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Snow Crashed
Somedays I feel like I have woken up in a Neal Stephenson novel. The following is not science fiction:
The poster child for profitable Second Life businesses is Ailin Graef--better known by her avatar's name, Anshe Chung--and Anshe Chung Studios, the business she runs with her husband, Guntram Graef.
Originally, the two ran the company from Germany, but at the beginning of this year, they set up shop in Wuhan, a large city in China, and are now employing more than 30 people full-time at, she says, better than local average wages.
Last month, Ailin Graef issued a press release announcing that the company's total holdings, comprised mainly of virtual land in Second Life, were worth more than a million real-life dollars. For those who aren't familiar with the complex economies of virtual worlds, such a claim may seem incomprehensible.
But for anyone who has spent significant time in Second Life, the number seems all too possible, given Chung's dominance of the land market there.
On Monday, Graef visited Second Life for a discussion about her business, how best to set up businesses in Second Life and the nature of competition there.
Unfortunately, as the interview was commencing, the event was attacked by a "griefer," someone intent on disrupting the proceedings. The griefer managed to assault the CNET theater for 15 minutes with--well, there's no way to say this delicately--animated flying penises.
It's not clear why the griefer attacked, but Anshe Chung is controversial to some Second Life residents for reasons such as inflexibility on land pricing, the signs she has placed in many areas of the virtual world that are visible to anyone flying overhead, and her ability to get many residents to sell their land to her.
Posted by Alex Tabarrok on December 22, 2006 at 07:20 AM in Web/Tech | Permalink
Comments
I find it oddly ironic, that businesses in second life are seen as little more than child's play, but Microsoft has been, and regularly jockeys for, the position of most valuable company in the world. Pray tell, what is the difference between Ailin's company and any software company?
Posted by: nelsonal at Dec 22, 2006 9:28:28 AM
The largest difference will be the potential market size. Second Life has 36,000 paying residents, compared to about 7 billion potential customers in meatspace. Second Life trumpets having 2 million "residents," but some 98% of those would be called "free trial accounts" elsewhere, and some large percentage of people have never logged on ever. It's kind of like running the biggest store in a small town (with a large cemetery).
Also, to the best of my knowledge, Microsoft's central offices have never suffered sustained attacks from flying genitalia. I could be wrong.
Posted by: Zubon at Dec 22, 2006 10:32:55 AM
Physical land is valuable because "God isn't making any more of it". Virtual real estate is overseen by a much more capricious "God", one who can create infinite amounts of it at the push of a button. Doesn't sound like such a great investment to me.
Posted by: Tony at Dec 22, 2006 12:24:55 PM
Actually, Tony, the classic real estate mantra applies here (location location, etc.).
If you own real estate in a more lucrative area, which Anshe Chung certainly does, you have an edge over everyone else, even in an inifinitely expanding "universe" (currently SL is frozen in size).
Sure development will continue, and the expensive land will eventually devalue, but that initial edge lets you continue expanding your holdings, keeping up with space expansion. This is just what Anshe Chung has been doing.
Scarcity of land in and of itself isn't a problem in VR, but there's definitely scarcity of well-trafficked developed land.
In the Stephenson's Metaverse, Anshe Chung would be owning the luxury real estate next to the Black Pyramid.
Posted by: Mike at Dec 22, 2006 12:55:50 PM
It's always funny how libertarians see "Snow Crash" as a libertarian uptopian novel, when Stephenson's "The Swarm" is lifted straight from Jean Raspail's "The Camp of the Saints."
Posted by: Steve Sailer at Dec 22, 2006 2:45:15 PM
Personally I always enjoy watching the various camps of political obsessives claim each new significant cultural artifact for their side. Conservatives and libertarians seem most prone to this -- the new Battlestar Galactica series, for instance, has been repeatedly lauded by bloggers at both Reason Mag and the National Review for its depictions of "values," libertarian and conservative respectively -- but liberals fall into the same trap from time to time as well.
My working theory about this is that people who spend all their time thinking about politics assume everyone else does too. Ergo, the intentions of novelists and filmmakers MUST be primarily propagandistic rather than artistic/expressive. After all, if the political obsessives were producing art, that's what THEY would be doing...
Posted by: Borovan at Dec 22, 2006 3:38:33 PM
I believe that land is to some extent limited by server capacity at Linden. People like to think that VR is completely unlimited, but it is in fact implemented on physical hardware, and that does impose limitations.
Posted by: Mitch at Dec 22, 2006 4:15:08 PM
http://secondlife.com/knowledgebase/article.php?id=291
nicely sums up the difference between Anshe Chung Studios's value and microsoft's.
It's a by Ginsu Linden detailing why second life residents don't have to worry about breaking US laws on gambling (a study, sorry can't remember the link, suggested that 80% of all SL transactions were gambling related, one reason why I wouldn't put money into any SL company).
'Linden Dollars are not money, they are neither funds nor credit for funds. Linden Dollars represent a limited license right to use a feature of the simulated environment. Linden Lab does not offer any right of redemption for any sum of money, or any other guarantee of monetary value, for Linden Dollars.'
All of the value of her company is dependant on the current world of SL. It's like a real estate company, but where new land could be arbitarily created or destroyed and you would have no legal recourse.
Posted by: Sam at Dec 22, 2006 7:08:28 PM
Borovan, your post was pedantic. Just because we appreciate the values in other people's art doesn't mean we are political fanatics.
Posted by: Francois Tremblay at Dec 22, 2006 7:32:58 PM
3 comments
1) I don't doubt that she could have assets that would be valued at $1mill
using a simple calculation, but I do doubt that she could actually liquidate
those assets and produce $1million dollars of real world currency. The
interview addresses that question, I just still don't believe it.
2) I wonder what the relationship is between the companies that run the game
and the people that hold supposedly large value assets virtually in the game.
They mentioned when the game designed doubled the land increase rate and how
it halved the value. So what's to stop that from happening tomorrow? Or
something even more upsetting. That kind of thing has always bothered me
about the everquest type markets. The game designers might want to redesign
something midgame for playability reasons, but now do they have to consider
the large real dollar effect it will have? What if they decide the ultra sword
that some newbie just bought for $500 is too powerful so they want to nerf it.
Should this woman in Second Life lobby the game designer to restrict land creation?
3) Is there a law against a game designer profiting through the market its
game creates? There must be, because this would be really easy to do.
Posted by: BillWallace at Dec 22, 2006 10:37:06 PM
Bill,
While not quite $1M USD, I was able finance my first 2 years of college with sales of items acquired in Everquest. I figured out I was roughly making about $16/h, but that also included time for which I was not specifically acquiring items to sell, but rather just playing for my own entertainment.
Posted by: Shaun M at Dec 25, 2006 1:42:27 PM
Lets hope for a better past!
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