True financial reform? OMG! Female teens may hold the answer

More rules from outside, more authorities above, less fun. That seems to be the future of financial regulation as it is being mapped out by House and Senate lawmakers this month. The point, presumably, is to sustain American markets’ competitiveness.

But there are other ways to bring players to markets. That at least is the takeaway from omgpop.com, a three-year-old teen game platform Time ranked one of the 50 best websites of 2009.

OMGPOP’s 3 million members visit at a rate of 70,000 daily, spending an average of 260 minutes a month chatting, networking, and playing games. Its games are themselves relatively social — such as a version of checkers and “Draw My Thing,” in which players guess what object a player is drawing, and so on. The site makes money through advertising or when customers use its virtual money, the Coin, to purchase virtual accoutrements.

One of its market advantages is that it attracts more teen girls than other gaming sites, which in turn brings in young male players. Then both sexes are happy and spend time and Coin on the platform.

Websites that serve the under-13 set must comply with the Children’s Online Privacy Protection Act and are monitored by the Federal Trade Commission. Those for youths older than 13, or adults, are checked less.

Still, OMGPOP has commercial incentives to manage customer behavior. Those prized teen girls may be drawn to the lightly provocative names of games — “Fourplay,” for instance — but they eschew bad neighborhoods, games where they encounter a lot of curse words and aggressive behavior, not to mention cheating.

Why Players Exit

When one player types, “I want to rape you,” the female tends to exit OMGPOP. She also may well turn to a competing game, online or in the Xbox.

At first, Chief Executive Officer Dan Porter and his enforcement officer and community manager, Joseph Alminawi, took the Chris Dodd approach to regulation. They made lots and lots of rules, and then tried to enforce them.

The two created a list of banned words such as “rape.” Players commenced saying “grape” for rape. After “grape” was banned players wrote “r4pe” and so on, until the list of banned words reached an unenforceable 9,000.

In addition, the OMGPOP discovered that publicly scapegoating wrongdoers had a counterproductive effect. Once other rogues heard of a vigilante, they didn’t want to shun him. They wanted to join him — even create a tough new gang to hijack the sweet culture of OMGPOP.

Getting Participants Involved

So Porter and Alminawi took a different tack. They involved players in the game, in management, even. Premium members, who have spent sufficient hours on the site, get to test new games, for example.

And, like the New York Stock Exchange before the Securities and Exchange Commission, they tried to get players to police one another. Banning still happened. But management worked anonymously and played on the deep human desire not to be excluded from a desirable tribe.

A typical note announcing a temporary ban reads: “Hey Swiftor! You’ve been banned from the site for a while. Probably because you broke the rules. This might be a good time to take a look at them again. In general, while on OMGPOP, you should be nice to everyone, never ask for personal info, post only appropriate pictures, and never cheat.”

Such lollipop discipline actually worked far better than Spitzeresque policing when it came to reducing infractions. OMGPOP’s staff could then spend time on the more profitable endeavor of creating graphics for new games.

Successful Model

The success of the OMGPOP method makes sense to Magnus Thor Torfason of Columbia University’s Business School. Social pressure works when it “makes the deviant feel like the only deviant in the room,” Torfason says. While not every website is based on keeping teens or girls, every site does have players who long to belong at any cost.

In a paper Senator Dodd might enjoy reading, “My Brother’s Keeper,” Torfason studied an interactive game world called Eve Online. Its participants committed a form of seemingly gratuitous violence called pod killing, the equivalent of shooting the pilot as he floated down in his parachute.

Torfason found that community or tribe was the big determinant for such behavior. If players were involved in multiple communities, they committed fewer pod killings. Isolated players, the Unabombers, committed the killing relatively frequently. So, interestingly, did those who hung with a single group exclusively, a tight pack.

Lessons for Regulators

All this highlights flaws in legislation to overhaul the financial system. The first is that its rape/grape/r4pe method of meticulous, detailed regulation will prove prohibitively costly to enforce. It may, as the Sarbanes-Oxley Act of 2002 did, drive players to exchanges in London or elsewhere.

The second is that the new law may foster even worse abuses than those heretofore seen. “When you have rules that proscribe a number of different behaviors, it can lead to the perception that anything that is not in the rules is acceptable,” Torfason says. As for splashy scapegoating through prosecution, that may perpetuate crime by showcasing criminal behavior for others to emulate.

Finally, the gaming experience suggests that the pack will not be denied. Market participants, or, for that matter, teenagers, will always run with a pack. All a regulator — or a parent — has is some small influence on which pack that might be.

(Amity Shlaes, senior fellow in economic history at the Council on Foreign Relations, is a Bloomberg News columnist. The opinions expressed are her own.)