28 November 2006

Interview with Second Life's Philip Rosedale, Part II

This is the second part of the interview, in which Rosedale talks about the future of Second Life, including funding options, the arrival of big business, the open sourcing of Second Life's code, and the rise of the 3D Web. The first part, which traces the origins of Second Life, can be found in a posting made yesterday.

Glyn Moody: What's your overriding principle in running Second Life? How do you decide detailed economic and social policies – elements that clearly have a huge impact on how Second Life is experienced by residents?

Philip Rosedale: The overriding principle is that it should run itself. And, in particular, that the best way to make SL stable in the long-term – and I say that word "stable" in the physics context, related to complex systems – [is to] have a high degree of heterogeneity and a high degree of locality in [its] behaviour. While there may be a loose framework of unifying principles, the majority of the policy and the majority of the environment is determined by the local area that you're in.

We should be able to define low-level rules of interaction – that there will be a reputation system, or that you can transfer inventory between people, or land has an ability to exclude others from it if you choose as the landowner. Our idea is to use low-level rules to make SL stable, not high-level governance, and in fact to do high-level governance only to the minimal degree that we can't simplify our way out of.

For example, economic policy is at some level necessary globally, only because the efficiency of a single currency is such an enormous public good, right? If there's one Lindex, there's $35,000 a day in trading and that will make it fairly stable, and having it be stable is a public good. There are a few cases where you need to use global systems, but we basically try to avoid those wherever we can.

With social policy – we don't really have any. The community guys say: be nice to each other and don't impair each other's ability to interact, and we'll use force to establish that if necessary. But I think that will give way to more and more sophisticated systems of local control. So, like the question of dispute resolution and arbitration and crime in SL, long-term I totally expect that to be managed by an overlapping set of locally-defined standards. If you look two years in the future or something, I suspect getting in trouble in SL would probably mean getting put on someone's blacklist. Or getting subjected to a trial by users – not by Linden Lab – [where] at the end of it you get put on that blacklist. And because it's a public trial getting put on that blacklist is very serious because 60% of the people in SL subscribe to that blacklist.

I suspect that that kind of user-created governance is much more likely to be successful. Indeed, I would say that one of the appeals of SL as compared to the real world is that the real world unfortunately has too many cases in which it seems necessary to use central control to establish an optimal system for everyone. In the real world there are key resource like historically steel and now silicon and oil, that humans can easily park on top of the only places on the earth's surface where those resources are, and then use guns to maintain control of those resources – or something like guns. Governments have to act to break up the monopolistic and therefore inefficient positions that can be established by single individuals over those resources.

But of course SL doesn't have any fundamental resources that you need to control, so establishing a monopoly position in SL is much harder - maybe, hopefully, impossible. So we'll try to set the low-level rules so that's it's as unlikely as possible that anyone can have a monopoly on anything. But I think we'll be more easily able to do that because we have access to the code in a way that I suppose only God has access to the code in the real world.

Glyn Moody: As well as the in-world traders, we are now seeing major RL companies enter Second Life; some residents are worried that this will turn Second Life into a huge market research experiment or into a virtual shopping mall: how do you view things, and how will you assuage their fears?

Philip Rosedale: Well, I don't think I've done a good job assuaging people's fears, and I think that's the right expression. But as a deep thinker about the behaviour of complex systems, I do feel fairly confident that major real-life companies will succeed in SL only to the extent that they are able to offer real value in the same manner in which those people that have been there for three years have offered value.

The real life companies in the real world can just park in New York and enjoy the benefits of being in New York – you just don't get that in SL. I also think that there is a kind of sense of community and a sense of a shared future in SL, the very powerful fact that you are writing the future – you as the user, all of us collectively. That is a very powerful, almost spiritual thing about what it's like to be in SL. And I think that if you're a real life company trying to turn SL into a marketing experiment you'd have to fight and win against that force, and I don't think you will. Even if we as a company were bound and determined to turn SL into some huge market research experiment, from which we would maximally profit, I don't think we'd be successful, given where it is now.

But I think if we can build low-level rules that keep it a level playing field then that is the primary thing that will keep all of that spirit in place. And I don't see us doing anything in any other direction. We have struck no deals with these big companies, we have no relationship with them, we don't even know how many there are or who they are. It's hard to tell who's buying what, but it looks like the real-world companies represent a low single-digit percentage of land ownership at this point.

Glyn Moody: Will your business model bring in enough to allow you to grow rapidly as Second Life takes off, and still make a profit?

Philip Rosedale: The money people are paying as land-use fees – the recurring fees per acre per month - that's a profitable business. We've set the prices pretty low at the outset, because we just wanted a lot of creativity. When people are new to systems like this they don't believe it's all going to work. So it was in our interests to make these servers as cheap as possible. But we always had in mind that that would be a fundamental part of the business and we needed to set prices in a way that made sense. If you look at the recurring price of a server today, depending on what kind of server you're buying, what kind of customer you are - whether you're buying on the islands or on the mainland – it's a couple to several hundred dollars a month – that's a fine business.

I think that on an even higher level than that, we believe that it's all going to be a good business just because of the size of the economy. We can reasonable ask a fee against what's going on in the economy in a variety of ways. I think today land-use fees are the right way to do that because it's a bit like being an entrepreneur who wants to move to a new country. You look for a country that offers like no sales tax and no corporate income tax. When you move your company there the only thing you probably pay for is a lease on the land and basically that's what we're offering here. I think to an entrepreneurial content creator we probably feel like Malaysia or something.

Glyn Moody: As Second Life matures, might you add things like a corporate income tax or a sales tax?

Philip Rosedale: We could, there's also things like advertising. Right now, people do pay us to list classified ads and also place listings. That could be a way to make money in the future. Sales tax on transactions? Maybe someday, we wouldn't rule that out. Our mission is to get the most people creating the most amazing content and experiences. So we'll be pretty aggressive about changing our business model only to the extent that it keeps that going at maximum speed.

People often ask, beyond the money, how will you say that you were successful, Philip? What I always say is that I will feel like I've been successful personally if I have made it grow as fast as it could. And if I slowed down some of that growth to convert it into wealth for myself, well, shame on me. The people behind the company are very principled about changing the world in a positive way through technology – that's Mitch [Kapor], Pierre [Omidyar], Jeff Bezos, Benchmark Capital, Catamount Ventures, and Ray Ozzie, all the people behind us, they've got the same perspective.

Glyn Moody: You've recently appointed a Chief Financial Officer who has had experience in making an IPO: does that mean you are thinking about doing the same at some point?

Philip Rosedale: I think the only thing I'll say about that is just that the company is making money in a way that will enable us to exist and grow as we like and as long as we like as a standalone company. Whether it's a private company or a public company, we can be a successful company in our right.

Glyn Moody: If someone made you a substantial offer for Second Life, would you consider taking it – or are you so committed to your vision that it would trump any consideration of money?

Philip Rosedale: Oh, without question, yeah. I can only speak for myself, personally. First off, I've had the fortune to be successful enough not to be tempted by dollars – I mean, everybody is tempted by dollars – I just mean that I've had the good fortune to convert enough brainpower into money historically that it makes me pretty insusceptible to that. But I fall back on what I just said to you: I would never make a decision that would cause this thing to grow any less slowly than it can, because I think that I'm making people's lives better. And I hold myself to the question: did I make as many people's lives better in as short a time as possible as I could? If I felt like the answer was “no”, and in particular because I wanted to make some money or something, I'd feel terrible, and I wouldn't do it.

If somebody came to us with a big offer, well, the question would be: How could the people who were offering us that money help us grow SL faster - better technology, better experience for more people? I think that what we're doing is so innovative, and in particular the way we run the company is so unusual, and the way we've built SL in many ways is so unusual, that it's pretty unlikely that there'd be another company out there that could help us do that. I'm not saying it's impossible, but I just mean that I would have to be convinced.

Glyn Moody: Going back to this tremendous growth, how will this be managed in-world – will there, for example, be new continents? And would you contemplate allowing different local (real-world) laws to be applied to some of that new land if the servers were located outside the US?

Philip Rosedale: To the first point - What will SL look like long-term? - I think if you look at the islands, people are already gluing them together, there's motivation to create contiguity. So I think that SL over the years to come will look like a bunch of large continents, that will have different characteristics, like we were talking about earlier. That may be related to governance and zoning and things like that.

The second question, about laws reflecting where servers are based, we just don't know. We're trying to be pretty smart about it, but the company's here in the United States right now. Yeah, the servers could be in another country, maybe that'll make the local laws apply differently on those servers - I just don't know. We're thinking about that, we're trying to learn as much as we can about it, we just don't have any immediate strategy.

Part of the problem here is there's a whole bunch of things about SL that are untested from a legal standpoint. So what we try to do is to err on the side of providing a lot of information and informing everyone. We talk to lots of people in the United States Government, for example, just saying, look, this is what's going on, this is what's happening, if you care, you can get more information, and talk to us about it, here's what on principle we think this means. There's a lot of different aspects of this that are going to be really fascinating to watch play out and that we couldn't give a final word on.

Glyn Moody: What is the US Government's attitude in general to this?

Philip Rosedale: I don't know. What I would say about everybody who comes into contact with SL, that has been really uplifting, everybody seems to get that it's a good thing, it's fundamentally an empowering thing. And nobody, whether you're the government or a company, nobody wants to screw that up. All the companies that I meet with, the CEOs, these companies that come into SL and do things, whenever I meet people, at least from my sample, they're all very smart and inspired about what SL is and what it can be, and can they just be there and be a part of that and not mess it up. I suspect that governments will have the same perspective. The US Government is pretty smart about doing things like taxation in a way that does not quench people's ability to innovate. I think that's what's cool about what we're doing, it's not just an economic discussion. Everybody who comes in contact with this and sees it is like, oh my God, this is making the world better: we've got to take that into account when we think about legislating.

Glyn Moody: You use a lot of open source to run Second Life, and you've said that you will be opening up elements of the code: what's the situation at the moment?

Philip Rosedale: So yeah, without speaking to specific timing or plans - and we've thought and are thinking lots and lots where there might be exceptions to this - but it seems like the best way to allow SL to become reliable and scalable and grow. And we've got a lot of smart people here thinking about that.

Glyn Moody: Looking forward, what are your views on the convergence of three-dimensional virtual worlds like Second Life with today's Web – the 3D Web as some are calling it?

Philip Rosedale: People always believe that the idea of simulating a three-dimensional world will make the experience of people in it different because it's three dimensional, and that's certainly true. However, there's a second thing about the 3D web that makes it different than the 2D web, and is really important, which is that there are other people there with you when you're experiencing it.

Look at MySpace. When you go to a MySpace page, you can listen to their music. What is the listening experience like? Well, it's still just you sitting in front of your computer listening alone to that music. But in SL, if you're listening to somebody's music, whether live or pre-recorded, there's a very good chance that there's someone next to you listening to the same music, and so you're able to turn to them and say: What do you think? Or you're able to turn to them and say: Have you been here before, and, if so, do you know where the lawnmower section is?

That, I think, is what makes the potential of the 3D Web different perhaps even more so than the spatial difference between 3D content, and 2D content. And I think that alone makes it very likely that there will be a kind of a 3D Web, that has this shared experience property. That's what everyone will look back on and say: Wow, that is what made it different.


Unknown said...

Finding the Lawn Mower: Philip Linden's Evil Ideas

Glyn Moody said...

Thanks for pointing out the link: Prok's comments are, as ever, thought-provoking....