Tesla Motors Inc (NASDAQ:TSLA) CEO Elon Musk made waves last week when he opened the company’s patents to other firms to use ‘in good faith’, saying that he was acting in the spirit of the open source community, and Red Hat, Inc. (NYSE:RHT) CEO Jim Whitehurst, one of the de facto leaders of that community, has welcomed him to the fold.
“Everybody loves to talk about cars,” said Whitehurst in an interview with TechFlash. “So it does just bring more public attention to the dynamic.”
The first London Value Investor Conference was held in April 2012 and it has since grown to become the largest gathering of Value Investors in Europe, bringing together some of the best investors every year. At this year’s conference, held on May 19th, Simon Brewer, the former CIO of Morgan Stanley and Senior Adviser to Read More
Red Hat business model a tough act to follow
Red Hat, Inc. (NYSE:RHT) is a company with a strange business model and one that is incredibly hard to copy. As former XenSource CEO and Andreesen Horowitz partner Peter Levine put it in an op-ed on TechCrunch, “the odds are long and the path is littered with the corpses of companies that have tried the support model.”
The challenge is that Red Hat, Inc. (NYSE:RHT) makes its source code freely available, but sells the compiled operating system along with support services in a subscription model. Compiling the source code isn’t as trivial as you might think, but neither is it an insurmountable obstacle. And any major breakthrough made by the Red Hat team can be copied by Ubuntu or one of the other free Linux-based operating systems. It doesn’t sound like it should work, and for most other companies that have tried to follow suit, it hasn’t.
Tesla’s final product is much harder to duplicate
But most of those other companies were trying to sell software or tech services. Tesla Motors Inc (NASDAQ:TSLA) is selling cars. It can give away its patents and then continue to sell the Model S as fast as they can put more together because the car is incredibly well-made. It takes more than patents to build a car, and Musk is perfectly happy to compete on quality. Just like Red Hat, Inc. (NYSE:RHT) benefits from a healthy Linux community, Tesla will benefit from a larger shift toward electric cars.
Musk said at the time that he has a changing view of patents, seeing them as barriers to progress, and that the spread of electric cars is important for the planet. There’s no reason not to believe that he was being sincere, but it doesn’t hurt that his open source stance is intended to breathe life into a market that his company dominates.