Video Download (Quicktime)
Audio Download (MP3)
Streaming Video Archive at Blip.tv
Yesterday we hosted another Metanomics session featuring a bare-footed Ginsu Linden, the avatar of Gene Yoon, Linden Lab's VP of Business Affairs. He gave us some unique perspectives on how the company sees Second Life and made some bold statements about which types of analysis aren't useful, and which might be more pragmatic.
The very way we think about Second Life in the first place was at issue. We tend to see what happens in the virtual world in basic economic terms. Traditional macroeconomic principles, however, aren't useful for Yoon when looking at Second Life: "It's a little bit of taking the metaphor too far. What we've got here [...] is a product."
Most analysis of the virtual world at Linden Lab revolves around simply creating a good product that people would be willing to use. There isn't an outright denial of a "virtual economy", but from Yoon's point of view that's not a useful way to understand what's going on when it comes to making decisions. Instead they focus on creating a product people like, and they sell that product.
This goes a long way toward explaining why Linden Lab behaves the way it does. If they see themselves as simply service providers and nothing else, they aren't putting themselves in a "government" role. Past moves to avoid policing or micro-managing what people do on the grid begin to make a lot more sense in that light. After all, do people expect eBay to regulate the quality of the goods sold on the site, or do they expect the real-world regulators to?
The perspective on land changes a bit at that point. Yoon said that virtual land "can't be measured or evaluated like real estate because there's no scarcity." Even more important, however, was Linden Lab's definition of what virtual land actually is: software as a service (SaaS). This lends itself to more straightforward supply and demand thinking.
This has intellectual property rights implications as well. It's entirely normal for an email service to say that they don't own the emails you write, but neither do they make guarantees that your emails will never be lost. Backing up emails is a normal thing to do; you'd hate for the only copy of your book to be in your email where it could easily be lost or accidentally deleted. As a result, allowing users to back up content in Second Life is a priority for Linden Lab, but again we run into problems: if you back up your inventory, are you making copies at that point that violate someone else's intellectual property rights?
On The Linden Dollar
There were a lot of questions from the audience about the in-world currency, the "Linden Dollar". Yoon sees it as just another component of their product. While some might ask: "why shouldn't we fear that they'll print an unlimited number of Linden Dollars and crash the economy?", the entire idea is that it's a valuable and necessary part of their overall product. While they could, theoretically, print as much currency as they want, that would only make it less valuable. The comparison was made to the diamond industry, where storehouses of diamonds are prevented from entering circulation in order to keep the value up; the same kind of philosophy is actively applied here as well.
A stable value on the Linden Dollar makes the entire Second Life experience that much more valuable, but many asked why it was necessary to have a virtual currency at all. Mostly it has to do with the micro-transaction problem: most goods sold in Second Life are sold for the equivalent of less than a dollar USD. Services like Paypal have minimum charges, fees, and other hurdles that would make these kinds of transactions impossible.
On Competition
Yoon didn't really see other virtual worlds as an actual threat to Second Life mostly because Linden Lab sees the demand for these kinds of services growing far ahead of the supply. Their perspective is that everybody who uses online tools will eventually be in virtual worlds - possibly as many as a billion users. If that's the case, while there will be many competing services, the market will have grown to the point where that won't matter so much.
This kind of strategy might explain comments by the company's CEO Philip Rosedale back in May that they were on a "mission to get this thing as big as we can, as fast as we can." Explosive growth, in this case, isn't considered so much a problem as it is an assurance of future business.
Cybergrrl Oh at SLNN covered the event, and in post-interview with Robert Bloomfield summarized: "Bloomfield wondered what Yoon might be “throwing away” by eliminating the metaphors. He pointed to the fact that Second Life does have an economy and believes that Yoon should be thinking about 'the supply and demand of product features that are traded freely among customers.' Regardless of Yoon's perspective, the 'product' is still novel and complicated."
Yoon did offer the disclaimer that, while he is the VP of Business Affairs, his opinions do not necessarily reflect those of all at Linden Lab.
Not a government or virtual economy... hrm... extension of the "unmanaged service provider" playbook. Avoids issues regarding user-created content.
Bingo Crap
I don't know what legal mess Ginsu is trying to avoid but I got the impression the terminology he insisted on had nothing to do with LL's view of their world, and everything to do with liability and other legal issues..
There is a very poignant analysis of Ginsus semantics over here http://url.ie/6l9 written by Prokofy (formerly of this house). I think corporate reality is begining to knock on the door of our cosy virtual world. The power shift is truly under way.
I believe that Linden Labs is making a very serious mistake not to be concerned about the competition. Their competition has watched the growth that Second Life has enjoyed and have learned from the mistakes of Linden Labs.
Eventually there will be a glut of providers offering 3D multiuser experiences and hosting will become more of a commodity service. Unless LL can fix some of the architectural mistakes they have made (no load balancing and fixed sized regions) AND move to an updated graphics engine they will be at a serious cost disadvantage to the competition.
In the end it's going to be about dollars, nothing more.
Linden Lab is a corporation, and I was surprised by the strange path they seemed to be taking with Second Life and the unusual interaction between its customers and those within the company. Here the mask is ripped away and we can see that at least *part* of the corporate entity thinks like every other corporate entity thinks: bottom line and liability avoidance.
The views expressed by Ginsu were shocking in how stark they were, but I couldn't shake the sense of how much simpler things look from that stark perspective. It is hard to argue with "evaluate product options and the customer acceptance of those products, make money on successful products".
My takeaway was that, while the some rank and file Lindens still believe in parts of the Virtual World Utopia, the corporate offices have seen the long term financial picture (and liability risks that have been dangling the the breeze) and are acting to protect the long term viability of Second Life. This of course means tearing their gaze from the shadow puppet play of the virtual and focusing on the actors behind the shadows. This is guaranteed to aggravate those of the immersionist camp, who wish to remain focused on the shadow puppet's play, but I'm actually heartened to have finally heard an analysis of Second Life that I could wrap my head around. (Frankly, it comes as a pretty harsh realization for a long term immersionist such as myself, as it paints a lot of my prior virtual activity in an interesting light that I'm still processing.)
The comment I worry about most is the lack of concern for competition. Yes, this space is expanding rapidly, but the "infinite expansion" model looks pretty grim in the face of the various toolkits that are coming online and I am deeply concerned that there will be way too many players and not enough converts to support them. How many dot-com players drew a hockey stick graph of growth? Almost all of them. I hate hockey sticks when I'm consulting; they almost always represent unbounded enthusiasm, not a realistic view.
I also think that that pointing out that their concern for their customers is solely financial and that changes will be made to roll over them at their whim (if more money is to be made by doing so) was a pretty gutsy move. It is all true, but such a stark statement clearly left people shocked. On the upside, people providing products and services within Second Life have finally been given a good model to hang their projections on: Second Life is a service provider and will react to real world pressure just like any other. This is a lot more predictable that the Utopia view that many have subscribed to (and Linden Lab has promoted up till now).
its sad it took this long for many to see the real world behind the virtual one.
now that reality begins to slip into the virtual worlds fantasies of 2006-7 the real work of designing an open web based system for the hosting , creation, and ecommerce around realtime 3d media can begin.
Frankly no product or system Ive seen recentlty or in the last 10 years has offered a better "cartoon" of what this media could be other than the "mistakes that are Second Life." Ironically its the things that a single company CANNOT do or provide (which is what yoon clarified this week for many) that is required for a new mass 3dmedia type (the metaverse) as desired by the audience here.
Its not a "product" or a single "platform" that CAN ever provide for a economy as broad as the "3d metaverse" needs to be to be anything "more" than what the "games" or "advergaming" market truly is. If last weeks "virtual worlds" defination exercise should have shown, theres no real metaverse or 3d web today, or in ANY of the TOP 8 PRODUCTS listed (at least anytime soon or open to developers economic interests in mass). I do wish there was, ive watch self proclamed "contenders" come and go for a decade from the NYVRMLSIG and SFWEB3D groups that were full of people just like those who frequent these blog rings.
So now that the Emporer has TOLD you he's NAKED...Where does that leave this audience? Possibly with many pundits, dollars spent, and hyperbole. But hopefully with some learned experience and a clearer vision of whats "real" vs. "virtual" or we'll be no closer to a web3d mediaverse than we were a decade ago.
Second Life is finally transparent even to those most blinded by the light of idealism, fantasy and fashionable futurism. Is it time to build a real 3d media for all, or just continue to play pretend in virtual worlds products?
To be truly "metaversed" one should be able to answer the question and more importantly look realistically toward the next ones asked.
Best
Cube3
www.cube3.com
www.starbasec3.com
www.mediaverse.net
Yoon is right. Now work the problem of rates for the service classes.
Larry, there is no end of fools that believe in magic beans, beanstalks to the clouds, and giant's holding a golden goose hostage. Investment bubbles are built on such. The good news is the VCs released a lot of money into the environment. IBM and Sun sell lots of servers, artists get *some* money, and so on. Fertilizer.
Economics or Customer Preference?
In the course of his presentation, Gene Yoon critiqued the growing practice of analogizing virtual worlds to the real world through the metaphor of the virtual ‘economy,’ instead describing Linden’s actions and decisions as deriving from marketing towards customer preferences. As I watched this, it appeared to me that this argument was based purely on semantics.
If we are going to study virtual worlds as independent and discrete entities, perhaps they are best conceptualized as independent countries (this seems more fitting than viewing them as truly independent “worlds” since there is interplay between virtual worlds and the real world much as there is interaction between different real world countries). If we do this, then the owner/ruler of that ‘country’ is Linden – it sets the rules/laws – and the residents/citizens are the participants – they go about their business (largely) complying with those rules. Yoon’s critique of the analogy was based on the idea that Linden sets policies (e.g. monetary) in order to match their consumer preferences and expectations rather than to engage in ‘monetary policy’ as conceptualized in modern economics. But what, fundamentally, is the difference? What other reason is there for a real world country to choose one monetary policy over another besides meeting the expectations and needs of its citizens – their “consumer preferences and expectations.” We don’t tend to conceptualize a country’s monetary policy in this way, but when a country changes monetary policy it does so to balance the needs and expectations of its citizens. Viewed this way, there is no reason to fight the analogy.
This conceptualization even works when one considers Linden’s ‘hands-off’ (no judgment intended) approach to disputes and regulation. What is NASD? A self-regulatory organization. Yes, NASD operates within the law of the SEC, but the SL dispute resolution mechanisms must operate within the “law” – the terms of use – of SL. Real governments do not handle everything either.