Arguments for cooperation

If you’ve shopped for a house you’ve probably heard the acronym MLS. It stands for multiple listing service and exists as a database of information around the marketing and sales of real estate. Real estate companies, or brokers, cooperate and share information about the transactions their agents complete on behalf of their clients.

In the old days, the listings were printed in big books, published and distributed. I think it was in the 1990’s when the transition was made to a database with terminal access. In the old days, every region had their set of information with norms that governed its quality and input. This kept agents in their own backyards as they only had access one multiple listing service.

There are still corners of the state where local realtor associations choose not to participate in a shared system. They feel that sharing local data will rob them of their livelihoods. Keeping their market proprietary obliges buyers and sellers, who want to do business in their county, to seek out local agents.

This short video clip is from the CEO of Northstar MLS, the largest multiple listing service in the upper Midwest region. He makes the case to smaller associations to relinquish their private control of the data and share it in a cooperative fashion with all 22,000 of Minnesota’s realtors. His strategy is to tell a story of how Northstar chose to make a portion of code- the add/edit function- an open source item.

The issue arose when the software vendor failed to provide enhancements needed to allow agents to add and edit the listing information. Being a timely and key feature, the board approved additional funding so Northstar was able to develop the code inhouse. They were successful to the point of being approached to make this improvement available for sale. Instead, they chose to put the code out in an open source model.

Note how he talks of selling the technology for a fee, that it ‘wasn’t what they were about.’ Note too that although there is no monetary fee for the add/edit code, there is an implied long term partnership in growing the technology together. As the new user of the code develops it further, they incur the obligation to reciprocate and share their improvements.

Some might say this is foolish, to turn something of value loose, and trust competitors and peers to simply share on their honor. But the public, or the group who can benefit from this piece of code, is a limited group. It might not be limited to the extent that everyone is on the same speed dial, but players in an industry of like products tend to overlap in hiring, purchasing, and other workplace transactions. The pressure to conform to a standard exists in order to minimize the risk of being left out in the cold, especially in times of need.

In economic terms one could say that Northstar chose to provide a positive externality within their public sphere of industry peers by making a segment of code accessible in an open source model. To make it a public good. Financially they reasoned that their technology cost was already well spent as it achieved the desired goal. Furthermore, to keep it a private good and sell it would change the nature of their business. An evaluation of the public group to which it was made available was determined to be tight enough to indenture a sharing of progress in the code’s development.

What Northstar lost in potential income from the sale of the code was valued less than what they speculate to receive in converting it to a public good. Meanwhile, the public sphere gained an asset.