Vasudha Linden - "the economy does not need stipends to sustain it.”

Holy shit - ANOTHER one - between you , Jonas, Enabran, Grimmy Moonflower, myself, Pharkbawlz Broken, Bub AND Philip Linden it's hard to keep track!

Alternatively I'm sure we could get cheaper fucktards in third world countries to replace the ones we have HERE....

Now THAT, my friend, would be a feat of captialism!

Removing Basic stipends would probably serve the economy well. There's no shortage of money; just look at the exchange. Besides, the Basic stipend is a pittance for individuals. If L$s were only available on the exchange or via genuine productivity, it would enliven the SL economy, sweetening the pot for producers with no shortage of funds for consumers. People would immediately understand that if they want to be tourists, they have to cash in USD for the local currency. Why would new users expect to receive a monthly stipend? Yeah, there'd be whining from existing accounts, as when the rating bonus was rescinded, but they'd get over it if they had any interest being here in the first place.

Oh my, Stand Alone Complex in SL

Omg, you are my hero!

Now don't look behind you and...just RUN!!...

...because the pro basic stipend crodwd is coming to get you.

My stance on basic account stipends is off a bit..

I see them as a good tool to introduce new inabitants and a good thing. That being said, by 2-3 months of SL they should be able to tell whether they want premium or not (or have a business or othe rincome). The basic stipend should be cut off somewhere between 8-12 weeks is my personal opinion, but the premium should not be touched without an equal return, say 1024 m2 more free tier..

new sig coming soon..

This is exactly right. Remove the stipend for Premium accounts, and I will no longer be paying for a premium account, nor would the vast majority of players. IMO the people who think that they would are out of touch with the average user.

If keeping the value of the Linden up is important, (And personally, I think that it is. [1]) then the way to do this is to have Linden sinks that will take up an amount of $L that will balance out what is coming in in the way of stipends.

This doesn't strike me actually being that hard. The lindens control the game. Surely there are some services, even simple trivial things like allowing, for instance, someone to show their name and group title in different colors, (Or other trivial, silly things that people would pay for.) that could be charged for in $L that could be used to soak up up excess $L.

Expecting everyone to get a job, or buy their money will *not* work. The vast majority of people don't have the time or skills to make and sell things, there's already a shorage of jobs that pay anything, (Other than Escort, and I'd hope that that's not something anyone is suggesting as a default job for newbies.) and as I mentioned above, the vast majority of people are not going to buy $L *and* be willing to pay for a premium membership.

[1] The really big thing that SL has going for it is that almost all of the content is user created. Let the US$ value of the Linden drop and there will be less motivation for people to create that content. Eliminate user created content, and SL becomes a dull, dreary place.

D'oh! Sorry. Normally I pick up that kind of thing.

So this has struck me as a real puzzler and I've been trying to separate the meaningful from the meaningless in the SL pseudo-economy. Here are the things that I see as uninteresting in the classical economic sense or which have effects that apply only in-game.

Player to player exchanges no matter how they are mediated are uninteresting. Consider Player A and Player B: any exchanges between these two serve only to redistribute L$ that are already in the money supply. In the simplest case, A gives L$ to B for kicks - the only effect is that B has more and A has less. What has been noted by others is that A and B could trade the same L$1k back and forth one thousand times. By some accounts, L$1M appears to have been involved in a transaction while from another view, there has been no net change in anything. Now let A exchange L$1k with B for a shirt. In the real world, we'd consider this to be an actual transaction, that is a sign of economic activity. But real world understandings don't apply in SL. As noted before, since the shirt has a marginal cost of production of zero, no material is consumed in the process, no other thing was not made because of the "opportunity cost" of the materials or non-labor that the shirt required and nothing ever degrades this purchase has the same net effect as if A had just handed B L$1k. By induction, no sold "good" does anything other than redistribute L$ and the redistribution is uninteresting.

Similarly - if my understanding of LindeX is correct - Linden Lab extracts only processing (e.g. credit card fees) from the transaction. If this is the case (I don't exchange L$) this is merely another transfer from A to B with no interesting effect. Let's just take this to the point of absurdity to show that in-game transfers of L$ have no meaning. Let every single player give all their L$ and future stipends to me - the only thing that has changed game-wise is that no one but me will be able to upload textures. There lies the singular opportunity cost and since some of you won't give me your L$, players will still be able to upload.

So what does matter then? I've seen people discussing their use of L$ in only two interesting ways: 1) to pay tier costs 2) to sell for US$. If my understanding of LindeX is correct, (2) almost becomes uninteresting as it is little more than the transfer from A to B described above; the difference is that A now has US$ that she didn't before and B has less US$ than he did before. I call this uninteresting as it affected neither the money supply nor LL's revenues. It has made a difference in the real wallets of A and B which may be of interest to them but not to anyone else. So that leaves us with just (1): paying LL tier as being the only meaningful transaction - what are the implications of that?

If tier is paid with L$ and those L$ have originated from the only place they can, stipend, then LL has removed L$ from the money supply and has reduced their real revenue by an equivalent amount. Put another way, LL is in effect buying L$ with unrealized US$ revenues, in other words, doing exactly what some have suggested they do as monetary policy. Like the Fed, LL is buying L$ at cost to them and taking them out of circulation.

It is very likely I have missed something as I really don't pay much attention to L$. I have intentionally ignored rating sinks as they are no longer significantly used and have also omitted small charges like directory listings because I assume they are miniscule compared to stipend, and if I have missed some "interesting" transactions do let me know.

So what do I conclude from this? That as the thread title says "the economy does not need stipends to sustain it". This is not to say that stipends can be removed without enormous customer dissatisfaction and thus may not be removed for that reason alone. Linden Lab is already playing half the role of the Federal Reserve but they would also have to be willing to play the other half and sell L$ or they'd just drive the economy out of game (e.g. into PayPal or similar).

I don't think my armchair analysis will have lead LL to any conclusions that they haven't already come to, and they do have the huge customer acceptance hurdle to face. So I cannot say they will eliminate stipends, but I think we're seeing the first "trial balloons" being sent up. If this post causes players to think I've brought the end of stipends, I will allow Lecktor to crucify me in-game and will accept a deserved public vStoning.

I hope I've made an error somewhere.

This is not correct.

There's a 30 cent transaction cost for purchases.
On each sale, LL keeps 3.5% of the value of the transaction.
If you withdraw money through paypal, it will cost you $1. Paypal's fees are a maximum of US$1 per transaction. (LL keeps the difference if the fee is less than that)

Depositing money to LL costs 1.5% to 2%. But this is only charged when you give money directly to LL. If you were to say, sell L$ on LindeX, and then buy L$ on Lindex, LL would keep 3.5%, without having to recover the cost of credit card deposits.

So, assuming that the exchange rate is at L$288/USD, and L$6 million is traded on LindeX every day, this nets LL at least US$320 per day. (conservative estimate)

Thanks for dispelling my ignorance regarding LindeX. However, even if you are conservative by a factor of 3, US$1k/day is hopefully not a significant portion of their revenues. Or, if it is, yikes.

This is also incorrect. You can't pay tier in L$. What actually happens is when you sell L$ on the exchange, the proceeds of the sale go straight into your account with LL. Essentially LL operates as a safety deposit box until you ask them to send your money to you via some method or another, the cheapest being PayPal for $1 USD. However, when tier time comes around, LL first checks your deposit box and pulls money from there instead of your credit card if sufficient funds are available (or both if you only have partial in your deposit box.) So in reality, paying tier with L$ is exactly the same as cashing it out for USD. This is not unrealized revenue, nor is it a sink.

Introvert, I think you argue for more effective sinks other than just tier.

Statements like "we don't need stipend" coming from a Linden, and supposedly someone who is an 'expert' in economics is very worrying, and would make me wonder what game they are playing.

Simple truth of the matter is that 99% of players NEED that money to keep going. I enjoy the creativity that SL offers - something no other game can - and I'm not here to make money despite the false advertising that you can easily make thousands a year off of a game.

The only way that you could possibly remove the stipend without destroying most people's gameplay would be for the monthly fee to be lowered by the equivalent of L$2000 - which makes it complicated for 5 week months.

Many people - like me - rely on the monthly stipend just to keep going - uploading textures and buying other people's creations.

Remove that facility from me, I can't spend my L$ buying from other players, and my quality of gameplay is lowered as well as those I no longer buy from.

Remember that for every person making enough in game to make a real life income from it there maybe 100 or more people spending their L$ with that individual. Remove that income, and suddenly everything collapses because there's no point having people selling anything if there's nobody buying.

I trust nobody else's "opinion" when it comes to financial matters in SL. It shouldn't even be an issue because it's JUST A FRICKIN GAME, and this whole emphasis on the moneymaking aspect of the game is probably LL's biggest mistake in promoting the game, because people will believe the advertising, come here and find out it's all a load of lies and give up playing - without even discovering all the great creativity, social and entertainment aspects that SL provides.

I just hope that LL don't 'jump the shark' and remove the stipend, because I truly believe that will be the beginning of the end. I would certainly need to evaluate whether further expenditure per month can really be justified on a mere source of entertainment, and quite likely cut back in my land tier to compensate for having to buy L$. I am sure that if I had to actually buy L$, the $10 difference of tiering down would not mean I spent $10 worth of L$ in a month because I'd only buy what I needed when I needed it, but having it there means I can spend it because I get it.

It's just unfortunate that people often complain about "you play your game your way, let me play mine my way", without giving one iota of thought that the 'economy' side of it affects every player whether we like it or not.

Lewis

This is insane!
If the money in circulation doesn't increase (rather, decrese through sinks), but the number of people do increase, we're in for a massive deflation!

Expect it to reach 1 US$ = 100 L$, then 10 L$ and even worse!

Yes, I totally agree!

Some people see basic stipends as 'money thrown out the window'. It's not! A normal business might 'throw out' money on 100 ppl, but if even 1 person will be a paying customer, it might easily recoup the 'thrown out' costs.

From 'What Is Second Life', the front page of SL's site:
"Second Life is a 3-D virtual world entirely built and owned by its residents. Since opening to the public in 2003, it has grown explosively and today is inhabited by nearly 100,000 people from around the globe.

* From the moment you enter the World you’ll discover a vast digital continent, teeming with people, entertainment, experiences and opportunity. Once you’ve explored a bit, perhaps you’ll find a perfect parcel of land to build your house or business.

* You’ll also be surrounded by the Creations of your fellow residents. Because residents retain the rights to their digital creations, they can buy, sell and trade with other residents.

* The Marketplace currently supports millions of US dollars in monthly transactions. This commerce is handled with the in-world currency, the Linden dollar, which can be converted to US dollars at several thriving online currency exchanges.

Welcome to Second Life. We look forward to seeing you in-world! "

I see no mention of a game. I do see a reference to an economy. What made you think you were signing on to a game?
"I trust no body else's opinion"? I find that an interesting statement, because personally I do. I read with interest posts by people I've never met, but have been around SL longer than me. My opinions are flexible, there's many times when someone has posted something that made me think differently, look at something in a different light.
99%? Where do you pull those numbers from? It is arrogant, to say the least, to claim to represent the vast majority. I can assure you, you don't even come close to speaking for me.
I also find it amusing, that on one hand, you claim you depend on the stipend, and on the other, you say you don't know if you'd buy US$10 a month, you'd only buy it if you needed it. Which is it? Either you need it, or you don't. We don't have needs in SL, we have wants.
I now hope they remove all stipends, just so I can watch your head explode.
You might want to use SL as a game, and that's fine, but you can't claim that's what was sold to you. Can you accept that others bought into something else? Some of us don't want to sit at a bus stop, waiting for a bus that doesn't exist, that will never come.

No, that is the very last thing sl needs. Cybertown has an economy which depends on jobs - and when I was there it was a vision of 1984. Join it and enjoy its pleasures for a while if you don't believe me.

There's just as much skill in making a bus shelter as there is making a chair or any other item in game. Just because it's not something I can make money out of, does that mean it is worthless?

Do you actually play for fun and entertainment, or do you think about whether the profit you can make is worthwhile the time spent doing it every time you log in?

I provide content. I provide things for other people to enjoy if they want to. I provide a rich experience that, through my creativity, can enhance other people's gameplay experience.

What do you do, apart from make profit?

Thing is, my gameplay does not rely on customers. Everything I do is self-funding as far as possible, and my enjoyment through building remains the same whether I get traffic of 5 or 5000. If you're in a business and making money, remove the customers and the point of your existance is gone. Which leaves you a choice.... diversify or quit.

Lewis

While it doesn't cost a thing to reproduce a shirt this does not mean the cost is 0. Time = money. To produce something worth selling you need time and hence the value of an item is defined by the time spend. You also need to fiddle with uploads a bit so that would add to the cost too (off course, if you resell a lot it's marginal).

Is L$ redistribution uninteresting? Only if there's equal redistribution which there is not. You've consumers and producers. The goal is to get the consumers to buy while making it worthwhile for the producers to produce. As LL benefits from the Lindex transactions it's even more beneficial for them if there's an unbalance so that consumers feel urged to spend and buy L$ using US$ and producers feel urged to produce and sell L$ for US$.

Now where come stipends into this? Well everything revolves around creating incentive. Consumers need to be fired up a little. If you had no or few L$ you'd be forced to trade in US$ immediately. As there's a fee you'd need to be a bit economic and minimse your "loss". In reality that it means that buying less than ~10000L$ is rather ponitless. The end result? There's a barrier from the start while no incentive has been created. With the stipend (especially the premium one) you have enough L$ to start shopping. And once people start buying they rarely quit.

For a would be producer it's the same. When you start designing you'll end up uploading at least a few of your own textures. If you're unlucky it takes you a few tries to get things right. If you've little or no L$ you'd be forced to go invest. Again it would mean buying at least L$ 10000.

The basic stipend creates basic incentive. It's the thing that makes you want more. The premium stipend is what creates the incentive to become premium. You've got 2 options basicly:
- you trade in your US$ on the lindex to get L$
- you get a premium account and get your L$

With the Lindex you've your money immediately but an account gives you a better rate (given current rates) but a lower pace.

Note that for LL people with premium accounts are more interesting in several ways. It hence pays off to give them a more appealing offer than just trading in at Lindex. A few things that make it interesting:
- with the current rules, premium accounts drive the incentive for small scale land ownership (ever felt tempted to start going over your 512 when your neighbour is selling?)
- paying out over the timeframe of year = commitment. If I get myself 10000 L$ on the Lindex, spend it and feel burned out I'll just remove SL from my computer. Though if I pay for an annual account I'll keep it and feel at the least a bit compelled to log in during that year.

Note this is similar in the real world but you'll need to look at those economies that combine great social security with capitalism. The reason why people get an allowance even if they do not work is not simply to help them survive. You want to give them more than what they need to survive because:
- they'll spend it in your economy and help it grow
- once they start spending they'll feel urged to work to get more

Paying unemployed people more than they need to survive is all about creating incentive too. You'll rarely want what you've not tasted.

So basically stipend = incentive in many ways. Take it out and you'll put up hurdles that a lot less people will be willing to take.

I did play a cyberpunk MUSH for a short period, I forget the name, where the only real way for newbies to get money was to work in a factory packing widgets into crates. You had to type in "work" every now and then, or the boss would kick you out. It was immensely depressing.

But then, that was supposed to be dystopian.

Indeed, I think you are correct. I apologize for my late night ramble and shall leave this to players who know more and have thought more about the matter. I thank those who have pointed out where I was overbroad in my thinking and for their kind explanations. I just wanted to let you know I am reading and am fascinated and am clearly out of my depth.

In case it wasn't clear, I think elimination of stipend would be disasterous and ought not be effected; alas, my opinion plus L$980 will get you a latte with a trademark on it.

You're so holier-than-though, you make huge assumptions about people. No, making something not-for-profit doesn't make it worthless. It also doesn't necessarily make it worth something either.
I don't 'play', true.
Do I log on for profit however? No. If you want to know what I do, I log on to build, and see my beautiful girl. The latter, most importantly.
What do I make?
I spent the first four months here building, 8-12 hours a day, just learning, without even thinking about earning money. I built 9 storey buildings just for kicks, then took them down and started again.
Eventually, Lillybeth approached me to rebuild Textures-R-Us. I jumped at he chance to build something that people would use. I let her set her own price. As the job progressed, she increased it of her own volition. I worked my ass off for a week, but I ended up earning a very real amount of money. And honestly, it was incredibly satisying. It was even more satisying building something people visit so much.
The instant I finished, I was approached by someone to build them a castle. I'd never built one, it's not my style, but I said ok. He was new, pretty cool, so I charged him half of what I would have charged normally. I buiilt him the best goddamn castle I could, and loved every minute of it.
Then I was approached for a project I can't discuss in detail because of a confidentiality agreement. All I can say is, it was an RL building. I looked at the photo, and I thought, 'no f*@king way can I build that'. I found myself saying yes, however, and accepting a deposit. I was sure I'd be returning it a few days with an apologetic 'sorry I'm not good enough'. I built it though. I figured out every complicated little bit, and when it was done, I was so proud of myself. The person who hired me was incredibly happy with it, and paid me above what he initially promised. I cant wait to see people use it.
I never actually looked to make money, it just came to me, after lots of hard work and building for pleasure.
I provide 'content' too I guess buddy. I'm just not so precious about it. You wear poor sales like a badge of honour. I'm naturally ambitious, I like to strive for more.
I don't just create for money in SL you know. I have a 20 year career in creating for money. I've owned a magazine, been an artist, a DJ for 15 years, been involved in fashion, any number of things. I've lived on scraps at times, just to keep creating. I've never had a 'normal' job. I've always made my own. And loved every second.
I always scoff at people who criticise anyone who dares earn money from creating, like it somehow invalidates it. I ask you, (I won't assume), what do you do RL? Do you work some job for someone else, doing something you'd rather not do? Is it creative? Is it satisfying? I've never had a job like that. Who's pimping themselves, me, or the person who sells half their life to someone else for a wage doing something they wouldn't without a paycheck?
Dude, Ive been to your land. You've got a few little things there, nothing special I'm afraid. But you're so goddamn precious about how you are 'enriching' our 'expereince' with content. Frankly, I'll put mine up against yours any day.
I find it enormously satisying to pay US$75 in tier out of money I've earnt. And you know what? If I didn't earn money, I'd no longer be able to be part of SL. In RL, years of pushing myself and hard living have taken a toll on my body, and it's failing me. I barely manage to get to work one night a week, and I'm gritting my teeth in pain the whole time I'm DJing. But the music, and the people, keep me going. However, I'm no longer capable of working enough RL to pay for things like SL.
SL is more important to me than you could ever realise. Apart from the few hours a week I'm DJing, I barely get to see the world anymore. Some days I can't make it down the street. Some days I can't get up at all. Most of the time, I'm trapped in a failing body, seeing noone. The other day, I couldn't control my hand enough to fill in a form, for the first time. I don't know how much longer I'll be able to DJ, apart from the pain, it requires more control than I have.
SL allows me to get out, see the world, interact in a way I can't RL. My avi feels no pain, can hold himself up as he walks, dammit he can walk! And fly!
I take exception to you, because you exclude any path but your own. You demonise people, it's Lewis' way or it's wrong.
You demonise land barons, for example. Let me tell you about my positive experience with Jon Rolland yesterday, I hope he won't mind. You'd call him a 'baron'. I was 512m short of reducing my tier from $75 to $40 US. It was a few days till the next billing cycle, but I didn't want to chance it. I IMed Jon. He came that instant. He took my lot I was offering, and let me tell you, it was a turkey. Snow, surrounded by the ugliest plywood monstrosities you'll see. He paid me $1500 on the spot, chatted for a minute, very friendly, and off he went. Today I checked what he was asking for it. L$2500. Where is this extortionate pricing you claim? Considering tier and the risk, that's what I'd call a low margin. You tell people if they accept less than L$4000, they're getting ripped off. He's selling for L$1500 less than that. So who's greedy?
He did me a solid, dude. He saved me from paying US$40 extra tier, and I only got L$1000 less than I would have sold it for, who knows when. I in no way felt exploited, 'tyrannized'. I felt he offered me a service that was easily worth L$1000. He saved me 15-20 times that.
And once again, you didn't answer my question, you just attacked my values without knowing me, but...
What part of the section I quoted "What Is Second Life" made you think you were signing on to a game?

Edit: I don't think it's a bad thing for someone to log on purely for profit. It's the aspect of SL LL promotes most heavily, and I think to myself, how wonderful, some people make all or part of their living in a virtual world. What a marvellous, creative way to make money, however they make it! I admire them.

OK, get this for a L$ sink hole... 2 words... SALES TAX.

an object can only be sold if an available to sell box is checked or something. That would be a good sink, though it would raise sales prices, it would be effective. We already have property tax (land tier), so why not sales tax?

If they remove the stipend, i go back to basic. I paid for my L$500 stipend per week.