Monday, October 27, 2008

The Second Life Economy

There is, in case people have not heard about it, a recession in the outside world. It is reaching the US and Britain, Japan, and is spreading to countries both core and peripheral. So it is no surprise that this recession is reaching here. It's also no surprise that old business models are dying in SL, even as new ones come into being. This is the edge of technology, not the staid and settled. The bad news then, is that there is going to be a lot of cutting back, and people will cut back here too. The good news is that there will be a lot of cutting back, and people will come here, to cut back out there. Which side of that you are on in the Sleconomy, is to some extent up to you.

Now my knowledge of business comes, mostly, from working in other people's businesses. I did the books for my ma from a young age, I worked in my ba's business. I help run a small business here in second life. There are lots of people who know more about business than I do, and so I can't offer that really great cogent business guru advice that people really need. But I can say what I've seen.

One is that there is going to be a big cut back in pure consumption. People who do things here and just pay for them at whatever price, are not going to do that as much. Another is that people are going to dream more here. There are lots of people who are going to treat modern Second Life, the same way 1930's glamor movies were an escapism. There are going to be more people with more long distance relationships, and more using second life as a test of real world ideas. That's going to mean these people will work doubly hard.

Another thing is that people are going to be in less of a hurry. The time in Second Life when it seemed you had to rush into get in early is long over. Our recession started here with the gambling ban, land crash, and bank crash in August of 2007. Second life has been in recession since then. LL responded by cutting prices and coming out with a new product: open space sims. They are responding now by increasing the quality of mainland, which has also crashed in price. People in second life have to realize something that you can learn from studying history: periods of economic downturn are not necessarily bad for creativity, in fact, they often unleash it. Some of the greatest works of art and music occured during wars, periods of financial and economic instability. Letters from great artists are sprinkled with references to how hard it was for them to make ends meet.

Second Life has undergone tremendous changes in the last year: sculpties, havok 4 and mono have made significant changes to the landscape. Content creators have gotten much better at content, and buyers better at finding it. That it is going to be harder for people who have gotten used to running vending machines for mainland to make money, isn't really going to change the way people experience second life.

In my time here I've seen how, over and over again, the bad information system of second life has been exploited by people who scam and engage in high pressures salesmanship. That's going to get harder and harder. People who aren't rushing to do things now, who have more time in their real lives, are going to be less willing to just pay to get the problem out of the way. Everyone is going to watch expenses more closely.

In summary, things are bad in real life, they are going to get worse. To the extent that a business person in second life can provide a haven from that, they can survive, even flourish. To the extent that a business in second life is dependent on bubblemania, scamming, and merely being in the way, they won't. I don't know which group I will be in, but at least I know what the challenge is, and am not running around spouting racist or paranoiac nonsense as a cover up for what is always the reality of business: provide things people want, at a profit, at price they are willing to pay.

[Well now I know, LL just put us out of business. So I am in the "gone forever" category.]

1 comment:

  1. Excellent insight.

    On top of the usual slow Summer periods, this is going to be an unusually slower-than-normal Winter season as well, in my estimation.

    The real-world economy does affect the in-worl one. It does so because it costs real world money to really enjoy Second Life. Even though there are builders and scripters and all manner of 'business' in SL where people can use Second Life Linden Dollars to actuallt pay for all their Second Life expenses, there are still a lot of people who buy Linden Dollars directly, rather than "earning" in-world.

    If the real life budget starts needing a tighter 'pinching' - then discretionary spending is cut back.

    The business-owner to business-owner exconomy will continue. However, all the "sinks" to Linden Lab - where the Linden Dollar leaves the world in tiers, upload fees, group maintenance fees and so on - more L$ will have to be purchased directly in order to keep the number of L$ circulating in-world.

    Those who have business will recycle some of it through in-world purchases, but tier fees suck it back out again.

    Thus, the economy really does rely (from my simple perspective) on those to actually purchase linden Dollars.

    And when they decide the descretionary part of the budget needs tightening and they start hacking and whacking away at just what they spend those funds on... I am pretty sure Second Life Linden Dollars are on that list.

    Thank you for a very insightful article.