Investment Banking?

I'm very interested in starting a sort of Investment Bank, where people could deposit money which would be used to invest in profit making ventures, and so they would get paid interest or dividends, say weekly. I know there is a big trust issue, and no formal legal structure in SL, which is why I'm thinking that it should:

1) start small, not asking for 1,000s of linden dollars in deposits, but... say, you have $10 that you got as a gift from being in a casino... deposit with us!

2) include some sort of free gift... like when you get a free toaster for opening a bank account, but more in line with what you actually deposit. Perhaps even a whole store where your purchases would be counted as deposits that will yield you interest!

I know, even then, some people won't want to trust me with their money. But this world is full of pioneers, not to mention gamblers, who might be interested.

I want to build a solid institution that enriches the lives of SL citizens, both financially and... well, non-financially. I'm going to start with a pilot program, paying 1% weekly (from my own money).

Anybody interested in investing, or help set this up? Places I could rent, scripters, advertisers and designers I could hire?

Any ideas or comments?

Sounds an interesting idea Nic,

Am curious to know how you would be able to materialise the idea though. Have seen similar programs from other communities which allows users to invest and have a variable returns of investment.

However how the sites did that was from the sponsorship from a higher order - usually from the governor which in turn will be used to be invested in a form of stock exchange. So, in a span of a month, perhaps the person would have a return of 2 percent or 5 pecent ...depending

Anyhows, interesting idea, will be looking forward to know of new developments

The only reason people would need a large up-front mound of cash would be to purchase land.

If you're going to give out money as a loan, you'll need collateral. What's the only good collateral in SL right now? Land. So, there's a catch-22.

If you're going to dole out land for investment purposes, then the bank has to hold land tier, which means donations from the "investors". And if someone pulls out? There goes the entire investment, unless someone puts in more.

LF

hmmm... thinking more about this and our conversation, nicholas, it sounds like a retail bank or a savings and loan... people put some cash in at a low risk level and get interest, (or I suppose they could put in at a higher interest level and get performance-based (of bank's investments) dividends).

letsee... in real life this typically went towards mortgages and investing in small businesses. Mortgages at least had the collateral of the house so that if borrower defaulted, bank can take and sell the property.

in SL, are there really investments that are low enough risk to fit the model? Doubt it. And as LF says, the only real collateral is land right now.

It sounds like there might be some land-related arbitrage opportunities by using group buying power i.e. the volume discount built into pricing model, but I haven't really bothered to look into that, and if it starts getting used en-masse, this would defeat Linden Lab's pricing model and they would have to close the loophole somehow or figure out a way to make up the revenue gap.

The investment idea would work only if the bank or lender could place a lein against the land, that the money was loaned to purchase. This could be easily accomplished at the time of purchase. Borrower gets approved by the banker for land. Borrower finds land and contracts to buy land. Borrower then contacts banker about land. Banker arrives at land places lein (which borrower must accept) and pays for land. Borrower puts land on their own tier (which makes the bank not responsible for land fees)and should they default on the land or drop out of the game land goes to auction to satisfy lein or revert to lein holder for cost of investment. I know this sounds some what complex on the surface but could easily be implemented based on a set a varibles if it is a simple payback or dividend payback for a period of time until the note matures the banker then must release the full value of the land to the borrower or a partial release based on value or continued dividends for the project. This project would only work if you could gain the support of the lindens to implement the changes in the system based on the above needs. SL would then truly have an real estate inventement ability.

For decades, USENET groups have been compiling FAQs to prevent the same great "new" idea or question from being posted weekly. It's beginning to look like SL-FAQ time.

Nicholas, this idea has been shot down many times before for exactly the reasons Lordfly explains. It is not necessarily a bad idea, the mechanics of SL just don't afford it and aren't likely to soon.

So this is all? Good. I have done a lot of planning, and my bank will open. I will walk the walk, and if inevitable, stumble and fall.

It's not a question of "if", it's a question of "when" and "how much you lost".

SL can't support a player-run financial institution at this stage.

LF

Actually you might be able to solve the "lien" situation in start-up businesses by taking "ownership" of the products so that the entrepreneur has to put up the rights to convey of the product to the investment banker on a shares basis. Just a thought.

Hello, I'm willing to put $5000 in your bank and I hope you will develop some CDs for 30 or 60 or whatever days to deliver a better percentage that 1 percent.

Immigrants need a way to buy land and build houses or start small businesses in RL so they make credit unions or building associations. It might be a smaller-scale model in SL than a RL bank, i.e. based only on the residents of one sim or something, and you could then make chains or franchises eventually.

You have to do this despite the naysayers. Just the other day I was looking for a loan when GOM was tapped out for me for the day and IGE was too expensive, and I actually thought by looking in the "find" list I'd find a bank or savings and loan, as they had in TSO. I didn't.

I think one way to use the game mechanics to having a loaning system is as follows:

You form a group called the Immigrants Building Association or whatever. You're going to have to be willing to assume tier coverage up to a certain amount. When an existing landowner wants to buy yet another piece of land, you ask him to put his existing land temporarily into a group ownership along with you in a group you have made for this purpose. So now you have a group with you, your partner, and the prospective loan recipient as a partner and you are all on the land as a group. You are officers, and he is the sole member. Of course, given the risky loophole in the game mechanics, as officers you can sell the land out from under the third guy, the member who wants the loan. So you use that built-in fuction to make sure that he pays. He can't sell the land out from under you, too, as a member only, but even if he could somehow, you don't care, because then you don't have to give the loan, or pay the tier. As the sole member, he can't collect 2/3 votes to vote you out (that's my understanding).

It's not so pretty, morally, but then, immigrant associations can often look like mafias. The point is, you have a fail-safe way to make sure that he pays. If he doesn't, you could renegotiate prices before having to take as drastic a method as selling his land out from under him, or failing that, either sell the land or make a new group that puts the land into that new group doesn't include him, in order to keep the ownership (another tactic the game permits which can be used under duress).

If all works out well, the fellow pays his loan and interest back, then buys his original piece of land back for $1 and you all move on to the next square. Yes, it means you have to have your accounts willing to assume tier in this fashion, and going up and down like this with those month-long Linden tier payments regardless of what you actually own for the entire duration of the month (SO unfair!)

Another way you could give loans to designers is to ask them to give you a copy of the item they wish to sell that you hold until the loan is paid back. Again, this could only be possible if real trust and respect develops in your institution. It's a little unsettling to have banks without laws and courts, too, but we'll have to bite that bullet.

What about people with no land? You could give them a loan too. You could make it very high-interest if there isn't collateral. But there are other options, such as explaining that you and your 9 partners will negrate the non-payee so that 10 negrates on behavior show up on that non-payer's profile. Now, if he's a griefer, he'll just cancel and get a new account. But it's one option.

And there's yet another way to make sure that the land that the immigrant wants to buy itself becomes your collateral in the process, as in RL. He buys it, but only along with you in a group. You all own group land now together, and again, if he doesn't pay up, you sell it to yourselves out from under him. The minute he pays back the loan with interest, you let him buy the land back for $1. I think this is the most positive use you will ever see out of this probably often pernicious function. So put it to work before all the nervous nellies at the gate complain and get that particularly clever function removed from the game.

People are too nice, and don't want to use the built-in negative features of the game for positive ends. But they concentrate the mind wonderfully and would work.

I wouldn't to start with. I've seen many banks in SL and every one goes under. And very often they scoot with your money and leave SL before the Lindens can do anything about it. So a bank would need to have been around for a while for me to trust it.

I understand, but you have to start somewhere, and usually the only place you can start is the place where hundreds failed before you.

I personally have taken out year-long subscriptions to Linden and intend to stay at least that long. And as I said, I would put some money into this bank, and furthermore, if the idea of a temporary land-holding group could be established, to enable people to purchase land while they wait to clear their cash on GOM or IGE, or whatever their circumstances are, for some kind of percentage, I'd be willing to contribute some tier to such a group.\

Re:

I could provide some low-cost rental space also to get this started as well. You have to start somewhere!

What would stop the owner of the "bank" to cash everyone money at GOM and split to the bahamas?

Trust is priceless...

I just dont see the need for banks and loans........ if I cant afford something I just dont buy it, land included

Income?

> I have done a lot of planning, and my bank will open. I will walk the walk, and if inevitable, stumble and fall.

Good attitude; I like this attitude.

Azelda

Or start a decent casino. I like to think I have a bit of knowledge about how SL gambling operations should be run... and in my humble opinion it is good policy to have cash on hand to cover every jackpot on every machine that has jackpots as well as enough to cover exceptional winning streaks at any given time.

That ends up being a lot of money.

Of course many places just bank on their machines sucking their patrons dry ... however I am talking about building a reputable gaming operation.

That said, I wouldn't recommend financing a SL casino though an invetment bank for a multitude of reasons. I'm just pointing out that there *are* some other ventures besides land that require a nice chunk of change to set up properly.

-AP

I would just like to say that the bank is fully operational and open for business. You can visit us, just use find for GinkoTec Financial, or IM in game for a TP (Nicholas Portocarrero). Everything works great, and we have finished our first successful unbacked loan, although this is not something we are focusing on. You can get a notecard with more information by clicking on the ATM at the bank, or just asking me. We have had a good response from people and have a good amount of money in deposits already, though it is no fortune. We also have our first in-house business operational. Drop by and check us out.

1% paid out every Sunday? That's about 67% annually, right? Damn. I should convert my retirement fund to L$...

How on earth are you funding that sort of return?

J

Oh, I didn't have the full notecard in the ATM when you dropped by. Well it's a mix of in-world businesses (such as the Poker Lounge), high interest loans, and an off-world venture. I'm thinking about how to explore investments in land in a way that would minimize the potential losses with land tier fees, but for now this is it. The 1% is sort of a test rate, but should be sustainable.

Hey Nicholas are you the same guy i played poker with? Id just like to say i think your idea is great. Instead of money could land be invested? I mean contribution to a groupl like what was mentioned earlier as i have unused land allocation, Send me a pvt msg on here if you like im not in world at the moment.

What would work is if a RL banking society became part of SL and worked along side with the SL developers to develope an inworld secure system to allow players to save, borrow money whenever it would be needed.

In fact, if this could be done with the co-operation of LL, this would maybe encourage other businesses to try venture into SL to attempt making money from it.

When will you silly peons learn that nobody is going to give you their money with no recourse?

First we had silly Alby Yellowknife telling us all he was going to introduce a stock market
Then we had ludicrous Jac Richelieu trying to make a go of her investment bank
Now we have your outlandish idea.....

Its all rehashary. Never going to happen w/o security.

Never say never. It is already happening.

It certainly is. I've known Nicholas for some time in-game, and I trust him enough to invest some money I can afford to lose anyway. IMO there is a need for banking in SL, and i give my support (half-hearted, i certainly know the risk) to the first that has actually managed to pull off a working system.

Only time will tell if he will run with the money. I certainly make more than 1% per week on my investments in SL. Why shouldnt he be able to?