The World Stock Exchange (WSE) is a SL business that tends to garner a lot of attention. As the only stock exchange its role in the financial life of SL is significant. And like any institution involved in finance, contention is easy to find about that institution’s role in the broader community.

First, some context. Luke Connell is an Australian who is known as LukeConnell Vandeverre in-world. He is Managing Director of Hope Capital and runs WSE. Additionally, a virtual World Trade Centre (WTC) has been created, as reported by the Second Life Herald this week. The WTC project has generated a great deal of interest and controversy given the real-life events affecting the New York-based WTC.

We caught up with Luke Friday evening for an in-depth interview.

Lowell Cremorne: To start off, can you give a potted history of yourself?

LukeConnell Vandeverre: I grew up in the eastern suburbs of Melbourne, Australia. I left school at 14 years of age to become self educated after being told I wasn’t allowed to participate in the business and accounting classes due to my age. I spent most of the time from 14 – 18 years of age just finding my way around the world of business, the terms, key areas and reviewing many opportunites that were and still are in the market both nationally and globally.

Lowell Cremorne: So have you completed studies since then?

LukeConnell Vandeverre: I’m self educated with the information necessary to assist me in achieving my goals.

Lowell Cremorne: Ok, so how did you educate yourself in economics / finance / business? They’re not easy areas to pick up.

LukeConnell Vandeverre: I completed most of a university assignment on Ethics and Corporate Governance for a friend studying at RMIT and he said that the work got a D, which at first I thought meant bad but in actual fact it meant that my work got a distinction.

Lowell Cremorne: (laughs) True, it is a distinction. What did you learn about corporate governance from that? Given you’re running a stock exchange, corporate governance is pivotal – what model of governance are you using?

LukeConnell Vandeverre: There isn’t a model for governance, simply common sense and in an emerging market that has in many ways been developed from scratch by myself both morally and conceptually. It has many areas that need to be improved yet, but that can only happen with time as some changes require the assistance of third parties.

Lowell Cremorne: Ok fair enough – what sort of third parties do you envisage will need to play a role?

LukeConnell Vandeverre: Linden Research and myself will have to begin working closely to ensure that the market grows along with the Second Life economy while also minimising the risk of clear in-world fraud.

Lowell Cremorne: That’s the reason I asked about corporate governance – without a detailed approach from WSE aren’t Linden Labs going to be a little concerned on your ability to mitigate risk in regard to fraud?

LukeConnell Vandeverre: Obviously there will need to be a detailed plan however this is a new market and we are still watching the market to see what areas can be improved on in order to draft up the appropriate plan. This isn’t real life and it isn’t a real market and therefore the approach to minimising, preventing and tackling fraud has to be approached differently to real life.

Lowell Cremorne: How do you feel virtual fraud differs?

LukeConnell Vandeverre: Well for a start, fraud is deceit, trickery, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage in a virtual world using a fictional currency.

Lowell Cremorne: Yep for sure – what I’m interested in is your assertion that fraud is ‘different’ in SL – aside from the currency differences, wouldn’t fraud prevention methodology essentially be the same for a company? The reason I’m asking these questions is the central role WSE plays in regard to stock trading in SL – any company or investor will have concerns around fraud, risk mitigation, corporate governance etc and may have concerns that the only security is the claim of a ‘common sense’ approach.

LukeConnell Vandeverre: I have to stress that this cannot be taken too seriously by people as it is a fictional market with virtual companies built on avatars using a fictional currency and therefore the expectation of real life governance within a short time is not possible. It is the investors responsibility to decide what to do and don’t do with their Lindens.

Lowell Cremorne: But given the reporting today of the SL World Trade Centre deal you’ve done – you’re talking significant amounts of real money. And yes, investors do need to make their own decisions, but surely you’d agree there’s no basic security being offered by WSE around governance and the like?

LukeConnell Vandeverre: On the contrary i’m not taking any real world money. It’s Lindens. There is security – we have the WSE Listing Rules to minimise fraud and it has worked rather well, a WSE Constitution which oversees the obligations by companies and the shareholder rights and we have the Terms of Service which lays out the risks.

Lowell Cremorne: Well I won’t dwell on that point any longer then – can you tell me about the WTC deal? It sounds exciting.

LukeConnell Vandeverre: There’s nothing I can really say that wasn’t in the Hope Capital Report or the WTC Press Release. Would you have questions related to something not in there?

Lowell Cremorne: Well, the only one would be the quote from Shaun Altman around not being consulted on the HCL transaction in regard to the WTC – what would your response be to that?

LukeConnell Vandeverre: Shaun Altman did not need to be consulted on this transaction as it is the responsibility of management to make the executive decisions regarding all matters of the company. For example, upon paying Shaun Altman 12,500,000 shares in HCL for his share of the WSE, the existing shareholders at the time were also not consulted however there were no complaints, only support. The dilution of equity was far greater during that transaction than the small amount used to acquire the WTC Project. Shaun Altman didn’t like the WTC Project deal because it made the company less attractive to a potential buyer who decided not to purchase most of his shares after the deal in what was to be a transaction organised off market.

Lowell Cremorne: Ok – in both cases – in RL isn’t it fairly standard practice for the management of a company to at least inform stock holders (via the stock exchange or directly) of their intentions prior to such a large deal?

LukeConnell Vandeverre: The normal practice in RL is to follow the constitution and rules which Hope Capital did.

Lowell Cremorne: True, though the ASX for example has reporting requirements and while I’m no compliance expert, wouldn’t a large deal like that fall within reporting requirements? Let’s use the current QANTAS takeover as a parallel.

LukeConnell Vandeverre: There is no rules for the WSE saying that I had to make any announcements prior to the transaction.

Lowell Cremorne: I have no doubt WSE doesn’t have that rule, I was just interested in the RL / SL comparison and whether you felt that level of reporting would ideally occur.

LukeConnell Vandeverre: You can compare the ASX, SEC, ASIC or WSE however they are completely different and are setup to cater for different markets and environments. RL is RL and this is SL not real

Lowell Cremorne: Let’s move on – what do you hope to achieve in SL in the next year?

LukeConnell Vandeverre: I intend to continually improve the SL operations of the WSE and Hope Capital in order to provide a more realistic trading and regulatory environment that encourages continued growth of the WSE and SL economy through increased economic activity.

Lowell Cremorne: And the WTC project is likely to be Hope Capital’s main RL dollar earner?

LukeConnell Vandeverre: They are completely different investments in order to help Hope Capital Ltd achieve its objectives. The WSE is a far more profitable business than the WTC. Profit isn’t the main focus for the World Trade Centers but rather a strategic acquistion.

Lowell Cremorne: And the strategy behind the acquuisition is?

LukeConnell Vandeverre: The strategy is to drive economic growth and awareness of SL.

Lowell Cremorne: A totally different question – have you had mostly support, resistance or a mix of both to your operation from businesses in SL?

LukeConnell Vandeverre: I’m confident that over 90% of HCL shareholders support my operations and I have many friends and associates throughout SL that also support our operations.

Lowell Cremorne: Do you get many ‘knockers’ in your dealings?

LukeConnell Vandeverre: The major reason for the significan’t decline in the HCL share price is a direct result of the large number of HCL shares sold by Shaun Altman over the past 2-3 weeks. Do you mean am I getting approached with business opportunities in my position?

Lowell Cremorne: I haven’t actually followed the share price, it was more a general question for any business person with a monopoly on how much dissent you receive in-world.

LukeConnell Vandeverre: In my opinion it’s in the best interests of the SL economy to have one serious virtual exchange right now. There will also be a small minority with loud voices who will work against the major corporation in any economy, except in SL they can get their message to more people within a short time. It’s also easier for someone with malicious intent to make false or misleading allegations about an SL company with the aim to have a negative impact on the share price and market sentiment.

Lowell Cremorne: Have you had issues with that sort of thing?

LukeConnell Vandeverre: most prominent individuals, avatars or major companies in RL or SL have such issues.

Lowell Cremorne: True – what would you say to (a) a potential investor and (b) a company interested in listing to convince them they’re making a sound investment decision. Particularly for the investor, how do they know the listed companies have been vetted and actually exist?

LukeConnell Vandeverre: I don’t tell anyone how to invest full stop, I can only speak for myself and the operations I run directly. The investors know exactly the same information as me, what’s freely available in the Avatar profile, what the CEO tells us and what’s registered in the SL groups.

Lowell Cremorne: That’s the core of my question – does WSE do any vetting of companies to determine their abiity to generate returns for shareholders? I know you have an application process etcetera..

LukeConnell Vandeverre: The WSE doesn’t make the decisions of which company is or isn’t a good investment, thats up to the market to decide. The WSE makes sure that companies listed meet the listing rules.

Lowell Cremorne: Ok – I was just getting at the issue of a new investor having faith in the WSE itself – if you end up with a market listing full of unviable companies, doesn’t that affect the reputation of the WSE?

LukeConnell Vandeverre: Yes, however the IPO process will remove most of those companies that people don’t want to invest in 🙂 And I won’t approve IPO applications if there isn’t sufficient information in the application. Determining who is and isn’t a viable business is something that each investor decides, not the WSE as all investors have their own opinions.

Check out WSE in-world

We continue our interview with Gary Hazlitt. Part 1 is here.

Lowell: Could you talk a little about Australia’s presence in Second Life?

Gary: I think it is a very interesting time for web 3.0 and especially Australia which is one of the most remote communities in the physical world. I think there is both a strong camaraderie and inventiveness in the psyche of Australians and it bodes very well for their place in the global, virtual, metaversal grid. I created the first major Australian presence in SL with the AFTRS Island Esperance, and then a private island that I share with 3 other Aussies. It has always been a goal to try to create a larger community of connected islands. Originally the BigPond islands were close to ABC and the two above and other educational institutions were going to come into the mix. That will still happen – it is important to have virtual proximity with such a small population and market. A cluster of Australian islands is important as a foundation and seed to learn from each other and build an Australian community and have brand fights at this experimental stage.

Lowell: What are your aims with your company?

Gary: One thing that excites me most about SL (and this is with my LAMP hat on too I suppose) is to bring producers and corporates into the metaverse and develop a range of cutting edge services that cross-over between virtual and real world forms – in real-time so it is truly reality based. I think the potential for emergent and engaging virtuality cross forms is vast. But we also know that it is vital that the Second Life presence for any company adds that little bit extra to attract visitors which is different from anything that currently exists and give them an experience that they will enjoy. There’s nothing worse than spending time and effort to build a world online and then find no-one visits. So we are a company that spends time in-world to understand its sensibility and not a production agency that has just added Second Life to its roster. I liken SL to a foreign country and you need to be able to speak the language.

To be more corporate about our aims, the focus of The Project Factory is to bring established and trusted brands into this innovative world in a way which captures people’s attention and keeps them coming back. Companies in Australia are looking for ways to attract new customers, build loyalty with existing customers and build communities that bring them onto the world stage. With Second Life, we are able to produce brand experiences that attract international audiences and present an innovative message to customers. There are also companies that are keen to use 3D worlds like Second Life for employee training, internal communications, even basic meeting rooms. We are seeing an increase in interest in this sort of development from major companies. The Project Factory is uniquely positioned in the Australian marketplace as it is able to offer local development expertise, as well as relying on our technical and production network in the UK and South Africa. The Project Factory’s key areas of expertise are games builds, interactive storylines, in-world AI robots and events as part of its service to ensure that our visitors have the different experiences and challenges each time they visit.

Lowell: Can you talk about any future projects you have in the pipeline?

Gary: We are currently very busy with planning many new projects with three or four coming in each week. They range from highly corporate at one end to entertainment and game-like at the other. Of course we will be making sure all the projects we have initiated so far can grow and there will be announcements on that very soon.

Lowell: What are some of your favourite places in SL?

Gary: You can of course check my profile to see what are my favourite places – but these are usually a few months out of date. I have also done a sticky post on my JustVirtual blog called top twenty places in SL (admittedly based on a Channel 4 UK list). Oher areas that I go back to a lot:

Really immersive role playing areas:
City of Lost Angels
Midian City

Nice places to hang and dance
Lost Gardens of Apollo
Elements
Festival

Good recent brand entries
L Word Island
AOL Pointe

Place to play games
Pot Healer Adventure
Games island – footcake, danger zone

and of course recent Australian entrants
ABC Island
The Pond

Lowell: What developments in the SL architecture do you think will occur in coming months?

Gary: Well, regardless of all the anti-hype press and technical moaning I still think LL are still way ahead of many other companies in this space as they have an existing and loyal, persistent community which many others don’t. They still need to move very quickly to a distributed or peer-to-peer server model and begin to scale. I know they are working hard on reducing load on San Francisco and Texas, particularly as most traffic is from outside the US. I’m really looking forward to local Oz servers soon. All of this is being discussed on SL forums. I actually think the open source client will have far less impact than LL moving to a peer-to-peer model, so everyone has small parts of the grid and it becomes much more bit torrent. This actually makes most sense when typical SL users are permanently logged in, I can imagine half a million users all with a half a millionth of the grid becoming the norm combined with a series of distributed main servers that trickle out global updates.

Lowell: What improvements in SL would make your virtual work-life easier?

Gary: Most builders and developers feel limited by the in-world tools. I actually think they make the process much more rapid than it would be if everything was done in Maya or 3DSMax and imported – and I love the collaborative way of working which you don’t get in non-networked, more industry standard tools. But I think a combination of the two is important, particularly to use existing models to start from. When Warda and I were working out the best way to do the Opera House sails out of the scripted in-world building tools (thanks Cadroe Murphy), it would have helped to import many of the existing models – but no import available. From a dynamic perspective it is still tricky to get images from outside ticking into world. Important for events, RSS or up-to-date advertising, so a built in element to the client that uses LibSL to automate sound and image importing. I could go on with a list as long as your virtual arm but those two will do for now.

Lowell: Where can people find out more about your work?

Gary: The Project Factory have a great website and my main media blog has some interesting perspectives on the future.

With the launch of the ABC and Telstra presences in Second Life, Gary Hazlitt (Gary Hayes) has become a well know figure for Australian SL users. He’s managed both projects and built the majority of the content as well. SLOz caught up with Gary to get some insight on the builds done and the ones coming up.

Lowell: Can you describe a little about your background in RL?

Gary: Sure. From an SL perspective I am the Head of MUVE Development at the Project Factory and also the Director of the Laboratory for Advanced Media Production since 2005. Prior to that I have always had positions at the bleeding edge of new service delivery including Senior Development and Producer at BBC New Media for eight years and Interactive Producer in LA during 2004. All the positions have given me a strong grounding in every digital tool there has been, so I won’t list them, and I have found having a range of ‘natural’ skills very useful in SL so my other ‘passion’ areas such as music composer/producer, sound design, professional photography and travel writer have been useful in metaverse development.

Lowell: When did you first get involved with SL and had you been involved with other virtual worlds prior?

Gary: I may be showing my age but I was one of the first to have a personal homepage on the web back in 1994 which had lots of experimental VRML elements and I also linked/joined this to pseudo-3D virtual worlds like Cybertown. In 1995, I joined the BBC as a new media producer as part of a team of 12 at the BBC Multimedia Centre, I did lots of cool projects and worked partly on one called ‘The Mirror’ – six themed VRML virtual worlds that had avatars wandering around talking about BBC videos amongst other things on large screens. A clunky time for virtual worlds but the potential was obvious even then for new cross-over formats. As well as producing many to-air services such as interactive and broadband TV, I worked on several BBC R&D projects (in departments such as Imagineering) looking at artificial life, TV-cross over games and artificial intelligence, many based in shared virtual social networks. I have closely followed the sims revolution, been in and out and back in various MMORPGs and indeed joined SL back in 04 when I was living in Santa Barbara. SL was a quiet place back then and was pretty limited community wise. I rejoined early last year just ahead of the swarm. The Laboratory for Advanced Media Production which I direct also has many projects that utitlise Second Life including Emergence, Inworld and City Games all detailed on the site.

Lowell: Can you give your thoughts about the Telstra and ABC builds – what were the biggest challenges and rewards?

Gary: I can’t talk directly about the thinking behind the Telstra project as you may expect, so will talk about my general approach to 3D immersive social network design and give more detail on the ABC project. The challenge with any build is to make sure the client has prioritised the experience for the user. To not talk about stuff that will be pushed at them (web 1.0) but about what the users should feel and be able to do. It is all about ‘doing’, and doing can take many forms – the most important being ‘creating our own stories’ by socialising in these spaces. So the spaces and specific builds must have character and allow play. Much of the philosophy of my approach for more corporate properties or brands entering into SL for the first time can be found in quite a few posts on my personalizemedia.com blog. A recent post talks about the L Word and AOL and 13 tips for new entrants.

In terms of what my role was on these projects, for ABC I am credited with direction and build. For the Pond project (as it states on the official press release), I produced and developed it. In fact, I built most of what you see in the Pond – having done an audit the other day I worked out I created 21 000 prims of the 22 800 on the islands, but if you had time you could find that out yourself! I did everything (including terraforming and layout) apart from the Opera House and Bridge because of time and also as they were add ons and partly to decorate the race track – which will be the real draw there, eventually. Both of the recent Oz projects are widely reported as being R&D so the investment and expectation are relatively low. The key for both companies is to get as much learning as possible from these islands, and use that to build on for the good of everyone in Australia.

Back to approach. I always begin by saying SL and any 3D MUVE is a social network so what can we bring that will be attractive to users (new and old) and that will develop a community and a sense of belonging. Once you have tha,t any advertising, product or media that you want them to watch will be part of the producer/audience agreement – much the same as ads are on TV – “you give me a good time, I will be happy with your ads”. It is great to see both spaces slowly becoming a ‘home’ type destination for users, but there is a long way to go yet. The old ‘build it and they will come’ needs a good dose of ‘and be around when they do, with lots of events and friendly chat’, so it has been interesting to see how each company has handled its ‘potential’ community.

I advise on the approaches but it does require a people resource to follow through and that is not easy for some companies – but this is not a website you create and leave, so new entrants need to think carefully about on-going community management. I think SLOz has reported a good deal on this issue too. Another issue that is often overlooked, and a challenge for incumbant media companies, is the rights issue. You often hear people say “this and this club are way more popular than here” and the real reason for that is that the clubs and various other big social areas are streaming internet radio or linking to full length ‘illegal’ movies in-world without any recourse to the rights holders. In some cases they are charging inworld for the privilege. Well known media companies cannot do this and have to negotiate rights out of respect for the creators of movies and music but also to not be sued by them. The creators are unlikely to sue the owner of Club X for example as they know it is not worth their while. But moving on.

To make the spaces feel like ‘home’ you need to build depth and an inherent organic, naturalistic feel to the place, which is the thing I get most satisfaction from – creating a space you can explore and always find something new. So it is great to see couples and groups wandering (flying) around areas that don’t necessarily have ‘stuff to see’ but have an atmosphere. It creates a loyalty to the brand that put it there. Also it is about creating personality, environments that have character. I am always surprised at many other corporate builds that are of cities, or whole town centres – they are great to visit once or twice, but you don’t really feel like you could hangout there or call home, I find them rather cold. With ABC particularly, the small team agreed on general ‘naturalistic’ principles and then layered on the other themes such as the alien thing, hidden clubs, odd Australiana structures, part outback, part sci-fi and so on. It was exciting watching this come together. With the ABC project we also wanted to leave breathing space for the community, so we made sure it wasn’t overbuilt – and that comes back to other brands who cover the land with concrete jungles. Many spaces require specific look and feel and function, big dance clubs, meeting areas with screens and so on – these are important too for the education and social aspect, but I have been lucky in both ABC and BigPond to be able to go beyond that in may ways. The real reward for me is watching users ‘be’ in these spaces, learning from what was intended to how they are being used. For instance, the Billabong Bar I knew would be a draw and I worked hard to make that ‘organic’ and it now has as much traffic (albeit early low numbers) as the bridge and opera house combined. To get numbers as high as some of the main dance or established sims (Lost Gardens of Apollo springs to mind) does require an iterative response to how the areas are being used. I hope this will happen.

Part 2 – Australians in SL, recommended spots in SL for new users and future projects.