The document discusses a virtual finance panel held in Second Life. Representatives from the real-world Saxo Bank and various virtual financial institutions discuss topics like what Saxo Bank hopes to gain from its Second Life presence, the current state and challenges of virtual currencies and markets, and how virtual stock exchanges operate and regulate listed companies.

1. VIRTUAL FINANCE
NOVEMBER 12, 2007
ONDER SKALL: Hello, everyone, and welcome to another session of Metanomics, part of
the Metaversed series of events that we hold in conjunction with Cornell University’s
Johnson School.
With us today is a full panel of guests from both real-world and in-world financial institutions.
Both David Karsbol and Jillian Falconi come from Saxo Bank, and they are joined by in-
world financial entrepreneurs Arbitrage Wise, Gigs Taggart and IntLibber Brautigan. They’ll
be introduced and interviewed by Professor Robert Bloomfield of the Johnson School at
Cornell.
The main sponsor of Metaversed Island is the Otherland Group--Making Sense of Virtual
Business. I’d also like to take a brief moment to thank sponsors of the Metanomics series
and all the Metaversed events. They are Saxo Bank, Generali Group, SAP, Kelly Services,
Cisco Systems, and Sun Microsystems. And of course none of this would be possible
without the good people at SLCN, who are absolutely the ones to talk to when it comes to
working with video and virtual worlds. Avatars across the grid at all event partner locations
can join this conversation by joining the Metanomics group, and also remember to join the
Metaversed group for all future Metaversed business events.
Financial institutions have been around for generations, but how we will translate what they
do into the virtual economy remains to be determined. I’d like to introduce you to Robert
Bloomfield, who will be attempting to find an answer to that question with his panel of

2. guests.
ROBERT BLOOMFIELD: Hey, Onder, thank you very much. This is Rob Bloomfield/Beyers
Sellers, starting up another Metanomics event. Before we get into it, let me just remind you,
first of all, to join the Metanomics group and open up the Metanomics chat channel so that
you can say hello. We all know, since we’re spread across a number of sims, that you can
communicate with one another and also communicate with the speakers, who can see your
questions and comments in backchat. We love backchat because it lets us know that you’re
all out there, and how you’re responding to what we’re saying.
We’ve got a large group here because we’re really going to be covering three different, but
related, topics. First we’re going to be talking about what a real-life bank would be doing in
Second Life, and that’s Saxo Bank. We’ll also be talking about the virtual banks and stock
exchanges. So we have people representing those. And there’s been so much commentary
and reaction to Ginsu Linden’s/Gene Yoon’s, comments on last week’s Metanomics show
that I think a number of our guests are going to want to respond to his perspective.
I’d like to start by introducing and welcoming Jillian Falconi from Saxo Bank. Hello, Jillian.
JILLIAN FALCONI: Hi, Robert. How are you? Hi, all.
ROBERT BLOOMFIELD: Hi, nice to talk with you. Now, Saxo is an investment bank, a
trading bank, that caters to a large number of individual investors, and you have an island, a
presence, in Second Life. You’ve chosen to sponsor Metaversed and Metanomics, for which

3. I am grateful. Can you tell us a little bit about what it is that you guys see in Second Life and
why you’re here?
JILLIAN FALCONI: I would say there are different reasons why we are in Second Life. First
of all, we want to understand the future of virtual worlds. No matter what, this is a mode of
communication that is sort of creating a path to what the future of the Internet is, and we
want to see how we can use it as a tool to communicate with our future customers in the
coming years. Second Life is also a way for us to uncover a little bit the potential of virtual
currencies, where they’re heading to and understanding its potential as a financial product.
ROBERT BLOOMFIELD: So what would you say the key lessons are so far that you’ve
taken away?
JILLIAN FALCONI: I would say the main one so far is that real-life clients have a lot of fun
too. It’s very interesting to have your real-life clients coming to in Second Life and talking to
you in a more relaxed atmosphere. You can see that people open up. You can say it’s our
path towards user-driven innovation because we can really see that people feel comfortable
to come with their opinions and give ideas--not only what happens in virtual markets, but
what’s happening in real markets--and how they would like to see our product.
ROBERT BLOOMFIELD: Okay, so you’re using this partly as, basically, a teleconferencing
device to meet with people in a new way and exchange opinions with them? Is that safe to
say?

4. JILLIAN FALCONI: Yeah, you can say that is one of the purposes. But, in the same way,
we’re also actively using it for education at the moment, where we have partners that
basically stream educational material. Let’s say, for example, a 4-X(?) scores explaining the
basics of foreign exchange, and then taking this further to their clients so that they can be
educated in a place that is not the typical classroom.
ROBERT BLOOMFIELD: So let me ask, when you talk about streaming content, that’s
something that potentially you could do on the web. So you still see advantages of the
immersive virtual environment over simply streaming web content, webcasts and so on?
JILLIAN FALCONI: I would say today it is relatively challenging. The public that you invite
has to be open for it. But one thing that I’ve seen in those that I’ve participated in so far is
that people feel more comfortable because they are in a fun environment, in comparison to
the classroom, or in comparison to just having a computer screen in front of them. So
they’re more open to listen to you and to spend time listening about your product.
ROBERT BLOOMFIELD: I understand you spent a little time researching whether you
might actually provide securities to be traded in Second Life based on virtual world data.
Where does that project stand?
JILLIAN FALCONI: The project is still running. I would say, no matter what, it’s very
challenging to speak about offering, let’s say for example, Linden crosses against real-life
crosses at the moment. That is just purely an issue of demand.

5. ROBERT BLOOMFIELD: If in could just interrupt, when you talk about “crosses,” what do
you mean?
JILLIAN FALCONI: Say, for example, if somebody is interested in trading currencies, but in
this case we’re speaking about trading the Linden dollar against the Euro or the Linden
dollar against the US dollar. Would you call that speculation--as an example?
ROBERT BLOOMFIELD: Mm-hmm.
JILLIAN FALCONI: In these cases of imoders(?) it’s a matter of demand; it’s a matter of
regulation. Mixing these two worlds together, I would say, legally, the world is not there yet.
ROBERT BLOOMFIELD: And is this something that you’ve had to have your legal team
look into, and they’re just not ready to sign off yet?
JILLIAN FALCONI: Yeah, we can say that. In our case, we’ve had several, for example,
product managers; we’ve had legal associates. We have several departments so far looking
into what the possibilities are when it comes to offering these kinds of virtual products. But
it’s clearly a matter of demand, and if you compare the volume for real-life currencies in
comparison to virtual currencies, I would say the market has to grow.
ROBERT BLOOMFIELD: So have you done some research on the size of the market that
you think you might have now, and how large it would need to be before you would be
willing to take the plunge?

6. JILLIAN FALCONI: To a certain extent, but I would say we’re still on our path when it
comes to that. We focused first and foremost on Second Life as a mode of communication,
because you could say that that is the most stable aspect of Second Life at the moment.
When it comes to economy, when it comes to the security, we’re taking it one step at a time
because, for us, it’s extremely important to put the safety of our traders first.
ROBERT BLOOMFIELD: Right. And that actually is a wonderful segue on to our next topic,
which is the safety of traders and their experiences, their exposures to risk. In the existing
Second Life markets, of which there are a number, we have with us today representatives of
two markets. We’ve got Arbitrage Wise, who is the CEO of the SL Capital Exchange,
SLCapEx, and we’ve also got IntLibber Brautigan, who is the head of the Ancapistan Capital
Exchange, a new exchange. He is also the head of the SLEC, the Second Life Exchange
Commission, which thinks about transparency issues.
Arbitrage, if I could I’d like to start with you. You took AVIX over from Investor Allen--who
owned that as recently as, I guess, late summer--and changed the name to SLCapEx, and
you’ve been running that for a while. My first question is something that’s on your website,
Arbitrage. It’s a statement on the information page; it’s the first thing anyone sees on that
page. Let me read this to the audience:
“The SL Capital Exchange is a fictitious stock market simulation operating solely as
an element to an on-line game. It is not a real-world securities entity, and does not
offer any opportunities for real-world profits or investment. Please be forewarned, we

7. make no representation of any kind regarding the accuracy, fitness or purpose, or
use of the software constituting the Exchange whatsoever. Please play accordingly.
The unit of measure commonly called “Lindens” is not legal tender, in our view. Any
conversion of Lindens into any other unit of measure, including US dollars, is solely
the responsibility of the individual making such conversion.”
And then finally:
“Further, play at your own risk. The companies within the game may be fictitious.
Any profits, earnings, or other claims, or representation of monetary value made by
any individual within the game is solely their own legal responsibility.”
So Arbitrage, can you just give us your own interpretation of what we should make of this
statement, and how investors should “behave accordingly.”
ARBITRAGE WISE: Right now the market’s pretty--in comparison to the real world, we
don’t want people to assume they could jump into this Second Life market and treat it like
it’s the real world and assume that they can make profit from the same assumptions.
There are lot of different factors involved, and because the economy’s unregulated we want
people to keep that in mind when they’re entering the _____ and, in particular, in the stock
exchange. So this is more of a disclaimer that we want traders and investors to know, and to
be forewarned about it.

8. ROBERT BLOOMFIELD: So is this the result of working with lawyers to come up with this
very strong disclaimer?
ARBITRAGE WISE: Yeah, we actually had Bogart Beck, our currency--he actually looked
into this, and he actually recommended--based on some of his associates that we have this
disclaimer out there.
ROBERT BLOOMFIELD: So is it your view that traders really are viewing this as a game?
ARBITRAGE WISE: I wouldn’t consider it just a game. I would consider this more as an
educational process into how the trading environment works. Because of the simplicity of
the trading environment of Second Life it can be used as an educational course, and it gives
you some basic understanding on how to trade before you convert to real life. So while there
can be profit made in Second Life trading, we want to kind of convey the message that yes,
this is the first step into trading, and it offers you the simplicity of trading while understanding
the fundamentals of it so that, if you want to, you can go into the real world. And this is the
first step for novice or, I guess, beginning traders.
ROBERT BLOOMFIELD: On the other side of this, you have firms that are issuing stock,
and that money is actually then going to the CEO. And they are supposed to be--they
typically promise in the prospectus that they’re going to invest that and then return profits to
the investors. First, what’s your impression of why the listing firms are actually listing? Is it
something that they’re doing primarily for entertainment? Are they truly raising capital? Are
they engaged in some type of long-term scam, taking advantage of the lack of regulation?

9. And what are your responsibilities as the head of the exchange to figure out their intentions?
ARBITRAGE WISE: We think their intention is to raise capital to conduct business in
Second Life. We do our due diligence when we have any companies that want to list on our
comp--[AUDIO GAP]. We actually go through the process of obtaining some real-life
verification, so we do treat these companies as an attempt to raise capital, to be a profitable
business. And we try and monitor them and try to be selective on who we have on our
exchange so we can ensure that these companies are trying to make a profit and doing
what’s best for their investors.
ROBERT BLOOMFIELD: So when they come to you and propose listing, you assess their
business plan, what they intend to do with the money?
ARBITRAGE WISE: Yes, we actually do, and we actually meet with the companies and see
what their business plans are. We actually interview them to make sure that they have a
legitimate business plan, and we try to uncover any possible loopholes that they could be
using to scam. We try to see what their business model is and what their value proposition
is and what they’re bringing to Second Life. Then we try to ascertain that. [AUDIO GAP]
ROBERT BLOOMFIELD: And as time goes by, do you keep up with them on a regular
basis and monitor whether they’re sticking to their original business proposal?
ARBITRAGE WISE: Yes, we actually do. We have some investor liaisons and investor
relationship, as well as we have a person who makes sure these companies are in

10. compliance with everything from financial reporting to keeping our investors updated
weekly. So we do monitor these companies closely, and make sure that they don’t deviate
from what their original proposal was when they came to us to be listed.
ROBERT BLOOMFIELD: Now, I assume this has got to be a lot of work for you running this
exchange. Can you give us a sense of just what’s involved on your part to make this
happen?
ARBITRAGE WISE: It is a lot of work. We have to make sure--each month we do--instead
of the real world where companies do quarterly financials, we actually do monthly financials.
And then, on top of those monthly financials, we try to get the CEOs to post a weekly
update, if nothing else, just to tell the investors they’re out there, they’re working, and they’re
concerned about their investors and when they want to keep the investors in the loop. So
there are a lot of things we have to do to manage the companies so that they, in turn, can
manage their business for their investors.
ROBERT BLOOMFIELD: I assume you are retaining your day job? Or are you making
enough money from running this exchange that this can be a full-time position for you?
ARBITRAGE WISE: I’ve actually been doing this full-time since February. The exchange
isn’t our main business; it’s the bank, which is what we’re trying to build up.
ROBERT BLOOMFIELD: So the exchange, do you view that more as like promotion? Do
you have a profit model for the exchange? And how are you making money?

11. ARBITRAGE WISE: The exchange is making money, but it is one of the front-end
businesses for our bank. Our bank is the primary platform that we’re trying to set for all the
businesses in Second Life. That’s the primary business that I’m actually trying to grow. It’s
not the exchange. The exchange is just, I guess, a percentage of the overall business.
ROBERT BLOOMFIELD: So when I think of a typical banking model, like any other
business they’re buying stuff and turning it into something else. And usually what banks do
is buy small amounts of money from a large number of people, and then they package it up
into the form of loans that they pass out to other businesses to get interest. Is that pretty
much your banking model as well?
ARBITRAGE WISE: It actually isn’t, because we don’t do any loans. The model we’re trying
to establish is to be the platform for transactions inside Second Life. And we want to link
companies that are outside of Second Life into Second Life. The best comparison I can
make is that we want to be what PayPal was to eBay sellers. Let’s assume that some real-
life businesses and home-based businesses out there want to sell virtual products. They
need a way to do currency conversion. We would be the intermediary between the buyers
and the sellers, the buyers being the people in Second Life, and the sellers being the
businesses out there that do not have a presence in Second Life yet.
ROBERT BLOOMFIELD: In a way, although I can see why you call it a bank, it’s really a
rather different type of financial service.

12. IntLibber, welcome to Metanomics.
INTLIBBER BRAUTIGAN: Hi, thanks for having me.
ROBERT BLOOMFIELD: Now, you have a new exchange which is just starting up and, like
other exchanges, I believe it is also associated with a brokerage bank. Really, two questions
which are very closely related. One is why did you feel that there was a need to have yet
another exchange in Second Life? And then also do you have reactions--could you do sort
of a compare and contrast between your business model and the one Arbitrage just
described?
INTLIBBER BRAUTIGAN: First off, while Brautigan and Tuck Holdings, the parent
company, owns B&T Financial, our banking operation is completely separate from the stock
exchange. We believe in keeping the stock exchange separate from the bank, and no
commingling of operations. We feel that that’s important not only to our interests, but also to
the interests of the investors. B&T Financial has been around. Right now it’s the oldest bank
in existence in SL. It originally started in May of 2006 as MetaBank.
We just got the exchange going this past month. While B&T originally IPOed on the world
stock exchange back in April, we raised 13.5 million Lindens that helped us expand our
estate operations from 12 sims to 40 sims at the present time. We found that the other
exchanges really were not meeting our standards. Everybody has their own standards, and
that’s fine. We have our own feeling about how we want to invest and where we want to
invest, and we think the investing public is looking for an exchange that is much more

13. stringent about protecting the assets of the investors.
One of the things we do, for example, that’s different from any of the others is that there’s
been a complaint about a lot of IPOs elsewhere. That they’re essentially buy-me-a-sim
plans. So what we’re doing is, any business that wants to IPO that includes the price of a
sim in their business plan they have to buy that sim through our estate. So the sim is in our
estate; they have the [land?] and can do their operations there. But if they go out of
business, or poof, we’re able to repossess that sim and liquidate that asset to benefit the
stockholders.
ROBERT BLOOMFIELD: So basically a form of collateral.
INTLIBBER BRAUTIGAN: Essentially, yeah. The stock exchange is essentially acting as
the underwriter. So we have some degree of responsibility for who we allow to IPO. If
someone gets through who either frauds and poofs, or their business plan doesn’t cut it and
they go out of business, then the people of SL are seeing way too much bad business plans
and fraud and so forth. They want to see an exchange and they want to see banks that are
taking a more responsible role in how things are being run. We feel that by operating in that
manner that we’re going to attract a lot more interest.
Similar to that, for example, I founded the SLEC in February following the first closing of the
World Stock Exchange. However, I’m not the head of that. Traderjohn Sosa is the head of
that. I turned over control because I felt there was essentially an ethical conflict for me to
head a listed company and be the head of the SL Exchange Commission, and also at that

14. time I was on the board of directors of, first, the World Stock Exchange then, once we re-
listed on AVIX, I was on the board of AVIX. So limiting conflicts of interest, I felt, was very
important to building investor confidence in the mission of the SLEC.
So Traderjohn Susa’s been running the SLEC, and they’ve been marking progress. Once he
took over I stepped down, and then was elected to the board of directors by the members.
I’m now stepping down from that now that we just had a new election. As chair of ACE I’ll be
taking a seat as s representative of ACE on the SLEC. But I’m not leading the group. I’m
just one member of the board, and we’re giving a lot more voice to the investors to have,
now, four seats on the board. So there’s a lot of community involvement that’s growing, and
we’re looking to build that as well.
ROBERT BLOOMFIELD: So what do you see as their greatest achievement--SLEC’s
greatest achievement--to date? And what do you think needs to be at the top of their list to
do?
INTLIBBER BRAUTIGAN: Well, from the founding to now they’ve basically been working on
creating standards that are SL-centric. Rather than just taking real world standards and then
copying them over without really trying to respect the very different economy of SL versus
the real world, we felt that it was important to create standards that reflected the unique
economic characteristics of the SL economy. So that’s what they’ve been working through,
and they haven’t really wanted to become a crisis-of-the-moment type reactionary group.
It’s been more a deliberative group to create standards, kind of like the Underwriters
Laboratories or Consumer Reports in real life, where you first work on creating the

15. standards, and then start testing products or companies against those standards.
That’s been the orientation of the group so far. However, this week we’re going to be
holding a hearing regarding the takeover attempt of World Stock Exchange against Midas
Bank by World Stock Exchange defaulting on its bond. So that’s going to be an issue that’s
coming up that’s relevant to current events that needs to be dealt with. The meeting tonight
at 6:00 should be dealing with that.
ROBERT BLOOMFIELD: I can understand a non-governmental organization like SLEC;
much like, as you said, Consumer Reports or Underwriters Laboratory. It makes perfect
sense to me that they would come up with a list of things that they would like to see firms,
banks--and exchanges, too--and say as long as you do these things you’ll be a member in
good standing and we’ll tell people that, and that’ll improve your credibility with investors.
But when it comes to--as I understand the details of this transaction, World Stock Exchange
borrowed a large amount of money from Midas and is now not paying it back. This is sort of
an after-the-fact issue. Without true governmental powers, what could SLEC possibly do
about that?
INTLIBBER BRAUTIGAN: Once we find out the facts of what’s gone on and we can
essentially deliver essentially an opinion about what we feel should happen, then it’s going
to be up to the people involved. We can say, “Luke, you need to pay your dividend or turn
over control of the exchange.” If he refuses to pay the dividend we’re going to be
recommending that either Linden Labs turn over control of the groups, as well as support
any effort by Midas Bank to engage in a foreclosure action in Australia against Luke

16. Connell's servers and so forth--whatever he’s got going on down there.
ROBERT BLOOMFIELD: So what I’m hearing is that step one would be to go to Linden
Labs and say, “We’re a large group of residents who have thought about this carefully, and
we believe you should be taking action,” and step two sounds like a legal process.
INTLIBBER BRAUTIGAN: Yes.
ROBERT BLOOMFIELD: You know, I don’t to prejudge the SLEC’s conclusion, or ask you
to do that, but let’s just assume hypothetically that SLEC recommends taking those steps.
What do you think the chances are that Linden Labs is going to take action?
INTLIBBER BRAUTIGAN: I have heard just the other day that Linden Labs is actually
taking action on another banking issue. National Investment Bank poofed with a good
amount of depositors’ money, and I’ve been hearing that Linden Labs is actually refunding
the depositors. Now, I’m not sure why they decided to do that. And if they’re actually doing
this, this is a rather welcome change in Linden Labs’ attitude toward inter-residential
economic transactions.
ROBERT BLOOMFIELD: Well, a welcome we--I think, could debate. But it’s certainly a big
change, and that is one for the rumor mills. I know we have a number of bloggers and
journalists out there. I think this would be a great one for people to track down.
Okay, we’ve got two people. We’ve gotten a lot of facts out about the banks and the
exchanges and what’s going on. We’ve got two additional people on our panel who, I think,

17. are in excellent positions to just respond and give their reactions to how they see this, and
the first is a long-time blogger. So Gigs Taggart, welcome; good afternoon--or I guess for
those of you who live on SL time, good morning.
GIGS TAGGART: Hi, how are you doing?
ROBERT BLOOMFIELD: Hi, I’m doing well. Your background--you’ve been studying the
economy sort of as a hobby and sideline as you work very closely on the software side of
Second Life. I understand you've advised Linden Labs early on, on some of their economic
policies. You won the Linden Labs Hippo award for open-source contributions and bug-
hunting. You know, that sounds like a great thing to win--what fun!
Anyway, can you just tell us, from what you’ve heard, what’s your take?
GIGS TAGGART: I’m kind of thinking that no matter what anyone claims, Linden dollars are
fungible for US dollars. Putting a disclaimer up that says that it’s just a game and it’s not for
real, I don’t think anyone’s going to actually buy that. Judges are not stupid. If you were to,
say, create a stock exchange that operated based on gold, no court would say that gold isn’t
money so therefore you’re not subject to regulation. I think that’s a key issue there.
The other thing is that a lot of these SL-based stock exchanges, I’m not seeing that there is
an actual transfer of ownership. When you’re selling a stock you’re not just getting money to
make your business strong; you’re actually, in theory, selling part of your business, part of
the ownership. I think what IntLibber’s doing is good in terms of at least being able to

18. recover some of those assets, but I don’t really think that a lot of people making these IPOs
actually have the mindset that they’re selling part of the ownership in their company.
ROBERT BLOOMFIELD: So are you suggesting that they’re scamming, or are you
suggesting that they’re viewing it more as a loan? That they’re not actually giving up any
control, but they are promising to pay something back?
GIGS TAGGART: I think some of them do actually operate under the pretense, at least,
that they will try to make money and try to make payments. But I don’t think there’s that level
of ownership transfer and responsibility that you would normally see with something that you
would call stock.
INTLIBBER BRAUTIGAN: If I could interject here, B&T Holdings has been involved in a
number of mergers and acquisitions where there’s been a peaceful transfer of ownership of
companies and we’ve obtained controlling interest in the companies. We first started that
with Mind the Box when they were on the verge of going under. As a major stockholder we
stepped in and took over the company and their assets. Actually, the ACE stock exchange
is located in the sim Venture Square, which was the sim that we took control under that
merger agreement.
We’ve also taken over a private entity, My Second Bank, which is now B&T Financial. We
took over Global Credit, and we recently merged Countless Galaxies into B&T Holdings
after Jasper Tizzy abandoned SL. The major stockholder was given control of the company
on the Vistex Exchange and he held a shareholder meeting and they voted to merge CGI

19. and its remaining assets of over 220,000 square meters of mainland into Brautigan & Tuck
Holdings. And we completed that merger and, while there were a few kinks along the way,
we got it all done, so there’s been a rather mature and peaceful transfer of control of
companies in several instances.
And we’re not the only company that’s done this sort of thing. I think it’s a matter of the
players involved, whether they want to act in a mature manner or are just out to be
predatory. So it’s a matter of judging the--
ROBERT BLOOMFIELD: So would you say these peaceful transfers of control are still
more the exception than the rule?
INTLIBBER BRAUTIGAN: Just counting the number of takeovers that Brautigan & Tuck
itself has done is the majority of the takeovers I’ve seen in SL. Just from our own record,
you can say what we’ve done is the majority example.
GIGS TAGGART: You know, I think it’s good that IntLibber is doing that. I see that as the
majority of the behavior in the past seems to be the companies go to the stock exchanges
with the attitude that it’s kind of this fountain of money. I think it’s really good if there are
these transactions that are going well, and I’ll have to keep an eye out for that.
ROBERT BLOOMFIELD: David Karsbol from Saxo Bank. You are a market strategist;
you’re closely involved--

20. DAVID KARSBOL: Did I lose you there?
ROBERT BLOOMFIELD: --in financial markets. You do this type of thing for your day job,
so I would be fascinated to hear your reactions to what’s going on in what arguably are play
markets.
DAVID KARSBOL: Yes, I have to say that as an economist I’m quite thrilled to see this. I
think it’s very interesting. First of all, I like exchanges, of course. That’s what I do for my day
job. Secondly, I pretty much ascribe to the Austrian economic school of thought that was
founded by Ludwig von Mises a long time back. He was once asked how he would define
socialism. Actually, he declined to define socialism. He just said, “If there’s a stock
exchange, it’s not socialism.” So I guess regarding Second Life, it’s pretty weird, but at least
it’s not socialism. That’s also a thrill to me.
Second, I would like to say that the major issue regarding exchanges, of course--because
exchanges, they’re about transfers of ownership that’s valuable. It’s not only a T-shirt we’re
talking about here. It’s actually real money regardless of the fact that it’s actually going on in
a virtual world. This is all about trust, and I think that’s the real issue. The institutions that
are involved in transactions here need to build trust. And you can only build trust if you have
something to lose, and you can only lose something if someone is actually able to protect
your property rights. I think that legal framework is sort of lacking.
The fact that IntLibber is, for example, saying that they are now taking contact to Linden
Labs in order for them to intervene, that’s a bit sad to me because I clearly see that, okay,
someone has actually been doing some not so good stuff. I don’t know about the particular

21. issues, but this might create a precedence of Linden Labs to actually go in and intervene in
these kinds of thing. I think that’s actually sad because you guys might instead use
competing institutions that are providing adjustment here that you could stick to and,
perhaps, someone to actually enforce your property rights.
ROBERT BLOOMFIELD: That’s a good point, and I actually think I agree with that one. If I
can take a moment to state my own opinion on that issue, Linden Lab is going to do what
Linden Lab does. But one of the things that I think has been so great studying the financial
markets in Second Life is that there are no real regulations, it appears.
I think when someone takes something to the lawyers we’ll find out exactly what regulations
apply, but I’m hoping that the regulators and Linden Lab will allow these markets to do what
they will. Because right now we have so many regulations in financial markets, and it’s very
difficult to tell which ones are actually effective and which ones are unnecessary frictions
and burdens on people in the markets.
So to see what, potentially, a market could do in the absence of regulation--maybe the
SLEC model actually can work and we can have successful, lightly-regulated financial
markets and banks. We have not yet, I would say, seen that in Second Life because the rate
of fraud is higher than I think we need in markets. But who knows where they’ll be with a
bunch of people working full time on this over the next year?
We’ve got a number of questions. David, did you have more you wanted to say?

22. DAVID KARSBOL: I just want to make the point that in Somalia, for example--perhaps not a
role-model country--they actually have no government, but they do have a banking system
that functions totally unregulated, and it actually works quite well. It can pretty much be
compared to the surrounding countries like Kenya and Tanzania. Due to some of the
analysis I’ve seen, it actually works better in those countries with a government. The same
goes, actually, for the Somalian telecommunication sector. It’s also provided totally by
private companies, and it’s being totally unregulated and it actually happens. And they
provide better service than what goes on in Kenya and Tanzania.
ROBERT BLOOMFIELD: That’s very interesting. Many people do make the comparison of
Second Life to a developing country. You know, there are some items there that are valid,
some maybe not so valid, but those are interesting examples that I will definitely take a look
at.
So we’ve had a bunch of questions coming in, and I’d like the sort through these and get
reactions to people. First, we have a question from Xantha(?) Oe, if I’m pronouncing that
correctly. Last name O-E. This is a question directed at IntLibber, but perhaps, David, you
would have the view of you on this as well.
The question is, “Have you considered the securities laws? Is it illegal to sell unregistered
securities and to run an unauthorized stock exchange?”
Now IntLibber, you’re based in the US so, for you, that would be US law. I know European
laws are different, and maybe David has a different perspective on that. But IntLibber, can

23. you take that first?
INTLIBBER BRAUTIGAN: We have checked on that and, actually, under SEC regulations,
they have different tiers of essentially capitalization in which different markets can operate.
For example, people are used to looking at the New York Stock Exchange and NASDAQ
and so forth. Companies on those exchanges have a certain degree of capitalization and
most of them have started at more of a startup or microcap level. All the exchanges in SL, in
terms of the amount of money that’s raised in their IPOs, fall distinctly within a class under
the SEC regulations called microcap exchanges. And microcap exchanges are unregulated
and unlicensed.
ROBERT BLOOMFIELD: These are exempt securities, I think they’re called.
INTLIBBER BRAUTIGAN: We have looked into the legalities of this, and we did that quite a
while ago, so we’re not really concerned about that. The thing is, most retail level investors
don’t really have experience with microcap exchanges or microcap stocks. They’re used to
looking at Blue Chips and stocks that are on NASDAQ, the New York Stock Exchange, and
the other major exchanges around the world. And they’re used to that level of regulation and
the way things are operated there. They’re not quite used to looking at how things work at
the microcap level. To tell you the truth, real-life microcap exchanges tend to be a lot like
how they are in SL.
ROBERT BLOOMFIELD: Pink Sheets would be the most famous.

24. INTLIBBER BRAUTIGAN: Yeah. People are comparing apples and oranges when they’re
looking at the distinction between the New York Stock Exchange and SL stock exchange,
like ACE or CapEx or World Stock Exchange.
ROBERT BLOOMFIELD: So actually, people who are interested in following up on this
more I would suggest taking a look at the web site pinksheets.com, which is a platform on
which you can find securities, many of which are exempt from filing any SEC documents,
getting audited, and so on.
There is still a key difference, however, between the pink sheets and what’s going on in SL,
which is that those are actually corporations, typically. So the issues of control that Gigs was
getting at before are still, I think, more secure, more strong and clear in Pink Sheets, in the
exempt SEC securities.
INTLIBBER BRAUTIGAN: Oh, certainly. Some companies that are listed on SL exchanges
are, in fact, incorporated in real life. Brautigan & Tuck is incorporated, where M2B LLC,
which is a Delaware corporation--I believe that Arbitrage’s parent company is incorporated.
ROBERT BLOOMFIELD: Arbitrage, is that right?
ARBITRAGE WISE: We’re an LLC, but it’s not associated with the exchange directly.
ROBERT BLOOMFIELD: Okay, that’s the bank, then, is an LLC?

25. ARBITRAGE WISE: Well, the LLC is more of a real-life, overall corporation that [AUDIO
GAP] in Second Life, but it’s not dedicated specifically for Second Life only.
ROBERT BLOOMFIELD: Sorry to interrupt, IntLibber; I just wanted to get that fact out.
INTLIBBER BRAUTIGAN: No, no. And also, Lindsay Druert(?), her bank is also
incorporated, I believe, in Georgia. She’s in that area, so she’s been operating as a
corporation. She did that before we did. Essentially, when we took over the bank they had
the corporation, and in the takeover I basically took over 100 percent of the stock of the
LLC.
ROBERT BLOOMFIELD: Okay, that’s a real-life stock of the real-life LLC.
We only have a few minutes left, and what I would like to do at this point is get people’s
reactions to some of Ginsu Linden’s comments last week on the Metanomics show. One in
particular has caused a lot of discussion. That is that Ginsu does not see Lindens as money.
He does not see the activity in Second Life, really, as an economy, and therefore he doesn’t
view Linden Labs’ role as one of trying to manage the economy in a von Mises sort of
macroeconomic sense.
Instead he views Second Life as a product that has features, and Lindens are a feature that
may look a little bit like money, but really it isn’t, and the aspects of Second Life that look
economies--economic issues--are actually just, in many cases, features of the product
they’re selling. So that’s been a fairly controversial perspective, and I’m wondering if any of

26. you would like to add your perspective on that. Gigs, do you have comments on that?
GIGS TAGGART: Yeah, I can take that first. I think that it’s concerning when I hear Ginsu
say that he thinks it’s just a product and that he called residents “consumers.” And I think
that product/consumer paradigm is not necessarily the best way to look at things. Linden
Labs ultimately is providing a platform. Almost everyone here has some sort of investments
here. Not always monetary, but people have a time investment and an emotional
investment. And people build things here; this isn’t something that we just consume like a
retail product. I think it’s concerning when he uses a word like “product” to describe Second
Life.
ROBERT BLOOMFIELD: There were other people. IntLibber?
DAVID KARSBOL: I would like to comment on that as well.
ROBERT BLOOMFIELD: David, let’s hear from you first.
DAVID KARSBOL: I also listened to you guys last week, and I think Ginsu’s comments
made me sad. Actually, I cried just a few minutes, because his comments were kind of
destroying the trust in Second Life. I think if you guys are trying to create a society with a
medium of exchange there must be trust in that medium of exchange.
And Ginsu’s comments were not really trustworthy. This is not something that wants me to
put a lot of money in Linden dollars, right? Because he’s saying basically that Second Life is
just some kind of product offering. That might be true in some sense, but if you guys are

27. trying to take it to the limit it should be about trust all the time. At the same time, there has
recently arisen a lot of issues about the pace at which Linden Labs is issuing money, and
that pace is quite high.
ROBERT BLOOMFIELD: You’re taking the Austrian view, that you’re concerned Lindens
aren’t backed by something of value.
DAVID KARSBOL: Yes, exactly. I’m actually referring to an article that appears on
mesis.org(?) about this very issues, and I think that’s very, very true. They have a budget
deficit and they are basically monetizing that, so they’re just printing money to cover it. I’m
sorry to say that’s how Western governments were destroying their economies in the 1970s.
They just miss the taxes in Second Life, then it’s a very close resemblance to what
happened in the 1970s.
I think this is very wrong. I think they should have a very trustworthy currency in order to
take this to the limits. If they really want to make it, they cannot have that kind of attitude.
ROBERT BLOOMFIELD: IntLibber, you always wanted to weigh in.
INTLIBBER BRAUTIGAN: I agree 100 percent with David. I’d also like to say that contrary
to past statements by folks like Luke Connell, and Ginsu’s statement--and sorry, Arb, but
your statements earlier in the program, I don’t see it as a game. I don’t see the Linden dollar
as a fiction or a license. The Linden dollar is 100 percent as fake as the US dollar is, and no
less real. I find these kinds of statements as really disingenuous evasions, and I’m not sure

28. why these people are doing this--what kind of people they’re relying on for their legal advice.
But let’s face it, folks; Second Life is the path to the next phase of the Internet. And all these
evasions sound to me like people who are tying to avoid something.
Nobody’s come to my door to try to tell me that I’ve got to treat it as a game. I’ve been
working in SL 12, 16 hours a day, seven days a week for the last year building Brautigan &
Tuck Holdings, and this is my real-life job and this is my real-life living and these are real
dollars I’m pulling out of here. I have a staff that also makes a decent amount of money in
their work in SL. Nobody’s making a full paycheck for doing a similar type of work in real life,
but we’ve been growing there. My plan all along has been to be an agent in growing the SL
economy to the point where a ton of people around the world can make their real living in
the SL economy.
Looking at the number of avatars who are earning positive monthly Linden flow has been
growing and growing. We had a bit of a setback in that in August when things went to heck
with the banking crisis, but since August the number of avatars with positive monthly Linden
flow is up 20 percent, and it’s continuing to grow. That percentage is not just dealing with
the people who are making 10 bucks a month, US, but the people who are making more
than $5,000 a month has gone up by 20 percent as well.
So to say this is just a game or a service, that you’re a consumer, I find that to be really--
when someone says that sort of thing, they’re not just destroying public trust in the platform,
but they’re making themselves look like fools. And if they’re representing a major company
like Linden Lab, they’re making the company look foolish. I think that’s a disservice to
Linden Lab itself, to all the residents of SL, as well as to the investors in Linden Lab who

29. have put a good amount of money into making SL what it is.
ROBERT BLOOMFIELD: Well, strong statements from several of our panelists. We are
almost out of time, but if anyone else on the panel wants to chime in, then, who knows,
maybe we’ll get Ginsu back again for another talk.
Well, we are just about out of time so I would like to thank all of our panelists for coming
today. That’s Saxo Bank--we had Jillian Falconi and David Karsbol; IntLibber Brautigan from
Ancapistan Capital Exchange, ACE; Arbitrage Wise from SL Capital Exchange; and Gigs
Taggart, the blogger.
I guess I would like to just very briefly say a few things about Ginsu’s comments and the
responses, which is that there are a couple words that are often used to distinguish between
Second Life’s real economy and its not-quite-so-real economy. One of them is “game,” and
the other is “play.” As an economist, the word “game” actually doesn’t mean “unreal,” to me.
A game is just something that we can describe. It’s a way that we capture economic
situations, and it’s important for people to understand that lots of interactions have
economies and can be modeled as games, even though we don’t think of them usually that
way. People have looked at the economic forces behind decisions to marry and have
children. People have used economic models and games to describe how fish and frogs
behave. And even though it would be stretching the definition of economics to say they
really have an economy, it turns out that tools of economics and game theory do a great job
of describing what’s going on.

30. “Play” is, I think, a difficult word to use because this notion of the magic circle, that we can
draw a circle around something and then say that’s just play is a very fuzzy, fuzzy concept.
I’d also like to introduce another word to this discussion, which is “toy.” I think in many ways
we can view aspects of the Second Life economy as a toy economy. What’s the difference
between a toy and the real thing? Well, in many cases it will perform a similar type of
function. It just doesn’t cost as much, doesn’t do as effective a job, and can’t cause as much
damage. So if you think about a toy car or a toy truck, it can actually move something
across the room, okay? But we don’t worry about emission regulations and safety
regulations and licensing because, again, it simply can’t do as much damage.
So I find, in many ways, it’s most useful to think of the economics--I guess I still want to
think of the economics of Second Life just like I would think about modeling the economics
of fish and frog populations and how they interact. But again, I would view them, at this point
anyway, as toy economies; things that we can experiment with.
Well, I’m afraid we have gone a little over our time but, again, thank you to all of our
panelists, thank you to our sponsors, and particularly Saxo Bank. Jillian, David, I’m
delighted you were able to come on the show tonight. Thank you to SLCN-TV, which makes
it possible to syndicate this program and show it on many different islands. I look forward to
having more conversations like this, and seeing you next week. Good-bye all.
[END OF AUDIO]

31. Document: cor2010.doc
http://www.hiredhand.com
Second Life Avatar: Transcriptionist Writer