Game talkDoomcasting SL

 Posted by (Visited 5526 times)  Game talk
Feb 222007
 

Randolph Harrison is back, with another detailed post questioning SL’s economic viability. This one has even more graphs.

You may recall that his last article alleged that Second Life is a Ponzi scheme (I discussed it here). This time, he moderates the rhetoric a little bit, considering it instead a HYIP, or high-yield investment program. In theory not all HYIPs are necessarily Ponzi schemes. But in practice, they tend to be.

I haven’t dug into the numbers he presented very much, but I’d caution very strongly against using the standard population metrics of registered users as any sort of unit by which to divide or multiply. Unique users will serve as a better baseline.

In any case, the real thing I want to respond to is his tone of outrage over his reception by the virtual world blogosphere. The thing that I, at least, responded to negatively is his accusation that in effect Linden Lab is knowingly conning users out of money. Calling an entire product a Ponzi scheme is effectively that accusation. I don’t think that is the case.

That doesn’t mean that I, or indeed many observers, think that it’s wise to sink your money into any virtual world and expect to cash out a profit. :) For better or worse, central-server worlds run as businesses are about operators making money off of users — there’s lots of ways to do it and means of indirection, but that’s the bottom line. Whether or not users can transact amongst themselves is almost beside the point; all the worlds mint digital assets (currencies, etc) and they all persuade users to cough up cash in order to acquire more of these digital assets. In fact, in all the worlds, users do transact amongst themselves — it’s just approved of or not by the management.

When users transact amongst themselves, it’s always the exchange of one user’s labor for something the other user considers of value. Basic economics here. One guy gold-farms, the other gets some plat/adena/whatever. One guy raids endlessly, and eventually another guy gets a nice sword. One guy labors over the prim forge and produces a cool chair or avatar or set of pixelated genitals, and the other guy gets another pile of bits in their database record. Whether or not the labor is “creative” is really beside the point; indeed, whether or not the user retains ownership of the digital bits is also kinda beside the point, as far as a macro-level analysis goes.

Fundamentally, the value of all this stuff is propped up by the value that the buyers attach to their presence in the virtual world. It doesn’t matter whether it’s a game world or a social world. The only thing that matters is whether the buyers find it emotionally satisfying. In that sense, Randolph is exactly right when he says Second Life is a game — if the users aren’t finding it sufficiently entertaining in some fashion, they will depart, and the accumulated value they have acquired will plummet. This is why departing users are so often willing to sell or give away stuff worth theoretical thousands on the open market.

In this sense, all virtual worlds are “Ponzi schemes.” If you assume that no world will grow eternally, then any world you buy into is going to be a losing proposition. You will eventually get bored of it. If you are late to the party, there will almost always be fewer people there to buy what you want to sell. The increased richness of the world over time will mean that most early-acquired digital goods will be of less value than the latest and greatest.

The mistake here is to see the value as an investment. It is, but it’s not an investment intended to provide a monetary return. We’re dealing in the currency of attachment, the investment of emotion. Bottom line, that’s where the lasting value lies. Trying to make a buck off it on the side — enh, possible but not likely, and also not the point.

That’s why posts like this one are far more of a risk to Second Life than currency collapse.

  28 Responses to “Doomcasting SL”

  1. Ya but, as Randolf goes through so much trouble to point out, LL and the other proponents are busily hyping that it is ‘intended to provide monetary return’. Take out all the BS and he and a lot of other folks would stop complaining.

    I am sorry that in this age where ads for natural male enhancements and diet supplements are perfectly acceptable, and that corporate spin seems far less a sin, to a plain old everyday guy like me, a lie is a lie is a lie.

    The posts aren’t the threat. The original lies are.

  2. That toothpaste guy’s post was hilarious! He wrote up the typical experience very well of griefers who dress themselves in an ugly naked avatar look and fly into people’s spaces and grief them. It’s the typical stuff from the typical noir narf-narfers of that age and demographic. His post will only make 20 of his friends secretly try SL and try to find the scripted furry phallus.

  3. @Raph

    Curious question I had last night, and this relates to your point:

    Has anyone ever designed a game where there WAS NO currency, what I mean here is litterally a game where players attach value based on VW economic efforts (of course this would require limiting resources to create value)

    Great take on the article btw

  4. If im not mistaken there was at least one that was 100% barter.

    AC?

  5. …and the other proponents are busily hyping that it is ‘intended to provide monetary return’.

    And to a plain old everyday guy like me who is both a proponent and has ridiculed companies attempting to use SL as anything other than an R&D platform (i.e. a money sink but with a non-monetary return: understanding a different kind of user interaction), I consider this sort of inaccuracy another lie. Unfortunate that both sides can’t be more careful in their choice of words.

  6. ATITD has no currency, although players are able to create their own. There has never been very much RMT in the game and issues of backing and finite world life have probably helped to limit the success of the few attempts. In now the third telling, all trade is barter with limited use of trader based script (prepaid credit).

  7. Has anyone ever designed a game where there WAS NO currency

    A Tale in the Desert intentionally has no currency, and the world size and warp-rules make barter a little bit difficult. I designed it this way on the notion that if a player finds a single thing he is best at, and is able to progress fastest by doing just that one thing and trading for everything else, he’ll burn out faster. If there’s a (time) cost to trade, he’ll still trade for things that he really doesn’t like doing, but the list of things that he does will expand.

    People do self-regulate more than I had anticipated, and so over Tale 2 and Tale 3 I’ve added things that make trade easier: More methods of travel (chariot stops), easier methods of communicating (regional chat), with others in the pipeline.

    FWIW, ATITD does have a facility where players can invent their own currency by printing Scrip using a Mint. Scrip is a piece of paper with a denomination and name on it. The system only assures that the names on Scrip are unique to the Mint they were printed on. (IOW, another player will not be able to counterfeit your Scrip.)

    Getting other players to value your Scrip is left as a challenge to the would-be banker. (Some have succeeded, BTW.)

  8. If im not mistaken there was at least one that was 100% barter.

    AC?

    No AC had currency. However a lot of the commerce took place in items that took on currency like status e.g. shadow shards and sturdy iron keys.

  9. I learned a valuable lesson my first go around with the Second Life faithful. Second Life is not a game to many involved. It’s more of a cult. I attempted to honestly engage all of my critics. Unfortunately, I learned that such is a wasted effort when dealing with the blind faith that afflicts Second Life True Believers.

    I’m surprised he didn’t realize that going in. I’m more surprised that he thinks there’s only one cult.

  10. That toothpaste guy’s post was hilarious! He wrote up the typical experience very well of griefers who dress themselves in an ugly naked avatar look and fly into people’s spaces and grief them. It’s the typical stuff from the typical noir narf-narfers of that age and demographic. His post will only make 20 of his friends secretly try SL and try to find the scripted furry phallus.

    “That age and demographic”, if you read to the end, turns out to married (probably therefore at least 20+ years old) and tech-savvy.

    Testing boundaries of a social space upon initial login is very standard, in any online community. Players are innately psychopathic in any environment – they don’t know the social rules of an online world – and will remain so until they decide that those social mores are worth learning because the environment is worthwhile. Second Life has a harder time teaching those rules because there is so much freedom, that the rules end up being cultural (no fatties in our sex clubs!) rather than enforced by TOS.

  11. That toothpaste guy’s post was hilarious! He wrote up the typical experience very well of griefers who dress themselves in an ugly naked avatar look and fly into people’s spaces and grief them. It’s the typical stuff from the typical noir narf-narfers of that age and demographic. His post will only make 20 of his friends secretly try SL and try to find the scripted furry phallus.

    Labeling him and writing his critique off as unimportant or significant of an unwanted demographic ignores the fact that there are millions of other people that would ask some of the same questions. It’s a bit closed minded in my opinion. People use virtual worlds for their own entertainment in their own ways and no single way is “superior” to any other way if the game mechanics allow the entertainment to be had. Oh and soon the 20 year old you categorize as “mature”. To each his own when the game allows it, I say.

  12. @Damion

    “That age and demographic”, if you read to the end, turns out to married (probably therefore at least 20+ years old) and tech-savvy.

    Thats pretty much right on target, further, while early adpotors might drive usage and evangalize the quality of the enviornment, growth and sustained (ESPECIALLY SUSTAINED) economic stability depends on those uncouth but tech saavy newcomers. Of course this is apparently forgotten by those who distain the unwashed masses of noobs.

    Prok those “noir narf-narfers of that age and demographic” have the fattest wallets btw….

  13. Any non-convert to SL is a griefer, apparently.

    It is, as Randolf mentions, a cult.

  14. I feel i must comment further on one of Raph’s statements:

    The thing that I, at least, responded to negatively is his accusation that in effect Linden Lab is knowingly conning users out of money. Calling an entire product a Ponzi scheme is effectively that accusation. I don’t think that is the case.

    But advertising it persistantly and incessantly as an arena in which to make money (which their PR hype is all over) indicates that they are indeed trying to get people to spend money on a promise of making money. They try to sell those people “land” and their token/currency/whatever it is this week on that basis and that basis alone.

    If we assume that they’re not merely Rose(dale) coloured spectacles then they must surely have access to the same data that Randoph has and that Clay Shirky acquired and shared with everyone. Anyone with half a functioning braincell can clearly see from that data that the likelihood of making a living inside Second Life is vanishingly small, statistically speaking. Copybot and other such innovations reduce it still further.

    If we think that Linden Labs is operating in a blissfully unaware vacuum then your stated belief is just fine. If we think they KNOW that only a tiny percentage of players will make money in Second Life but persist in selling their product on the basis of it being a medium for financial gain, there is very definitely something highly suspect if not downright unethical going on.

    Come on, Raph. I know it’s easy to think the best of people you know, but look at the marketing and the endless PR puff pieces. Look how it’s selling a product in which you too can be gazillionaire! Are you knee-jerking away from the possibility of knowing malpractise or damning them with the faint praise of really stupid marketing?

  15. Jimminy Biscuits. We’re at this again…

    Zero: To set the stage, I am NOT an SL cheerleader. Frankly, I think its chances of long-term success are limited by its ability to let people have decent hair without spending money or learning to do really complex things with 3D modeling software. That being said…

    One: I love how at the same time, Randolfe makes the claim that SL doesn’t have an economy, and then uses detailed (and, to me, incredibly confusing) real-world economic reasoning to prove that the economy is in trouble. It’s not an economy. It’s a game/entertainment-platform with some economic features. As such, using the same tools to analyze in-game economic goings-on as are used to predict RL economics is, I think, odd at best.

    Two: Calling SL a “High Yield Investment Program” instead of a “Ponzi” or “Pyramid Scheme” is like saying, “I didn’t call your sister a whore… I called her a hooker.” It’s basically the same flippin’ thing, in a slightly different coat.

    Three: As I’ve said before, the one thing you need to look for in ANY accusation of a Ponzi or Pyramid or (New Defamation! Now with 3000% more graphs!) HYIP is that there is no underlying product or service that offers any value. The heart of the scam is that all the money goes to supporting the scam. In SL, most of the money goes to… I don’t know… Let’s make a crazy guess here… servers? Linden salaries? And, for the few people at the top of this so-called fraudulent world of dark intrigue… the primming of more virtual stuff perhaps? There is some “there” there. Call it a VW, a game, a pass-time, a hobby, masturbation… whatever you want. But in almost all the fraudulent schemes that keep getting compared to SL, there isn’t anything approaching a product, unless it’s a booklet on how to continue the scheme.

    Four: If we use the number of residents Randolfe accepts — 200,000 — and look at the SL stats for the economy, we see that less than 3,000 people are making more than $100/month on the platform. Now, if you’re a Doomcaster… this clearly spells out the evil inherent in the system. See! So few people are making money at the system… it must be a scam. Or… not. How about this alternative hypothesis: so few people actually give a fat rat’s ass about making money. It’s a game/platform with some economic features. Why does Linden tout them? Because *all companies* tout their unique features in their marketing. Jeez… what are they supposed to do? Say, “Never mind the fact that you can make some money in SL. Try to play it like a sucky WoW-clone instead, which would be a lousy experience that we never designed it for.” Here’s my take on the numbers: If only 1%-ish are using the economic feature at any kind of level where you could buy groceries… it can’t be a Ponzi/pyramid/HYIP. At least, if it is, it really really really sucks as one. Because you need some decent base of people making decent dough to prove that it can be done to the noobs. It’s right there on the SL economy page. And if you look at the oft deflated number of residents provided by Linden — now up to 4 million — and compare it to number of residents pulling in anything like a real income — let’s call it US$500 or more… you’ll find that only 934 residents are earning that much. Which works out to around .02%. Not 2-percent. Two one-hundredths of one percent. So… Linden is evil for publishing grossly exaggerated gross user-base numbers… and they’re evil for telling people about the possibility that you can make money… and they’re evil for posting the economic stats… that show that the odds of you making more than you could working in a McDonald’s are around 1-in-4,000. Wow. That’s AMAZING advertising for a get-rich-never scheme.

    Five: Randolph continues to just be wrong on so many basic levels about the SL economy, that I wonder why we continue to pay attention, except that he puts so much effort into being wrong that it’s fun to watch the steam come off the graphs. Here’s my faves from this round:

    “Unlike economies in the real world, the Second Life economy is strictly zero-sum. Therefore, every real $1 USD extracted from the game comes from someone who put a $1 USD in, whether directly from new users buying L$, or indirectly through internal “sinks…” Well, besides the fact that RL economies are (in the final aggregate) zero-sum, too (see the Laws of Thermodynamics), it is possible to “extract” money from SL on a micro-level without putting money in. I can join the game for free, perform a service or create an object or a script or texture, charge for them, leave the game, cash out the $LD for $US, and never have paid Linden dime-one. Now, Randolph will (I assume) clarify that what he means is that the $LD that I was paid came from someone who got them from someone who got them from someone who got them from Linden. Ah. Well, yes. In that sense, sure. I would like, then, an example in RL of a business — not an entire economy, please, or the entire freaking planet — in which value on the macro-scale is not zero-sum, by the definition given. All transactions within a business are zero-sum until they leave the business. I buy a stock. Until I sell it, I get no return. I buy a flank steak. I pay the butcher what he charges. When I leave the store, it’s a zero-sum game. I bought meat, I have less money. I fail to see how this is a problem. There is no creation of value external to the system in which it is created; that seems, to me, definitional. No… I can’t use my prim hair in my bathtub in RL. Neither can I eat my stock certificates or sail a cat. Lots of zero-sum games in RL.

    “It is often argued that the Second Life virtual economy does not qualify as a HYIP type of structure because the nature of internal commercial activity largely involves productive endeavors. By productive endeavors they are generally referring to virtual item design and creation. At a detailed level, these are largely graphics design, 3-D computer modeling, computer art, and script programming activities… I maintain this is false. While lower-level players may earn some returns, by and large their investments into the game (both capital and labor) are trapped and not monetizable at fair market redemption rates.” Unless, of course, you qualify the time investment as “game” or “fun” in which case getting it for free or making even $100/month is cheap. Or if you compare it to playing WoW, which has no educational, long-term benefit when compared with the provision of a social, free and robust platform for the creation and distribution of 3D models, textures, scripts and the means to market, share, discuss, teach and generally “do” stuff. Again… if you go into this with the mind-set that “Linden is evil and trying to convince everyone to play SL to make a $1 million and be Anshe,” then, yeah. These activities ain’t right. If, however, you change the framing and say, “Instead of spending 40 hours a week playing a game that is, essentially, hacking elves to bits, and instead of charging hundreds of dollars for a comparable 3D modeling and scripting program, Linden is providing a free platform for people to engage in social VW learning, art, education, entertainment and economics.” Same stuff, different angle. You call it, “not monetizable at fair market redemption rates.” I call it, “free tutorial.”

    “It is unclear how much of a percentage of the virtual economy is driven by these “productive endeavors” versus the online gambling, sex and real-estate markets. The first two are clearly not productive endeavors and likely constitute a significant portion of the internal L$ economy.”

    This is where I just check out. How are “gambling and sex” not “productive endeavors?” First of all, I have no idea where R. gets his info on this section (he doesn’t say). But mainly I just object to the tone and point, both. Regardless of what I or Randolph or anybody else does or does not want to do in SL or any other game/VW space… who the bloody hell is he, or I, or anybody to declare that any legal entertainment is “clearly not productive?” Sex and gambling are not productive? Compared to… what? Slaying orcs? Blogging? Sudoku? Fly fishing? A PhD in 18th century Canadian history? For the love of pete, for most people who play SL, it’s an amusement. And gambling is amusing. As is sex-play. Which means that people will pay for both. They have for thousands of years. To discount the features of a platform that provide for methods of these activities is ludicrous. If you don’t like them, that’s fine. If you want to argue that the sex and gambling trades are dangerous to the long term viability of SL because of possible government regulation, OK. But just calling them “not productive” is… goofy.

    In closing… I really don’t know if the numbers and graphs R. uses points to a decline in overall use or economic health or ill-health for SL in the future. Can’t tell. I really just don’t understand that level of economic discussion. But at the level of “common sense,” he’s lost me.

  16. Gee Andy what’s to say. Pretty long message for you to say:

    * Perhaps you don’t know what an HYIP is. Research them a bit more before making definitive statements. HYIPs are not without merit or product, they are simply financially engineered to produce the same outcomes as ponzi schemes. That’s why they aren’t just called ponzi schemes. If law professors at prominent law schools are still debating how to nail HYIPs, I wonder whereby you come of your knowledge. Maybe give them a call and let them know they’re wasting their time?

    * Using economics and demand analysis to analyze Second Life is not anathema. I have repeatedly clarified my usage, context and meaning of the terms ‘economic’ and ‘financial’. Regardless, most of my methods were more related to demand-analysis and the underlying lognormal stochastic process that defines unique user/login growth, and the relationship between that an the L$-$USD redemption rate.

    * I find it interesting that the same people who decried lack-of-depth on my first article now feign too-much-detail in this one.

    * You may gain some schadenfreude by proxy threatening me with defamation. Quite frankly, I had a Second Life cultist email me threatening to find out where my son goes to school, so pardon me if I rank your snarky lawsuit encouragements humorous by comparison. But congratulations on choosing your company well. Perhaps I should send you his [fake] email address and you guys can pitch in and buy a dartboard upon which to place my portrait.

    Randolph continues to just be wrong on so many basic levels

    (Ironically, you start off with something which are are categorically wrong about. Irony is usually lost on the Second Life defensive squad, though.)

    * Well, besides the fact that RL economies are (in the final aggregate) zero-sum, too (see the Laws of Thermodynamics), it is possible to “extract” money from SL on a micro-level without putting money in.

    See Solow and derivative theories. Real economies are not zero sum. They are also not theoretical physics, and don’t abide by the same laws (because economics is an abstraction). Perhaps you are confusing finance with economics, but then, it’s not I that’s being pedantic. It’s not my place to pretend I could educate you to that fact, but there are no shortage of texts and courses available for your consumption.

    * Internet gambling is now legal entertainment? Perhaps you checked out a bit too early and you missed the past 6 months of Congressional action. Oh wait, it’s not _really_ gambling because the Linden dollar isn’t _really_ money, right? And Second Life is just a game, or not a game, depending upon which part of the argument you’re transiting.

    * Productive is a term of art in economics, which I know you don’t need to study because you already have a solid practical working knowledge of. No, Andy, gambling is not productive. Neither is producing and consuming crack or flipping virtual real estate. Only that the latter *could* be productive if the economy/market/game/whatever-Andy-wants-to-call-it is liquid, open, and striving to become a perfectly competitive marketplace.

    But then, this all started because I attempted to deliver more liquidity to Second Life, only to find out that they didn’t mean “that kind of liquidity”. No, we only want liquidity that flows out of your pockets and into ours.

    Keep on with the common sense though. It will save you from ever having to worry about graphs and charts. And it will ensure that you’re right and all those misguided economics Nobel laureates are just wrong. After all, if you know thermodynamics what more is there to know?

  17. Randolph: Howdy! My comment wasn’t as long as your post, I guess. And I tried to make my points using actual English, rather than obfuscatory terms that (as far as I know) are up for debate even among the rarefied circles of economists that you… uh… circle with. Didn’t mean to accuse you of crimes, any more than (I guess) you accused Linden of crimes. But if you are accusing them of knowingly defrauding customers, isn’t that a kind of defamation? I get no schadenfreude, nor did I threaten anything, nor have I or would I ever take any kind of action similar to that which you describe. Doing so is execrable in the extreme. I believe we can argue, and even do it with some vim and occasional humor and, perhaps, even show some color from time to time, without resorting to anything approaching the behavior you mention. I don’t believe my words here or on TN or on your blog should have led to your lumping me with that kind of nimrod. I am not anonymous, have never been, and while I disagree with you, am not a SL cultist, and you won’t find that anywhere in my mad ramblings. But neither do I find your analysis of their product particularly cogent.

    I said a couple times myself that I didn’t understand the complex economics that you went into, so feel free to beat me up on something I admitted to. If you want to explain your arguments in terms that an average player of the game might understand, that might be helpful.

    It seems to me you’re doing two things at once, and it makes me confused as to which I’m supposed to take seriously, since they happen at the same time:

    1. Prove that SL is a fraud of some kind
    2. Prove that it’s going to fail as an economy or economic venture

    All the charts and economic terms, etc., seemed geared at #2. You didn’t address one of my main concerns with your argument, which is that if SL is designed as a fraud, it doesn’t *matter* if it is or isn’t failing as an economic venture. In any kind of fraud (as I understand the term at its most basic definitional level), the idea is to convince people to pay money into a system with the promise of a return on the investment… where the promise is knowingly false. Thus, fraud. A system that simply fails to return a good yield, but where the promise is either unknowingly false or true but then subject to changed circumstances… those are just bad investments. Right? If a company says, “Do X, Y will happen, and you’ll get a return of Z,” and they know that “Y” is a lie… that’s fraud. If they honestly believe in “Y,” and can show that it’s a good faith declaration… it’s an investment. Ponzi, pyramid, HYIP… those are all systems whereby a company knowingly makes claims about a product, system or service to investors when they (the company) know, for sure, that the claims are bogus. Fraud.

    Like I said… you’re using all this RL economics “stuff” (again, that I don’t grasp… please make fun of me some more for not having an advanced economics degree) to prove that a system you don’t think is a valid economy, or is a fraud. Which is it?

    You say: “flipping virtual real estate… *could* be productive if the economy… is liquid, open, and striving to become a perfectly competitive marketplace… But then, this all started because I attempted to deliver more liquidity to Second Life, only to find out that they didn’t mean “that kind of liquidity”. No, we only want liquidity that flows out of your pockets and into ours.”

    Right. You wanted to flip virtual real estate. One, specific type of economic activity. Didn’t work. So… SL isn’t an economy. Except it has to be, in order for you to use all them thar charts that we regular folk don’t understand. Except it isn’t an economy, because it’s zero sum. But it is an economy, because people can use it to commit fraud.

    Look… I’m not saying that many of your points don’t have merit. Whether you want to call what happens in SL “an economy” or “economic” or “somewhat kinda economic” is moot, as far as I’m concerned. It’s like people arguing about whether writing on a blog is “content” or whether comments on a YouTube video count as “participation.” It’s part of the system, and it’s tied into other economic stuff, so there you go.

    What I am saying is that — to me — what Linden is doing is so clearly, in the main, removed from what Ponzi/pyramid/HYIP scammers do, that you have to ram 10lbs of sausage into a 2lb sack to make your arguments fit. SL has been around now for what… five years? And profitable for… what? Ten minutes? And lots of their money comes from VC-style investors, not mom-and-pop scam-target folk. And, as I pointed out above, the volume of their user-base vs. the volume of folks making any money at all is just sadly small for the whole argument.

    I agree that:

    1. The Lindens over-hype the “economic features” of SL
    2. Making a brazillion bucks in SL is “results not typical”
    3. Some people are probably getting hosed who hope to be “not typical”
    4. SL may, in fact, over time crash and burn because its model sucks

    But those four things, taken together, do not necessarily equate to scam or fraud. Occam’s Razor. That’s all I’m sayin’.

  18. So far, i’ve only managed to disagree with Randolph on one thing.

    There’s very little that’s theoretical about the laws of Thermodynamics anymore ;)

  19. I love logical excercises, so please allow me to flex my education…

    Andy Havens:

    But those four things, taken together, do not necessarily equate to scam or fraud. Occam’s Razor. That’s all I’m sayin’

    William of Occam:

    Pluralitas non est ponenda sine neccesitate.
    trans: Plurality should not be posited unless necessary

    Translation is my own so please don’t blame the good Friar if you don’t like my choice of words. Also, please consider the following:

    Aristotle:

    The more perfect a nature, the fewer means it requires for its operation.

    Brother William’s snappy Latin teaches us that positing complications where there is no evidence is a logical mistake. Aristotle’s earlier philosophy indicates that the simplest system is the one which works. This is also well-known to anyone having anything to do with systems engineering since multiple points of failure usually multiple failures and a real bugger of a time tracking them down.

    How can we apply these axioms to the seemingly unrelated case of Linden Labs? Normally, i wouldn’t bother but Brother William has been invoked and he by extension further invokes the Philosopher so let us follow classic Aristotelian principles.

    Let us first sum the relevant data.

    1. Linden Labs have access to all the financial data that Randolph has and more.

    2. Linden Labs insist on using a metric (the Resident) which is utterly discredited by the standards of their peers.

    3. Linden Labs employ a PR company through which they persistently and unapologetically continue to market their product as a means of making money (i could produce relevant cites here but Raph’s space is a factor – if requested, i will expand on this in my own space).

    4. Only a vanishingly small percentage of participants in Second Life will ever earn any significant (let us assume “significant” to mean “self-sustaining in terms of time, electricity, depreciation and benefits”) amount of money from Second Life.

    5. The later a participant began his or her “career” in Second Life, the lower the chances are that they will ever become on of the vanishingly small percentage earning a significant sum of money from their activities within it.

    Those five factors should be sufficient for our purposes.

    Now, the purpose of this excercise is to determine whether or not the likelihood of malpractise is greater than that of ignorant marketing.

    In order to answer this question, we balance those five factors and sharpen the question (to the Razor’s Edge perhaps). Reducing it to its base, the question becomes:

    Qa: Which is the more likely? Are Linden Labs aware of datum #4 and datum #5 or not? Given datum #1, it seems almost impossible that they should not be. It is not impossible that they should not, however should they not the conclusion of gross financial incompetence is unavoidable.

    So at this point, data indicates that Linden Labs are either grossly incompetent or guilty of mis-selling.

    Datum #2 and datum #3 do not alter the conclusions drawn from #1, #4 and #5. That option is not amendable at this stage according to classical logic.

    However… One of our conclusions from Qa explains #1 and #2, the other does not. This is one of Brother William’s unnecessary complications and nothing should be logically inferred from it. It is meaningless unless the corresponding conclusion is true. But since without an investigation of some sort (which given the prevalence of gambling and paedophilia within the product, i expect very soon) we cannot state with certainty whether Linden Labs are criminals or idiots but that they are certainly one of the two, it is certainly interesting.

  20. I spent a year spending money on SL instead of Everquest 2 which my friends from Everquest moved onto.

    I spent it for the entertainment I was getting for logging in- voluntarily, because for the first couple of months I paid nothing. I wanted to buy pointless virtual stuff so I paid for it. It wasn’t an investment with expectations of anything back out. These days I make and sell stuff in SL, and I’m doing ok as it happens. I think I’ve paid for all my previous SL fun from it and more besides. I have friends that I’ve seen start with literally nothing and build successful (as in could be genuine actual living wage successful) content creation businesses in SL. People I knew as week one avatars last year. Nowhere near the tops of any pyramids, and they’re not people who are in the big cliques/circle-jerks/group love-ins that you see either. They just put work in and got the rewards out. Same for me- I kept myself to myself for ages. No real network or exposure or anything, and went from nothing to genuine income in a few months.

    I doubt it will last forever. The coastal towns of England took a real hit when cheap package air flight holidays to Spain etc became economically viable. It didn’t make renting a booth or running an arcade into being suckered into some scheme.

    Picking up on some single instance of someone making basically nothing despite their work is fine, but I know a whole bunch of people who basically had fun in SL for a while then got into making money late last year, and they’re all doing well as far as I know.

    What I’d like to know, if I sell my L$ on LindeX, and someone buys it from me (paying me US$ for it) in order to spend that L$ on one of my products, how is this different to them paying in US$ on SLEX for it, or, I dunno, paying iTunes for a Madonna track?

  21. [...] actually i’m concerned that Raph will moderate me into oblivion and nobody’ll get to see this really quite elegant deductive process In a fascinating thread over [...]

  22. @Randolph

    “Neither is producing and consuming crack or flipping virtual real estate”

    Oh man all these years I’ve been completely unproductive…..thanks for harshing my mello man.

    @Andy

    “Thermodynamics…”

    @Cael

    Quotes “The Republic” provides logical arguements and etc. concluding LL are hoodlums or crazy.

    @Allen

    Decides to take a pass on this debate about the virtual crack smoking land baron Aristotle, flipping Thermodynamics, and positing prime cause.

    Hey, is that a Chorizo burrito I smell? Some things are way more important on a Tuesday morning……/cheers

  23. Second Life, a years old game, is the fourth most visited on Yahoo Games today. All the others in the top 10 are alot newer, if not released this month.

    There are ~20,000 people with “positive linden flow” (lowball)… one way to extrapolate total number of players would be to say there are an even 100K playing. 3.9 million are thinking about it.

    I find Cael’s points 4 and 5 interesting. Does the proletariat have a place earning value in a virtual world? Second Life thirsts for industrialist value, and is evaluated as a platform for such. That’s a difficult road to follow and I doubt they’ll get there. But I think it’s safe to say the Proletariat = Consumers, and consumers ONLY. All of the points about emotion investment certainly apply there.

    SL’s got the middle class SKILLED crafter economy down pat.

  24. Ahem… My reference to thermodynamics was meant to be ironic. At least. Possibly even humorous. Apparently, it failed at both. My apologies.

    As to the good Bruddah Occam and Cael’s treatment thereof…

    You say [and I'll reply].

    1. Linden Labs have access to all the financial data that Randolph has and more. [I agree]

    2. Linden Labs insist on using a metric (the Resident) which is utterly discredited by the standards of their peers. [You now begin making judgments on facts rather than simply stating them, and, in this case, bringing in a statement that, even if a fact, doesn't bear on the case at hand. You're already off the razor. First, though the public in general may equate "Resident" with "active user," the term itself is disclaimed on SL for what it is, and *is* and *has been* widely known in the industry for years as a measure of total, all-time sign-ups. What this has to do with whether or not the economic features of SL are a scam isn't clear.]

    3. Linden Labs employ a PR company through which they persistently and unapologetically continue to market their product as a means of making money (i could produce relevant cites here but Raph’s space is a factor – if requested, i will expand on this in my own space). [True. But this is only relevant to the scam/fraud arguments if, in fact, SL is a scam or fraud.]

    4. Only a vanishingly small percentage of participants in Second Life will ever earn any significant (let us assume “significant” to mean “self-sustaining in terms of time, electricity, depreciation and benefits”) amount of money from Second Life. [True... though I would phrase it "...currently earn, nor will probably ever earn..." We don't have crystal balls.]

    5. The later a participant began his or her “career” in Second Life, the lower the chances are that they will ever become on of the vanishingly small percentage earning a significant sum of money from their activities within it. [False. First, you’ve got no data to back this up to the current point-in-time. And I’ve seen nothing to show that current players are making less money now than players did two years ago, which would be the result of your hypothesis, right? Because the scam should go backwards in time as well as forwards, shouldn’t it? Also false because you are making assumptions about the future inside your data, rather than applying a different set of data to support this. You’ve got a razor on a razor here. And I’d say that you are MORE likely to make money now, with 200,000 regular players involved and 20,000 people in-game at any one time and companies spending money to build big marketing doo-dah on the grid than you were 2 years ago when there were 6,000 regular players and 500 online regularly. Or whatever. More people = more money. When/if it starts to go down the loo and the numbers of players begins to fall, and people stop playing, then you can say (as most prognosticators do), “Ah, ha! Now is the future moment of failure I’ve been predicting all along! THIS is the point at which it’s clear it’s a scam, because NOW… RIGHT NOW is the point in time where anyone who gets in is going to get taken for a ride.” Problem is, that’s the same story for any investment. Buy low, sell high. Works in real life malls, too.

    To repeat my point using even more basic ideas, I’d swing Occam’s razor this way with a generic of what’s going on with Linden…

    1. Company has funky new service that isn’t well understood
    2. Press latches on to one aspect of the service
    3. Company beats the crap out of that drum to get good PR
    4. Some customers don’t understand the details and are disappointed

    That happens *all the time* in all kinds of businesses. It’s called puffery. It’s why diets and real-estate “get rich quick” schemes that have a .2% rate of success can be advertised the way they are. “Results not typical.” In Linden’s case, though, you can go to their site and see HOW atypical the results are. I mean, good dog-a-mighty… If you can go to the company’s own site and see that out of their 4 million (bogus) users, or even 907,000 logged in on the last month… less than 300 make more than US$2,000/month.

    On the flip side of that, though… you can see that 3,500 people — still, not a lot percentage-wise, but more than a few nonetheless — made $50 to $500/month. Now… that is not salary money by any stretch, at least in the good ol’ US of friggin A. That is not what you see in those ads on the teevee for real-estate schemes where the regular, folksy couple stands beside their yacht and talks about how, “We used to worry about where our next month’s rent was comin’ from. Now we own nine rental properties and we made over $400,000 last year.”

    It’s just. not. that. C’mon! Check the razor! I read most of the “gushing” press about Second Life. Lots of it is slippery, yes, but lots of it also goes on about what a freak show SL is, how hard the interface is to use, how small it is compared to WoW, how only a few people are making money, etc. etc. And unlike most scams/frauds, there’s just no easy way to dump a huge load of money in one big lump on Linden. Scamming people into playing a game over the course of 6-8 weeks, having hobby income, maybe buying a $1,500 island… it’s all just too much of a stretch for a “scam.” And if Linden’s PR gets too close to the line, someone (probably in California, where all business speech, including PR, is regulated like advertising to a much greater degree) will nail them.

    None of this by means of saying that I have a whole lot of faith that SL’s basic economic/feature proposition is particularly likely to be successful in the long run. I think that some of the things people point out here, and in Randolphe’s articles, are good points. Yeah… yelling about how you can make money at something, when that ends up being a small part of the game isn’t smart. But it’s not a scam/fraud, either. It’s just not great business.

    You *can* make money in SL. It may, as Randolphe says, be a bad idea, from a business perspective, to have a publisher-managed micro “currency” or game currency or call it whatever. Sure. I’ll gladly entertain the notions of “bad” or “dumb.” And discuss those. Neat discussions.

    But fraud? If it’s fraud, it’s one of the dumbest frauds I’ve ever seen. Because the platform necessary to defraud the players is so friggin’ huge and requires so many people who pay so little money (or none) into the system, and allows a decent number of people to actually take money out and is done with (some level of) transparency and so so so so much bloody press. All of which are inimical to truly intentional scams.

    Now… Habbo Hotel? That’s totally an f’in scam.*

    * * * * *

    * More satire. Sarcasm. Irony. I don’t think Habbo Hotel is a scam. My appologies to the very nice, very honest Habbo Hotel people. I chose their service at random to make a ha-ha.

  25. Because the scam should go backwards in time as well as forwards, shouldn’t it?

    I can easily financially engineer a scam that will only “go forwards in time”. Give me some bonds, puts&calls and stock (or cdos and swaps, etc.) and I’ll create a product guaranteed to take your money and transfer it to me. The components themselves are not scams. My “investment program” would be. But, it wouldn’t be a Ponzi scheme because you couldn’t prove my scheme was a scam ex ante, only ex post. Of course *I’d* know it was a scam all along. But so long as I choose my conspirators well, you can’t prove it.

    This type of thinking should keep many a low-grade “hedge fund” investor awake at night.

    My points have been that I strongly suspect, as Cael eloquently narrates, either gross incompetence or “engineered incompetence”.

    As for the media on Second Life as an investment/money-making platform, just do a broad survey. I captured the Reuters SL video prominently displayed on the SL website the other day. 24 separate references and images suggesting or referring to the wealth of wealth opportunities therein. Rosedale himself, on multiple occasion, said things along the line of “sell stuff in SL and pay your rent”.

    The choice of real-estate get rich quick programs is a poor choice of analogy. I’m a bit of a battled expert in this arena. Yes, indeed, most of those things are scams, and many are ultimately prosecuted as frauds and/or pyramid schemes. The Donald himself faces some pretty stiff allegations of a pyramid-al nature right now.

    Oddly, I publicly called the entire NAR a criminal cartel and proceeded to demonstrate myriad antitrust and collusion violations. We’re talking the Glenn Gary Glenn Ross crowd here. And we’re talking a blog with about 300K-500K daily reads (a real estate bubble blog). But not a single threat or hate mail, just some heated comment rounds.

    If nothing else, Second Lifers are just too thin skinned to be convincing as constituents of any real economy. Or, as the sharp razor of common sense would tell me, they sure seem to act a lot like amway/herbalife sorts.

  26. Well yeah… but if you read on, i did leave #2 and #3 completely out of the logic chain.

    Agreed though, they should have been introduced post thesum.

  27. Post thesum? Did i just mix latin and greek in public? I’m sorry, it’s early. Is there any of that burrito left, Allen?

  28. I think the irony is that he apparently doesn’t understand that US Currency works under the same rules – it only has value as much as we all desire it.

    Also, isn’t it illegal for a company in the US to establish a currency with the requirements he demands?

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