The utopian ideals of some of the early internet pioneers are long since forgotten. More recent debates about the rights of avatars have been steam-rollered under “the tyranny of the End User Licence Agreement” (quoting Andrés Guadamuz – although perhaps such an agreement is still more democratic than a unsigned contract with society). So who cares?

Virtual Policy Structure

Who is important:

• Who is no longer dominated by a group of well-educated early adopters. Casual games and similar online services are attracting a far more mainstream audience. Ordinary people live day-to-day based on “common sense”, with almost no awareness of formal statute or the wording of contracts. For example, virtual goods are sold as a highly limited license, but the purchaser generally assumes they own these goods, just like they own other stuff they buy. So there’s a disconnect between “the law” as it is, and the law as it is popularly expected to be. That might be fixed by education (marketing, propaganda), but virtual goods are popular precisely because of the status they convey about the individual purchaser, so such goods have to “feel owned”. Instead this disconnection between law and common expectation risks becoming a governance issue.
• Who is no longer entirely dominated by “players” and hobbyists. Serious socio-economic activity is starting to occur in and around environments which are legally little more than a piece of software, owned by the programmer or publisher. That poses some serious challenges, because now unresolved issues involve significant value (and money). Creative reuse issues become even more poignant, because almost everything is a reflection on the creatvity of more than one thing (individual, organisation, work). Meanwhile, rights that you assumed you had evaporate, because either you signed them away in a contract, or they relate to an abstract concept which isn’t clearly recognised in law. That sounds trivial until, for example, you discover that your online persona has greater economic value than your physical persona, and that the only person that can exploit this value is someone other than you.

Who is important now because who changes the scenario from “some kid in their bedroom”, to anyone and everyone. That brings previously abstract problems into the mainstream, and will rapidly start making the debate less academic and more, erm, real.

Pragmatically, we may seamlessly adjust to the new order. For example, instead of viewing a provider like Facebook as a service, ultimately we will see them as our corporate employer: Implicity accepting their right to make profits out of our work, with only limited regulation controlling the extremes of exploitation. Subtle adjustments to the existing legal structure – especially via case-law precidents and reactionary changes to contracts. In the interim, there will surely be blood: Service providers that previously just had to deal with an irrate “I quit!” forum post, risk finding themselves hauled into court, because that’s what some people in “the real world” do when they get upset. In Jas Purewal‘s “little old lady doomsday scenario”, the defendant can not only hire lawyers to defend themselves, but is likely to be treated far more sympathetically by a judge due to their age. Especially likely where the provider’s internal dispute resolution system is biased by the arrogance associated with the absolute control of their software. Most of the legal profession, service providers, and ordinary people will probably end up here.

Politically, this raises a lot of familiar issues. The fear of a few dominant owners profiting from the labor of the social collective sounds rather Marxist. There are certainly some serious equality issues lurking, even if you reject the notion of collective property. Likewise some of the rights issues feel hauntingly familiar. Why is the physical ownership of another person so abhorrent, while ownership of another’s virtual presence so acceptable? Or to use Peter Yu‘s example, why is fine to impersonate Elvis in the street, but not in certain online worlds? Eventually such discussion turns to fundamental philosophical questions about the role of the individual, and their relationship to other individuals. But this isn’t a Utopian agenda. Rather, it seeks to carry existing social norms and balance forward into a slightly different environment. Good policy makers should find themselves here, biasing the pragmatic free-for-all (above) so that balance is maintained and the infamous 2027 “WeeMee Riots” (in which “we demand our clothes back”) never happen.

But there is a third approach, one better optimised for the virtual environment itself. That’s not as radical as it sounds, because we are still dealing with humans, who are mostly still satisfying primordial needs. Not much changes. But there are facets of the online environment that are important to its success, yet are already difficult terrain for Old World law: Mass-collaboration, creative reuse, emergent outcomes (not known at the start), constant product evolution, many linked identities. The logical structure is one that is natively multiplicitous [from multiplicity] – optimised for many, rather than one. This doesn’t just mean better systems for joint ownership; or devolution of specific laws to specific spaces, without universality: It implies a further re-balancing of governance, away from god-given sovereignity, in favour of emergent chaos. Maybe. Abstract, even idealistic, such a broad approach helps us understand the core issues.

Cynically, foresight is rare in governance, while protectionism of the past is rampant. Meanwhile, the technology may itself enable a solution.

Flaming Postscript

The text above was originally written last year (including the “WeeMee Riots”), in response to the 3rd Digital Interactive Symposium Edinburgh (27 August 2010), but left unpublished.

Today I started to grow incensed about England’s current wave of youth riots. Not incensed about the riots, but about “popular” (especially political) reactions to them. I’m loathed to write about what I don’t fully understand. But if I hear another, “if looters were protesting against the society, they’d burn town halls and police stations, not high street shops”, I may turn violent myself: Is there no appreciation that the stuff sold in stores is the basis of the society? The aidas® riots…

One unattributed radio commentator casually remarked that many kids were being taught to behave socially by “computer games”. But I doubt they understood why this might be relevant: Not just a proxy for a generational gap or poor parenting. Not just for biasing an individual’s expectations towards winning, when the physical world mostly teaches us how to lose. But also by providing a deep, cynical education in owning nothing – how the things you value most can never legally be owned by you. Combine that with a wider society structured around property, especially owned consumerist property, and confusion abounds. Naturally, if your society is structured around the individual ownership of stuff, and it transpires that the stuff that’s important to individuals isn’t owned by individuals, then your society isn’t structured.

This is commonly expressed as a generational inequality. For example, older generations appearing to price younger generations out of owning their own homes. A very physical case, easily understood by anyone aged over 30. But the intrinsic problem is deeper – that outlined above: A historic social-legal structure that doesn’t natively match the new environment, but is largely being forced upon it. Many un-physical things, that are increasingly important to living – important to the fabric of structured “individual ownership” society, but yet aren’t owned by individuals – from your WeeMee’s cloths to the electronic data generated by your interaction with others.

I have previously mused that generations born into this sort of technology might learn to use it better, by not instinctively applying prior techniques. But if the formal socio-legal structure first demands they learn everything prior does not fit that model, conflict becomes likely. Knee-jerk reactions to that conflict are highly pragmatic – “water cannon and rubber bullets”. Good political policy-making will attempt to smooth a transition. Optimising for the new environment is more logical, but profoundly challenging. Challenging because it requires the “governance of chaos” – the ultimate oxymoron? Challenging because it requires a way of thinking, knowing, even being, among humans that is not familiar to modern Westerners.

The third case suggests the divorce of the individual from property. A fundamental reassessment of Locke‘s, “though the earth … be common to all men, every man has a property in his own person,” and everything built around that.

(And that final sentiment has been stalling me for the last 3 years…)

Over 220,000 sales to a market of about 4-5 million potential customers (only active WoW players can use the minipet, and the pet does not appear to have been sold in China or Taiwan). Roughly 5% of potential customers spent $10 on an ostensibly useless vanity item: A small pet that follows you around, looking cute.

Like most virtual goods, the cost of making and selling this pet is marginal: Primarily some additional art and marketing time, all built on the back of existing systems (store, staff, world). The first 2 months of Pandaren Monk sales will have made contributions to Blizzard’s profits of about $1 million. That’s only around 1% of the business’s turnover in that 2-month period. But that 1% is “free money”. Blizzard (-Activision) would be doing a dis-service to its investors if it did anything other than continue to milk this virtual cash cow.

Apply a healthy bit of European cynicism, and it is easy to conclude a scam. Tobold‘s:

“Send me $10, and I promise to send $5 of it to charity.”

Of course, Europeans fundamentally don’t understand US philanthropic culture: The idea that it’s fine to exploit your fellow human and make outrageous amounts of money, so long as you give some of it away in the end. Some philanthropy is able to take a somewhat rational, balanced view of what is good for the world. But there is a tendency to support visually appealing issues, such as charities servicing the needs of children.

The purpose of this article is not to argue that a European, government-centric re-distribution of wealth is preferable to an approach lead by personal responsibility. (I’m not sure it is.) The problem emerging here is more fundamental: That virtual goods are replacing trade-able value with non-trade-able value. Non-trade-able value that, by definition, can not offset inequality in (game) society. Donating part of the price of sales to charity is pure irony. In true Orwellian style, we’re sleep-walking into a potentially broken social structure with the best of intentions.

This article started as a box during my Adventures in the Invisible Tent, but has been expanded here in much greater detail. This article describes what a minipet is, highlights the role of money to balance inequality in society, and explains the problem with virtual goods. On this page:

• Isn’t it Cute?
• Trading Equality
• Wealth of Hypocrisy
• Shared Value
• Postscript: Small-Scale Altruism

Isn’t it Cute?

Minipets are small creatures that follow a player’s character around. Their (often) elaborate animations bring them to life, evoking many of the same emotions as a domestic pet or small child in the physical world. Unsurprisingly, since humans’ physical world desires tend to transfer directly into virtual environments, these creatures are especially popular with female players: WarCraftPets.com, Breanni’s community and database for minipet collectors is the only major WoW website where the majority of visitors are female (strong male biases are more typical).

The (programmed) game mechanics of minipets offer absolutely non advantage to a player. So while we can argue that “vanity” mounts have some utility (the benefit to the player of faster travel), minipets do nothing other than be seen. Yet they can hold significant monetary worth:

I suspect the most valuable single thing I own is Mini Tyrael. Mini Tyrael sells for between $500 and $1000, because only 8,000 (code cards) were originally printed: The pet is scarce, and therefore especially desirable for the minipet collector that “has (almost) everything”.

Sure, I have to discount the value (reduce the buy price to the likely resale price) of the computer I’m typing this on. And ignore future income from “inaccessible” assets like pension contributions. And even then, the revelation primarily reflects my hermit-like existence, which hasn’t deemed it necessary to own residential property, or, frankly, anything other than mundane items that are not practical to rent.

But it is important to show that there is real money involved here. And not just a few cents spent on throw-away items.

A wide range of pets are available, some sold for dollars, some available by completing activities. Sometimes the method by which people are able to gain a minipet is ethically questionable, as the box below describes.

Box: Lambs to the Slaughter
Blizzard occasionally holds Arena tournaments for World of Warcraft. The arena is a focused, player-vs-player combat environment in which small teams of players compete to “kill” each other. Tournaments are open to any player, for a modest (few dollars) entry fee. In practice the competition is global, and some of the most talented eSports stars are in the competition. Basic play skills aren’t going to be good enough to win many matches. But it would be a fairly boring, not to mention unprofitable for the organizers, if only a handful of elite veterans bothered to enter. There were certainly contestants that entered both because they enjoyed the tournament, and because they wanted the exclusive Murkimus the Gladiator given to serious competitors. But there were also teams that competed solely to obtain the minipet. Many could be seen in the WarcraftPets community comments at the time. The pet required contestants to complete 200 matches. Not win. Just enter the arena, and be slaughtered by the lions… 200 times.

Trading Equality

When William Pitt (the Younger) first introduced income tax in Britain, the levy scaled from roughly 1% to 10% of individual income. Now we consider a 10% to 50% range to be acceptable. Perhaps it is no accident that government continues to spend an ever-greater proportion of national income, in spite of apparent political pressure for “less government tax and spend”. For example, increasingly intangible, information-based economies are increasingly controlled by government because the (non-legislated) competitive market is increasingly dysfunctional as the knowledge sphere of the economy grows in importance.

Britain no longer needs to raise money to fight the French. Occasional “crusades” aside, a key (especially European) objective of taxation is the redistribution of wealth.

This stems from basic egalitarian motives in humans. At least among “people like us”. There’s a tendency to equalise wealth within a group, even if that means an individual has less wealth for themselves: “Happy societies” are often also societies with low income inequalities. Scandinavia is the best example, where standards of living are considered to be very high, yet inequalities are relatively low: The richest 10% of people only earn about 5 times more that the poorest 10%. “Only”, because in the United States the difference is 15…

The tax system works because money is exchangeable. It can be used both to trade goods and services, and to trade equalities within a society. Indeed, I argue that once government redistributes the majority of national income, the main reason for having money is to exchange of equality, not the purchase of goods and services.

Box: Robin Hood
In practice, most of the developed “first” world maintains moderately stable societies by “robbing from the rich and giving to the poor” – although bureaucrats replace folklore outlaws. In the United Kingdom, about half of all taxes are paid by the wealthiest 10%, and a half of that half (that is, a quarter of taxes) are paid by the top 1%. About a third of the money raised is then spent on social provision – a direct redistribution of income from the rich to the poor. Much of what remains benefits people equally, regardless of personal income – health, education, general affairs of state. (Equal in a very general sense – the rich tend to rent seek, while the dying poor tend clog up hospitals and social care services – the net winner is unclear.)

Wealth of Hypocrisy

In Paying for Points, I explored the role of altruism in virtual environments – specifically teen-orientated WeeWorld. Important is Raph Koster’s observation that, “a core philosophy of a world with transferable stuff is that you can help out anyone, anywhere.” Online games have their own currencies to allow players to offset inequalities between themselves and those they play with.

Secondary markets in “Real Money Trading” further allow players with wealth outside the game to transfer it into the game, gaining some form of in-game advantage or status in the process. And it was in response to that activity, that Blizzard, the designer of World of Warcraft, took to strong ethical position on player equality:

“Everyone starts off even [in WoW]. In the real world that’s not true, but in WoW everyone starts even, and the RMT stuff messes with that.”

The caveat that should have been added to that quote is “except for vanity items”. Vanity items can be sold for $10 or $1000 or… but that’s okay, because vanity items grant no in-game advantage to the player.

Except, I contend that WoW is a social game, where vanity is very important indeed. In Adventures in the Invisible Tent I presented evidence that the social, consumerist elements of the game had become as important as the original “kill 10 boars, raid dungeons in a group” MUD-style design. World of Warcraft increasingly resembles an exclusive gymnasium: There are lots of machines to help you keep fit. And you may even play on them from time to time. But the main reason you join a gym is to be seen by other people at the gym, not because that’s the only way to keep fit.

Consequently selling vanity for hard currency (both minipets and mounts) appears to be hypocrisy. Or perhaps ignorance. It allows players to bring their out-of-game wealth into the game environment, gaining (consumerist-style) status that does not necessarily reflect their accomplishments within the game itself. Yet hypocrisy isn’t the big problem.

Box: Vanity Inequality
This discussion raises the notion of vanity inequality. Which sounds like social security payments should include rations of fashionable clothing. Or something. But if we agree that vanity (consumerism, if you prefer) is important within modern social structures, and we wish to balance inequality, then seeking equality of vanity is perfectly logical. If a little paradoxical, because exclusive, valuable fashion is largely predicated on the fact that everyone else isn’t wearing the same thing. In practice, social security systems evolve: Victorian Britain was concern with the fairly basic human needs. Today sanitation, housing, and food tends to be assumed, while social isolation and related psychological issues are becoming more prevalent. Perhaps we already experience a form of vanity inequality?

Shared Value

Valuable virtual goods cannot generally be traded. Certainly not traded as easily as currency. WoW allows gifting of purchased minipets – either when buying the item in the store, or by transferring it prior to using it (many minipets are now bound to a character on use, partly to limit third-party scams, that claimed to offer players exclusive pets).

But the basic problem remains: These items cannot be split or redistributed between many people. My Mini Tyrael can only ever be attached to one player account. Its value and status can only ever be gained by one player. Consequently, it’s a lousy token with which to balance equality.

And hence we see the irony in selling a minipet and giving half the dollars to charity: Making the physical-world slightly more equal, while simultaneously fostering a less equal virtual world.

This is part of a wider trend for “worthwhile” things to not be purchased with in-game currency. For example, the most sought-after mounts (ridden creatures) tend to be those that most players don’t have. Most don’t have them because they are linked to activities that require a lot of player skill or time commitment or something unusual.

Reducing the need for in-game currency logically reduces demand for Real Money Trading, and hence reduces the volume of accounts hacked: Currency can be rapidly transferred away from a hacked character, and resold to another (unwitting) buyer. “Bound” items like mounts and minipets cannot. Fewer upset customers, less support staff time wasted, lower chance of money laundering and unwanted criminal involvement. You can see why less currency is attractive to a game operator.

Many of the old “gold farming” organisations that used to earn in-game currency (by playing continually and selling their earnings to other players), can now be paid (in dollars) to play your character and accumulate rare mounts, status symbols and other achievements with that character. So the secondary market by which players can transfer physical world status into the virtual still exists, with or without in-game currency.

What’s changed is that there are now fewer methods available to players to equalise wealth within the game itself. Evidence from wider (physical world) society suggests that a more unequal game environment will become a less happy place. Not a good attribute for a game that claims to be “fun”.

Postscript: Small-Scale Altruism

While humans have a need for altruism, that need can be focused on a relatively small number of people. A single (sharded) game realm may contain tens of thousands of players. But some players primarily play within much small groups of players – commonly a “guild”, with typically under 100 people. So equality within a guild structure could become far more important to players than equality of all players across a realm.

This would be a more robust argument if most players spent most of their time playing together. But players tend to play as individuals, with very loose interaction with others. And consequently the most important signs and symbols are those that are clearly apparent to people you don’t know. Focused, small-scale altruism genuinely does require a much more fragmented society than humans seem to enjoy.

Which is probably a good thing for the rest of us.

It would be easy for groups within national societies to become highly fragmented. And for those fragments to start using non-trade-able tokens as a form of motivation and status. If (for example) bankers started being primarily motivated by how many brightly colored virtual widgets appeared on their trading screens, rather than relative (million-dollar) differences in bonus payments, tax revenues would collapse, taking state social provision with them. Redistribution of wealth would fail because brightly colored virtual widgets are neither trade-able (and hence not readily taxable), nor particularly useful for those struggling with the basics of life.

The ideal is laughable for any established commercial industry. Yet the motivational logic is clear from social online games. Games which involve satisfying much the same humans that go out to work. The differences are not so different.

Unfortunately, our systems of taxation and income redistribution are built around money. Capital gains can be taxed, but the gain needs to be liquidated – converted into money. How exactly does one tax a single Mini Tyrael that I choose not to sell? Or, worse, am unable to sell by design? Remember, the only tangible asset is a numeric code. It’s utterly worthless out of context, and cannot be meaningfully divided.

The risk is that our structures for limiting inequality in society continue to be based on money, even when value-earning silently evolves to use non-monetary, non-trade-able forms.