Then what is that example trying to prove? There is no way I could afford to pay for the software my company produces.. Should everyone work in a place where they can afford what they build?
Yes, because they don't have a product to sell, just their labor. But software IS a product.
You could argue that there should be no products at all. Again, what would our economic model look like then? You are using a product right now, HN. Among many others, I am sure.
> There are industries where this kind of process is required and it truely shows in the quality of the results.
It also shows in the cost of building the software. Most software companies aren't willing to pay the cost of that process. Like it or not, you will almost certainly interact with software written by these companies, either directly or indirectly.
You've possibly missed my point. The author made the statement that software differs from other items. It does not. Try making a 1km long truck and see if it's perfectly bug free. That doesn't mean trucks don't enjoy economies of scale.
Let me try another way to explain this: if software had diseconomies of scale, then selling each successive copy of your software that you made would make all the software more expensive. Eg, if I made a computer game and sold it to 1 person, I could do it for $10. If I sold it to 10 people, I would no longer be able to afford selling it for $10 and would need to sell it for $20 (x10 = $200 total). Makes no sense right? That's because software enjoys economies of scale. If I sell 1 copy of my game and want to make a profit, I need to charge $500000 to 1 person. If I sell it to 500000 people, I can get away with charging each person $0.99. The more software I sell, the better my economies of scale become.
In what world is the cost of software production zero?
You are aware software developers are paid, you know, money for services, right?
To be honest, your argument, here, is exactly the trouble economists have trying to understand economic rent. Rent is to economists what pornography is to a supreme court justice: they know it when they see it.
There simply is no concrete theory to define rent, and so it's extremely difficult to provide any kind of proof of increased rent seeking in modern economies without relying on personal judgment, and therefore bringing to bear personal bias.
Which is, of course, why you think software is rent while someone else might not: it's in the eye of the beholder.
Is not that the thing? Working in software I am already competing with the world. My job could get out-sourced tomorrow, but apparently that does not happen.
See the difference? Value vs. cost. Very different.
Exactly. Software development is in the middle of a clash with reality. It's just not sensible to expect to pay nothing for a piece of vital infrastructure.
This is actually a good example of my point. The important part is not the marginal cost to produce the software, it is the value it creates for the user.
As a salaried employee, there isn't much software out there that can either increase my income or decrease my expenses, so most of my personal software purchases end up being for leisure. However, software does provide tremendous value to my employer. As a result, they are willing to spend millions on it annually.
In the example of selling an AGI product, why bother selling it to me for whatever the maximum price I could afford? I'm not going to put a mortgage on the house to buy it because it won't allow me to maximize income by working 10 salaried positions or anything like that. But my employer could save millions with it and therefore they would be willing to spend millions to buy it.
Sure, but this is closer to having soda delivered to your home. The costs on the production side don't matter to you. You only care about price, quality, and delivery time.
I personally suspect the employment market is just not very efficient due to a lack of information. If companies had perfectly accurate information about how good every software person is, available for free, we'd probably all be paid based on that information, with our cost of living ignored.
Well, my third paragraph wasn’t arguing that it would be profitable to employ Tim, just that him working on software in such situations would increase total production of value. If that value isn’t sufficiently capturable by the employer, it still might be unprofitable. So it doesn’t actually argue for your #1 or #2 case.
I agree that if #1 or #2 is true, then there’s a big and profitable opportunity to make things better within capitalism. But if they’re not true, that doesn’t imply that regulation or the overthrow of capitalism is strictly necessary to improve the situation; it could be that non-capitalist institutions that can coexist with capitalism could solve the problem. Dominant assurance contracts on Kickstarter, for example. :)
> Why is it that this argument only seems to apply to software?
Maybe because software has a unique property: a practically zero marginal ("reproduction") cost. Hence software, and services that depend only on software are suitable for the rocket-fuel injection strategy VCs so heavily rely on.
Make no mistake - good software is damn expensive to create, but once it's ready for delivery, creating and selling additional copies (or serving more clients) costs practically nothing.
> I agree. What matters is to write great software, how you finance it is irrelevant to the end user.
Well, yes and no. If, for instance, you have proprietary software, and your users depend on it and have no source code, and you go out of business, they are up a creek. Or, if you have released some open source software that people like and find useful, and you can't find a way to fund more than sporadic development, that may be a problem too: in an ideal world you'd spend more time working on it.
The incredibly annoying thing about this is that there's a really obvious case - software tools. There should be so many cases of people who have written a useful tool and have 100 businesses who pay $1000/year because that tool is the backbone of their $1000 * xxx profit.
The fact this doesn't happen very often is a significant failure of the tech industry.
This is only true if you are a software company that makes money selling or servicing software. I work at a mega bank and we produce tons of software. It’s still a cost center, a means to an end.
The only distinction I see is that software developers want to believe they are somehow more special than everybody else.
Software isn't static nor does it exist on it's own. You're not paying for the current version. You're paying for support, security patches, and for the next versions to be written. In the case of software services, you're also paying for administration, active network security, networking, and hardware operations.
Software is a lot like art or literature. The creator needs to be able to live in order to continue creating. Otherwise updates, new versions, and new creations become highly irregular or utterly non-existent.
Profit extracted from companies over the cost of business exist because that is how all businesses function. Profit is literally the point of capitalism. Investment in companies would not happen without the promise of a return. Even the smallest of businesses would not be possible without profit.
For a non-tech example, eggs don't cost $3.99 per dozen to produce. Eggs are expensive because of an extremely high profit margin. Is it justified? Price gouging? Currently there is no hard rule that differentiates the two.
Whether or not there should be a profit percentage cap is an entirely different conversation and not unique to tech. Personally, I think there should be a maximum amount of profit expressed as a percentage of unit cost that should be legal. Further, I think that an equal percentage of the unit cost should always be applied to wage increases equally across the company for non-management roles. Management should be paid out of the extracted profit percentage.
You are looking at it from the wrong side - selling software does not provide an income to anyone. Lets take the nuclear power plant example again. You have high initial costs F building it and then you are trying to produce x units of electricity without additional costs and sell them for a price per unit P. In this scenario you will provide incomes on the order of F to the people building the power plant but later you ask for x * P to pay for the produced electricity and x tends to infinity. So unless you just throw away your perfectly good nuclear power plant at some point or lower the price to zero, you will suck in money you will never hand out again.
The heart of the problem is that at zero marginal costs nobody has to work, nobody has an income, nobody can pay the price. And more realistically having very small but non-zero marginal costs does not really improve the situation either, because it will still only provide an income to very few workers compared to the large group of potential customers.
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