One-On-One With Second Life Creator Philip Rosedale

Is there a second act for Second Life? That's the challenge that will be faced by Linden Lab's new CEO. Philip Rosedale, the company's founder, stepped aside as CEO in a surprise announcement on Friday, and said the company is beginning a search for a replacement.

Rosedale said he will focus day to day on the technology and strategy of Second Life, and leave running the company to the new CEO. The changed role was "100% my idea," he said. We talked with Rosedale in a telephone interview this week.

What are the requirements of the new CEO? For starters, Rosedale said it won't be a learn-as-you-go job. "They're going to have to have a deep and intuitive knowledge of what Second Life is, what it means, and why it's important. We're definitely not going to hire someone who doesn't have a deep functioning understanding of what's going on here, in the way that people who have immersed themselves in Second Life do," Rosedale said.

The CEO's most important job will be providing leadership internally, including choosing the right people for the right jobs, organizing the 250-person company, and motivating people to work. "I do a pretty good job of that, but it's not the best use of my skills," Rosedale said. He said he sends out quarterly, anonymous surveys to Linden Lab staff asking them to evaluate his performance. "My performance on those is extremely high. Everybody likes having me," Rosedale said.

The announcement by Rosedale comes at a time when Second Life's growth is hitting a plateau. The in-world population exploded in late 2006 and early 2007, fueled by a great deal of journalistic hype. The number of Second Life accounts went from about 2 million in December 2006 to 12.88 million as of Monday evening.

But new sign-ups slowed in the last half of 2007, and the number of active users -- people who log in frequently -- remained flat at under 600,000 for the past several months.

On the other hand, the news isn't all bad: The average number of users signed in at any given time is growing, routinely exceeding 60,000 simultaneous users logged in. And Rosedale says the company is profitable.

Could the change of CEO be a move to take the company public? The Financial Times thinks so. The paper reported on Sunday that Linden Lab "is moving closer towards a listing and life as a public company with the replacement of its founder with a new chief executive."

Rosedale denied that Linden Lab is moving toward an IPO. "No," he said. "That's my one-word answer. This is not predicated on anything about an IPO."

Rosedale's announcement comes four months after Cory Ondrejka, the former CTO of Linden Lab, and its fourth employee, left the company in December.

The Love Machine

The new CEO will come into a company with an unusual culture, focused on management by consensus and peer review.

One of the most well-known features of the Linden Lab culture is the Love Machine. "It's a simple thing with a cute name that captivates everyone," Rosedale said. Companies need to make employees feel good about their day-to-day work, but at most companies the work environment is filled with negative messages. People don't bother to communicate unless there's something wrong. "When you get an e-mail late late at night, it generally means that someone is upset with you because something you're doing is wrong or not on plan," Rosedale said.

So the Love Machine is a simple application that allows an employee to log in, select the name of another employee from a drop-down menu, and type up to 80 characters of praise for that employee. It's done when a member of the Linden Lab team observes someone else doing good work, or thanks them for a favor.

The recipient of the Love Machine message gets a copy in e-mail, and the output of the Love Machine is visible to everyone in the company. "You're able to quickly see what people are doing, you can look through the love and see what's going on in the organization. It's a little bit less hippie-crazy than it sounds," Rosedale said. "It's a tool for creating a lot of transparency inside the company in a way that's very enjoyable for everyone."

Employees receive bonuses for high scores on the Love Machine. "At the end of the quarter, you actually get a dollar for every piece of love that you get," Rosedale said. Some employees receive a few hundred dollars per quarter from the Love Machine.

What keeps employees from gaming the Love Machine? "It's transparent, everyone can see it, and violating it or gaming it is cause for termination," Rosedale said. "You can't say, 'I'll send you love if you send me love.'"

Another unusual element of Linden Lab culture: Employees make their own assignments. "We encourage people to be self-directed with regard to how they allocate their hours at the company," Rosedale said. "The belief is that, in an environment with a high degree of transparency, it's likely under those conditions that encouraging people to make their own decisions on what to work on will result in a higher level of productivity and a higher success rate."

This contrasts with Google, where employees are only allowed to allocate 20% of their own hours. "In the Google environment, an individual is encouraged to take a portion of their time and work in isolation on an idea that is solely theirs. You see a lot of entrepreneurial projects spearheaded by a single engineer," Rosedale said. Linden Lab encourages team efforts.

The company uses an internal, market-based system where employees get a certain number of points to invest in internal projects they believe in. Once a week, employees are given an equal number of points and urged to pledge those points to a project or projects that they feel will be the greatest benefit to the company. Employees can also give their points directly to the people they feel deserve the points. "When a project is completed, the points pledged to that project are divided among the people that contributed work based on a breakdown decided by the project lead," Rosedale said. "At the end of the quarter, earned points (those gained through pledging) are paid out as a bonus, with the value of the points being based on the company's profitability for that quarter." But is this consensus-based management working, given that growth at Linden Lab is flattening and residents frequently complain about bugs in the system? Rosedale noted that the company is profitable, and that it is still growing -- even if growth is slowing.

"It's hard to say whether we're doing what we should be doing," Rosedale said. "The challenge is that nobody else is doing what we're doing. Our business continues to be one that is very durable and very successful."

He said the virtual worlds industry as a whole is in its infancy, and cautioned against attaching too much significance to fluctuations that are basically random noise. Virtual worlds will be hundreds of times more popular than Second Life is today, Rosedale said.

Everybody Will Be In-World

Rosedale said the company is unwavering in its vision that virtual worlds -- not limited to Second Life -- will become universal, and the incoming CEO will have to share that vision. "We will use computers to access virtual worlds even more globally than we do the Web today," he said.

Virtual worlds will become more popular than the Web because you don't face as many language barriers in a virtual world. Web pages are naturally segregated by language -- if you stumble on a page written in a language you don't speak, you're lost. But in a virtual world, you can teleport to an area dominated by another national group, and just walk around quite naturally. "Just like in the real world, if you don't know the way, you can ask someone -- statistically, every third or fourth person speaks English," Rosedale said.

Likewise, many people worldwide still find the Web and computer interfaces confusing, whereas a virtual world use the same three-dimensional cues that we use to navigate the real world, Rosedale said. It's true that the Second Life interface is difficult to learn at first -- but once you've learned it, you can learn everything else you need to know about Second Life just by traveling around and talking to people.

The Burning Man Connection

Burning Man was a strong influence on Second Life. Wagner James Au, a Second Life blogger, journalist, and author of the recent book The Making of Second Life, has told the story several times about how Rosedale visited the Burning Man event early on in the history of Linden Lab, and was so profoundly moved by the experience that Rosedale based Second Life on Burning Man.

Burning Man is an eight-day festival of 48,000 people held in the middle of the Black Rock Desert, 120 miles north of Reno, Nev., in late August. It features massive public art displays, free love, and generally wild behavior -- kind of like an annual Woodstock for the Internet culture.

Rosedale said he attended in 1999 and, while he didn't base Second Life on Burning Man, he realized that many of the same attitudes that were prevalent at Burning Man would also be widespread in a virtual world. "I didn't set out to make Second Life like Burning Man. I just realized it would probably net out that way," Rosedale said. "I was struck by the fact that people were willing to make social connections to each other. Just standing there in Burning Man, you are willing to talk to people that you would never talk to just standing on a street in New York or San Francisco," Rosedale said. Like Burning Man, virtual worlds would allow people to rapidly build relationships. In particular, Burning Man had three qualities which are duplicated in Second Life, Rosedale said.

First, Burning Man and Second Life are purposeless -- like the Internet. The Internet can be used as a tool to get a job or get a date, but the Internet itself has no inherent purpose. Similarly, Second Life has no inherent purpose.

Second, there's a sense of danger: Burning Man is physically a frightening and deadly environment. It's the desert in high summer. Temperatures can be over 100 degrees, or bone-chilling cold. The dry air promotes dehydration. The elevation is 4,000 feet, which means sunburn is more likely.

Third, roles are symmetric. There are no spectators at Burning Man or Second Life; everyone is a creator, everyone is a participant.

At least two of those qualities -- purposelessness and danger -- are frequent criticisms of Second Life. People log in and can't figure out what to do, and so they don't stick with it. And, while you're not going to die of exposure in Second Life, the user interface is intimidating, which drives people away.

Rosedale agreed that Linden Lab has to do a better job of working with content providers to make it easier to make content accessible to new users. But the platform itself has to remain purposeless -- like the Internet. And Linden Lab is also working on making the user interface more friendly.

But can Second Life can become business-friendly and mainstream without losing some of the essential craziness that makes the environment attractive for present day users? Conversely, will people trust a platform for business that's inhabited by so much eccentric behavior that Second Life is home to?

He said he thinks button-down business and craziness can co-exist in Second Life, so long as the platform itself remains neutral, with tools for feeding both cultures.

"I think you could have asked the same question about the early Web," Rosedale said. Parts of the Internet became safe for business, but not all of it. "The Internet still has a functional personality that's similar to what it was in the 1990s."