via Linden Lab
|Tuesday, June 21st, 2022 saw the second in the SL19B Meet the Lindens events, Featuring Linden Lab board member and Executive Chairman Brad Oberwager (Oberwolf Linden), together with Linden Lab founder (and now Second Life Strategic Advisor) Philip Rosedale.
|Table of Contents
- The following is a summary, not a full transcript, and items have been grouped by topic, so may not be presented chronologically when compared to the video.
A Little Background
Brad Oberwager is one of the three investors who acquired Linden Lab in 2020, together with J. Randall (Randy) Waterfield and Raj Date. Since the acquisition closed, he has been very hands-on at Linden Lab, working alongside members of the management team, and he has also brought-in long-time business associate Cammy Bergren as the company’s Chief of Staff.
His biography, as supplied by the Lab reads as follows:
Brad Oberwager has spent his entire career in technology and consumer focused companies as an entrepreneur and board member.
Currently, he sits on the board of two public companies, Asure Software (NASDAQ: ASUR) and Better World (NASDAQ: BWACU). He is the chairman of two companies he founded, Jyve and Sundia and is also on the board of TEGSCO (aka AutoReturn). He owned Bare Snacks, acquired by PepsiCo in 2018.
Brad was Vice-chair of YPO International, a global organization of 25,000 CEOs [where he met and became friends with J. Randall Waterfield, another of the Lab’s owners / board member].
Brad received his BS from Georgetown University, his MBA from the Wharton School and lives in San Francisco.
Philip Rosedale earned a Bachelor of Science degree in physics and computer science from the University of California, San Diego, and in 1985 he created a video conferencing product called “FreeVue”, which was ultimately purchased by Real Networks, for whom he went to work, rising to the positions vice president and chief technology officer.
Departing Real Networks at the end of the 1990s, he founded Linden Research Inc (functioning as Linden Lab), and commenced work on trying to develop both the hardware and software for an immersive virtual reality system. The company switched to focusing on the software – which it called Linden World -, launching it as a publicly-accessible platform under the name Second Life in 2003. As founder and CEO, Rosedale steered the company through until 2008, when he stepped back from the role of CEO to become chair of the board of directors.
In 2009, he founded LoveMachine Inc., with Ryan Downe, which later evolved into Coffer and Power (2011), with Rosedale briefly returning to Linden Lab in 2010 as interim CEO. After two years developing a mobile application called Workclub that helped bring contractors and those seeking them together, he and Downe announced Coffee & Power would become a new company, High Fidelity Inc. (2013), focused on building a fully decentralised virtual reality environments, and the required supporting applications / services. In 2019, High Fidelity ceased working on this platform to focus on one of the key supporting services: spatial audio, with their product subsequently being licensed by a number of companies.
In 2021, High Fidelity invested in Linden Research, brining in both staff and patents that might be used with the platform, and while High Fidelity still very much operates as an independent entity, Rosedale took the part-time position of Strategic Advisor to Linden Lab.
Questions Specific to Brad Oberwager
Spending Time In-world
- Has been 18 months since taking over Linden Lab.
- Does spend a “tremendous” amount of time “on Second Life” – it is his primary business focus, and he is constantly working to ensure the resources needed to improve and grow the platform and its products and available.
- However, as a result, does not get to spend much time within Second Life as an avatar.
What Drew Him to Second Life, and How Does He Feel 18 Months On?
- Has known Philip for more than a decade and they are close friends, so has always been aware of SL.
- This awareness included knowing that the former investors – as venture capitalists – had reached a point where they wanted to sell LL as a going concern and move on. However, due to the complexities in running the platform as both a social experiment and an open-ended, creative platform for its users where they can engage in direct commerce with one another, make it it hard to find a buyer.
- After one opportunity fell through, Brad decided to get involved and make an offer to buy the company. As expertise on the financial side would be required, he contacted J. Randal Waterfield, and together they worked out a deal by which they could acquire Second Life and Tilia (the company’s money service business) and continue to move both forward
- 18 months on, feels that the acquisition of Linden Lab is more exciting. In purely monetary terms, sees running a business as having three options by which to add monetary value:
- By increasing revenue whilst keeping expenses the same.
- By keeping revenue the same and decreasing expenses.
- By increasing expenses [/outlay] in order to drive revenue higher, and try to ensure the latter outpaces the former – which tends to be the hardest, but most interesting, of the three options.
- Second Life is proving that it is capable of the third option: it is possible to invest (increase expenses) and grow revenue.
- Within the company, the mantra is, “give two dollars of value, but only charge a dollar” – the idea being LL might lose money as a result of something they introduce, but over time, that loss will be recoups and turned into a revenue gain.
- This is the core idea behind Premium Plus – to offer greater value to those wishing to use the capabilities offered, but at an overall lower cost than might be the case with raising Premium fees to cover the same, whilst still allowing those who do not wish to go Premium Plus to still have Premium.
Questions Specific to Philip Rosedale
What Pleases Him the Most about Second Life?
- In the early days, felt it was the collaborative nature of design and building and the escalating designs.
- Has always appreciated travelling in SL and seeing the diverse region designs and all of the art and creativity.
- What he particularly appreciates about the platform today is that, despite the state of the physical world, it remains a place of hope in the way it brings people together who engage and communicate with one another, build communities, all in generally positive ways .
- Would love to see this positivity, love, and engagement transferred somehow into the physical world.
What Drew Him Back to Virtual Reality?
- Opening the means for people to communicate and engage with one another through the use of technology / on-line has always been one of his driving passions.
- FreeVue was revolutionary in it time – if limited by the technology. By the time of SL, the technology allowed the ball to be moved much further forward.
- High Fidelity (HiFi) came about as a result of him purchasing one of the gyroscopic chips now used within VR headsets, experimenting with it and realising the potential it represented for VR – although admits he was wrong in his belief of how fast head-mounted displays (HMDs) would “change the world”.
- Ten years on from that point, recognises that HMDs have yet to reach that tipping-point, and understands that connecting people is harder than the technology alone.
- Does believe [as I’ve actually always stated as a layperson – please pardon the horn tooting] there are specific vertical markets for HMDs. One such vertical is education – which is also a market where Second Life has long proved its value, and is a market that will only grow as technologies such as HMDs mature.
Second Life and “the Metaverse”
On SL and Upcoming “Metaverse Platforms”
- Philip Rosedale:
- Notes the origins of the term “metaverse” in Neal Stephenson’s 1992 novel Snowcrash, and notes that what we’re seeing now is the latest resurgence of interest in the idea.
- Believes this resurgence has been spurred by three things: COVID and the need for social isolation; the general rise in noise around crypto and web 3.0; and Facebook throwing a Hail Mary in trying to claim the “Meta” verse to recapture HMD hype.
- Notes that much of the noise around crypto and NFTs actually echoes what has been available in Second Life since its earliest days. However:
- Within Second Life, the concept of “the metaverse” was empowering people to create things together within a single space. This is what spurred everything else – you needed an economy not for “currency” speculation, but to enable people to engage in commerce.
- Much of the current thinking about “the metaverse” runs contrary to this, as it starts with exploitation: obtaining data from people in order to push them into consumer-based activities.
- Very much hopes SL can continue to grow as an example of what “the metaverse” can more positively be, and encourage others to move in the same direction.
- Does worry that the term “the metaverse” is being used to promote ideas very different to those found in SL, ideas that see personal data as the “currency”.
- Brad Oberwager:
- In terms of Meta and the rest, they have had zero impact on Second Life; Zuckerberg may try to usurp the term “metaverse” but the residents of Second Life just carry on.
- Where there is a broader impact, it is in consideration of where and what to invest in within Second Life, particularly in terms of rising above those environments that are being built around the crypto-currency / advertising model which could have the advantage of offering experiences for “free” where they’d have to be charged for within SL.
- However, LL is steadfastly against direct advertising intrusion as a means of leveraging “payment” for services to users. This means the focus is liable to remain on the precepts of creativity and social engagement, and trying to encourage social groups into the platform by offering unique opportunities and experiences.
- Touches on TOSL – The Office of Second Life and the management team of Grumpity, Mojo, Brett and Patch Linden, who are responsible for running the day-to-day Second Life operations – and their focus on attempting to bring richer, deeper experiences into Second Life.
- Notes that the resurgence interest in “the metaverse” from other companies offers LL the potential to pick and choose who they might want to partner / collaborate with in order to bring new experiences to SL residents.
On SL’s Longevity Compared to Other Platforms?
- Philip Rosedale::
- Again, the collaborating, creative elements.
- A common critique of Second Life in the early years was the lack of polish to the viewer UI, and predictions that once “professional” designs stated work on a competitor, virtual worlds will take off. However, this wasn’t the case and polish to the UI wasn’t the key.
- Another point is that today, the big audience pullers of the world – Fortnite, Roblox, etc., – tend to cater to a younger demographic; but the reality is still that there is nothing that caters for “grown up” sensibilities and creativity in a manner that matches SL, and none of the alternatives – VR Chat, etc, – are close to offering the broad range of creative freedom or the audience reach to be seriously considered a core part of “the metaverse”.
- This ability to capture a more adult demographic is potentially the “secret sauce” any platform needs to feed it if is to grow to fulfil a vision of “the metaverse” – and it is something that is hard to find .
- Also feels that there are a lot of governance, technology and management hurdles that need to be cleared – and that’s going to take a lot of time for others to sort out and SL continue to build upon.
On Concerns about “Metaverse” Competition & Maintaining SL’s Position
- Brad Oberwager:
- Would estimate that over the years, would-be competitors to SL have collectively invested perhaps a billion dollars into their ideas and platforms; in the same period, Second Life has paid out a billion dollars to its creators.
- Suggests one risk to SL is that upcoming platforms might entice SL creators away from the platform, which could be damaging – and LL need to be wary of this occurring.
- Believes the flipside of this is that creators will continue to recognise that SL remains the best platform to which to make a commitment – it would be hard to try to split creativity between multiple platforms.
- Believes that the more people SL can attract, even without widespread advertising, then the rich and more rewarding it will become for everyone.
- Does recognise that the existential risk to SL is a competitor offering everything that SL can do, with mass advertising and effectively “for fee” to its audience.
- Philip Rosedale:
- Would suggest that, philosophically, the nature of SL’s design and implementation being centred around the ideas of creativity on the part of users, adds to it uniqueness and attractiveness. Even now, features and capabilities are focused solely on this, and on providing users with the tools and capabilities they need to express themselves (and perhaps make money from that expression).
- The downside of this is that any change to the platform has to be balanced against the risk of content breakage and potential loss of items / revenue for users / creators.
- Does not see the latter as a weakness per se, but more of a challenge, in that it can both limit what might be done and allows proper consideration of what can / should be improved / implemented whilst keeping it as a living world.
- Agrees with Brad that a weather eye needs to be kept on the competition to ensure the LL can respond to any possible drain on the user community to another platform.
As the Linden Dollar is a virtual token system that can be exchanged for money, it came under regulations regarding the transfer of money between states in the US and internationally, requiring the Linden Lab seek full and proper federal and state level registration as a money service business and, particularly, a money transmitter. In working towards this regulatory compliance, the decision was made to spin-off the money services (which include the Linden Dollar, the LindeX, the entire process of cashing-out money from Second Life and payments made into the platform) into a wholly-owned subsidiary company, Tilia Inc.
Placing these operations with Tilia Inc effectively means three things: all transactions related to virtual currency / fiat money are handled by Tilia and its services; Tilia can be managed as a regulated, vetted and routinely audited business geared to meeting financial compliance as a dedicated entity, separate from Second Life and without those regulatory requirements directly impinging on SL; it allows Linden Lab to offer Tilia’s services to other companies – the most recent being Unity, for their developer community.
- Brad Oberwager:
- The Linden Dollar might be seen as an “off-the-blockchain” crypto-currency, but it is in fact different to crypto, in that it is a completely closed system, with all trading and value of the Linden Dollar only occurs within Second Life, and not subject to trading on other platforms and pseudo-exchanges.
- This means that the Linden Dollar works for the platform and SL’s economy; it is not a tool for speculation and trading in and of itself, which could significantly harm the SL economy were this to be the case.
- Tilia itself is a further exciting opportunity, as it can be leveraged by other companies / platforms [Unity, Upland, Sansar], providing Linden Lab with further revenue opportunities, which are good for SL.
- Philip Rosedale:
- Considers the Linden Dollar a “cousin” to crypto, inasmuch as it is “traded” against other currencies through the LindeX.
- Money can be defined in two simple terms: as a means of carrying out trade without having to rely on the direct bartering of personal goods for other goods; and it is a store of value that can be held for future use.
- Crypto, by contrast sits purely in the latter definition – it is a store of (hopefully to those holding it) increasing value, and has nothing directly to do with enabling open trade.
- By contrast, the Linden Dollar very much sits within the first of definitions, and from the outside was set-up with checks and balances to ensure that its value could not run away with itself and cause the Second Life economy to fall apart.
- The Linden Dollar also differs to crypto in that the latter’s value is based on limited numbers, whereas LL periodically released L$ into the market to both hold the value steady and encourage trade.
The Economy, Past Present, Future
- Philip Rosedale:
- Original economic model was a “prim tax” intended to charge users equally for the resources they use. This proved increasingly complicated and eventually resulted in the “prim axe revolt” (2004/5).
- Feels the approach was a reasonable one, just ahead of its time, particularly given the way AWS and other services charge for the use of their resources.
- More broadly, sees the economy as a differentiator between SL and some upcoming “metaverses”: the economy of SL exists as circular model, in which the aim is to keep commerce circulating, and this requires minimise fees where possible (hence no fees levied on in-world sales / purchases). Upcoming “metaverses” are more directed at sales through the platform from provider / advertiser to user, and in this model, the fees can be almost anything, as there is no need to operate the economy on a circular basis.
- Brad Oberwager:
- Charging based on resource use can work whether services and resources are obvious. SL is hampered by the fact there are various services that cost a lot to provide, but are not that visible to users, so charging for them can appear unfair.
- In this regard, feels that charging land fees, fees on MP sales, etc., is more transparent to users and more effective.
- Other aspects of SL’s economy could be said to be:
SL and NFTs
- Philip Rosedale:
- The immutable metadata built-in to SL objects [visible through the General tab of the Build floater] has always been one of the factors of SL’s success, in that it allows people to right-click on objects in-world and view their provenance.
- This is pretty much what is now being touted with Non-Fungible Tokens (NFTs).
- Key differentiators are:
- It doesn’t cost to move SL objects around in the manner of minting costs to update an NFT within a blockchain.
- Second Life is not decentralised in the manner of a blockchain system.
- Believes it likely that some users have already written scripts to display objects associate with NFTs in-world.
- As to SL support blockchain-based NFTs directly, believe the platform has already gone one better with the current metadata system.
- Would also point out that having a central arbiter of content (LL), rather than everything being decentralised, helps in matters of theft, copyright infringement. etc.