Neualtenburg Banking Law Draft - Request for feedback and completion

The real reason behind "why Neualt" is that contracts are enforceable. This enables many types of business on more than a "trust me" handshake. That's what I see as the competitive advantage of doing business here. This won't be readily apparent until we get successful businesses in here, doing complex contractual business only a Neualt citizen could.

Until then it's a little academic, so I'd like to open shop ASAP. My particluar venture works best when I do business with large landowners, not as partners but as people who do much business together.

Traxx,

You posted to the Law Society forum a while back a contract template. It was full of checkpoints and partial payments because, as Frank Lardner pointed out, there is no contract enforcability in SL. What we have set up here allows for adjudication of contractual disputes along with the presence of escrowed assets to guarantee a creditor at least partial payment in the event the commercial court finds in their favor.

When SL was a few thousand residents, you could do everything on a handshake. That's still largely possible because the number of active residents doing expensive contracts remains small. Once the world grows and there are hundreds of architects and thousands of homebuilders, a handshake won't work. Unless the Lindens want to do a Linden court to hear breach of contract actions (unlikely), this is the best way to give parties at least some security beyond personal trust.

Well, Nicholas Portocarrero is the owner, and I've been in touch with him in the past (we share a common language ). I don't mind talking to him again.

What about infoNet?

I think it would be great if you could speak to him again; sound him out on his interest in NBurg. That surely would help clarify the relationship.

InfoNet would be appropriate in the School or in the Rathaus, it seems to me. Or even in a public place outside, since its entirely a public service. In fact, I'd think that wherever it is, we might wish to put a small sign on the Platz directing people to it.

While it is privately owned and suffers from the limitations of in-world interface, InfoNet is a public service, hinting to me at much more broad-based capability in the future.


Sudane

Well, Traxx, I just have read your email, and obviously, being biased towards self-created legal frameworks that are only possible if you are able to enforce them, I tend to disagree. I would say that currently just a small part of Neualtenburg's citizens have any interest in "politics". Most find it 'fascinating' when they first attend a session at the RA; then 'interesting' if they happen to watch the second one; 'plain boring' after the third. Most citizens here don't really care about the 'politics' part, they just want some peace and order — what N'burg promises, and they'll stay around while N'burg is able to fullfill those promises.

Businesses are 'intrigued'. There is no such thing as 'over-regulating', IMHO; either things are regulated, or they aren't. We have started some (mostly unsuccessful) projects in the past that did not have 'enough' regulation — as expected, they didn't work, simply because there was no way of distinguishing them from other projects in SL. Neualtenburg's projects are only 'different' (and give added value beyond what you can commonly do) if you use the special, distinguishing features of Neualtenburg that enables things to be regulated. That's the whole point. Putting in place something that is similar to what otehrs have already done (and failed) is, well, condemning that particular project to fail as well.

The Museum is our latest project. There are a handful of museums in SL already; there are also dozens of galleries. Most of them already exhibit regularly (or semi-regularly) and have attracted quite a crowd. So why do you need a "new" museum? Because all those museums in SL are the wish and will of a person or a group; if that person/group tires of the concept, the museum will disappear. And you have to gather all the artists again under a different place. Remember the lessons from Montmartre — even artists need something that goes on in time to make a career, and succession problems on 'who runs the show' come up every time. Projects like that die because you cannot deal successfully with 'succession'.

The Neualtenburg MoCA is naturally based on the same concepts as Neualtenburg itself. There is 'regulation' that allows the current museum curator (Farfletched Ixchel) to run the museum for a term of 6 months. But Fletch may tire tomorrow from SL and simply go away, never to return (heaven forbids!). The museum, however, will not suffer from that; the Board of Trustees will elect a new member. If there are any problems (money-related issues) there is a supervising body — the Guild — which oversees accounting. If the Guild is withholding information, they can be sued at court. If the courts are corrupt, you can impeach their members. If the ones doing the impeachment are corrupt themselves, you can vote them out of their jobs. And so on. This scheme of balance and checks — 'regulation' — is at the core of Neualtenburg's philosophy.

So, what this means is that projects are not 'better' or 'special' because they start in Neualtenburg. What Neualtenburg gives to them is a framework, a super-structure, 'regulation' in a word, that is enforceable. For the tiny shop that sells L$10 T-shirts, one per month, this is not important. For the merchant that has hundreds of customers, some of them presenting false claims ("hey, I paid to your vendor and didn't get anything in return!", and where a large amount of L$ changes hand every day, having 'regulation' is a Good Thing™. Right now, we're struggling with the barriers of mistrust, and the overhead needed to have 'regulation' in place. This is simply stated as: "why should I bother with the extra overhead?"

IRL, people go the same route when they think of insurance. Why should you bother? Is it really worth the extra expense? Well, some never insure themselves like they should (unless it's mandatory); others prefer to continue their lives/businesses with a certain degree that at the very least, if all goes wrong, they'll get something in return.

Think of Neualtenburg's 'regulations' as a sort of insurance for your business. At the very least, if something goes seriously wrong, you have a framework that will try to help you out to put you back in business, and mantain your good reputation as a businessperson. All this has some overhead — a few notarisations, owning (at least) a deed for a 16 m2 plot that allows you citizenship (L$40/month ), doing some accounting. Overregulation? Not really. As a businessperson, you know that 'business' is not only exchanging goods/services for money — there is a whole backoffice to consider. And while Neualtenburg cannot help you much in getting more business (or at least, cannot do more than any other project...), it places safeguards on your backoffice to make it run smoothly, leaving you to concentrate on your business.

The big difference is that the framework exists — it's not something that has 'grown out of nowhere' overnight, from the head of three people that have just founded the group for Yet Another SL Regulation Authority yesterday and are accepting submissions today. No, it's something that has been growing and evolving for the past 15 months, with rather a large number of different people (from the original active Neualtenburgers, only two remain — but things have been dramatically growing!). Neualterburg's solutions are quite mature. Not perfect, but 'the dust has settled down'. Even new rules/regulations/laws already show a certain 'Neualtenburgerish touch' that is the past experiece of running long-term projects where people come and go easily, but the project goes on.

I agree with most of Gwyneth's post. I will say that it is possible to regulate business in such a way that attracts investment, promotes business, and ensures fairness. There are other types of regulation that impose unfunded overhead and fees on the business person for little tangible gain. Such regulation works like a high tax rate, and discourages business.

Telecom and banking have always been heavily regulated for good reason. In RL, in Canada, I will never, ever be able to found a chartered bank. There are a fixed number bank charters and have all been used, never mind the capital cost barrier to entry, and the 10,000 other hoops to jump through. This I can understand, as Canada has 30 million citizens.

Neualtenburg has 30 odd citizens. In fact we're way ahead of our time. Most 30 person tribal groups function as extended families with a single dictatorial family honcho. We have a constiution, laws, a ToS, a covenant, land ownership, potentially a chamber of commerce and corporation code. This is all fantastic as it allows trade with the outside that isn't possible without this framework.

In terms of banking, when we talk about $900USD escrow, 6-9 month moratorium on private deposits and a "bank free zone", I worry about over regulation. We currently have the financial RL equivalent of 4 lemonade stands in NB right now. I think the above regulation might be a bit premature. There is nothing stopping further regulation in the future. As far as the idea that business cannot be over regulated, I'm sure plenty of HIPAA and Sarbanes-Oxley compliant companies would disgree with you. This stuff can place an unfunded burden on operations, much like higher taxes and the benefit must outweigh this overhead.

Another example is incorporating NB in real life, it's currently not worth it. That (I hope) may change in the future, but it's not the case right now. I do not want wild west, robber baron unlicensed banking, I just think $900USD and a 9 month wait are excessive barriers to entry.

With the current bills I think we've got a pretty good framework. Let's try it out and then make some adjustments.

Thanks for reading the contract template, Claude. Ferren and I put a lot of work into that. It's based on tried and true contract language used in RL, but modified as appropriate for SL. Even if a businessperson were to set up in Neualt for the benefit of some degree of contract enforceability, they'd probably continue to use a standardized contract. The two are complementary. Zarf's notary is another complementary component.

I'm following this endeavor with interest, and wondering what it would take for the initiative to succeed. Mentioning an association with Neualt to a successful businessperson who also happens to be a client was an attempt to see if there could be equal benefit to both parties. What I get out of this meddling is an opportunity to see how things work. My post might appear negative, but in many research activities, a negative result is also informative.

My post also contains suggestions that would help me become a better meddler by making the benefit of association with Neualt a sweeter deal. Of course you guys can say 'quit meddling' anytime. : )




Italics added.

The commercial court is composed of SL residents. Being interested in how SL works I've noticed an underlying concensus among those who have expressed an opinion on the matter of placing decisionmaking authority over one's second life in the hands of other SL residents. The concensus is reluctance. Notwithstanding that, we see residents settle in the privately run subcontinents all the time. Living in Hiro's subcontinent or Dreamland means accepting certain rules developed by the authority who owns those sims, and is also another SL resident. So it's not an insurmountable barrier -- just one that needs to be offset with benefits.




Yes, I get the impression of very small businesses right now, and expectations centering around large businesses in the future. My musings concern an intermediate step analogous to getting a mid sized anchor tenant for a mall. Success might depend on whether you can entice the prospective anchor tenant with a good deal.

I find your system well made, and recognize the fun to be had in system development, but a businessperson might want to concentrate on product development. I recall some statement by Desmond Shang about the Neualt rules being possibly useful to him in some 'Neualt lite' form.... Anybody remember that post? I think it was in PoliSci. Any bit of feedback and commentary from the business community is useful in helping this initiative to be successful.

The flaw in this "snapshot" method is that unscrupulous individuals A, B and C, each with L$85k in money borrowed overnight (say from an unscrupulous or innocent lender), could pool funds, let A run them through the "proof of capital" machine, then A hands the sack to B, who does the same, and hands it to C, who does the same. At the end, the three have now "verified" a total of L$750,000 when they only have L$250,000 between them.

Capital verification is hard. Just ask a bank examiner or an insurance examiner. Which is why I have in the past suggested land or cash escrow as one of the few ways of providing security. Neualtenburg bonds (or bonds issued by another reasonable reliable issuer) might be an alternative, if they were deposited in escrow with the interest being paid to the depositor during the term of the escrow.

Frank

Actually, I contested the common assertion that there is no contract enforcement possible in SL. I think it is possible, using the sort of escrowed assets you mention. Others have indicated that the method may not be worth the trouble and restriction on assets required.

Frank.

My apologies. I was working from memory and did not look up the posting before I typed.

Frank,

I look forward to testing these theories. I plan the following (post #59):
/130/81/103335/2.html

There's already some interest from Shaun Altman regarding escrow for land trades. I've asked everyone to comment, and have no response, so any holes you can poke in my post #59 would be greatly appreciated.

I realize of course, that tying up the assets, and the complexity of these transactions may not make them worthwhile. I also worry about a commercial case involving myself and a non-citizen. It could appear to the outsider that SC might be biased in my favor as I have a stake in the "corporation" (Neualtenburg). Sadly, SL Mediators seems to have disappeared, so as far as I'm aware there are no 3rd party mediator services in SL other than the NB SC.