250 l$ = 90 cents and the SL Depression of '04

(note: please visit http://secondlife.com/money.php before commenting)

The Problem

I suspect some investors are bailing out of SecondLife and GOM due to the significant dissapointment with SL's promise of owning.

While I believe lower land prices are good the rapid devaluation of land with no warning has caused anyone who wishes to buy land to think twice because of the erratic, opaque, and random volatility of its value.

Land can no longer be reliably resold. When you can't resell reliably and you're still paying a monthly fee - you're pretty much, in affect - renting.

The whole 'own' tab is a misnomer and promises something that doesn't exist causing land investors to be dissapointed and to withdraw their investments from SL.

The withdrawl of these investors is having another affect as well. A current account deficit has been created and this is withdrawing RL currency from the SL economy.

Therefore goods, services, and content sold in SL can not be traded for RL currency as easily anymore.

This is causing anyone who pays for their tier fees or enjoys a bonus for the intellectual property they create in SL to suffer another dissapointment in an expectation created on the SecondLife website - causing them to reduce their investment in SL and creating a positive feedback loop.


What is the solution?

The solution is not to stop reducing land value. This will be necessary sometimes and higher land prices are not always the right approach. It's also just a solution for a singular problem.

The solution is to provide a clear roadmap to the population of SecondLife so that when they make investments they can plan ahead of time as to how upcoming changes will affect their various enterprises.

Random postings in blogs and forums does not cut it. We need a singular web page or spreadsheet detailing the planned changes in the next 3 months. This includes not only new features, LSL changes, bugs to be fixed - but also changes to the grid.

To not do this is to ignore your community and treat them with utmost disrespect .. It is to assume that their plans are unimportant and disrupting them will not have an affect on the SL environment.

It will. Nobody (nobody serious) wants to plan and play in a world where the rules are changing arbitrarily with little or no warning.

Games are fun, aren't they The value of your investment may go up as well or down. Don't cry foul when they go down and demand that Linden Lab provide information to take the risk out of investing - that's stoopid and will fall on deaf ears.

I guess some people want the SL market to be like Kindergarten, with Phil personally holding their hand as they "invest" in virtual real estate. My question is why Blaze felt the need to create a new thread, when a dozen others with identical topics already exist, half of which were started by himself...

How is it stupid?

Do you know anything about managing economies?

I suggest you read Maestro, by Bob Woodward and How the Federal Reserve Runs the country by William Grieder before calling my statements 'stupid'.

Do your research. No what you are talking about before criticizing others.

I could ask why you're replying to it instead of the dozen others with identical topics....

Ardith Mifflin, as I said, and which you don't bother to read before criticizing, I agree with lower land prices.


It's not just virtual real estate.

What if they released "object search" tomorrow in a month or so? All those people buying land and building malls will get blown out of the water.


What if they release a new payment system in a month or so? Anyone creating exchanges or a new payment system will get completely screwed.

Obviously, they don't know everything about what they are going to do. But what they do know, what they are thinking, they should share or people are not going to share their time with them.

I assuredly did read your post, Blaze. I had to go to great lengths to do so, having ignored you after your previous threads stating the exact same thing. Let me state my point in simple terms: You are not an investor. SL is a game. Though money can be made from it, it's primary purpose is not to generate profit for you. The property in SL has negligible RL value, and what little value it does have is nearly completely obliterated by the fact that the Lindens own that land, and that it could cease to be in a fraction of a second.

Besides, only an idiot would have seen the flood of land that the Lindens were releasing, and thought to himself "Geeze. I bet land's going to continue to be scarce tomorrow!). You had plenty of warning, you just weren't paying any attention. What do you want? The Lindens to give you a personal announcement before every move they make? I'd much rather they focus on refining their product, than helping the Special Investors turn a buck.

This isn't a real life economy Blaze, as well you know. What you're asking for is stupid and I've got no need to do my research as I treat anything I do in Second Life with the same attitude - it is Linden Lab's perogative to change it tomorrow should they wish to. This is a game, an escape, it is nothing more (although it may well become more in the future). If at the moment you've come here solely to make money (which I'm guessing you have, going on your previous posts as well), you've come to the wrong place I'm afraid if you want a stable feature set to suit your investment needs.

There's no disrespect in not giving you the information you want to mitigate your own investment risk. Change your investment with the changing market, or choose not to invest at all. It's your choice - you make an investment on the information you have to hand, and Linden Lab can control the dissemination of that information as they see fit. And plus we do tend to know way in advance of any major changes. For instance, we were all talking about animations way before they arrived, because we had been told. And if anything this has got better with the blogs, the economic information etc. that's coming out now.

You're making a big issue out of it and there's no need.

If you read my post clearly, you'd realise that this wasn't about land as you are making it out to be.

Also, before you start throwing words like 'idiot' around, perhaps you should visit
http://secondlife.com/money.php and perform a little self-introspection.

The big problem here is that a large proportion of current users heard about SL through the game industry in one way or another and perceive SL as 'just another game'.

IF this were Everquest or Halflife or Starwars I'd agree, however it is not and was never intended as such by Linden Lab. They intend SL to be a 3D interactive developement environment in which you can build games if you wish, or you could start a business or just hang out with friends. But SecondLife itself is NOT a game anymore than Ebay is a game...

The longer people keep posting comments like "Stop whining, it's just a game..." the longer it will take for serious developement to happen because, at the end of the day, LindenLab simply provide us with the tools, it is US that build the world....

So yes, if the L$ rate on GOM crashes it IS a serious thing. It means that more people think it's 'just a game'.

Nothing in the link which you provided suggests that SL is a stock market. None of it suggests that SL is a good place to invest your money. It suggests that, by participating in a GAME, you can also earn money. It does not say that you should quit your job and start trading in SL like it's some precious commodity. No where in the list of proposed enterprises does land speculation appear. No where in this list do we see a promise from the Lindens to personally keep you abreast of the changing financial market, nor are any promises made that you will actually earn money, merely that the potential is there.

If you are afraid of changes in the market, PREDICT THEM! You've already mentioned that you think an object search engine will kill malls. Fine. Don't buy any malls. Sell the land. Find a new niche. Even if tomorrow the Lindens abolished land ownership, I'd still be making money because I do something unique. I may not be the best at it, but I still manage a few sales, and will continue to do so as long as adapt to the market. If your business model is so inflexible, then it's doomed to failure from the start.

Personally I think the fact that you can/could generate real money from Secondlife is nothing more but a nice side-effect that you should not take for granted or try to exploit... I think a better way to look at secondlife is "how can I improve the expirience for other players' instead of 'how can I make the most money in SL'. At least I do that and I feel lucky I don't care about this whole 'recession' thing

I'll believe all that you say above when Linden Lab doesn't have a TOS agreement that makes it clear that they do not take business in Second Life, and the generation of wealth in the system, seriously. Your investment is worth nothing, their currency can be removed, your copyright is dodgy at best and they offer no service level uptime. Until all those are changed it's game, it's entertainment. Nothing more, nothing less, and anybody that treats it differently is in for a shock.

I couldn't agree more Mark.

LindenLabs changings the rules are not fluctuations in the market. To say that, is like saying the government of the US suddenly flooding the world with newly printed US dollars is just a fluctuation in the market.

A market is something that evolves on its own. It's an ecology, the natural evolution of organisms fighting for survival. I am a huge believer in free markets and the invisible hand.

LindenLabs changing the rules is not the invisible hand. It is a potentially dangerous force when can cause depressions and wipe out whole economies in a single, arbitrary swipe.

Any investor needs to deal with the fluctuations in demand. That is natural. However, when some governing force changes things in spite of the free market that exists - that is not natural and impossible to predict.

Moopf - did you check out http://secondlife.com/money.php?

An expectation is being made there. I'm certainly not try to hold LL up to some legal contract, but I think posting how they could better support the expectations that they create is not an altogether incorrect action.

There is nothing to prevent people from profiting in other MMORPGs, the practice is generally tolerated without any explicit approval or disapproval from on high. SL is different in that the Lindens have embraced the economic potential of the game. Regardless, it is still a game. Some people, including the Lindens, think that they are developing something which will eventually become more than a game. This may be true, but it is still over the horizon.

Ermm...isn't what you describe exactly like govenments banning imports of steel (or suddenly unfairly taxing other import) for instance, or changing the laws to make something that previously was OK, illegal (this happened recently in the UK with chipped games consoles which it is now illegal to sell). I see no difference what so ever. By the same tokens, governments are not invisible hands and are potentially dangerous forces that can cause depressions and wipe out economies.

It's called marketing Blaze - fluff, spin, selectively highlighting. Just because they say that some people can do it, doesn't mean that they've geared the system to support it. The TOS certainly isn't geared towards it, and in fact was recently changed to further take a step back from supporting business investments in SL. Go figure.

Your grasp of economics is tenuous at best, Blaze. You've accurately described a free market, even trotting out trite little phrases like "invisible hand", but you completely ignore the other varities of economies. SL is not a happy little land of Adam Smith. SL is like Soviet Russia. (In Soviet SL, car drive you!) It is a command economy which exists to ensure that business interests never completely dominate the interests of the vast majority of people who are here to have fun. Again, the Lindens never promised you a free market.

In the real world, Alan Greenspan is usually fairly tight-lipped and intentionally vague on his plans for the money supply in the US, and I know of absolutely NO government entity anywhere in the western world that establishes price targets for real estate.

Why is it that you think this sort of super-central-planning would be good for SL, when its avoided by any central economic authority in real life?

Dealing with market uncertaintity is a cost of doing business anywhere, and I would expect SL's economy to be no different.

- Ace

Ardith Mifflin: Have you read Adam Smith's seminal work, the Wealth of Nations? I have.
Please do not insult my grasp of economics unless you have done your research. I am not using insulting language to describe your understanding of anything, please extend the same courtesy to me.

Anyhow - for SL to be a land of opportunity as LindenLabs so claims ("Second Life is a land of opportunity" then it should try to simulate a free market as closely as possible.

Nobody said the USSR was a land of opportunity, except perhaps the politicos.

As JFK once famously said,

"I am a hotdog."

No, wait....

"Ask not what you can take from your Secondlife - ask what you can give to your Secondlife."

Ace: I didn't say central planning was good. Central planning is a complete given here, don't you think? Unless LL is going to suddenly up and quit.

I said they need to warn us about what they're going to do. Greenspan, and avid Randist (read maestro), is also against centrally planned economies BT.

One of the great additions he added was the ability to communicate bias to the market. Also, the interest rate announcement takes almost a year to enter into the market at large, so in affect he's giving investors and businessmen a year lead time.

Also, land in SL does not equate land in RL. You can't arbitrarily create new land in RL.

Moopf - I have a little bit more respect for Philip than that. I think if he's going to advertise SL as being land of opportunity it's not a boldface lie just to get more people into SL.

Over promising to that extent would be a disaster for the reputation of SecondLife. Not a boon.

Seriously? Tell that to people with mortgages or savings.