Why do people work on open-source software?

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations

It's not hard to create a plausible economic model that explains why open-source software exists. One argument is that enterprise software has a minimum cost associated with developing and marketing it. These costs include the engineers that write the software, the people that test it, the sales engineers that install it at customer sites, the sales people who help customers through the sales cycle, the marketing people who let customers know what's available to solve their problems, etc. The total cost of all of these isn't cheap, so if a particular application isn't worth more than that fixed cost, it can't be the basis for a profitable business.

But if there's a demand for something at a lower cost, someone will probably find a way to make it happen. It's much like minimum-wage laws. There are some jobs that just aren't worth the minimum wage, and when this is the case, people find ways to get those low-value jobs done, even if it involves breaking the law. They might hire illegal immigrants for less than the minimum wage. Or they might agree to pay someone cash to avoid the taxes that, from the point of view of the employer, are also part of their cost of labor.

On the other hand, an argument like this only describes market forces, Adam Smith's invisible hand that makes things happen. It might explain why open-source software exists, but doesn't really tell us why any particular person would make a decision to work on open-source software. That may require a different explanation. Here's one, and it's based on modeling contributing to open-source software as a tournament. It's much like the model that Stephen Levitt and Stephen J. Dubner used in their book Freakonomics to explain why so many drug dealers earn roughly the equivalent of the minimum wage.

It turns out that almost all drug dealers don't make very much money. These are the ones that actually sell the drugs on the streets. The real money is in managing an organization of drug dealers, and Levitt and Dubner describe how the entry-level drug dealers tolerate the low pay because they hope to eventually become one of the managers. In this sense, drug dealing can be modeled as a tournament that selects the most fit drug dealers and promotes the winners into the more lucrative jobs.

Maybe this model also applies to open-source software. After all, being a recognized contributor to a big, successful open-source project is also a good way to get a high-paying programming job. So it might be the case that the programmers who donate their time to open-source projects do this in the hope of becoming an open-source superstar one day. This doesn't sound obviously false, and it does give you a good way to start a conversation: "Did you know that open-source programmers are like drug dealers?"

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