Questions for the Metanomists

I have to confess some chagrin at the line-up of a much-discussed conference coming up next week for "Metanomics," and the launch of an entire prestigious college course at the Ivy-League Cornell University. To be sure, the speakers represent some of the most celebrated figures in or around the Metaverse, and several of them are grandfathers of the virtual world phenomenon itself (Bartle and Castronova); one of them has made a million US dollars from virtual worlds (Chung); another represents major RL business (IBM) that has bothered to come into this controversial space and dig in for a long run (Kearney); yet another is poised to try to harvest the Metaverse for a real-world government's coffers (Miller),

Yet I don't believe they will deliver to us anything substantive about the present and future of the Second Life (and by extension Metaverse) economy per se -- even though, of course, they'll likely have something interesting to say, in a particularist or a generalist sort of way, that will undoubtedly be of value to us all.

While the conference grew out of the desire of one professor, Robert Bloomfield, to have material for an Economics class, what might have been a small and dryly academic experiment took on far more heft due to a series of fascinating developments for RL and SL media, the casino bans and the collapse of Ginko's and the emergence of new (and just as dubious) stock exchanges and banks. At the same time, some prominent real-life businesses like American Apparel and media like Wired announced they were leaving SL as it wasn't bringing them any return on investment -- however they were measuring this. That meant the media needed sound-byters to make sense of all this, and suddenly, what might have been the use of a platform just to make an insular experiment and teaching model for one class became a desire -- because there was a major media audience -- to shape the entire Metaverse's economic policies, creating regulatory bodies and policies at the drop of a dime.

The first question to ask about the SL economy is whether it is in fact interesting to talk about, anyway. It is a synthetic economy very heavily controlled by a software company that sets the basic currency exchange level through the LindEx. LL sells anywhere from half a million to a million US dollars worth of currency it prints out of thin air. The real millionaire of Second Life with the most reliable source of income isn't Anshe Chung; it's Supply Linden. LL also places brakes within that LindEx on large transactions and monitors and freezes accounts at will if they appear to be engaged in suspicious activity.

This same entity prints land out of thin air, and auctions or sells it roughly according to the fixed cost of servers in its colocation facility. The miracle of Second Life is that out of those very rigid and synthetic parameters, numerous people have made at least a small profit or a help toward online expenses, have arbitraged the land not merely by flipping it but by adding social and architectural value in its development (yet not truly owning the "land" or being able to port it elsewhere); and have designed and sold an enormously diverse amount of content which *can* be ported and has more intellectual property value than land, but less than the software and the technology itself.

Castronova said just about everything there is to say about game worlds and RMT in his seminal "Synthetic Worlds", which should be a must-read on this course, but he's simply been uninterested in this apparently non-compelling world of SL. His own current project of virtuality involves recreating the era of Shakespeare with another platform, not following a modern-day online economic experiment called "Second Life". For years, he's rarely pronounced more than a 30-second sound byte on SL, and has been able to pronounce it not because of his actual engagement and field knowledge of the world, but because he is turned to by media looking for answers, based on his reputation for study of Ultima Online or World of Warcraft, very different fixed and synthetic economies. By the same token Julian Dibbell, as thoughtful as he is, didn't make money through design and development in the open-ended world of SL, but made game loot by working the system of a fixed rule-set game -- an activity very unlike what business involves in SL. Richard Bartle appears apparently in the role of what the Russians would call "a wedding general"-- and let's hope that his visit to SL, the first in about 2 years I believe, will leave him more enthusiastic about its capacity for immersion this time.

Any fellow from the IRS such as Dan Miller should be squarely challenged on what on earth he is doing fishing in SL; given that we do not own our property, and that we suffer enormous costs in development, terrible losses in down time and griefing, unimaginably long hours of unpaid labour, and miserly return on both land and content that we don't fully own and can't port. Indeed, rather than chasing *us* around, the question for the IRS should be whether Linden Lab is exploiting "crowd-surfed" enthusiasts as free or poorly-paid labour, and should be tasked to fill out a thousand of so 1099s forms and distribute it to those who have assisted substantively in its "research" -- and perhaps even pay more payroll tax than it pays now. There really isn't an awful lot more to discuss at this juncture. I certainly plan to tell any revenooers coming on to my lawn to go look for something more productive like truckers running cigarettes from the North to the South, and patching them with fake stamps.

Anshe Chung, alone among the participants (besides Bloomfield himself, who has done an admirable amount of immersion and augmentation with SL in a relatively short time), could be said to "understand" the SL economy. Yet, the reality of this particular virtuality is that she has in fact *made* the economy by being without question the most enormous player in it, after Linden Lab. No other firm -- even the IBMs and Ciscos of the world -- comes even close, so it's really a question of a huge, oligarchic company that has benefited from close -- but sometimes contentious relationship with the one-party state, and has helped shape the entire policies for the world -- setting the price for prime mature waterfront, keeping the entire market liquid, and ensuring regular sales on the auction. But Anshe has little thought for the rest of the economy many tiers below her level, and the levers and checks and balances needed to sustain the many small or medium businesses below what is a kind of chaibol. So while it's fascinating to hear how Anshe made her first million and how she will adjust down prices of furniture with a Wal-Mart experiment in flooding the market with cheaper goods (something that is normal, and which I don't oppose) -- it does little to explain the potential of the economy for everyone else -- except insofar as they react, or get out.

Yet all of these panelists, as much as they might have a worthy conversation about the economy as it is now, and fuss among themselves about the sliding scale of outside regulation versus inside regulation (and the political question of who gets to do that pre-emptive inside regulation -- and it better not be self-appointed lawyers!), are all going to be besides the point unless they focus on the cataclysmic event coming in less than a year: open source. Any other abstract discussion is already overtaken by this event.

The Lindens have told us that they are open sourcing the server code, and also "opening up" a dialogue on the architecture and the technology. As I've noted in response to Tao Takashi's article enthusing about this development, this narrowly technical discussion about how servers will move to independent hosting and connect or not connect to Linden Lab's asset server is for now, not anticipating any "confusion of the facts" by outsiders and non-tekkies concerned about the *content and people ON the servers*. Yet this discussion is even more urgent than the technical one, and for want of any other viable think-tank on Second Life (given the enormous hostility and even biased coverage of SL that Terra Nova and some other mainstream non-Sl blogs give to SL), Bloomfield's Metanomics course is *it*. So let's make the most of it!

That means asking very, very hard and deep questions about the following:

o What will happen to the integrated, connected economy when other servers began to operate parallel to SL, and possibly not even linked to it, or linked to it in stages, or only in part? Will open-source ruin the existing economy, but open up potential for numerous other parallel or self-contained economies appearing as archipelagos in the Metaverse?

o Will the LindEx simply have to shut down, as the dollarization of the world will continue rapidly apace, with more and more services like building and rentals paid for in PayPal, and more and more control of the LindEx devaluing wages? (The "wage" for work in SL dropped from $4.25 for $1000 Lindens in 2005 on the old GOM, to $3.70 for $1000 Lindens today in 2007, under strict LL control).

o Do real-world businesses really have any viable metrics for measuring ROI, and can they conceive of the SL platform as valuable if there is no mass, general audience of customers primarily involved in entertainment, socializing, and small business? If Cisco can just build its own world; if MOU can go to Gaia to *really* get ad placement for its clients; if Laguna Beach choses There; if Sony Home is about to really threaten the user base, what is the value-add to having some, say, 100,000 people regularly logged on and participating in a synthetic micro-economy that is interesting as a kind of toy spectacle, but has no future because it can't scale or sustain itself against the relentless pressures of inflation, devaluation of land and content, and globalization represented by open-source? Is Second Life essentially doomed to be the Belarus of virtuality, able to retain its sovereignty and meaning only by being in the way of a pipeline that one powerful entity (Russia) wants to run to another powerful entity (the EU)?

o Will the new host-your-own servers really reduce server/labour costs (they all imagine that they will) and cause a disruption to the economy, by devaluing all those dependent on LL servers and land-printing, and replacing them with cheaper, more flexible, and simply better working servers? Since the Lindens are likely to go slow on actual full open-sourcing, and will go with their short list of friends as the early licensees, what does that spell for those of us participating in the economy, who won't have the opportunity to host yet, or may never wish to host? Will LL continue services on the mainland, and continue selling islands that it will host, or will it drive all its customers to seek haven with its chosen providers? Frankly, I look at such a scenario as a bit like Balkanization, and the rush of displaced persons hoping to make peace with this or that warlord to gain protection. It can't possibly be a process without a lot of bumps in the road.

o What about banks, stock markets, loan companies -- will the influx of less wealth people outside the U.S. create an inexorable pressure for the criminality of money-laundering and loan-sharking forcing SL to close?

o What will happen to content creators' IP under the new dispensation? The server code currently contains in it the god-mode to override any and all permissions and simply copy anything (and this has been reverse-engineered successfully with copy-bot, and even other bots or exploits that even copy LSL scripts as well). How will LL address the featurs of their software that enable essentially the loss of IP? Will they stream their asset server to new worlds/hosted sims that will wind up being able to work the exploits (or "normal processes" involved in viewing everything) and simply grab all the content?

Perhaps they won't care, and new venues and spaces will open up where copyright-protected static content will no longer be relevant or even for sale, but the ability to create multimedia diverse ephemeral content for experiences will become the new valued dynamic content that will mainly privilege large companies with the budgets to hire these more skilled programmers and designers. This will spell the end of the nation of shopkeepers that is Second Life, where people even sell something as modest as a $5 t-shirt or $100 prefab to make ends meet. Some of the more nimble ones will end up busking on the broad highway of the Metaverse; that's about it.

o Will the inability of Linden staff to sufficiently watch the world, especially foreign-language sims, and the increasing growth and population and diversity of activity, mean that money-laudering will begin to escape them, even with all their whistle-blowers, and some huge scandal threatens to shut them down?

I don't know whether Henrik Bennetsen (http://slcreativity.org/wiki/index.php?title=Augmentation_vs_Immersion), who worked for LL for a time, was first to make the distinction of augmentation/immersion, as before him, Hamlet Linden, Aimee Weber, and many others talked about "platform versus world" and even used these terms. But one thing is certain: with the end of the large proprietary walled estate of Lindenor in a year, "immersion" will merely mean the experience that this or that company hosting a sim will create; indeed, if we face the facts, we know that the "immersion" once represented by a contiguous, compelling world has now disintegrated under a welter of griefing and red-line land bans, and a future integrated world in fact has yet to be conceived and created.

We'll see the thinning out of worlds/servers to be merely drop-in glorified websites, a kind of flashy "Flash" component for people to try a car or pick up a prize or learn about cow flops and energy as they can now at Ben & Jerry's advertisland in SL (as the SL Herald now calls such ventures). If it's hard now for the Lindens to keep all the servers spinning with contiguous land on them that you can keep flying to and fro on, think of how it will be with thousands of different hosts. This will be something like the Meeboization of Second Life. Only the really experienced and wealthy will be able to get the servers working to sustain immersion, but will inevitably be in competition with LL itself if it stays in the world business.

Who, then, should be invited to this Metanomist series in order to speak coherently about this cataclysm coming that will utterly disrupt, and possibly even destroy the inworld economy, which, after all, is part of the lure for the outworld corporations hoping to do advertising and brand interaction in SL?

First and foremost, whether we like it or not, there has to be a Linden -- probably Zee Linden, given that the Lindens control this synthetic economy, they know what they are doing with it, and we don't.

Second, those who have consistently watched the SL economy very closely, writers such as Pham Neutra writing for the Avastar and SLOG, should be invited simply because none of these other panelists follow the vicissitudes of the economy *as a whole* for *everybody* (and not just their narrow take on it) like economic journalists. Frankly, I'd put myself on this list as well, and would refuse to be ghettoized into some narrow slot about "real estate" as I have done as much conceptual writing about the economy as anyone.

Third, the non-Anshe real estate moguls have to be consulted as they actually don't have the same model as she does (lower cost staffing in China, cross-platform business, plans for production of cheap content). Adam Zaius has also made a million US on his Azure Islands empire of hundreds of sims. He also happens to be the person reverse-engineering the code in the OpenSim project, and has actually begun opening up servers that have avatars and building features and even HTML on a prim, though not the ability to port content across servers. He should be asked to speak very directly on how he envisions his own business crossing the chasm from the closed garden Wild West that SL has been to the host-your-own Even Wilder West of the broader Metaverse.

Fourth, in addition to real estate, there should be represented those who have actually created large or medium content businesses in SL, such as Simone Stern, Stroker Serpentine, Timeless Prototype, etc. who can talk about what open-source will mean to their IP; to the future in general of legal support for IP; to the issues of pricing and freebies and competition from outworld RL business to inworld SL business.

Fifth, keeping in mind that we as North Americans and even Europeans are actually in a shrinking pond, and the real powerhouses of the consumer economy and user-made content economy in SL will likely come from Brazil, Japan, China, Russia, etc. the panel ought to be having some of the actors and thinkers of the non-English-language world.

Sixth, a real effort should be made to find economists who aren't game economists, stuck in MMORPEGs, and not actors in the SL economy learning from field experience, but economists who actually work on transitional and developing economies that can put the experiment of SL into some framework where they can examine the decisions made about land policy, or printing money, or preventing laundering, just as they would if the subject matter were Russia or Brazil or Nigeria. This requires a more macro and broader approach. The problem of Second Life isn't just having the IRS regulate it or the FBI shut down the casinos. The problem of Second Life is how to go from Yeltsin, printing rubles (the Lindex), and paying numerous subsidies to the poor (stipends), with an economy very dependent on smuggling drugs and alcohol and traffixing (the sex economy of SL), to Putin, where a select group of oligarchs have been allowed to run their companies without too much confiscation by the state, as long as they agree to stay out of politics.

That is, what's needed is to hear the views of an economist who compares various economies and also looks at globalization and the international economic order, not just the study of corporations and small businesses. A figure like Jeffrey Sachs could be approached, but it would be important to have someone speak who doesn't wear out their welcome by pontificating for an hour as to why no one should have a Second Life as it is a luxury in an impoverished world.