Financial Analyst Calls Second Life a Pyramid Scheme 334
Petey_Alchemist writes "Silicon Valley gossip rag Valleywag is carrying a story about Second Life being a new spin on the old pyramid scheme.
The article, which consists mostly of selections from the report of financial consultant Randolph Harrison, suggests that not only are most people deceived about the amount of money they can make in Second Life, but also about how easily they can withdraw it. It says 'Like the paid promotion infomercials that run on CNBC, sadly SecondLife is a giant magnet for the desperate, uninformed, easily victimized. Its promises of wealth readily ensnare those who can least afford to lose their money or lives to such scam in exactly the same way that real estate investor seminars convince divorcees with low FICO scores to buy houses sight unseen with no money down.'"
Can't the same be said about the stockmarket? (Score:3, Insightful)
Re:Can't the same be said about the stockmarket? (Score:5, Insightful)
No, because the value of a company's stock is based on real assets, liabilities, and income: all of which are easily translatable to real money, and which commonly pay cash dividends. This is commonly referred to as liquidity- the ability to transform whatever type of investment one has made into actual cash. The article asserts that transferring money from Second Life 'assets' to real-world cash is much more difficult than people are being made to believe, and that the only way to make money is to pass off those 'assets' to some other sucker.
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No, because the value of a company's stock is based on real assets, liabilities, and
That would be the so-called "book value". However, many healthy companies are worth much more that their assets...
income:
This is a more realistic source of value. Value is based on income versus risk. However, even here, many companies are/were tremendously overvalued (no way the company's income (even future income) could justify the share price), especially during the period before the bubble burst...
...the only way to make money is to pass off those 'assets' to some other sucker.
Re:Can't the same be said about the stockmarket? (Score:5, Informative)
Okay, I realize that you are simply making snide comments about the value of traditional investment vehicles, and that I might be feeding a troll here, but I am simply explaining the argument the analyst takes in the article, which you seem to not have read or are ignoring altogether. It does not matter what you think of the stock market, etcetera. The analyst has stated clear, identifiable criteria that differentiate the stock market and what they regard as a market in Second Life. You can dismiss the value of trading ownership in a company, but that doesn't change the fact that it is different than what the analyst claims is happening in Second Life.
Roughly speaking, a Ponzi scheme is one in which the perpetrators make false claims in order to lure investors. Once they have some investors coming in, they begin to pay back the earliest investors in order to create hype and garner more investors. People make money in ponzi schemes, but only by being at the top of the pyramid. What separates a Ponzi scheme from an actual market is that in an actual market, the items being traded have value outside of the system itself, and that access to liquidity is therefore available at levels other than the top. The article claims that because cash exchanges and the corresponding exchange rates are controlled by the people at the 'top', they are the only people with the ability to achieve substantial liquidity, and therefore, to make any money. This is why they say it resembles a Ponzi scheme more than an actual market.
Differences in valuation and perception are what make the stock market work, and why people make and loose money speculating in the market (and in other markets and industries as well). You can pay too much for anything, be it a stock, a pig, a bushel of corn, or necklace with fake diamonds you find on ebay. That doesn't make the market a pyramid, because those things have value outside of the market itself, and can be transfered independently of the market place. On the other hand, in a pyramind scheme, the items traded generally have all of their value because of the scheme itself, not because of their value to the outside world, and access to liquidity is not independent of the people who sold you the item.
This is simply false. Shareholders not only control the company, determine who gets serves on the board, and other items of fiscal policy, but they have very well-defined avenues of legal recourse. Not only that, but the company itself has no control over the valuation of its stock other than how it presents its performance to the outside world. Which once again, is strictly regulated. Once again, you may have issue with the way that the stock market works, but it is clearly different than the way that a pyramid scheme operates. TFA claims that all access to valuation is controlled (and manipulated) by the people at the top to their financial gain, and the detriment of others, and you can make snide comments about how the stock market operates, but it does clearly operate in a manner different than that of a Ponzi scheme.
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Okay, I realize that you are simply making snide comments about the value of traditional investment vehicles,
Well put. Actually, I was just trying to make a first post. Of course, once the people took that FP seriously, it was very hard to resist the temptation and run with it... ;-)
... in the article, which you seem to not have read or are ignoring altogether.
Well, if I had read the article, I would have been unable to get FP.
That being said...:
Roughly speaking, a Ponzi scheme is one in which the perpetrators make false claims in order to lure investors.
Well, that also happens in the stock market, see the recent article about spam-based pump & dump schemes.
This is simply false. Shareholders not only control the company, determine who gets serves on the board, ...
Correction: majority shareholders control the company. Small-time investors are out of luck most of the time. And yes, the larger inve
Re:Can't the same be said about the stockmarket? (Score:4, Insightful)
>> order to lure investors. Once they have some investors coming in, they begin to pay back
>> the earliest investors in order to create hype and garner more investors. People make
>> money in ponzi schemes, but only by being at the top of the pyramid.
> So, you mean like the stock market?
No, more like 'Social Security'.
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But... my barber is wealthy...
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Not for a long time. Most do not pay dividends, and their value has little relation to any actual assets a company might have.
Stocks are like baseball cards: pieces of paper with collector's value.
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Stocks are like baseball cards: pieces of paper with collector's value.
Re:Can't the same be said about the stockmarket? (Score:5, Insightful)
Investors can be stupid and investors can be lied to. That does not make the entire pursuit worthless, nor does it mean that we have a better system. Hwang Woo-suk, the Korean scientist the forged his stem cell work, was payed very well, given a lot of funding, published in major journals, given academic support, and more.... up until the revelation that he was forging his work. So does this mean science is bad? No. It means that people are people and any human system is bound to have liars, frauds, crooks, etc. The trick is to pursue them to keep the great majority honest.
I wouldn't completely disagree with you here, but all institutions have the same kind of problems as they're staffed by people. We don't have a better alternative. It's better to allow people to under and over-react than to not allow them to react at all. In general the market prices things fairly efficiently -- the fact that it is very hard to beat the market consistently demonstrates this fact.
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Heh. That's RICH.
Stock valuation might be based on that if you're talking IBM or GE, but unless it's one of the stocks on QQQ or one of the NYSE blue chips, you're not investing against that- and the valuation is based on a lot of things utterly unrelated to the things you mention. Working the stock market (or any securitie
Re:Can't the same be said about the stockmarket? (Score:4, Informative)
Re:Can't the same be said about the stockmarket? (Score:5, Insightful)
Currency gets its value thanks to simple acceptance.
Re:Can't the same be said about the stockmarket? (Score:4, Informative)
You are correct in at least one respect: if you ask anyone why they accept dollars as payment, they answer is always: "because other people will take it as payment". But isn't this fundamentally a house of cards? ("I thought you were watching the kids." "But I thought you were watching the kids!") With no *separate* reason to value them, we're forever exposed to the risk of the value quickly evaporating (cf. hyperinflation).
However, based on what I've learned about the Fed, large financial institutions expect it to sell its assets for dollars if the dollar drops too low, in effect, propping it up that way. It's like this: let's say I get investors to give me 100 silver ounces and I issue them 100 notes redeemable for a silver ounce (ozAg). But then, let's assume I suspend convertibility on demand. Can the notes still have value? Yes, if people expect me to buy them back. Let's say on the market, merchants start demanding more than one note for an ozAg. Well, then I can dump my ozAg's on the market at the prevailing price. If the price of an ozAg on the market stubbornly refuses to return to exactly one note, then I can buy back all the notes, and keep the extra silver as a profit. And merchants won't let that happen.
So yes, it's possible for dollars to have value, even if they're "unbacked" like in the above, as long as people expect the central bank to do what's necessary to keep its value up. Once that stops
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Actually, it's quite possible for dollars to have value, even in the complete absence of a central bank. See this article: http://www.mises.org/fullstory.aspx?control=1595 [mises.org]
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It's true that the Fed can print money without having extra assets to back it up, thus devaluing it. But as long as people *expect* this to happen, interest rates will be such that by holding your money in a money market account, it will grow and erase this effect, right?
And again, I'm not trying to justify government control of the money supply. I'
What people don't know about the US Dollar... (Score:2)
Stop and think about what one thing that everyone in the "first world" countries want that is a natural resource...
That one thing can only be bought with ONE currency. You can't buy it in Euros, Francs, etc.- only in US Dollars.
Once you realize this, many of the things that the US does and have done over the years snap into clarity.
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What are you talking about? Neither the article nor the post you replied to said anything about the value of the US dollar. The point is that if there were really a market for exchanging SSL and USD, as claimed, then there would be some price that represents the relative value of these two commodities that is "simply accepted", in your parlance. It doesn't matter what these v
Re:Can't the same be said about the stockmarket? (Score:5, Insightful)
True enough -- but it is trust in something that has a certain reliability. Anyone who accepts US dollars in exchange for real goods is trusting that the US government will behave a certain way. That's a reasonable article of trust -- it is not the act of faith that some imply it is.
Trusting the government of Weimar Germany to behave similarly would be an unjustified act of faith.
Same for US treasury bonds. The buyer of such bonds is trusting that the US government will not default on the necessary collection of taxes and repayment of mature bonds, and that the US economy will not crash bad enough to be unable to make such payments. That too is a justifiable act of trust.
Of course we all disagree over just how justifiable that trust is. The world's collective estimation of our trustworthiness is expressed in the interest rate that bonds fetch on the open market. Trustworthy countries get to pay lower interest rates on their bonds; risky countries pay higher interest rates... just like any consumer loan.
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Re:Can't the same be said about the stockmarket? (Score:5, Informative)
Except that if you rely on luck for your stock picking, you really need to get out of the market. No, really. Day traders and the ignorant make the jobs of real investors much more difficult. Not impossible, and really not even less profitable, just more difficult.
On the other hand, if you do your research, long term investing in well run businesses with good financials has far less risk and higher return than almost anything else you can do with your money.
Re:Can't the same be said about the stockmarket? (Score:5, Insightful)
Arguably the dumbest 'smart' statement I've seen on slashdot in a while. The reality is that without day traders and the ignorant, things like heuristic trading schemes set up by large investment banks would be far less profitable. Real investors LOVE day traders and the ignorant, as they are the ones who are giving them money.
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Except that is how the market works now. Apple's stock just dropped like a rock right after they announced their quarterly earnings and they have the highest earning yet. What gives!
Of course... Apple tends to follow a general pattern in which it
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Also remember that the stock market is not about past earnings, but future earnings. It is about expectations.
Now regarding Apple here are the details:
* The Apple stock has been riding high and some took profit.
* Apple is making record earnings, but only in iPods.
* Computer sales slacked and underperformed meaning that Apple is largely a one trick pony show.
Re:Can't the same be said about the stockmarket? (Score:5, Informative)
Actually, that's about as wasteful as day trading. Don't bother figuring out which company is good or bad. Other people are already doing that in an attempt to appropriate value the stocks. It's not enough to know which businesses are good; you have to know which ones are good relative to the price their stock is selling for, which is a much, much, much more difficult problem.
The alternative? Buy an index fund. They simply track the relevant broad market (large cap, small cap, foreign, bond, whatever). They don't have to pay for research and they don't rely on a manager's hunches.
No, this isn't sarcasm. Anyone not trying to sell you on a manager's stock picking ability will tell you the exact same thing. Slate has a great series going on now detailing this: see here [slate.com].
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Almost correct. The stock market need the gambling fools to trade, because that generates the fees they live off ("they" now being the stock exchanges and the investment bankers and brokers, not "the market", which is everyone).
Roughly
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Second life is too unregulated. Also the stock market has a goal of developing wealth for the investor. The same isn't true of second life. Second life has a very high overhead for infrastructure (sims) and they have other economic forces that make ridiculous things like camping chairs profitable for their owners.
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You mean like First Life? (Score:3, Informative)
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WoW! (Score:2, Interesting)
It's not easy to make money in your First Life either, therefore, real-life must be a pyramid scheme. Damn you, God, you sly bastard!
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The bottom edge of the top 5% sorted by income isn't obscene -- I think that is somewhere around $300-$500K USD per year. It's hard to dismiss the value of a $500K CEO whose wheeling and dealing keeps two hundred other people employed at $40K+ each -- that's $500K propping up $8 million in salaries.
Now, the bottom edge of the top 1% is g
But it's a pyramid scheme with... (Score:5, Funny)
Daniel
Other Pyramid Schemes (Score:4, Insightful)
My stock shares of Coca Cola must be a pyramid scheme because (accounting for inflation) I paid more for them than the person before me, and he paid more for them than the person before him.
The Dow Jones Industrial Average (12560.56 at last glance) must be a pyramid scheme because it represents people selling stocks for more than they bought it for. It's going to crash, I tell you.
Scientific research might be a pyramid scheme because many successive discoveries rely on knowledge gleaned from past discoveries.
Why is it that insufficiently educated journalists can point to value-added commodities with accusations of the P-word for the sake of sensationalism? Has it ever occurred to them that "Pyramid Schemes" are neither illegal nor unethical as long as something of value changes hands, and especially if that particular something can be developed or improved? It becomes morally wrong when that something in question changes hands with an artificially inflated price that does not properly demonstrate its commensurate worth. Whitewater could be thought of as an illegal pyramid scheme. Ponzi's operation was an illegal pyramid. "Make Money Fast!" was an unethical pyramid, albeit not illegal.
There are many legitimate operations that can be thought of as a pyramid scheme, but if one starts thinking of them that way, please refrain from thinking the P-word is a bad thing.
Solomon Chang
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The article's point is not that the economy within SL is a pyramid scheme itself, but rather that "withdrawing money from the Benchmark-backed virtual world is about as hard as cashing out of a pyramid scheme". In particular, he's referring to the all
One born every minute... (Score:3, Insightful)
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we live in a fiat economy, the chinese discarded it a thousand years ago, the problems they had then are rearing their ugly heads yet again, with the same end result, more than likely.
http://en.wikipedia.org/wiki/Fiat_currency [wikipedia.org]
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That is correct, but some objects have little or no intrinsic value, because they have no utility. In the city of Ahmedabad, Gujarat, India in the 19th century, there was heavy speculation on a currency that was printed by no bank or government. Its value mushroomed and then collapsed. The Tulip Bulb Mania of 1630s Holland is another case. At least the tulips were pretty,
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Except a programmer usually works in an environment with well-defined and stable social and economical rules. They have reasonable certainty that, if there is demand for their product, they will be able to sell it on a market with an enforced system (however imperfect) that protects their ability to do so.
As long as you treat Secon
Just like first life.... (Score:5, Interesting)
The same adage works in both worlds: "If it sounds too good to be true, it usually is."
I've spent considerable time in SL, and have spent a grand total of $20 in my time there. I've made small amounts of in-world cash through various jobs. I tune out the scammers in SL just like i do in RL.
Anyone that gets scammed like this (in either world) deserves to be parted from their money. Anything we can do to make stupidity painful (or at least expensive) is OK in my book.
Re:Just like first life.... (Score:5, Interesting)
You must just love it when grandmas who have only just discovered the internet lose their life savings to PRESIDENT UBUNTA OF NIGERIA.
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If not, well, there's your problem. The stupid is not located within Grandma, it's located within anyone that allowed Grandma within 15 feet of a computer with Internet connectivity before educating her (or at least attempting to.)
Again, conventional wisdom applies.. "If it sounds too good to be true, it usually is." I would hope that someone with grandchildren would at least be familiar with the concept.
Re:Just like first life.... (Score:5, Insightful)
Blaming the victim is trait that has become more common in the average American. Most educated people would agree that this common sentiment is not a good trait to have, and many say it's a sign of our increasing callous attitudes and selfishness, but what is the cause?
It has been proposed that one cause of victim-blaming is the "Just World Hypothesis". People who believe that the world has to be fair, may find it hard or impossible to accept a situation in which a person is unfairly and badly hurt for no cause or reason. This leads to a sense that, somehow, the victim must have surely done 'something' to deserve their fate. Another theory entails the need to protect one's own sense of invulnerability. This inspires people to believe that bad things to those who deserve or provoke it (Schneider et. al., 1994). This is a way of feeling safer. If the potential victim avoids the behaviours of the past victims then they themselves will remain safe and feel less vulnerable.
Supporters of this view (once referred to as "Job's comforters") must perforce accept that to do otherwise would require them to give up their belief in a just world, and require them to believe in a world where bad things -- such as poverty, rape, starvation, and murder -- can happen to good people for no good reason. The cognitive dissonance in doing this becomes too great, and results in victim-blaming.
So BVis, what do you think is wrong with you that makes you think this way?
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The world isn't fair. Once you accept that and take steps to be responsible for your own safety and your own actions, you'll do a lot better.
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This isn't even remotely true, as a staggering amount of bizzare, yet successful, law suits will tell you. I'd argue very strongly that the opposite is true.
Pouring hot coffee on your lap while driving? Not your fault. Being raped by some creep you met on MySpace? Clearly MySpace is the one to blame. Some punk shoots some other punk? Clearly violent video games are to blame.
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You're not wrong, in the sense that there are plenty of people who suffer from that "Just World" problem. But using it as a method to attack anyone who judges another at fault for failing to apply even the most basic thought to a a significant action does not require that you subscribe to the Just World hypothesis.
People who subscribe to that will blame another for what essentially constitute random accidents - a car hits yours when you had right of way - why didn't you do a defensiv
Re:Just like first life.... (Score:5, Interesting)
[rhetorical]Why does the internet have anything to do with this?[/rhetorical]
If grandma received a letter in the mail from the PRESIDENT UBUNTA OF NIGERIA what are the odds of the scam working? I would say it's less likely to work with snail mail based on purely nothing other than I think that since the internet is much more convenient and "magical". It's almost effortless to for people to just click reply and think, well, it can't hurt.
A previous landlord of mine, who I figured was quite intelligent (he did have a phd in geology and was a professor) received a friendly note from our friends in Nigeria. He mentioned it to me and I explained to him how the scams work in detail. He said he was going to try seeing what he can get out of it, since some guy from "Canada" (since it's not Nigeria it's okay right?) had contacted him. Four checks came in with the sum of about 100k, he cashed them. I told him to not do anything at all, don't send these guys money, ever. Few weeks later he stopped by my place and said: "I'm sorry, but, you were right, I'm in the hole 300k. I've made arrangements with the bank to start repaying the money". The bank actually managed to recover all of it eventually (he had wired some people money and then the Nigerians withdrew even more). I can't believe he was actually thinking about just paying the bank back over 40 years.
I really don't know if it's just pure stupidity or not.
Why shouldn't he? (Score:2)
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It would appear on the surface that Capitalism will inevitably lead to a highly oppressive society where rich people rule over large masses of poor people. But it is not true. Proven scientifically.
Robert Axelrod of Univ of Mich, showed, based on simulations of Prisoner's Dilemma problems, how cooperation emerges due to purely selfish reasons. He showed that nice, forgiving, non-en
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Purely unregulated economies dont' work. But there's more to a society than the economy.
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So long as greed and materialism exist, socialism can't work. And I don't see those going away any time soon.
Wait, why am I reasoning with an AC? Seems like anytime anyone suggests replacing greed with altruism someone screams "socialist."
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Probably more like Vegas than pushy realitors (Score:5, Insightful)
Second Life? (Score:5, Interesting)
Compared to other online communities or games, Second Life is miniscule.
"...only are most people deceived about the amount of money they can make in Second Life, but also about how easily they can withdraw it."
Yeah. Right. The reason people start playing Second Life is because their First Life is boring or sucks. Not because they "heard how much money they can make off it."
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I think that you are right about the majority of people using Second Life, but I personally know people who do Second Life for a living.
There are people who hear stories about making money from Second Life and pick it up for that reason, but I think the point that the article fails to get is that it is not the creators of the game saying it.
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It's more due to the fact that Linden Lab (the company behind Second Life) hired a really good PR agency [lewispr.com] that packaged the story up with a bow for reporters [valleywag.com].
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Valleywag seems to be mounting a 1-man crusade against Second Life right now. They either generate or publicise pretty much any negative news about it they can. As to the rest of the news industry, well, journos like to talk about it because it's basically unique and the idea is a bit sci-fi.
Deceived by whom? (Score:5, Insightful)
Never in the game's help files or the blogs I read did it talk about using this thing as some huge income-generator. It's a game, and I find it pretty good at being a game. If on the other hand I wanted to work and make money I'd get another job.
This "OMG MONEYS!" hype seems to be confined the more sensationalist news outlets which I don't really take as gospel, and some third-party stuff. From my own short experience playing the game the actual financial rewards appear, just as in real life, to come to the people with the skill, time, and wherwithal to put into making stuff other people want to buy.
So who is doing any deceiving here?
Re:Deceived by whom? (Score:5, Insightful)
These people are only fooling themselves, making money in SL requires time and effort just like in real life. If you want it to provide income, you're going to have to treat it like a job. A job in a bizarre and very unpredictable economy, but still a job.
The really sucky part about this whole phenomena is that as these people gain publicity, their clout with the SL developers grows, and so the whole setup starts shifting in the favor of those who treat it as a job, at the expense of the majority, who treat it as some sort of a game. Linden Labs needs to be very careful with how they balance those two sides, because if all the "gamers" leave, then the bottom of the economy falls out, and all those virtual moguls won't be able to save SL.
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I think the article misses the point that people put actual value into virtual items. Heck, the entire online porn industry is built on this (all you get are some bits that happen to represent naughty images with no resale value). The thing is that they're only focusing on land
Crap (Score:2)
Quick, someone make a Thrid Life!
Ads (Score:5, Funny)
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Load of junk (Score:5, Insightful)
He also seems to have no grasp of how the currency exchange system works, either you sell automatically at the lowest asking price or price it yourself. Trying to buy and sell currency is worthless due to the fees involved and the relative stability of the market.
Any actual SL business will sell content to people, then cash this out on the official currency market every so often. It's really not hard to make a few dollars with no overheads. He does have a point on the circular nature of the market though, there are very few money sinks and the market is only healthy due to the fact new users are constantly joining.
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Back in '03 when I played SL, I started an in-game "bank". I held people's money over the end of their week so that it looked like they were poor and the system would give them more in-game currency. (It always refills you up to a certain level.) I didn't pay interest, but at one point I considered doing it to build trust.
Re:Load of junk (Score:5, Insightful)
Be Worried About Taxes (Score:2, Insightful)
The press does seem to have some kind of fascination about people making money off it, as they should, but for the wrong reason.
What I think the industry should be more focused on is not the dashed dreams of people hoping to make money in these virtual universes and failing but those who succeed in making money.
If you can turn around and sel
Problems (Score:2, Funny)
And not ONE cheat code has surfaced yet. I ask you!
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Well.. (Score:5, Interesting)
That's just silly. If anything, it's closer to a pure meritocracy than anything - there are some stunningly creative people in there (apparently with LOTS more time than me). There are a lot of things I'd be interested in exploring DESPITE the horrendous lag and 1992 graphics. Hopefully these creative people can sell their work for Linden$ and turn that into cash based on market forces.
At some point, people have to be responsible for their own actions. It's 'caveat emptor' for the computer world, which itself is capitalist Darwinism that is essentially no different than any OTHER non-computer capitalist mechanism.
If I enter 2nd Life with no knowledge of what I'm doing, and expect to "make ton$$$ of money!", I'm probably going to waste my time (and if I'm stupid enough to spend real money, I'll lose that too). How is this ANY different than if I buy a franchise restaurant without knowing anything about the business, or start day-trading stocks knowing NOTHING about the market? In every case, my ignorance will cause me to make mistakes (at best) or even be exploited by more savvy actors (at worst) but either way, the ending will not be happy for me.
In that sense, 2nd life is no different than the real world.
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It's not like a pyramid scheme in any way shape or form.
I have my own reasons for hating Linden Labs (customer service, especially) but call it like it is.
SL economy is not a traditional economy (Score:4, Insightful)
I think a lot of people have failed to realise some things about the economy of Second Life. Unlike our real-world economy, the world of SL doesn't have the same economic limits and drives that we're used to. If we do look at what's really going on there, we can see how things might change in our "real" economy in the future - and I don't just mean trying to do the same old "real" stuff virtually:
Now, the only real reason for any money in this game is for people to be able to buy items from other people that have created. However, if this system were to be abandoned in favour of, say, a FOSS-like model, people would simply make things that they enjoy creating, freely distribute them and likewise obtain items that they like from others without need for any financial exchange whatsoever. There certainly are many people already in SL who just give their creations freely without seeking any real payment other than a simple "thanks".
There is no reason that this shouldn't happen other than we're quite used to dealing with a capitalist system based on scarcity. If we ever hope to grow beyond our current real-world economics, it's certainly worth trying to experiment with alternative systems virtually.
Re:SL economy is not a traditional economy (Score:5, Interesting)
People in SL won't abandon the economy for a "FOSS approach", and I say that as an OSS advocate myself.
The thing is that no real cash would actually make SL a less impressive place. Let's suppose you want for whatever reason to look like your RL self. Right now you can hire an artist who will tell you what sort of photos they want of you, and will then create textures and clothes in the right shape. They get cash, and you get to look like yourself.
On the other hand, who will bother with that in a pure "FOSS" environment? It's tedious work. The same way, OSS does badly in areas like accounting packages. Working on the kernel is interesting. Writing code for dealing with some obscure tax regulation is boring. Making some random guy's nose look just right is boring.
Yes, people can and do release all sorts of things for free. Say, avatars. But who wants to be cybergoth #12342? All of them would look exactly the same. If you want to look unique there are only two things you can do: make it yourself (which is hard unless you're skilled), or get somebody else to make it. And so far we haven't come up with a better way to motivate people to make custom stuff than paying them for it.
Bullshit (Score:5, Informative)
SL is simply an environment capable of connecting buyer to seller. You provide a service: drawing a custom picture, making a custom script, building something, the buyer provides the cash. This way of doing things simply CAN'T be a pyramid scheme.
Banking in SL is stupid - that I can agree with. People in SL simply aren't patient enough to handle a sane interest rate. Most people work with amounts like $5 USD, which they consider significant. Only maybe 1% of all people in SL works with amounts of money where a 5% interest would amount to something. So SL banks offer really insane interests, possibly operating as a Ponzi scheme. I haven't used any SL banks, but my feeling is that they're very unreliable.
Calling all of the SL economy a pyramid scheme is bullshit though. If you act as a scripter/artist/builder for hire you can make some money without problems. Build something pretty, put it on sale, and if people buy it, you get cash.
Now, indeed, you won't get rich in SL very easily. Earning say, $10 or $20 in SL is easy. Earning something approaching a real income is very, very hard. It'll take dedication, an impressive quality (there's tons of competition), selling things much below what they'd cost in the real world (meaning, what you get per hour of scripting is probably noticeably below what you can get per hour of coding in your country). Through all of it, you'll have to be your own programmer, marketing department and businessman, because involving any more people makes it even less profitable. Through all of that you have to contend with that everything in SL is intangible. With no materials other than perhaps hosting costs for things that require external servers, anything you offer for cash, somebody else could offer for free.
Now, despite all this, I'll say that selling things in SL can be a very nice experience, despite the low income you get from it. At least for me personally having something I made byself get used by several hundred people and personally hearing feedback gives a much nicer feeling than being a faceless drone in a corporation, even though the corporation pays a lot better.
KoL Addiction (Score:2)
Ha! Tell me about it!
I am a victim of Kingdom of Loathing addiction. It's a web-based MMORPG in which you pick a class like Turtle Tamer or Seal Clubber and fight a variety of foes to gain items and skills. Sound familiar, huh? Well KoL takes it to a whole new level of abject, life-destroying addiction:
-- Real-world buying and selling. KoL gear routinely reaches 15 or, for the rarest items, even 30 dollars on ebay! Just trying to keep up with high-level characters can result in a second mortgage or ev
It's a game! (Score:4, Interesting)
I got into SL a few months back mostly out of curiosity. I didn't buy into the hype being generated by the media and checked it out because I was intrigued (as I have always been) at the concept of virtual realities. I was always a big fan of Gibson and the Cyberpunk novels in general and so I already had a "primer" in the thoughts behind virtual worlds.
Now, SL is not perfect. Not by a long shot. It's sometimes laggy, crash prone and buggy... but it IS enjoyable. I have friends I made through SL whom I probably would never have met in RL. I used to get on IRC a lot about a decade ago, and this provides similar interaction in my opinion. I enjoyed IRC because at the time I lived in East London, and getting on IRC provided me a way of meeting and communicating with people all over the world. Although now I've not logged into IRC in 7 or 8 years some of those same people are still my friends, and they were instrumental in helping me when I decided to move to the US 10 years ago. I don't predict I'm going to make another similar move, but SL provides me with the same sense of community I got back then.
Now, as far as the pyramid scheme thing goes... please! Take a look through secondlife.com (the official site). Although the idea of selling your creations or renting property is discussed, it's not plastered on the main page "Make Massive $$$$$$ Now" or something like that. Linden Labs for all their faults are selling SL as what it is; a virtual world, a community and a creativity tool. If you are creative enough and good enough with the built-in building tools, then you can sell your wares to others and make a little cash. I know some people who do this and make enough in-world L$ to "shop" occasionally. Sometimes they even make enough that they can "own" a small plot of land and have their monthly fees covered by their sales. I have never known anyone personally who makes a massive profit. In that regard, it's more like real-life... if you have a marketable skill (avatar building or building models of ships, houses, furniture etc.) and know how to market it properly you can make some in-world money. If not, you won't. It's that simple. There are no more huge opportunities to make "phat cash" in SL than there are in real life. The only advantage of SL is that it's still a relatively untapped market if you're creative enough.
Hell, I make some L$ in-world by creating real art. I draw, sometimes ink and paint... then I upload a texture and map it onto a simple prim with a nice frame... voila... one saleable item that people will buy to hang in their property. I don't make much, but I cover expenses... and I get to keep the original
The media has created the pyramid scheme, not SL... and certainly not the majority of the denizens of that virtual world. They're the ones selling the idea that you can get rich quick in SL... Linden I don't think has ever claimed that. Oh, and the SL "millionaires"? Have you seen the exchange rate of L$ to USD? An SL "millionaire" probably has as much in their "bank account" (read that as SL account) in real world $ as I do in my bank account. I am not rich... in fact there are months I juggle bills like everyone else. Plus, I have to note that there were probably more scams being thrown at me in IRC 10 years ago than I have seen in SL. It's just the media ignored IRC because it wasn't "cool" to be geeky back then. The same things have happened... they just have an extra coat of polish and eye-candy.
Tulips anyone? (Score:2)
All I hear about in the popular press is Anshe Chung, Anshe Chung, Anshe Chung. These give you the distinct impression there's millions to be made, easily. If anyone has experience to the contrary, lets hear it...
Nothing to see here, move along... (Score:2)
Poor Judgement costs money (Score:4, Insightful)
I am sure I am missing out, but lots of people have GIVEN me things that I assume cost someone money at some point. That of course dilutes the value of the investment. The pay back probably involves social status, similar to potlatch societies where whomever gives away more is the 'wealthiest'.
Clearly the actual issue is how to convert ANY of that into real value, in a way that economists can equate either directly or analogously to real world value, such as income or return on investment.
What this article does most effectively is highlight the lack of support for predictable commerce. The same is true in countries with unregulated financial systems, and the factors of anonymous commerce, no legal system, and essentially no reliable contract, means that the only commerce that is effective for most people involves commerce in which there is a low stake, which means that actual use and accumulation of wealth is both hindered, and less valuable.
This is a vending machine economy. Its based on a million players putting in a quarter in a slot machine, or buy a new outfit, face, body etc... Things that are specifically part of the online environment (playing with toys or enhancing your visual representation)...
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Second Life really is more interesting because it is the equivalent of a Graphical MUSH where all the users have the ability to create items. I can create any number of items, and give them away or clone them. A good item may be worth something but since any good item can be reverse engineered and distributed at no cost, there is little value to developing quality code except for social praise. Real designers and coders actually can earn good livings in the 'FIRST WORLD' so most of what you see is toys made by people for fun, which makes alot of sense.
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Last but not least, its a crappy environment for real development. It is harder to output text in any meaningful format. Thats an intentional crippling to force people who want to create content to have to pay to input graphics, rather than write code to actually draw graphics. Pretty regressive considering the direction of the web, which enables REAL commerce and has created a good amount of wealth.
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When SecondLife stops being a scam, and supports real internet technology and openness, perhaps it will also draw the kind of mindshare that will create real value and an honest marketplace, but that is a different economic model. For now, its mostly a place to play john and whore and part of that means paying, and if that happens to let your one dollar turn into 250, then the game seems more exciting. If a grown woman and parent of two actually believes that earning 185 dollars a month for being a whore and a mule for money laundering is good money, then I guess thats what she deems herself worth. Hard to argue with that sort of capitalism.
and this is different from real life... how? (Score:2)
Proper pyramid schemes also require more th
I don't know much about the game... (Score:2)
If that's the case, I can't really consider it a pyramid scheme because that wouldn't be the primary selling point of the game. If it *is* the primary selling point of the game then the author's argument i
Yes and no (Score:3, Insightful)
The Linden is just another fiat currency. (Score:2, Interesting)
"In economics, fiat currency or fiat money is money that enjoys legal tender status derived from a declaratory fiat or an authoritative order of the government."
It should read: Fiat currency is money that is backed by the trust in the promise that goods will be delivered in exchange.
Neither the Euro nor the "modern" Federal Reserve Dollar are backed up by anything but promises, they are fiat cur
Examples of a Pyramid scheme (Score:2)
Call me libertarian, but I'm having a hard time seeing how this is any different in concept from banking in the real world, albeit much higher risk -- you get a small rate of return, the banks take a cut by using the combined saved money of their customers as assets to invest and reap higher rates
Warning: small novelette ahead (Score:2, Informative)
The problem is that they are "investing money" into lindens and hoping the exchange rate changes. Linden Labs as specifically "pegged" the linden to the dollar. I track it and it usually has been consist to about 1000L for abojut $4/US. Lindens are strictly controlled, it is not easy to just make large amounts of linens, ( I know I have tried :) ). Most of this is planned, they hired an economist to help control the economy. Linden labs makes $.30 US on each buy and about 3.5% on each sale. Sales of linde
Banks have to build trust (Score:2, Interesting)
This is not a sign of a pyramid scheme, it's a sign of underdeveloped institutions. It happens in most societies which are first developing banks and stock markets. (Shouldn't a finance writer remember John Law and the Banque Générale?)
Banking institutions develop in roughly three stages.
First there's the banks-disapp
Re:Now on computers! (Score:5, Insightful)
Re: (Score:2)
No, the (state) lotteries are far worse. They are more heavily advertised, they are designed specifically to allure to poor people and they do fool many, many more people. State lotteries are nothing but a terrible (but shockingly effective) tax on people with poor math skills. This correlates pretty well with just plain poor people, unsurprisingly.