From time to time I look at the stock market and scream. Watching the price of Internet stocks reminds me of a science fiction story in which the hero was sitting in headphones in front of a screen on one of the moons of Jupiter while remotely controlling machinery on the planet below. The disjunction between the reality in which he worked and the calm office to which he popped back when he removed the VR gear drove him mad. At the end of the story it was revealed that the whole project had been a sort of gigantic double blind devoted to discovering anti-gravity, and the hero just gibbered. But no one has yet revealed the purpose behind the Red Hat stock price.
Red Hat markets a sort of Linux. That is to say, it supplies manuals, packaging and tech support for an operating system that is by definition and on principle available for free. You can pay £76 for Red Hat Linux in a box with manuals and some telephone support, or you can download everything but the phone support for free. This is about as far from a monopoly as anyone can imagine; what is more, there is a rival company, Mandrake, that markets Red Hat Linux with slight improvements and a more usable look and feel for £50. That's one of the things that can happen with free software. So we have a company whose money is made by selling a niche product, available more cheaply elsewhere, and whose whole business model is based on its main product being free. It went public this autumn at $16 a share. As I write, the price is $235, which means that a company that sells only software you can get for free is now valued at $19.5 billion - a sum to make anyone scream, however it is written out.
This is Linux, remember, an operating system that is still almost completely useless at the things you might want a household computer to do. It has no decent web browser, no proper printing system and abysmal documentation that you have to study in depth if you want to do something so simple as inserting a floppy disk. All these things are changing. I expect it will be usable by normal people some time around June next year. But even then it will still be free; and with the spread of proper, fast Internet connections it will be practicable for anyone interested to download it. I know that Red Hat sells manuals and tech support, but the best manuals for free software have always come from O'Reilly, and many people praise the manual that comes with the German SuSE Linux at £30. As a user of SuSE, I think the manual needs an almost complete rewrite. But the point is that even if Red Hat had a monopoly on Linux - by definition impossible - it's hard to see how it could justify the share price.
So where's the anti-gravity? Some of the answers are obvious, if traditional: there are large numbers of ignorant investors chasing a very small number of shares. Red Hat gained a lot of justified praise for allowing some of the people who had written free software for them to get share options when they went public. But if you want to trade shares in the companies that sell Linux, you had better have a Windows machine handy for reliable, secure web browsing to your stockbroker.
Another example is suggested by Amazon.com, which has used its stock price to buy into all sorts of businesses that actually are profitable. Red Hat is rumoured to be buying Corel, the Canadian company that now owns WordPerfect. WordPerfect for Linux is horrible at the moment, but it is one of the few programs for Linux that sells for hard cash - at least, the manuals do. And Corel's Windows products are extremely nice, widely used and (I believe) profitable. So Red Hat could use its Linux-boosted share price to buy into profitable businesses that sell to the people Linux users despise. Or they could go into charging companies for their services. Linux may be free, but the people who can make it useful command large salaries and, once your business depends on it, support will always be profitable. Red Hat has already bought one company specialising in that business, Cygnus Software, whose motto was "We make free software affordable".
But it's difficult to imagine that one company's share of this market will ever be worth $19.5 billion. And I'm prepared to bet that most of the shareholders have even less idea than I do of how it might ever happen. They just think the share price has discovered anti-gravity. But it is not enough to discover anti-gravity. You have to prevent your competitors from copying you and the only man who managed that successfully was Mr Gates.
