customers.
Both companies invest millions of dollars annually, battling head-to-head for new market share (new customers), yet both companies are financially dependent upon a stream of maintenance revenue from their existing customers.
Because that’s how the software industry works: the ongoing maintenance of software is actually what keeps the lights on, not so much the acquisition of new customers.
(A similar dynamic exists in other industries as well, by the way; new car sales is soft of important, but what’s vital to the automotive industry retailers is ongoing maintenance revenue.)
So let’s assume that TECH INC launches a low-level and low-cost whisper campaign, executed slow-and-low on a few Twitter accounts, a few places in Reddit, and elsewhere, targeting existing customers of ACME.
The message:
“I’m also a customer of ACME software, and have noticed that they aren’t adding new features each year, nor are they doing a very good job of providing regular maintenance updates. I feel like ACME is milking my company for renewals, so we are considering alternatives so we can get the best for our money.”
That’s the message. It’s very simple, but devastating because it hits at the heart of trust, as a form of soft capital, which has a value transcendent of that of money.
The manifestation of this attack takes the form of increased demands for discounts at maintenance renewal, which is thus quantified in a devaluation of the product within the marketplace.
This may seem like a subtle thing, and you’re right, but it’s deadly; a product in a devaluation cycle is headed towards EOL and thus towards death.
And the campaign works because it’s based upon truth. In fact, all companies milk their customers for maintenance revenue; that’s the business model.
So the “whisper campaign” isn’t disinformation; it’s truth, and as such a company can defend themselves by simply being truthful, transparent, and consistent in the manner by which they continue to add new features and necessary maintenance to their product.
Granted, most of them don’t, because the business world tends to monetarily reward people for “the exploitation of unrecognized value,” otherwise referred to as “entrepreneurial creativity.”
Which is sad, because it lacks creativity. There’s lots of ways one can embrace entrepreneurial creativity without being dishonest, but what are you gonna do about it?
The answer is: come up with a more competitive model, which is what the “open source” movement was (and is).
The open source model is one that suggests that a number of software users will engage in gift economy to launch and sustain a software architecture that can be used for free.
It’s a radical concept, but not a perfect one, as I discuss in this article “closing the loop on open source,” which is summarized in the following manner:
The “gift economy” of the “open source” community is subject to the “tragedy of the commons,” resulting in significant gaps which can manifest as security defects, stability and performance bugs, system incompatibility, and so on.
