L$ Inflation Thoughts (no gloom! promise!)

The talk about inflation and the basic stipend got me thinking a great deal about the L$ and how it's maintained, so I thought I'd mention things..

The problem with a lot of the discussion of the RL currency market compared to SL is that L$ has a property that no other money in the world has - highly variable demand. In RL, since everyone has to buy food and you can always live a little nicer or save more for your children, pretty much everyone is going to want as much money as they can get, all the time. That's not the case for L$, because people can quit, or go without spending anything for long periods of time.

An increase in money supply - stipend - would do no harm for the economy as long as demand went up by a comparable amount. So as long as a new account can add L$50/week worth of demand - whether by buying it themselves, or by making things which people buy L$ in order to get, or just by adding value to the SL experience by being around and socialising.

That means that LL have a difficult job as far as selecting stipends, because they have to choose an amount such that a) the person will be able to create demand enough to counteract their stipend, but also that b) they'll have a good enough time doing so that they won't quit and drop their own demand for L$ to zero.

This leads to some deductions. First of all, people who hang around for long periods of time on Basic accounts, rather than upgrading to premium, are not so much an inflation problem as people who arrive with a free Basic, spend their initial flourish, and then quit. Even by hanging around on their freebie, they are generating at least some demand by socially participating, and may themselves buy L$ in the future.

Secondly, premium accounts are actually more dangerous than basic accounts for L$ inflation, because they have to create more demand to counter their stipend. Being Premium doesn't increase your social effectiveness (so it's not guaranteed that you'll generate more demand that way), actually reduces the chance that you'll buy L$ yourself (you need it less), and doesn't guarantee that you'll build things that others will buy L$ to get. So the premium who buys their First Land, throws up a prefab, and uses it for hanging out with the same group they did when they were basic is pretty badly tilting the supply/demand curve. But, they are making money for LL!

There is also the matter of dwell. Dwell, again, should be taken on the basis that it's a reward for running areas and events which add value to SL and thus increase demand for L$. This does not mean that the events themselves have to charge admission, only that they have to give people stuff to do so that people have things to do with their funky gadgets and outfits. In this sense therefore, "sexy av contents" are probably the most economically sound events because a person who wins one will probably get less money in their prize, and generate less dwell, than they spent on the av - while at once energising everyone else there to go and spend more on their own avs. Obviously, events that only hand out L$, like gambling games, aren't too sound.

Yard Sales.. bring us to another question. Because there's no production costs on SL, prices can always fall while still bringing the creator a profit, and a new creator is usually pressured to sell their product for less than the current sellers, which means that the amount of bang for your L$ is pretty much certain to increase over time - a good thing in theory, but not so good when it reduces L$ demand as a result. (Asking around for some market research, I've been amazed by how many people say I'm nuts for planning to sell the thing I'm working on so cheaply, but who when then asked admit that if I sold it at a higher price they'd buy the then-cheaper competitor instead)

At the moment, the definition of "success" or "winning" in SL is being able to get someone else to buy L$, so you can cash L$ in for US$. Unfortunately, this can create a problem if all the non-"winners" quit because they don't like being losers, and then everyone is waiting for someone else to buy their L$. So, the proposals I'd have are:

a) give Premium members some form of social bonus that guarantees they'll generate extra social value to conteract their stipend (and encourage people to go Premium). For example, only Premium members can be found in Find People, and Basic members names are not displayed unless they are clicked on
b) give unique non-transferable rewards in world to those who buy certain amounts of L$ without selling it (ie, on their total transaction balance) - (so that the critical people who do so, aren't the "losers" on every scale)
c) try and work out an equitable way of reducing price erosion (folks aren't going to like this one, but you could add a "sales tax" which increases with the number of times the same item has been sold, thus encouraging the price to go up, counteracting the otherwise tendancy for it to go down with competition)

This isn't about winners and losers. It's about producers and consumers. Try not to think of it so much as a game with goals, SL is simply what you make of it.

Here's an alternate thought. How about an incentive plan that is actually useful in incentivizing people to PRODUCE content which is compelling enough that consumers are driven to spend US dollars on it. This content should be completely out of the reach of 1 month's worth of government welfare.

In other words, whatever it is should cost at least L$2001. Whether this is for a piece of content (a vehicle, a prefab home or store, whatever), access rights to a piece of land containing some sort of experience, access rights to some sort of media, etc. What is critical is that it costs at least L$2001 per unit.

What could be done towards incentivizing content creators (probably on a per sale basis), to create content at this price level which people will actually want to buy? Also, how could the reward scale up as the PRICE also scales up?

The Developers incentive was supposed to be that... um... incentive. But the population gamed it... so LL blew it. Dwell was supposed to serve as a second to nothing incentive, but that's been pretty much gamed too, and with the alleged falling value of the L$, it's pretty much useless as a real incentive.

I used to have the idea that developers should have free (or very pampered) access to SL. After all, what they make is what keeps most people comming. The non-developers are who should be paying to access the world and enjoy the rich content within. But, having it the other way around is what is hurting the community in general.

I don't think anyone should call the content creators "greedy". Doing so would demonstrate an ill knowledge of the work they put into the community, all while paying for it too.

It takes many many man hours, and lots and lots of money to create the kind of content that you can still find in many places in the world. And most of these people don't make a dime out of it. A couple of years ago, you could visit so many fabulous places - places that delivered rich content both in objects and in entertainment. The hard work (and maintenance cost) of the creators was at least offset by the hopes of recieving the developers' incentive. Now that that's gone, many of the creations are gone too, leaving only a few of the most autosustainable (and some altruistic) spots alive in SL.

Of course, this clasist view of the SL population was not devised since the beginning - and I doubt the current population would tolerate such a reversal happening.

Also, please note that when I mean developers, I don't mean "premium" accounts. Some premiums are not developers, or don't actively contribute to the enrichment of content throughout the grid.

What do I think would be a good idea? Have more free plots / free sim / free tier offered by LL for those individuals and or groups that present really good ideas for projects that would guarantee quality work for the grid to enjoy. I'm sure it would be alot cheeper for LL than to hire full time developers, like the almost-bankrupt THERE.

Of course, this would pose many other questions, like what is "quality" work? How to control who's developer and who is not? What actual incentives would work? But... this is just an idea...

The incentive plan is the receipt of $Ls for the product sold.

Linden Labs needs to make (Prims) a Commodity. That will resolve the lack
of need for the Linden Dollar.

If everybody has to buy Prims to build anything, believe me, demand
for the Linden dollar will skyrocket.

I really like the post that starts this thread. I agree with everything until you get to the a,b,c part at the end. The analysis up to there is spot on, though. You really point out what is really important and how things really work in SL.