The New Virtual Frontier


The matrix has its roots in primitive arcade games…Cyberspace. A consensual hallucination experienced daily by billions of legitimate operators, in every nation, by children being taught mathematical concepts… A graphic representation of data abstracted from banks of every computer in the human system. Unthinkable complexity. Lines of light ranged in the nonspace of the mind, clusters and constellations of data. Like city lights, receding.

~ William Gibson, Neuromancer (1984), page 69

The virtual worlds are entering the public's mind.

On August 31st Democratic presidential candidate Mark Warner held a Q&A session in Second Life with his avatar this in order to reach out to new voters.

The cover of BusinessWeek this April featured Anshe Chung, a very successful businesswoman in real estate. But Anshe Chung does not exist, she is the virtual avatar created as the "in-game" persona of German-Chinese Ailin Graef. Graef has built an online business that engages in development, brokerage and arbitrage of virtual land, items and currencies in the Massively Multiplayer Online Roleplaying Game (MMORPG) Second Life. Since February 2006 the company ANSHECHUNG Studios, Ltd. has been legally registered in China. The company has equity valued to 250,000 US dollars, in virtual lands.

Researchers flock to study them from a variety of disciplines, not only from informatics but also sociology, economics, media sciences and linguistics. Studies of virtual worlds are seen as the next big thing but there have been virtual worlds previously both graphic and textual. The difference is in function and scale.

The stock markets are increasingly becoming virtual worlds, just study NASDAQ or the Stockholm Stock Exchange where trade is fully electronic or aircraft simulators for pilots.

But the virtual worlds are no less important because of their heritage from computer games

World of Warcraft has six million players and it cannot be considered a peripheral phenomenon any longer. The average age of the virtual world user is currently 30 years and women and men log on to the same extent.

In December 2004, there was a public shock when the Swedish company Mindark, creators of the virtual world Project Entropia, announced that they had put up a virtual island for auction. The winning bidder paid 265,000 Project Entropia Dollars ($26,500 US Dollars) for the island. At the time this was the highest price ever paid for a virtual item (even though this has been surpassed since), a new field of economics was in the wake.

The man that started the shift from considering the virtual world something more than "mere child play" was the economist Edward Castronova at the University of Indiana. In his book "Synthetic Worlds" he started to apply economic logic to the interactions between players examining their effects on a societal and financial level.

Castronova studied the trade in digital goods in EverQuest, as it had a clear interface with the real world through eBay. He saw the extent to which people were paying real money to buy items for their game characters, thus blurring the distinction between the game economy and the real one. Norrath, the game world of EverQuest, was studied with the same methodology as you would use to study Ghana, France or Canada. He found that its currency, the Platinum Piece, was actually quite solid. At a rate of 1 PP per 0.0107 US Dollars, it was even more solid than the Japanese Yen.

Norrath would have an average wage of $3.42/hour, and an average yearly wage of $12.000. The GDP per capita of Norrath would make it in par with Bulgaria, that is soon accessing the EU, and higher than both India's and China's.

Castronova's book made him an instant superstar, and although there has been some criticisms of his research the trend is unmistakable; virtual worlds are a worthy research object and the virtual activities on them have to be compared to real world counterparts to be understood.

Milton Friedman said in the 20th century that if you want to see capitalism in action: go to Hong Kong. To paraphrase him for the 21st century; if you want to see capitalism in action: log on to Second Life. In this tax-free economy there is a market for everything, from poetry to gardening, to sexy underclothes for avatars. In fact, Second Life has received criticism for the brisk trade in sex and pornography in some areas of the virtual world, but probably this is just mimicking the same pattern for how commercialization was introduced on the Internet.

Second Life is composed of rich, diverse, user-driven subcultures and countercultures, often stretching the boundaries of free speech of the real world. Intense philosophical and political debates regarding the real world and Second Life's own politics are held among the more than 170,000 residents.

The company that created Second Life, Linden Lab, provides only a piece of software with a couple of different user accounts (with the basic variety for free), and the rest is up to the user.

The stated goal of Linden Lab is to create a user-defined world of general use in which people can interact, play, do business, and otherwise communicate. Although it has notable competitors, Second Life is one of the most popular MMORPG, since it does not have a scripted action or story. In this free world, entrepreneurs and creators can freely create their own worlds and fill it with content. As they also acquire the intellectual property of whatever they create in the virtual landscape they can sell it, lease it, rent it and donate it.

Second Life has its own economy and a currency referred to as Linden dollars (L$). Residents receive an amount of L$ when they open an account, and a weekly stipend thereafter – the amount depending on the type of account. Additional L$s are acquired by selling items or performing services within the environment.

Second Life's economy is closely connected to the real one. The Linden dollar usually exchanges by 300 L$= 1 US$. Banks and exchange offices are booming in Second Life and in 2005 the world had a real turnover of more than one billion US dollars in transactions regarding acquirement of virtual land, housing, clothes, music, furniture and animations and gestures for avatars.

Corporations are finding their way to the virtual worlds seeing the users not only as customers but as co-creators. 20th Century Fox held a premiere for "X-men: The Last Stand" in Second Life. Adidas Reebok will create a permanent presence in Second Life and Toyota recently offered a virtual replica of its Scion xB model. NGO's are also finding their way to the virtual worlds as the American Cancer Society has held a fundraiser event in Second Life.

We are quite far from the predictions of the 1960's, that the media society would be a "vast wasteland," turning people into passive, hypnotized zombies thanks to the creativity, sociability and interactivity of the virtual worlds. World of Warcraft has been called the "new golf" as the slaying of orks online fills the same cultural niche for young colleagues and acquaintances as gathering around the tee for elder generations.

The parallel existences many will take for granted in the virtual worlds, will change our views of society. A very important underpinning in today's ethics and political philosophy, namely that the individual is strongly knit to a geographic political constituency. There he finds his peers whose destiny he must share, and from which obligations, rights and duties stem. But as people increasingly live important segments of their lives in online communities, they could well start to identify themselves more with their online groups, with members spread apart by physical distances but held together by mutual interest. After all, we value our communities and relationships if we are able to associate freely with those we identify with.

The establishment of the virtual world happened just 20 years after William Gibson proposed the idea. Such a rapid development aught to be discussed more in order to understand the direction society, business and politics is heading to.

October 16, 2006