Neualtenburg TOS Review - Part II - What is a Person?

Haha.. indeed! But... Frank... there is a very profound liklihood that land in VR is different than land in RL. After all, "used" sims go at a discount; to my knowledge, they have never been known to appreciate. In an environment where what is called "land" can be created or deleted with a mouseclick, surely differences in sustainable value exist.

But, this too is an extremely interesting topic. It could be that certain areas of "land", owing to a tradition of traffic flow, become invested with "value". Its sort of like a high speed timeline for ancient Troy... 3000 years ago, land in downtown Troy might be worth a fortune, because of the traffic flow/commerce. Now it's a ruin; value approximately zero. (Well there is the tourist traffic ).

Inherent land value in SL will probably work the same way. It will appreciate in the same way that RL city land appreciates... because people cluster there to transact business. When events cause them to drift away from that "people cluster", the land will lower in value. As SL ages and the patterns of life begin to "set" more, it could be that the appreciation of land will indeed become a more conservative bet.


Sudane

After an interesting post-RA informal discussion at the Biergarten, some issues were raised regarding my own suggestion, and in all due fairness, I think they should be brought up and discussed openly.

One of the issues that Pelanor raised is that we should focus on attracting business, and not increasing the hurdles for new businesses to establish themselves in Neualtenburg.

Thinking about this a bit, I can imagine that someone with L$20,000 to invest would certainly not be very happy to know they should now deposit L$10,000 in escrow, and just invest half of it, while outside Neualtenburg they had the full L$20k to invest. Even if the Neualtenburger Bank would say: "oh, you have a good reputation; here is a loan of L$7,500 on top of your L$10,000" it's a question of principle — making business outside of Neualtenburg would still be seen as more attractive.

So, despite my earlier comments, I'd suggest that "holding stock in escrow" should be an optional alternative for businesses that don't mind having unlimited liability.

What this means is that the customer has now more choices. The City of Neualtenburg presents the customers with several options of established merchants in the City. Some are unlimited liability companies: the City does not give any guarantees on them; deal with them at your own risk; the best the City can do to minimize fraud — and I always assume that a guilty party will flee Neualtenburg and very likely SL (returning eventually under an alt) — is to seize assets (likely only land and buildings...) and compensate defrauded parties with the results of the sale of those assets. But that is not much compensation.

The City will also, however, give customers the choice of dealing with limited liability companies. These will have their Incorporation Charter duly notarized, and a copy will be available — you'll know who they are, who runs their company, and what their stock is. You'll also know how much money/land/assets are hold in escrow for that particular company. And finally, you'll also have access to their public quarterly reports. While the City cannot guarantee the total elimination of risk — we discussed this rather energetically yesterday, business is always about risk, there are no "safe" business transactions, the best the City can do is minimize risk and facilitate/mediate bankrupcy suits — the City can say "this company has a good track record, they have L$150,000 in assets and money in escrow, and they're pretty safe to deal with, if you're signing a contract for L$1000 with them, we can give you good hopes for successful business transactions".

This is not unlike a stock exchange 'rating' done by those specialized companies like Merryl Lynch. They can't guarantee you on a 100% that buying public stock from a AAA rating is going to guarantee that you'll make enough money to buy a private island in Greece But at least they can tell you that it's generally safer to deal with them. Unlike 'auditors' or 'ratings', however, the City of Neualtenburg can give an extra 'safeguard' to potential customers: they know, if something goes wrong with their L$1000 contract, they won't lose everything. At the very least, they'll get L$1 (assuming 150,000 residents are defrauded ). That's WAY MORE you can get dealing with a Neualtenburg-incorporated company, compared to dealing with a mainland 'company' (L$1 is always better than L$0 )

Also notice that this extreme case will never happen. Assuming all L$1000 contracts are also notarized, a suspicious customer will say "yeah right, but how many L$1000 have you signed so far??" They can check it up on the notary! If the total number of contracts is below 149, the contract is almost absolutely safe to sign... on the worst case scenario, all customers could get indemnification from the money held in escrow.

So, while the incorporation model, using an escrow system, does not guarantee 100% risk-free business, it definitely can guarantee a lot more than mainland 'companies' (which are nothing more than individuals with a fancy title). I can even imagine people like Anshe having a 'branch' in Neualtenburg with one million L$ in escrow just for the purposes of doing business with those extra-suspicious types; she knows that perhaps only one in thousand will ever really wish to go the whole trouble of notarizing a contract and having it accountable under Neualtenburg common law; but she can use that as a (free) marketing ploy: "if you don't trust me, let's sign this contract under Neualtenburg law". I imagine that in half a year or so, major SL economy players will have a tiny "local branch" at Neualtenburg just for purposes of marketing (while conducting their major businesses outside N'burg, of course, where there is no public accounting, no escrow systems, and no way to file a suit). But that is all right; we just need to attract a handful of those guys, and slowly increase from there.

What I also like about this system is a way to 'fund' the Neualtenburger Bank with more than bonds. I'm not sure if the NB should become an investment bank or not; I rather like the approach of a "federal reserve": encouraging private banks to borrow money from the Neualtenburger Bank, transfer the responsability of escrow to them, set them limits on how long they can invest money and have it "uncovered", but also allowing them to explore investments. In a sense, imagine a Neualtenburg Bank with stock worth several million L$, but spread among several smaller private banks, each perhaps just with a few dozens of thousands of L$, but investing here and there in residents' businesses — or, rather, on citizens' businesses, since the amount of risk is lower!

I think this might just work. I even think that Neualtenburg will quickly become the victim of copycats trying to improve our model. After all, the Golden Rule is: who has the gold, makes the rules And the Neualtenburger Bank will definitely have the gold...

... as a side note, I can very well imagine that in 2007 those 16 m2 plots might be worth a fortune Not because you can have access to 3 prims; but because it allows you to incorporate under Neualtenburg

This is very interesting discussion, keep up good work I like the idea of escrow service and legal institution. We have incorporate in China as limited company already, but since RL law do not apply inside SL (yet) some escrow tied with legal institution inside SL could be very helpful

Please use easy English when writing laws, TOS and such things, so people in foreign countries can understand easily.

Personally I'd prefere if the Neualtenburg Bank would act as a central bank:
- Emitting municipal bonds (as risk-free investments)
- Bank supervision and giving "banking licenses" to private owned banks and holding a determined amount of their liabilities
- Lending money to financial institutions
- Taking 3rd parties deposits at given interests rates

There is no point in my opinion im holding half an investment as escrow..
Lets say you want to invest 100k L$ in a SL company.. 50kL$ are hold by the NBurg Bank as safety deposit (and are lying around without any use)- but you can get ripped off aswell of the 50k left.

The way to SL companies is trust and rating agencies.

You cannot forget our own history!

Throughout the years, people have been promoting the concept of "trust and rating agencies". The old issue of who does the rating, or how can you measure "trust", has popped up uncountable times, groups have been formed and disbanded, and all possible theories have been presented, tested, and abandoned (so far).

The most optimistic residents just discard the past efforts and say "trust and rating agencies will come to SL sooner or later... you just wait". But three years have passed, and not a single agency has emerged and survived for over a few weeks or months.

The plain truth is, who checks upon those agencies? How can you ensure their degree of fairness? If they commit a mistake, whom do you apply for an appeal?

These and other questions have been asked uncountable times; they're not new; and again, the optimists tend to say "we'll work out a way".

The point is, among 150,000 residents, not a single one has found an answer. Not one! I would say that it's almost impossible that all of them lack ideas or imagination; something must be fundamentally wrong for these things not to "emerge naturally".

So, instead of insisting on abstract concepts that are not forthcoming "naturally", there is an answer in the mean time: trust is replaced by guarantees; ratings are replaced by accountability. These, at least, we know they work in RL, and there is no reason why they shouldn't work in SL as well — even if ultimately anyone can perpetuate a scam and disappear forever from SL. But at least the above suggested system, while certainly not perfect (at least when dealing with the issue of "people disappearing", minimizes risk by using guarantees and accountability.

"Minimizing risk" is not the same as "risk-free", however. For instance, the City of Neualtenburg has actually emitted bonds in the past, but they're not risk-free; SL may be shut down forever tomorrow, for all we know. However, at least there is a commitment to paying off these bonds, beyond individual persons who might be present when the bonds were emitted — even if in ten years not one of the current N'burg citizens are online, there will be new citizens running the City, and safeguarding the payment return on the bonds. So, again, it's a much lesser risk than, say, buying bonds off John Doe and his Yesterday-Created-Not-Here-Tomorrow Company.

I also think that the Neualtenburger Bank will probably not make investments on their own, or accept deposits in return for interest payments, but be much more like the "central bank" you mention. It makes more sense to give that business opportunity to the private enterprise, ie. your suggestion of "banking licenses" — the NB will oversee and supervise other, private banks, and these we'll be the ones making investments and accepting deposits...

Notice that it doesn't make sense that money left in escrow is "lying around without any use"; it makes much more sense to use that money to make investments (or let private banks borrow it under specific terms and agreements). The only thing that needs regulation is the amount the NB may use for further investments, and the cash that it needs to have available in case of necessity. A well-run bank, doing some statistic analysis on the honest-to-crooks ratio, will be able to successfully use a large amount of the money held in escrow to make it circulate in the economy, and multiply.

In theory - there could many ways to invest in SL:
- Public Offering (like the Space Station that raised around 8kUSD in EveOnline)
- Savings Accounts
- Bonds
- Funds
- Loans & Mortgage
and so on

The point is none of business i saw is serious - except the NBurg bonds.

Lets start with Ginko Financial:
- No Businessplan
- No monthly or quarterly reports
- Investments outside SL ( personally i dislike the idea of selling L$ and investing them in projects outside SL, since the yield in SL is really high )
- Unrealistic high interest rates ( 50.4% p.a.)
- You can deposit for example 10k L$ right before midnight to get interest rates paid and then withdraw them right away. If Ginko really wanted to invested the money - they would only pay interest rates if your money is frozen for a period of time (e.g. one month).
I'd said very poor rating...

Just in case anyone is relying on thread notifications to be informed when there are news on the issue of legislation for incorporation in Neualtenburg I'd like to point out that the discussion has now been moved to this thread in which an actual bill is being drafted and discussed. Feel free to chip in - every comment is appreciated!

Okay my Internet at home has been out and I havent had that much time at work and while I was away this thread has become completely derailed by the absolutely facinating topic of incorporation and corporate legal matters. (Zzzzz)

Since no one has commented on Part III of this series I am going to answer Gwyn's point on this one and then skip to the punchline. Apologies to Gwyn for making her write out all that stuff on psuedonyms again, I did know about that stuff, but I don't think it changes the fact that we still have to do something about the poor wording of the Nburg TOS in regards it's definition of a person, a citizen, an avatar etc.

Personally, I feel that since this law on pseudonymous behaviour is most often applied to the situations Gwyn describes in the music and sports industry and not in the virtual realm, that the concept of mutliple psuedonyms is really yet to be tested. for that reason I wouldn't rule out the idea that someone might make a valid argument in the future for the legal status of multiple avatar personalities in a virtual world, but that's a quibble.

I think most of us agree that when we are dealing with another Neualtenburg citizen that we treat them as a real person (the person behind the psuedonym), and that we dont expect this person to be running multiple citizen avatars (even though ultimately we have no way to check on this.)

How about these for (brief) definitions:

Citizen - "An avatar that owns land in the CityState of Neualtenburg."

Avatar - "The primary pseudonymous representation of a person."

Person - "A real-life human individual."

A full legal definition of each would be longer of course.

The language that I would remove from the TOS that I was referring to, is that which treats the document as a contract between a person and a company. It is clear that for starters there is no "company" that is Neualtenburg, it is at this point a "virtual organisation," or "virtual land cooperative" only, and not a "company" in the capitalist sense of the term anyway.

There are also clear references in the TOS to an individual's "personal information" and the conditions under which we would show it to the police or the FBI or other presumed legal authorities or whatever and since we do not actually collect this information and therefore don't have it to hand over to said authorities, I think it makes no sense to have these provisions in there. As has been mentioned, the TOS was lifted from the LL TOS which describes exactly a situation that does not exist between Neualtenburg and its members. LL *does* have our personal information and *will* turn it over the the FBI on request. Neualtenburg does not.

The Neualtenburg TOS, like the Covenant, is really a contract between a virtual organisation and an avatar. Or, viewed cooperatively (my preference), as a statement of participation in an organisation of virtual or pseudonymous individuals. If it's as much of a "given" that avatars are in fact legal representations of rel-life individuals (and I agree with Gwyn that it is), then I think this is as much definition as is required.

It makes sense to me to include statements of definition in our founding documents as to what all these terms mean, as well as a clear mention of the legal status of pseudonymous individuals. This is important for the sections on IP rights if for nothing else.

For practical purposes however, an "avatar" is buying virtual real estate in a virtual CityState and things would be a whole lot clearer if the document reflected that instead of the current way in which it jumps from one definition and one wording to another depending on which clause you are reading.

Like the covenant, the TOS also seems to me to function mostly as a set of rules that avatars agree to by participating in Neualtenburg and as such is better organised more conceptually, than as a set of legalese clauses. Further, if we define ourselves as a cooperative organisation, all the stuff about the "service" we provide and indemnities and interruptions of service become unecessary also.

Viewed this way, large chunks of the TOS become extraneous and dissapear into puffs of smoke. It becomes primarily a (still rather confusing), document about IP rights with a section about membership at the top. It is for these reasons that I feel that combining a stripped down TOS with the current Covenant (and calling the whole thing a Covenant), is ultimately the way to go.

I know there seems to be a big movement lately towards seeing ourselves as some kind of corporation (maybe soon to be a RL corporation), and a "financial powerhouse" or something, and we are all really giddy lately about money, but a "covenant style" agreement is really all that is necessary at this stage IMO.

I would like to see us use a Covenant that is clearer than any other, and a Covenant that offers clear legal definitions of the state of affairs and with a certain amount of gurantees, but a Covenant nonetheless.

Not (as the currently TOS seems to me), a trumped-up pretend legal contract that offers more confusion than it does protection.

I don't think the discussion of incorporation that arose from your comments was an intentional effort to 'hijack' the thread. Other proposals designed to make Neualtenburg nore commerce friendly were moving towards some notion of incorporation. This latched on to your thread due to the RL status of corporations as "legal persons", thus making it relavent to the TOS discussion of personhood.

I do think your definitions are a good starting point. Your points about the vaagueness of the TOS are also well taken. It might be more productive if you would propose specific changes in language. Having a detailed proposal to which to react can help people clarify their positions and concerns, Witness Diderot's very detailed corporate structure bill for an example of this working well.

Dianne,

Excellent work! I can only say that I read your post on the TOS review with great satisfaction. I agree with practically all your observations and I think your proposed definitions should be sufficient even in a legal context. Like Claude I also think that the groundwork has now been prepared for someone to go ahead and actually present proposals for a reworked TOS and perhaps also come up with suggestions as to how it can be merged with the covenant.

Is this something that would be best done under the auspices of the SC? When will you be meeting again by the way .. presumably at some point after the next RA?

Oh and just for the record I am not immediately among those who would be counted as supporting the vision of seeing ourselves as some kind of (RL) corporation. As others have posted it would mean that we'd have to succumb to an unnecessary degree of bothersome bureaucracy, which doesn't really give us any benefits compared to our RL legal status quo.

Keep up the good work

Thanks!

Claude, I hope I didn't imply intentional hijacking, I know how threads meander.

I just find all the buisiness talk boring is all and in RL I am an ardent Anti-Capitalist so when I hear the word "Incorporation," inside my head it kind of translates to "Satan." But that's just me.

The reason I posted all this stuff is at a recent SC meeting I brought up the bad language of the TOS and the Dean suggested I look into it. Being as it concerns us all I use the forums as a public platform so no-one can say "where is this coming from?" when I propose changes later. Any actual changes would likely be submitted as a Bill to the RA and voted on in the normal sort of way.

I will be posting a draft revision of the TOS soon, as for now I declare this thread and the related threads on the TOS... over!

*bangs virtual gavel*

Ah, the problem isn't capitalism, per se, but the ways its been twisted in bent. In theory, it's a great system. Kind of like communism in that way.

The wonderful thing about Neualtenburg is we can, within SL, try to do things "better".

Yes!!

I apologize for all the money talk, we just want to make the place financially viable for all of your (and others') wonderful artisitic and social contributions. Keep up the great work and I'm happy to see a non-materialist lefty on the SC. It'll help keep us plutocrats in check.