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Linden Dollar Economy Update #1

Lawrence Linden
Linden Lab Developer
Join date: 25 Jun 2005
Posts: 235
08-31-2006 10:53
I have some recent and upcoming LindeX Tier changes to talk about, as well as an update regarding L$ Sales by Linden Lab.

Please see my blog entry on the Official Linden Blog at:
http://blog.secondlife.com/2006/08/31/linden-dollar-economy-update-1/

Cheers,
Lawrence
Lee Ponzu
What Would Steve Do?
Join date: 28 Jun 2006
Posts: 1,770
Just post them here
08-31-2006 10:55
...where people will read them 8-)

Sorry. Couldn't resist.

regards,
lee
eltee Statosky
Luskie
Join date: 23 Sep 2003
Posts: 1,258
08-31-2006 12:15
I would like to see some greater clarification on how LL would intend to manage a falling price. If they are now going to sell $L to the point the price never rises, how will they adjust for sudden/steep falls in the value like, for example, after they announced they would start selling.

Will LL be buying *BACK* some of the extra $L that they are introducing with this system?

It just seems very one sided... 'we will forever stop it from rising any further by dumping loads of cash on it' and then 'if it falls thats just natural market fluctuation'.. those seem self-contradictory... yet they seem to be what LL is saying with its official economic policy... in the real world money is sometimes 'bought' out of circulation as an economic control on inflation... if you are going to mint it, you *really* should have a policy for burning it too.

Mabye it would never need to be used, if the economy is that robust, but at the same time, in order to *be* that robust, it really ought to have some 'immediate' way of combating drastic falls in value, should they occur.
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Shaun Altman
Fund Manager
Join date: 11 Dec 2004
Posts: 1,011
08-31-2006 12:28
I posted the following on the Linden Blog. I am submitting it here for discussion as well.

From: Shaun Altman

Linden Lab is upping the amount of their L$ sales restriction to L$27,000,000 per rolling 30 days? This is to aid in STABILITY? I speculated, when Linden Lab L$ sales were first announced with a limit of $10,000 USD per month, that the limit would go up very soon. In fact, I what I talked about at the time was that as soon as Linden Lab's capital partners saw an EASY additional $10,000 USD on the cashflow statement, a roadmap would be defined to get that figure up to around $100,000 USD per month, regardless of the effects on the in-world economy.

I was told that this would not be the case, and that Linden Lab's directors were essentially much too enlightened to make a move like that. It is interesting to note however, that L$27,000,000 at an exchange rate of 270 equals $100,000 USD per month. I am somewhat skeptical, at this point, that my theory is wrong.

In spite of evidence to the contrary, I'm still willing to give the benefit of the doubt that this isn't the case, and that these measures are being taken in an effort to provide stability to the L$ exchange rate. With that said though, at BEST, this policy move is incredibly short-sighted and one-sided. In order for it to be effective at its stated cause, two critical commitments are needed:


1. You need to publish an exchange rate target number, which these measures are going to keep the exchange rate within, say, 3% of.

2. Simply committing to create and sell an amount of L$ equal to total sinks per rolling 30 days isn't enough to ensure stability. You must also be willing to publicly commit to BUYING and DESTROYING an amount of L$ equal to TOTAL SOURCES per rolling 30 days, in the event that the exchange moves beyond what is acceptable in the other direction.


Is Linden Lab willing to commit to these things? If not, how can we, as residents, reach any other conclusion, but to find that these changes are intended for no other purpose but to rob the in-world resident economy of a considerable fraction of its value, and put that value directly into the pockets of Linden Lab shareholders?

In my view, Linden Lab's current in-world economic policies are CRYING OUT, to be circumvented ENTIRELY, by a new monetary system that is created and managed by residents, and COMPLETELY out of reach to Linden Lab.

We love Second Life, and we are more than happy to pay you tier for our land. However, WE build the in-world economy, and the value of that economy. You have NO RIGHT to steal the value of our in-world economic output to line your own pockets with that value.

Linden Lab is crossing lines by creating and selling new money on the currency market. It would be wise to think very carefully about where that road will have to end.
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Regards,
Shaun Altman
Fund Manager
Metaverse Investment Fund
Jon Rolland
Registered User
Join date: 3 Oct 2005
Posts: 705
08-31-2006 12:36
Please see my blog reply here.
Lewis Nerd
Nerd by name and nature!
Join date: 9 Oct 2005
Posts: 3,431
08-31-2006 12:37
From: Shaun Altman
Linden Lab is crossing lines by creating and selling new money on the currency market. It would be wise to think very carefully about where that road will have to end.


It has no end. Anywhere there is a profit, Linden Lab can go in, undercut the hard work of the residents, and kill any business.

The question is… will there be anyone left playing by then? What incentive is there for any resident to create anything of value or invest any time or effort in SL if there’s the ever increasing risk that it’s just going to be destroyed in a Linden decision - which, of course, benefits them only. Never mind the poor resident who might see a year’s worth of work down the pan and their entire existance here destroyed.

Last one out, please turn off the lights.

Lewis
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Keiki Lemieux
I make HUDDLES
Join date: 8 Jul 2005
Posts: 1,490
08-31-2006 12:37
Very bad policy. So there was a temporary spike in the price which was corrected within a day or two. This should not be an excuse to pour new money into the system. This has nothing to do with "stability" until LL commits to buy currency when it's getting too cheap. This is an excuse to tax content creators by competing with us on the Lindex.
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eltee Statosky
Luskie
Join date: 23 Sep 2003
Posts: 1,258
08-31-2006 12:45
From: Shaun Altman
I posted the following on the Linden Blog. I am submitting it here for discussion as well.


What bothers me is its really double dipping. The vast majority of content creators use their sales on the lindex to pay tier... direct to LL... now LL is comitting to printing themselves free money, at the possible expense of *ALL* sl landowners using lindex to pay that tier, with no real 'safeguard' to help everyone else out, should the value fall.

If the value 'goes up' *they* win because they can print free money to bring it back down.. and if the value goes down, we loose, because they still get their tier.

I say honestly either tie tier to lindex, and keep themselves honest, or commit to buying back should the value fall, to keep the balance fair, of course, neither will happen
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mcgeeb Gupte
Jolie Femme @}-,-'-,---
Join date: 17 Sep 2005
Posts: 1,152
08-31-2006 12:52
So now we need to compete with Linden Labs even more on the Lindex?? This just opened up the door for one sided swings in the value.

How would someone feel when their sell orders gets cut off by 2 million Linden Lab's Lindens put up for sale?? Not good!

How is the price spike any worse than the price decrease a few months ago? I thought the priced increased at a much more alarming rate than any price increase of late.
eltee Statosky
Luskie
Join date: 23 Sep 2003
Posts: 1,258
08-31-2006 12:54
what really gets to me is the fact the 'value' was being artificially depressed, is *still* being artificially depressed, and when that depressor had a hiccup and the value began to recover, suddenly its time for *drastic* 'corrections'

a *true* value will be established with a smooth progression and slow rythmic cycle of the market where you have a decent fraction of the overall daily exchange at most of the individual price points around that value...

thats not what happened when the L$ value fell, it was a specific set of 'single' high sales that leapfrogged eachother over and over and over steadily depressing the value, artificially to a significantly lower mark than it would have rested, without that intervention.

which is also incidentally what happened about a day and a half to two days ago to push it back to 280-285, people were literally leapfrogging entire brackets, going from 275 to putting large chunks at 280 with 276-279 left *empty*...

even now you can see it, the huge spike at 280 that was specificially/purposefully left there to artificially depress the natural market movement...

either protect BOTH sides of the market, or let the market adjust itself, artificially intervening on one side only is gross profiteering at the overal economy's expense.
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Alienware Pitts
Registered User
Join date: 16 Jun 2006
Posts: 57
Get off the LindeX.
08-31-2006 12:59
There really should be some set rule for selling other than, just a limit for every month which you can change at anytime. I don't like the idea of LL being able to manipulate the market in such a way. I hope no Lindens or anyone associated with the sales from LL are able to trade L$ on the market for personal reasons as this would be unethical. Yes, it does seem one sided as some have already mentioned. (We’ll sell but never buy if value loses). And I don’t like the idea of being "jumped" on the LindeX by some cash printed out of thin air. That really stinks.

Balance sinks to adds and let the currency find its own equal Librium. If the population grows and the value gains, great. Maybe add some currency in the form of dwell or other incentives rather than cutting such incentives only to turn around and start jumping your own residents' $L sell orders, which they have worked so hard to earn. Just seems unethical and creepy.

:(
mcgeeb Gupte
Jolie Femme @}-,-'-,---
Join date: 17 Sep 2005
Posts: 1,152
08-31-2006 13:00
LL should show their orders on the Lindex and then we'll see how angry people get when people have their orders leapfrogged by LL.
Shaun Altman
Fund Manager
Join date: 11 Dec 2004
Posts: 1,011
08-31-2006 13:05
From: eltee Statosky

What bothers me is its really double dipping. The vast majority of content creators use their sales on the lindex to pay tier... direct to LL...


I said exactly this at the town hall where they announced their original L$ sales plans. In an environment that was full of people commenting on the announcements, I was forcibly removed, banned for hours, and given my first official disciplinary record. In essence, Linden Lab made me a criminal when I pointed this out.

From: eltee Statosky

If the value 'goes up' *they* win because they can print free money to bring it back down.. and if the value goes down, we loose, because they still get their tier.


Exactly! This is a classic PRS scenario. You create a problem (massive overnight cuts to entitlement programs), you get a reaction (surging L$ valuations on LindeX, due to shortfalls in supply), and then you step up to the plate to provide a solution (massive amounts of L$ available for purchase on LindeX, presumably to ensure economic stability).

I find it hard to believe that any of this was done with residents in mind. Linden Lab's directors most likely engineered this entire situation to line their own pockets, at great cost to the people. Does Linden Lab REALLY believe that we all just fell off the turnip truck?

From: eltee Statosky

I say honestly either tie tier to lindex, and keep themselves honest...


They need to do a lot more than this, but it would be a good first step towards a responsible economic policy for Second Life. Unfortunately, a responsible economic policy is not compatible with maximizing corporate revenue.
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Regards,
Shaun Altman
Fund Manager
Metaverse Investment Fund
Alienware Pitts
Registered User
Join date: 16 Jun 2006
Posts: 57
08-31-2006 13:14
From: Shaun Altman
I said exactly this at the town hall where they announced their original L$ sales plans. In an environment that was full of people commenting on the announcements, I was forcibly removed, banned for hours, and given my first official disciplinary record. In essence, Linden Lab made me a criminal when I pointed this out.



Exactly! This is a classic PRS scenario. You create a problem (massive overnight cuts to entitlement programs), you get a reaction (surging L$ valuations on LindeX, due to shortfalls in supply), and then you step up to the plate to provide a solution (massive amounts of L$ available for purchase on LindeX, presumably to ensure economic stability).

I find it hard to believe that any of this was done with residents in mind. Linden Lab's directors most likely engineered this entire situation to line their own pockets, at great cost to the people. Does Linden Lab REALLY believe that we all just fell off the turnip truck?



They need to do a lot more than this, but it would be a good first step towards a responsible economic policy for Second Life. Unfortunately, a responsible economic policy is not compatible with maximizing corporate revenue.


Agreed. Seems FUBAR to me. Bring back dwell and stop selling on the lindeX. Just my 2 cents>
Cheyenne Marquez
Registered User
Join date: 19 Sep 2005
Posts: 940
08-31-2006 13:24
Linden Lab, If you are willing to make this change under the guise of stability, please bank some of these funds you are earning while selling to stabilize the $L when it is strengthening against the USD, and comit to buying lindens when the linden is swinging in the other direction and weakening against the USD.

This is becoming less and less a free market that is being powered by market forces and more and more like a manipulated market.

Why not simply set a set price of $L250/$1.00 and be done with it?

We love and support you but please do not take advantage of us.
eltee Statosky
Luskie
Join date: 23 Sep 2003
Posts: 1,258
08-31-2006 13:24
just really gets on my nerves...

they came up with the system announcement and the value went down by almost 20% in the span of 2-3 days and nothing *NOTHING* was done to help the residents who lost tens of thousands of us dollars combined, mabye hundreds of thousands... and now the value *ALMOST* starts to go back to what it was before all the manipulating and other problems hit it, and within *ONE DAY* LL completely changes their promised limits to better take advantage of the fact we had almost gotten back the value we had lost so long ago :/

many of us in world held tight to our principles, we didn't raise prises during the fall, not wanting to go down that slippery slope of second guessing the economy, and it cost us dearly... and just when our belief in the system and its long term sustainability is about to bring is back to where we were... we get hammered again.
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mcgeeb Gupte
Jolie Femme @}-,-'-,---
Join date: 17 Sep 2005
Posts: 1,152
08-31-2006 13:32
If LL wants to stop the L from strengthening, one of these announcements works well enough. How many times did the L fall a few months ago with each and every bad announcement LL had??
eltee Statosky
Luskie
Join date: 23 Sep 2003
Posts: 1,258
08-31-2006 13:35
From: Cheyenne Marquez
Linden Lab, If you are willing to make this change under the guise of stability, please bank some of these funds you are earning while selling to stabilize the $L when it is strengthening against the USD, and comit to buying lindens when the linden is swinging in the other direction and weakening against the USD.


god that is so simple...

just do something like 'bank' even 1/4 of all sales funds gained, for USE to buy back later if the value begins to precipituously fall... i jus wish that someone would have the real foresight/integrity to implement that :/
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Keiki Lemieux
I make HUDDLES
Join date: 8 Jul 2005
Posts: 1,490
08-31-2006 14:14
I made a very similar reply on the blog as I did here and it has gone from "awaiting moderation" to vanished. Very nice, LL, change your policy and try to silence or at least muffle opposition to it.

Cowardly and greedy.
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Jopsy Pendragon
Perpetual Outsider
Join date: 15 Jan 2004
Posts: 1,906
08-31-2006 14:27
Tier and fees are LL's primary revenue stream as far as I can
tell.

I think selling L$ directly creates conflicting priorities and will
result in compromised decisions for new policies and development.

I've said it before, I'll say it again.

LL should profit from successful residents, not compete with them.
Svar Beckersted
Registered User
Join date: 14 Apr 2006
Posts: 783
08-31-2006 14:41
I am really pissed that LL doesn't let the natural market forces determine the exchange rate. The drop they talk about and the cause was immediately corrected when the exchange rate hit L$272/1. Before that time the measures that I use to calculate new L$ entering the LindeX on the Limit Sell side was swinging from 9 million to 17 million L$ per day with a two week average of 13.47 million L$ per day. On 8/26/06 when the exchange rate hit L$272/1 over 20 million L$ was offered and the average since is over 18 million L$. Why? Simple, the residents saw that rate as a bargin and came back to sell. The market corrected nicely without any intervention by LL. Now that the market is working as any free market will and self correcting why do they have to come in and screw it up yet again?
Schwanson Schlegel
SL's Tokin' Villain
Join date: 15 Nov 2003
Posts: 2,721
08-31-2006 15:02
The $L has been GOM'd!
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Saadi Zadeh
Registered User
Join date: 19 Jul 2006
Posts: 7
08-31-2006 15:04
A few thoughts for those in Ll who are too much focussed on "bottom line".

In any business, and especially the kind of business this corporation is, Sometimes the management has to chose between Long Term Success and short term profitability. Profits and success, to common mind, are one and the same thing in business, but a more refined business mind understands the difference. Collect the eggs, and don't kill the hen if Success is your goal.

In 21st Century modern business world, more and more focus is being diverted to intangible factors than the tangible ones. On tangible factors almost all businesses compete tough with eachother, these are the intagible factors that determine the winners in modern business world... intagible factors like Customer satisfaction/service, corporate transparency (customer sense of security and trust building), guarntees /warrnties (peace of mind promise) , stability ( established name/brand) etc

So far what I have seen is that LL's policies seriously lack that aspect. They are doing things in "trial and error" method instead of full spectrum strategic thought process. maybe they can afford it at the moment while there isnt any serious competition threat, but once there's a competition ... hmm!

Why I said all that? because what I see is worst level of instability, and wide range of insecurity among resident content creators, increasing level of customer dissatisfaction, haphazard policy introductions and changes like a trial and error method that affect the stability and a new element that is just emerging... distrust in LL on L$ issues. That is an alrm bell clear and loud if anytime a competitor emerges in the market who learns from LL's mistakes and addresses all these issues "strategically" from outright start. Let me give you a peek into the scenario:

assume a TL (third Life) a company that is almost exactly like SL with same functionalities and even less but has only ONE thing in it, in-place securities for content creators on how their earnings will be exchanged. What do you think what would happen? First the content creators migration, and then obviously where the content creators are there the content is and then a mass migration of residents who would eventually find that TL has better content than SL... etc etc... and the rest is history.

Astonishingly, LL's policies hardly seem to gear towards content creators. They are overlooking SL's backbone and hardly seem to think before implementing a policy change how its gonna affect content creators.

However, apart from it, and if these issues are successfully tackled, SL has a bright future and so has the LL, only if they start correcting their angle of looking at things. And you know what I see, I see a lot of Pressure on CEO Phillips from shareholders, and I don't blame him.
Michi Lumin
Sharp and Pointy
Join date: 14 Oct 2003
Posts: 1,793
08-31-2006 16:07
Well, Lawrence came in to post this, and fat chance that he'll come back to read the responses...
Luth Brodie
Registered User
Join date: 31 May 2004
Posts: 530
08-31-2006 16:11
My reply will probably get deleted thanks to censorship.. so here ya go...


When LL opened the Lindex, Philip CLEARLY stated that the target exchange rate would be at 250/1, which was the average rate on GOM at the time. While this was all just a ploy to cushion the blow of LL taking over a resident run service, it seems everyone at LL has forgotton all about this 'promise.'

When the rate plumeted to 300-320 where were you? Silent. Nothing not even a single mention of it.

Then the moment it starts going back to your own projected rate, you leapfrog residents' sell orders to quickly bring it back to some magical number of what? If the target rate is 250/1, then why push it back to 285/1?

Accordingly, LL cut stipends to help with the lowered value of the L$, yet the amount of source-sinks L$ = L$15,317,910 more in August (MTD) than in July. That is roughly 10mil in more stipends this month and 1.78mil in selling on the Lindex. How is this helping at all?

Then you have the currency tier system that will fluctuate based on factors that will probably make no sense, just so LL can sell more L$. How many people will not be able to pay their land tiers based on this unforseen and probably bad maths?

1. If you want us to feel even remotely secure about the value of our hard work, you must post and stick to a target exchange rate.

2. If you really want a 'steady' market, you cannot only play one side. If the value of the L$ gets so low, what are you going to do? Sell more L$ and flood the market some more?

3. Get rid of the crap teir system. If I want to sell all my L$ so I don't have to worry about you guys breaking animations again with another broken update, I should have that right.
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