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In the opening keynote at South By Southwest Interactive today, location-based game company SCVNGR’s energetic “chief ninja” Seth Priebatsch outlined his broader vision of what games can do for the world.

Priebatsch has long talked about putting a “game layer” over the real world, but this has so far been mostly literal. People who have loaded SCVNGR’s apps on their smart phones can engage in challenges at locations they visit, many of which are brief games.

But Priebatsch sees something bigger on the way. The last 10 years have been building technology that adds a social layer to the world, he said. This was all about building a framework to express the connections that people form in the course of a day. Games, Priebatsch declared, will drive “the next decade of human technological interaction.”

Though the game layer is brand new and has not yet been built, he believes it will provide a technological framework for “influence,” since games influence people to take actions through both social interaction and game mechanics. The power that games have to shape people’s actions, he said, is “fascinating, very cool, and just a little bit frightening.”

Priebatsch outlined five problems that he expects game dynamics could address. They ranged from making location-based services more mainstream–admittedly a niche, self-interested concern–to making people feel more able to address global problems such as climate change.

Perhaps the 22-year-old Princeton dropout’s smartest discussion was of how a game layer could improve school. “School is one of the most perfect game ecosystems out there,” he said, noting that it includes many motivated players, a system of allies and enemies, has a captive audience, and a well-developed system of reward and punishment. The problem, he said, is that the game of school “is poorly designed.”

In particular, he criticized grading systems. While they give students different levels to aspire to and a sense of status–both important for game dynamics–they’re also set up so that people can lose. “School is a game where you don’t want anyone to lose,” Priebatsch said.

He argued that grading systems could borrow from schemes that have been shown to engage players more effectively, such as the progression used in games such as World of Warcraft. In those games, players gain experience over time and can progress to playing very powerful characters. However, they don’t get penalized or “leveled down” (as happens when someone gets a failing grade). Adjusting grades to measure progress in a positive way, Priebatsch argued, could focus students on gaining the next level, however long it takes.

Speaking about topics more immediate to his business, Priebatsch also analyzed the game dynamics that aren’t working well for location-based services.

One of the key problems he sees is that the game is too hard right now for most people–it requires special equipment (smart phones), and you can only play if you’re in the right place at the right time. Priebatsch suggested that location-based services could come up with looser requirements, such as allowing people to participate by saying that they plan to go to a location, or giving them ways to engage with a location from afar.

Priebatsch also argued that location-based services have their reward schedules out of whack. “We’re training early adopters to hit a button and get a reward, which is a level of reward that we can’t actually deliver,” he said. For example, he pointed to a Facebook Places campaign that gave a free pair of jeans to each of the first 10,000 people to check in at a Gap store. Such promotions gain attention, he said, but people lose interest when they’re no longer getting rewarded.

Priebatsch has previously told me that he reads hundreds of pages a month of research into games and their mechanics and effects on people. His intensity and rapid-fire conversation style can make for an overwhelming outpouring of ideas. But he’s one of the most interesting people thinking about game mechanics today. His business grounds him in practicalities more than some of the (still fascinating) academic thinkers out there, but his optimism and energy save him from giving the impression of calculating profiteering that can come out of companies like the frighteningly profitable Zynga.

Expect to hear much more from Priebatsch as the game layer develops.

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Tagged: Web, gaming, education, SXSW, location-based services, game dynamics, World of Warcraft

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