Economic inbalance

After I posted this yesterday, it dawned on me that this should be its own thread and not a reply to a farewell post.

Over the past few weeks I have seen users start threads about cashing out of SL. All of them have been in the service business -- clubs and casinos. In RL business there is certainly a food chain that can be applied to the quasi-market of Second Life.

The companies that procure and sell raw goods, manufactured products, and land are the most solid organizations. RL companies like P&G, Kraft, GE, and Halliburton have built respectable empires based on commodities and consumable products.

As you move farther down the food chain of business, you eventually reach service companies. In contrast, service companies sell time and materials and are unfortunately the bottom feeders of any free economy.

Service companies have to buy everything they need from the commodity and manufactured products markets before they can begin to make a dollar.

Professional service companies have less risk. "Intellectual prostitution" as I like to call them, such as designers and architects have less upfront investment in their businesses but still suffer from the same types of problems other service companies face.

Service companies, whether in RL or SL, get stuck with fickle retail customers, non-transferrable inventory, employees, land and building costs, and not to mention life or death competition.

Always remember that land barons, manufacturers, builders, and Linden Labs all make money off of your service business before you take in your first dollar. And your success or failure in SL business is not a direct financial concern to them.

SL is very volatile. Everything -- the economy, sociology, and technology -- are all in a constant state of flux. This means that at present, there is currently more stability and money to be made in commodities and land.

All that said, the economy and Linden Labs will cease to exist if everyone becomes a land baron and designs nifty sex balls for a living.

I'm not an SL veteran, but it seems to me that if less then 25% of the SL users own land and most of the SL experience is in the social entertainment realm, there are a few things that need to change to encourage service business.

Off the top of my head, I can think of four things I would change immediately:

1. Money Circulation - weekly stipends should be more to users with and without land. Regardless of how this would be done, there needs to be more money in circulation of the common user.

2. Hosting Incentives - Dwell bonuses should be increased and event reimbursements should be reinstated in some form or another.

3. Limit Anti-business Sentiment - Things that are currently free should cost money. I don't own a club, but I find it unacceptable that club owners don't have the cojones to charge at the door. I hear boxing is working out well with the door charges. It's time for clubs make it standard. The market could only bear this if more money was in circulation.

4. Wages - A full-featured payroll module should be added to groups for managing wages. Reports on median and average pay rates should be made available to all users as a form of tracking fair wages. Pay rates should be raised once social "service" businesses can begin turning a dollar.

LL should be focused on raising the value of the Linden dollar based on all markets in SL including the service industries.

Currently the average land baron can spend less than half an hour on flipping real estate and make L $1,000s. Compare that to a dancer that works four hours in a club for a few hundred L$.

There is little or no balance for the people in SL that are building the places that entertain 80% or more of the residents.

This is a very interesting proposal. But in making it, you're going to run smack into the squeamishness this company, even with its land auction, has, in making the landowner the center of the economy and the marketplace and the system of law.

RL always made landowners the center through giving them the vote or seat in parliament traditionally, or having their taxes be the economic base for things like schools. But in SL, landless tekkies or tekkies on free-4096s for a significant base to which LL caters. The sentiment of the average tekkie is hostile toward land owners, mall, managers, and club proprietors. They often tend to have the leftist utopian ideologies. They'll scream if LL were to institute a two-tier stipend schedule based on land holdings. This will be blasted by socialists as corporate welfare. It's a shame, really, because it would be some kind of incentive for all the enormous amount of dollars Linden soaks out of players who pay lots of tier.



LL moved away from this not only because they didn't want the administrative chore or the Linden sink, they don't want to make a dwell game. It's not clear what they want to make exactly, but in the last year, they got rid of all of these features that used to exist and they have refused to revisit the entire dwell thing. In fact, I wouldn't be surprised if they eliminate dwell completely.



The problem is the 'should' in a free economy of course, but then..it's not really free. It's very hard to collect tickets efficiently given peoples' ability to fly and evade even lot bans up in the air, and the ticket-admission function that used to be on the land has been removed because it didn't work anyway. That leaves only payment of admission to join a group that is the only entity allowed on a land, let's say, set to admit group only, but currently the payments circulate to every member of the group, because groups were set up with idealist communard functions instead of structured to manage rational businesses.



I can't see LL incorporating these types of features, that would involve making mini-busineses or starter-businesses with the corporate model, and they loathe that, and they think they have a better idea, but their better idea was already thought up by a German philosophyer in a dusty library 200 years ago, sheesh.

Go and read Philip's blog. He is questioning everything written in 1937 in the essay about the firm, etc. It's scary.

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No, it is very hard to flip land within half an hour. I've flipped some land in my day and I am here to tell you that it is very hard to flip even telehub land within that short span.

Would lead to rampant inflation and the devaluation of the linden dollar. Not good.



Leads to gaming of the dwell system, which is already problematic enough, and re-instating event bonuses would just lead to a flood of nonsense events held for no reason at all except to make money. Not good.



The lindens have no control over this. You have no control over this. Neither of these will change. It's called a free market. Live with it, love it. Anything else is not good.



The lindens shouldn't pay users like this. Groups can already do that, albiet with a bit of book-keeping. Anything else, what's the point?



Actually, no they shouldn't.

Because the markets are connected, but not comparable. It's like saying the government should try to make sure that a highschool dropout burger-flipper gets payed the same as a phd-holding neurosurgeon.

I don't have time, right now to comment on everything that the root post in this thread mentions. It does seem well though out, and much of it is right. But not all of it. I have chosen to touch the surface of just one of the early points: Heavy industries v. service industries:

In the "New Economy", many, if not most major corporations have been frantically diversifying into services as fast as they can. There are many examples of this. Check their web-sites and see for yourself.



Halliburton

http://www.halliburton.com/cat.jsp



G.E.

Media
http://www.ge.com/en/product/home/television.htm


Financial services
http://www.ge.com/en/financial/business.htm

http://www.ge.com/en/financial/personal.htm


A non-singleton subset of their healthcare division

http://www.gehealthcare.com/usen/cis/products/dig_hosp/index.html

http://www.ge.com/r/r?http://www.gehealthcare.com/hfs/index.shtml

http://www.geinsurancesolutions.com/

http://www.geinsurancesolutions.com/erccorporate/insurance/ci/insu_na_prof_lhagents_us.htm


Retail
http://www.ge.com/en/product/business/retail.htm
10 sub-categories

Many more. From here, you can figure out how to do your own research. Have fun.

The comparison between these companies and SL is nearly irrelivant considering that for the most part concepts such as "consumables" and "energy" don't exist in SL as tangible items.

Furthermore, the "economic pyramid" in SL is literally turned on its head. Clubs and events are one of the main sources of income for the Broadcast Culture; that's why so much noise was made about event funding, stipend cuts, and rating cost increases. All three directly effect the whole economic tree at its roots.



The problem here is two-fold: The technical mechanics for managing cover charge is beyond the scope in which most club owners, event manager, or patrons are willing to cope with. Second is that "clubbing" is one of the menial wage-earning activities available. Clubs actually pay people to show up, either in the form of contest prizes, raffles, or free money dispensers. This runs a bit contrary to the idea of charging entry.

My girlfriend, who doesn't really have any sort of artistic talent that applies to SL, nor an interest in SL beyond casual recreation asked me what jobs were available to people. I actually had to think for a minute and realize that its pretty much limited to:

-Clubbing, though the competition for those L$12 random money draws is stiff.
-Tringo, though I've never played so I don't know if theres much to be made here.
-Modeling, though most modeling jobs I've seen don't pay L$.
-Escorting/Prostitution. (I got a definite frown for this one )

Basically as far as I can see, SL is a declining society of Broadcast Culture decadance and exploitation supporting a system of manorialism. In my opinon there is two things that LL could do to address and aleviate this:

- Revamp the group model. Groups as they stand are useless for anything beyond free land tier and silly titles. I spent many hours trying to utilize the current group system as a corporate framework and failed because the group functions are pathetically limited particularly when dealing with financial transactions. (I've also attempted to formulate my own group system, though I've run into the problems of email being not always reliable. XML-RPC is too heavyduty for such a simple task, nevermind the fact that the current implemtation is castrated. I suppose you could do rudimentary GET operations by abusing PARCEL_MEDIA_COMMAND_URL but that's an ugly kludge.)

- Remove the restrictions on events. Its time that we recognize that shopping is the social activity of choice for the masses. I'm sure there's plenty of vendors and entertainers that could promote a shopping event not just for traffic and product placement, but also perhaps to close the "leaky loop" that seems to be in the economy.

In closing I'd like to point out that I'm not a student of political science or economics. My opinions are merely based on the fact that I've now completed an entire cycle of virtual enterprise. I'm open to suggestions/corrections to my viewpoints.

putting aside the inflation issue (because new money creation is different from increased circulation), you need to remember that Linden Lab needs to push one-time $9.95 users into monthly customers. This may have also been the root of their recent event-listing changes as well (trying to push more people to own land) -- but that is pure speculation.



I do too. I believe in paying for value. That said, I don't think it is so much anti-business sentiment as user habit. It takes time and some pain to change market attitudes. All those people in the late 90s who got everything for free on the Internet (subsidized by investors) weren't anti-business, they were just used to getting things for free, and they liked it. Of course those businesses went bust, and now you are seeing new versions of those companies but this time around customers have realized they are going to have to pay something.

Prok raises good points about ticket collection problems too.



hell, any and all corporate controls would be useful. I would love to be able to open a store with multiple designers and actually know how much money they were making (i.e. how well was the store doing?). I would love to be able to set up a group structure where the founder can dictate who gets what percentage of cash flow (i.e. performance-based wages to all, rather than the current group split equally)... the list goes on... these i'm just tossing off quickly... i don't have time right now to design my ideal feature set, certainly not when there's no idea whether LL is listening or not.


at the end of the day, LL can only do so much. Either people are willing to pay for value or they are not. If few people convert to monthly customers, LL goes out of business. If no one pays for a club, then the club goes out of business.

Prokofy, I believe that you and Johnny Ming are talking past each other on this.

I believe that he is talking about spending a given work-period to decide, from aggregate holdings, the most profitable properties to flip during that period, and flipping them.

You, on the other hand, may have (mis?)understood him to have meant spending a work period finding the parcels with the smallest cost/area ratio available at that time, and flip those specific parcels within the given work-period.