Open the Future: Second Life, Economic Evolution and the CopyBot

The Economy of Second Life is demonstrating that, for media and knowledge products, the model of scarcity and control of property through control of access is breaking. The nature of the bit medium, and the file-copying nature of computers in general, turns digitized media content, software, and knowledge products are fundamentally non-rival, or even anti-rival goods.

It appears that a hack to the CopyBot utility in Second Life is exposing the Economics of Abundance (see P2P Wiki: Abundance vs. Scarcity) inherent in online exchanges. Open The Future explains:

The Second Life internal economy was predicated on the notion that designers could produce in-game objects that they could then sell; these objects would ostensibly be scarce (in the economic sense) because the designer could put limits on how many copies s/he would sell, and because — in principle — other residents couldn’t make copies except by tedious efforts to reproduce a design by hand. Although the only “raw material” involved in the creation of Second Life goods is the memory & storage space needed on the SL server, the capability to design desirable objects serves as a market-generating form of scarcity. No matter that everyone can have the capability to make limitless numbers of in-game objects — unless you can design something that other people want, you’re just making digital junk.

But with CopyBot, these limitations are less meaningful, because it eliminates the barriers to making your own duplicates of other people’s designs. It’s not tedious or challenging, it’s a click of a button. As a result, apparently over a hundred in-game designers have shut down in protest, and threats of lawsuits and copyright-infringement actions are flying.

If the ability to make copies continues to exist, these vendors argue, the basis of the SL economy will be destroyed. And since there’s a direct conversion between in-game money and real-world money, anything that weakens the SL economy threatens the real-world economic livelihoods of many SL residents. They’re right — but is the Second Life economy worth saving?

What Linden Lab has tried to do is replicate the atom-world scarcity rules in a bit-world environment. Nobody should be surprised in any way that this doesn’t work for long. It is the nature of bits to be easily copied. Even if Linden manages to shut down CopyBot, it will arise again in another form, and probably as something much harder to squelch. The death of Napster becomes the explosion of Gnutella and Bit Torrent; the death of CopyBot will mean the emergence of something more powerful and less easily eliminated. It’s delightfully Darwinian.

Bit world economies based on scarcity are inherently fragile, and cannot survive. To the degree that Second Life is a test bed for a future of abundance, then, the way that the Second Life community (both the builders and the players) responds to this reality will give us an early indication of how the real world will respond to the economic challenges of nanofactories and distributed fabrication. The question is, will Second Life be a model of successful evolution or a painful failure to adapt?

Later, a reader responded to Open The Future by stating:

I think it’s highly debatable whether SL is a scarcity-based economy, to begin with. If you visit SL and explore it at any great length, the immediate thing you’ll be overwhelmed by is *stuff*, content of all kinds, high quality stuff, too. That’s always been true. (Indeed, there are numerous “newbie junk yards” where clothes, weapons, etc. can be bought extremely cheaply, or free.) So I think it makes more sense to think of SL as a reputation, brand, or even *personality* economy, in which there’s a high premium in owning content from the most successful, popular, and/or admired creators. Those are qualities that can’t be replicated by CopyBot.

And this is one element of the new type of economy that will emerge in an environment of Abundance.  The new economies can be based around personality, unique experience, and innovation/ingenuity.

As we see in Chris Anderson’s blog posting about the Economics of Abundance, media companies increasingly stop being distributors, and shift into becoming enablers, when the hardware and software for media and online content enter the territory of abundance.

Linden Labs shows some elements of this “enabling” role, allowing Second Life residents to  create and modify the entire virtual world they are part of. Most Web 2.0 services also  are largely “enablers”. Enabling people to easier serve and share their DIY media content, and knowledg/information.

This role is important in considering business models for online environments, and for the hardware that enables the environment.