Second Life’s John Zdanowski

The CFO of Second Life explains what the online virtual world is all about, and how his real-world company measures and rewards employee performance with the Love Machine.

John Zdanowski, 39, lives in two worlds. He spends up to 15 hours a week working “in-world” as the handsome avatar Zee Linden, who bears a striking resemblance to Brad Pitt. In the real world, he rungs the finances for one of Silicon Valley’s most innovative companies, Linden Lab, creator of the popular 3-D online world known as Second Life.

Not that Second Life is all fun and games. This virtual world has become a petri dish of loosely regulated markets and has begun to pose some profound questions about the meaning of assets, currencies, and intellectual property. A recent financial meltdown inside the Second Life economy had academics, analysts, and “First Life” regulators peeking in to see what happens when virtual crises turn real. From the comfort of his computer, Zdanowski watches it all unfold.

How do you describe Second Life to someone who has never heard of it?

It’s like a game where you’re interacting in a simulated environment with many other people. The difference between Second Life and conventional video games is that the objective isn’t to slay a dragon and the story line is not created by the maker. Most of the content in Second Life is created by our users, our “residents.” You can skydive, you can dance, you can give a presentation.

Describe the work environment at Linden Lab.

We believe in and operate with 100 percent transparency. We publish all of our financial data internally and we have a pretty decentralized approach to decision making. People choose what they work on and how they get it done. We make sure that all employees have lots of information about what’s going on inside the company so they can make good decisions. We have adopted a number of tools to help us with that, including wikis and blogs and a hosted project-management system called Jira. We also use NetSuite, a hosted accounting application.

What are some of your most innovative tools?

The best example is something called the Love Machine. People generally find that, in companies, feedback about performance is top down and negatively biased. The Love Machine is a way for any person to send love to any other person inside the company, with a few words about why. For example, I might send somebody love for taking on more responsibilities or for doing a really good job with a customer or for cleaning up something in the accounting system. Somebody might send me love for being a good mentor or for helping him or her think through a tough problem. We keep track of all that in the database, and it’s all transparent. It becomes an interesting set of data with which to evaluate performance. In fact, we tie it to compensation a little bit. At the end of a quarter, we’ll pay out about one percent of aggregate salary for every love you receive. That translates into about $3 per love. For each employee, it can be a few hundred dollars of thank you.

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