Standards Are Insurance | Infrequently Noted

I keep getting distracted from writing this long thing by responding to the discussion created by the last short-ish thing, but I wanted to explicitly call out one aspect, namely that standards are a form of insurance.

More correctly ? and apologies if this sounds like a Planet Money episode ? vendors sell derivatives contracts (insurance) against the proprietary nature of any new technology. Adopters of that technology often refuse to buy it at all without the availability of a derivative to cover their risk of lock-in.

The nice bit about these contracts is that the results (price) are free to the public ? ITU and other old-skool orgs are exceptions ? meaning anyone who wants to implement can assess what it?ll cost, and if they can provide a solution at a lower to-end-user price, they can compete under the same terms. The public nature of the derivative contract can have the effect of lowering the price of the good itself in markets that clear and have many participants.

Standards organizations are correctly understood as middle-men or market-makers for these contracts.

Source: http://infrequently.org/2011/09/standards-are-insurance/

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