Get a (Second) Life

As Kevin Kelly pointed out in his Four Corners interview, he can’t “unwrap” what virtual sex is all about in the Second Life universe. What this suggests is that all the demand for products and so forth in Second Life has no floor on which it can rely, there is no basic requirement for goods. The problem with that is that it makes the economic stability of Second Life nonexistent. Even if there was a basic need in the game that the players had to fulfil (like that attempted in The Sims Online), the players are still able to quit at any time and stop spending their money.

Such volatility is not uncommon and any new market is subject to it. It is a necessary factor in market economics that the market corrects itself when it realises that there is nowhere near as much demand for the products supplied, as was experienced in the dot.com bust of the early part of this decade.

The unfortunate thing with virtual worlds is they could be subject to volatility the likes of which has never been seen. For example, when prices in the virtual world are determined based on the only real cost that is applied to suppliers, in this case the price of land and the ongoing land tax, what happens when there is a shift to the right in the supply curve? 

For example, some programmer at Linden Labs rewrites a major portion of server code making it much more efficient, with the result that the cost of land (which is directly related to the cost of server processing power and space) is reduced by 80 per cent overnight. The price of everything will drop almost instantly as will the income of many suppliers.

But why stop there? Why does it have to be a programmer at Linden Labs? Why can’t it be a programmer at a start-up company, creating a new virtual world with capabilities never seen before in Second Life? What happens if the demand in Second Life contracts because all the residents in Second Life have found it more appealing in the new virtual world, let’s call it Third Life?

Such changes are unavoidable. The volatility will stay for a long time until the market for virtual worlds is as strong as the market is in the real world, that is, there’ll be such a large number of these virtual worlds and so many residents will set up their second, third and fourth lives there that changes such as the ones mentioned above will not have such dire consequences on a mass scale.

In addition, the potential for uncontrollable activity in a lifelike environment has infinite possibilities, both negative and positive. All activity not allowed in the real world would most likely shift to the safe havens of the virtual worlds, all of which is beginning to sound an awful lot like the Matrix to me. I encourage all to try the revolutionary experience that is Second Life, it’s free to play and is quite an eye opener in terms of seeing where our lives are headed and how soon we’ll all have to start praying for Keanu Reaves to come save us!