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A Very Curious Economic Exercise

Desmond Shang
Guvnah of Caledon
Join date: 14 Mar 2005
Posts: 5,250
02-15-2006 23:57
Ok, I've had a *lot* of people ask about this, so here we go.


The Interesting Economic Exercise:

Tulips! In the spirit of 'Tulipmania', however at a nano-economic scale small enough that even free account holders can participate.

100 tulips have been made, all by the creator "Desmond Shang."

All tulips will originally sell for $L 10. Each are no mod, no copy, transferable. They come in seven different varieties:

36 Scarlet Passion Tulips
25 Phantom White Tulips
15 Spirit of Flame Tulips
10 Pale Lavender Tulips
8 Luscious Peach Tulips
5 Precious Gold Tulips
1 Rare Dark Beauty Tulip

Each are numbered in their names, i.e.: "Phantom White Tulip, 7 of 25."

I'll keep the "Scarlet Passion Tulip, 36 of 36" for an example.

I, Desmond Shang, solemnly swear never to make any more of these tulips ever again, or in any way alter their scarcity. If any are destroyed, they are gone forever.

I have *already* donated the full proceeds in advance, $L 990 in its entirety, to Mr Travis Lambert of the Shelter. (15 Feb 2006)



Expectations:

That the perceived value of an item with no functional attributes in Second Life will follow a typical "collector's market" curve: the item will appreciate in value for a period of time, peak, and then lose open market value as time goes on.

1) The most common tulips will appreciate in value by perhaps 200% or even 500%, going from $L 10 to perhaps $L 25, or even $L 50 in a few weeks.

2) The most rare tulips might even approach 1000% gains, possibly selling in the $L 100 range during their market peak.


Potential:

1) You could own a pretty tulip for $L 10.

2) You could sell a tulip for more than you paid for it.

3) You could identify that the Second Life economy strongly supports value (or not!) when appropriately 'backed' by reputable interests.


Risks:

1) It costs $L 10 to buy a fresh tulip, no way around it.

2) Desmond Shang could throw caution to the wind, risk his $L 2M a year content business and through a cunning variety of illicit tulip production, alts, and cronies, undermine the value of your $L 10, or even $L 100 tulip. *rolls his eyes*

3) You could buy a tulip from someone else for say, $L 25 or more, and be stuck with owning it when interest wanes.

4) Second Life could be hacked, Desmond could be hacked, a sim could 'roll back' and destroy your tulip. You might give it to a Second Life love and lose her. The tulip might recall bittersweet memories of a time in your life, and haunt you.



How everyone else fits in:

- If you buy or sell a tulip (or destroy a tulip!) mention it here, and mention the price and type. I don't think we are allowed to 'name names' of other parties in the forum.

- Tell us what you think in general, even if you never go near the tulips. Community reaction (or lack thereof) will be interesting.

- Without your help, no one will have any idea what happens! I'm not repurchasing or making any more tulips; I'll be 'out of the loop'.



I'll release the tulips in little groups at odd times, so everyone gets a chance to participate if they wish. I'll post in this thread when I do so. I haven't set any out at all yet.

If you buy a tulip, remember to 'take' the tulip - they are all set to 'sell original'. You won't get a copy, you'll have to 'take' it after buying it.


Picture of the tulips:

http://westtrade.250free.com/100tulips.jpg
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Apollo Case
Registered User
Join date: 30 Dec 2004
Posts: 21
Not quite unique.
02-16-2006 00:09
What is to stop someone else making the same Tulips and engraving them the same way, or making better tulips (although I am sure your quality will be very good.) They are not as unique as it seems.
Jesrad Seraph
Nonsense
Join date: 11 Dec 2004
Posts: 1,463
02-16-2006 00:41
Interesting :)

Is enforced scarcity anything like natural scarcity in a world with zero reproduction costs ? Do we value this scarcity at all ?
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Desmond Shang
Guvnah of Caledon
Join date: 14 Mar 2005
Posts: 5,250
02-16-2006 00:43
From: Apollo Case
What is to stop someone else making the same Tulips and engraving them the same way, or making better tulips (although I am sure your quality will be very good.) They are not as unique as it seems.


Absolutely nothing stops someone else from making a tulip very similar to mine.

The only thing that (I'm 99.99% sure) nobody else can do is put "Desmond Shang" as the creator.

It's possible someone else will 'flood the market' even before I put a single tulip out. We'll see!
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Zonax Delorean
Registered User
Join date: 5 Jun 2004
Posts: 767
02-16-2006 01:20
From: Desmond Shang
Absolutely nothing stops someone else from making a tulip very similar to mine.


So there's no real incentive for anyone to choose your tulips, if similar ones already exist.

I mean, why are people buying flowers? To collect and sell them? Or maybe to gift them, or just put it in their garden.

Also, the economy could still work somewhat, if the creator was 'Philip Linden'. Yes, a tulip by Philip might be worth 10x more than a tulip by just anyone (sorry :-) -- at least, for some people.

For me, I'd just buy the nicest flower that I can find, when I need, without caring who made it.
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Eggy Lippmann
Wiktator
Join date: 1 May 2003
Posts: 7,939
02-16-2006 01:29
Here are some revised expectations:
1) Nobody will care an awful lot about your tulips.
2) Anyone who does care will copy them, by hand, or with an exploit.
3) If a critical mass of people does start to care about your tulips, the aforementioned people will make a pretty penny while all you got was L$1000
Shaun Altman
Fund Manager
Join date: 11 Dec 2004
Posts: 1,011
02-16-2006 03:45
It looks like more forum respondants than not have disliked or just belittled your idea. In my experience, this is a VERY good sign that you're onto something big! :) I, for one, would like to buy a tulip or two. :)
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Eggy Lippmann
Wiktator
Join date: 1 May 2003
Posts: 7,939
02-16-2006 05:14
I dont have anything against the experiment, I'm just pointing out a few basic tenets of capitalism... and why you can't enforce scarcity in a digital world.
Surina Skallagrimson
Queen of Amazon Nations
Join date: 19 Jun 2003
Posts: 941
02-16-2006 05:21
He can enforce scarcity on the basis that only his tulips will have his name as the creator, regardless of how accurate all the copies may be.

But from what I understand of the experiment it is irrelevant that anyone else can make their own tulips. The point is to track the value of the ones HE made.
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Kris Ritter
paradoxical embolism
Join date: 31 Oct 2003
Posts: 6,627
02-16-2006 05:26
I'll buy all your tulips please :)
Sirex Cookie
Registered User
Join date: 29 Jan 2006
Posts: 103
02-16-2006 05:41
yes. this is an exellent idea. good luck with it. and ill hope to find a tulip at sometime.
Introvert Petunia
over 2 billion posts
Join date: 11 Sep 2004
Posts: 2,065
02-16-2006 06:22
Did I miss how I can gets me a tulip? I wants one.

Incidentally, for those who may not know where this exercise derives from, in the 1600s, there was a runaway speculative explosion of interest and cost in an item (tulips) with little inherent value.
Desmond Shang
Guvnah of Caledon
Join date: 14 Mar 2005
Posts: 5,250
02-16-2006 06:26
Great comments and predictions, everyone!

I'll make a post in this thread when I set some out. Likely I'll do it in little batches at random hours over the next week or so.



From: Eggy Lippmann
3) If a critical mass of people does start to care about your tulips, the aforementioned people will make a pretty penny while all you got was L$1000


Ah, I already donated the $L 990 proceeds in advance to "The Shelter" via one Mr Travis Lambert. I had to, otherwise this whole venture would belong in the Classifieds and not in this forum. I'm hoping he will chime in and confirm I did so.

The last tulip I'm keeping for example. So yes, this whole thing may prove to be one massive fool's errand.

Or maybe just a lot of fun? :)
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Khamon Fate
fategardens.net
Join date: 21 Nov 2003
Posts: 4,177
02-16-2006 06:37
I'll purchase the gold ones and donate four of them to various charity auctions over time. If their forced scarcity does make them valuable, they might fetch a good amount for worthy* causes.

*wholly subject to the posters opinion
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Doc Nielsen
Fallen...
Join date: 13 Apr 2005
Posts: 1,059
02-16-2006 06:41
The only problem I can see is that no 'mechanism' for trading tulips exists... nothing specifically dedicated to the trading of 'Desmond Shang original limited edition tulips'.

This makes the likelihood of your replicating 'Tulip-mania' somewhat remote.

OK - now shoot me down in flames! :rolleyes:
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All very well for people to have a sig that exhorts you to 'be the change' - I wonder if it's ever occurred to them that they might be something that needs changing...?
Lordfly Digeridoo
Prim Orchestrator
Join date: 21 Jul 2003
Posts: 3,628
02-16-2006 06:45
This is a great idea. I've loved the idea of collectibles in SL. I'll be sure to buy some if I can.
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Frank Lardner
Cultural Explorer
Join date: 30 Sep 2005
Posts: 409
Beanie Babies even better comparison
02-16-2006 06:50
From: Introvert Petunia
Desmond's little experiment is even more reminiscent of the Beanie Baby (TM) mania at the end of the last century, because Ty Warner (the man behind TY) admitted that his business model was deliberately based on "controlled scarcity."

Like Desmond, the toys were made in limited quantities, then promoted to drive demand over supply. Like Desmond, the maker did not attempt to profit from the initial sale so much as from the high demand for subsequent "editions" that was driven by the speculation of profit on resale. Like Desmond, the maker was vulnerable to counterfeiting, and in fact fake Beanie Babies were made, smuggled in and were the targets of law enforcement seizures enforcing the Lanham Act (prohibiting sale of counterfeit trademarked goods). Of course, true collectors swapped lore on how to distinguish counterfeit from authentic Beanie Babies, based on fabric, construction, stitching techniques and the dies used in the little tags.

There was a vigorous market in price books, collector's bazaars in local hotel meeting rooms, hoarding and swapping among ordinarily sane adults and children. A whole secondary industry evolved around these little plush toys filled with polystyrene beads. There are still some around our house, perched on the occasional shelf or holding up this or that object to give it a better angle and reduce vibration. In short, what was once a treasured collectible is now used as dunnage.

Or a simple child's toy.
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Travis Lambert
White dog, red collar
Join date: 3 Jun 2004
Posts: 2,819
02-16-2006 08:31
I was curious what the heck this experiment was all about - and it does seem fascinating.

Desmond - thanks for your donation. Every bit helps :)
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Theo Lament
In Perpetua Designs
Join date: 30 May 2004
Posts: 68
02-16-2006 08:50
Desmond, I am interested to know how you will be selling the tulips. What I am thinking about is collectable card games. I used to play Magic the Gathering, and one of the biggest sidelines of the game was collecting all of one kind of card. For instance, all the white cards, all the demon cards, all the spell cards… I personally still have a collection of all the angel cards.

SO my thoughts are that you need something more to entice the collectors of the world to be interested in them, add in a bit of chance into the whole thing.

Will the tulips come in special packaging? So if they are unpacked and “planted” they might have less value than a “mint” still in packaging tulip.

Will they be sold in a way that the person buying the tulip doesn’t know they are getting the “rare” one?

You might consider selling them in crates of 6, perhaps 100 crates of tulips, mixing up the tulips in each, and drop a few of the uncommon tulips into a few of the crates and then THE rare one into one or two crates.

Time intensive, but I think very worth it if you’re interested in creating a “collectable” market.
Polka Pinkdot
Potential Slacker
Join date: 4 Jan 2006
Posts: 144
02-16-2006 09:19
I don't think the "original packaging" idea will make any difference here. In the real world stuff that is still in the packaging has not be touched (theoretically) and thus will be in the best possible shape compared to things that were collecting dust (or worse, played with!) for years.

In SL handling an item in no way degrades it, so the packaging doesn't mean anything. Also, you can always put something back in it's original box and nobody would ever be able to tell that you had it out. There are not virtual fingerprints or virtual dust to worry about in the game.
Theo Lament
In Perpetua Designs
Join date: 30 May 2004
Posts: 68
02-16-2006 09:25
From: Polka Pinkdot
In SL handling an item in no way degrades it, so the packaging doesn't mean anything.


I believe that I have dolls in SL that are in packaging, there is a note in the description about removing the doll from the package destroys the packaging. I will have to look at the item when I log in next to be 100% sure.

I have seen Desmonds set up at his shop, he has scripting skills... I am sure his crafty mind could work something out if he decided it was something he wanted to implement.
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Apollo Case
Registered User
Join date: 30 Dec 2004
Posts: 21
Anyone can make a tulip - tulipmania
02-16-2006 09:40
With respect to the original poster ... there are a lot of potential tulip makers out there. Again with respect... adding your name would not make a lot of difference unless it has value to the buyer.

Even with your good tulip making qualities, there are probably ten, twenty, maybe a hundred, possibly 1000 that could make a better tulip ... or just the rare one you want to make.... someone else could make just that one in quantity.

If you are the Michaelangelo of tulips the value would go very high and to be truthful i hope there are Michaelangelos that can create in SL. However, this whole thing reminds me of tulipmania in holland. Someone is going to get caught with a very expensive bulb.
Apollo Case
Registered User
Join date: 30 Dec 2004
Posts: 21
Pyramid selling
02-16-2006 09:51
Actually, it reminds me a bit of selling the pyramids ... or pyramid selling .. not that I think that is the original posters intention, I am sure he is an honourable person.
Gabe Lippmann
"Phone's ringing, Dude."
Join date: 14 Jun 2004
Posts: 4,219
02-16-2006 09:52
I have reservations about

(1) what the inherent value is of the tulips, though do not dismiss out of hand the idea that Desmond somehow becomes so important (gets booted for killing sim with tulips, is instrumental in some tech advance in SL, whatever) that the mere fact that Desmond is the creator makes them valuable

(2) the tracking mechanism is not as robust as I would like to see. Having the original creator (Desmond) automatically informed of a sale of the tulips would be nice.

(3) would like to see a tracking of other "tulips" sales and price for a full comparison

Either way, it's interesting and if a total waste, no harm. I say, press on, Desmond. Tracking buying/trading trends in any scenario is to be applauded. I'll probably get one myself for the heck of it.
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Gabe Lippmann
"Phone's ringing, Dude."
Join date: 14 Jun 2004
Posts: 4,219
02-16-2006 09:58
From: Apollo Case
Actually, it reminds me a bit of selling the pyramids ... or pyramid selling .. not that I think that is the original posters intention, I am sure he is an honourable person.


But there is no guarantee of value or return as in a pyramid (and certainly no guarantees of returns significantly higher than is made available other places). Only the guarantee that he never makes another. And you do get an object for your purchase price. How you trade that object and at what value isn't of direct economic benefit to Desmond. If Desmond goes bankrupt and leaves SL, you will always have your tulip and that would actually help ensure no more Desmond Tulips are made.
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