I'm coming back online a bit cautiously, following my Boom and Bust blowout, which had me disconnected from the Internet for a few months, because it had become an obsession.
The rupture served its purpose: my Internet activity is now more reasonable. For instance, instead of compulsively trying to keep up with Twitter and Plurk, I just log in and read a few pages from time and time. It feels weird knowing that I'm missing most of the content of the streams. But of course we all miss most of what happens on the Internet, because it is so huge.
One thing I missed while I was away from Second Life was the eruption of the conflict about the OpenSpace Sims (otherwise known as void sims). So what better way to resume my Second Life blogging, than to write a retrospective review of the OpenSpace fiasco.
The Void Sims get an Upgrade
It all began rather innocently, back on March 7th, 2008, when Jack Linden announced changes to the OpenSpace sims. The announced changes can be summed up as follows:
According to Tateru Nino's history of openspace, low-prim sims were originally used exclusively by Linden Lab, to pad empty areas on the mainland and to provide coastlines. The Lindens called them quad simulators, because four of these sims shared a single server, whereas a normal sim had its own dedicated server.
Prokofy Neva remembers that early in 2006 the Lindens allowed Adam Zaius to use the void sims to add open sea in and around his rentals continent of Azure Islands. Anshe Chung noticed that Adam had these, and demanded that the Lindens let her have them too.
In late 2006, under public pressure, Linden Lab packaged void simulators into a product, called OpenSpaces. They were sold as adjacent groups of four, for a setup fee of USD$1250 and a rental fee of USD$195/month. Tateru says that demand for this product was modest at that time. In late 2007, void simulator groups of four became decoupled. Instead of being clustered together on the same server, they might wind up all over the data center, which caused major problems with border transfers between the void simulators. Then in March 2008 Jack Linden announced the major changes to the OpenSpace product. Why?
A New Use for Old Servers?
Why did Linden Lab decide in March 2008 to encourage increased use of void simulators? Gwyneth Lewellyn suggests that Linden Lab might have wanted to maximize their profit from old, obsolete servers that were leased, together with the necessary bandwidth, under a long-term agreement (if there were no ongoing lease to keep paying for, they would have just thrown the obsolete servers away). Gwyneth is unsure of the dates, but she thinks Linden Lab first started using void sims just after upgrading to Class 3 servers, which meant they had a lot of old servers lying around. Some of the old servers were moved to the Beta Preview Grid or to the many internal grids, but some could be used for low-traffic sims.
The original void sim product required purchase of 4 void sims at a time, in order to use a full server, and was available only to owners of regular sims, to prevent anyone from purchasing them in place of a regular sim. LL in fact earned as much from 4 void sims, using old hardware, as from one regular sim on new hardware.
But as Gwyneth explains, the technology kept improving. From Class 3 servers, which could handle at the most two sims at a time, LL progressed to Class 4 and then Class 5, and will soon migrate to Class 6. At some stage LL started buying quad-core servers, which can handle four regular sims at the same time. This meant that they had more obsolete servers than ever, still under lease. The obvious business solution was to sell as many of those old servers as possible, while making sure they remained a low quality product. Gwyneth suggests that this is reason for the March 2008 announcement. And she mentions an additional feature which is only indirectly implied in the announcement: the new openspace policy allowed parcels to be sold and announced on the available parcel list.
The OpenSpace Product Takes Off
The new product aroused interest on the part of resident landowners (you still had to own an island already in order to purchase an openspace sim).
A typical response was that of Sarah Nerd. In a post on the Your2dPlace website, the day following Jack Linden's announcement, she wrote: "Personally I like this new option. It will allow me to expand my holdings quicker and be able to offer full free standing open space sims to renters that allow for a lot of freedom at a lower price." Landowners were clearly interested from the start in buying OpenSpace sims in order to rent them out. And many landowners began to buy OpenSpace sims.
On June 2008, Linden Lab announced that they were suspending the auctions of new mainland simulators. Tateru states that this dearth of new mainland sims made void simulators a preferred choice for landowners. However, the Linden announcement suggests that the mainland freeze was a result of the popularity of the openspace product, rather than a cause. The Lindens shut off the supply of mainland sims because the price per square meter fell too low, and they cite as a cause of the price fall: "the large number of OpenSpace regions sold through the new Land Store." Moreover, they mention that the price per square meter "rose a little as we reached March of this year before falling consistently since then." The logical conclusion is that mainland prices were falling because landowners were instead buying OpenSpace sims.
There is of course an additional possible cause for the drop in prices of mainland sims. The first half of 2008 saw the growth of several new grids using OpenSim, the open source derivative of the Second Life software. OpenSim grids such as OpenLife began selling sims for far less than the LL prices. Of course, as my own experience shows, the OpenSim alternatives offer far fewer functions than Second Life. But they do offer enough functions to be interesting as a cheaper, low-end alternative. Competition from the cheaper OpenSim grids may even have been one motive for the development of the new OpenSpace product – as Gwyneth also seems to suggest.
On July 8th Zee Linden posted the second Quarter results for Second Life which showed that total land mass grew over 44% in the second quarter of 2008. The post expressly stated: "Our growth was due to the popularity of our newly launched 'Openspace' land product along with a change in pricing to make the purchase of land more accessible to first time buyers."
OpenSpace becomes a Linden Nightmare
The use of Openspace sims soared far beyond LL expectations. Gwyneth reports that by fall 2008 there were an estimated 13,000 OpenSpace sims on the grid, out of 32,000 sims in all. On September 18th, RightAsRain Rimbaud noted that LL had reported more than 2700 new islands on the grid since the 1st of August, which would be more than a 10% increase in land mass on the grid in 6 weeks. RightAsRain asked whether this was a real statistic, or just the conversion of full sims to void sims, since there was no corresponding growth in the number of avatars. He also noted that the new sims appeared to be mostly academic islands (which pay lower rates than businesses – even in the case of void sims).
This growth was favored by a new tendency towards larger plots with less residents. The OpenSpace sims were restricted to lower prim counts, but people actually wanted sims that were less dense. Many landowners were buying OpenSpace sims in place of regular sims. As Gwyneth puts it: "the openspace sim, as a product, was undermining LL’s own income."
Also, certain unethical landowners began selling parcels on OpenSpace sims without saying that they were not regular sims, and complaints began to flood in. This was bad for the Linden image, and overloaded the support services.
More recently, Gwyneth has also suggested that the bandwidth cost of the OpenSpace sims was becoming a problem. While hardware use increases linearly with the number of sims, bandwidth use increases exponentially, since each new sim needs to be connected to its 4 neighbours (it is unnecessary to connect each sim directly to its 8 neighbours), with all the resources needed to keep the networking pipes flowing, such as memory buffers at all stages. A given number of OpenSpace sims consume the same bandwidth as the same number of regular sims, but they earn LL far less income.
Jack Linden Pulls the Plug
The Lindens decided to put an end to the Openspaces disaster as quickly as possible. The bad news came to residents on October 27th, 2008, in the form of a new announcement by Jack Linden. The announced changes in OpenSpace pricing and policy can be summarized as follows:
Jack justified these changes by explaining that most of the OpenSpaces were being used for much more than the expected "light" use. Rather than being employed as open areas with little content and traffic, most were being rented out to other residents, causing overloading and performance fluctuations.
But as Gwyneth put it: "Nobody truly believes that no one at Linden Lab wasn’t aware of what was going on." And the "ridiculous" price raise was a clear signal that LL was simply trying to drop the product.
Yet Another Revolution
Jack's announcement set off Yet Another Revolution in Second Life (to use one of Prokofy's favorite constructions, as when he called me Yet Another Leftist on the Internet).
Revolts of all sorts are common on the grid. Even in my short Second Life (my first rezzday recently came and went without my noticing it) I've seen at least two major protests, one after the other last spring. The first was a blog strike prompted by the Linden decision to initiate a new branding policy, which required all bloggers to add the trademark symbol after the words "Second Life." The second was a protest in response to a mandatory upgrade of the official SL viewer which suddenly deprived thousands of older computers of access to the grid.
But the OpenSpaces uprising was particularly virulent. On October 28th, the day after Jack's announcement, Wagner (Hamlet) Au covered an in-world protest outside the Linden Estate Services office, with angry avatars waving protest signs, and at least one case of self-immolation. The SL blogosphere broiled with indignation. Major landowner Lillie Yifu announced on her blog that she was leaving Second Life. A petition was started on the JIRA, the official SL issue tracker, and votes against the price rise began flooding in. Crap Mariner created an
Openspace Flickr stream to show the Openspace sims threaten by the price increase.
By the evening of October 28th, Tateru was comparing the protest to the Second Life Revolution of 2003, a tax revolt modeled on the tea party of 1776.
The reasons for the anger are well explained by Hotspur O'Toole, who argued that the price hike would do particular damage to "sims that rely heavily on open spaces for not just an aesthetic, but their day to day activities. Sims like the Second Life Sailing Confederation, or the Wild West sims, or Caledon, or Antiquity, all of which have significant open sims that are being used as an essential aesthetic for community activities."
In other words, the end result of the Linden maneuvering is that the void sims, which had long served a useful special purpose at a low cost, had suddenly become unreasonably expensive.
Prokofy's interpretation was that the Lindens were trying their usual method: "let's bomb them with a really harsh announcement, then see where the 'pain points' are, and solve accordingly." That brings to mind the way the Linden's introduced the new branding policy last spring – only they never gave an inch on that one.
Exodus to OpenLife?
As reported by Bettina Tizzy, within 24 hours of Jack Linden's price rise announcement, over 800 new users signed up on the OpenLife grid, more than 16 times the average number in a 24 hour period. On October 29th even Prokofy Neva, unrelenting foe of open source software, logged on to OpenLife, ironically calling it ClosedLife because of its lack of user-friendliness.
Bettina was obliged to report that OpenLife was not ready for most Second Life users. Prokofy, after a few more tries, dismissed it as NotWorkingLife and NotReadyForRentalsLife. I myself had first looked into OpenSim thinking it could serve as the basis of an alternative business model for virtual worlds. But I concluded that it seems more appropriate to use OpenSim to create entirely open source worlds, and to leave the virtual monetary systems to proprietary developers like Second Life – if only they could do it properly.
Damage Control
Gwyneth Llewelyn recognizes Jack Linden's efforts to respond in an appropriate manner. He launched the discussion on the forums (there were more than 3,000 replies) and he organized several in-world meetings. On October 29th he posted an update on the OpenSpaces announcement, thanking everyone for taking time to give feedback, assuring residents that Linden Lab was listening to them, and acknowledging that some OpenSpace sims were being used as they were intended.
The turmoil continued. On November 4th Jack Linden announced that the next day M Linden, the Linden Lab CEO, would post details about how LL would proceed regarding OpenSpaces. Comments were closed on this blog post, as they would be on M Linden's announcement. If you click on Find out why the explanation seems to be that: "some posts — like service status updates — are simply for informational purposes." Feedback on M's post was instead directed to the Forum.
On November 5th M Linden posted A Letter to Second Life Residents. After a few paragraphs of justifications and rationalizations, he presented the new policies, which can be summarized thus:
The same day, Tateru Nino offered the additional information that the modified OpenSpaces product would have its object limits slashed to 750 prims, as compared to 1875 prims in the old void sims, and occupancy limits slashed to 10.
Landowner Disappointment and Deflation of the Land Mass
The response to M Linden's announcement was summed up in the title of Gwyneth Llewelyn's post: Wrong Answer Mr. M Linden. As she notes: "the cost-per-prim in the new 'Homestead' sims will be about 500% more expensive than on regular sims." And two severely limited Homestead sims will cost as much as a full sim on the mainland without any unusual limitations. So nobody is going to want these Homestead sims.
Moreover, informed users know that the technology has advanced to the point where even the old servers can handle much higher levels of prims and traffic, so the arguments about overloading seem to be outright doublespeak. (Although as mentioned above there may be more credible bandwidth arguments.) The real reasons appear to be purely economic. But is it good economics? Gwyneth quickly calculated that if most of the 13,000 OpenSpace sims are dropped by their owners, which seems a likely outcome, at US$75/month this will mean a one million dollar per month drop in LL income!
A week after M Linden's Letter, Tateru Nino reported that the Second Life land mass had shrunk for the first time on record, with a net loss of 24.05 million square metres. However, this net loss amounted to only 2.8% of the total OpenSpaces product on the Second Life grid. Many OpenSpace owners apparently intended to hang on to them until the January 5th, 2009 price change, and dump them then.
Looking through the blogs, however, it appears that some OpenSpace owners are leaving Second Life for good.
On November 18th Tateru reported that the decline of Second Life land mass was accelerating, and had reached a net loss of 52.1 million square metres (or 795 simulators) by midnight of 16 November. This represented more than 6% of the total Openspaces simulators at the time of M Linden's letter.
Thus it seems likely there will be a sudden drastic drop in land mass around January 5th. To prevent this, Gwyneth Llewelyn has proposed an interesting solution: upgrade the mainland sims, keeping the price at US$195, and allow OpenSpace owners to transfer their sims to the mainland without setup fees. The proposed upgrade would include introducing on the new mainland sims the Estate Tools and avatar limits (100) currently available only on private islands. Many of the OpenSpace owners would probably gladly transfer their sims to the mainland, and pay the higher price, to obtain all of these advantages.
Back to Business as Usual
That brings us up to today. The clamor seems to have died down, other than a mention by the Second Life Herald that one group of residents is forming a virtual organization to raise funds for legal action against Linden Lab, to try to recover monetary damages suffered due to the OpenSpace sim price increases.
The sailing and dog-fighting blogs have gone back to business as usual, which seems to mean that they can live with 750 prim OpenSpaces – all they need is water or air, basically.
Second Life may have lost a few paying customers, but most of the rest will stay, because there is really no alternative.
But for anyone who is interested in democracy, on-line communities and user rights, this latest series of blunders by the game gods should serve as a reminder. If the system you adhere to fails to define your rights in an official text, then you have none. No amount of "listening to the forums" can replace an explicit recognition of your right to representation, participation and redress. Of course there is no legal obligation for the game gods to provide such rights, but nothing prevents them from doing so either. And if you had a real choice between a virtual world that provided them, and another that did not, which would you choose?
READ MORE...
Friday, 5 December 2008
OpenSpace Revisited
Sunday, 20 April 2008
Yet Another Business Model
A couple of weeks ago, Prokofy Neva wrote a blog post about the relationship between IBM and Second Life, entitled I Be Am. This fascinating post was followed by a series of equaling interesting comments, including notably a few statements by Adam "Frisbee" Zaius about the OpenSim project. The ensuing debate between Prokofy Neva and Adam Zaius focused on the general subject of the role of capitalism in virtual worlds, and on the particular subject of why OpenSim is being implemented without data encryption to protect intellectual property, and without payment protocols to support an in-world currency.
Reflecting on this debate led me to formulate a mixed-economy business model for a new virtual world. I described this business model in a late comment on Prokofy's post. The short exchange of comments between myself and Prokofy on this subject is reproduced below. (A few irrelevant sentences about the configuration of Prokofy's blog have been deleted from this otherwise verbatim transcript.)
Danton Sideways:
I finally read "The California Ideology" as you suggested, and probably agree with it even more than you do. Because the solution proposed by the authors is a *mixed economy* for digital development, with state funding to help the disadvantaged participate in the internet revolution. For example, that the state should help provide every citizen with a computer and cheap broadband access - which is of course socialistic.
As an advocate of mixed solutions, I see interesting possibilities for combining open source with protection of intellectual property. I may write a post on my blog about this, but to sum up, one possibility would be to organize a virtual world as a consumer cooperative. All residents would pay a fee to be members of the cooperative, and the cooperative then hires a management team to run the hardware and software, including data encryption to protect IP. And the software could be developed on the basis of the OpenSim platform, but as a forked private system incorporating Paypal and other modules. Structuring the company as a consumer coop would permit running it as a representative democracy both in-world AND in real life.
Prokofy Neva:
Whenever I hear the words "co-op" I think of my many years in Toronto or Rochester joining various food co-ops or living in communes or whatever, and eating millet loaves and all that kind of organic stuff. Co-ops are good for certain small things among like-minded people. They are terrible ideas for how to organize entire societies.
That's what's wrong with all this opensim stuff -- it's constantly predicating its model on an assumed and often unconscious belief that a sturdy foundation of capitalism will underpin its notions, ready to pay lots of money that it has gained from proprietary code lol. I find it hilarious at how unconscious all
this is.
Capitalist free markets are more efficient and serve more people.
Socialism doesn't work.
Danton Sideways:
I agree with you that a society that leans too far towards socialism will fail, as did soviet communism. But so will a society that leans too far towards unregulated capitalism, which is why Keynes introduced national economic regulation and the welfare state. All really-existing national economies are mixed systems.
As for cooperatives, either of producers or consumers, they *do* work on a large scale. Large examples of the former are farmer's cooperatives, and an example of the latter is my bank, the Credit Mutuel, which is one of the largest banks in France. Any cooperative must however be managed in a sufficiently professional way.
In the virtual world business model that I propose, the "nation" would be set up as a a democracy of paying citizens (consider the payments to be the equivalent of taxes), and the "government" would be the corporate structure to which implementation is delegated. Note that some or even the major part of the implementation could be outsourced, such as in the form of a management contract, to a separate company which would be required to meet specific performance criteria. The outsourcing could even be done with an open competitive bidding process.
This model could provide a way to mix together social cooperation and market capitalism for successful implementation of a virtual world.
Prokofy Neva:
[At the time of first posting of this article, the above dialogue is still on-going on Prokofy's blog. Prokofy's expected reply will therefore be inserted here.]
[Note added on July 3rd 2008: the dialogue on Prokofy's blog in fact ended there. And this post went pretty much unnoticed until today, when RightasRain made the comment shown below.]
READ MORE...
Friday, 14 March 2008
Fixing Second Life
Is Second Life broken? If it is, can we as residents do anything to fix it? If we can, should we bother?
At the recent Game Developer's Conference held in February 2008, Jane McGonigal made the following surprising statement (as reported by Terra Nova and blogged about by Prokofy Neva):
"Reality is broken, and we're not fixing it…"
She goes on to explain: "If reality is broken, why aren't game designers trying to fix it?" Let us withhold for a moment any judgement about this statement (the judgement follows just after the fold). Consider instead the following hypotheses. Assume that reality is, as stated, "broken," and that Second Life is a mirror of reality. In that case, could trying to fix Second Life teach us anything about how to "fix" reality?
McGonigal's idea is of course preposterous. Reality is not "broken," it is simply whatever it is. In everyday usage, reality means "the state of things as they actually exist." Who ever promised us a rose garden? (Karl Marx did propose a "scientific" method for making a rose garden, and other less dangerous thinkers have envisaged a variety of utopias, but they've all gone out of fashion.) Following Voltaire, however, we have all hoped that increased knowledge - "enlightenment" - might make the world a better place. But there will always be tragedies. Even if the extropians succeed in making everyone live forever (and that might be the ultimate tragedy), there will always be cases of "A loves B but B loves C," and similar heart-rending imbroglios. Growing children even *need* a good dose of frustration in order to develop, so that they can create themselves in the struggle against the "resistance" that life (or parents) can put up. So reality will always be hard to take.
But let us be charitable towards McGonigal, and assume that she just means that we should try to improve the world, rather than to "fix" it (this recalls something one does to cats). At the same Game Developer's Conference, Raph Koster delivered a similar message, saying: "Why do we build theme parks instead of parks?" In other words, why are we spending time building theme parks in virtual worlds, such as in Second Life, instead of building real parks in the physical world? (Added note: Raph actually meant something different. See his comment below.)
Are these game developers suffering from spasms of rich white "game-god" guilt, as Prokofy Neva would have it? Whatever their motivation, they are trying to bridge what is perceived as a gap between the virtual world and the real world. More than that, they seem to think that games can somehow help us to find real-world solutions. Thus the question: can Second Life help us to develop solutions to real-world problems?
Of course, as a platform Second Life can be used for organising and educating around real-world problems, but so can any internet program or platform. The question is more whether Second Life, as a virtual world, can teach us about solving real-world problems, due to the way it *models* the real world. (Added note: someone will probably object that virtual reality is a new part of reality, with its own characteristics and validity, rather than just a "model" of something else.)
At the risk of writing another of those long posts that no one reads all the way through (unless they are written by Prokofy Neva or Gwyneth Llewelyn), I propose to investigate the questions set out at the beginning of this post: is Second Life broken, can we fix it, should we bother? But I'm going to take them up, rather illogically, in reverse order. Before looking at whether there is a problem, or whether we can do anything about it, I'm going to ask whether we should even bother.
Why Bother about Second Life?
Part of the hypothesis stated above is that Second Life could help us to solve real-world problems. But if the goal is to improve real life, why take a time-consuming detour through the nether-realm of virtual worlds? Just roll up your sleeves, and deal with real life directly.
This is the message coming at me from my real-world environment. My wife hates to see me on the computer - she thinks I'm totally wasting my time. She would rather see me reading books, or better yet, writing them. I explain that I'm reading and writing things on the Internet. But to her, it is all just stupid geek stuff. And my shrink suggests that I should limit the number of hours per day that I spend on the computer. (I started seeing him a few years back when I had serious workplace problems, all of which disappeared the day I moved to another company - but the habit of seeing the shrink remained.) He seems afraid that I've become "addicted" to Second Life, to which I reply that I in fact spend most of my online time reading blogs. Are those around me just expressing an old-fashioned bias against digital culture, or is it true that I'm fleeing from real life?
Between real-world demands on my time, and the social pressure to stay off the computer, the time I can devote to Second Life is rather limited. I would be part of the group that Prokofy snidely suggests forming, called "Too Busy in Real Life" (added note: Prokofy apparently *has* created this group):
"There ought to be a group, like Not Possible in Real Life called Too Busy in Real Life with a very lite SL browser and readers' digests of blogs and rapid-fire tours of interesting sims that they take only 15 minutes a day to consume."
In all fairness to my wife, children, shrink and others around me who find I spend too much time on the computer, I *have* been totally absorbed in Internet for over a year now. This is new. Up until the end of 2006, I was just a casual user of Google, like everyone else. What sent me over the edge was my desire to create my own website. I'd wanted for years to make a real website, rather than a blog, but I kept getting hung up on the initial difficulties. I finally decided to make a big push no matter how much time it took – and disappeared down the rabbit hole.
After figuring out how to use the space I had rented on a distant server, I went through successive stages of learning about: FTP, domain names, HTML, PHP, MySQL databases and various software packages. Then I settled down to creating content for my new sites. But I discovered with horror that most of my pages weren't even getting picked up by Google. So I dove into learning about Search Engine Optimization (before finally deciding that it was pretty much a waste of time). My increased involvement on Internet also led me to activities such as reading blogs, contributing to Wikipedia, and – signing on to Second Life. And I'm only getting started: I have yet to use RSS feeds, Digg, Facebook or Twitter.
But here is the point: the personal returns are spectacular. After years of suffering from an inability to communicate about the ideas that interest me most, I'm suddenly sharing them with the entire cybersphere. A classical exercise when using any new software program is to try to print out "Hello World." I feel I've managed to put a big "Hello World" out on the Internet – and the world is talking back!
Which is why I conclude that it is worth bothering about Second Life. Those around me fail to understand that Internet has become the new agora. Online communication is now as valid a means of expression as going to a meeting, writing an article or talking on the radio. When I participate in a meeting in Second Life, I exchange ideas about significant topics with real human beings, even though to casual observers I may just seem to be sitting alone in front of a screen. The other participants in the Second Life meeting take for granted what has been said above, but many of us have to deal with resistance from our real world environments. And that resistance limits how much time we can put in. We might find that improving Second Life is worth it, and yet be Too Busy in Real Life to do much about it.
If it is worth the bother, what then can we do to improve Second Life? I recognise the limits of my own first-hand knowledge, due to my newbie status, and to my being Too Busy in Real Life. But I've gleaned some information reading the blogs, and I'd like to throw out a few informal ideas. The following are just random reflexions, rather than systematic study.
The Political Dimension
In my recent post Back to Building a Country I presented a brief overview of the history of Second Life politics. There seem to be two basic attitudes among residents. The "platformers" hold that Linden Lab just provides the platform, and should intervene as little as possible in what residents do with it. The
"interventionists" hold that Linden Lab should regulate the in-world society.
In my post I payed considerable attention to Prokofy Neva's advocacy of interventionism. (This may be why he has graced me with a place on his list of smart Second Life blogs!) It should be obvious that I personally think Prokofy is on the right track in his long struggle to get the Lindens to regulate abuse such as griefing and ad-farms. But just at a time when the Lindens have finally begun intervening as never before, as told by Hamlet Au, Prokofy declares that he is "done with the Lindens". It is not just that they are always doing "too little too late," it is also that their way of implementing the new Department of Public Works resembles the worst of their favouritism towards what Prokofy has called the Feted Inner Core.
Recent events confirm that the Lindens are basically platformers. They did intervene massively at the beginning of Second Life, in order to ensure its success, as Gwyneth Llewelyn has described. But now that Second Life has grown beyond what anyone expected, intervention is expensive, and the Lindens try to avoid it, for economic reasons if nothing else. They recently introduced new regulatory measures which they felt to be strictly necessary, but the enforcement turns out to be weak, and their attention is clearly turned elsewhere. So Prokofy says he's "through" with them.
Yet Prokofy was the foremost advocate of government by the Lindens, by "King Philip" as he called Philip Rosedale. Prokofy repeatedly said that the residents should ask King Philip for a Magna Carta to establish a government and rule of law throughout Second Life. However, in 2004 Robin Linden did ask if residents wanted self-government (as I mentioned in my last post) and the answer on the forums was a resounding "no." And Prokofy himself has been opposed to various proposals for a resident-based government, such as those made by Ashcroft Burnham.
Let us step back from this puzzle a bit, and try to put the pieces together. Apparently nobody wants the Lindens to initiate resident self-government. Prokofy no longer has much hope in asking King Linden for a Magna Carta. And there is widespread hostility to Ashcroft Burnham's scheme, because Ashcroft picked up the question at the wrong end. He started with the idea of enforcing the law, and thus asked residents to turn over their land to a central authority, which would have the power to confiscate the land as punishment for breaking the law. But no one wants to turn over their land to a central authority which would have the power to confiscate it, and understandably so!
The Magna Carta would immediately make one think of the English Parliament, which the Magna Carta helped to institutionalize. But living in France, I thought instead of the Estates-General, and of their role in the French revolution. Both the English Parliaments and the French Estates-General were called by the King, generally to get consent to impose new taxes. In a few instances, such bodies turned upon their Kings, and cut off their heads (Charles 1 of England, Louis XVI of France). But such an outcome was rare, and King Linden - or his successor - should be able to keep his throne in a Constitutional Monarchy.
What is important to note is that these bodies were only called together for *discussion*. The participants were bound by no other obligation than that of verbally representing their constituencies. Thus Ashcroft's land-donation scheme is totally unnecessary. Before going to Metaverse Republic, Ashcroft operated within the Confederation of Democratic Sims (CDS), which may be where he got the idea of collective land holdings. And as a current participant in CDS, I have postulated that the holding of collective property is the basic cause of some of the repeated conflicts within that small realm. Thus neither CDS nor Ashcroft has the proper model for Second Life democracy.
A Second Life Parliament should begin just as a place to talk, nothing more. (I use the word "begin" because there may a wider range of alternatives to be considered in the future.) It should also begin as a totally voluntary exercise. And it should probably also be geographically-based, as are all real-life representative democracies.
All we have to do is to define a procedure for representation of each sim (or group of sims, since there are 16,000 of them) by a locally-elected (or even locally-appointed) delegate. Then set the time and place for the big meeting, establish the procedures for the discussion, and issue a call for participation. Those who want to send delegates will; the others are free to abstain. Is anyone interested in forming a group to get this rolling? I'm tempted to offer my services, and to participate, as did my namesake Georges Danton in France. But I'll probably be Too Busy in Real Life.
The Economic Dimension
The economic aspects of Second Life are complicated. One undeniable success of Second Life is its amazing in-world economy. I made an initial study of it for my Funny Money post, in which I concluded that Second Life has something less than a real economy, since the currency lacks strict exchangeability. I may have been wrong. Since then I've read a paper by Cory Ondrejka, in which he suggests that even playing at business in Second Life is true economic activity, based on exchange between real individuals linked into networks.
By and large, the Second Life economy seems to work, despite problems such as fraud and Intellectual Property theft. One major worry was fraudulent banking schemes, which Linden Lab removed by banning unregulated in-world banking, although that also removes potential resources for in-world economic growth. Since the economy generally works, I will leave most of the in-world economic issues to specialists, and will focus on one particular economic problem: land use planning.
The problem of land use planning, or rather the lack therefore in Second Life, has often been discussed, as in a post from 2005 by Gwyneth Llewelyn. This problem seems to be directly related to the Linden Lab business model. I've seen it said on the blogs that the Lindens depend on the auction of new sims as a major source of revenue. Someone stated recently, for instance, that the Lindens introduced ad-farm restrictions only after seeing Umnik Hax devalue a set of brand new sims by putting an ad-farm right at the corner where four of them met.
It therefore seems that their business model requires the Lindens to keeping cranking out new sims, like sausage for the masses, as Sleazy Writer put it. To impose restrictions on what people can do with their land would be unpopular. Prokofy has repeatedly denounced the prevalent attitude of "I will do what the fuck I want on my land." But above all, to impose such restrictions might slow down sales.
And sales have been good: there are now some 16,000 sims! I've explored only a tiny percentage of the existing regions, but as I fly around I ask myself in wonder: "Who the hell MADE all of this stuff?" This is certainly a prime example of the power of massively distributed collaboration. But on the mainland these creators are all stepping on each others' toes, doing the exact opposite of what their neighbours are setting up, destroying whatever "ambiance" the next guy has made. Many of the islands of course are well planned, which is why Anshe Chung and other "land barons" have made fortunes. But the mainland is just one solid mess.
Are there solutions? Prokofy Neva has set himself up as a one-man urban renewal committee for the mainland. His answer to Sleazy's complaints was:
"No. If you don't like the weather, change it. In SL, you can do that. Buy land, fix it up. Or, support others who buy land and fix it up -- which I know you do with our SL Public Land preserve."
Prokofy's Ravenglass Rentals is a small empire of residential and commercial rentals scattered across mainland territory. In managing his rentals Prokofy simultaneously tries to upgrade the value of the mainland environment, which is one reason for his struggle against ad-farms. And this is part of why Prokofy is so exasperated with the Lindens' ludicrous attempt to improve the mainland with their new Department of Public Works. Fixing a few roads and adding a bit of other infrastructure will hardly put a dent in the land use chaos.
A real solution would be for Linden Lab to institute land use planning and zoning on the mainland, as is done in any real-life urban or sub-urban area. But we will probably have to wait a long time before they do so. Another solution would be to follow Prokofy's lead, and to do something like what he has undertaken as a rugged (grins) individualist, but in groups.
There is again something to be learned here from the Confederation of Democratic Sims (CDS). As I pointed out in a recent thread on the CDS forum, the CDS community is currently set up both as a political democracy, and as an *economic* democracy, because all CDS is essentially collectively owned. Since Linden Lab recognizes only one official owner for an island sim, each of the three CDS sims is currently owned by one person acting as caretaker for the group. Individual members "buy" plots, as on any island, but such individual ownership remains as much a fiction as in the case of a sim owned by a land baron. The real owner is the CDS group as a whole. And this is a curse, because CDS is un-gated, meaning that anyone can join. A cooperative business can work if it is gated, with a selective recruitment process. But collective property in an un-gated environment belongs to everyone, and hence to no one. As per the principle known as the tragedy of the commons, such a situation easily leads to collective disasters such as those seen under soviet communism.
I have therefore proposed that, in order to remain un-gated without provoking endless conflict, CDS should transform most of its collective property into private property. This drew puzzled comments from CDS members who thought that the property was already private, since each member "buys" one or more plots. But to understand the real situation it suffices to look at the cash reserves, which steadily accumulate because rental payments from members outstrip the tier payments, and which are clearly the *collective* property of the entire CDS group.
In order for the property to be private, in other words clearly divided up among the members, some sort of contract is required, spelling out exactly who owns what. There is of course the risk that members will default on the contract, but if the group is large enough, this risk is shared and thus reduced. And this brings us back to the possibility of forming economic groups to develop the mainland.
This could work as follows. A group forms with the goal of rehabilitating some part of the mainland. They should do this for the fun or for public service, because the profits accruing to each member would most likely be insignificant. The different members of the group would then buy adjacent individual plots, and set up a *contractual relationship* between themselves to develop the region in a harmonious way, and to divide up any possible profits according to the some predefined scheme. The CDS experience suggests that this last point is crucial. Even if in the end there are no profits at all, the contractual relationship must still define how to divide up any *possible* accumulated wealth, for example on the basis of the initial investment, plus some measure of each individual's contribution (for example, m2 of build). Some such scheme might evolve into a successful model whereby resident groups could rehabilitate portions of the mainland. Any takers?
Other Dimensions
There are many other dimensions to consider when talking of improving Second Life. But this post is already long, and I lack expertise, so I'll just list a few of the better-known dimensions and issues:
*Technical Dimension: libsecondlife, Copybot, User Interface, rolling restarts
*Service Dimension: customer service, online help
*Social Dimension: griefing, ad-farms, bot-farms, newbie experience, avatar rights
I could have linked each of the above issues to some blog post or other, but that would have been a lot of work. And what important dimensions or issues have I forgotten?
I've failed to address one of the key questions above, which was: how we can learn from Second Life as a *model* of reality. Perhaps that will be the subject of a future post. But it is time to move along...
Is Second Life Broken?
Now for the very first question of all, which I have deliberately left for the last. Is Second Life "broken"?
Of course not. Second Life is no more broken than "reality is broken." As long as we are able to log on, to find our avatar, inventory and sims, to use the software, and so on, Second Life works. But we could always make Second Life better – and we could always do the same for reality.
READ MORE...
Sunday, 20 January 2008
Spammed by Prok
When Prokofy Neva adds his two cents to someone’s blog, the result can resemble a spam attack. Out of the ten posts existing yesterday on Danton’s blog, six have been hit with long comments by Prokofy, signing in as Dyerbrookme. On three of the posts, he made two comments rather than one. And several of Prok’s comments are longer than the original posts.
Danton Sideways is flattered to have received this attention from Second Life’s foremost pundit. As I indicated in my post about Second Life Loudmouths, I find Prokofy to be consistently interesting and informative. Moreover, his incisive critical analyses help me to understand this scene I recently joined in creating my avatar on Second Life. As is his general wont, however, Prokofy has gone into exhaustive detail in responding to my posts. It may therefore be helpful if I provide a brief summary of Prokofy’s comments, for those who lack the time to read through them all.
It could be noted in passing that Prokofy suggests that there is room for a Second Life newspaper giving "news, satire, cartoons, classifieds that was not tied to the land baron business, or banks, or to a TV station," and that he offers additional explanations for the phenomenon that I have called Second Life Blues. But the main gist of his comments concern Second Life economics and politics, so let us turn to those subjects without further ado.
Prokofy reacts strongly to my question about whether he is a member of the Second Life oligarchy, up at the top of the economic pyramid, alongside the likes of Anshe Chung. Harrison Randolfe had already mentioned in a note added to his famous pyramid scheme article: "I thank Prokofy for enlightening me to some of the bitter realities experienced by those on top of Second Life's economic order." In his comment on the present blog, however, Prokofy denies being "on top" of the pyramid, stating: "the land barons, while famous for having Anshe Chung supposedly making a real-life million, are collectively, much lower wage-earners than the content creators" such as animation wizards Craig Altman, Owen Khan or Cristiano Midnight, or dress designer Simone Stern. Prokofy observes that land barons have far greater costs (tier, prefabs) and spend more hours doing customer service, and claims that he personally is quite low on the pyramid because he deals in mainland rentals: "any island dealer with 20-30 islands probably makes double what I do, because islands simply sell better and are more fully occupied." He concludes that if most of the Second Life business people, including himself, billed for their hours, they would break even or lose. (Note that this was the main thesis of my post anyway - one which Prokofy seems to confirm.)
Prokofy then gets more positive and corroborates Gwyneth Llewelyn's encouragements, suggesting that there still exist many possibilities for opening up new businesses in Second Life. He points to the many newcomers from outside the Anglo-Saxon countries (Brazilians, Dutch, Russians) who have lowered the prices in rentals, services, and widget businesses, and added better service, notably by avoiding the tendency to over-script everything. The most successful are those who log on and stand behind their store counter day and night. Prokofy also notes that there are many content creators making money from prefabs, furniture, animations, clothing and inventions to do various things.
Prokofy’s reaction to Madame Irma’s pronouncements is of a different sort. Here what he objects to is Madame Irma’s insistence that "nobody shops in malls anymore," seeing in it an echo of the snobbish disdain that the Feted Inner Core had expressed for Anshe's "tacky" malls, before economic logic obliged many of them to join the mall scene. Prokofy claims on the contrary that people do still shop in malls: currently popular shopping sims such as Tableau are essentially higher-end malls on private islands. He does however agree with Madame that the overwhelming majority of sales in Second Life are currently made through search ads, despite the tiny minority that still make their fortunes through word of mouth (which is undeniably important), and that loudly insist on the forums that "nobody" uses search and that it is "broken". Prokofy concludes that people with little boutiques and a special clientele refuse to believe in malls, but in studying Second Life economy one must set aside blinders of class taste and go to see what is happening in the field. (Danton did try to do that, but his first excursion took him no further than Madame Irma’s world-view.)
Prokofy’s reactions to Danton’s political musings are mostly concentrated in his comments on my Troubled Sleep post. He says the leftists in CDS don’t need to create a separate leftist city, because CDS is already leftist, in that the land is not for sale on the open market. What does he mean by that? I bought a total of three plots in Colonia Nova, and last week I sold one of them by putting it up for sale "to anyone." It was purchased during my absence by a complete stranger who simply clicked on "pay." Prokofy must be referring to something else, because he tells about how he opened Ravenglass to the general public for sale, and everyone said he would be flash-mobbed by land barons, but he wasn’t. He holds this up as a model for CDS to follow, claiming that the fear of right-wing plotters buying it all up is what prevents the Frieswiththat (his play on the name Neufreistadt) gang from letting the sim become a truly open democracy. According to Prokofy, decent prices and a covenant would be sufficient to prevent that from happening.
And Prokofy repeatedly points to Danton’s unfamiliarity with all of these issues. In one comment he states directly: "Danton, you have to study SL history and economics way more than you have." I’m painfully aware of this. I break out in a cold sweat wondering how I am going to keep up with all the new posts of the main Second Life bloggers - let alone read the past ones! I claim to have clinically identified a condition of in-world avatar anguish, for which I modestly propose the name Danton’s Syndrome. What then will we call this out-of-world obsession with trying to keep up with the Second Life blogs and forums? Since the name "Danton" has already been used, perhaps this separate but related disease, which I again claim to be the first to have clinically identified, could be called the "Sideways Syndrome."
READ MORE...
Saturday, 19 January 2008
Benchmarking the Boutiques
With her long comment on my virtual money blog post, Gwyneth Llewelyn started me back on my search for in-world business possibilities.
I thought I should begin by talking to someone with hands-on experience of virtual shopkeeping. I discretely asked friends for the name of an avatar I might interview, and was introduced to a businesswoman who runs a small shop in a distant sim. She willingly answered my questions, but for reasons which will soon be apparent, she desires to remain anonymous. I will just call her Madame Irma.
I met Madame Irma in her boutique, and started off asking questions about shops and shopping in Second Life. She wondered at my curiosity. I told her that I wanted to benchmark Second Life business practices, and was in search of the best stores in Second Life. In my Funny Money post I had summarized Prokofy Neva's history of Anshe Chung's shopping malls, so I asked Madame Irma where to find the best shopping malls on Second Life.
"Malls?" replied Madame Irma, nonplussed. "Nobody needs to shop in malls any more. Only a newbie would travel to go shopping. You just open Search, go to the All tab, and type what you're looking for. When you find the name of a shop that interests you, you can teleport there. But you can also shop on the SL Exchange Marketplace or at the Onrez site."
My personal experience of shopping had started in my own neighbourhood, with the purchase of a roman chair at Torin Golding's Roma outlet in Colonia Nova. I had clicked on a picture of the chair to pay for it, and received the chair into inventory, with no shopkeeper present. I had then gone to the large Emporio Romani store in Colonia, which is full of panel pictures of clothing, but had wondered how to try something on before buying. Madame Irma explained that some shops let you try samples. To demonstrate, she put on a sample of hair that she had in her inventory. The hair sat neatly in place, but above her head there hovered a box, which could only be removed by buying the sample. She took the hair sample off and put it back into her inventory.
I realised how little experience I have with Second Life shopping. I should get out of CDS more often and see the (virtual) world. But my education was only beginning. Madame Irma started talking about speciality shops. "RAC is the best for skin," she explained. "For sexbeds it used to be Strokerz, but now there are many shops. And XCITE corners the market on, well, penises and such." I already knew something about this, having read the Wired Guide to Second Life. Madame Irma went on: "All newbies get taken to XCITE at some point. And there are nice themed malls, like the BDSM malls."
It was my turn to be flabbergasted: "You said nobody goes to malls anymore. But now you say there are whole malls just for bondage, dominance and sado-masochism." Madame Irma could only confirm: "OMG yes," she assured me, "BDSM is very big on Second Life."
Talking about skins reminded me of a web page that I had seen, about a sim with a shop that sells dragon avatars. I mentioned to Madame Irma that I fancied the idea of being a dragon for a while. "You are so bored," Madame Irma replied. I was afraid that she had said I was "boring," but I checked the chat history, and she had indeed said "bored." However, on Second Life "bored" appears to be a derogatory term. After about a quarter of an hour in-world, some 50% of newbies announce: "I'm bored." Those are the ones who never come back. Myself I've been endlessly fascinated since the first moment, so my reptilian fantasies are not from boredom. I just think it would be great fun to fly around as a huge dragon. I could scare little children…. I could eat newbies! Second Life tends to bring out the hidden side of everyone's nature. For some it is BDSM. Apparently my hidden nature is to be a fire-breathing griefer.
Talking with Madame Irma made me realise that it is much too early for me to do benchmarking about Second Life businesses. I've got to do more serious Second Life shopping myself, before I can start thinking of selling anything to anyone else.
READ MORE...
Sunday, 13 January 2008
Going into Buzz-ness
During the past few weeks the Confederation of Democratic Sims has been in the throes of election campaigns. This election period has been the occasion for the Real Danton to stand up and reveal himself as a "left-libertarian." Ruminating about Second Life politics has also lead me to spin out a paranoid rant about flash-mobbing as a political gambit. But now that I've voted, my attention has already turned back to more serious matters.
I’m still looking for a line of business to go into on Second Life. I've been toying with a few ideas, such as for example creating an in-world travel agency. But what does it mean, in fact, to "create a business" on Second Life? In my rather pessimistic post about virtual money, I suggested that it only means playing at business, since the real-life gains seem to be generally paltry. That post was graced with a long comment by renowned Second Life blogger (and CDS's own) Gwyneth Llewelyn, in which she promotes a more positive point of view.
Gwyneth points out for one thing that there are many other large land barons, in addition to the notorious Anshe Chung with her Dreamland. For example, the Azure Islands, owned and operated by the Australian company DeepThink, directed by Second Life residents Adam Zaius and Nexus Nash, now have a larger landmass than Dreamland. Even smaller barons such as Prokofy Neva and Desmond Shang of Caledon have at least a thousand paying customers each.
Gwyneth also gives numerous examples of promising sectors of economic activity on Second Life, including fashion, education, art, music, lawyers and environmental groups. She even mentions finance, regretting that Linden Labs has made it difficult for the finance subculture to survive in Second Life. In the fashion sector, Gwyneth mentions Ana Lutetia, whose website review of the Second Life fashion scene has become a reference. Gwyneth also refers to the giant education sector on Second Life, noting that "they organise huge venues, sponsor thousands of projects, do RL conferences all the time, and write hundreds of papers." She specifically points to the New Media Corporation as an example of an in-world business that provides services to this education sector.
My initial reaction to Gwyneth's comment was to reiterate my earlier objections about the generally low real-dollar profitability of Second Life economic activity. What do the earnings of the land barons represent in terms of real dollars? Moreover, the big land barons, sitting at the top of the Second Life economic pyramid, hardly represent the average Second Life business owner. In the other sectors, what are the real economic gains of individual entrepreneurs, when translated into US Dollars? The SL fashion sector, including clothing, hair, skins and so on, is undoubtedly enormous, even in real life dollars. But since each separate transaction is for only a tiny amount, one wonders about the net earnings of the individual small creators and entrepreneurs. And for all the size of the Second Life education sector, how many large in-world service providers can it actually support?
My objections undoubtedly contain an element of truth. But I've recently come across additional information which corroborates Gwyneth's point of view. Studying the SL History Wiki in more depth, I've been realising how big Second Life and its economy actually are. And I've been reading a fantastic paper by Cory Ondrejka, which has helped me better understand the Second Life "market." Prokofy Neva in a recent post credits the telehubs and Anshe Chung with stimulating in-world creativity, but Cory shows that the key insight in fact came earlier, from Stanford Law professor Laurence Lessig. Cory describes Lessig's contribution as follows: "Specifically, he made the comment that it was a mistake to ask users to create a world but not allow them to own what they had made." The in-world economy and the explosion of resident creativity both spring from this initial decision to allow individual ownership of created objects. Cory goes on to suggest that the in-world economy breaks down the dichotomy between play and profession. In other words, playing at business in Second Life is true economic activity, based on exchange between real individuals linked into networks.
The intensive networking that goes on in Second Life is one of the aspects that drew me here in the first place. In this context, where the boundary between work and play washes away, the definition of "economic activity" also expands beyond mere in-world exchange. For me personally it has little to do with Linden Dollars, and everything to do with audience and notoriety.
Let us say, for example, that I create an in-world travel agency as my Second Life business. This would mean concretely that I would create in-world links to a plain old website, full of pages about possible in-world travel destinations. (Such websites already exist of course, and I may discuss them in a future post). I could then contact landowners to see if they would give me commissions on travellers or buyers that I send their way. But the net profits would probably be rather meagre when exchanged into US Dollars. I might however want to create such a "company" in order to procure something other than Linden Dollar commissions. If the website succeeded, my payoff would be notoriety: I would have captured an audience. And I have in mind a number of ways to profit from that buzz.
READ MORE...
Sunday, 6 January 2008
Funny Money
About a month ago, after only a few weeks on Second Life, I bought a home in a quiet corner of Colonia Nova. Then a few days ago I was unexpectedly presented with the opportunity to buy a small shop near my home. I jumped on the chance, although I have as yet absolutely nothing to sell, since I'm still learning to make basic plywood boxes.
Economic activity is evidently a central part of the Second Life experience. Most landed residents have a shop or a business of some kind, in addition to their house – or in place of a house. It appears however that the wheeling and dealing of the majority of residents remains on the level of a game. Someone has said that if you calculated the average financial return on all of these virtual businesses, you would find that the owners could have earned a higher hourly rate by babysitting for their real life neighbours. There are exceptions, notably among the land barons, who purchase and develop large blocks of land, sometimes entire sims, and then rent out parcels. The most famous land baron is Anshe Chung, who made over a million real-life dollars from her in-world business. But for each successful merchant or land-baron, there are thousands of gifted creators producing marvellous content and gaining only a pittance from it (just as in real life).
So I have no illusions, but I'm ready to play the game of developing my own virtual business. I therefore began looking through the blogs and websites to learn more about the virtual economy. As usual, a natural starting place for my research was Wikipedia, which has a long article about Second Life, as well as shorter articles on specific topics such as Second Life Real Estate.
The particularity of the in-world economy is the currency. Linden Dollars (L$) can be converted to or from U.S. Dollars, either through Linden Lab's official currency exchange, called the LindeX, or through third-party currency exchanges such as SLExchange (SLX), ACE or BNTF. These currency exchanges are said to be open markets, fluctuating daily as resident transactions set the buy and sell price. However, Linden Lab in fact intervenes whenever necessary, by buying or selling Linden Dollars to keep the exchange rate relatively stable, at around L$270 per US$1 on the LindeX. (The rate is slightly higher, around L$ 275-285 per USD, on the third-party exchanges.)
It has been suggested that this stability is fragile. The total value of Lindens in circulation is only partially backed by Linden Lab revenues in US Dollars, since Linden Lab steadily creates new Linden Dollars out of nothing, such as by providing new premium users with stipends. This fragility could lead to a recession, or even to outright economic collapse if people lose confidence in the stability of the exchange rate. Moreover, Linden Lab includes provisions in the Terms of Service which state that Linden Lab is not required to pay any compensation if Linden Dollars are lost from the database, which deprives Linden Dollars of intrinsic value as a form of currency.
What I understand from all of this is that Linden Dollars are a truly virtual, rather than real-world, currency. Investing in them involves correspondingly high risk. The lack of true exchangeability with US dollars was demonstrated by an experiment described in an often-cited blog post by venture consultant Harrison Randolph. Working for a group of entrepreneurs and investors, Randolph sunk nearly $10,000 USD into Second Life over a 6 month period, borrowing from or lending to virtual banks, and entering into various types of virtual financial arrangements. Randolphe's first conclusion was that you can seldom trust those with whom you’re doing business in Second Life. Even supposedly well established business citizens are prone to defaulting on any obligations which prove inconvenient, since their real world identities are carefully-guarded anonymous secrets.
Randolphe's second conclusion was that the L$ exchange process is more of an open auction than a true currency exchange market. The catch is that the announced stable rates only apply to small amounts, to the multitude of tiny transactions by small-time buyers and sellers going through the official LindeX exchange. As soon as you want to make a big trade, you must go through the private exchanges, which are owned by the businesses which sit at the top of the Second Life economic hierarchy. (The “Virtual Land Baroness” owns the largest such exchange). Every time Randolph tried to transact more than a couple hundred US dollars, the exchange rate would suddenly spike to levels of about 400 to 500 Lindens per USD.
Because of this "rigged" exchange scheme, the end result of each of Randolph's deals was a net return of only around 4%, which was the prevailing interest rate on dollars deposited in a real world bank! He tried to figure out a way to disguise his trades, or to create his own in-game banks and exchanges in order to arbitrage the other direction, but found no solution. This led him to conclude that Second Life is a "pyramid scheme." As he notes, the buzz is that it is possible for enterprising residents to make big money in Second Life. The reality is that one of the more successful in-world business-persons that Randolphe spoke with made an impressive L$50,000 in one month of operation of her virtual jewelry store - which is only about $185 USD! A tiny handful of land barons and brothel owners are responsible for nearly all of the real money extracted from the game, and they profit from the mass of new recruits who invest in-world in the hopes of making big money themselves.
The question that interested me next was, how did the big land barons at the top of the pyramid get their start? I obtained an answer from the blog of Prokofy Neva, the Second Life loudmouth who engages in rough intellectual jousts with just about everyone, in the name of defending "resident rights." Prokofy turns out to be an acknowledged expert on Second Life economics. This acknowledgement is shown for example in the applause that Robert Bloomfield, a professor of accounting at Cornell University, and creator of the Metanomics conference series , gives to Prokofy's long commentary posted to the Metanomics website. Bloomfield also turned to Prokofy for advice when Bloomfield was granted an interview with Robin Linden. Although Prokofy mocked Bloomfield for turning to him for advice, he willing provided Bloomfield with a list of questions about Second Life to be posed during the interview. (It could also be noted that Prokofy is opposed to Bloomfield's project of promoting self-regulatory business associations in Second Life, an opposition which reminds one of that distant time - four years is an eternity on internet - when Prokofy, under the name of Dyerbrook, struggled against the Sims Shadow Government.)
Prokofy gained his economic expertise through the school of hard knocks, as an in-world business-person. He explains in a recent blog post that he got his start by advertising his rentals in an Anshe Chung shopping mall, located on the same sim where Prokofy's rentals were. And Prokofy still has tenants today. Thus when Prokofy pipes up to defend "small businesses" on Second Life, he knows by personal experience what their problems are. Of course Prokofy is in business in order to be able to mouth off, rather than mouthing off because he is in business, but the end result is the same. He knows what he is talking about.
Prokofy is thus in a good position to inform us about the history of Second Life economic development. As he tells it, the whole story hinges around the introduction of the telehubs, which modelled the Second Life economy for a few years, before the Lindens changed tack and destroyed them.
The telehubs were an artificial constraint on resident travel that was introduced to make residents socialize and build together. The Lindens got this idea from Jane Jacobs, who held in her classic "The Death and Life of Great American Cities" that New York grew and thrived because of rich accidental constraints that forced travellers and merchandise to go through it. Travelling Second Life residents were thus forced to teleport into the hubs and then fly out of them, which obliged them to congregate, if only briefly, before they rushed off somewhere else. The areas around the telehubs soon became ugly, laggy messes, obliging the Lindens in late 2004 to start redesigning some of them with green grass, trees and open spaces, in order to mitigate the mall lag and blight. But according to Prokofy, the telehubs were an enormous engine of growth and creativity for Second Life, precisely because of the capitalistic mall development. Entrepreneurs realised that this land was valuable, bid it way up on the auctions, and cornered the market. Thus Anshe Chung, Blue Burke, Moonshine Herbst and a few others made their fortune in mall rentals and machines. Anshe's malls were carefully master-planned, laid out to provide a maximum of rental space and an easy flow-through of avatars, and business boomed.
Prokofy claims that: "The mall barons created a system that, ironically, was extremely democratic, accessible, and wealth-producing." Although mall rentals were very high per prim, anyone willing to pay the price could get a stall, whereas prior to that point the Second Life economy resembled a medieval apprentice system. You had to cultivate and flatter a member of the aristocracy of feted divas, in order to get a spot in the back of her store. Prokofy adds that under the mall system: "You could even make a deal with Anshe, if you were large enough, to put out your stores for you each time she managed to snag an auction win with a telehub in it." Did "small businessman" Prokofy successfully make such deals with Anshe? Would he in fact be sitting somewhere high on the Second Life pyramid, instead of down here with the rest of us, as he pretends?
Prokofy waged a battle for keeping the telehubs, as did Gwyneth Llewelyn, though for different reasons. But all 42 telehubs were simultaneously deleted in late 2005 by the Lindens, who were under pressure from various lobbies to allow teleporting "P2P" (which on Second Life seems to mean Place to Place, rather than Person to Person). With the telehubs gone, some of the malls stayed as before. Traffic continued to come, but the lag was gone, since only those residents visited who specifically wanted to be there.
What this story would seem to suggest, of course, is that the mall-managing land barons who climbed to the top of the pyramid during the telehub period, now form a permanently closed club. The "historical conditions" that allowed them to rise by grabbing the land around the telehubs are now definitively gone. One could always try to create a brilliant new set of themed sims, on the model for example of Desmond Shang's Caledon or Torin Golding's Roma, in the hopes of attracting enough renters to make a profit. But the sheer concentration of economic activity that resulted from the telehubs no longer exists anywhere on the grid. With the telehubs gone, the in-world economy has frozen into a form of oligarchy, which someone like Prokofy Neva has no reason to contest, however undemocratic it has become.
There remain of course many ways to make real money from Second Life. The best bet is to provide consulting and content creation for real life businesses that want to establish an in-world presence. Since these businesses install their in-world presence only for purposes of marketing and publicity, the service-provider acts as a cross between an advertising agency and an architectural firm, with a dose of computer savvy thrown in. It is significant that such service-providers are wary of Linden Dollars. One of these companies recently indicated on their website that their services are billed in US Dollars, though this information has since been discretely removed from the site (hidden from the public eye and reserved for private response to serious client queries). In others words: please pay us for our real-life services in real-life money, rather than in Linden funny money.
I still plan to create my in-world business. But the information summarized in this post indicates that my chances of making more than pocket money in-world are practically nil, especially since I'm unwilling to invest the significant amounts required to become a land baron. Second Life is however an incredible tool for learning about economics and entrepreneurship. A whole range of economic phenomena are modelled with surprising realism within the virtual world, to the extent that some people seem to have taken it for a real, rather than a virtual, economy. And although a tiny few at the top of the pyramid do extract real dollars from the system, the in-world business of most residents remains just a game. And this is how it should be. The proper employment of funny money is to use it to have fun.
READ MORE...
Posts
