The Organ Grinder’s Monkey

The collapse of Ginko Financial, a virtual investment bank inside the online world Second Life, has people wondering just what is the difference between real and not real. The verdict? Not much. Why should you care? Because what happens now may change the nature of business in the future.

What’s Real and What Isn’t

Here’s the quick and dirty - according to Wired Magazine, Ginko Financial was

…an unregulated bank that promised investors astronomical returns (in excess of 40 percent)…

The declared insolvency meant the bank would be unable to repay approximately 200,000,000 Lindens (U.S. $750,000) to Second Life residents who had invested their money with the bank over the course of its three and a half years of existence.

So, what happened is that someone - no one knows who, exactly - set up a bank in Second Life, and folks who lived, worked and played in that online reality put their money (Lindens) into the bank expecting a high rate of return. The bank folded, and now all that money is gone.

So what’s the big deal - it’s just a game, right? Wrong. Those lost Lindens are worth real money - there are actually currency exchanges that allow people to exchange money between games (such as the Sims and World of Warcraft), and from game worlds to meatspace currency (from, say, Lindens to euros or dollars). Online currency is a big business these days, and before long (if it isn’t already happening) Lindens (and other gaming currencies) are going to be as real a part of the global financial market as are yen and pesos.

“A lot of people forget, Second Life is governed by U.S. law and the laws of California,” [lawyer and virtual laws and legal issues blogger Benjamin] Duranske explained. “It just so happens that these laws haven’t been enforced.”

In fact, while the immediate reaction is to dismiss virtual banking as just nerds playing with Monopoly money, consider this: When is the last time you exchanged real, hard cash at your bank? In reality, almost all of the banking we do today - making deposits, withdrawals, payments, transfers, etc - are done virtually. It’s all pixels.

And when these online game currencies have real-world value, they become de facto real world currencies and result in real-world changes in the nature of business, the legal system and law enforcement, and the economies of both our real and virtual worlds.

It’s Full of…Pixels!

So what does all of this have to do with you? It’s hard to say, yet. But what I do know is what the answer won’t be, and that’s “nothing.” You’ve got some people saying that Second Life is over-rated and that businesses who’ve flocked there are wasting their time, while on the other hand, folks are quietly and not-so-quietly going about making millions of dollars (that’s real US dollars, btw) and investing millions in real-word cash in this virtual economy. (Meanwhile, affordable and functional ways to immerse yourself completely in virtual reality keep getting better and better all the time.)

Just consider this: When the electricity, the telephone and the Internets all hit the news, they were ballyhooed as fanciful toys of interest only to wealthy eccentrics, geeks and scientists. And in each case, they changed the nature of our lives, personal and business to such a degree as to make them completely unrecognizable to anyone coming from before the big change.

Will Second Life be one of these changes? Maybe. Maybe not. But virtual online realities will be, I’d bet my geek cred on it. I think Second Life is a testing ground. A slow, clunky and - at this time - seemingly pointless testing ground. But a testing ground none the less.

It’s the Tesla coil of virtual reality. The telegraph of the future. The UseNets of the new world order. And you’d do well to keep an eye on what’s going on over there in GeekLand. Because GeekLand, and everything it represents, is coming to a future near you. And I have a feeling it’s coming sooner than we think.

cyberspace, meatspace, second life, virtual business, virtual economy, virtual reality

Tags: Business, Changing the World, Society and Culture //