Brainstorming: How to solve the economic problem

We all know that the economy is a bit unstable lately. LL has started to counteract the falling Linden by announcing the removal of dwell. Whether this will help or not is yet to be seen.
I think there is more LL can do. We have so many bright minded people, economists and wanna-be-economists in here, I believe we can find some sort of solution.

Let use this thread to collect ideas for about a week. After that we can discuss them here or in a community meeting.

Please respect the following rule:

! No negative critics during the brainstorming phase (the first week). We all know that negative comments might scare away a lot of people with their ideas. !

After we have collected all the ideas, we can start flaming, ranting and discussing the pros and the cons.

Please post your ideas for the following problems:

1. How do we stabilize the L$?
2. How do we get more people to go for premium?

Let's go!

1. Stablize Linden

I think the current stipend system is flawed. The current system is a fixed money printing machine, no matter if the residents need that money or not. And as the LindeX/ LL released economical data indicate, the money supply far out pace the demand, this lead to the downward spiral of $L, ever since the beginning of LindeX.

The key at this time seems to be to match the $L influx to the demand. How do we do it, as you have mentioned in your post, as well as myself and others in other post, removing stipend is ONE options. http://forums.secondlife.com/showth...080#post1032080

We may not have to remove stipend. Some residents who prefer to have a subscription based, stipend or rather standing buy order at a fixed price every week. 500 $L per week at 250, 288, or 361 per USD( if we ignore the initial 512 m2 “free” tier). And what LL can do is to do exactly that, with the new TOS change, LL can now buy $L from the LindeX at market value, release them to the subscribers( more like options holder) at the promised prices as stipends, instead of printing new $L every time.

However this would not solve the problem in the long run as we have already mentioned we need a net influx of $L to help the economy grows. What need to happened is this, LL would need to have a monetary policy, mainly someone to act like the FED/ central bank to evaluate the money supply and economic growth and release additional $L through stipends/ instructor payment (i.e. instead of buying all the stipend needs from LindeX print additional $L, but rather then 100% of stipend as new money, a percentage would be from LindeX) Someone with a PhD in economy would probably be needed for the job.

Since there is no banking system in SL, they can’t adjust interest rate. A good gauge would be the $L value in Lindex, a chosen price point would be the nominal exchange rate. LL would then print more or less $L to stabilize the rate. I think it would be something around 300 to 325. 250 /USD will never happen again, unless LL is willing tighten their belt and get all the stipend needs from Lindex for an extended period, not to mention the easily gamed “annual account” Linden farm.

I will drop premium if they drop the stipend -as is.- My renewal of premium will be based upon any 'new' terms, but the premium is a contract I will press charges over if changed without my consent mid term (since I've already paid). Raise 'free' tier by 1024 (for a total of 1536) or keep the 500/week. Simply put.

I'm sure they need to look at other sources of revenue..the Linden exchange is -not- unstable if you remember its an open market whose value is set by the buyers and sellers. Don't try to take away my stipend because someone -has- to undercut someone to sell -one second- faster. Fix the selling system. Sell at a fixed rate. Buy at a fixed rate. The capitalists wanted a free market and now complain about it. Take it away.

Two simple steps:

1-> make "money source" = "money sinks"
2-> put unlimited L$ at 255/usd

Step 1 will force L$ to have more value, step 2 will force L$ to be at most 255/usd.
Philip Linden keeps saying: "SL needs more L$ for the increasing population", so let SL decide this. If it needs more L$, put unlimited L$ at 255/usd, demand will buy it.
I dont say "remove stipends" for step1 maybe reduce them, OR increase money sinks(or the current one's prices) to create a balance.

I think we need to just create more of a demand for L$ in the game so everyone isn't so quick to sell it off. A good bank that is backed by LL that returns interest on your savings account balance would make more people hold on to the money. A corporate group structure that costs a bit more than a regular group but has many more options such as employee pay, management structure, and the ability to retain money to operate as an entity would really hold the money and increase business in SL. This type of group could also sell stock which will be automatically valued according to the amount of cash the group holds, and land holdings worth. There is so much that could be added to the business portion of SL that would feed the economy and create a demand for use of the L$. Right now, if you have no need to buy any items or clothing, you don't "NEED" L$.
so lets just create the demand and watch the economy flourish!

Ok my turn now:

We heard a lot of people disagreeing about stipend removal/reduction. So i think it would be wise to increase the fees on the sinks' side. The L$ is currently so cheap that people CAN afford increased fees.

1. Classified fees: I suggest to raise the minimum fee to L$ 60.

2. Group creation: L$ 100 -> L$ 150.

3. Introduce group upkeep cost: L$ 10 per week for the group founder.

4. Parcel directory fees: L$ 30 -> L$ 50

5. Upload charges: L$ 10 -> L$ 15

This will take a few millions L$ more out of the economy.

I want to thank you all for the input so far. Keep it up!

PS. We should keep an eye on the source/sink ratio.

1. sounds good

2. sounds good - once we get group tools and can eject officers, etc

3. ditto (and I would get multiple fees)

4. works for me, and I list my shop

5. Minimal fee still, I'd suggest 15L for nromal uploads and 20 for the largest. Also ad in the option to make a seperate account of some sort like paypal to give the option of USD payment for large bulk uploads.


3.

That would negate bulk uploads as a sink.

Another idea:

We need a more flexible tier system. I tiered down from 4k to 2k tier, though i would need an extra 1k plot. You see, this is a barrier keeping people to buy more land and tiering up.

If we could have a tier system where you could pay for the exact amount of sq.m. you are holding, this would give people to buy a little extra plot of land, which they wouldn't have bought with the old system. Even tiny prim lands become more attractive. You wouldn't want to tier up with the current tier system, just because you want to hold another 16 sq.m., right?

The results of this measurment:
1. People buy more land, which leads to an increased demand for L$ on the Lindex.
2. LL gets more tier money because people are willing to "tier up" with the new flexible system.
3. It might lure some to go for a premium account

1. Stipends...

Currently, all Premium accounts collect their 500 L whether they log on or not. Why not make the resident have to click a button or go to a virtual bank to collect this money? If you *need* it, you always will still have it. And you'd have just 1 week to collect, it would not roll over.

I think this would take some of the current influx of Lindens away, without penalizing anyone who needs it. Those who do not log in would not collect the money.



2. Uploads

Charge more for uploads based on the texture size. This might also help encourage people to not use such lag-inducing textures.



3. Alts

Don't allow people to make more than 1 Basic account Alt. Many make Basic alts just to sit in camping chairs (and are they ever going away? I doubt it)

I agree that LL should increase the sinks for things like classified ads, uploads, group fees, and the like. I do make outlays for these things, but I'm willing to pay more if it will help stabilize things. The trouble is, the sinks are so far outweighed by the sources that I dunno if the existing sinks can do the trick.

So I'd also support making new sinks -- perhaps optional ones. Here are some ideas:

1. Allow someone to pay a ludicrous sum of Lindens (not dollars) to LL to rent some gizmo that only LL has the capacity to create.

2. Perhaps LL could rent island sims as well as sell them, and charge an arm and a leg. I could imagine someone renting out an island for just a week for a wedding or some such. Again, perhaps LL already does this?

3. Allow someone to pay a large sum of Lindens for a temporary increase in prims. (Maybe that's already possible?)

4. Establish a collection center for Lindens to go to real-world charity? I know players already do this (e.g., the Katrina funds), but perhaps LL could institutionalize it and create in-game incentives to participate. A "top charitable donors" leaderboard or some such. This could be a way for SL tycoons to burnish their reputations, much as RL tycoons do.

5. Reinvograte ratings, increase the cost for them to 100 or 200L each, but add some nonmonetary in-game incentive to give out ratings. Again, perhaps a "generous rater" leaderboard, as well as a leaderboard for "best rated in SL".

For a Bank to pay interest, it has to loan money. How will the bank
prevent people from taking their loan money and running?

I hope you don't think LL should print new money to pay the interest
on deposits.

You are 1/2 way correct. They need to generate demand for Linden
Dollars... Which means LL needs to facilitate tools that allow for
people to create investment grade opportunities that are denominated
in Linden Dollars...

For instance, Allowing players to issue Bonds against their land.
The land owner pays interest on the bond to the bond holders.
If the land owner defaults, the land becomes the property of
the bond holders.. Who then can sell the land and recoup their
investment.

Then create a trading floor that allows users to buy/sell those bonds.
Then a 3rd party can become a Moodys who ranks various bonds
and grades them. Giving investors the ability to judge bond risk of
the bond issurer...

Just one of a million things that LL could help create to generate
demand for Linden Dollars. While at the same time, boosting the
economy of SL...

Making something rare does not necessarily make it valuable. Just making Linden dollars harder to get will not increase their value.

Making Second Life more competitive with other multiperson on-line experiences would increase the value of the Linden dollar.

Creating must-have items that can only be purchased with Linden dollars would increase the value of the Linden dollar.

Playing house/club/tringo/casino can be fun for a while, but then people look around and say, so now what?

So to increase the value of the Linden dollar, someone needs to provide the now what.

The unsolvable problem here is how people are going to pay their tier when they have to pay in US dollars but they can only earn Linden dollars in game. That is what really causes the inbalance in the exchange.

Here's a simple idea. Let the L$ to $ rate float as it does now, but let the Lindents aim to adjust the money supply so as to keep that rate at a targeted value. The details of how the money supply are adjusted don't really matter at this level, the goal is just to determine whether the money supply needs to grow or shrink.

Keeping the money supply constant won't work, because more people are joining the game. Keeping the money supply per person constant won't work, because average financial activity levels may change over time. Let us instead aim to keep the price of L$ constant in $.

Although I said above that the details of how the money supply is adjusted don't matter at this level, they do of course matter in practice, in terms of keeping the game fun to play. The details of which sources are reduced or sinks are increased do need to be hashed out. But this is all a matter of tactics, and I am talking about strategy.

The strategy should be to pin the average L$ cost; the means should be to adjust the money supply by moderating sources and sinks. That's my suggestion.

Even though I'm an Anti-Stipend voter, it would be a
major improvement if Linden Lab tailored the Stipend
Payments based on the Economy and Population.
Instead of a Fixed Rate of L$500 or L$50, adjust the
payouts weekly/monthly to the health of Second Life.

Think of the task as being like the Federal Reserve.
If the Linden Dollar is going down the toilet, you trim
back the money supply to bring it in line with the
daily demand for linden dollars. If the linden dollar
gets too expensive, LL can flood the market to bring
down the value to its arbitrary target price.

That's an excellent idea actually, by just making it so you pay per sq m in whatever proportion the tier happened to be:

0-512 sqm : Free with Premium account

+512 sq m ($5 tier) add 1 cent per sq m

+1024 ($8 tier) add 0.78 cent per sq m

+2048 sq m ($15 tier) add 0.73 cent per sq m

+4096 sq m ($25 tier) add 0.61 cent per sq m

etc

It's easily calculatable, by the most land you hold in a month, and can be automatically charged. Certainly I know that knowing an odd 200 sq m of land that happens to appear as prim space only costing me $2.00 instead of another $15 to go from the 4096 to 8192 tier would be a much more tempting proposition.

Lewis

Good luck.... Linden Labs won't be just broke and living on
investment dollars, they will be bankrupt...

It's up to them to take action if they want their game to survive.

They aren't retaining signups in any great percentage, despite the increasing 'residents' figure.

Clearly their plan - whatever it is - isn't working, so the question is are Linden Lab too arrogant to think they have it right, or listen to the collective voice of those of us who pay to keep their game running, and the fact that we may have better ideas than they have.

As a company, their 'forward thinking' business practices are clearly a complete failure. Second Life has such potential, yet it isn't being promoted because they're trying to draw people by greed instead of all else it offers.

Lewis

We can't. Linden Labs can, but they are uninterested. This latest round of L$ devaluation was triggered by LL's announcement that they were changing the ToS to allow them to print and sell L$ directly. That this would negatively impact the value of the L$ versus the US$ was simple economics. They knew this. They made their announcement anyway. The only reasonable conclusion to draw is that LL is not concerned with keeping the L$/US$ exchange rate at the current level.

What's more--they might have good reasons for such a decision. For example, it might be more important--at this time--for them to reach a certain profitablity goal, than to have the L$ at a specific price point. Or they might not have the manpower to both bring out a new version and to do what is needed to stablize the L$. We don't know. (I know personally, I'd rather have a SL and L$ at 500 to the US$, than to see SL close its doors with a L$ at 250 to the US$.)

However, assuming LL does decide they want to reverse the decline of the L$ relative to the US$, here would be my suggestions to them:

1) Get out the the L$ printing business. Announce that they made a mistake, and that they have decided that the company will not print and sell L$.

2) Increase sinks. Don't raise the price of existing sinks--add a new one. I propose charging a fee for P2P teleports. It can be a small fee--as little as 1-5L$. Couple this with bringing back telehubs. Allow teleports to Telehub to be free. This allows SL residents who are not that well off, to have a free alternative.

(Note this is not my idea; I believe Prokofy Neva originally suggested it during the discussion of the P2P teleport change.)

Someone else suggested a "group maintenance fee" sink. That's not a bad idea, either.

I think the most popular sinks would be sinks that pay for previously non-existant services, like name changes, custom last names, multiple partners, enhanced terraform capability, etc.

LL could run a landscape and nursery so that we could buy trees and flowers that sway in the wind and that do not use up as many prims as the current one do. Altho they are very lovely.

1. Limit the placement of sell orders to one per day

2. Limit the ability of sellers to leapfrog as follows:

a: You may place any amount at the rate the bulk of sell orders is set to (e.g. 300 L$ per US$) or 1 L$ below (299 L$ per US$ in the example).

b: You may place a sell order at 1 L$ above the rate for the bulk (301/1) if it is smaller or equal to 0.5 % of the bulk. That means if there are lets say 6,000,000 L$ put at 300 your maximum sell order at 301 would be 30000.

This would make it very hard to push the rate of the L$ down, wheras it would be possible for the sellers to increase the value by placing enough orders at 299 making this rate the one where the bulk of orders is placed, something that is impossible at the moment.

Greed is a great way to motivate people to sign up.
When somebody hears, "I made $1000 playing a video game"
at the water cooler, greed and dollar signs flash into people's
eyes and they want in on the action.

Greed and fear. All those folks standing around the water cooler are afraid they'll miss this boat too like they missed the eBay boat (yes, I've heard eBay references from multiple new residents). So, they show up and expect to make a fortune, but have no clue how they'll accomplish this. I bet the turnover rate among this crowd is huge.

Hmm all this finacial stuff gives me headaches ^^ however... stipends yup its alot of cash influx into the sytem, and as far as i can tell from reading these forums its not too bright an idea to do that.
But there are alot of ppl who like there stipend this is to some there only source of income and there spending money. Basically consumers with little wish or knowledge to learn the complex scripting or building skills hey some kids just wanna have fun! Lets not punish these very much needed demographic by taking there pocket money.

Then again content creators, club owners etc etc have very little use for 500L$ a week its a tiny drop in the ocean to some.

My thought was wouldnt it be nice for the second category of player, to opt out in return for some other non cash kick back, i dunno possibly access to an exclusive sandbox or added prim allowance or added basic land use. This may not stabalise the economy by itself but would be very attractive to that group of users and wipe quite a few L$ out in one swoop.

I myself vote for content creator island there please take my stipend! hehe