The Net: How Much for a Jetpack?

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By Newsweek Editors

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If the managers and residents of the online virtual world Second Life agree on anything, it's this: don't call it a game. Second Life is the Internet's purest embodiment of science-fiction author Neal Stephenson's vision of the "Metaverse," a parallel online universe where residents wander around as animated avatars and interact with one another. Think of Second Life as a 3-D eBay. All the occupants look like characters from "Shrek" and conduct business with a currency, the Linden dollar, that's convertible into real U.S. greenbacks on Web-based currency exchanges. Everything users create in the world (at secondlife.com) is theirs to sell or barter. Medford, Ore., single mom Munchflower Zaius, for example, designs decorative cyberclothes and skins and makes a high five-figure income selling them to Second Life citizens. "I put in a 40-hour week," says Zaius, who is so famous in the virtual world she prefers to use her Second Life name and keep her real name private. "I have fun, but for the most part, it's become a full-time job."

Second Life has become something else, too--the Net's fastest-growing virtual world, with a robust marketplace whose dynamics mimic the vicissitudes of a real national economy. Sixty thousand residents conduct 50,000 transactions per day on the service, spending the equivalent of about $2 million U.S. dollars per month on things ranging from beachfront property to sunglasses to personal jetpacks. Philip Rosedale, CEO of Linden Lab, the San Francisco company that runs Second Life, has faced such real-world headaches as a tax revolt (Lifers hoisted boxes of Linden tea into a virtual Boston harbor to protest membership fees) and steady inflation, which is damaging for residents like Zaius who depend on a stable Linden dollar for their livelihoods.

But with help from the bankers and venture capitalists who invested in his company, the 37-year-old Rosedale is now trying to stabilize his currency--with some unintended consequences. In August, with the Linden dollar down about 25 percent on the year against the U.S. dollar, he reduced the weekly stipend given to paying members of the service in an effort to tighten the money supply. Last week, trying to improve economic efficiency and reduce fraud, he opened Linden's own currency exchange, the LindeX, forcing the closure of a popular private exchange that operated on a separate Web site. Like a surprise announcement from Fed chairman Alan Greenspan, the move had an immediate effect. The value of the Linden dollar first shot downward as panicked residents rushed to convert into U.S. dollars, but later began to rise for the first time in months in a dramatic show of confidence. Such authentic economic turbulence actually seems to please Rosedale. "I'm not building a game," he says. "I'm building a country."

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