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Future proof

MM: One last thing, as we move towards what we’ll call the “future proofs” or future-forward-looking comments,” and so on.

I just read a book called, “The Making of Second Life.” It was the corporate history—a four- or five-year history of the development of second life as a user-generated world. The emphasis was on the pivotal role that digital property rights and user-generated worlds have.

Specifically, the emergence of the Linden dollar as a way of managing micro payments.

Could you speak to some of the underlying technical or business issues as they relate to customer relationships or trade relationships based on micro payments?

ES: With our system, we’ve separated micro payments from micro transactions. We think they’re very distinct types of transactions or interactions. Meaning, if you look at the Lyndon and how the Lyndon happens, one of the reasons they came up with the Lyndon was that the economic cost of doing transactions in real-world dollars versus virtual-world dollars was cost-prohibitive to them.

That meant you couldn’t come out and buy a cool tee shirt in SecondLife that in real-world dollars might be a fraction of a penny. One thousandth of a cent.

MM: Right. Economists refer to that as the “transaction cost.”

So the transaction costs of the deal far exceeded the actual dollar value of the deal—much less the profit of it.

ES: Correct. I think that a lot of the future development is going to be in two things. What we call “payment processors,” and then “payment methods.” A payment method can be—effectively—a currency. You have the aggregators—the PayPal, the electronic wallet providers. They try to aggregate these transactions.

So we built our system to be processor-independent and also currency-independent. That means we can transact in Lyndon if we can hook up to a payment processor that will accept Lyndon as a currency. There are none of those, yet. But if you look at things like PayPal and maybe a little bit of what Amazon’s doing with their DebtPay, they’re actually going to end up being a de facto wallet.

MM: This gets into another development I’d like you to speak to. Again, I’d like to reference it in terms of a popular science fiction book by Cory Doctorow. He wrote a book called, “Down And Out In Disney World.”

It’s set in the near-term future, and essentially describes how each of us are completely embedded in a [inaudible] mesh for a mobile or wireless environment. In the course of this new pattern of how we live, work and play as described in the book, there are two basic accounting systems.

There are two financial systems that prescribe or envelop us as individuals. There’s the actual monetary system of dollars and cents, and you buy stuff. Then there’s a reputation management system, where in the language of the book, they call it “Whuffie.”

As you do good things, like free up a parking place for somebody, they throw you 10 or 15 Whuffie. Or if you’re rude to somebody, they take away 10 or 15 Whuffie from you.

So as you kind of go through life, you’re constantly collecting or expending social credits. Whuffie. That has the net effect of whether you get the good seat at the restaurant or get all these other kinds of soft privileges, based on your reputation.

So we’re beginning to see how Arthur C. Clark envisioned satellites and we made them, and as the creators of Dick Tracy envisioned the walky-talky wristwatch. Science fiction often informs the next thing for engineers to go build out.

Specifically, as you talk about micro payments and micro transactions, could you speculate on how you’d see your system or systems like yours facilitating the emergence of this second economy, based on Whuffie dollars—for lack of a better term?

ES: I actually love the analogy. I haven’t read that book, either. I just ordered it on Amazon as you were talking. There’s the combination of the financial system and then the combination of the reputation system.

If you think about it today, effectively, the three credit card company interchanges do—with Visa, MasterCard and in combination with their merchant banks… they are the reputation system. They are underwriting that reputation.

They are coming out and saying Ed Sullivan is a good guy and has a very high probability of being able to pay you that $30.

MM: Even in more direct terms, Ed. If you go to eBay, you’ve got that TrustMark.

ES: Right.

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