032808 Mitch Kapor Metanomics Transcript


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032808 Mitch Kapor Metanomics Transcript

  1. 1. ROBERT BLOOMFIELD INTERVIEWS MITCH KAPOR MARCH 28, 2008 ROBERT BLOOMFIELD: Welcome, everybody, to today’s special edition of Metanomics. Normally we air on Mondays at 11:00 A.M., but, with so many things happening at Linden Lab, I was looking for the soonest opportunity to talk with today’s guest, Mitch Kapor, chairman of the board of Linden Lab. I’d like to thank United Business Media’s Think Services Metaverse Group for letting Metanomics hold this event at the CMP Amphitheater. And, as always, thanks to our sponsors SAP, Cisco Systems, Generali Group, Saxo Bank, Kelly Services, Sun Microsystems. Special thanks to my own institution, Cornell’s Johnson Graduate School of Management, for supporting me in this effort and to SLCN for filming and distributing these discussions. We have some great sessions coming up, and I’d like to run through them just very quickly. This Monday, March 31st, we’ll have a panel to discuss accounting and tax issues for virtual businesses, with Rocky Maddaloni, director of the Maryland Association of CPAs, director of the Second Life Association of CPAs; Chili Carson, who has an accounting practice in Second Life; and Bryan Camp, a tax law profession from Texas Tech’s Law School and also a Metanomics guest from the fall. If you’re going to be filing taxes on your Second Life businesses, this is one you won’t want to miss. Monday, April 7th, we’re going to have experimental economists from several different
  2. 2. institutions talking about using Virtual Worlds for experimental research. On April 14th, Cory Ondrejka and Wagner James Au will join us to talk about the history and future of Linden Lab. The following week, April 21st, Mitch Wagner, of InformationWeek, and Steve Prentiss, analyst from Gartner Incorporated, will give their take on the state of Virtual Worlds and their future. And then, finally, April 28th, we’re going to have Karen Herzog, the director of Sophia’s Garden. She’s going to discuss a Virtual World platform that’s been set up for families with seriously ill children to communicate with one another, with friends and with their medical providers. The platform is based on Quaq, and Quaq’s CEO, Greg Nuyens, will be joining us. And we’re going to film the episode in Sophia’s Garden. This is going to be a really fascinating hour. Even those of you who are steeped in all things Metaversal, I think are going to be surprised at this wonderful and really quite touching application of Virtual Worlds that shows just how much they can affect the most important and most personal parts of our lives. Before I introduce our guest, I’d like to make a few other quick comments. First, you can find information about our show, Metanomics, at our website, metanomics.net, or follow us on
  3. 3. Facebook or Twitter. If you haven’t done so already, this is a great time to join the Metanomics Group in Second Life so that you can join in on the Metanomics backchat, which I see is already up and running quite actively. Second, I would like to point out these special demo interview chairs that Mitch and I are using today, provided by RDV Animations run by Valradica Vale and JenzZa Misfit. They’re also the creators of Rendezvous Software, which lets Second Life residents walk, fly and swim and do other very natural activities together. These chairs are just one element of a package they’re putting together for business events. I am glad to have a chance to try one out, and so I’ll give a big “woot” to the RDV makers. And, let’s see, get that on camera again. I will “woot” once more. There we go. Way to go. I think that’s great stuff. The second quick announcement I’d like to make is, I’d just like to give a shout out to one of our longest-standing event partners the Confederation of Democratic Sims, CDS. CDS is the oldest functioning democracy in Second Life. They’ve got more than 70 residents who participate in a small government that has a resident assembly, an elected chancellor and an appointed judiciary, as well as multiple regular functions in political parties. They do a lot of stuff together all the time, including every Monday getting together to watch Metanomics on Colonia Nova. So hello and thank you to our friends on CDS. Congratulations on your success. Okay. Now on to our guest, Mitch Kapor. Mitch, welcome to Metanomics. MITCH KAPOR: Thank you. Happy to be here.
  4. 4. ROBERT BLOOMFIELD: Yeah, I’m really glad you could find time in what must be for you an absolutely packed schedule. In preparing for this interview, I went through and tracked down all of the many things you’ve done, so just let me mention a few of these. I guess you studied psychology and linguistics in college, as well as compute science. And that before you did the things that, I guess, made you famous, you were a rock DJ for a couple of years. Studied Eastern thought and mysticism and even taught transcendental meditation. So pretty typical ’60s college start, and who would guess that, over the next decades, what would you go on to do? Well, you created Lotus 1-2-3, the first widely adopted business spreadsheet software. You helped found the Electronic Freedom Foundation, which is a nonprofit dedicated to securing civil liberties for computer users. Joined the board of Level Playing Field Institute that seeks to remove barriers to full participation in higher ed and workplaces. You are, of course, the founder and trustee of the Mitchell Kapor Foundation, which also works to ensure fairness and equity, particularly for low-income communities of color. Founding chair of the Mozilla Foundation, which is responsible for my personal favorite web browser, Firefox. And, of course, the reason most of our Second Life audience is here today is because you are founding investor and chairman of the board of Linden Lab, until you find a successor for your current CEO, Philip Rosedale, who will be taking over your role. So that’s just an incredible list of things you’ve been doing, and so I’d like to just start by asking whether your early interest in Eastern philosophy has had much lingering effect on your other work beyond inspiring the name of Lotus?
  5. 5. MITCH KAPOR: I suppose it has, but not in any really direct kind of way. I mean I think it gives me a perspective that human beings are actually ultimately quite small and insignificant in the cosmic scheme of things. So yeah, it’s hard for me to say how it’s worked its way into me, but I know it is. I know it’s there. ROBERT BLOOMFIELD: You’ve been a major player in the Open Source movement in particular. We see that in Mozilla, and we see that now in Linden Lab, and that, to me, seems like somewhat of getting all those people to connect in new ways. I can see a link there. Let me ask: Can you give us a sense of your work week? I mean you have so many things going on right now. How actively are you actually involved in these endeavors? MITCH KAPOR: Well, these days I have my fingers in a bunch of different pies, so I’m pretty busy incubating new internet startups in my office here in San Francisco. Nothing that’s highly visible yet but things that I think will push the edge of the envelope some in a variety of ways. I have my Second Life related activities. I do a lot of nonprofit work with my foundation and the scholarship programs for the Level Playing Field Institute. So I’m having a lot of fun. I’m busy. I like starting things in the early stages of new things, both on the for-profit and nonprofit side. And I love living in San Francisco, where I have been for the past seven or eight years, having relocated from the east coast. So fun, busy, trying to make a difference. ROBERT BLOOMFIELD: You were here on the CMP stage last week during Life 2.0, and you talked a fair bit about the 3D cameras. So does that fall into the category one of the early-stage startups that you’re working on?
  6. 6. MITCH KAPOR: It falls into the incubation area, although I should be very clear, at this point, the work with the 3D cameras is experimental. It’s evangelism oriented. And we’re thinking about what the business opportunities are yet, but it’s “preceived” stage. Although I will say, for people who are interested in that, we’ve now shot some very good video of how all this works, and we’re editing it and it should be up late next week or the week after. So 3D cameras are very exciting. They’re going to transform Virtual Worlds and gaming and lots of other things. ROBERT BLOOMFIELD: Yeah. So people interested in that, I believe that Life 2.0 will have the transcript and recording of that talk that you gave last week here so people can look more into that. It sounds like a fascinating project. Can you tell us, as far as where you have your hands-on activities, what’s at the top of the list? MITCH KAPOR: Well, hands-on, there are really two things. One is, I have a company called Foxmarks, F O X M A R K S, that makes a browser extension for Firefox that synchronizes bookmarks. And we’re in the process of getting it financed. It turns out that, if you have several hundred million bookmarks, which is what we’ve accumulated, you can mine that in interesting ways to help people with discovery and connecting them to information resources on the internet that search doesn’t handle. So I’ve been pretty busy with helping get that started, raising some outside money for it and moving it along. It has 12 people in it now. And I’ve been very busy with my board responsibilities at Linden Lab, in a hands-on way for a board member spending a lot of time with executives of the company and talking to other
  7. 7. folks and making appearances like this one. I’m personally very interested in the business and business collaboration applications of Virtual Worlds. I mean I think there’s this enormous spectrum of things that people are doing, and they’re all utterly fascinating. The ones that I find personally compelling is thinking about how we’re going to use Virtual Worlds, like Second Life, for business. ROBERT BLOOMFIELD: Well, that’s certainly my interest as well. I know a lot of the people who are here today want to hear about your vision of the current state of Second Life and Linden Lab and where you might be heading over the next few years. But before we do that, let’s take a step back and go to the beginning. So I understand that Philip Rosedale repeatedly pitched the idea for Second Life, or a precursor idea anyway, to Accel Partners, the venture capital firm you were working with, and he repeatedly was turned down. So you were willing to go ahead and get involved, providing some financing and ultimately becoming chairman. So I’m wondering back then, really, two questions. One is: What was it that you saw in Rosedale’s idea that you liked, that got you to sign on? And the other is: What is it that the Accel Partners didn’t like? MITCH KAPOR: Well, let me give you a little bit of context on that. The events you’re talking about were taking place 1999 to 2001, and Philip was an entrepreneur in residence at Accel Partners, A C C E L. I was just moving to California and was to become a partner at the firm, and I was trying to figure out if I liked venture capital or not. It turns out that I didn’t. So Philip and I were both, though in different roles, kind of new kids on the block, and we bonded together because we arrived at the same time. I thought Philip had the makings of a successful entrepreneur. I’d been investing on my own as an angel investor for a long time,
  8. 8. since the mid ’80s and found that I got a lot of gratification out of working with entrepreneurs to help them realize their vision. The vision that Philip had, I think, was large, expansive and very, very risky, especially back then when there had been nothing but commercial failures when people had tried to run with these ideas. So what I would say is it’s easy to say, “Oh, the stupid venture capitalists,” and it wasn’t just Accel which turned down Linden. It was really literally a couple of dozen. Some ideas are large, have long time frames, are very risky and don’t fit into the envelope of the kind of opportunities that venture capitalists are able to help with and, really, that was Second Life. So the right thing for it was to start out with angel investors and to take it to the point where it could show the kind of progress that would get the institutional investors involved. Although I will say Jed Smith, from Catamount Ventures, came into the company very shortly after I did in 2001 because he also saw this enormous opportunity. But, for me, it was about backing Philip and Philip’s idea. That is how we got started. ROBERT BLOOMFIELD: How different is what Second Life is today from what that idea was back in the ’99 to ’01 time period? MITCH KAPOR: Well, it was like the relationship between a seed and a tree. So in one sense, the seed is completely different in size, shape and properties than the tree it turns into. But, on the other hand, there’s this incredibly intimate causal relationship in that the seed becomes the tree. So I think Philip had been thinking about Virtual Worlds since high school really. And
  9. 9. certainly there was a lot in the science fiction literature and elsewhere. Ideas were kind of out there. Nobody knew and understood what it would take to get the first one that would have some kind of critical mass. And, in fact, I think we certainly didn’t understand what the business model was going to be or very much about the details of it. But the original idea that there would be a large-scale simulation that could be infinitely expanded in which people could create their content and their experiences, that idea was really, I think, there absolutely in seed form from the very, very beginning. ROBERT BLOOMFIELD: But harder to pull off than it must have seemed at the time? MITCH KAPOR: Well, no. I think actually big ideas are always hard and risky, and this seemed--the right thing seemed to be to take it a step at a time and see how far we got. In a way, Virtual Worlds, if you sort of pull back into a long shot and you look at the underlying pattern, is a kind of classic disruptive innovation. And I’ve given a number of talks about this, including, I think, at the first Second Life community convention. It falls into the same category as the personal computer itself or the internet. Inevitably a small number of people actually wind up giving the impetus to that, crosses a divide from ideas and fantasies into reality. And they’re always hard, difficult. They take a long time, but they’re fun. They're just the most amazing thing. I think we’re all early adopters here in this room still. Virtual Worlds are still in the early adopter phase, although I’m willing to bet if you surveyed everybody here, people--and you ask, “Is this going to become a mainstream phenomenon?” everybody here would say yes. And it’s the interesting thing.
  10. 10. William Gibson, the novelist, had something interesting, “The future is already here. It’s just unevenly distributed.” So it is with Virtual Worlds. ROBERT BLOOMFIELD: And here we are on the bleeding edge of technology. MITCH KAPOR: Oh, the bleeding edge. More than the bleeding edge. ROBERT BLOOMFIELD: The idea actually of surveying the people here is one that we’ve been talking about. We’ve got over 700 people now in the Metanomics Group and are actively trying to figure out exactly who those people are, why they’re interested in this and what they’re thinking of doing. Let me move on to the state of Linden Lab today and, in particular, what I’d like to do is a SWOT analysis, if I could. So this is standard fare in business schools around the world when you’re studying the strategy of a company. SWOT is strengths, weaknesses, opportunities and threats. And so I wondered if you could just walk us through your take on what you see as Linden Lab’s and Second Life’s key strengths, weaknesses, opportunities and threats. Let’s start with the strengths. MITCH KAPOR: Well, I dropped out of business school, so if I had completed business school I could probably do a better job at this. ROBERT BLOOMFIELD: It doesn’t seem to have held you back too much.
  11. 11. MITCH KAPOR: Oh, you never know what might have happened. So among the strengths are the fact that the company has been able to be successful in creating a large-ish Virtual World platform, and so there’s a lot of people who use it. There’s a real business there, which makes money. We probably understand more about how to make one of these things go than almost anyone, and it was very much at the center of this new ecosystem. So there’s a set of strengths there, but it comes with a set of weaknesses. I guess one way of summarizing it is to say Linden has a whole bunch of first mover advantages writ large. On the other hand, I can tell you from having done Lotus 1-2-3, we were not the first spreadsheet. First mover advantages are sometimes overrated. There was a product called VisiCalc that was the first spreadsheet, and it was on the Apple II computer and on the IBM PC. And sometimes the people who come in second have a much shorter learning curve because they can look back at who came first and see what worked and what didn’t work and avoid all the mistakes and can also understand where the market is going in ways where they’re not fettered by where it has been. And so one of the great challenges for Linden is for its first mover advantage not to be a liability. Obviously it would be an understatement to say significant continuing challenges with respect to the current business in everything from the stability and performance of the base platform to the quality of the user experience, which, while still suitable for early adopters with a high threshold of pain, I don’t think even the most ardent enthusiast would say that the current user experience is anything close to what is needed to reach a mass market. And there’s an enormous amount of competition on every side, above, below, to the left, to the right in every sector you could imagine. So the penalty for having validated not just a
  12. 12. market segment, but a whole new paradigm, is that everybody in the world thinks that you suck and that they can come in and do it better. So it’s an intensely competitive environment. So that’s the threats. But the opportunities, and I’ve been on record as having said this before, are just so large I don’t even know how to put a number on it because I believe that Virtual Worlds--and I’m not in love with the phrase; I’m just not sure what to call it or what’s better, but this sort of 3D virtual simulation avatar stuff that we are figuring out now is going to become as mainstream as the personal computer or the web itself over the next generation. So call it a hundred billion dollar market. So there’s insurmountable opportunities. ROBERT BLOOMFIELD: Yeah, I remember hearing you use that term before. I mean there’s clearly a tremendous amount to do and that could be done. As someone who’s spent a lot of time in the World, I see a lot of different sort of various types of tensions that, as you move forward, you’ll have to deal with. And one of them you mentioned earlier in the show that you’re particularly interested in seeing how this platform can be used for business. There are also a lot of people who come in to Second Life really for a very different experience, what you might think of as a personal fantasy. They’re certainly here for their own personal behalf, and there’s some tension between the corporate types, which I guess I am, and the personal fantasy type. So moving forward, how is Linden Lab do you think going to be addressing these two communities? MITCH KAPOR: Well, let me say a couple things. One is that some people want the business side of things to be dominant from roughly 9:00 A.M. to 5:00 P.M., and they want
  13. 13. the personal side from 5:00 P.M. until midnight. So it’s not strictly either or. And, in fact, this mirrors the use of computers in general, where the enterprise sector is enormous and the consumer sector is enormous, but the same base hardware platforms and operating systems--I’m talking about, Microsoft and Apple--serve both to one extent or another. So I kind of take it as a given that Virtual Worlds are going to serve both interests and that right now Second Life does not yet do what it needs to do as a baseline to really support the [AUDIO GLITCH] ROBERT BLOOMFIELD: Hold on. I’ve lost your sound, Mitch. MITCH KAPOR: No. No, I’m going to stand up. Let’s keep talking. ROBERT BLOOMFIELD: Yeah, okay. Okay. We can go ahead and do that and, I guess if JenzZa Misfit wants to come toward the stage and see if she can help out with this. I don’t know if it’s the chair or another issue. But yeah, let’s go ahead, and let’s talk about the stability issue. And one way that I see this, I guess, is that in an attempt to create a setting in which anyone can make whatever they want, you know, that their imagination is really the thing that holds them back, it’s much harder. You end up with a technological beast which is much harder to keep stable and make easy to use. I’m wondering how you settle that tension without just investing huge amounts of money in order to solve both problems at once. MITCH KAPOR: Well, the first thing is that the fundamental investments to make the base platform as it is work well are being done and have to be done and will continue to be done.
  14. 14. And I would say that there’s such an obvious business opportunity just for the current business as it is that, should Linden not do that, and I don’t think that that’s the case, somebody else will do it. I mean there’s the sort of getting things as they are to work well can be done. And there’s actually been progress on this. I know it sometimes doesn’t seem like it. But one of the things I’ve said, just taking the big picture for a moment is the following, which is, if you look at the history of personal computing and we now have 30 years of that, we tend to forget that the dominant operating system for the first almost, well, between 15 and 20 years was DOS, which was a very difficult operating system [AUDIO GLITCH]. I’m getting an IM from the director who says, “Please turn around.” I’d be happy to turn around, but it’s not working when I do that, so I think this is going to be an object one and just how painful it is when things don’t work. So I’m going to sort of stop. Here’s this nice red chair. ROBERT BLOOMFIELD: Yeah. Yeah, we got you a new chair, and it should go well with that Hawaiian shirt, which I understand the Hawaiian shirt is sort of a trademark of yours. Is that right? MITCH KAPOR: Yeah. ROBERT BLOOMFIELD: Signature piece. MITCH KAPOR: For a long time. Let me go back to my point about DOS because, until Windows took over fully which was 1995 with Windows 3.1, DOS was really the dominant
  15. 15. operating system, and it was too hard to use for lots of people. It was character based. It was clunky, and it took Microsoft actually several attempts to write Windows and rewrite Windows and rewrite it, to the point where an average person could use it without too much difficulty. And I’m oversimplifying. I’m not talking about Apple. I’m not talking about how hard Windows still is. We should understand from this that, when you have something that is a big platform, it will take a generation to really get right, and it’ll be written and rewritten and rewritten. And we’ll see that with Virtual Worlds. I’ve said this many times inside the company, while we grapple with making things as they are work better, there also have to be investments in fundamental advances that are going to take us to the next level of usability more suitable for a mass market, and that requires attention to the organizational structure. It requires the capital to do that, although I think capital is more available than the right people in the right organization to go and execute. All in all, this is a once-in-a-generation undertaking, and we’re still in the relatively early stages of it. And there’s no guaranty that Linden--it’s really up to the company to seize the insurmountable opportunities to chart a course and to execute on it. And, if it can’t do that, it’s not going to be easy to point a finger at anybody else. ROBERT BLOOMFIELD: When you talk about this the incredible opportunity-- MITCH KAPOR: And I am now sitting down. ROBERT BLOOMFIELD: Wonderful. Yes. And I’m also looking at you on the SLCN screen. You look marvelous. You’re clearly made for this.
  16. 16. MITCH KAPOR: That’s good. ROBERT BLOOMFIELD: Now when you talk about this growth and the opportunities, one of the things that I come back to when I analyze, from the outside, the company, is trying to see where the revenue model for Linden Lab goes. I guess question one is: Where is today’s revenue? And I think the more important question is: How do you make that scalable and sustainable? MITCH KAPOR: Right. I’m going to answer that, but I want to just go back one more time to the previous question. Many business applications, although not all of them, don’t require a fully connected large grid. If you just want to have a virtual meeting with one or two other people, a much simpler infrastructure could enable that to happen, and there are people actively working on that, and it’s my belief that, among other things, there will be a kind of bottom-up adoption in the enterprise that may or may not come from Second Life. But if it requires much, much less infrastructure to do that, I think Linden, as well as everybody else, should look at those opportunities as well. As I think we all know, there are some very interesting Open Source work that’s being done now around Virtual Worlds. I think that’s going to play a major role in the enterprise, and it’s all going to unfold in very complex and unpredictable kinds of ways. Okay. Now to your question. Today’s revenue model is really--it’s a hosting model. The company makes money from leasing land primarily. Going forward I absolutely expect more heterogeneity in terms of the operation of the grid.
  17. 17. And so the hosting business won’t be the exclusive source of revenue, but clearly there are lots of other opportunities. Now I’m speaking in broad terms, and I’ve spoken about this on a number of other occasions publicly and over a period of years, so these are not announcing what Linden is going to do. This is more looking at the strategic landscape. But, if you look where the big businesses have been on the internet in search advertising, for instance, there’s a company called VeriSign that does a lot of domain registration and provides naming and identity and connectivity services. I believe there will be similar opportunities in Virtual Worlds that represent potential business models. ROBERT BLOOMFIELD: I guess I’m again trying to figure out where the--most of the revenue [AUDIO GLITCH]. You have this Open Source movement where you have people who are essentially reverse engineering from the client, which is Open Sourced, people are reverse engineering the server side. I’m trying to figure out where your revenue comes from that. MITCH KAPOR: Well, I guess there’s a couple of things. If you look at Open Source in the enterprise--and I’m not getting some kind of an echo and other extraneous noise. I don’t know if someone else has a mike open. There are plenty of companies that have made money. I mean my SQL, the Open Source database company, was acquired by Oracle for a billion dollars. So successful business models and Open Source actually go hand in hand, and how that exactly plays out in the Virtual World--I’m sorry I’m hesitating because I’m hearing noise and echo from someone’s open mike. ROBERT BLOOMFIELD: I think that Movies 1963 Beck has his microphone open. So if someone can ask him to deal with that.
  18. 18. MITCH KAPOR: Right. So I think, even with Open Source platforms, if people want a hosted service, they’ll pay for that. There are typically--in the enterprise world with an Open Source stack that is providing the basic services, there’s lots of value added software that does configuration, installation, monitoring, security, lots of value added services that enterprises are happy to pay for that sit on top of an Open Source base. So the fact that there’s--I think, going to be an Open Source component to the Second Life ecology is actually more of an asset than a liability because it’s going to expand the total base of usage and, in fact, open up new monetization opportunities. And this is just strictly paralleling what’s been happening in enterprise software. Again, let me say I’m not saying anything about what Linden is going to do or isn’t going to do. These are opportunities for somebody. Multiple opportunities for multiple somebodies. ROBERT BLOOMFIELD: Okay. Let’s move on and talk a little more specifically about what’s going on at Linden today, and, in particular, there have been a lot of major changes in the last few months. So your chief technology officer, Cory Ondrejka, left in December. You banned banking in January. Philip Rosedale announced he’s stepping down. MITCH KAPOR: We didn’t ban banking. We put some regulation on it. ROBERT BLOOMFIELD: Okay. Fair enough. You laid out a policy on banking that banned unregulated banking--
  19. 19. MITCH KAPOR: Exactly. ROBERT BLOOMFIELD: --which is perhaps more accurate. MITCH KAPOR: Definitely. ROBERT BLOOMFIELD: Philip Rosedale announced he was stepping down from his post as CEO. That was announced in March. And then just this week a new policy was announced and new terms of service regarding use of the terms “Second Life” and “SL” and a new “NSL” logo. And I know that a lot of the people in the audience have questions about these. So I guess I’d like to start by talking about the management changes, and I know that this is tough. There are a lot of things you can’t say, so I’m hoping we can find that sweet spot where you can give us some insight, and your legal and PR departments don’t get too upset with you. So the first one is, Philip’s announcement came pretty rapidly on the heels of the departure of your CTO, obviously a very major figure in the software company. Why was that? MITCH KAPOR: I think you may be inferring a kind of connection that may not be there. I can’t say the two things were entirely unrelated, but I know, in the case of Philip and the CEO, I will comment on that. A bit of context. The first thing is that it is much more the rule than the exception that, when you have a company that starts from nothing and is on the way to getting to be very, very large and successful, that there’s a leadership transition where the founder steps aside from the CEO role. What you like to have happen in those cases is for the founder to remain integrally involved, committed full time and adding value in a distinctive set of ways. And that’s exactly what the plan is here. The exact timing of
  20. 20. when the day-to-day demands of running the business get to the point where it no longer feels like the right solution, that varies from case to case to case. But that this is happening really should surprise no one. I mean I’m grateful that Philip remains completely committed to this and really has the wisdom to recognize that these big opportunities are best going to be served by building up the executional capability of the company by hiring a CEO. Now that said, that is a difficult and challenging task. It’s a bit like, in these cases--the partnership between the CEO and the founder is critical. There has to be a real trust. The chemistry has to be good. You can’t just hire to a spec or from a mail order kind of catalogue. Very often these things don’t work out. Sometimes they do. Eric Schmidt has done quite nicely at Google. And, although that’s not an exact parallel, there are some similarities. So I would really say, in the larger picture of things, the management change with Philip is business as usual for a disruptive innovation platform. ROBERT BLOOMFIELD: It seems a little unusual to announce that a CEO is stepping out of that role without having a replacement in hand. MITCH KAPOR: I don’t agree with that characterization. I mean it might be the case statistically that it is, if you gave me data. But here’s what I have to say. The company’s always been significantly more transparent than the average for-profit startup. And I understand not as transparent as some people would like, and we can talk about that. Given that this was happening, I mean honestly, it was going to become clear this was going on, and it’s not something to be embarrassed about, and so the feeling was before it started
  21. 21. really dribbling out, let’s be transparent and make a disclosure about it. I mean, again, I think it only seems unusual in light of how screwed up communication is in the business world. ROBERT BLOOMFIELD: So let me actually follow up with that because I was mentioning that I saw a number of tensions that Linden Lab needs to deal with, and one of them is the tension between what I would think of as residents who see themselves as citizens in Second Life and who may feel that they have a say, or should have a say on the new CEO. And then there’s the very different perspective of just customers. So how do you try to balance that and communicate it effectively? MITCH KAPOR: Let me say several things. The first is that Robin Linden, who’s the VP of community--Robin Harper, advised me to duck this question. ROBERT BLOOMFIELD: Thank you, Robin. I appreciate that. MITCH KAPOR: No. But, in fact, it was a suggestion, and I’m actually going to talk about it some. The reason is--I mean let me say this is a charged subject. A couple of things. First, it is not atypical for very ardent early adopters of a major new platform to feel such a sense of participation and psychic ownership that it extends perhaps to feeling like they want to have a say in who the new CEO is. The early power sellers on eBay are a great example, where there are similarities. And I could cite other examples. First of all, nothing new here, folks. This is what happens. Second, the company is a business and, if--somebody might have started a very successful critical mass Virtual World phenomenon on a purely Open Source basis, that didn’t happen. Its ground rules would be different had that happened.
  22. 22. We are living in the universe where, in order for Linden to continue going, it has to operate as a business. It has investors. The investors are very patient. I mean we’re in this now nine years since it started, seven years since I got involved. And contrary to any speculation, there is no plan for an IPO, and I hope you’ll ask me about that. ROBERT BLOOMFIELD: I’d be glad to. MITCH KAPOR: What I’ve said about that may have been misconstrued. But it is going to operate as a business, and I think--and so a new CEO will be chosen. Smart businesses understand their circumstances, and here there is a kind of an implied social contract with the residents who have made it successful. When the company fails to listen to those voices, it makes a grave error. But close listening and conversation and dialogue stop short of voting. And people who want to vote on this sort of thing probably are advised that they’ll be very frustrated about this because that’s outside the bounds of how Linden operates and how it’s always operated. So yeah, there’s a kind of a balance that has to happen. And I understand that it is not possible, it is not a goal to make everybody happy. I think understanding what it is the company can do that brings value to people such that they’ll invest of themselves and will want to build businesses on top of it, how we keep faith with a critical mass of people is very important. And it will continue to be something the company puts a lot of effort into. But the amount of venom that comes out at times, particularly from a fairly small percentage of people, is remarkable. And it sometimes becomes a challenge not to get defensive about it.
  23. 23. Nonetheless, we persevere. ROBERT BLOOMFIELD: Yeah, I appreciate your answering my question and not listening to Robin on that. MITCH KAPOR: I hope Robin doesn’t mind me poking a little bit of [AUDIO GLITCH]. I have to say she’s been with the company since the beginning and has really done more than anyone to continue to build the bridges between the residents and the company and is just super spectacular on that and continues to be a voice, inside the company, of advocacy. ROBERT BLOOMFIELD: Yeah. We had her on Metanomics back in January, the kickoff for the year, and she was great. Wonderful resource. I’d like to pick up on a couple points that you made. You talked about the IPO and, before we get to that, I’d like to say you also talked about an implicit agreement between Linden Lab and its residents. There’s quite a bit of discussion in the blogosphere this week about Linden Lab’s decision to enforce the Second Life SL and Linden brands and then the new NSL. And I’d say the gist of what I’m reading by people like Gwyneth Llewelyn and also actually SCLN’s own Wiz Nordberg is really along the lines of, “Look. We went out there. You told us we could use this brand. We gave Linden Lab worldwide recognition. We spent lots and lots of time to give you the value of many millions of dollars of promotion and, far more than that, of building, and now, all of a sudden, you’re reversing that position. Can we really believe it’s our World, our imagination?” I see someone has written in the Metanomics
  24. 24. backchat a comment along the lines of, “Your world, our IP.” A play on Linden’s typical “Your world, your imagination.” MITCH KAPOR: Let me tell you how I approach this issue as a board member, which is, first, the facts really matter, particularly when it’s heated, and this is, I’ll stipulate, heated. So what has been the history of representations the company has made and not made to people, and how have they been communicated? That’s highly material. And I will tell you I get my information about that from a variety of sources, as a board member, by being briefed by the company’s executives and then also by being able to directly read resident blogs and all of the different media. I haven’t done that in this case. In the ordinary course of events, you have to remember directors are not the people who run the business day to day and shouldn’t be and shouldn’t interfere with that. And so, if I had to answer this, I would be going to asking Robin and other people, “Okay. Tell me what’s the history here about this,” and then I’d form a judgment about it, and I haven’t formed a judgment about it. I mean it’s possible, and I know in the past there have been occasions where the company has not always given enough runway in advance to be reasonable when changes were about to be made. But, on the other hand, I’m also aware of other instances where, based on that, plenty of advance notice was given about things, and some people still didn’t like it or found fault with it or argued with it. And I don’t know where on a spectrum this issue is, and you’re not going to get anywhere with me on that. You’ve got to talk to Robin or to somebody else, as I told you in the pre-meeting. What I will say is the company ought to do things that protect and preserve its own interests, and certainly the appropriate use of trademarks is, I think, not something that’s highly controversial.
  25. 25. The big issue is: How is the management going of the inevitable evolution and change that is going to happen as we move beyond the startup phase, and is that going well, or is that going poorly? And, if it is not going well, how do we fix it? And so people have been around. We’ve been through multiple rounds of this. As I said, lots of things have gotten better. The support issues have gotten significantly better, although clearly not perfect. There’s been a recognition of the estate owners need certain kinds of tools and service, and things have been put in place there. So that’s the context that I look at this in. And I’m sure by next week or the next time I get a refresh from the execs I’d actually have a view about the specifics of this one, but, as yet, I don’t. ROBERT BLOOMFIELD: Well, any time you want to come back on the show to talk about these things, you are definitely welcome. MITCH KAPOR: Yeah. ROBERT BLOOMFIELD: When we put together all of these changes that have happened recently, it does lead a lot of people, including me, to read the tea leaves and say, “Boy! Is Linden Lab looking to make some major organizational change, whether it’s an IPO or a merger and acquisition activity?” But it does have the feeling of sort of cleaning house. Cleaning house internally by dealing with people who are arguably untrustworthy operators--I’m talking about the bankers--at the top levels in management and then also tightening up control over the brand. You mentioned just now that you wanted to clarify what you said. I guess it was to the reporters from Reuter’s Second Life office that you did say an
  26. 26. IPO is an option under consideration, but then just a minute ago you seemed to back away from that. MITCH KAPOR: I went back on the Reuter’s site. When we did the pre-meeting, you sent me this email. And I found the audio of it but not a transcript, and I didn’t have time to listen to the audio. So I don’t have something to say about what I actually said, so if you want to give me my direct quote, you could do that. But my recollection is not saying that an IPO was under consideration in the sense of we actively think about, "Are we doing this month, are we doing it that month, are we doing it-- it’s more like being able to take a company public. First of all, it’s a process that is started typically 12 to 18 months in advance. Very complex these days. And, even if you don’t plan to take the company public, the discipline of running the books and doing things internally so that you could is a valuable business discipline. So there’s no time table for an IPO. It’s not under active consideration. But it is something that is on the strategic roadmap, which you would expect is the completely “business as usual” scenario. And, as to the big changes coming, gosh, I hope not. I understand that the company becomes just like an object of mystery, and it is very central to a lot of people’s both business plans and hopes and fantasies, and so it’s going to be the object of attention. I’d like it to be predictable. I’ve said, for a long time, and I continue to believe that, long-term, Linden should not have any proprietary control over the ecosystem. And while we’ve made a bunch of progress on opening up the client, there’s still a long way to go on that. But, as that happens, people’s destinies will be more in their own hands, which is the direction I
  27. 27. would like to see things moving, and then you don’t have to worry so much about things happening. ROBERT BLOOMFIELD: So now we just have a bunch of questions from the audience. We normally go for an hour, but, if you are willing to talk a little longer. MITCH KAPOR: I have ten minutes. ROBERT BLOOMFIELD: You have ten minutes? Let’s go for it. One question that we’ve got is about basically the hype that has gone up and down in the business community, in the marketing community, with Second Life that first it’s the media darling, then we see the articles about how businesses are moving out and aren’t getting the ROI. And then you see some positive articles maybe again. So I would turn this into, I guess, two questions. One is: How much do you think that type of hype is affecting Linden Lab and Second Life? And to what extent do you control it, and how? MITCH KAPOR: Oh, I don’t think you can exert a lot of control out of it--over it. I mean very clearly it was dramatically over-hyped a year-plus ago. And it’s not a kind of medium or environment today that makes sense for, in general, global brands, mass marketing. There aren’t enough people. It’s not mature enough. It’s still way too early. And so there was some experimentation, some disappointment around that. But I would say, at the same time, there were some very smart businesses that are understanding that what you do with something like Second Life. because it’s such an
  28. 28. immersive environment, is, you figure out how it is going to be best used to interact with your customers in new kinds of ways. And there have been lots of small success stories around that and that have actually gotten less attention. So I think, overall, it’s turned out to be, in a way, a kind of a distraction, but I’m much more concerned about the fact that the user experience with Second Life is still so difficult for most people. I mean there’s just no two ways around that, and people who get through it get through it fine, but we’re just losing many, many, many, many, many, many, many people. And so investing in simplifying things, everything from the signup to just the client itself, I think is incredibly important in terms of developing the long-term potential of the whole ecosystem. And, if and as that is done, I think some of these big global brand kinds of uses will again become more interesting. ROBERT BLOOMFIELD: Here’s a very short question from Lexa Dryke, editor-in-chief of the Looking Glass: According to rumor, Google intends to purchase an interest in Linden Lab. Can you confirm that? MITCH KAPOR: Well, I’m always the last person to find out about the existence of these rumors. I was unaware of the existence of that rumor. I’ll go back to what I said before. When we’re in this situation, there’s just going to be speculation. My experience over 30 years is, and it’s not just about Linden, 99 percent of it is wrong. So on the other hand, I mean publishers sell a lot of copies of People Magazine and the Enquirer and Celebrity Gossip, and 99 percent of that is, if not wrong, sort of off the point, and so it’s a big business. But I just think it’s such a distraction.
  29. 29. ROBERT BLOOMFIELD: Okay. This is a question from Steve Atlas, who is studying economics at Tufts University, and he’s wondering about your take on the role of the economy within Second Life. So how important is the strength of the virtual economy in your ability to create an attractive environment for the residents? And how actively does that economy need to be managed? MITCH KAPOR: Well, it’s very important to have a stable exchange rate as a kind of condition for doing business, and that is, in fact, managed quite carefully by the company. And no small accomplishment. In addition to that, my personal perspective is that certain types of regulation are necessary, at least in this stage of things. We saw that with the banking. We saw that with the gambling. Linden Lab is not founded and run by the kind of people who buy and abandon offshore oil platform and want to create an independent nation state. This is not the DNA of things. So I would say, to the extent that the company needs to regulate--and it hates to do that; it really doesn’t like it, but it recognizes that sometimes it’s necessary in the larger scheme of things. That’s been the pattern, and I anticipate that will continue. It’s supposed to be empowering for people. That’s the main thing. ROBERT BLOOMFIELD: So we are basically at the end of our time. We’ve covered a lot of ground, but no doubt there are things that you think about and perhaps something you’d like to say in closing that we didn’t get to. MITCH KAPOR: I appreciate very much how deeply, passionately, seriously people take Second Life. There are lots of ways that people could spend their time, but it touches something deep within people. And I think that’s a wonderful thing. I think the company
  30. 30. needs to continue to respect that and figure out ways to help people actualize whatever it is that is so deeply stirred up within them. I believe that’s the right thing to do and a key to long-term success. Thank you. ROBERT BLOOMFIELD: Okay. Well, thank you so much, Mitch Kapor, for joining us here on Metanomics. We have our next Metanomics show on Monday, 11:00 A.M. Second Life time, and we will be discussing accounting and taxation. So those of you who have businesses in the Virtual World, I would strongly recommend that you take a look. So really, thank you so much for joining us as I use the special clapping animation on this chair. I hope that we will talk with you again, Mitch. MITCH KAPOR: Well, you’re welcome so much. Thank you for having me, and I’d like to come back, and we’ll figure that out. ROBERT BLOOMFIELD: Bye bye. MITCH KAPOR: Bye bye. Document: cor1013.doc Transcribed by: http://www.hiredhand.com Second Life Avatar: Transcriptionist Writer