The Great SL Recession of '04?

Business models make the most wonderful noises when they break.

I don't think there is conspiracy. But I think Linden has difficulty to properly balance their supply formulas. There can be bug in economic formula as much as there can be little bug in software. This is why it make sense bring up such topic for discussion. I believe somebody who oversees SL economy should review some calculations since they might lead to a different result than what Philip may be intending to achieve.

I only see about US$250 in bids over 3.50, and not much support below that until you get down to 3.20. In a market that does about US$4000 a day in transactions, that ain't a whole lot of money.

My hunch is that there are a bunch of US$ on the sidelines, waiting for this to find its bottom.

Yup... Time will tell

- Ace

Going by the technical definitions of free market, a market that runs completely on the forces of suply and demand without intervention from governments, she's correct. I don't think there's any conspiricy about it: in this case, Linden Labs acts in a similar manner as the U.S. Federal Reserve and the IRS by deciding when and how much money is released into the system (and also land, in the LL case). Once upon a time, there was no Fed controlling the interest rates and the US economy went through much more massive swings than it does today. And when the Fed mismanages the economy, everyone tends to feel it.

Is this a case of misjudgement on the part of the LL Fed? I dunno...I'm still a newbie. ^_^

I agree with your concerns in theory, but not your implementation.

A stable land price is not desireable. Certain cases will demand a low price and other cases will demand a high price.

For example, if SL is about to launch into a marketing campaign then they'll probably want to make sure there is a large supply of land on the market for these people to buy. They could, I suppose, flood the market the day before they start their advertising but there are so many problems with that I don't know where to start. Time required, grid stability, unclear on what the effect to land price, not to mention the sudden and painful shock to everyone's sense of the universe.

Better to slowly flood the grid with new land and depress the average land price.

So, hopefully I've convinced you that a stable price is not the right solution. Just like a stable interest rate isn't the right solution for steering the american economy.

What is a good idea though, is clear communication to the populace about what your plans are in terms of land prices.

A 3 month target price would give people time to adjust their inventory and prepare their models to handle the new rates. It would bring a certain amount of transparency to what is going on rather than waking up one day to suddenly find 40 new sims on the east coast of SecondLandia. (What is the secondlife continent called, anyways?)

Anyone good manager will tell you the number one thing they want when it comes to managing their business - no surprises.

I don't think the Lindens do, or should have price targets.

That's what the markets are for... to figger out what these prices should be.

So long as they keep the money supply and the land supply proportional to the number of subscribers, then there doesn't need to be a target price. We just let the free market make this decision.

Anshe's not sure that this supply is being managed correctly, and I'm not so doubtful.

But having the Lindens set price targets for either land or currency is not something I want them to worry about. Let the free markets sort that out.

- Ace

Yes, agree with you blaze. And proper public communication beforehand also reduce the possible effect of informal communication.

However, looking at Philip's remarks about the issue and what actually happened I see mismatch. And, blaze, your scenario about marketing campaign would make sense if Linden Lab would also lower tier fee. I don't see them doing that though.

Ace, if there would be no tier fees that might work. Lower land price would allow people to afford more land.

However with land tax system that is not based on value of land but on sqm, this is not free market and supply won't grow with price drop. This is major fault in a system that is supposed to be free market but in really isn't.

I'm trying real hard to understand the point you're trying to make here, Anshe. Believe me, I am. But I just don't get what you're saying.

How does the fact that a land-owner has monthly recurring costs denominated in US$ somehow make the land market not free? That's where I'm puzzled. Its still buyers and sellers competing over a limited resource.

- Ace

Ace - allow me to translate:

"My business model is breaking, ow, ouch, ohmy, ohnoes! How can we fix my - er, I mean the market my business is based on!"

You don't.

You either change your model, or take your lumps. That is what is really being expressed here.

The cost of land is tilting towards zero while the 'rent' is becoming an increasingly large portion of the expenses.

What this means is that the whole 'own' tab on secondlife.com is a misnomer. It should be 'rent'.

I can understand the pain, unfortunately I think a part of this pain stems from a misunderstanding of the resource, or at least a misunderstanding of LL's interpretation of the resource.

If LL was more clear about how they saw these things, nobody would be feeling the pain. Well, except for those who aren't paying attention, but they are unlikely to have anything significant invested - otherwise they would have been paying attention.

Maxx -

It's not that simple. Changing your business model is required, I agree, but having to suffer a loss because, 'whups we just added 40 sims .. tee hee' isn't funny.

How would you like it if tomorrow, SecondLife releases something that breaks all of your scripts or makes all of your content unuseable .. with no warning?

LL has learned, the hard way, to warn people about changes in certain parts of the world. I think it's only fair that they warn people ahead of time when they are about to flood the land market.

They've broken enough of my scripty stuff that I don't bother scripting anymore. But I wasn't living off of it either. I don't buy land because I've been dealt some particularly memorable lessons in lack of aesthetics and neighborly behavior (lack thereof). Building is a challenge with rotations, and when you hit 180.01 over and over, it takes the steam out of you sometimes.

So every major thing I could do has been broken, but I'm not whining about it and wheedling for everyone to 'fix it for me' now am I?

So if someone wants the system to be 'fixed' - how about starting at home, mama sita?

Well, I can't speak for Anshe, however I don't have a dog in the hunt here so I am speaking purely to hopefully encourage and convince LL people that a more transparent environment is to everyone's benefit.

In Anshe's case, I get the sense that some of the pain she's feeling is anecdotal. However, given that she's probably one of the more 'world-wide' users of SL, her anecdotal pain is probably very significant in some way.

They most definitely made public their intention to release a lot of land at a Town Hall (sometime in July, if I recall correctly), and the outpouring of glee and celebration reverberated throughout SL at the time.

I certainly don't think the Lindens can be accused of not making their intentions known.

To be frank, I'm surprised that it has taken 4 months for the price to wiggle its way down to where it is today.

- Ace

> Well, I can't speak for Anshe, however I don't have a dog in the hunt here so I am speaking purely to hopefully encourage and convince LL people that a more transparent environment is to everyone's benefit.

LL are doing exactly what they want. The way SL is now IS their vision. This is the world they want: essentially a social one.

Everything else is just marketing to try to bring as many people as possible into this particular vision.

That doesnt mean it will stay like this; but it will continue on roughly the same course, because this is what they want.

Still, it's not the only ship in the sea.

Azelda

Maxx, this is not about somebody's business model. I have been constantly adjust my business and have done so successfully in past.

The point is that current situation if not corrected will make me and other people who support SL adjust their business model in a way that negatively affects the growth of SL. Which means no longer reinvesting huge part of our profits into SL, but instead cashing out and seeking safe heaven on US$ bank account. At some point investment opportunity and business opportunity outside SL might appear more compelling than dealing with an economy where what you invest in looses value faster than tomato rott on market.

What is this vision? I'd like to know.



http://secondlife.blogs.com/philip/2004/10/evolutionary_fi.html#more

Sorry, but if that is the vision we need to know ahead of time what SL is going to do to land prices. And vague promises about "more SIMs" and what not isn't going to cut it.

Dealing land is a gamble. It's reselling a resource you don't have control over. Simple as that. There is no guarantee that it will always be profitable and there's never been any guarantee that anyone will know what sims will be released and when. The fact that a lot more land has been released lately is a result of LL not releasing enough in prior months... because they were apparently too busy with other things, like trying to make the game better for everyone.

Hmmm... I think I'm gettin the grumpies from my SL withdrawl. Hehe.

Anyway, on a different note... I was thinking that maybe there should be more ways for LL to siphon L$ out of the market so there's not quite as much of an ever growing volume in circulation. (FYI: I know jack about economics.) Granted, uploading a texture or getting hitched will cost ya L$10 but is that making an impact at all?

-Meiyo

Right blaze. And I actually consider Philips vision described here rather naive and detach from reality of land business. Who wants spend hours hanging around newbie area and touring some newbie around land, just so that some of the newbie might possibly buy some piece of land you earn half a dollar on? And usually newbie will say "no" once she hear about tier fees.

i'm not the queen of business but like a wise man said "gotta know when to hold 'em and know when to fold 'em, know when to walk away and know when to run." that's business. you have to ride the wave and jump off before if smacks you into a reef. doesn't seem reasonable to expect them to tell you when to jump. nobody tells me when to get into a business opportunity.

I think things are fine. If you're crazy enough to make your life land brokering, then hey, take your lumps, my chicken-of-the-sea.

If you can't hack it, then dump your stock and stop complaining about it. I don't hear people who make clothes post threads about how LL can 'Fix the fashion business'....because they deal with their fluctuations.

Suck it up, jesus, its getting embarassing.

Anshe - Heh heh yeah, I laughed at that when I read it at the time.

I wasn't going to get into it though, cause I find it interesting that he supports something I got so much grief over.

Martin Luther King Jr had a great saying, "learn to help yourself so you can help others". Someone who works for LL at 1$/hour isn't helping themselves and certainly is not in a position to be helping others.

Maxx - didn't you just say you stopped scripting because LL busted your scripts? That seems sad and drastic! The same thing is happening here with the sudden flooding of land. Rather than scripts getting broken without warning, a business model is getting broken without warning.

I had some ideas on how to develop real estate (with houses, gardens, etc .. like Philip described) in a very nice way for new users but I'm not going to invest any time in doing so because of the exact problems that Anshe is going through.

The whole point to this is that without a roadmap of what Linden Labs are going to do, anyone who is slightly intelligent is going to resist investing effort into SecondLife because they can get suddenly side swiped without any warning.

Bwahahaha! Ha Ha hah Ha *cough* ha hah HA!
Hee he ha haHA HEh. *cough* *cough* heh he heh...

oh my. Lordy...

That's rich...

Good times, y'all.

Okay, from everything we've seen, wouldn't it be better to consider Anshe Chung the Enron of the SL economy?

Ahh, what's SecondLife without people launching into completely unprovoked personal attacks.

Really makes you want to be associated with this community.