In this section we explore how the World Wide Web brought hackers together on message-boards and email chains, where they began to organize. We look at their ambition to a build private networks, and how they staked out requirements to build such a network using the lessons learned in earlier decades.
Out of the hacker culture grew an informal system of collaborative software-making that existed outside of any individual company. Known as the “free” or “open source” software movement, and abbreviated FOSS, this social movement sought to popularize certain ethical priorities in the software industry. Namely, it lobbied for liberal licensing, and against collecting or monetizing data about users or the way they are using a given piece of software.
In a software context, the term “free” does not refer to the retail price, but to software “free” to distribute and modify. This sort of freedom to make derivative works is philosophically extended to mean “free of surveillance and monetization of user data through violations of privacy.” What exactly is the link between software licensing and surveillance? The Free Software Foundation says of commercial software:
If we make a copy and give it to a friend, if we try to figure out how the program works, if we put a copy on more than one of our own computers in our own home, we could be caught and fined or put in jail. That’s what’s in the fine print of the license agreement you accept when using proprietary software. The corporations behind proprietary software will often spy on your activities and restrict you from sharing with others. And because our computers control much of our personal information and daily activities, proprietary software represents an unacceptable danger to a free society.
Although the Free Software Foundation drew on philosophies from 1970s hacker culture and academia, its founder, MIT computer scientist Richard Stallman, effectively launched the Free Software movement in 1983 by launching GNU, a free and open source set of software tools. (A complete OS did not arrive until Linus Torvalds' kernel was released in 1991, allowing GNU/Linux to become a real alternative to Unix.) 
Stallman founded the Free Software Foundation in 1985. This prescient cause foresaw the personal data hazards that might arise from platforms like Facebook, whose sloppy data vendor relationships resulted in the violation of privacy of at least 87 million people in 2016. A bug allowed attackers to gain control over 50 million Facebook accounts in 2018.
The GNU Manifesto explicitly calls out the corporate work arrangement as a waste of time. It reads in part (emphasis added):
“We have already greatly reduced the amount of work that the whole society must do for its actual productivity, but only a little of this has translated itself into leisure for workers because much nonproductive activity is required to accompany productive activity. The main causes of this are bureaucracy and isometric struggles against competition. The GNU Manifesto contends that free software has the potential to reduce these productivity drains in software production. It announces that movement towards free software is a technical imperative, ‘in order for technical gains in productivity to translate into less work for us.’”
We have defined free software to mean “free of monetization techniques which contravene user privacy.” In most cases, free software is free of all the trappings of commercialization, including: restrictive copyrights, expensive licenses, and restrictions on alterations and redistribution. Bitcoin and Linux are examples of free software in both senses: both that it is free of surveillance, and also free to distribute and copy.
A system of values has evolved amongst free software developers, who distinguish themselves from proprietary software companies, which do not share their internal innovations publicly for others to build on; and who track users and sell their personal data.
Stallman’s primary critique of commercial software was the preoccupation with unproductive competition and monetization:
“The paradigm of competition is a race: by rewarding the winner, we encourage everyone to run faster…. [But] if the runners forget why the reward is offered and become intent on winning, no matter how, they may find other strategies—such as, attacking other runners. If the runners get into a fist fight, they will all finish late. Proprietary and secret software is the moral equivalent of runners in a fist fight….. There is nothing wrong with wanting pay for work, or seeking to maximize one's income, as long as one does not use means that are destructive. But the means customary in the field of software today are based on destruction. Extracting money from users of a program by restricting their use of it is destructive because the restrictions reduce the amount and the ways that the program can be used. This reduces the amount of wealth that humanity derives from the program. When there is a deliberate choice to restrict, the harmful consequences are deliberate destruction.”
The “non-productive work” cited by Stallman harkens back to Veblen’s conception of “spurious technologies” developed in the service of some internal ceremonial purpose, to reinforce the existing company hierarchy: 
“Spurious 'technological' developments... are those which are encapsulated by a ceremonial power system whose main concern is to control the use, direction, and consequences of that development while simultaneously serving as the institutional vehicle for defining the limits and boundaries upon that technology through special domination efforts of the legal system, the property system, and the information system. These limits and boundaries are generally set to best serve the institutions seeking such control.... This is the way the ruling and dominant institutions of society maintain and try to extend their hegemony over the lives of people.”
In 1997, as the Web was gaining momentum, hacker Eric Raymond presented a metaphor for the way hackers developed software together. He compared the hacker approach, which relied on voluntary contributions, to a marketplace of participants who could interact as they wished: a bazaar.
Commercial software, he said, was like the building of a cathedral, with its emphasis on central planning and grand, abstract visions. The cathedral, he said, was over-wrought, slow, and impersonally designed. Hacker software, he claimed, was adaptable and served a larger audience, like an open bazaar.
With this metaphor in mind, Raymond codified 19 influential "lessons" on good practice in free open source software development. Some of the lessons appear below:
These ideas would come to crystallize the hacker approach to building software.
As the Web proliferated, hacker subcultures collided on message-boards and forums. All of them found they had a core set of common attitudes and behaviors including:
But they had different ideas about how the Internet would develop in the future.
Utopian ideas about the power of computer networks to create post-capitalist societies had emerged as early as 1968. The utopians thought networked computers might allow society to live in a kind of Garden of Eden, mediated by autonomous computerized agents, free of labor, and co-existing with nature.  
There were also dystopian visions. A young fiction writer William Gibson first coined the term “cyberspace” with his 1981 short story Burning Chrome.” In his conception, cyberspace was a place where massive corporations could operate with impunity. In his story, hackers could enter into cyberspace in a literal way, traversing systems that were so powerful that they could crush human minds. In cyberspace, Gibson imagined, government was powerless to protect anyone; there were no laws, and politicians were irrelevant. It was nothing but the raw and brutal power of the modern conglomerate. Gibson, Bruce Sterling, Rudy Rucker and other writers went on to form the core of this radically dystopian literary movement.
Another group of hackers hailed from the original 1960s counterculture. Many of them had a sanguine outlook on the Web as a new safe world where radical things could come true. Like with the acid counterculture, cyberspace could be a place where individuals were liberated from old corrupt power hierarchies.
This optimistic view pervaded the entrepreneurial circles of Silicon Valley in the 1980s and 1990s, creating an extremely positive view of technology as both a force for good and a path to riches. One British academic wrote at the time:
“This new faith has emerged from a bizarre fusion of the cultural bohemianism of San Francisco with the hi-tech industries of Silicon Valley… [It] promiscuously combines the free-wheeling spirit of the hippies and the entrepreneurial zeal of the yuppies. This amalgamation of opposites has been achieved through a profound faith in the emancipatory potential of the new information technologies. In the digital utopia, everybody will be both hip and rich.”
The ideas of the “aging hippies” culminated with the “Declaration of Independence of Cyberspace” in 1996, written by a former Grateful Dead lyricist named John Perry Barlow, who had been part of the acid counterculture. By the mid-1990s, Silicon Valley startup culture and the upstart Wired magazine were coalescing around Barlow’s utopian vision of the World Wide Web. He began holding gatherings he called Cyberthons, as an attempt to bring the movement together. They unintentionally became a breeding ground for entrepreneurship, says Barlow:
“As it was conceived, [Cyberthon] was supposed to be the 90s equivalent of the Acid Test, and we had thought to involve some of the same personnel. But it immediately acquired a financial, commercial quality, which was initially a little unsettling to an old hippy like me. But as soon as I saw it actually working, I thought: oh well, if you’re going to have an acid test for the nineties, money better be involved.”
But while the utopians believed everyone would become “hip and rich,” the dystopians believed that a consumer Internet would be a panopticon of corporate and governmental control and spying, the way William Gibson had imagined. They set out to save themselves from it.
They saw a potential solution emerging in cryptographic systems to escape surveillance and control. Tim May, Intel’s Assistant chief scientist by day, wrote the Crypto-Anarchist Manifesto in 1992:
“The technology for this revolution—and it surely will be both a social and economic revolution—has existed in theory for the past decade. The methods are based upon public-key encryption, zero-knowledge interactive proof systems, and various software protocols for interaction, authentication, and verification. The focus has until now been on academic conferences in Europe and the U.S., conferences monitored closely by the National Security Agency. But only recently have computer networks and personal computers attained sufficient speed to make the ideas practically realizable.”
Until recently, strong cryptography had been classified as weapons technology by regulators. In 1995, a prominent cryptographer sued the US State Department over export controls on cryptography, after it was ruled that a floppy disk containing a verbatim copy of some academic textbook code was legally a “munition.” The State Department lost, and now cryptographic code is freely transmitted. 
Strong cryptography has an unusual property: it is easier to deploy than to destroy. This is a rare quality for any man-made structure, whether physical or digital. Until the 20th century, most “secure” man-made facilities were laborious to construct, and relatively easy to penetrate with the right explosives or machinery; castles fall to siege warfare, bunkers collapse under bombing, and secret codes are breakable with computers. Princeton computer scientist professor Arvind Narayan writes:
“For over 2,000 years, evidence seemed to support Edgar Allan Poe's Assertion, ‘human ingenuity can-not concoct a cypher which human ingenuity cannot resolve,’ implying a cat-and-mouse game with an advantage to the party with more skills and resources. This changed abruptly in the 1970s owing to three separate developments: the symmetric cipher DES (Data Encryption Standard), the asymmetric cipher RSA, and Diffie-Hellman key exchange.”
Of the 1990s, he says:
“For the first time, some encryption algorithms came with clear mathematical evidence (albeit not proofs) of their strength. These developments came on the eve of the microcomputing revolution, and computers were gradually coming to be seen as tools of empowerment and autonomy rather than instruments of the state. These were the seeds of the ‘crypto dream.’”
Cypherpunks were a subculture of the hacker movement with a focus on cryptography and privacy. They had their own manifesto, written in 1993, and their own mailing list which operated from 1992 to 2013 and at one point numbered 2,000 members. A truncated version of the manifesto is reproduced below. In the final lines, it declares a need for a digital currency system as a way to gain privacy from institutional oversight:
The term “cypherpunk” is a play on words, derived from the term “cyberpunk,” the sub-genre of science fiction pioneered by William Gibson and his contemporaries. The Cypherpunk Manifesto reads:
“Therefore, privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system. An anonymous transaction system is not a secret transaction system. An anonymous system empowers individuals to reveal their identity when desired and only when desired; this is the essence of privacy. Privacy in an open society also requires cryptography… We cannot expect governments, corporations, or other large, faceless organizations to grant us privacy out of their beneficence. It is to their advantage to speak of us, and we should expect that they will speak. To try to prevent their speech is to fight against the realities of information. Information does not just want to be free, it longs to be free. Information expands to fill the available storage space. Information is Rumor's younger, stronger cousin; Information is fleeter of foot, has more eyes, knows more, and understands less than Rumor. We must defend our own privacy if we expect to have any. We must come together and create systems which allow anonymous transactions to take place. People have been defending their own privacy for centuries with whispers, darkness, envelopes, closed doors, secret handshakes, and couriers. The technologies of the past did not allow for strong privacy, but electronic technologies do. We the Cypherpunks are dedicated to building anonymous systems. We are defending our privacy with cryptography, with anonymous mail forwarding systems, with digital signatures, and with electronic money.”
There would be many attempts to create digital money systems, some by the names on the mailing list. One of the individuals on the mailing list was Satoshi Nakamoto. Another was Tim May, the originator of crypto-anarchy; Wei Dai, an originator of the original concept of P2P digital currency; Bram Cohen, creator of BitTorrent; Julian Assange, who would later go on to found WikiLeaks; Phil Zimmerman, the creator of PGP encryption; Moxie Marlinspike, developer of the OpenWhisper protocol and the Signal Messenger application; and Zooko Wilcox-O’hearn of the Z-cash project. 
Modern-day engineers have made repeated efforts to create organizations which enforce ethical principles in their fields, including:
The technological optimism that characterized 1990s Silicon Valley also laid some of the industry’s growing ethical traps. In a 2005 paper entitled “The Moral Character of Cryptographic Work,” UC Davis Computer Science Professor Phillip Rogaway suggested that practitioners of technology should examine closely the assumption that software by nature was “good” for anyone:
“If you’re a technological optimist, a rosy future flows from the wellspring of your work. This implies a limitation on ethical responsibility. The important thing is to do the work, and do it well. This even becomes a moral imperative, as the work itself is your social contribution.”
Rogway suggests technologists re-focus themselves on a moral duty to build new encrypted systems that empower ordinary people:
“All that said, I do believe it accurate to say that conventional encryption does embed a tendency to empower ordinary people. Encryption directly supports freedom of speech. It doesn’t require expensive or difficult-to-obtain resources. It’s enabled by a thing that’s easily shared. An individual can refrain from using backdoored systems. Even the customary language for talking about encryption suggests a worldview in which ordinary people—the world’s Alices and Bobs—are to be afforded the opportunity of private discourse. And coming at it from the other direction, one has to work to embed encryption within an architecture that props up power, and one may encounter major obstacles to success.”
Many free software projects had third-party coders contributing improvements back to the project out of altruism, integrating improvements they’ve made on their versions to the original. In this way, free software projects accumulated the work of hundreds or thousands of otherwise uncoordinated individuals, without any central organizing agent. This form of organization has become known as “open allocation.”
Open allocation refers to a style of management allowing a high degree of freedom to knowledge workers, who are empowered to start or join any area of the project, and decide how to allocate their time more generally. It is considered to be a form of “self organization” and is widely practiced outside of any corporate or partnership structure in the world of free software.
In open allocation, decision-making capabilities lie with the people closest to the problem being solved. Projects have a ‘primary responsible person,’ which is usually the person who has been working in that area the longest, or with the most influence. There are no arbiters of the direction of a project outside of the person or persons working on it.  Project leaders can rotate into being followers, or drift out entirely, only to be replaced by new collaborators. As opposed to traditional management structures, where power is fixed, in open allocation, positions of leadership are temporary distinctions.
As we discussed in Section I, the “analysts” that make up the managerial corporate class typically have a vested interest in change. Marketing narratives may supercede engineering priorities. Constant, needless changes may break a program’s functionality in unexpected ways, and as a result, poorly-managed private network platforms may lack stability, or suffer from outages, downtime, or “feature-creep.” 
In open allocation free software projects, you propose changes you build. Non-technical managers are not there to think up spurious features, and even if such features are proposed, it’s unlikely anyone else will pick them up and build them.
Features or changes which are proposed, are generally expected to be implemented by the proposer, who is only permitted to commit code if the rest of the maintainers of the project agree that the problem being solved is real, and the solution is appropriate.
This alternative model for organizing work relations is considered the primary accomplishment of the free and open source software movement.
This system has many benefits, one of which is that it minimizes “technical debt.” Technical debt is a metaphor for the additional work created later, by quick and dirty solutions used today. In practice, technical debt can accrue easily from frivolous feature requests, redirections, changes, poor communication, and other issues. Technical debt can also be introduced by regulation and legislation enforced on software companies.
In this way, corporate management and governmental oversight are indistinguishable, both sources of forcible, monotechnic, ceremonial, spurious technological development—and debt.
If technical debt accumulates, it can be difficult to implement meaningful improvements to a program later on. Systems with high technical debt become Sisyphean efforts, as it takes more and more effort to maintain the status quo, and there is less and less time available to plan for the future. Systems like this require slavish dedication. They are antithetical to the type of work conducive to happiness. Technical debt has high human costs, as recounted by one developer’s anecdotal description (edited for length):
Technical debt usually results from beginning a software project without having a clear conception of the problem being solved. As you add features, you misapprehend the actual goal of your intended users. As a result, you end up in an “anti-pattern.” Anti-patterns are patterns of design and action which, despite looking like the right path at the moment, turn out to induce technical debt. Anti-patterns are project- and company-killers because they heap on technical debt.
By contrast, in an open allocation project with global significance, the benefits of open allocation governance are maximized. Those benefits include:
As it turns out, people love open allocation. In 2005, MIT Sloan and Boston Consulting Group did a study about the motivations of open source software engineers. The study reports:
We found that... enjoyment-based intrinsic motivation, namely how creative a person feels when working on the project, is the strongest and most pervasive driver" for voluntarily working on software... Many are puzzled by what appears to be irrational and altruistic behavior by movement participants: giving code away, revealing proprietary information, and helping strangers solve their technical problems… FOSS participants may be seeking flow states by selecting projects that match their skill levels with task difficulty, a choice that may not be available in their regular jobs.
This has led to an acknowledgement within managerial science of the sins of the 20th century. Now they are looking for ways to reorganize to push decision making to the operators!
The “open source” movement officially emerged in 1996, as a marketing program for free software adoption within businesses. It framed free software adoption in a way that businesses could understand.
Stallman, the GNU creator, says the difference between free and open source software is a moral one: “Most discussion of ‘open source’ pays no attention to right and wrong, only to popularity and success.”
Whatever the distinction, corporate technology giants panicked at the sudden invasion of software that anyone could license, copy, fork, deploy, modify, or commercialize. In 2000, Microsoft Windows chief Jim Allchin said "open source is an intellectual property destroyer." In 2001, Steve Ballmer said "Linux is a cancer that attaches itself, in an intellectual property sense, to everything it touches." 
The fact remained: the methodologies of open source and open allocation-style governance were enjoyable, and produced very successful software. In 2001, a movement grew to bring open allocation methodologies into corporations. It was called “Agile Development,” and it was a desperate measure by the commercial software companies to hang onto relevance. If they couldn’t beat open source, they could join it and build commercial services and products on top. Copying the Cypherpunks and Cyberspace enthusiasts before them, the Agile proponents wrote a founding document. The Agile Manifesto read in part:
“In order to succeed in the new economy, to move aggressively into the era of e-business, e-commerce, and the web, companies have to rid themselves of their Dilbert manifestations of make-work and arcane policies. This freedom from the inanities of corporate life attracts proponents of Agile Methodologies, and scares the begeebers (you can’t use the word ‘shit’ in a professional paper) out of traditionalists. Quite frankly, the Agile approaches scare corporate bureaucrats—at least those that are happy pushing process for process’ sake versus trying to do the best for the "customer" and deliver something timely and tangible and "as promised"—because they run out of places to hide.”
Microsoft finally integrated Linux and the open source technologies into its enterprise Azure platform in 2012. Linux, for its part, bested Windows and other proprietary operating systems to become the foundation of the Web. Unix-like operating systems power 67 percent of all servers on Earth. Within that 67 percent, at least half of those run Linux. No matter what kind of computer or phone you’re using, when you surf the Web, you’re probably connecting to a Linux server. 
Other free open source libraries have also been successful within a corporate setting. Bloomberg LP uses and contributes code back to the open source Apache Lucene and Apache Solr projects, which are critical for search functions in its Terminal. BSD, another open source Unix derivative, was the basis for macOS and iOS. Google’s Android is based on Linux.
BMW, Chevrolet, Mercedes, Tesla, Ford, Honda, Mazda, Nissan, Mercedes, Suzuki, and the world's largest automobile company, Toyota all use Automotive Grade Linux in their vehicles. Blackberry and Microsoft both have vehicle platforms, but they are used by a minority of car OEMs. Volkswagen and Audi are moving to a Linux-based Android platform as of 2017. 
Tesla, for its part, is open-sourcing its Linux distribution for the Model S and X cars, including the Tesla Autopilot platform, the kernel sources for hardware, and the infotainment system.
These examples serve to demonstrate two counter-intuitive lessons about software generally:
Today, many software companies experiment with some way to reduce reliance on management hierarchy. Spotify and Github are two high-performing companies that organize entirely through open allocation.
Spotify, for its part, has produced two in-depth videos about how its independent project teams collaborate. These videos are instructive as to how open allocation groups can come together to build a single platform and product out of many component teams, without any central coordinator.
Figure 4. Spotify’s “engineering culture” videos summarize how open allocation can work in a
commercial software company. In practice, traditional companies have trouble adopting this organizational design
without outside help.
Open allocation works inside companies similarly to the way it works outside a company structure, with a few exceptions. While companywide rank doesn’t determine project allocations, it is often a factor in compensation.
“Responsive Organization” is a movement anchored by Microsoft to adopt open allocation style organizational design inside itself and Yammer, the corporate messageboard system it acquired in 2012. Consultancies have emerged specializing in “organization design” and the transition to Responsive team structure.
Ultimately, attempts at creating “ideal engineering conditions” inside a corporation may only last as long as the company is comfortably situated in their category. Google began its life with a version of open allocation governance known as “20 percent time,” but later eliminated it when the company grew and adopted stack ranking.
Broader study reveals power is not truly migrating to the “makers” in most companies. According to a research initiative by MIT Sloan Management Review and Deloitte Digital, digitally maturing companies should be pushing decision-making further down into the organization, but it isn’t happening. Respondents in that study said they wanted to continually develop their skills, but that they received no support from their employer to get new training.
This finding mirrors the aforementioned MIT study on the motivations of open source contributors, which found that programmers enjoyed working on open source projects because it was a path to developing new, durable, and useful skills, at their own volition.
In this section we introduced hacker culture and its approach to creating software around a specific set of design principles and values. We’ve shown how hacker culture developed an organizational pattern, and we have suggested that these patterns have made computer software more accessible to non-professional and non-academic people, undermining the social divisions created by strict licensing and closed-source code. We’ve demonstrated the success of the free and open source approach at the foundational level, with software such as Linux and Apache.
Finally, we have shown the ways commercial software companies have tried to mimic the open allocation ways of working. With free and open source software, the hacker movement effectively destroyed the institutional monopoly on research and development. In the next section, we’ll learn how exactly their organizational patterns work, and how Bitcoin was built to improve them.