Questions for Philip's Economy Town Hall

I think she meant that a buyer's market is one where supply exceeds demand and price pressure is downward; seller's market is the opposite -- the terms speak to relative power in any market.

- -

My question for Phil would be (and I too may have to miss the meeting) a futures question: how does he see the evolution away from a dwell-payment system to a pay-for-attendance/pay-as-you-go system, or a combination of the two?

Understand the need for dwell to kickstart system when content and events are required to expand to attract new participants...

Hopefully LL addresses the issue of creating corporations that allow for shares of ownership in that corporation to be bought and sold. Along with a profit/dividend distribution model so players can pool wealth together to grow SL.

I have a few long-term/macro-level questions:

1. Do you foresee any structural changes to the economy in the next year? Such as, increased processor power leading to the ability to supply 4x the amount of land or prims for today's rates. Or, offering island owners the chance to host multiple sims off of a single server, much as the void sims are done.

2. Are there any plans to stabilize the land prices? A while ago I recommended using a set price for initial land offerings and letting a reservation system drive the demand for new sims. In other words, will we ever be able to just buy land as a direct service from Linden Lab or will we forever have to deal with professional middlemen and the circus atmosphere of the auctions?

3. Are there any long-term plans to increase the flexibility of the environment? For instance, would it be possible for island-buyers to make trade-offs on the physical size of their space, like choosing to make a dense, compact city sim, versus a multi-square-mile terrain park. Or perhaps creating new atmospherics like storm clouds, orbital facilities, etc.

My interest in SL derives from expanding opportunities to create shared universes. Any such shifts in technology could have a major impact on how the current economy works, so I am very curious to hear if there are plans in the works for these possibilities.

Actually, these could significantly restructure the economy.

For example .. maybe a shift towards an economy where you are taxed on the number of prims instead of the area of land you own?

If the new land sims have few prims but are hosted on a single server, then that means the bottleneck isn't the area of land you own but rather how many prims, avatars you can host, and LSL scripts you are running.

I hadn't thought about it before, but one can only assume that this is where LindenLabs are heading.. Good catch, Ananda..

I completely agree about the impact though. I am constantly begging LL to develop a better way of communicating their roadmap / task list, as everytime they make a change of somekind it rips the rug out from underneath a significant segment of the population.

The problem is, it's only 10% of the populace that is effected, so no one change is enough to cause a change in process. However, over, time, it's about 90% of people who eventually get effected.

blaze... that's how it *used* to be. You were taxed on each/every prim you had rezzed IW, plus extra tax if the prim was a light object. It also cost $10L to rez a prim, which was refunded if/when you deleted it.

There were many problems with that model. People would hide thier prims (take back into their inventory) just before 'tax day' and re-rez them the following day to avoid the taxes. In addition, it discouraged creativity for those with limited funds.

When SL switched to an economy that allowed conversions between Lindenbucks and U.S. Dollars, it also meant that any system of contracts or incorporation could have real-world implications. Linden Lab is best served by staying out of that arena. Players can set up real partnerships, merchant accounts with other online services, or even incorporate if they like. If real money is involved, say in pooling resources to buy islands, it'd be advisable to do so under previously established laws.

Actually, you are currently taxed on prims, however land is unfortuately bundled up into it. I'm sure you could have a 'prim tier' and you are charged on the greatest amount of prims you have in any one month.

Also, it's been shown that one sim can handle massive amounts of land, if there are few prims. I'd love to own a huge bit of property with just a few prims. I think that'd be very cool

Sanboxes would still remain for those who could not afford land.


It's also interesting to think that lag can often be caused by being forced to use all your prims in a small area which have to get loaded into the client. By letting owners having largers tracts of land with prims spread out .. less lag because players won't need to encounter all of the prims immediately.

To avoid potential disruption, these could be relevant to islands only as Ananda proposed.

Another question...

While I understand that the motivation behind the "dwell" incentive is to encourage residents to develop locations within Second Life that attract people to this virtual world, it seems to me that the result of the dwell bonus is to encourage people to build places that cause lag and frustration for neighbors because of SL's inability to scale well to lots of AV's in the same place at the same time.

Is Linden Lab considering some other incentive for residents to build "attractive" places that don't have the same problems?

- Ace

Yah, we wouldn't be well-served by a return to the old pay-per-prim system. Eventually, though, our current system's lack of flexibility could hurt too. What I think we'll face in time is a sort of overall devaluation. If performance improves to the point that LL can host 2x or 4x the number of prims in the same server, maybe they could offer us 4x the amount of land on each monthly tier.

The islands are pretty much a separate system for measuring resource use. Each island has its own server, complete. The real bandwidth bottlenecks faced by these are number of avatars, followed by rendering (lights, textures, prims), running scripts, and terrain generation. As we have seen with the void sims, a single server could very easily host a much larger area of terrain. So what I'm wondering about is whether a new island owner could get the option to make trade-offs. Perhaps they could limit the number of avatars in exchange for more prims. Or just spread the prim allotment over a smaller or larger terrain.

We currently are on a pay per prim system. I always find it odd when people don't realise that. Unfortunately, you're limited in land as well.

It's also interesting as well, if you had a larger landscape then in theory since you are not interacting with other avatars (don't need to get information about their movements) you would, in theory, by able to handle more avatars as well.

lets see lets see

ALTs are nessessary to create a group if you dont trust 2 other players. which is one main reason many alts exist, not to mention hiding from people a little to fond of you.

I would like to see an improved group system that allows better options like:

a group owned land being the owner, and another group as the "set" group.
this would be helpful for those of us who own land with someone else, but have a need to set it to another group to prevent money loss ie. vendors or rentors. basically allowing 2 groups to work together.
also land sales have no notice, i would love to see what has sold and where
group dividens are automatically divided evenly, i wish the group itself could set the division.
same with dwell, it needs to be up to the people/group involved who gets what.
group land needs to be sortable by sim and or size, the current list is not very helpfull in that mannor.
there is a tab broken in the group money options, when will this work?

that most of it for groups (i know your talking about econimics but most of these affect it)

the L$ for land idea rocks, but is there some way to make it up to date?, and if it is being taken away because LL dosent want to loose US$ on tier, could you just implement something like a 1/2, or 1/4 max could be paid in tier in this way? something that allows another output for L$ other then the market.

just some ideas i wil post more later... gtg back to work! sorry for spelling and typos

No, we're not taxed on prims blaze. We aren't taxed at all anymore. You pay a land tier fee, if you own land, but that's certainly not a prim tax. Maybe you could consider it a land tax.

Under the old system, even if you didn't own land, but you built on someone else's, you had to pay the prim tax. That' not so today.

no, alby raises an important question when asking about corporate structures, and it comes down to the requirement for a legal/contractual system needed to underpin any sophisticated economy.

Neverland required volunteer labor and Linden sponsorship to become reality. Linden would see greater SL-generated content/activity and exciting, larger-scale projects if the underpinnings of entrepreurship are duplicated within SL.

Entrepreneurship needs investors and they need a legal system protecting ownership rights and enabling "exit" strategies. "Groups" do not suffice. For example, Spellbound could have raised the money to build Neverland with a stock offering of their "corporation", and then pay L$ dividends for the money generated by that the project and other Spellbound projects. Entrepreneurs building smaller businesses could also be rewarded by selling the ownership of their business, and then go create the next cool thing.

Incorporation is not a dirty word -- it drives innovation and energy! (speaking as a former sw entrepreneur).

It is only when large corporations run rampant that the negative connotations are earned. Hence, oversight is also necessary to an extent to keep the big from abusing their size, hence the anti-trust regulation we have in RL, labor laws, etc. Conflict resolution/arbitration would also need to be figured out.

If SL is indeed to be user-generated, and LL really wants to follow the eBay model of being a platform rather than content creator, they need to think long and hard on these issues. No doubt they have been from the beginning!

Not all users will have to participate, but having the option available would change the name of the game.

sorry, this is a post more than a question... but I wanted to second Alby's request

Ok, well I pay $9.99 per month so I can rez prims which don't get returned.

Call it what you want, but I am paying that money for prims. If there is a way I can rez unlimited prims without having to pay, please let me know.

Certainly. It's called the Sandbox. Rez away.

Anyhow, I just realisied we're hijacking this thread for our little dispute. If you want to talk about it further, please IM me inworld.

THe Lindens for Land program was created about 3 weeks before the GOM and IGE popped up. As such, the Lindens simply guessed at the value of the Linden dollar.

They haven't changed it simply because no one uses the service. It's deprecated.

LF

Are there any plans to even out the land tier fee system so that there isn't such a big jump between the tiers, both in price and land amount, so that if you are just a little over you are stuck in the next tier? For example between $40 and $75.

Why do you start off new players, especially trial users, with so little money ($250/$750). This seems very unrealistic given how pricing has increased for popular items, and would seem to just frustrate a new player and force them to turn to third party currency sites. If LL were selling money I could understand, but it doesn't make sense to me why you would start off new players with a bad experience off the bat. Prim hair, shoes, skins, animations, dance bracelets, etc.. are all extremely popular, and $750 cannot buy very much in SL at all.

To curb inflation?
Noobs need to be taught how to buy money instead of whining that they dont have any.
It has been my opinion since beta that getting money for free every week is silly.

I agree. If n00bs are given more money, it would only fuel inflation. Money being bought on GOM/IGE is existing cash, not new cash. If LL increased the n00b cash from L$250/L$750 to maybe L$2000 or L$5000, that would spark inflation on the L$ and cause it to decline in value.

Maybe what LL needs to do is become more Pro-Business in SL. Allow for Corporations and the ability of those corporations to hire and pay employees L$. Create a Stock Exchange that allows for SL corporations to trade shares of ownership. The ability to trade Land Ownership on an Exchange instead of onsite peer-to-peer. Turn land into a commodity along with Prims. Allow players to trade Prim Counts like a commodity. Lets say a 1024/plot has 120 prim count and the player only needs 50/prims. Let them trade the remaining 70 prims on a market to another player who might also have 1024/plot, but needs 5000 prims. So that player is buying prims as a commodity with their L$.

Overall, LL needs to be reorganized into 2 halfs. 1 half works on system development, in-game coding and such. The 2nd half works on in-game economics and pro-business development. LL needs a President and Federal SL Reserve Chairman at the same time.

Actually, that brings up a fascinating question:

Is the l$ a bit of a self-righting machine? Are stipends corrected for inflation in any way?

Since prices go up but stipends do not, then the demand for GOM currency increases and the currency should be valued more.

Can you go into as much detail as possible as how stipends (all stipends) are calculated? (it had to be asked .. I don't expect an answer, so don't flame me)

eek keep talking like that and everyone will have to fill out a w-2 before the install completes.



seriously tho LL does allow for that this is a player run world

Cat

LOL... Your too funny. ' I suppose LL could draft a SL version of a W-2. eheheheheh
But really, it kinda makes sense. Overall, LL needs a system which removes cash from
SL to prevent inflation. Because if every week they kept paying people stipends and didn't remove some money from SL, the money pile would grow and grow.

Didn't LL claim at least 15,000 members? Lets say that everybody gets L$250/wk. That adds up to L$195,000,000 a year, assuming the population remains stuck at 15,000. And I believe LL's last report mentioned that L$140,000,000 already exist in the game. So if you do absolutely nothing for 1/yr in SL, your looking at L$300,000,000 to L$500,000,000 (roughly) in the SL circulation pot. And unless the number of in-game businesses and things to pump your money into grows at the same rate, you'll match the basic definition for inflation.


Inflation: A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services


In plain english that means there will be too many L$ dollars chasing too few goods and services. The net effect is the decline in the L$'s valuation to the US$. And I wouldn't be too shocked if that is why the L$ continues to decline right now. LL has gone from L$70,000,000 in August '04 to L$140,000,000 in Oct '04. That much cash being poored into SL and not enough avenues to remove it from the economy is creating inflation.

I just pulled the numbers, here we go:


Nov04: L$124,457,884
Oct04: L$106,906,995
Sep04: L$98,681,770


So we have about a L$26/million dollar gain in the currency in circulation. A 28% gain in a meer 2 months. No wonder the L$ is falling, the SL economy can't absorb such a rapid increase. LL needs to stop all Stipends or figure out how to remove the same amount of dollars its putting in to keep the circulation amount flat. Because a 28% growth in 60 days is bordering on being called "Hyperinflation".

Unless something is done soon, I estimate SL to have about L$540,000,000 Linden Dollars in circulation by this time next year. What does that mean to you? If you have L$100 right now, it'll be worth (in purchasing power) L$25 next year. LL needs to stop the flood of currency into the market.