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There has been a lot of speculation over the last week regarding the transparency of business operations within Second Life. While people like to fling around phrases like 'fictional currency' and 'fictional exchange' - as if the currencies and exchanges are isolated from the real world currency markets - we all know that this is real money. We'd have to be fools not to know that. Every Linden dollar is just as real as the equivalent amount in US dollars; the use of the phrases is a tongue-in-cheek description to maintain the illusion of a 'game'. Edward Castronova makes the point in Synthetic Worlds: The Business and Culture of Online Games:

I would argue that these processes of value creation have advanced so far, even at this early date, that almost everything known as a "virtual" commodity - the gold piece, the magic helmets, the deadly spaceship, and so on - is now certifiably real. Indeed, as I argued in the introduction, the term virtual is losing its meaning. Perhaps it never had meaning. The things happening online have always been literal human things; there was never anything metaphorical, as-if, or subjunctive about them. At first it may have been convenient in many ways to think of networked human interaction as only a model of the real thing. Now, however, and specifically in the arena of synthetic worlds, the allegedly "virtual" is blending so smoothly with the allegedly "real" as to make the distinction increasingly difficult to see. There's nothing revolutionary in this, though. It is merely a recognition that these things were always as real as anything else in the human culturesphere.

There's nothing fictional there. Is email fictional? If anything, real world credit is as fictional as these exchanges are - and while there are Laws which regulate credit, there really are no laws regulating businesses which exist in virtual worlds. And if one spends time in a virtual world - how virtual is that world? The human investment is quite real, be that investment emotional or financial - or both. People invest time and energy into services such as Second Life - if they are services. Is that investment virtual? Of course it isn't. The investment itself is real.

Thus, cutting right through the thick icing and virtual veil, we have the truth laid bare. And in looking closely at things - as Benjamin at Virtually Blind has been in the context of Ginko Financial - why not step back and then look around too?

Let's start with Linden Lab, the company that runs Second Life. If there should be a beacon of transparency, it should be the publisher/management of the Virtual World. How transparent is Linden Lab itself?

Linden Lab

About a year ago, Philip Rosedale wrote a blog entry titled, 'The Tao of Linden' - a very catchy, 90s sort of title for those of us who barely remember The Tao of Pooh. But in the post, Philip states:

...Linden Lab has a different and better way of doing work. It relies on the idea that if the level of transparency (everyone can see what everyone else is doing) can be made high enough, you can stop managing people by explicit authority or delegation. Instead of being told what to do, you choose your own work by listening to your peers, making good strategic judgements, taking risks, and surfing a huge amount of information...

Be Transparent and Open There are many ways to emphasize responsibility, accountability, communication and trust. We
believe that the one key principle that best supports all of these values is transparency. As much as possible, tell everyone what you are doing. This transparency makes us responsible to our peers, makes us accountable to our own statements, and replaces the need for management with individual responsibility. Over time, it creates and reinforces trust. Be willing to share ideas before you feel they are ‘baked’. Report on your own progress frequently and to everyone.

This is about working at Linden Lab - but if this were being practiced at a level where it could be seen on the very same weblog, there probably would be less complaint. As it is, rumors and ambiguity are the way that they seem to do business with residents; phrases such as broadly offensive haunt with a chill when Daniel Linden says in a workshop that ambiguity is the order of business. Really, here's the video. Without a real warning (perhaps a virtual one?), Gambling was banned effective immediately. To date, buying Linden Dollars on eBay has resulted in bans but there is nothing in the Terms of Service or Community Standards which indicates this - let alone the weblog.

When the WSE lost 3.2 million Lindens through someone giving a person modify rights on their objects - the person who misappropriated 980,000 Linden of the 3.2 million Linden¹ was banned. Meanwhile, Landbaron Merlin and others took advantage of other users and quite possibly glitches within the Linden Lab system - and got no punishment, making away with thousands of real dollars - over $10,000 US at last count. What makes WSE so special? Perhaps because of this:

[4:25] Wse Huet: wse is an sl biz getting lots of rl press
...
[4:25] Wse Huet: that means its a good thing for sl

The abuse report system does not demonstrate precedents, perhaps because those precedents would be as ambiguous as everything else: There is no way to tell what actions will cause a reaction from Linden Lab, and it is open to speculation how even handed the justice is.

Then there's the 150% fine for receiving funds that Linden Lab deems fraudulent:

......If Linden Lab, in its sole discretion, determines that a Second Life user has purchased Linden Dollars for real currency through any means other than LindeX, and that the seller of such Linden Dollars acquired such Linden Dollars through fraudulent means, or any other means in violation of the Terms of Service, then Linden Lab will consider the buying user a complicit party in the fraud or violation. As a penalty for participation in such fraud or violation, Linden Lab will reduce the Linden Dollar balance of the buying Second Life account (and/or any Second Life accounts owned or operated by, or affiliated with, the owner of the buying account), by any amount up to 150% of the amount of Linden Dollars involved in the transaction. In addition, repeated participation in such fraud or violation will result in suspension or cancellation of the buying party's accounts. (The selling account will of course be suspended or cancelled on a single fraud or violation at Linden Lab's discretion.)...

Is that in the Terms of Service? No. Is it in the Community Standards? Again, no. Then where is it? It's on the page of the Risk API, which is only really read by people interested in Third Party Exchanges. The rule was used on the Second Life Investment Bank, now L&L Bank and Trust - which doesn't have a Third Party Exchange. Oh, and it has also been used on people who purchased Linden dollars through eBay.

Transparent? I won't even get into population figures.

On this ever-so-fragile framework sits the business aspect of Second Life. Any avatar, at any time, can have rules inconsistently applied to them. To make a case for consistency, Linden Lab would have to demonstrate transparency - and I would love for them to prove me wrong. In fact, it's a direct challenge to do so if they wish for business in Second Life to be taken seriously.

Companies Within Second Life

Even if a company went into details including their DNA, they could disappear tomorrow. That many haven't doesn't mean that it is a rule - it is an unstable structure, one which invites satire. So how does one trust any company in Second Life? It's quite simple - you do, or you don't. You use your gut, and you pray that your gut leads you right because even the most upstanding member of Second Life may suddenly not be found in Search, their assets seized, et al. This is why Bragg v. Linden Lab has so many eyes on it; if it were as simple as Bragg having done something naughty perhaps no one would have blinked. But the seizure of assets - and they are real assets - doesn't lend itself to a fiction of Monopoly, the board game.'Do not pass Go, do not collect 200 L' means nothing when the Jail is off the board and the Joker in the deck is the 'Get Out of Jail Free' card.

Wouldn't it be nice to have a transparency index of businesses within Second Life? Businesses compared to one another, demonstrating transparency - because a lack of transparency tends to be used as an indicator for corruption. In a way, WSE was in a position to do such a thing but since tarnished itself, and the WSE itself is far from transparent.

There has to be a way to address these issues. If there is no way to address these issues, then Second Life business itself may fall under the gambling ban.

¹ Yeah, I've been doing my digging.

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