Eric S. Raymond, Bazaar Financial Advisor

Uncle Scrooge: I'm the richest man in the world! Yippee!

Open source advocate Eric S. Raymond has been working Sun Microsystems hard for months, trying to persuade the company to make Java open source. Though I favor the idea, I'm concerned for the future of any commercial enterprise that would take business advice from him.

When Sun CEO Scott McNealy called Linux a "zero-revenue model" that could help the company's hardware business, Raymond responded in an open letter:

... the casual equation between "open source" and "zero revenue" suggests that on another level you don't really know what you're talking about. Open source is hardly a zero-revenue model; ask Red Hat, which had a share price over triple Sun's when I just checked.

I practically did a spit take when I read Raymond's taunt this morning. Anyone who compares two companies' share prices as a means of assessing their worth has even less business sense than I do

A share price is an arbitrary figure that can be manipulated through stock splits and other means. The numbers to look at are market caps, the total worth of all outstanding shares -- as of Friday, Sun totals $14.44 billion and Red Hat $4.70 billion.

A few years ago, Raymond wrote Surprised by Wealth, a hilariously self-revealing essay assuring the members of Slashdot that even though 150,000 pre-IPO shares of VA Linux had made his net worth $36 million, becoming an overnight multimillionaire wouldn't change him:

... while there aren't likely to be a lot more multimillion-dollar bonanzas like mine, lots of hackers are going to have to evolve answers to this question for smaller amounts that will nevertheless make a big difference to individuals; tens or hundreds of thousands of dollars, enough to change your life -- or wreck it. ...

Megabucks are power, and with power comes an obligation to use it wisely. I'll give carefully, and in my own time, and only after doing my homework -- too much charity often kills what it means to nurture. ...

I also expect I'll still carry my own luggage.

This ostentatious show of humility, which reminds me of Uncle Scrooge diving into his beloved sea of coins, ought to be considered one of the defining moments of the dot-com era's "irrational exuberance." During those heady times, you could track his good fortunes with the Eric S. Raymond wealth clock.

By the time Raymond could legally sell his VA Linux shares in June 2000, they had plunged $31 million in value to a still-impressive $5.5 million.

However, insider trading reports show no transactions in his name. Raymond kept all 150,000 of his open source tulip bulbs through April 2002, his last month on the VA Linux board.

Thanks to the dot-com bust -- fed in large part by big-hype, no-hope companies like VA Linux, the worth of Raymond's shares had dropped to $195,000, a loss of more than $5 million. Yet today he continues to be in demand for technology investment advice and serves on the Merrill Lynch Technology Advisory Board.

Raymond's job prior to the VA Linux gig was at a non-profit ISP in Pennsylvania ("I wrote the expansion plan that secured us our first $16,000 in donations," he states on his resume). He shrugged off his lost millions in a February 2001 essay about VA Linux's decision to lay off 25 percent of its work force:

All the corporate stuff is not, after all, the point -- the point is to change the world, to do better software and give users more choices. It's been a nice party, but some of us did get a little distracted by all that easy money flowing around. If the slump does nothing else but take our eyes off those dollar signs and put them firmly back on the work, maybe it will have been the best thing for us after all.

Though in essays and public speeches Raymond demonstrates a strident interest in personal ethics, he has never addressed his own role in the dot-com IPO craze, a process that the business journalist Christopher Byron calls a "massive, shameless and totally irresponsible free-for-all riot in pursuit of money."

In July 2001, Byron testified before Congress at a House Committee on Financial Services hearing on the dot-com bubble:

I have included, with this testimony, a collection of stories and columns I wrote during this period that attempted to call the public's attention to the colossal pocket-picking to which it was being subjected. Most particularly, I wrote repeatedly about the outrageous situation in which IPO's would be offered to investment bank clients at a cheap "pre-market" price, even as the bank's analysts engaged in nonstop commentary designed to pump up demand for the stock among individual investors in the after-market. Then, when the stock would come public, the insiders would instantly dump their shares into the waiting and out-stretched arms of individual after-market investors at four and five times their pre-market price. Within hours thereafter, the stock price would collapse. You can call it what you want, but I view schemes like that as nothing more than swindles and fraud.

You may review the trading histories of literally dozens of tech-sector IPOs during this period and find precisely this pattern repeating itself over and over again.

One of three particularly egregious examples that Byron used in his testimony: VA Linux, sold to insiders for $30 and individuals for $320.

At VA Linux, Raymond was at the center of a phenomenon that used the open source movement as a means to transfer billions of dollars in wealth from individual investors to investment bankers and other insiders.

Thanks to stubbornness, company loyalty, or a total lack of investment acumen, his own fortunes followed the same miserable trajectory as anyone who bought into one of the Linux IPOs on Day One.

Raymond carries his own luggage, but the burden of burning so much money on behalf of free software isn't weighing him down at all.

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