Redefining the Divide Between Work and Play

     Second Life, a virtual online world, mimics real life by allowing its subscribers to buy, sell, and develop different types of digital goods and property. By taking a radically different stance towards real-world laws and money than its peer digital worlds, Second Life has developed an intricate freemarket economy with a level of sophistication unseen in other similar programs, which just charge monthly fees. In “Aviators, Moguls, Fashionistas, and Barons: Economics and Ownership in Second Life,” Cory Ondrejka, the Chief Technical Officer of Second Life’s parent company, Linden Labs, examines the interplay of Second Life’s market-oriented policies and their ramifications for its residents.

     Second Life permits users to convert real money into “Linden dollars (L$),” which are then used to purchase and own digital property. Tokeep money flowing quickly, the program grants a stipend of Linden dollars to residents based on how many other users gather on that resident’s property. Moreover, a robust toolbox allows users to create and modify a wide variety of goods, whose intellectual property rights remain with the creator. A flourishing economy evolves from these foundational property rights in which residents host parties at houses or clubs they’ve designed or commissioned, sell goods like clothes or vehicles at their own stores, or go skydiving from private airplanes.

     Because of the economic flexibility in Second Life, digital entrepreneurs have found a number of ways to generate real-world profits from in-world businesses. The Linden dollar has actually appreciated relative to the American dollar, making investment in Linden dollars a legitimate enterprise. Digital fashion designers and shopkeepers compete to set new trends, establish their brands or franchises, advertise, and generally conduct business almost identically to entrepreneurs in the real world. The digital nature of the world, however, obviates the need to worry about marginal costs of production or holding an inventory. New land is regularly made available for auction, and a new breed of land baron has sprung up, who buys vast tracts of virtual land for resale at a modest markup. These features create niches for digital real estate agents to broker deals for participants, for architects to plan houses, or for industrial consultants to design businesses.

     Just as consumer preferences have set economic patterns in the real world, successful business owners must take the tastes and demands of Second Life residents into account. For instance, beachfront property sells for more than inland property, as do lots close to transportation hubs. The most shopping occurs on Sunday. Airplanes, wings, and other means of flight garner the most attention from shoppers and inventors alike. The entrepreneurs with the best business acumen (those who make real profits) often keep track of statistics like these in databases outside Second Life.

     Aside from direct profits made from Second Life, ambitious users clearly reap other rewards that translate into their real lives and jobs. The skills that successful entrepreneurs develop in-world – product innovation, brand development, customer service, marketing and advertising – have concrete applications in the real world. This relevance pushes Second Life beyond the standard purview of online games or virtual worlds. Instead, the program has assumed a significance that transcends its name: the “second lives” of its residents are not divorced from their real lives, but rather the two have found potent avenues of interaction that make the second life a very real part of the first.