Economic Stats Analyzed

I did some number crunching on the economic stats that Philip posted last week, and came up with some interesting observations that I'd like to share.

Before I present these though, let me mention the 3 assumptions I made.

The first, is that for converting the value of the L$ to US$, I picked US$4.00/L$1000. It made the calculations easy, and is pretty damn close to where GOM is pegging its value as I type this.

The second is that I had to take a WAG, and pegged the SL population at 15,000. This is only relevant to the per capita calculations, but is probably in the ball park.

And the third is that I took the economic figures for the 3rd quarter (from the first week in July through the last week in September), and multiplied by 4 to get an annual result. So it doesn't reflect any specific 12 month period, but is rather an extrapolation of the 13 weeks I looked at.

So... without further ado

Total L$ in circulation : L$124,457,884 (US$497,831)

That's kind of kewl, I think. We have a half million US dollars worth of play money running around.

I next looked at the economic activity. Philip's spreadsheet breaks things out into 4 categories, and its difficult to try and figure out what the different transactions mean. Some "Payments" are money coming in/out of GOM/IGE, while others are payments to vendos. But it seems to me that every recorded transaction reflects some sort of business activity within SL, so I just added the 4 different categories up to get a handle on total economic activity.

Q3 Economic Activity :
Land Sales : L$88,078,796
Gifts : L$159,449,060
Payments : L$316,585,221
Object Sales : L$29,001,967

Total : L$593,115,044

This means that in the 13 weeks studied, we had well over a half billion Linden dollars changing hands. That's a helluva lot of Lindens. And if you consider the fact that this doesn't consider payments "in kind" (e.g. if you write me this script, I'll give you this box full of textures), then this undercounts all economic activity.

Here is where it gets really interesting....

On an annualized basis, the total economic activity is L$2,372,460,176 or, when converted, US$$9,489,840.70.

Think about that folks. We have a micro-economy that is generating nearly US$10M of activity every year.

If you divide that by the estimated subscriber base of 15K, then it works out to a per capita GDP of $632.66. This amazes me!!! We can generate this much "value" in what amounts to a diversion or a hobby for most of us.

To put this in even greater perspective, I found a CIA webpage that ranks GDP by country. Second Life ranks ahead of 6 of the world's countries' per capita GDP. Apologies in advance to any Burundians or Tanzanians out there, but we kicked your butt.

I dunno... I think what we got cookin' here is pretty damn amazing.

- Ace

Very interesting post, Ace. Thank you.

A bit WAGgy

I think payments can't be realistically included, unfortunately. I think I do about 10 million in payments to myself in two hours sometimes just testing things.

Or an 8 player texas holdem table probably goes through about 200-300K in one session.

I think the payments*20% might be a bit more realistic.

However, you should annualize that with growth and see where we go with it

Very interesting stuff, Ace! Thanks for sharing.

I'm not going to argue any of my assumptions. I just simply stated what they are.

If you want to make your own assumptions and draw your own conclusions, then by all means, go for it.

I'm just sharing mine.

- Ace

Isn't that what I did?

Interesting, but I do have some questions. Because it may be more like Burundi than you know, in that elites run the economy without democratic participation, sometimes using brutal force (the right to expel anybody at any time for any reason or no reason), there is no truly free media and transparency of public information, the UN subsidizes a lot of it, and government officials are always taking public funds they should have used for health care, etc.

You took a guess that subscribers are up to 15,000. I"ve seen reports of "more than 10,000" in mainstream media. I wonder why the company can't give these totals frankly and publicly right on their website, a weekly report in a box somewhere on their site. A RL business of another sort would have to tell you the actual customer base to attract investors. It's only in transitional new states that newspapers, for example, won't tell you their real subscriber list figures because they always want to create an artificial bubble of public confidence in their enterprise. Game companies get away with this all the time -- look at how EA.com has refused to reveal their real subscriber numbers and the media continues to use this artificial figure of 50,000. All we have to do is look at the number of green dots on the map, however. There can't be 15,000, even allowing for some variable like only 30 percent log in at any given time. Clubs would be a lot more laggy if there were that many!

You pegged the Linden to a good figure from today, $4.00 per 1,000. But only a few days ago it had plunged down to $3.80 or less. I have no idea if these peaks and troughs are common because unfortunately, we can't see the whole year's statistics at GOM and have to rely on players' memories.

There are so many mysteries in this game, for someone just tuning in, as I am. The Lindens collect LL10 per upload -- and I've enriched their coffers by the thousands at this point. They collect LL100 for me to join a group, and collect other fees. They have loads of Lindens! What do they do with them in that centralized coffer? Do they take them and play GOM like the rest of us? Do they strategically dump 80,000 of their scarfed-up Lindens from fees now and then to lower heated GOM markets and keep the price of the currency artifically in their favor? And come to think of it, what *would* be in their favor, exactly, if people are chased out of the game or away from transactions

Or do they take those "taxes" and plough them back into, say, $500 events grants and weekly $500 stipends? I could be mistaken, but it seems we as the public have absolutely no knowledge of our government's budget -- we're actually worse off than Burundi, which also has UN socialism, but at least the UN knows some of the numbers.

I don't know if I should care if the Lindens play GOM with my tax money, because they keep feeding me socialist welfare packets of LL500 which I can turn around and sell on GOM too.

How and when do Lindens release land into the economy? Who decides? Obviously there's no kind of town planning and zoning board that looks at the economy and tells the Lindens, hey, don't lower land costs and make a new sim that will only fill up with clubs and malls, we don't need that. I'm not sure you could feasibly create such a happy town planning board without limiting freedom.

Do Lindens wait to get better prices on their newly-made land? For example, I stare in amazement at a prized parcel in my neighborhood that is marked "First Land" but which remains tantalizing not-for-sale really for weeks. Somebody told me the Lindens sometimes "give away" land for free here on the forums. Or it might appear some morning at 5:00 a.m. or something and immediately be purchased by a multi-accounted land baron, and re-sold for 10 times its price. Or whatever. But without transparency of land transactions like this, without knowledge about the decisions going into land release and sale, we can't know whether we have an economy, or whether we have state capitalism with a couple oligarchs in cahoots with a kleptocratic state, or whether we really can ever have a democratic and liberal market economy because of the Burundi-like exigencies of our situation -- highly-paid programmers need to keep making our game, and somebody has to pay THEM.

Can I really get excited about burgeoning game economies that suck creativity, time, and energy out of players and enrich game companies and a few hand-picked oligarchs? I've watched skilled players spend 10 hours making an object, investing not only their time but the uploaded textures, etc. that go with it, and re-sell that object for a mere LL150 -- are they little better off than the talented scientists that Stalin kept in high-class labor camps with softer conditions called sharashki?

I'm not complaining, mind you, just trying to ask some questions in the face of what seems bubble-like ecstasy and self-congratulation about game economies reaching the billion mark. At what cost to exploited players?

kinda... You made different assumptions about what is and is not economic activity.

I just don't want to get into a discussion about whether my assumptions are valid or not. They're the best I could come up with when I did the analysis, and I stand by the conclusions drawn based on those assumptions.

Its just that I kind of threw that all together, and I didn't want to get bogged down in discussions over whether my assumptions are correct or not. For all I know, they're a pile of horse manure, and my conclusions reek of the same horse manure.

If you want to redo the analysis based on a different set of assumptions, then by all means, I invite you.

- Ace

http://sl.sdfjkl.org/userdata/stats.spy

If I'm reading that right, that means that 8000 separate accounts have been spotted in the last 30 days. After trial accounts expire, you have about 5000 people that log in at least once a month. I might be wrong, though.



The GOM folks will gladly post the year's worth of prices if you ask them. When the GOM opened, it started at about $2.40/$L1000. It peaked when land became really scarce, and now it's normalizing.



Upload fees, land transactions, anything going to the nebulous "Lindens" are simply deleted from the game. Gone, poof, zing. Event grants are generated from another pool, and dwell is given out from yet another pool, albeit a LIMITED pool.

The give and take of all of these pools is that it pretty much evens out. When the land crunch was happening, though, we were actually LOSING money from the economy, leading to some deflation.

The lindens don't sell their currency, at all. They know it leads to There-like inflation.



The Linden's budget is quite simple. Every week they give all of us a stipend of money. And every day they give us a small dose of dwell money for us land-owners. The end.



The Lindens release land according to how many new members they get. They didn't release the exact formula, but basically, more people = more land.

Zoning is a topic that flares up every once in a while, and eventually boils down to player-run governments, which most of the forum folks hate the concept of. Ergo, unless you and your friends can suck up 4-5 sims next to each other, don't expect zoning any time soon.




Yes, you can. When you pay for your final classes of college to get your Associates Degree with money you made from a video game, you get a VERY warm and fuzzy feeling inside.



In Second Life, you can only be exploited if you let yourself be. Same as in Real Life.

Caveat Emptor, and all that.

LF

Upload fees, land transactions, anything going to the nebulous "Lindens" are simply deleted from the game. Gone, poof, zing.

I find this a scary concept. It devalues currency, in the long run. What's happening is that my currency is being devalued if I decided to act in the game, by uploading textures, forming groups, etc.

When money is burned that way -- burned because it was just as freely printed -- I can't help thinking that there is a lower valuation of players' goods and services than there should be.

Curious -- how did you adjust for the worth of currency in real buying power? Did you stay strictly with USD-to-linden ratio on the game market? Or did you try to factor in the worth of Tanzanian currency, for example, in the real commodities market? And factor in the limited commodities that lindens can actually buy? -- Tanzanian currency can buy a Buick, a generator, and a standard ton of rice, for example, but lindens cannot, nor would there be any reason to. Is there a metric to adjust for that?

If you kept it in the economy, you would have a MASSIVE pile of "extra" money floating around in the stipend and dwell pools, shooting the money supply (and eventually prices) way up.

It's much better to just delete them. The US Mint does that too, you know.

LF

It's hard to make comparisons to real world economy when we are talking about things like upload fees.

In the real word, money doesn't get burned when we pay taxes (oh hush). But in the real world, each and every one of us doesn't get a fat check in the mail each week for waking up each morning either.

I think the stipend system leaves an opening for the economy to get pretty screwed up if it's not managed correctly, so let's hope they have an economist or something on staff to keep an eye on things.

And that reminds me. I remember way back in the day I read an article on Wired about There hiring a real money guy to take care of their economy. Wtf happened to that? Was he too expensive? Too incompetant? I would have though the There economy would do fine. What went wrong? And lets hope the Lindens learn from whatever it was.

There was a post maybe a year or more ago by one of the Lindens that explained exactly how all the money went into a central pool that was then used to payout the stipends and other 'stuff' so no money is burned and no money is magically created, other than when a new user joins.

I just wish I could find it... can anyone help look?

A lower user base will only increase the calculated user GDP and make us even better.. what's your point?


You want hard facts? Take a look at the closing prices for EVERY day of trading on GOM since GOM opened HERE
The first weeks were mostly low volume trade as GOM got established and people learnt the system. The L$ soon found a stable level which it held for months on end until the "land crisis" pushed it up. It now appears to be settling into a stable pattern again...

However, the $4.00 per L$1000 Ace used is lower than the average price and so once again we are actually performing better than the shown example.

Taking growth into consideration, add the lower user numbers and higher L$ value and you may find we beat more than 6 RL countries in per capita GDP.

Yet another reason to stop calling SL a game.... We are, at least, a nation.

I think I need to amend my original post. I'll stand by all of the assumptions and most of the analysis, but would like to retract the GDP comparisons.

GDP represents the sum total of all "goods and services" produced, and what I calculated for Second Life certainly doesn't represent that. What I calculated was how many L$ changed hands, and money often changes hands without a good or service being produced.

To provide a simple, but clear example, consider a simple vendo that is selling an item of clothing for L$50. If someone were to "Pay" the object L$40, and the script within were to llGiveMoney() L$40 back to the payer, this would show up as L$80 worth of transactions in Philip's spreadsheet, but would merely represent an error and not any good or service.

So... I think we can safely assume that the GDP of Second Life is not nearly the US$600+ per capita that I calculated, and I think that the good people of Burundi and Tanzania don't have to worry about SL passing them on the CIA list just yet.

With that said, I'll also add that with the information we have now, we have no way to calculate the GDP of SL, and any attempt to do so from the spreadsheet would be pure speculation. I won't even go there.

I suppose that if content providors were willing to share sales information, and if service providors were willing to let someone know how much they are charging and how often, then we could do some sort of Commerce Department style estimations and try to come up with a GDP figure for Second Life. But I don't see that happening anytime soon.

With it said that trying to calculate the GDP of Second Life is an exercise in futility right now, I will reiterate some of the other conclusions from my original post.

- A half million US$ worth of L$ floating around makes its clear that there is something of "value" going on. We, as a community, consider those little bits on a hard-drive somewhere in California that form the basis of the L$ as valuable.

- With US$10M worth of L$ changing hands on an annualized basis, there is a LOT of economic activity in Second Life. While not every transaction represents something of value being produced, a good percentage does. What that percentage is is anyone's guess, but its certainly not insignificant.

Enjoy...

- Ace

Doesnt it strike you as odd that the L$ is rapidly approaching the same value it had back when SL was 10 times smaller? I was kind of expecting that the L$ value would grow proportionally to SL's population. But I'm not an economist.

That might be true if the supply of L$ was finite, and there were the same number in the economy as there were back then. But the Lindens have constantly grown the money supply, supposedly proportional to population growth.

- Ace

I agree. Based on personal observation (and ancedotal evidence) I believe SL's player base may be experiencing a period of negative expansion.

I have been studying it and Surina yes there was a post explaining it many moons ago but that was changed when they switched to the 9.95 life time accounts.

The pools were effective during the taxation era and some were some what carried over.

However, if you were to do the conversions as per the "data" you are seeking you will find that the lindens are created out of thin air. Surina you had posted an oposing thread in another post that said they were not and I had not had the time to respond to that until today as I always like to dig a little to make sure I wasnt talking out of my ass. However in this case I wasnt based on the information I am about to provide.

Lets look as some minor discriminating factors however keep in mind this is speculative as the information is not disclosed to us as hard data thus cannot be extrapolated effectively but mearly a speculative guess. (or as us rednecks say a SWAG...or Scientific Wild ass Guess)

If you go to the Lindens Conversion (Credit) for US$ page you will see that 1US$ is equal to about 2000 L$ with that in mind take a look at this as a perchance understanding of conversion IE adding to the overall pool of funds in SL.

Each month a "Paying" member of SL contributes on a minimum 9.95 US$ per month. Typically in addition they will pay and additional 5$US just to have 512 meters of land.

So thats 14.95US$ on a average as a minimum for a premium player to contribute to SL.

So in conversion as per LINDEN conversions that would mean that 30,000L$ are contributed at a minmum to the Pool of Lindens that are split up amongst the pools of funds.

Now remember this is speculation based on evidence given by Linden Lab.

So if thats the case....explain this there are a ton of other accounts out there that have only contributed 9.95US$ one time for a "Lifetime" account. That means they contribute approximately 20,000L$ one time.

Sure thier stipend is only 50L$ a week(200L$ a month) but, still yet they can earn up to 6k a month just by getting ratings as the ratings system is equal for everyone.

So if 15% of the population owns land 85% are running on Lifer accounts...something is definately not going to ballence out.

You can run the data based on the information I have given here alone but unfortunately this information and data with the continued growth of SL does tend to lend itself to the fact that lindens are being produced out of thin air to make up for the promised deficits to those that "Game" the system as per how it was designed.

So again my statment stands with the continued production of Lindens out of thin air the overall economy will continue to have a surplus of Linden Cash flooding in world which will continue to devalue the Linden against the US$.


Shadow

Re: A lower user base will only increase the calculated user GDP and make us even better.. what's your point?

Surina, SL is a game/entertainment company devoted to making a product and making a profit, not just a computer geeks' viritual island nation.

Therefore, it is not in the interest of the game company, which needs to pay programmers, rent, etc., to keep a shrunken subscriber base, as high as that might make the relative GDP for that island world.

The game company is going to want to increase the subscriber base because subscribers pay for new subscriptions and buy newly-formed land at auction which increases profits for SL.

Also, I'm puzzled by two conflicting answers to my question about "where does the money go". Lordfly says it is burned up and poofs, like the US Mint (not an equivalent example because only frayed, used money is burned there but not the gold bricks that back that money). Others say it is actually ploughed back into the economy. If there was a problem of "too much" upload money coming into the economy and ruining the currency, then the economy managers could reduce upload fees, hmmm?

hmm..wonders what the big deal is about the economy..is this a Stock Market? Are people just playing to make money to put themselves through college? And if so..how do they get the time to study being in a SecondLife doing business transactions all the time? Is there a Wall Street in SL? LOL! Did the first players that came to this game eat up all the Land to resell it to make real money? As a newbie..how much would I have to pay for a little land? At the moment I do not have a Premium account..though this game is getting a bit interesting and I may do so..so I can have someone build me a house, but; If land prices are too steep..im not sure making $500L a week will get me much hehe other than making money selling something or services.

Shadow, I'd agree with you totally if you could show me any thread where the Lindens say they changed the money pool system they had in place. I would show you the thread they posted that expalins the money pool, but I can't find it

The L$2000 for $1 on the land page was set before GOM started trading. You can't use that as "what the Lindens think it is worth". It was a random amount set when L$ had no USD value.

Prokofy, I wasn't saying let's lower the user base... mearly pointing out that the "revised" lower numbers provided actually increased the argument given by Ace in the first place.

and SL is NOT a game/entertainment company. not any form of company for that matter... SL is a product made by LindenLab, who themselves are more a research/developement company trying to create a 3D version of the internet, some would say the "Metaverse". If you wish to play within SecondLife then that is your choice. That doesn't make it a game.

LindenLab just secured $8million in investments. It is not concirned about your $9.95 lifetime account to pay its wageroll. Phillip continues to state that the goal is to continue the developement process untill we realise the metaverse and more. That could be quite easily done with the userbase we had 6 months ago, if not a year ago. Afterall, we got this far with that number of users...

I remember the Thread Surina, unfortunately that was before the 9.95 life time account and as for conversion. (Unfortunately it was deleted with the thread revamps).

I do understand what your saying about LLs precept on what they feel the Linden is to the dollar.

However, you cannot use GOM or even IGE as a internal company conversion factor. Why because those are third party organizations and in essence not relevant to LL decisions on accepting exchange rates.

Thus for the speculative information aspect that I provided you have to use thier currency exchange to postulate how the pools are filled. With that information and a good spread sheet program and Phillips report you can surmize a few things.

#1 the number of people who own land versus those that do not
#2 the average user base of land held.
#3 the average user base of life time accounts base on total user base minus the land holding user base.

With that information and extrapolating that data out over a 3/6/9 and 12 months periods those finacial pools go into the negative when you have to compensate a 9.95 lifer for thier Ratings. Hence my speculation as to why the money is generated out of thin air.

A pool theory is good if you have a flat line user base that pays the same amount each month thus effectively "increasing" the pool by money financed into the world. However, were you to use GOM or IGE as the conversion factors the pool negative flow aspect is more apparent.

In essence when they instituted the 9.95 life time user base and those memebers gained any stipend just for signing in or getting ratings that offset the orginal data that they designed because people will game the system. Hence Alternate accounts played heavly to get ratings up to a certain level and then ensuring they log in at least 1 night a week and massively gaming the Ratings sytem to keep their Ratings Level high.

So, I hope that further clarified my stance and gave a better understanding of where I got my speculative data from.

Shadow

As I said in another thread, it's only the top few % that get the maximum rating bonus each week, a few % more get a lower bonus, but at least half no rating bonus at all.

We know that 85% stand no chance of getting any Dwell bonus each day as only 15% actually own land, but of that 15% only the top few dwell earners actually GET anything...


The more you look at the numbers, the more you can subtract from the payouts meaning a central pool could easily afford the weekly "givaways" without creating L$ from thin air..