Philip Rosedale

Just the other day, I flew to a discussion at the Reuters office that was also attended by a robot and a guy with a duck head. Since it was a special occasion, I made my head a bit bigger and bought some shiny new eyes. Shortly afterwards, I somehow ended up in a nightclub in Amsterdam, and to round it all off, I paid a flying visit to an island owned by Duran Duran that was populated by fans that seem to spend their time waiting for the band to appear. A warped futuristic vision? Futuristic it might be, but it’s all part of today’s world. The addictive, virtual world of Second Life.

Since its launch in 2003, Second Life has signed up more than one and a half million residents (almost 500,000 have been active within the last 60 days), and due to the recent media interest (Reuters has even got a correspondent who reports from within Second Life), more than 10,000 people join each day. In September alone, it grew at an amazing rate of 38 per cent. Meanwhile, companies and entrepreneurs have discovered the economic potential of Second Life, and about $500,000 is spent in Second Life every single day. That’s real US dollars, not Linden dollars, which is Second Life’s own currency (the current exchange rate is L$250 to $1).

Second Life is the brainchild of Philip Rosedale, the founder and CEO of San Francisco-based Linden Lab, who has been fascinated by the idea of virtual worlds since his childhood. “When I was a kid, I was really into computers and electronics,” he remembers. “I was interested in physics and how things work. I built a hovercraft in my yard and made my door go up into the ceiling like Star Trek. I was always trying to make cool things. And I think that, as I got interested in computers and computer networking, I was just struck by the thought that the ultimate thing you wanted to do with a computer was reconstruct the laws of physics as much as possible, and see whether you could simulate this, the real world. In an entrepreneurial way as well. I was always struck by the entrepreneurial possibility of such a place, that if you had a lot of computers that were simulating a place that people were in, things would be real there and that would mean you could have an economy and everything else.”

When Philip launched his first company, a database software firm, while still in high school, he kept this concept in the back of his mind and followed the developments of virtual reality in the 1990s. He didn’t think that a world similar to the metaverse described by Neal Stephenson’s sci-finovel Snow Crash was technically possible until 1999 primarily because, “the combination of 3D graphics and broadband were the two things that seemed absolutely necessary to make the whole thing work”.

Building a better world

There’s a big difference between Second Life and MMORPG games like World of Warcraft: there’s no levels, no scores and, most importantly, the content in Second Life is user created (“Everything’s got to be live and buildable”). Linden Lab just sells and maintains land – all objects are created by people inside the virtual world. You start with a basic building block, a so-called primitive, which you can transform into absolutely anything, from a house to custom-made genitals you can then sell to other residents (yes, there’s actually shops for sex organs, as your avatar doesn’t come with any).

Philip Rosedale has said that he’s not building a game, he’s building a country. His ultimate vision is not only to recreate the real world but to make it better. “What’s so important to note about Second Life, even today, is that it’s appealing because – aside from being escapist – it offers a set of capabilities, which are in many different ways superior to the real world. You see people get in there and do things and then come back to the real world and they say, ‘hey, why can’t I do this here?’. I really love that.”

It’s really inspiring, Philip says, how this “incredible dreamscape for creative expression” opens up opportunities for people who don’t have as many in real life. It makes it easy, for example, for a kid in Brazil to go to an internet cafe, earn some money in Second Life and transfer it into a PayPal account. “For people that can’t make money easily enough in the real world, or need a way to do that reliably, one of the things that Second Life can offer is globalising. There are no countries in Second Life. Nobody cares where you live.”

And it works. Second Life’s economy is thriving. It’s growing at a staggering, double figure percentage every month. A lot of people are just there to have a good time, to discover the islands, go to gigs, nightclubs or galleries. But, as in the real world, money does help. And so around 3,500 people have got a monthly income of $10 to $50, more than 150 residents earn between $1,000 and $2,000. Avatar Anshe Chung, essentially a Second Life estate agent, even makes hundreds of thousands of US dollars every year. In fact, land sales and land development is one of the most lucrative businesses in Second Life, alongside jewellery and clothing. American Apparel, for instance, recently opened a shop in Second Life and testmarketed its first line of jeans within the virtual world before they were available in real stores. The company sold in the region of 2,000 items for $1 or less in the first 10 days alone.

“There’s a lot of real-world companies that are now starting to come in because it’s such a good environment for things like case-testing,” Philip comments. “It’s a kind of time machine – things happen faster in Second Life, so you can go there and see what people want. It’s incredibly profitable in terms of establishing a brand or establishing a consumer preference or getting design ideas. If you look at the case of the Aloft hotel chain, they’re building this new hotel in Second Life (it hasn’t been built yet in the real world) to get feedback from people on what it should look like in the real world.“

Innovation = economy growth

Linden Lab, which is very close to being profitable, decided to allow Second Life’s residents to own the intellectual property rights to their creations, according to Philip Rosedale the recipe for a successful country. Philip and his team may not have had any real, living new country builders to compare notes with, but they were influenced by world history and literature: “We looked at things like Hernando de Soto’s recent classic book, The Mystery of Capital. This book basically says that if you analyse emerging countries, the significant fact (that the countries stuck in the Third World seem to share) is that they have an extremely difficult or impossible process by which an individual could own and get a mortgage on their own property. It seems that the countries in which it’s easy to own, sell and get a loan against a property, are far more successful.”

Another reason for Second Life’s success is that it’s full of creative possibilities, and as people very aggressively come up with new ideas and see how they sell, the economy grows. It’s all about innovation. “People are using the scripting language to build something like a watch that your avatar wears, and when you zoom in on it, it’s telling the right time and maybe has an alarm,” Philip explains. “What’s so interesting compared to the real world is that, as people compete to build better watches, they’re rapidly coming up with new ways to use the programming language to create watches that are much more compelling. A year ago, most of the wristwatches that you might buy in a store in Second Life and put on your avatar were watches that didn’t work. They just looked like cool watches. Now you wouldn’t buy one of those. You’d want one that works; you’d want one that keeps track of your friends for you or does some unusual thing. So, innovation is driving more and more competitive and compelling merchandise, and that’s growing the economy.”

The challenges of the future

Like every country, Second Life isn’t without its problems. There’s crime, including fraud, cyberterrorism and ‘pushgun’ assaults. Gangsters usually get banned, yet Linden Lab police Second Life as little as possible. The team has studied psychology, how people behave in groups, and believe that it needs to be locally policed and controlled by the people who have built the content in the area you’re in. Influenced by Jane Jacobs’ The Death and Life of Great American Cities (“the book about urban planning”), they believe that cities such as London or New York are compelling because they’re disorganised, not organised. So Linden Lab takes a step back and simply provides the technology. Thus, Second Life is full of different experiments in how to govern. “A fascinating question in the technology enabled world that we live in today is what’s the best form of government,” Philip muses. “I’d say one possibility is that we’ll find out in Second Life first.”

Some people are worried about real companies coming into Second Life and establishing monopolies, destroying the charm of the world. Philip thinks that this is extraordinarily unlikely because resource hoarding simply can’t take place in Second Life. “You can’t really corner markets very easily in Second Life, because there’s no cost of goods and there’s no manufacturing and distribution costs. So some of the conventional economics of scale that give real-world companies the ability to stay on top of the market don’t exist in Second Life.” It’s still possible that new kinds of monopolies could develop, but Philip sees it as Linden Lab’s responsibility to destroy them. The same is true for the hacking attempts that Second Life suffers every so often. As the world grows, more and more hackers try to shut it down. Linden Lab reacts by repeatedly changing Second Life’s architecture and security data.

The biggest challenge Linden Lab is faced with is showing new users what’s going on in Second Life, so they can have a good time quickly. At the moment, it takes a whopping four hours until you’re used to Second Life and know what to do and how to do it, which is obviously quite an obstacle on the web, where every second counts. Philip Rosedale compares the process of discovering Second Life with being thrown out of a helicopter over New York, but is confident that Second Life will eventually be easy to use. In fact, Philip sees Second Life as big and pervasive as the web in the future. His vision is a world where everyone has avatars. Linden Lab operates hundreds of thousands of servers (there’s 3,500 today) and we are much more social when we surf the web. “One of the points about Second Life that I think people miss is the most different thing about it isn’t necessarily that it’s three-dimensional,” Philip explains. “The most interesting thing about Second Life is actually that it’s inherently social. When you go to an island in Second Life, you’re visiting a website, right? It’s just that you’re doing it in 3D. But there’s something incredibly different: the other people who are visiting the website are standing next to you and you can communicate with them. On the web, when you’re on Yahoo and you look to your left and you look to your right, you don’t see anybody. When you navigate the web, you’re alone. When you navigate Second Life, you’re never alone."