makingsecondlife-hc-c.jpgLast week I interviewed Wagner James Au about his new book, “The Making of Second Life: Notes From the New World.” Today, here is my review of the book. The Wall Street Journal published this review today and with their permission we’re making it available here in case you didn’t catch it. (I left it in their respectable style with honorifics).

Catherine Winters hit a bad patch about five years ago: The young Canadian woman, a high-school dropout and temporarily homeless, was squatting in a condemned building in Vancouver. And yet, despite her bleak surroundings, she regularly found herself in a rich world of staggering variety. Having salvaged a computer from a Dumpster and repaired its broken fan, and with a soup can to snag a wireless Internet signal from a nearby office building, she escaped her neighborhood’s menace by stepping into the three-dimensional realm of the nascent online community Second Life, where it didn’t matter whether she had running water or a proper bed.

As Wagner James Au reports in “The Making of Second Life,” Ms. Winters, navigating through Second Life in the persona of her 3-D “avatar,” a punky girl named Catherine Omega, was busily putting her computing skills to work constructing the buildings and streets of the site’s first city. Second Life users, or “Residents,” as they’re called, are responsible for everything that happens within the virtual world — from playing games and making friends to buying property and fighting wars — but the site itself is operated by Linden Lab, the San Francisco-based brainchild of Philip Rosedale, a former chief technology officer of RealNetworks.

Since launching Second Life in 2003, Linden Lab has seen the site’s population swell to about 600,000 active Residents world-wide — this from a pool of 20 million registered users. A basic membership is free, but premium memberships, which enable users to “own” land, cost $9.95 per month (an annual premium membership is discounted to $72) and furnish them with an allotment of “Linden dollars” that can be spent on virtual goods and services on offer from fellow Residents. Membership fees and income from leasing virtual land to Residents are the primary sources of Linden Lab’s revenues.

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As Mr. Au notes, despite Second Life’s quick rise, Linden Lab struggled to monetize its popularity — a plan in 2003 to deduct Linden dollars from the accounts of users who built excessively was met with what amounted to a tax revolt. “Tea crates the size of apartment buildings floated in the rivers,” Mr. Au writes of the revolution. Billboards and signs were “bristling from homes and lawns and street corners: ‘Born Free — Taxed to Death!’ ” Virtual buildings were set alight. The company soon relented.

In Mr. Au’s fascinating account of the rise of Linden Lab and Second Life, he interweaves anecdotes so improbable — catching a wireless signal with a soup can? — that you have to remind yourself what’s real and what’s not. We meet a real-life black woman who discovers that she’s much more popular in Second Life as a blond white woman; another woman suspects that her actual boyfriend is carrying on an avatar-to-avatar fling, so she hires a virtual detective to spy on him. Mr. Au knows the virtual turf of Second Life: He was hired almost from its inception as a sort of embedded journalist, operating as a bearded, bespectacled avatar named Hamlet Linden, whose role was “a cross between historian, ethnographer, and sole reporter of a frontier-town newspaper.” Mr. Au left Linden’s employ to write “The Making of Second Life” but continues his online reportage on New World Notes blog as Hamlet Au.

He has witnessed a remarkable corporate story as Linden Lab’s online environment attracted not only users but also companies eager to reach them. IBM, Toyota, NBC, Reebok and other businesses maintain Second Life outposts that Residents can visit — and perhaps be impressed by the quality of the creative effort on display. Or not. Most corporate sites lie dormant, Mr. Au notes, “except for a jolt of visitors during special events.”

The story of Second Life is one about serendipity and dealing with it. Because Linden Lab’s project was the first major attempt to design a world where users could create everything (competitors these days include Active Worlds and There), its early days were filled with mistakes and false starts — not least the tax revolt that Mr. Au deftly chronicles. But even before Second Life launched, it wasn’t quite clear what it would become. Linden Lab’s founder, Mr. Rosedale, envisioned Second Life as a simulation of the natural world, but Chief Technology Officer Cory Ondrejka wanted it to function as a game-development platform. When they set the first user loose inside Second Life, neither one predicted what she would do: build a beanstalk that climbed into the heavens.

By contrast, Linden Lab might have guessed that Second Life users would create genitalia so that their avatars could engage in cybersex in the dark corners of the gentlemen’s clubs they built, but how quickly things got racy was a surprise. How much sex goes on in Second Life? About 18% of the land is dedicated to “mature activity,” Mr. Au reports, and about 13.6% of the Residents say they engage in virtual sex regularly. Inevitably, there’s a nerdy side to the raunch. “I once interviewed a top stripper who liked discussing Ray Kurzweil and transhumanism with her clientele while she disrobed,” Mr. Au writes.

Clientele? That brings us to one of the hallmarks of Second Life: online commerce. The Linden dollar at first seemed a quaint concept but soon took on an economic life of its own. Users began creating goods for avatars (clothing, vehicles, houses) and selling them for Linden dollars, which can be bought and sold for real-world currency (the exchange rate holds fairly steady at 270 Linden dollars to the U.S. dollar). As of April 2007, the company reports, Second Life economic activity averaged the equivalent of about $1.5 million a day in U.S. currency.

But Mr. Au’s book isn’t a guide for making money in Second Life. That subject was covered by Daniel Terdiman in “An Entrepreneur’s Guide to Second Life.” Mr. Au is more interested in the inhabitants, and he offers some keen observations, such as his description of what he calls “mirrored flourishing.” That’s what happens when virtual achievements help in the real world. One beneficiary of mirrored flourishing is Catherine Winters, whose Catherine Omega avatar become so renowned as a Second Life builder that she was hired in 2006 by a Web developer in Vancouver as the company’s Second Life coordinator. Ms. Winters has her own apartment now, she tells Mr. Au. “It’s in a good part of town,” she says. “It’s pretty tiny, but it’s clean and all mine.” Second Life, second chance.