Victory of the Commons

Update Dec 12th 2013: here’s the video! About half way through there’s a short clip from A Beautiful Mind that gets clipped out, that’s embedded a bit below in this post:

Note from Joost: This is the write up of the presentation I gave today at WordCamp Europe and an earlier version in Dutch at Drupaljam. I created this presentation together with Marieke, who also wrote this post based on it.

Introduction

At Yoast we make money using the open source platform WordPress. For some people this might feel contra-intuitive. Can you make money while giving knowledge away? And should all of your software be free if you work with open source?

In this post we would like to explain how making money in an open source community is not weird at all. In fact, our point is that making money in an open source community is even beneficial for the open source community (and of course, for us too J).

Tragedy of the commons

The concept of the “Tragedy of the Commons“ was first introduced by Hardin (1968). Hardin’s article has been influential in economics, but also among ecologists and environmental policy researchers. More importantly for us, it is applicable to common-pool resources. And in our opinion, the open source community can be seen as such a common-pool resource. Let us explain the Tragedy of the Commons:

Imagine a pasture. A green pasture. A pasture that is open to all herders in the neighbourhood. Every herder can put sheep on the pasture. The sheep will grow and give wool, lambs en meat. All benefits are for the herder. Each herder is thus motivated to add more animals. This will lead to overgrazing. The pasture will become less productive. Even when the number of animals exceeds the capacity of the pasture, each herder is still motivated to add more and more animals. Surely, the herder receives all of the proceeds for the animals and only a partial share of the cost of overgrazing. Eventually, this leads to the tragedy, the ruination of the pasture.

Open source: a reversed tragedy of the commons

The open source community is a common-pool resource. Let’s look at the open source community as a pasture. It is a platform in which people can participate and contribute and from which users can download free software. Contributing to develop software and donating your knowledge to the open source community can be seen as proceedings that take care of our pasture. But what about the sheep in this example?

It seems as though in the open source community, developers take great care of their pasture, but hesitate to reap their benefits. It is like a reversed tragedy of the commons: in the WordPress community there are many benefactors who bring fantastic ideas and products to the community, but who make virtually no money. So, we are mowing lawns and watering our pasture, while there aren’t any sheep grazing (in fact, it is even worse, see our aside on ‘free-riding’).

That is what Joost was doing up until 2010. He developed all kind of functionality for the WordPress community. Entirely for free. Beautiful and useful of course, but from 2006 onwards he had a child to feed. So, Joost needed a full-time job in order to make a living.

Insights from Adam Smith and John Nash

Adam Smith stated that if every individual does what is best for him, the situation would be most optimal. Assuming Adam Smith was right, Joost would have chosen to focus solely on his professional career in 2006 and quit working for the WordPress community immediately. Fortunately, John Nash already showed (both theoretically as well as mathematically) that Adam Smith was wrong, as is explained well in this scene from A Beautiful Mind:

Applying John Nash’s principle to open source

According to John Nash, the most optimal result will come as individuals do what is best for them and for their group. This means that the most optimal result will come by both taking care of your pasture as well as using the pasture for your cattle. Applying this to the WordPress community would mean that one should invest in open source software development as well as in individual gain (through the open source community).

Making profits in open source

Although contra-intuitive for some, developing open source software and making profits, can go hand in hand. We would even dare to state that making profits in our company enhances the development of an open source community like the WordPress-community. As Joost started making money of his WordPress-work, he was able to quit his full-time consultancy job. Now, he can spend much more time on the development of open source products and in fact hire other people to develop alongside him.

Win-win equilibrium

John Nash calculated an equilibrium. So, the optimal result will appear when harvesting your pasture and reaping the fruits from your cattle is in the right proportion. The most optimal result for us will appear if we actively develop new open source software as well as profiting from selling (support for) open source software. For us, it also means that we want to continue to distribute free plugins. Simultaneously, we sell plugins and offer support for paying costumers. Making profits will allow us to invest more in open source. Investing in open source will allow us to make more profits. It truly is a win-win equilibrium!

Of course, an equilibrium is always vulnerable. Putting too much effort in developing free open source software would eventually result in a bankruptcy of our company. Putting to much effort in maximizing our own profit would result in damaging our reputation and by doing so in diminishing profits (and of course in less open source development).

Conclusion

Making money with the development and distribution of open source software is very possible. This combination is not weird at all; it is a nice Nash-equilibrium!

This situation could be seen as a Victory of the commons: a nice green pasture and lots of healthy sheep.

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21 Responses

  1. Thomas N. ZickellBy Thomas N. Zickell on 7 October, 2013

    I agree everyone should get paid what there do for work rendered however if you are working as a developer on open-source software many people realize that you have to do your best in order to actually be recognized from the thousands if not millions of others that are doing the same work how do you do that well in your case you created the best search engine optimization plug-in on the market and gave it away for free if you did not accomplish this goal you would not be able to sell anything to anyone so to tell people to actually charge money when they’re starting out seems slightly skewed.
    However my business is mainly plastics I own a manufacturing company as well as a marketing company and I understand economics not as well as an economist but this is a free-market economy if you’re saying that your plug-in did not put you in a position to be able to charge for Huggins and actually gain trust of users for instance many people switch hosting companies based on your opinion may people do quite a few things based on simply your opinion because you’ve proven yourself right time and time again I’m not taking this hallway from you however why am saying is that if you did not offer this information for free you would not be getting the same amount of users nor the same amount of trust look at other content management systems that are not open source such as HubSpot tell me what are you doing for the WordPress community that is benefiting it by charging so much money for your plug-ins? This is not a negative I just want to know? All the best, Thomas

    • Marieke van de RaktBy Marieke van de Rakt on 7 October, 2013

      Joost would be able to tell you more precisely what he does for the wordpress-community (and I suspect he will do so in a few hours ;-)). For now, I would like to state that Yoast gives back plenty to the wordpress community: Yoast sponsers many wordcamps and will continue to develop his largest wordpress plugin (wordpress seo ) for free.

    • Joost de ValkBy Joost de Valk on 8 October, 2013

      Thomas, you’re seriously asking me what I do for the WordPress community? You mean other than maintain 30 plugins, sponsor WordCamps around the world, speak at them for free and provide free content on this blog, right?

      • Thomas ZickellBy Thomas Zickell on 10 October, 2013

        Hi Joost
        the 1st post on a cell phone using dictation unfortunately it did not come out is perfect as I wish it had.

        I in no way shape or form am implying that you have not given back an incredible amount to the WordPress I was not doubting your huge contributions that I truly understand you have given back a tremendous amount to the WordPress community possibly then anyone else you literally created one of the best plug-ins available and made it free.

        So please do not look at this as me attacking you I’m not I’m praising you I’m simply asking a question about developers that are not as accomplished as you and this same system being applied to them.

        I apologize if I was not clear on that I respect you and it is a fact you have contributed huge amount to WordPress.

        I agree you sponsor a lot of WordPress related events.

        I am not questioning your tactics I am questioning rather not people that do not have a successful plug-in or theme anything WordPress related to contribute will start off by charging therefore it will stifle their progress if the person X has no clout in WordPress community and delivers a product that costs money instead of trying to use whatever plug-in or theme they want to use as a free method for people to start recognizing that they are in addition to that start adding to their code using GIT many people working on one CMS equals a better CMS.

        I guess if you could tell me do you believe everyone should charge something for their contributions even in the very early stages?

        Please understand I was not questioning what you’ve given back obviously my ability to speak to you right now and even have this conversation regarding the topic word press and all the information you have on your website that is very valuable to many people myself included in addition to the numerous things you have given back to the WordPress community I am stating I recognize that and I applaud it.

        I simply thought that by telling people to charge when they don’t have the name recognition and most likely skills that you have acquired so is this more about how you’re going forward because I think it’s what you should do.

        For the average developer I think they need to stay free until they get a hit I say a hit I mean either somebody willing to pay them for their contribution it doesn’t matter what method but it must be paid in monetary form not gratitude.

        Or do you believe for the average developer they should start charging off the bat and hope there product does well?

        What you have done with your plug-ins and knowledge is going to surpass what many can do I am not saying that put anyone down I’m saying it because there are so many people working very hard to achieve what you have achieved and obviously not everyone can accomplish becoming a big fish in a very large pond.

        I’m sorry for the mixup I in no way shape or form intended to imply that you did not give back.

        Is this the structure every developer should follow?
        Sincerely,
        Thomas

        • SteffenBy Steffen on 17 October, 2013

          i think what you mean is market positioning. ofc not everyone can make such a complicated plugin such as the yoast seo one. but, that level of skill is not needed at all. you can make any plugin that fits your skills and that fits a need. if you make your choice right and your plugin does the job best amongst a lot of similar plugins you are on the right track.

          the free plugin brings you (like great articles in content marketing) a highly targeted crowd. giving stuff for free is afterall a great marketing instrument.

          in your case with physical products, you have a cost associated with every piece you would give away for free. on the other side one more read of an article or one more download of a plugin does cost (almost) nothing.

          but it can work with physical products aswell. that guy who gave away free lamps and was selling lamp oil afterwards prooved it.

  2. Joshua SteimleBy Joshua Steimle on 7 October, 2013

    Nice write up. But didn’t you prove Adam Smith correct? Isn’t the trick to accurately identify what is in one’s best interest? If that happens to be helping others does that invalidate Adam Smith?

    • Marieke van de RaktBy Marieke van de Rakt on 7 October, 2013

      I guess it does invalidate Adam Smith, as he stated that an optimal result would only come if everybody did what was best for himself. It is a pity we cannot ask him anymore ;-)

  3. Bastiaan van de RaktBy Bastiaan van de Rakt on 7 October, 2013

    Wow!!!!! Nice writing on my favorite subject. Nash is a living legend, but “is in the right proportion” not the impossible or at least very difficult thing here? In the right proportion for who? The next sentence starts with: “the most optimal result for US….” so, in the real non-mathematically world (axiom: people are irrational) the equilibrium is not for everybody and only valid for a certain amount of time. Is it possible to adjust over and over again to keep this a win-win equilibrium??

    • Marieke van de RaktBy Marieke van de Rakt on 7 October, 2013

      Thanks for the feedback! Perhaps your right, Bro… I guess we will have to stay on top of it continuously…

  4. Gorakhnath SirsikarBy Gorakhnath Sirsikar on 8 October, 2013

    6/7th lines from the bottom, should be -Putting *too much effort in maximizing our own profit..

    Thanks for your insights, always a unique perspective. It’s been very difficult to sell this aspect to clients that we charge not for the technology but for customization, implementation and support (which at times is the largest cost).

    I guess it’ll not be long before people understand the value of support and come out of the “we can do without support” mindset, as the tech advances and becomes more crucial to their business/activity. Until then, we’ll try to make more useful products services, like your plugins, to settle down in the sea of open source!

    Your blog is always more intellectual than other WP blogs (no offence to any of those writers though) makes for a lot of food for thought :)

    • Joost de ValkBy Joost de Valk on 8 October, 2013

      Thanks for the positive feedback! We try to move the conversation forward and that sometimes requires getting people to think ;)

      • TerenceBy Terence on 25 October, 2013

        Joost,

        Before you start taking the moral high-ground and telling people to “think” ~ do you know who said “Digressions, objections, delight in mockery, carefree mistrust are signs of health; everything unconditional belongs in pathology.”? No? Well you should. And if you read a little more about him and YOU think about what he made clear to us, YOU will realize ~ even if you don’t like looking into the abyss ~ why the first post by Thomas N. Zickell was probably closer to reality than all those that followed.

        Peace and abundance,

        Terence.

        • Joost de ValkBy Joost de Valk on 25 October, 2013

          Terence, once again you’re missing the point and trying to attack me/us whilst not grasping what we actually meant. Maybe it’s better if you take your passive aggression elsewhere.

  5. arnoutBy arnout on 10 October, 2013

    Nice writeup, maybe also embed the slideshare?
    And I agree that if you create awesome plugins with great support you should make some money…

  6. Patrick + AngelinaBy Patrick + Angelina on 10 October, 2013

    We appreciated the speach at WordCamp last sunday.

    Think you’re right that is good practice to both provide value and serve people and while doing so get recognition and build your brand as well.

  7. TroyBy Troy on 11 October, 2013

    I saw this presentation at WordCamp Europe and it was clearly the highlight of the weekend. Joost is in a class of his own.

    I explained this presentation to a colleague who missed it like this: You know when the masks fall from the ceiling in an airplane emergency and you’re supposed to fit yours first and then help others? Well that’s what Joost is saying. You are no good to anyone (including the rest of the open source community) if you are anxious about how you’re going to pay the rent and eat.

    I’d like to take this idea one step further though and say that if you are not actively working your butt off to make boat loads of money then you are being selfish. I know that sounds counter-intuitive so let me clarify. You are more valuable to the community if you have the time, head space and resources to make and support lots of free plugins, code snippets, themes, moderate forums, contribute to core write documentation, podcast and interview thought leaders, sponsor meetups or add value in some other way. And that all costs money.

    So the more money you make, the more value you can add to the community.

    I find the main reason people are not making money in the WordPress community is because they feel guilty about making profit from open source software. I coach dozens of WordPress consultants through this exact problem and help the overcome their fear.

    So get out of your own way, stop being selfish and start making money. As Joost so brilliantly put it atWordCamp Europe – “we need you to make money”.

    Thank you Joost and Marieke for starting this conversation. It’s been a long time coming :)

    So stop being selfish

    • Cesar LeeBy Cesar Lee on 13 October, 2013

      I agree with you and I would add: You are harming your audience/readers if you are an expert and don’t share your experience by creating products. If you are good, you are worth it!

  8. quotesFlyBy quotesFly on 15 October, 2013

    Nice write up. But didn’t you prove Adam Smith correct? Isn’t the trick to accurately identify what is in one’s best interest? If that happens to be helping others does that invalidate Adam Smith? Thanks a lot For such a nice one…

  9. AkhilBy Akhil on 17 October, 2013

    Excellent. Well, I agree with your points. WordPress is the best platform to make money easily.

  10. hBy h on 20 October, 2013

    i like this post

  11. Tony NguyenBy Tony Nguyen on 20 October, 2013

    This is a nice writing. I do agree with you that WordPress can help us make money. I am eager to try it. Some of my friends have tried making money on WordPress and are getting the first benefits from it. I hope I will be successful in making money with WordPress as my friends.