Wednesday, May 03, 2006

The 21st Century McJob

Thanks to Don Barree for sending me this link from the New York Times
(Full Story--Registration Required).

I'm just going to give you the excerpts first. Be sure you're sitting down. the makers of Entropia Universe, a popular online science-fiction game, plan to introduce a real-world A.T.M. card that will allow players instantly to withdraw hard cash automatically converted from their virtual game treasury.

...The game's maker, MindArk, based in Gothenburg, Sweden, estimates that Entropia players generated $165 million (or 1.65 billion P.E.D.'s) in total economic activity last year. Since the game's inception in 2003, it has been relatively simple for players to add money to their Entropia accounts via credit card or electronic bank transfer. But until now withdrawing money from the system was a cumbersome affair that could take months, as MindArk employees manually verified that the player's virtual fortune had been earned legitimately (and not by hacking).

...Mr. Welter said that MindArk software engineers had been working on the A.T.M. project for years, and that they had finally developed a system secure enough to allow instant verification and cash authorization. He said his company was in contact with the Swedish government, and that systems were in place to prevent money laundering and other potential abuses.

"We have ways of detecting abnormal fluctuations between players and so on, and if this would happen, we would know about it," Mr. Welter said.

Whoa. My initial reaction was that these guys were going to get robbed blind. But I'm not sure that even matters.

Here's what I think matters. Let's take a long, long view of this. If you look at productivity per person on a worldwide basis, the change in the last two centuries is staggering. Here's a quote from William Poole in 2000 (he's the President of the Federal Reserve Bank of St. Louis):
Economic historians tell us that the world entered a new "capitalist" era in about 1820. Before then, for centuries, real output per worker had increased very little. Since then, there has been a fairly steady increase in the amount of physical capital per labor hour, and worldwide output (GDP) per person employed has increased more than eight fold.

I think that's actually a very conservative number, because it's assuming a compounding rate of only 1.12%, which is very low.

Regardless, though, output has increased dramatically. And it's going to continue to increase--new technology, new techniques. The entire world is going to begin a transformation from a manufacturing economy to more of a service based economy. It will become increasingly difficult for the economies of the world to create enough jobs to employ the people of the world.

So what exactly are all the people who are obsoleted going to do for a living?


That's right. They will be working in the new economy of virtual worlds to support themselves in the real world. It doesn't matter that they're creating goods and providing services in worlds that aren't "real"--if someone will pay you in currency that can then be converted into "real" currency, then it's as real as real can be. It will become just another segment of the service sector.

Think of it as a second, worldwide economy, with each game representing a country. And there will, on occasion, be financial fraud and scandals, with currency shorting that will crash virtual economies. Games will compete with each other with their exchange rages. Don't be surprised if the exchange rate of a virtual currency game is even "pegged" to the value of the currency in another game.

Why should the games be willing to do this? Money. Remember the fee the bank charges you when you use your ATM card to withdraw money? Exactly. There's going to be an ATM fee, multiplied by hundreds of thousands--even millions--of transactions.

New revenue stream.

Months ago, I wrote about the inevitability of online games creating auction houses for goods, because too many third party services were making too much money to ignore. This is just the next logical stop along the road.

Could Entropia be hit with massive fraud through some kind of exploit? Sure. Does it matter? No. Not a bit. What matters is that the door is opened and it will never be closed again.

Just watch who pours through.

Site Meter