The State of SL Bank

The notecard was accessed 2 days ago.

And now I need to badly wash my hands.

I suggest everyone reread all of his post and confirm his statements (if you can pin them down).

LOL, and I am also a teacher, a bartender, a sculpture, a historian, a writer, a philosopher, a dancer, a cook, a rocket scientist, a marketer, a game designer, a DJ, a mathematician, an entrepreneur, a dominatrix, an editor, a public servant, an engineer, an actress, a waitress and a ditch-digger (all true, I've had a very rich and enjoyable 54 years)

I also have a fairly good bullshit radar.

But then no one needs look at my opinions, instead I suggest everyone look at the facts (or lack thereof). They speak for themselves.

Pan, I suggest that if you want to denigrate someone, you find something worth denigrating them about. Thanks for the advertisement.

Ok now you have my attention. Where were you a rocket scientist and how many times did you attend JANNAF propulsion conferences?

You forgot, Gold Digger... lol

I worked for NASA at JSC on the Space Shuttle in the 80s, and I've never attended the JANNAF conference (I wasn't propulsion, I was flight design).

I assume you have an engineering degree, I got my degree from UCD in 1974 in Aeronautical Engineering and worked for the US Navy for 26 years in China Lake doing solid propulsion for tactical missiles. You certainly had a varied career up to now.

I suggest you research what money actually is a bit more. Most money is virtual, in the sense that it's existence is only in cyberspace. In addition, the Linden certainly meets most definitions of money. I think you are realy claiming the Linden is not legal tender, which it certainly is not.

But then, money isn't the key word here anyway. If I scam 100 shares of Microsoft from you, can I claim I'm innocent because it's not money? No, because the law is concerned with the theft of value, not the theft of money or legal tender. And before you claim the Linden has no value, please look at the LindeX.

Now, might a judge throw it out? It depends, most of what is going on is small potatoes. If I remember rightly, SL Bank's total liabilities are less than $300 US (which begs a new question of how they can claim a diverse RL portfolio on $300). A small claims court would handle it, but I doubt a federal court or criminal court would touch it. At least not at the current levels.

Hi Svar, it sounds like we are about the same age. I recieved a BS and MS in Engineering in '74 as well.

Yes, Ginko is most likely a ponzi scheme, as well. Your point is?

If SL "banks" can offer 60%+ rates of return per year, why can't you get those rates in RL banks? The defenders of these "banks" claim it is because RL banks can not make the more risky investments that the SL banks do. Maybe so. In the short run, it is possible for a few stocks or foreign exchange investments to make a 60%+ rate of return.

But--the SL "banks" ask you to believe they are going to consistently yield those returns. But high-risk, high-yield investments they claim are risky. Which means that--on average--over the long haul, many of them will fail. So even if these "banks" are honestly making such investments, market risk will eventually catch up with them. One or two bad investment decisions, and a "bank" that has deposits (with interest) of 10,000,000L$ suddenly only has 8,000,000L$ to cover them.

Let's look at the rates of return offered by SL "banks" and compare them with--oh say, one of the best investors of the 20th century--Warren Buffet. Below is a list of the annual returns of Buffet's Berkshire Hathaway:

Annual Percentage
Change in Per-Share
Book Value of
Berkshire Hathaway

10.5 2004
21.0 2003
10.0 2002
(6.2) 2001
6.50 2000
0.50 1999
48.3 1998
34.1 1997
31.8 1996
43.1 1995
13.9 1994
14.3 1993
20.3 1992
39.6 1991
7.40 1990
44.4 1989
20.1 1988
19.5 1987
26.1 1986
48.2 1985
13.6 1984
32.3 1983
40.0 1982
31.4 1981
19.3 1980
35.7 1979
24.0 1978
31.9 1977
59.3 1976
21.9 1975
5.50 1974
4.70 1973
21.7 1972
16.4 1971
12.0 1970
16.2 1969
19.0 1968
11.0 1967
20.3 1966
23.8 1965

21.9 Average Annual Gain — 1965-2004

(from http://www.berkshirehathaway.com/2004ar/2004ar.pdf Page 3)

An average of 21.9% gain. In only one year out of thirty--1976--did Warren Buffet ever once almost hit the 60% mark that SL "banks" seem to have as a floor.

If someone is a better investor than Warren Buffet, what are they doing wasting their time with the nickels and dimes of the L$ economy in Second Life?

Legal is relative. If somebody in SL is willing to buy/sell something from/to me and we agree to use the linden dollar for our transaction, its a legal as we want it to be.

Money is just a "TOOL" to facilitate trade. You can use, sheep, coke cans, tulips, anything. Money int he form of paper you stuff in your wallet is one of a million things that could be used as money. Because without "money" as a tool, we have to barter if we want to trade.

We've lost 2 Shuttles. Seems like your design work was crap.

The first Shuttle lose was a solid rocket motor failure and NASA was told by the deisgner not to launch under the cold conditions which they did because the motor was never tested under those conditions. RBD better stick to things you think you know.

Those were friends of mine killed on Challenger. And I think you are a piece of insensitive shit. GO TO HELL!!!!!!!!!!

Actually, if you want to split hairs...

spelt != Spelled
houseing != Housing
fiance's != Finances
ur != You're
duno != Don't Know

This is an article right here. Short, sweet, to the point. So the frewbie (free newbie) takes money tree dollars that people donate, risks them in an account, grows, and in a few years can...

Huh?

It's nice to write an article *for* banks. It is much more difficult to write an article about what banks do. Honestly, the article read like an advertorial (and that comes from a published writer and editor).

She probably makes more money than you, so she probably has more money than you, so... she probably pays more attention.

Of course, I'm assuming a lot. Perhaps as much as you are.

No need to drag people through the mud. We have enough lag as it is.

Poor Design..... Build O-Rings that span reasonable temp. ranges... (ie: 0-100/degrees)
I'm sure the problem has been fixed. So you have to wonder, why wasn't the new fix put into the original design?

Somebody should have known to design O-Rings to withstand 36/degrees. A real possibility when there are shuttle launches in the Winter Months. Otherwise, the designers should have redesigned the joints to either not need O-Rings, or used materials that could survive real world temperatures.

Sorry if the truth hurts.

I've done a number of different kinds of RL investments over the years. Currently, most of my investments are in two areas. The first is mutual funds, both US and international. The second is tax liens which I like giving me a fairly nice return, typically 4-5% over prime, at a fairly low risk. And very infrequently I get a nice bonus jackpot gain. I keep my liquid capital with Emigrant Direct which I think is now paying 5.15%.

I note that with all of those investments, I know the exact terms of my investment, and also the internals of what I'm investing in.

I wasn't advertising at all. But the fact is that many players are choosing to put their money in these banks. I wanted to talk about why people do and don't put money in SL banks, what banks do with their money, and how banks differ. I'm sorry to hear it didn't meet your approval.

Teufel, when I deposit money with SL bank am I lending the bank money or am I purchaing equity in the bank? You are not clear on this in your note card or even in your post, sometime seeming to describe it as a loan ("Interest is added to your SL Bank savings account " and sometimes implying an equity ("Why should I invest in SL Bank?".

I'm confused why people don't believe that banks like Ginko can pay their depositors such a robust interest rate. It's Second Life. Where else can someone make an investment of some time and 10 lindens (to upload a texture), then sell 1000 copies of their creation for 100 lindens each, grossing L$100,000 from their small initial investment? Does that mean these people are so savvy they should go into real-world retailing? No. Or can I expect to set out a tip jar and get a few sponsors to ask trivia questions at a RL club and rake in dough that way? No again. It's just the nature of SL's economy that these things are possible here but impossible in real life.

As I explained in the article from The Democrat, banks in Second Life make money not only from high-interest loans (compared to real-world banks), but also from currency speculation, land deals, and lotteries. These are all, undoubtedly, risky "investments," but the fact is that some banks are able to return high interest rates to depositors. Ginko, for example, has been around for 2 years. There is also the possibility that bank owners supplement bank income with other income to pay depositors, as a way of drawing customers for literally micropennies on the dollar.

The same primary argument against investing in a bank in SL can be used against having any lindens at all: things could crash, LL could go belly up. And the money could be gone. Don't put your kid's college fund into SL banks, as one of the bank owners said.

For those who are poopooing the idea of banks in SL, what do you propose someone who sees the potential market do? They're not circumventing the law or acting in a shady way; there are no applicable rules in SL, and transparency to the level some are asking for would violate depositor privacy. If you don't want to put your play money in SL banks, fine. But don't assume that just because YOU don't understand it then it can't work.

I would suggest your understanding of economics is missing a major factor. You've completely ignored the cost of creating and selling the item. For example, I probably spent about 50 hours writing my book on SL sex. My time is typically worth $50 - $100 US/hr, which conservatively means I've invested $2500 US or L$750,000 on my book. I've probably sold 500 copies netting me a little less than L$150,000. And this is probably the best selling book in Second Life! Also note I've completly ignored marketing cost. There was no high percentage return on my investment in Second Life, as a matter of fact, from the economic point of view, there was a huge loss.

And that's a typical second life investment return. They are mostly losses, not huge gains. Why do we do it? We do it because we are motivated by non-economic reasons (i.e. it's fun). But those reasons don't apply to an investment 'bank'. From the purely economic point of view, returns are actually much better in RL than SL (one needs to return L$3000/hr to beat working at McDonalds). Only a few people in SL can convert their time equity into anything close to RL equivalents, and no one in SL is making huge returns. From what I've read, even Anshe Chung is probably not generating huge returns.

Hello Marla,

You may want to look back at older threads to get a little more info. The main purpose of my project is not to make ourselves money, but rather to test how people in a virtual world react to risk based on return with little to no recourse if they were to lose. The project is mainly based on game theory.

To run similar experiments in a lab costs us about $7 - $27 per participant. We usually have 30-50 participants, and the experiment lasts about 45 mins. This amounts to $250 - $1,350 per experiment. Participants are paid based on their decisions. Some come in and spend commuting time to the project, time setting up, time participating, and time getting home (we average total time to be slightly less than 2.5 hours) and go home with $7. Some go home with $27. Lets also not forget that we are talking about New York city here. In some states $7 can buy you dinner. In NYC it can't even buy you a Jamba Juice. Now, for me to run a similar experiment, here in world, 24 hours a day, 7 days a week, long term with potentially thousands of participants whom can come and go at their leisure, based on total holding as of right now, even if I never invested any of the money and never made a dime, it would cost me, in interest, about $5 USD per 24 hours.

The info I have gathered, the experience of the experiment and things I have learned about a virtual economy, has been well worth it.

I am not here to try and talk you into investing in our project. That decision is up to you and will have to be based on the info we have given out.

When you deposit in our project, you are simply "giving" us your money with the hopes that we can turn a profit with it and get it back to you. You are also going to hope that noone "steals" your money and that we do not go broke. In this experiment, you could lose all you invest. In our real world experiment, you can only lose time and effort (which as per many famous economists, has just as much value as a hard currency). This has been factored into our interest rates. You can gain more, with much less energy in this in world experiment, than you do in our real world experiments, but you risk more.

From your posts and other threads you have posted, aptly entitled "SL Bank = Ponzi" it seems you have already made up your mind in regards to our project. This is not a problem. When setting up the project, I knew many would feel it could be a scam of many sorts. How people respond to this risk, is exactly what it is I am interested in. No risk = no point in me doing this in the first place.

I have one question for those of you assuming SL Bank is a scam of some sorts. At the end of 2007 I'll be finishing my grad work and will be traveling abroad to teach English. At that time, I'll be closing the bank and allowing ample time for withdraws (about three months). After everyone has withdrawn and I close the bank and it turns out the project was not a scam, what will you say then? Will how you view other banks in SL change? Stay the same? Will your risk tolerance change? It will be interesting to see how people react. Especially those who missed out on two years of some of the best interest rates in SL history! But then again, if we are a scam and if we will continue to pull a profit, is yet to be seen.

Good luck with your mission against the bank!

Cheers!