Author: Ruby Thelot (@being_on_line)
Editor: Katie Chiou (@katiewav)
Graphics: Mind Apivessa (@mindapi_)
The first virtual millionaire
The cover of the May 1st 2006 issue of Businessweek was groundbreaking.
It featured a black-haired Asian woman donning a red qipao on a yellow background. Yet, it wasn’t groundbreaking because of the individual’s gender or ethnicity, rather because the cover star wasn’t “real”—she was an avatar. Anshe Chung is known as the first “virtual millionaire”, the metaverse’s John Jacob Astor, if you will. Chung, the avatar, was born in 1999 in a game called “Asheron’s Call” where she quickly amassed a substantial fortune, however there existed no way to exchange in-game dollars for fiat currencies or real-world dollars at the time. She saw an opportunity when Second Life (SL) launched in 2003, along with LindeX, their proprietary exchange where players can trade US Dollars for Linden Dollars, Second Life’s currency. Anshe Chung was born again in Second Life on March 26, 2004 and launched her real estate business a few months later.
The business model was simple: buy plots of land in SL, develop them by creating beautiful architectural spaces and rent them to other players. At its peak, the Anshe Chung Studios, Chung’s company, employed more than 80 people in Wuhan and generated over 670 million Linden$ in yearly revenue, roughly 2.5M US dollars at the time.
Upon seeing a land of economic opportunities, albeit virtual, Anshe Chung migrated from Asheron’s Call to Second Life. This is the concept central here: migration.
The essay explores how leaders in the alloverse — an umbrella term for the alternative digital spaces and economies containing the metaverse and the cryptoverse — must showcase how they provide better economic opportunities if they wish to attract workers. Conversely, it details how, historically, migrants have been lured under those pretenses only to find themselves exploited either by incumbents or first-movers. Finally, I want to propose some solutions so that we may avoid the past mistakes.
Why Do People Migrate?
Although humans may not be perfectly rational economic agents, migration is one decision where the homo economicus’ reason really shines. In his 1932 book “The Theory of Wages”, British economist John Hick posited that “differences in net economic advantages, chiefly differences in wages, are the main causes of migration.” This hypothesis still rings through and can still illuminate modern migratory patterns. In his 1969 thesis “A Model of Labor Migration and Urban Unemployment in Less-developed Countries”, the American economist Michael Todaro explained the model as follows: “Workers calculate the value of the opportunities available in each of the alternative labor markets, net out the cost of making the move, compare likelihood of finding employment, and choose whichever option maximizes the net expected present value of lifetime income.” In layman’s terms, people go where they can obtain on a net-basis the best increase income and thusly, quality of life, often even adding a time function factoring the long term increase intergenerationally.
In sum, in order to attract workers who need to depart from their meatverse employment, employers of the alloverse will need to provide a higher net economic advantage to its newcomers, or say it does (the latter is as important as the former). Employers need not simply provide higher wages, but also broadcast the-alloverse-saved-my-life narratives in order to attract more workers. Recruiting is both a marketing and a human resources effort.
My apprehension is based on the unfolding of the crypto-based game Axie Infinity which uses a play-to-earn model. Earlier this year, business news and media bombarded the internet with stories of Axie players from the Philippines and other developing nations playing their way out of poverty. From their smartphones, individuals were able to surpass their usual daily income simply by playing. A shift happens when that threshold is crossed. Play-to-earn here becomes a bit of a misnomer as these players slowly livelihoods depended on the game, making it more akin to work than play.
This model also has a principal flaw, namely that players stop playing when the average daily income in-game falls below their meatverse average. This happened recently in Axie.
“Build It and They Will Come”
In the information age, it is not sufficient to simply build a platform. There is an abundance of alternative options and very low switching costs. Unfortunately, the method to increase stickiness and retention that play-to-earn models have adopted is to increase switching costs through upfront payments. In the case of Axie, in order to start playing the game, one must purchase three Axies, NFT-based pokemon-like characters used for fighting. This creates an economic structure that favors two types of individuals: the already-rich and the first-movers.
First, because the already-rich have a higher amount of disposable income, one of their strategies is to buy rare and powerful Axies and then lease them to less fortunate players for them to level up and breed. They are essentially building guilds or groups of players who lease their means of production (the Axies) from richer players who take a cut from their earnings. This model of income sharing agreement is not native to digital economies, but the affordances of the blockchain make it easy through smart contracts to deploy. One can foresee the problematic nature of such agreements, and how at extremes, they may veer into forms of indentured servitude. One crucial difference here is that players do get paid.
Second, lucky first-movers can also benefit from their position in these digital ecosystems. At the beginning of digital economies, acquiring land, factories, or any other means of production tends to be cheaper because there are less players and thus less demand. Similar to Anshe Chung, who joined Second Life in its first years, early players develop an advantage in their control and ownership of crucial resources in the game ecosystem. Their revenues tend to be rentier revenues, obtained by leasing digital assets to other players. Consequently, they have a vested interest in attracting more players to the space, in order to generate higher revenues.
The American Dream
There’s a certain cyclicality to labour migration in the United States. A region is heralded as the new land of opportunity. Migration is an extremely difficult decision as it uproots families and dislocates members from their communities. The American Dream is one of migration. Stories of success in America are broadcasted far and wide, with narratives that encourage individuals to move. There are many historical examples, the California Gold Rush from 1848 to 1855, the migration of the Okies and Arkies in the thirties, notably told through John Steinbeck’s “The Grapes of Wrath”, and to a lesser extent through the modern migration to California’s Silicon Valley, from 1990 to 2020.
The first two examples are jarring tell-tales. In the wake of rapidly degrading life quality due to environmental crises amongst other factors, crowds flocked and flooded the areas in search of better work. This glut of labour, in turn, created an opportunity for capitalists to employ these individuals at lower cost. Marx calls this concept the “reserve army of labour”. In an unpublished 1847 manuscript, he explains the phenomenon: “The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it, i.e., when the overpopulation is the greatest. Overpopulation is therefore in the interest of the bourgeoisie[...].”
A lot of the money made during these rushes is not in the production of the good itself but in the tools and infrastructure required to produce the good. This is called colloquially a “Pick-and-Shovel” play, in reference to the companies who made fortunes selling these tools to prospectors in search of gold in the California Gold Rush.
Leaders of the alloverse have two main incentives currently: on one hand, increasing the population of theses spaces, usually through augmenting daily active users or daily active wallets, in order for incumbents to generate rentier revenues, on the other hand, broadcasting the potential for wealth in the alloverse and selling the tools required to acquire it.
We are thankfully at the first inning of the creation of these new digital spaces. We as users, players and workers still have the power to alter these incentives. Although Axie Infinity is the third most popular game on the blockchain, they only have 86,000 daily active players meaning there is still time to unseat the incumbents to create better structures where the incentives structure favor distributive economics and labor models that do not pit workers and players against each other.
“L’Union fait la force”
This epitaph, the motto of my home country of Haiti, translates to “United we are stronger”. This idea is the crucial lesson from the aforementioned historical precedents. In 1849, for instance, in the wake of ill-treatment by employers in California during the Gold Rush, a group of carpenters leveraged their numbers and the power of strikes to negotiate higher salaries and better working conditions. A year later, the first union local on the West Coast was created. That same year, wagon drivers in San Francisco formed a political association to get one of their members elected to city council. Union and labour associations succeeded in pressuring the California State Legislature to pass the first progressive labor protecting law — limiting to 10 the amount of hours workers could legally work in a day.
I strongly believe that digital cooperatives — also known as decentralized autonomous organizations — can enable a new era of labour organizing that leverages the union of workers to ensure proper treatment in the alloverse. It is crucial that we implement these structures from the commencement proactively, rather than trying to fix a broken system teeming with injustices retroactively.
The affordances of the Ethereum blockchain allow individuals to band together under digital cooperatives to make their interests known, but also to own their own crowdfunded means of production. For instance, instead of leasing Axies via a Guild run by an owner, workers could coalesce their funds and acquire their own NFTs to play the game.
Lastly, gold rushes can be driven by misinformation or misrepresentation of the actual economic advantages to onboarding on a new platform, new blockchain, etc. We need to build education as a central tenet of the ecosystem and all new ventures. If we care about building a fairer and more just internet, we must empower its users through education.
Knowledge coupled with transparency from projects will ensure that individuals understand the economic models they will be engaged with, their pros and their cons. Platforms should be compelled either through regulation or public demand to share this information. There remains the issue of measuring the efforts to educate the public and to assess the implementation of transparency. Nonetheless, the question lingers: how can a system be trustless when not all information is public and accessible?
We have a once-in-a-lifetime opportunity to build the future of work. Let's do it thoughtfully and let’s do it together.
The future of work is coming, and we are all its contributors.
If these are questions you’d also like to explore, we invite you to become a contributor to the Station protocol or to participate in our research efforts through Newstand, Station’s publication focused on exploring the possibility of work in an era of hyper connectivity and fluidity. Station Newstand is open 24/7 for submissions and experimentations from contributors around the pluriverse.
Special thanks to Mind, Alli, and Michael for contributing to the edits.
Bibliography
- Chung, Anshe. “Press Kit - Anshe Chung.” Anshe Chung Portfolio, 2010, http://www.anshechung.com/media/media_info.htm.
- Glass, Fred. “First Stirrings of the Labor Movement: Gold Rush San Francisco.” California Labor Federation, 23 Mar. 2018, https://calaborfed.org/california-history/first_stirrings_of_the_labor_movement_gold_rush_san_francisco/.
- Kubursi, Atif. “The Economics of Migration and Remittances Under Globalization.” United Nations Economy Meetings, 2006.
- Linden, Maggie. “Buying Linden Dollars & Selling Linden Dollars.” Linden Lab, Linde Lab, 2015, https://lindenlab.freshdesk.com/support/solutions/articles/31000138105-buying-selling-linden-dollars.
- Sjaastad, Larry A. “The Costs and Returns of Human Migration.” Regional Economics, 1970, pp. 115–133., https://doi.org/10.1007/978-1-349-15404-3_10.
- Todaro, Michael P., and Lydia Maruszko. “Illegal Migration and US Immigration Reform: A Conceptual Framework.” Population and Development Review, vol. 13, no. 1, 1987, p. 101., https://doi.org/10.2307/1972122.
- Todaro, Michael. “A Model of Labor Migration and Urban Unemployment in Less-Developed Countries.” The American Economic Review, 1969.