To Linden Labs (Bonds)

I think I'll pass on the Rainbows, Fuzzies, and lifetime membership to the Purple Moose.

No, a couple of paragraphs would do. Just stop pouring hyperbole all over this post and actually address the concerns I raised.

- How do you think people will really benefit from bonds?
- How can it be implemented efficiently?
- How can we avoid some of the pitfalls I mentioned?

Here's how these forums works: Person A posts an idea. Other people come along and ask quesitons to clarify, explain, and defend the idea. Person A then clarifies, explains, and defends.

This then is your vision, right?

Just slightly off the record (I'm waiting for Alby's complete proposal/comments as well), but I do certainly agree that there are "lots of other features which should come first and that could be implemented quicklier and better".

I only meant that just because manpower is a short resource at LL, it doesn't mean we should concentrate it all on bug fixing and none on innovation, on general grounds.

However, one thing I certainly agree with Hiro: no "mindless" new features! Taking the Wright analogy a little further - the Wright Brothers did not "mindlessly experiment" until they just happened to find the correct combination to make a plane fly. First, they had some physics to help them out to pick the proper design for their planes; and secondly, they had some engineering expertise to know "more or the less" what kind of motor would be able to sustain a flying plane. The rest, yes, was a "trial-and-error" effort until they happened to find the "magic" combination that worked for them.

Now, I don't defend "mindless ideas" for new features on SL. While everybody can easily agree on bug fixing - it's easy to spot what's wrong and what we expect to be changed - it's almost impossible to have an unanimous agreement on "new features". It's even worse if you don't have the slightest idea what you can accomplish with them.

Back to Alby's proposal...

Slowly, SL is trying to "emulate" the RL economics, by subtly allowing parallels to be drawn. As I posted before, LL, in terms of "game talk", is a "real estate mega-agent" (or, better, a government administrating its territory). So we think as land as the basis for wealth.

In reality, what LL is, in terms of a "computer company", it's a hosting/co-location facility. They put up servers and share CPU and bandwidth on them, for a rent. More prims means more CPU and more bandwidth, so higher prices. Since you need land to rez in prims permanently, land becomes an "abstract" notion which encapsulates the cost of CPU and bandwidth.

This is a wonderful "trick" - the analogy works wonderfully well, since everybody understands both the notion of hosting/co-locating, as well as real estate.

It also means that we can suddenly try to apply all our RL knowledge and skill related to the real estate business, and work the land business in SL as if it were exactly the same. Thus, auctions, and real estate agents, they work just like in RL. Also, faster sims (better service, due to increased CPU) are usually sold more expensively than older sims. This is pretty reasonable - hosting on higher-CPU machines is costlier as well in RL.

A nifty side-effect is that the abstraction works so well that suddenly concepts from RL pop in into SL without any apparent reason. Why does a Mature plot in a snow sim cost much higher than a similar-sized, PG plot in one subtropical sim (assuming both sims are "new machines" with exactly the same CPU power)? This is purely psychological - an aesthetic sense pops in, which has absolutely no reason to exist, from a rational point of view.

But it makes a lot of sense, from the viewpoint of the real estate market. Land depends on location. So, while in reality we're selling the exact product - CPU power, bandwidth - abstractly, we pay more for location. This is a concept that starts to lose its meaning when we thing on SL as "only" a hosting/co-location operation.

Real estate in SL has auctions, dealers, real estate agents, land barons, and is tied to aesthetics (and not only technical things). What comes next?

Well, to me, it follows that "land has value", and, if it does have value, you should be able to apply to it the very same things that you apply in RL.

One thing is, for instance, applying a mortgage to your plot. You can do that (actually, that's the way I bought my plot, ages ago, before First Land existed...), by building a trust relationship with the person accepting your mortgage. But you cannot have a valid, enforceable agreement with that person - it's trust only.

This certainly works - people with a high reputation in-world will certainly be trustworthy enough to make whatever deals they want - but it's tricky and limited. A new player should be able to start doing business in the same way as a half-year-old resident. Just because you don't have a reputation in SL (yet!) does not mean that you're not trustworthy (in terms of your personality, which is a RL thing that you bring into SL).

How did the "real world" deal with this? Well, you have the Law that binds you to agreements. If you break a contract without reason, you're liable to being sued. If you con someone, you get arrested. That's the way you deal with these issues in the RL. In SL, you can't, since there is no "judiciary system" or so. You deal only on the basis of trust. There is one notable exception: money transactions are dealt by the system itself - you want an object, you pay for it. You can't get it by paying first, and the reverse is true, as soon as the system processed your paying transaction, you get the object delivered in-world. No conning possible. Imagine if it didn't work that way, ie., instead of money, you had to exchange objects physically (like it was, I've been told, in the begining of SL's Beta). Would we have the same flourishing economy as we have nowadays? I think not. You wouldn't "know" if either the buyer or the seller would be honest enough to provide you with the object you wanted, so, you would only trade with respectable people, and it would be very, very hard for a newcomer to buy any items, not even thinking about selling them...

So I think that proposals like the one from Alby want to "simulate" binding agreements in SL. We don't really need a body of laws and lawyers and judges to enforce written agreements between two players. We just need technology to allow them to be impossible to "break". Just like the money system in SL allowed us to do instant transactions without fear, we should have the ability to do more things with our land (which we recognize as having "value" which don't rely only upon "trust" but upon a mechanism of enforcement.

Bonds, mortgages, or whatever things you can do nowadays with RL land, all of these should gradually be replicated into SL... Like Alby, I think that this is the reason why we "should" implement all these in SL as well. We're stuck with the "land paradigm" as the basis of "value" in SL? No problem! Let's improve upon that idea!

I leave all of Hiro's questions deliberately open, since I'd like Alby to answer/comment on them. I'm just pro innovation, but not really "innovation for innovation's sake". I'd like to see if we're on the right track!

Exactly. And I imagine if you asked the Wright Brothers things like, "Say, how is this possible" and "What benefits could this give" they would be able to answer the questions, whereas Alby is dodging them.


Surely, I agree the land has value. But here lies problem #1 - What value, exactly? If we're going to hardwire the value of the land to the bonds, what value do we choose? Considering how wildly the value of land can change due to neighbors, new sims, etc, I see it as a daunting task to somehow have a hard-coded evaluation of land value. A whole system would have to be coded into SL's engine to be able to automatically determine price based on a variety of variables that are constantly changing, risk weighed, and so on. The alternative - having land appraisers - is even more far-fetched. If only for this reason, I think implementing bonds based on SL land very very difficult.

If you think of SL land like webspace, it gives a clearer picture. Could Ebay, for instance, use www.ebay.com as collateral on a loan? Eh, maybe. I think you'd be hard-pressed to find a real life example of something like this where the actual webspace is put down as collateral.

Virtual land, unlike real land, is hardly secure, as any land baron could tell you.

I'd imagine that bonds would be issued upon an estimation of the value of land, made by a third party (ie. also a resident)... and it would be the duty of the one accepting the bonds to agree upon those terms.

That's why I see "mortgages" as being more easily accomplished. You have one resident willing to give you money in return of a mortgage over your land. The value of the actual mortgage is figured out by both residents in advance. So, it's a risk for both, when estimating the value of land. However, the difference is, once both parties agree on the terms of the contract, they would be able to go to a web page somewhere and make it "binding".

As another slightly off-topic discussion... Hiro, you mentioned something very interesting, "advancing" money for a fee. I liked that very much! That sounds like a simple "loan" based upon income (and since you always receive a fixed amount every week, it woud be very easy to do the proper calculations). Again, if you had a way to "bind" that agreement technologically, I'd certainly applaud that "feature" as well!

a) People will benefit from Bonds by using them as a source of long term investment to increase their own worth in the game. If I player knew that L$100,000 invested today would return L$150,000 at somepoint down the road, then its pretty much free money for the investor. As for the person issuing the bonds, they get the "cash" now to use for whatever their needs are (maybe a business idea that they hire others to build which makes money). If their idea flies, they can repay the bond and its a Win-Win for everybody. Investor is paid, bond issuer is funded to create content, and all SL benefits from more content. Greed my friend spurs growth.

b) It can be implemented efficiently when LL adds the code to allow for such. Its not a matter of can it be done. Its a matter of having the 'will' to do it.

c) Avoiding Pitfalls is easy. All Bonds are secured by land. If the issuer of the bond is stupid enough to issue bonds for cash and not repay the loan, they forfeit their land. I'm sorry, but you can't idiot proof common sense. Maybe one factor to code into Bonds might be that Bonds cannot be issued for more than 50% the value of the land based on the overall average land price. This keeps folks from issuing bonds for L$100,000 on a 512/m2 plot of land worth L$2000. Coding can also limit the percentage yield on the bonds to maybe between 5%-20%.


The mindset I'm overall promoting is having SL create investment grade options in the game that multiply wealth. A Land Baron buys low and sells high. Thats an investment, but its risky because your at the mercy of a irrational L$ dollar and land gluts created by LL. But a less risky investment like being able to buy bonds backed by land which if defaulted on, the land becomes the property of the Bond Holder. If there are multiple bond holders, than the land is put into an escrow account and placed on the market at market price. When sold, the profit is equally given to the bond holders of record.

But do you see what I'm getting at? Bonds, Stocks, Oil Fields, whatever... Money is a tool to feed Greed. And the power of Greed can be harnessed to create loads of Good for all.

For example, maybe you want to create the 1st SL movie theater showing whatever... But you lack the coding expertises to do it. Maybe it requires 100hrs of coding work. Great Idea, but beyond your reach. Yet you own 20,000m2 of land that is just collecting dust. Somewhere in SL is a programmer who has the skills to do this, but they lack the vision and/or resources. In comes the value of Bonds.. You issue Bonds secured by your land to get $$Cash$$. You then post an ad for a coder to make XYZ for you for $$cash$$. 100/hours later you get your Movie Theater, the Coder gets their Cash, and the rest of SL is lining your pockets with L$ (recouping your money to repay the bond), and all of SL is enjoying the Movies every night.

Greed can Create Good if given the tools to make it happen. And promoting enhancements in the economy of SL will lead us down that road. Or better yet, lead us to the Promised Land. Because only the "few" will work 100/hrs for free with no reward. Maybe Merwan, but the rest want compensation for work.

Simple Economics 101...

What???

I'm just messing with ya.. Heheheheheheh

Greed, for lack of a better word, is good. Greed is right.

-G. Gekko, Wall Street

Gordon Gecko Speech on (GREED)!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

Right on, Alby!

Long term? Your initial proposal was one month. I don't see how this is long term.

Assuming you revise your post to be a more long-term type - say someone borrows $100,000L as you stated in your example, and has 3 months to repay:
1. You state a person making 50% profit on an 100kL investment like it's nothing. Investment is risky, and you make it seem easy and safe.
2. The realistic view of such a risky venture is that now Linden Lab, instead of making consistant land fees from a person, is now going to confiscate land as collateral - except that this collateral has no value to Linden Lab. Linden Lab could then put it up for auction again, but they more than likely are going to take a loss. So why would Linden Lab take a guaranteed profit in land fees and risk is so that users could do bonds that a private bank could give the player anyway? Obviously, they would not likely take this risk.
3. Who would these investors be? People without much land couldn't borrow much. People who have plenty of land have the capitol and won't need to borrow. And in general, anyone can use RL US$ as collateral, buy some money via GOM, and have their loan. Since GOM has been backed up by LL before in face of exploitation, this is fairly safe.


Alby, when I said "implement efficiently" i meant the code, not the actual borrowing process. I've explained why this would be a mess to implement in the code. You say "when LL adds the code to allow for such" as if it's nothing. Dude, coding takes time, and furthermore, this particular feature would take editing on a number of different layers of the program - database interface, higher-end UI, land database, money database, weekly scripts - it's a mess, dude. It ain't worth it when there's GOM instead.


No, Alby, you miss my point entirely - the pitfalls I refer to are not actually excercising bongs, but how to actually implement it, and how to deal with the fact that LL likely won't want to jeapardize their land fees to implement a risky bond system for investors.



I don't know what you've been reading, but bonds are not secure. In the real world, if you buy bonds, and interest rates go up, you lose money. If you sell bonds, and then can't make up the money to pay back the bonds, you lose your collateral. These are huge risks. At least land barons are spending money that they already have!

Even if Linden Lab offered what is essentially a front of your weekly dues, it doesn't mean wealth will suddenly appear. True, it means there is more money to draw from to invest, but at this point, it seems that the L$ is cheap right now and investors already have plenty of money to draw from. The effect of dumping L$ on the market via bonds could dive the L$ price down even further - easily $3.50 or $3, when our target price is $4.

Now, should a condition arise where the L$ is in demand, perhaps LL could consider loaning money - as overall it would be a safer assumption that on the whole, they would make a return. But now the L$ is cheap, and issuing bonds is just an unnecessary risk, on top of being difficult to implement, on top of being something that I still can't see all too many people would use.

Bottom line - use GOM. It's secure, your RL$ are collateral.

I'm just talking to a wall. What is your idea? Do Nothing? I'm on the side of the fence that supports creating the tools to allow players to generate wealth. Risk is Risk, nobody said there wasn't going to be risk. Risk against fraud can be minimized, but risk against the investment itself can never be resolved. Obviously, if somebody secures a bond with their land and can't pay it back, they lose their land. But that is a risk the player knowingly takes when they issue bonds. Just like I said before, "You can't idiot proof common sense".

Risk is Good, Greed is Good.

Yes, do nothing.

When there are many other features that can be implemented first that would have a much greater impact than this one, and when this feature poses not only risk to players, but to Linden Lab, yes, do nothing. If it were just risk to players, that'd be one thing, but Alby, I've described the risk it would pose to Linden Lab. That's what most concerns me and likely would concern them.

Sometimes, when you analyse an idea, you realize it isn't feasible, and the correct action is inaction.

Things that could be implemented before bonds that would have a much bigger impact in SL:
- Havok 2
- Improve number of players per sim
- decentralize the asset server
- fix ghosting
- fix permissions
- fix rating system
- fix dwell system
- update the community standards
- allow more flexibility with private sim physics, land, sky, and other options
- optimize the engine so it doesn't use 90-100% of CPU on client computers
- improve the player dispute resolution system
- implement 2-way XMLRPC
- implement offline backup of inventory
- create an AV bill of rights

And those are just off the top of my head.

Not to say that your idea doesn't bear merit, just it needs to be thought through, revised, worked out, and prioritized.

also, probably more important than any of that: increase prim limits.

I would add, bonds are cool, but really it comes down to contract verification. If we could get a verifiable AV signature system, the rest would work itself out without any help from above - though it would take some time to evolve.

And I agree with your thoughts on risk, Alby.

Alicia, even with signatures, it takes manpower and manhours (womanhours?) to actually enforce this. By signing up for SL, you agree to the TOS and CS. People break it all the time, despite the contractual obligation to follow it, consequently, LL has to provide dispute resolution of some sort to deal with it.


This goes along with creating an AV bill of rights (see below)


A lot of people have asked for this. It would provide security of data in the worst case that servers die. I believe this is inevitable anyway once SL is a fully distributed system.

I can't really go through all of these now, that'd be hijacking the thread. Check out my article on privacy on secondlifeherald.com

Hiro.. You win the "Nay Sayers" Award.


The Nay-Sayer
Down Side: Discredits ideas before they’ve been fully explained. Has a complete fear of the unknown or is so religious about previous design experience that they won't try anything new. Their favorite phrase is: "That’ll never work."

Alby, don't label me.
And Alby, if you do label me, at least get it right. This is just insulting.

I've been asking you to explain.

Even if this were true, I've shown that this subject is not unknown to me. I've approached it from a corporate, programming, and end-user perspective in detail.

Well since I'm still designing new stuff for SL, that's not accurate.

Ah, yes, now please go through my literally dozens of feature suggestion posts that I have started with different things LL could implement, and point out where I say this.

Alby.

Listen. Listen carefully. If you listen very hard, you may hear the sound of me slapping my forehead with my palm. Or maybe you need to take the fingers out of your ears first to be able to hear it.


I know you're passionate about your idea, but you posted it in the forum for critique, and this is critique.

Greed does not beget good - greed strives only for the fulfillment of selfish self-interest. Try not to apply pseudo-economic theory to ethics.

You seem to be over influenced by the entertainment industry and trickle down thinking from the privileged class.

I have to agree with Hiro on this one. I could use several of those features to generate a lot more weath and stimulate economic growth than by having a mechanism for bonds. Well, except for the AV bill of rights. Not sure what thats about.

But otherwise, yeah Hiro is spot on and its what I said in the beginning of the threaad: Bonds are a good idea, but now is not the time for it. There are other, more beneficial, features that can be added.

-AP

Silence you hippie.... Greed fuels the human drive for self gain. Thats why greedless hippies are dirt poor and always crying about what the "have's" got.. Back to your weed, LSD, and protests marches in front of the IMF... Leave the folks inside the IMF to handle the money while you say "Would you like fries with that".


When you come to your senses, give this a once over.
The Commanding Heights - Stuff Hippies Can't Comprehend

Money is a means, not an ends


Heh, you presume hippies are greedless. *chuckles*

I'd say there are too many types of hippies to stereotype them as you have, Alby. *grins*

Hiro:

I've got just the website for you and your hippie friends.

http://www.devo.com/tft/hippie/

The Anti-Hippie Action League was founded in 1995 with the express purpose of wiping longhairs off the face of the planet, by whatever means deemed appropriate. Society has for far too long neglected to stem the growth of hippie-culture and has thus remained ignorant of the degenerative effects. Common stereo-types of hippies being smelly, stoned, lazy and ugly looking prove consistantly true, but it is not enough to dissuade new youths from joining in. It is our mission to put an end to this societal plague before we all end up with ratty dreadlocks.