By Samantha Goldflake and Guardian Market
The transcript of the 12/12/2007 meeting of the Second Life Exchange Commission (SLEC) is not very encouraging. It shows an organization struggling with its own identity, leadership, and purpose in the virtual world, all the while public voices are growing increasingly critical of the abilities of the SLEC, as well as the conflicts of interest which reside with its leadership. Two different schools of thought appear to be forming within the SLEC - one which looks at a system of punishment for companies and markets not compliant with the SLEC's regulation, the other which argues for rewarding the companies and markets which are compliant.
The first idea, that of punishment, is a natural one to strive for. It is, after all, how governmental regulatory bodies operate. If a company does not comply with their rules, they can fine, imprison, or seize assets as justified. However, in Second Life this is simply impractical. Although some systems have been constructed to incorporate this system of punishment into the mixture (such as ACE requiring that its companies who own land use BNT land, so that that asset may be seized if necessary), it simply does not carry the same weight that it does in First Life. The bottom line is that even if you do everything you can to an avatar: take their money, land, inventory, maybe even ban them from Second Life - it simply does not carry as much weight as any one of those actions would in First Life.
The second idea, that of a reward system, also has many examples in First Life. Some examples include Underwriters Laboratories (UL), The American Institute of Certified Public Accountants (AICPA), The American Academy of Actuaries and numerous others all over the world. Each of these organizations has a set of rules and standards by which membership may be granted. In exchange for abiding by these rules and keeping in good standing with the organization, a designation is awarded. For example, the AICPA awards the Certified Public Accountant (CPA) designation, which is widely recognized throughout the United States. The only form of "punishment" which the AICPA can offer is to take away the right to use that designation, and yet this is punishment enough to keep the entire organization membership in line because of how well-respected (and valuable) that designation is.
This idea, the idea of awarding a designation to those who (voluntarily) follow the set standards, is indeed practical within Second Life. What standards, how the designation is awarded, and what the designation looks like is the concern of the marketing department of the organization awarding it. The World Wide Web Consortium (W3), for example, gives links or icons to be placed on well-constructed websites which then link back to the W3 explaining what the designation means and why the website is using it. When visiting a site displaying one of those icons, then, the user knows that the designer has taken the time to make their site compliant with the W3's standards (and this usually indicates a careful and advanced web programmer as well). A similar system could be put in place for the SLEC or other investor protection entity.
The concept of a regulatory body in Second Life is impractical. However, the concept of an organization which publishes well-founded standards, evaluates applications, and awards designation(s) to those who adhere to the standards published is entirely practical within Second Life. Such an organization could earn the trust and respect of investors, as well as gain publicity through publishing said designations. This method of honoring those who abide by their standards, rather than criticizing those who do not adhere to them, could (in time) grow to be an effective method of market regulation, support, and education.
So far so good, but one should always look at the whole picture. The aforementioned theoretical organization should be formed by people with a relevant First Life background, not by self-certified or wannabe public accountants. Also it should be unbiased and not partial. Is this an obvious statement? It sure is, however it's a good thing to recall this concept, as it's a good thing to recall that actual, apparent and even perceived (by the general public) conflicts of interests should be avoided at all costs.
An award is as good as the reputation of the awarding organization. Of course everybody has to start somewhere and public trust isn't earned overnight, so at the beginning the life of an organization dealing with accounting and business standards could be hard. However, by following some guidelines problems should be greatly reduced. The organization:
- must be formed by people with relevant First Life backgrounds and enough SL experience (there are differences between the two)
- must be unbiased and not partial to any SL financial institution
- must keep at any time open communication channels with SL financial institution and the general public
- must pursue at any time consistent, coherent and continued communication about its mission, acts, targets and such
- must strive to earn and keep SL financial institutions and the general public trust
- and, its members must avoid any actual, apparent or perceived conflicts of interests.
That given, then everything is possible. After all, it's a matter of business ethics. An ethical organization will be able to win the hearts of both SL financial institutions and the general public.
The idea of an organization publishing standards and assigning designations to those who adhere to those standards is admirable and achievable. There is a big problem, however: that organization must really be unbiased and independent. It must also earn public trust. In the SL financial world we see pretty much the same faces everywhere. If not those faces, we see their friends. Are there people we can trust to form an unbiased and independent organization? Time will tell if the SLEC will be that organization, or if another must be formed to accomplish that end.
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