As times change and technology changes the world, businesses are expected to adapt to these changes to continue to compete and flourish. When cars were invented buggies, horses, and trains steadily became less and less common. The old way of traveling made less sense and thus, in most cases, became a novelty. Today we have a different revolution. The revolution of information.

Before traditional media existed news travelled slowly by word of mouth. While someone in the same community would find out about something within a few hours or days, but people outside of that community would rarely hear of it and when they did it was months or even years later. Then came mail carriers and information began flowing regularly between communities, interconnecting them in an exciting new way. Then printed news papers started delivering the same news to everyone within a day or two. Radio stormed on the scene, able to reach a much larger audience than print media, audibly and instantly sending information as soon as it reached broadcasters and providing a more personal form of entertainment. Television brought pictures and video to the audible news and added ever more value. Now we have the internet.

With the internet the news is now. Not only do you get it on your computer, but also on your mobile phone anywhere you are. News is instantaneous and viral. Within seconds the entire world can be saturated with information on some newsworthy event. Traditional media has a difficult time competing with that because most value that can be offered by traditional media can also be offered by the internet.

Newspapers, especially, are fearful and they are now trying to put the cat back in the bag. They don’t want online news to be free. They want a subscriber base, like the good old days. Just tonight I saw a TV advertisement for the New York Times online. They are offering a subscription-based service to deliver you their news reports for $4.70 per week. This is the same New York Times that sends me free news via email alerts, an iphone app, an RSS feed, and via a website. Why in the world they expect me to want to pay for the news I already get for free is beyond me. Nothing in that commercial indicated that they were offering me something new or extra. No information about advanced services, no added value whatsoever.

If newspapers expect to survive, then they need to change their business model to one that will work in the age of information. Some will say that you can’t adapt, there is no way to make money online. Most people said that about search engines, but one of the biggest companies in the world is Google and their flagship product is a search engine. If the newpapers offer content people want to read then people will come to read it. From their advertising and special offers takes over. Give the customer a reason to come and a reason to stay and you will be profitable.

So far I have seen most services offered around an open source project to make money for the creators. These services usually include tutorials, customizations, hosting, technical support, and other offerings that usually require a lot of extra work on the creators part that is above and beyond the making and upgrading of the software that they created in the first place. Thus they have to do double the work to earn money. Obviously there are exceptions to this rule. Sometimes the developing groups can pair up with other companies or projects and share profits or get advertising profits, but those models are hit or miss.

Most programmers have a favorite text editor or IDE to use to develop their application(s). Mine happens to be an editor for Windows called E Text Editor. It is an application that was inspired by my favorite Mac OS-based text editor TextMate. I have been using this editor for about a year and a half and I absolutely love it. So when the owner/creator decided to make his product open source using a new business model that will not only still monetize it for himself, but also for others, I was thrilled and excited.

Alexander, the creator, is testing a brand new business model that will open source most of his code except the core, which includes his licensing system (to discourage pirating). It allows others to contribute and earn based on a trust metric. As they earn more trust and contribute more they will gain access to more and more code. Eventually even gaining access to the core.

This is great for several reasons. The first and foremost is that the development has been stagnating because of a new addition to his family. This would allow others to pickup where he left off and improve what they want to improve. This means that the community a large will see more frequent bug fixes and improvements because many more people will be contributing on a regular basis. Secondly it will allow those people to get paid for their work. Which should encourage even more contributions. Third, this experiment could possibly applied to other software applications and if successful could change the way the open source community operates. Fourth, not only could this model be applied to software, but also in other industries such as the failing newspaper industry that has been whining about the internet changing things from the way they used to be in the “good’ol days”.

I welcome new ideas for business models, especially those that allow the community around a business to interact with it closely. Years ago I heard many clamorings about how open source could never work in a business model and that it would eventually fail. These clamorings have died down quiet a bit since the 90’s, especially since Linux has proven itself such a strong survivor of this. Unfortunately I am having trouble finding any links to such stories.

So far the open sourcing of the text editor has led to a Linux version of the application as well as several bug fixes. I am curious to see where this goes, especially since Alexander put his business on the line to test out this new model. I hope that other businesses take notes and try to learn something useful from this experiment.

This, in part, may be related to news from cable executives that say that market saturation is the real cause of recent slowdowns in subscriber growth and not the worldwide economic woes nor increased competition from telephone companies. If this is true then they should instead focus on opening markets for free-for-all style competition instead of lobbying to limit the number of cable operators that can serve an area (often forming local monopolies). They should also increase their competitiveness by offering new and creative services, especially those related to music and movies (accessible over their networks and not blocking competition). There are a finite number of consumers on this planet. Eventually you have to reach critical mass where it is simply not possible to have any more subscribers than you already have. Before that happens they should diversify their offerings and find new revenue sources (excluding using ridiculous service limitations to create overage charges for internet usage).

It is unreasonable for any business, or economy for that matter, to expect perpetual growth. There is a finite number of resources on this planet. Resources used to create products and provide necessities for consumers to survive and even thrive. This, of course, limits the number of humans this planet can support and thus the number of customers a business can have. This drive for perpetual economic growth on all scales is part of what is causing this global economic meltdown. The unreasonable expectation that money will continue to grow without end. Instead an expectation of maintaining a stable level of income seems to be a lot more practical for everyone. That or create interstellar space travel to find new life and new civilizations to turn into customers.

For years the agency had a policy of keeping most investments in low-risk places, keeping only 15-25% in stocks. That was the situation under director Bradley N. Belt. However, under Charles E.F. Millard that changed to 55%. This change was originally decided upon in February of 2008, during a time of rapidly rising oil prices, an already well-known collapsed housing market, and many signs that were pointing to a severe recession ahead. As far as anyone can tell this policy stayed in place up through the end of Millard’s term which ended on January 20th, 2009 when President Bush left office.

To make things worse the operators of the fund refuse to say how it has fared in any detail. Telling us only that ” its fund was down 6.5 percent – and all of its stock-related investments were down 23 percent – as of last Sept. 30, the end of its fiscal year“. That was right before some of the largest stock-market drops in recent history. Which means that the fund could be faring significantly worse at this point.

Millard may have learned the unique skills he has for destroying financial security at his former post of managing director for the Lehman Brothers, a major corporation that went under last fall. However, he blames the problem on Congress stating “Congress had limited the agency’s ability to charge higher premiums based on each plan’s likelihood of drawing on the agency’s funds“. This may be the case to some extent, but he may have also taken the simplest path out. Only time will tell. Hopefully the new director from the Obama Administration will be able to curtail some of the losses of the fund before it is too late.

Article: http://www.boston.com/news/nation/washington/articles/2009/03/30/pension_insurer_shifted_to_stocks/?page=full