Slashdot Mirror
Financial Analyst Calls Second Life a Pyramid Scheme
Petey_Alchemist writes "Silicon Valley gossip rag Valleywag is carrying a story about Second Life being a new spin on the old pyramid scheme.
The article, which consists mostly of selections from the report of financial consultant Randolph Harrison, suggests that not only are most people deceived about the amount of money they can make in Second Life, but also about how easily they can withdraw it. It says 'Like the paid promotion infomercials that run on CNBC, sadly SecondLife is a giant magnet for the desperate, uninformed, easily victimized. Its promises of wealth readily ensnare those who can least afford to lose their money or lives to such scam in exactly the same way that real estate investor seminars convince divorcees with low FICO scores to buy houses sight unseen with no money down.'"
... or any other thing that may give money to the lucky?
Sounds a lot like the promises of becoming rich in real life that few actually obtain due to those pesky land barons^W^Wcorporations.
I've known World of Warcraft was a money-sink from day one. So this guy is saying MMO's cost money? I know Second Life has no monthly fee, but come on...a pyramid scheme?
It's not easy to make money in your First Life either, therefore, real-life must be a pyramid scheme. Damn you, God, you sly bastard!
Caffeine is my anti-drug!
Duranin - A NWN2 Roleplaying Persistent World
BDSM and Virtual Sex...
Daniel
Carpe Diem
"SecondLife is a giant magnet for the desperate, uninformed, easily victimized. Its promises of wealth readily ensnare those who can least afford to lose their money"
In other words: there's a sucker born every minute. This is nothing more than the same thing we've been seeing for decades now. Take an old concept, tack on "using a computer." and it somehow seems new and interesting. People get suckered. Now they're getting suckered with computers. So what?
I'm sorry, buy if you consider investing in virtual property in a Video Game a good idea, you have absolutely no business managing your own funds. You'd probably be better off investing in a pyramid scheme ( aside from the fact that they're illegal ). At least most pyramid schemes have some sort of actual product that moves around, rather than just a collection of bits on some hard drive somewhere.
there are people who will seek to take advantage of others for financial gain. It's generally referred to as "capitalism." Those same people who are deceived by con artists in Second Life are the people who watch the infomercials on late-night TV that have the guy with seventeen mansions and a 25 foot speedboat and hot and cold running girls, etc. and believe what they're saying.
The same adage works in both worlds: "If it sounds too good to be true, it usually is."
I've spent considerable time in SL, and have spent a grand total of $20 in my time there. I've made small amounts of in-world cash through various jobs. I tune out the scammers in SL just like i do in RL.
Anyone that gets scammed like this (in either world) deserves to be parted from their money. Anything we can do to make stupidity painful (or at least expensive) is OK in my book.
Never underestimate the power of stupid people in large groups.
Some will go in desperately believing that it will make them a lot of money then wind up losing a ton, some will be smart and/or lucky and go in and make a lot of money, and most will go in with the expecation that they will enjoy themselves, if they make some money great, if they lose it it sucks but they know that going in and set aside a small amount for that purpose. And of course, the house, aka Linden Labs, always winds up a winner.
Monstar L
Compared to other online communities or games, Second Life is miniscule.
"...only are most people deceived about the amount of money they can make in Second Life, but also about how easily they can withdraw it."
Yeah. Right. The reason people start playing Second Life is because their First Life is boring or sucks. Not because they "heard how much money they can make off it."
I've only recently started playing this game, and me getting into it had nothing to do with any hype about perceived money-making opportunities. I had seen some friends playing, and seen some screenshots and things, and was mildly interested. When the client went OSS I respected that move enough to dissolve my last bit of resistance and try it out myself, and it turns out I enjoy it so far.
Never in the game's help files or the blogs I read did it talk about using this thing as some huge income-generator. It's a game, and I find it pretty good at being a game. If on the other hand I wanted to work and make money I'd get another job.
This "OMG MONEYS!" hype seems to be confined the more sensationalist news outlets which I don't really take as gospel, and some third-party stuff. From my own short experience playing the game the actual financial rewards appear, just as in real life, to come to the people with the skill, time, and wherwithal to put into making stuff other people want to buy.
So who is doing any deceiving here?
Slashdot Burying Stories About Slashdot Media Owned
Financial consultant Randolph Harrison climbed the Pyramid of FUD and made it at least to the Slashdot frontpage.
Later he was seen falling down the Pyramid of FUD swinging his fist at the loss of attention and was heard cursing the whole world and capitalism as "Pyramid Scheme".
It isn't known if he will make it ever again to the top of the Pyramid of FUD where he might join CNN again for "Rumble in FUD" with the most important news and most expensive watches at the wrists of presenters.
Second life is full of peoepl trying to stela my monies!!!!
Quick, someone make a Thrid Life!
In Soviet Russia, dots slash you!
I play Second Life for fun. I just happen to sell stuff that I make to pay for a subscription. Investing a lot in a game as if it were a business is lame, IMO.
I love the ads that go along with this article:
Get a (Second) Life
Live out your virtual dreams with this official guide to Second Life!
www.amazon.com
Want a Easy $9000 a Week?
Not MLM and No Selling Fully Automated and Get Paid Daily
www.MillionaireSuccessCourse.com
I make $1500 US a month from Second Life, whilst the ease of making money is definately overstated it has nothing in common with a pyramid scheme and it is very easy to withdraw your money (Not so much if you are trying to withdraw less than $50 due to the fees involved). This article talks about "banks", which no real business should be touching as the are run by residents and are unofficial and unapproved. This is the equivalent of giving your gold to another player in World Of Warcraft who tries to make you interest off it through loaning it to other players.
He also seems to have no grasp of how the currency exchange system works, either you sell automatically at the lowest asking price or price it yourself. Trying to buy and sell currency is worthless due to the fees involved and the relative stability of the market.
Any actual SL business will sell content to people, then cash this out on the official currency market every so often. It's really not hard to make a few dollars with no overheads. He does have a point on the circular nature of the market though, there are very few money sinks and the market is only healthy due to the fact new users are constantly joining.
The entire economy is a pyramid scheme if you think anout it. Look at the pyramid on the dollar not that it is necessarily evidence, but most things with money turn into a pyramid structure. The lottery is just one example, but even a corporation hsa the few at the top. It just becomes a matter of degree after that and whether there is a minimum that those on the bottom can expect.
The pyramid scheme statement, in my opinion, would only be accurate if the game producers were using it as an enticement to get people to join the game, but they're not.
The press does seem to have some kind of fascination about people making money off it, as they should, but for the wrong reason.
What I think the industry should be more focused on is not the dashed dreams of people hoping to make money in these virtual universes and failing but those who succeed in making money.
If you can turn around and sell virtual items for real cash, there is an argument to be made that receipt of those virtual items could be a taxable event. Be very afraid about how close we are getting to having to spell out the magic items we've received in WoW and their disposition as part of our income taxes.
Sound nuts? Hardly!
Some people have a way with words, and some people, um, thingy.
The first lines of the article clearly shows that its deskwork of someone who has never even bothered to try the game.
quote first line:
"Linden Lab's virtual world -- a much-hyped online amusement arcade of cartoon porn, avatars of IBM executives and frog bands"
What a judgmental idiot!
Hey I am still having problems running First Life. I mean the resolution and refresh rate I am getting is AWESOME, but maintenence on my avatar is disturbingly difficult. It takes weeks to modify the look of my avatar (many users have reported a similar problem), and all my support queries to the Developer seem to be piped to /dev/null.
And not ONE cheat code has surfaced yet. I ask you!
Nothing witty
...I'm NOT a fan of Second Life - I think it's feeble, clumsy, laggy, antiquated in every technological way, and pointless - but even I draw the line at calling it a pyramid scheme.
That's just silly. If anything, it's closer to a pure meritocracy than anything - there are some stunningly creative people in there (apparently with LOTS more time than me). There are a lot of things I'd be interested in exploring DESPITE the horrendous lag and 1992 graphics. Hopefully these creative people can sell their work for Linden$ and turn that into cash based on market forces.
At some point, people have to be responsible for their own actions. It's 'caveat emptor' for the computer world, which itself is capitalist Darwinism that is essentially no different than any OTHER non-computer capitalist mechanism.
If I enter 2nd Life with no knowledge of what I'm doing, and expect to "make ton$$$ of money!", I'm probably going to waste my time (and if I'm stupid enough to spend real money, I'll lose that too). How is this ANY different than if I buy a franchise restaurant without knowing anything about the business, or start day-trading stocks knowing NOTHING about the market? In every case, my ignorance will cause me to make mistakes (at best) or even be exploited by more savvy actors (at worst) but either way, the ending will not be happy for me.
In that sense, 2nd life is no different than the real world.
-Styopa
I think a lot of people have failed to realise some things about the economy of Second Life. Unlike our real-world economy, the world of SL doesn't have the same economic limits and drives that we're used to. If we do look at what's really going on there, we can see how things might change in our "real" economy in the future - and I don't just mean trying to do the same old "real" stuff virtually:
Now, the only real reason for any money in this game is for people to be able to buy items from other people that have created. However, if this system were to be abandoned in favour of, say, a FOSS-like model, people would simply make things that they enjoy creating, freely distribute them and likewise obtain items that they like from others without need for any financial exchange whatsoever. There certainly are many people already in SL who just give their creations freely without seeking any real payment other than a simple "thanks".
There is no reason that this shouldn't happen other than we're quite used to dealing with a capitalist system based on scarcity. If we ever hope to grow beyond our current real-world economics, it's certainly worth trying to experiment with alternative systems virtually.
It's very possible to make money in SL. But of course taking it as a stock market is stupid. What sells in SL is services.
SL is simply an environment capable of connecting buyer to seller. You provide a service: drawing a custom picture, making a custom script, building something, the buyer provides the cash. This way of doing things simply CAN'T be a pyramid scheme.
Banking in SL is stupid - that I can agree with. People in SL simply aren't patient enough to handle a sane interest rate. Most people work with amounts like $5 USD, which they consider significant. Only maybe 1% of all people in SL works with amounts of money where a 5% interest would amount to something. So SL banks offer really insane interests, possibly operating as a Ponzi scheme. I haven't used any SL banks, but my feeling is that they're very unreliable.
Calling all of the SL economy a pyramid scheme is bullshit though. If you act as a scripter/artist/builder for hire you can make some money without problems. Build something pretty, put it on sale, and if people buy it, you get cash.
Now, indeed, you won't get rich in SL very easily. Earning say, $10 or $20 in SL is easy. Earning something approaching a real income is very, very hard. It'll take dedication, an impressive quality (there's tons of competition), selling things much below what they'd cost in the real world (meaning, what you get per hour of scripting is probably noticeably below what you can get per hour of coding in your country). Through all of it, you'll have to be your own programmer, marketing department and businessman, because involving any more people makes it even less profitable. Through all of that you have to contend with that everything in SL is intangible. With no materials other than perhaps hosting costs for things that require external servers, anything you offer for cash, somebody else could offer for free.
Now, despite all this, I'll say that selling things in SL can be a very nice experience, despite the low income you get from it. At least for me personally having something I made byself get used by several hundred people and personally hearing feedback gives a much nicer feeling than being a faceless drone in a corporation, even though the corporation pays a lot better.
>"Silicon Valley gossip rag Valleywag is carrying a story about Second Life being a new >spin on the old pyramid scheme.
... ok?
...
./ NO I did not rtfa
um
> The article, which consists mostly of selections from the report of financial consultant >Randolph Harrison
ok, never heard of him
>, suggests that not only are most people deceived about the amount of money they can make >in Second Life, but also about how easily they can withdraw it.
Its like anything else, to make money you have to work or have a product that people want to buy in sl. It's really no more, no less complex in sl than in rl.
The secondlife.com website explains _exactly_ how to "withdraw" the money by means of bank transfer, credit card or paypal. anybody who knows how to use a paypal account should have no misconception as to how easy or difficult this process is.
>It says 'Like the paid
>promotion infomercials that run on CNBC, sadly SecondLife is a giant magnet for the >desperate, uninformed, easily victimized. Its promises of wealth readily ensnare those who >can least afford to lose their money or lives to such scam in exactly the same way that >real estate investor seminars convince divorcees with low FICO scores to buy houses sight >unseen with no money down.'"
SecondLife is a giant magnet for _people_. That _people_ in society today generally happen to be desperate, uninformed and easily victimized is not the fault of SecondLife or infomercials for that matter.
Secondlife and infomercials aren't really comparable either. if anything SecondLife could be compared to having a TV. what you choose to watch on TV, likewise what you choose to take part in with secondlife, is really up to you.
To put things into perspective a little. SecondLife is only really available to Literate English Speaking Adults who own State of the art computer systems connected to the Internet via some Broadband connection. Hardly a descriptive profile of desperate, uninformed, easily victimized individuals, wouldn't you say?
Well then again, this _is_
I read the article, not sure I understand it properly (not that that generally seems to stop a lot of people commenting) It seems to be suggesting that SL is a pyramid scheme because the only way to get your in-game profits out of the game into US dollars is to sell your Linden Dollars to someone. However, as most of the money is controlled by Linden, unless there are lots of people willing to buy Linden Dollars, it's very hard to sell them. So in order to make money, you'd have to have a constant stream of people joining the game and buying Linden dollars, which makes it look like a pyramid scheme. Does that seem an accurate summary?
Second life has gotten hyped about its money making opportunities. STUPID! It's a friggin game.
Investing in virtual real estate at the mercy of another company that can make limitless amounts of it: STUPID!
However, hangliding, getting a cool outfit for your avatar, and chatting with friends that look better there than in real life: PRICELESS!
And NO: It is NOT a pyramid scheme. It totally does not qualify under the legal definitions of a pyramid scheme. It's entertainment. Don't expect to get rich of it. (In general work and things that make you money are not necessarily pleasant; That is why you get paid. If it were all fun and games you'd have to pay your boss!)
Hajo
Hajo Monogamy: Belief so strong that millions of people end perfectly good relationships in order to start a new one.
He put money into the game, and in a bank, and then expected to earn more than in real life? He honestly thought he could earn money in second life, just by putting money in? Without doing anything?
Second Life is not some kind of magic money maker. To make money you need to work for it. Build stuff. Not just stuff, but good stuff. Better than the stuff you get for free. Or become a prostitute (paid for cybersex), I'm sure there are enough lonely guys playing that you can earn some money that way.
And for the rest of us, Second Life isn't about money. I started with a free account, and I still have no money, but I'm having fun. More fun than if I had been playing World of (some old RTS game). For me, it's a social place, and a place where I can play around with building and scripting things (much easier than Blender). Maybe someday I'll be good enough to make stuff I can sell, but that's not why I'm playing.
Ha! Tell me about it!
I am a victim of Kingdom of Loathing addiction. It's a web-based MMORPG in which you pick a class like Turtle Tamer or Seal Clubber and fight a variety of foes to gain items and skills. Sound familiar, huh? Well KoL takes it to a whole new level of abject, life-destroying addiction:
-- Real-world buying and selling. KoL gear routinely reaches 15 or, for the rarest items, even 30 dollars on ebay! Just trying to keep up with high-level characters can result in a second mortgage or even involuntary organ donation.
-- Time sink. You start with 40 -- count them, 40! -- turns a day, and with skill that can easily become as much as 200. That means 200 page views, taking maybe as much as 40-45 minutes a day! True, use of scripting can reduce that to more like 5 minutes but even so it's enough to drain your whole life away!
-- Vicious competition. Every time you reach a certain level you are encouraged to start your character again from square one. That means hardly any characters are consistently stronger or weaker than others -- resulting in a mad endless scramble for levels, or at least confusion.
-- Griefers. Optional PvP combat not only allows stronger players to win imaginary flowers from weaker ones, it can even result in a rude message from the victor appearing at the top of your screen -- thus crushing the souls of new players and convincing them that they must play ever harder to catch up!
-- Haiku. Channels such as #haiku, locations such as the Haiku Dungeon and unhelpful, mean-spirited clans such as my own Haiku Vikings spread a cold, rigid, and uncompromising doctrine of 17-syllabled communication, locking victims even further into the cult mindset.
These are just SOME of the ways in which KoL gets its claws into you and destroys your life! Ban KoL now! If only I'd played Second Life or WoW or Everquest... but alas, it's too late... now back to KoL for a gruelling 10 minutes of hitting yetis with a duck on a string... or is it the other way round...
But seriously, KoL shows that multiplayer online games don't _have_ to have a ripoff/addiction element.
Whence? Hence. Whither? Thither.
It's not a game in the classical sense that there's a goal to be accomplished, scores and so forth... but it is nonetheless a game.
:) Plus I get kudos from friends who check out my store when I create a new piece... or comments (positive or negative) depending. I like that... it's communal. I don't expect to get rich from it... in fact I doubt I'll ever have to worry about withdrawing L$ from SL so I can't speak to how easy it is to withdraw.
I got into SL a few months back mostly out of curiosity. I didn't buy into the hype being generated by the media and checked it out because I was intrigued (as I have always been) at the concept of virtual realities. I was always a big fan of Gibson and the Cyberpunk novels in general and so I already had a "primer" in the thoughts behind virtual worlds.
Now, SL is not perfect. Not by a long shot. It's sometimes laggy, crash prone and buggy... but it IS enjoyable. I have friends I made through SL whom I probably would never have met in RL. I used to get on IRC a lot about a decade ago, and this provides similar interaction in my opinion. I enjoyed IRC because at the time I lived in East London, and getting on IRC provided me a way of meeting and communicating with people all over the world. Although now I've not logged into IRC in 7 or 8 years some of those same people are still my friends, and they were instrumental in helping me when I decided to move to the US 10 years ago. I don't predict I'm going to make another similar move, but SL provides me with the same sense of community I got back then.
Now, as far as the pyramid scheme thing goes... please! Take a look through secondlife.com (the official site). Although the idea of selling your creations or renting property is discussed, it's not plastered on the main page "Make Massive $$$$$$ Now" or something like that. Linden Labs for all their faults are selling SL as what it is; a virtual world, a community and a creativity tool. If you are creative enough and good enough with the built-in building tools, then you can sell your wares to others and make a little cash. I know some people who do this and make enough in-world L$ to "shop" occasionally. Sometimes they even make enough that they can "own" a small plot of land and have their monthly fees covered by their sales. I have never known anyone personally who makes a massive profit. In that regard, it's more like real-life... if you have a marketable skill (avatar building or building models of ships, houses, furniture etc.) and know how to market it properly you can make some in-world money. If not, you won't. It's that simple. There are no more huge opportunities to make "phat cash" in SL than there are in real life. The only advantage of SL is that it's still a relatively untapped market if you're creative enough.
Hell, I make some L$ in-world by creating real art. I draw, sometimes ink and paint... then I upload a texture and map it onto a simple prim with a nice frame... voila... one saleable item that people will buy to hang in their property. I don't make much, but I cover expenses... and I get to keep the original
The media has created the pyramid scheme, not SL... and certainly not the majority of the denizens of that virtual world. They're the ones selling the idea that you can get rich quick in SL... Linden I don't think has ever claimed that. Oh, and the SL "millionaires"? Have you seen the exchange rate of L$ to USD? An SL "millionaire" probably has as much in their "bank account" (read that as SL account) in real world $ as I do in my bank account. I am not rich... in fact there are months I juggle bills like everyone else. Plus, I have to note that there were probably more scams being thrown at me in IRC 10 years ago than I have seen in SL. It's just the media ignored IRC because it wasn't "cool" to be geeky back then. The same things have happened... they just have an extra coat of polish and eye-candy.
How many games allow you to do that?
Does anyone know anyone who has had a *bad* experience (as in, lost money) with Second Life?
All I hear about in the popular press is Anshe Chung, Anshe Chung, Anshe Chung. These give you the distinct impression there's millions to be made, easily. If anyone has experience to the contrary, lets hear it...
Having just read both of TFAs I really have to question the sanity of the author - it's a goddamned game! You could replace "Second Life" in that article with ANY role playing game all the way back to the original Red Book (Blue Book? whatever) paper editions of D&D.
I have had a second life account for over a year. I have some typical number of Lindon dollars. I have never bought more. I have never spent any. I have no real understanding of the economy, except that if I want to import a graphic image into the system it costs money, so I don't.
I am sure I am missing out, but lots of people have GIVEN me things that I assume cost someone money at some point. That of course dilutes the value of the investment. The pay back probably involves social status, similar to potlatch societies where whomever gives away more is the 'wealthiest'.
Clearly the actual issue is how to convert ANY of that into real value, in a way that economists can equate either directly or analogously to real world value, such as income or return on investment.
What this article does most effectively is highlight the lack of support for predictable commerce. The same is true in countries with unregulated financial systems, and the factors of anonymous commerce, no legal system, and essentially no reliable contract, means that the only commerce that is effective for most people involves commerce in which there is a low stake, which means that actual use and accumulation of wealth is both hindered, and less valuable.
This is a vending machine economy. Its based on a million players putting in a quarter in a slot machine, or buy a new outfit, face, body etc... Things that are specifically part of the online environment (playing with toys or enhancing your visual representation)...
-----
Second Life really is more interesting because it is the equivalent of a Graphical MUSH where all the users have the ability to create items. I can create any number of items, and give them away or clone them. A good item may be worth something but since any good item can be reverse engineered and distributed at no cost, there is little value to developing quality code except for social praise. Real designers and coders actually can earn good livings in the 'FIRST WORLD' so most of what you see is toys made by people for fun, which makes alot of sense.
-----
Last but not least, its a crappy environment for real development. It is harder to output text in any meaningful format. Thats an intentional crippling to force people who want to create content to have to pay to input graphics, rather than write code to actually draw graphics. Pretty regressive considering the direction of the web, which enables REAL commerce and has created a good amount of wealth.
------
When SecondLife stops being a scam, and supports real internet technology and openness, perhaps it will also draw the kind of mindshare that will create real value and an honest marketplace, but that is a different economic model. For now, its mostly a place to play john and whore and part of that means paying, and if that happens to let your one dollar turn into 250, then the game seems more exciting. If a grown woman and parent of two actually believes that earning 185 dollars a month for being a whore and a mule for money laundering is good money, then I guess thats what she deems herself worth. Hard to argue with that sort of capitalism.
How is this different from real life? Computers, stock options, stocks, homes, cars, home appliances, etc. are all sold with the promise that they save/make people lots of money, and they rarely deliver. Lots of people in real life have dreams of being their own boss and becoming independent, and they keep buying stuff supposedly allowing them to do it, but few ever make it. Financially prudent living involves purchasing very little, in real life or Second Life.
Proper pyramid schemes also require more than broken promises of financial wealth, they require a very specific pattern of payment and recruitment, something that doesn't apply to Second Life's business model. Second Life may be a waste of money and it may make false promises of financial riches, but it's not a pyramid scheme.
FWIW, Second Life does have pyramid schemes. They are actually--get this--pyramids that take your money and redistribute it.
... but isn't the economy supposed to be a secondary part of it? I thought it was basically a graphical MUSH -- i.e., you create your avatar, wander around and build stuff. Isn't the "virtual economy that translates into the real world" just a secondary feature that seems to be taking on a life of its own?
If that's the case, I can't really consider it a pyramid scheme because that wouldn't be the primary selling point of the game. If it *is* the primary selling point of the game then the author's argument is a lot more compelling to me.
Eviscerati.Org: All Hail the Eviscerati
Another observation on the falsity of the economic trading system (because it isn't just stocks and shares we really mean is it when talking about stockmarkets) is how can there be more wealth than there are goods? At any moment whilst the cash machine of the super rich operates the wealth is greatly more valued than the sum of the real goods at its foundation.
I suppose if the super rich all more or less simultaneously attempted to spend their money hyper mega super inflation would hit and only they would be able to afford anything which would rationalise the value in my previous paragraph.
Meanwhile they don't have to do that because slowly over time they owned a bigger and bigger percentage of everything anyway but can't afford to rock the boat too much or they would have to grow there own food. Farming being the one of the most important jobs on my short list of most important jobs which doesn't include president, property tycoon or evil monopolist.
But there seems to be a very vague understanding of what is a pyramid scheme among the /. crowd. A pyramid scheme is not just plain old deception, nor is any pyramid scheme illegal. A pyramid scheme is a market that can only go up because the amount of participants increases. Given a growing population, the housing market is an example of a pyramid scheme (that is, if you assume that nobody ever fixes up their house, or that houses don't automatically degenerate, but if you do that, and you get in early, then you're bound to win). The stock market in the nineties was a bit pyramid-like (it went up largely because the amount of players increased dramatically, and they all needed stock - any stock). I suppose 2nd life does generate value of its own (people are meeting other people, for example), so it's not entirely a pyramid scheme, at least.
Religion is what happens when nature strikes and groupthink goes wrong.
It's amusing that a statement like this can be treated with dead seriousness on /. Is this because geeks have an aversion to markets?
Am I the only one thinking: Step 1: Openly deride Second Life a pyramid scheme. Step 2: Wait for the Linden Dollar to exchange rate to fall due to people dumping their L$. Step 3: Buy large amounts of L$. Step 4: ??? Step 5: Profit!!
node-def: a tactical hacking sim. Now in open beta.
If they managed to make off with the money, why shouldn't he be on the hook for it?
The first sentence of the Wikipedia article on "Fiat Currency" (http://en.wikipedia.org/wiki/Fiat_currency) reads:
"In economics, fiat currency or fiat money is money that enjoys legal tender status derived from a declaratory fiat or an authoritative order of the government."
It should read: Fiat currency is money that is backed by the trust in the promise that goods will be delivered in exchange.
Neither the Euro nor the "modern" Federal Reserve Dollar are backed up by anything but promises, they are fiat currencies.
What's more, the dollar is given out by a _private corporation_: "The Federal Reserve".
If you give it enough tought you will find that the Linden has no more and no less substance than the US dollar. The only real
difference between the two is that the USD is backed by a bunch of exceedingly tougher thugs who may or may not suffer the
Linden.
Real Estate must be a pyramid scheme because every time land changes hands, it's usually because the previous owner is selling it for more than he bought it for, never mind when each owner has developed the property some more.
My stock shares of Coca Cola must be a pyramid scheme because (accounting for inflation) I paid more for them than the person before me, and he paid more for them than the person before him.
The Dow Jones Industrial Average (12560.56 at last glance) must be a pyramid scheme because it represents people selling stocks for more than they bought it for. It's going to crash, I tell you.
Scientific research might be a pyramid scheme because many successive discoveries rely on knowledge gleaned from past discoveries.
Why is it that insufficiently educated journalists can point to value-added commodities with accusations of the P-word for the sake of sensationalism? Has it ever occurred to them that "Pyramid Schemes" are neither illegal nor unethical as long as something of value changes hands, and especially if that particular something can be developed or improved? It becomes morally wrong when that something in question changes hands with an artificially inflated price that does not properly demonstrate its commensurate worth. Whitewater could be thought of as an illegal pyramid scheme. Ponzi's operation was an illegal pyramid. "Make Money Fast!" was an unethical pyramid, albeit not illegal.
There are many legitimate operations that can be thought of as a pyramid scheme, but if one starts thinking of them that way, please refrain from thinking the P-word is a bad thing.
Solomon Chang
"Twice half-assed makes an ass whole." --Solomon K. Chang
While it's not backed by gold or silver, it IS backed by a commodity's valuation...
Stop and think about what one thing that everyone in the "first world" countries want that is a natural resource...
That one thing can only be bought with ONE currency. You can't buy it in Euros, Francs, etc.- only in US Dollars.
Once you realize this, many of the things that the US does and have done over the years snap into clarity.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
The author makes some interesting [and I believe, valid] points. However, the implication is that [by calling it "pyramid" and "Ponzi" scheme], there is something either illegal or at the least, unethical going on.
Call me libertarian, but I'm having a hard time seeing how this is any different in concept from banking in the real world, albeit much higher risk -- you get a small rate of return, the banks take a cut by using the combined saved money of their customers as assets to invest and reap higher rates. Same thing happens if you're rich enough to invest in someone's hedge fund [or buy alpacas, for that matter]. It also seems to me that investing real money in a virtual world that is completely unregulated is a high-risk investment with low potential returns [seeing as how there is no recourse for collecting on successful arbitrage]. Caveat emptor, no surprise there.
Perhaps it wasn't explained clearly enough to me, but the concept of a pyramid or Ponzi scheme requires that investors recruit others to invest, then taking a cut themselves, as the money moves up the chain. Repeated ad nauseum, the farther down the chain investors are, the more they lose until the entire thing collapses. The other element for it to be this type of scheme [in the illegal sense] is that there is nothing being traded per se of value in a Ponzi scheme -- the thing that makes it work is the churn of the money. I guess we could argue whether the assets within the game = something of value, but that's a different point entirely.
Who put this thing together? Me, that's who.
This isn't one of those crazy pyramid schemes...Our symbol, is the rhombus!
The problem is that they are "investing money" into lindens and hoping the exchange rate changes. Linden Labs as specifically "pegged" the linden to the dollar. I track it and it usually has been consist to about 1000L for abojut $4/US. Lindens are strictly controlled, it is not easy to just make large amounts of linens, ( I know I have tried :) ). Most of this is planned, they hired an economist to help control the economy. Linden labs makes $.30 US on each buy and about 3.5% on each sale. Sales of lindens tend to act as stocks, meaning you put in a sell order and wait for some to bid on the lindens. buys are typically much faster though.
There is one example of linden dumping to control linden prices, quote: "In the second half of September we sold L$20,117,994 to prevent rapid appreciation of the L$. " . http://blog.secondlife.com/2006/10/03/linden-dolla r-economy-update-2/ it is on there blogs.
From the website (https://secure-web4.secondlife.com/currency/descr ibe-transaction-fees.php): Fees for Buying L$ You will be charged a fixed fee of $0.30 per transaction regardless of the amount of L$ you purchase.
Fees for Selling L$ Sellers of currency pay a fee of 3.5% per transaction. Proceeds will be credited to your US$ account balance.
Yes there are limits to trading, unless you apply for higher limits:
https://secure-web4.secondlife.com/currency/descri be-limits.php
So if you read the article, he was trying to do currency trading on a pegged currency, not the greatest idea. He got the same amount going in as going out minus the trasnaction fees, gee go figure.
And if you want to look at the economic statistics: http://secondlife.com/whatis/economy_stats.php Which also lists the sources and sinks, most of the money made by linden labs is from transaction fees, tier fees (fees for owning land or islands), and membership fees.
Linen exchange market data: http://secondlife.com/whatis/economy-market.php More useful economic statistics: http://secondlife.com/whatis/economy-graphs.php
Another interesting thing is that lindens are not produced, except by "allowances" given to residents and non-residents weekly. In WOW (world of warcraft) the server producers more gold when creatures are killed. Hence the lindens in Sl are an artifical scarcity, which is what all real world currencies are.
Not everything is sunshine and roses though:
There are some problems with the economy though:
Yes, you can get equivilent work much cheaper in SL by paying in lindens. Although the prices needed for contracted services have been going up steadily. I have had several friends in SL quit doing contracting because it does not pay enough for the effort even corporate sponsorship. I do know of some contracting companies that make enough to survive on though.
Problems with stability during the updates, this can be especially painful as shops cannot sell when SL is down, and sometimes products break during updates or on rare occassions inventory disappears during updates.
Land values going down or becoming unusable due
This is not a sign of a pyramid scheme, it's a sign of underdeveloped institutions. It happens in most societies which are first developing banks and stock markets. (Shouldn't a finance writer remember John Law and the Banque Générale?)
Banking institutions develop in roughly three stages.
First there's the banks-disappearing stage (John Law et al), where fabulous returns are promised, but half the time you never see your money again. Europe went through this stage in the early 1700s.
Then there's the Neoclassical stage: Banks build impressive buildings to let people know that they plan to be around for a long time, and to give the impression that they have been around for a long time. This stage arrived in China in the 1920s, when governments weren't stable enough to provide client protection, so banks had to give the impression that they could shoulder the burden all on their own. An impressive building and serious/professional bank managers/tellers help maintain the impression, which is critical if people who got burned in the first stage are going to be convinced to bring their money out from under their mattresses. (Banks built in the 1930s in small-town America have much the same look.)
Finally, there's the government regulation/deposit protection stage. Banks can tuck themselves into the corner beside the Starbucks and the tellers can chew bubble gum, because we know that the government will, most of the time, enforce regulations needed to keep our deposits safe. We don't need the impressive facades anymore, because we trust the institutions.
It sounds like Second Life is still at the first stage. Over time, if the economy continues to develop, expect the Neoclassical stage to develop. Certain players, or groups of players, will build up a reputation for dependability; they will enhance that reputation with professional presentation. Will they build banks with fluted Corinthian columns? Maybe not, but they'll have something equivalent.
This is not a pyramid scheme. This is an apparent arbitrage opportunity that turned out not to be an actual arbitrage opportunity, but, rather, a fairly conservative, boring investment.Check this out, quite funny.
" Although the idea of selling your creations or renting property is discussed, it's not plastered on the main page "Make Massive $$$$$$ Now" or something like that."
Well... from the front page:
US$ Spent Last 24h: $1,017,876
So I'm curious, then, having not "played" Second Life. If anyone can make anything in the game, what prevents people from copying other people's things? If the answer is "nothing", why are people able to sell things they make?
A work that expires before its copyright never enters the public domain and thus enjoys eternal copyright protection.
Because every article they do on it seems to consist of nothing more than setting up Straw Men and knocking them down. SL is a social game with pretensions - at core basically IRC plus a 3D environment so there's more to do and talk about with friends then simply hang on channels. I've never met anyone stupid enough to invest in SL in the way their 'Financial Advisor' suggests and it's difficult to imagine anyone with more than half a brain who would do.
There may be business opportunities in SL on RL scales, but they are rare. Many more people are content to play at running a business in SL and make money on SL scales, and if that's how you have fun who's to say it's wrong? Even the 'escorts' who charge only one or two USD an hour can hardly be doing it for a living.
SL could develop into something more interesting (and if you code the scripting language, LSL, whist broken in places is sufficiently powerful to be really rather fun) or it may not. Anyone who plays SL at this point who isn't primarily adopting a "I'll have fun a see where it leads" attitude is an idiot, but equally it'd be wrong to insist there's no potential there at all.
Case in point, myself and a friend are trying to develop something in LSL that we think could have potential and wide appeal using RL development standards (most stuff coded in SL is hobbyist level). If by an amazing longshot it succeeds and I make significant RL money then great, if it succeeds less so and makes significant SL money (i.e. a few hundred $ in RL) then equally great, and it it fails then no problem - I'm only investing the amount of time I would be playing another game anyway, and I'll have made a lot of friends and had a lot of fun in the process.
My sister works in Second Life. She has a job, paying real money (UK pounds, not Linden dollars) with a real, bricks and mortar design agency, and every day she goes to work in their real office, sits at her desk, logs in to SL, takes her avatar to work inside their virtual office, and gets to work.
Her company is paid by e.g. bands or designer clothing brands to create a "Second Life Presence" for them inside "the grid". It's a lot like hiring a web designer to build a web site - you hire a Second Life design company to build you a virtual tropical island, or whatever. People come to your virtual island, maybe you have virtual examples of your virtual products there, they like them, they buy them in real life... profit!
This seems like an entirely legitimate and mutually beneficial arrangement for all concerned; Second Life definitely can be used to make real money without scamming anyone. That's not to say it's not ALSO scamming people, of course.
. . . attack other members with flying penises?
What?
It's good we haven't had holodecks yet, because they will totally mess up society. Everyone will be in one, living their phantasies, with lots of virtual sex, of course.
This would be somewhat interesting if Second Life was actually decent. I played for ten minutes and was shocked to find a stuttering, laggy, visually stunted piece of junk. Ok so I'm being overly critical, but after all the hype....?
That's fascinating.
The reason the author calls it a Ponzi scheme is that it strongly resembles the scam known as a High Yield Investment Program. These schemes make it very difficult to get money out, so that, while the customer's investment appears to be increasing, it can't actually be converted to some other form of value. And in the end, the "HYIP" always goes bust. That seems to be exactly what high-interest "in-game banks" are doing.
The other problem is that the currency trading market in Second Life only trades about $40,000 per day. So if you try to sell $10,000 worth of SLL, the market moves too much. There's insufficient liquidity for trading.
p.s. Amusingly, my verification word is girlish. (http://images.slashdot.org/hc/50/518f650c1fa6.jp
What's more, the dollar is given out by a _private corporation_: "The Federal Reserve".
...." and from the related article on the FOMC: "the Federal Reserve System, is charged under U.S. law with overseeing open market operations in the United States, and is the principal tool of US national monetary policy".
/not/ something I would go around portraying as a "private corporation". The fed is rather a very unique and different beast. The chief reason why the Fed is /not/ strictly a part of the government has more to do with the long running problems where politicians and governments tampered with monetary policy and created large monetary economic problems. In 1951 independence was granted to the Fed for similar reasons and the Fed has remained independent for these same reasons. A politically independent entity is important to the integrity of a currency for both domestic and foreign investors. Great, so we're on the same page, the fed isn't really a private corporation... it's a unique entity.
/and/ credibility. The US Government isn't just a bunch of thugs (as you called them) backing their currency, they are also a credible backer so far as they attempt to stabilize the value of their currency. It is this stability (due to monetary policy, the rather permanent nature of the US Government, etc) that makes it important to others.
I'm not exactly sure what you mean by "given out", if you walk into the federal reserve, they certainly aren't handing out currency. However, I take issue with naming them a "private corporation". From the wikipedia article: "The Federal Reserve System is a quasi-governmental banking system composed of (1) a presidentially-appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee;
A quasi government operation with presidentially appointed members and charged by U.S. law is
Now, is the Linden a Fait currency? I'll agree that the USD and the Linden are the same when it comes to conceptually gasping currency, but they differ widely in terms of backers
So while the Linden may fit the criteria of a fixed exchange rate currency, I would not compare it to the USD. The Linden does not have an independent central bank (as the US and most western countries do), does not have a transparent or credible means (at least that I can find) of backing their currency.
I think the more interesting question is what if there was a classic "bank run" in Second Life? Could Linden pay up? The US banks are FDIC insured.
THERE's the backlash.
Hello Backlash, we've been waiting for you!
I have a lot of opinions about Cyborgs and Architects
I completely agree about index funds, I'm really amazed more people haven't caught on yet - you can pick whatever you want to track, it's so easy. They're a simple way to make money off major trends which are a lot easier to predict than individual company performance. For example, I put a chunk of money into an emerging markets ETF because based on my research it seemed like emerging markets would see a lot of growth. It didn't matter which specific companies the ETF tracked, to recreate the same effect I would of had to do weeks of research on hundreds of foreign companies. Of course emerging markets have grown tremendously and should for at least a few more years (compare EEM or VWO to QQQQ or SPY). I'm shifting into nanotech for the next "high risk" play once I pull some profits out later this year, they've got ETFs which track nanotech stocks now so it's easy.
I know, playing a game to make money is ridiculous. Imagine if someone played a game such as basketball, football or even soccer to make money! That'd be absurd. Oh, wait...
The same concept applies to virtual games (yes, they are still games), allowing them to be a profitable practise.
Why don't people try getting a first life?
today is spelling optional day.
I'm not sure why people are calling this a closed system. I personally played Second Life for a total of an hour before I decided I didn't like it, but I have played and made money in Asheron's Call (Microsoft/Turbine) and Anarchy Online was my job for 6 months and I made about 10,000US playing it exclusively for profit. The reason why I do not see this as a closed system is because the people putting money into it are taking something out...entertainment. And while that is not a tangible item it is still just as valuable in a videogame as it is in real life. You don't leave with anything after a movie or a trip to a casino, how is that different?
-Xoltri
(The way to go to make money, as in RL, seems to be real estate. With the increasing population of SL, demand is high; one land management company I deal with is planning to bring 4 whole "sims," or a bit over 250,000 square meters, of new land online per month to try and meet the demand--and, when they preannounce a new sim, it's almost always sold out before it even comes online.)
Be who you are...and be it in style!
Giving a private corporation special powers by the way of law is nothing new under the
sun and a continuing trend as privatized law enforcement and private prison corporations
etc. come to mind. I see nothing unique about that kind of entity.
Looking at the WP-article and what you cited from it you most have overlooked this interesting
paragraph, right after you stop citing it says:
"Federal Reserve Banks are nominally "owned" by private "member banks" (in that each member bank owns n
nonnegotiable shares of stock in its regional Federal Reserve Bank; see below). In Lewis v. United States,
[2], the United States Court of Appeals for the Ninth Circuit stated that "the Reserve Banks are not federal
instrumentalities for purposes of the FTCA [the Federal Tort Claims Act], but are independent, privately owned
and locally controlled corporations." The opinion also stated that "the Reserve Banks have properly been held
to be federal instrumentalities for some purposes." [1]
I would contest the quotation marks around the "owned" even just because those shares can not be sold.
And coming to a close and speaking of thugs, the original stockholders in the Federal Reserve Banks were the
Rockefellers, JP Morgan, Rothschilds, the Lazard Freres, Schoellkopf, Kuhn-Loeb, the Warburgs, the Lehman Brothers
and Goldman Sachs, in other words the same people who financed all major wars since the French Revolution.
Without question, people to be trusted to do whatever in their power towards your best interests.
"I think the more interesting question is what if there was a classic "bank run" in Second Life? Could Linden pay up? The US banks are FDIC insured."
They'll reimburse you with virtual land or other virtual goods. Buzzing clouds of electron charge is what they have a
virtually unlimited supply of.
As far as I can tell, permissions can be locked down in SL. You can set objects so you are not allowed to copy them - pick them up and move them, modify them. You could make a cool tree/ motorbike / house but you can set permissions so I can't copy the tree and put it in my area, can't sit on your motorbike, can't copy and paste your house.
Objects with functionality - say a noticeboard that allows me to type notices into it - can be given permissions and opened to a limited degree that you the constructor decide. You can sell me a noticeboard that allows me to type my own messages in it, i.e. a noticeboard that I can use in my space, but you can set the object and its associated scripts so I can't make further copies, modify the item, or look at the scripts driving the object: I can't buy one noticeboard from you then improve upon the scripting, you can close this off from me.
My choice is to learn to script and build my own objects using the inworld scripting language, or deciding whether it is better to pay you for object I desire.
I see claims in this thread that SL is a closed system depending on new members joining and therefore a pyramid scheme.
.Net) to it now too, and you will begin to see I think more interesting connections to technologies not currently in-game.
Perhaps the company running SL needs new members to buy land but SL as an environment I think fits none of the above claims.
The goods in SL can connect to the Internet outside of the game. For example you can stream music from your own web server to a radio in the game.
I am currently designing a product to sell in-game that has real value to people not just entertainment and I know there are people who want it.
I won't say anything else since I want to be first with this specific product but believe there will be more and more of this.. which should make SL superior to other communities despite what I hear about inferior clients for now.
Funny though, when I signed up I was supposed to get free Lindens (money) but the signup broke (hit the back button doh) and lost the money. Haven't bought any land or anything else yet though have spent over $50 in paying Internet cafes to use their machines to access (which I want to break that habit, it's silly). I think it is more about my not liking credit cards, since if the cafe I am in right now said I could buy some nice land for $50 I would plop the money down.
So I directly refute your FUD claim that goods sold in SL have no value, and that SL is a closed system. I also believe that it could be greatly improved. They are adding mono (open source
I just saw an alpha of something that uses Google sketchup. If it becomes easy to import 3D models then you will see a lot more advertising and links to the outside world. Not necessarily good but we'll see.
I have no idea about how the company that runs SL makes money but it is naive to imagine that people are constantly quitting and that most users are newbies. I find that is not true either.
As for pyramid scheme, let's not be dumb. The idea for something like SL goes back a long time (think snowcrash, etc.) and has little to do with a pyramid scheme. Also there are things that look like some kind of scheme but are not. Take OSS for example. Do you get more out of it than you put in?
There is only one real problem with SL so far that I have seen. It is overwhelmingly full of nasty (okay let's say mature) content. I couldn't recommend a kid to use it because of that, though maybe the open source client will quickly be changed to allow a lock on that. If you search for places or events it is mostly casinos, sex this and that, make money quick, etc. I also see no policing, for example I experimented with one to see if I could make money on a questionnaire thing to buy some land and not actually use my own cash. After answering oodles and oodles of questions I discovered it requires you to actually buy things.
Another problem perhaps is that I am a bit worried about privacy. On the other hand now that the client is open source, perhaps it will become possible to create encrypted channels.
Anyway it will get better and some people will lose money. For example I saw a new mall and talked to the owner about getting space. I think $300/week for a small space is just crazy.
But if it turns out to really become relevant to the world (and not just experimentally as it is now) you will have to eat your words. Incidentally I just saw two requests for commercial bids from NASA for programming simulations of current projects. I think you ought to study SL a bit before putting it down as a scam. It certainly is not a closed system, and while it has room for improvement, it has enough options now with open clients that it can grow. Big companies are interested in it so it has a certain critical mass. I have not spent a ton of time in SL and find its scripting documentation to suck, but I do not see a reason to call it a pyramid scheme.
I think one other problem though is that land is too expensive,
Sorry, I missed that you were talking about short-term investors. I should take my own sig's advice...
Still, who distinguishes day-traders from short-term investors *who buy stocks*?
Apology to Ubuntu forum.
In this regard, the items in SecondLife, to me personally do have value, but I understand someone outside SL would not see the value in SL goods, as they would consider things to have value only when they can touch and see it.
I attribute value in SL, to things that were created artistically, with a quality greater than than just a bunch of primites put together. You can see how much time and effort was put into such works and how they came from talented people.
I've bought stuff in SL just based on how it would amuse me, how it would entertain me, how it would make my SL experience better. I think this is the reason why we buy things in our everyday life as well. SL is no different from that.
For example, my girl friend spends more time and money on SL than me. The things she buys in SL has value to her cause it enriches her gaming experience and entertains her. It's no different than buying a dress or outfit real life, or buying a pair of designer shoes, or cds.
Having said that, I do feel there are pyramid schemes within SL. For example there are banks in SL with investment returns of 180%. These are mostly Ponzi schemes much like what existed in Eve Online. And only someone really desperate would invest in them.
The average player, by default, can't push too much money around. For businesses and currency traders, you can request tiered levels of increased limits. How, otherwise, would these 'top of the pyramid' land barons pay for a couple dozen islands a month tier, if they couldn't reasonably get a dozen or two K a month out?
Looking at the withdrawl/outgoing maximums for each class:
Resident class: $5,000/month
Business class (Level 4 of 4): $30,000/day or $320,000/month
Enterprise class (Level 4): $60,000/day or $1,280,000/month
Currency Trader (Level 4): $40,000/day or $1,280,000/month
These arrangements aren't automatic, so take a request to The Lindens to get cleared for. Obviously too much work for our author, for whom *looking at the webpage* was either too much effort, or too damaging to his case.
"These people look deep within my soul and assign me a number based on the order in which I joined" --Homer re:
I went to the mall with $100. By the end of the day, all I had were some clothes and pretty trinkets. I was completely unable to cash out more money than I put it. Therefore, the mall must be a pyramid scheme!
"Convictions are more dangerous enemies of truth than lies."
Giving a private corporation special powers by the way of law is nothing new under the sun and a continuing trend as privatized law enforcement and private prison corporations etc. come to mind. I see nothing unique about that kind of entity.
/NOT/ necessarily fall in line with what the stockholders would like to see happen.
/not/ out to further the interests of the stock holders, member banks, or the US politicians.
And how many of those private corporations were a part of the government for decades beforehand? Look, I'm not quite sure if you're willfully turning a blind eye to the obvious differences between the fed and other private corporations or what, but I'd challenge you to name me one of those private corporations, I'll quickly point out just how greatly it differs from the fed for you.
But how about we cut away from the wiki article, let's go check the Fed:
Who owns the Federal Reserve?
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects.(Emphasis mine)
and again in the same FAQ
The twelve regional Federal Reserve Banks, which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
Back to you...
Without question, people to be trusted to do whatever in their power towards your best interests.
Just to fill you in a little more, the board acts based on the members. Most of the voting federal reserve banks actually support a team of research economists. For example the Chicago Fed hires a number of economists who regularly turn out publications. These economists make an informed decision based on their opinion of what is best for the long term economic growth of the country. These interests do
Believe it or not, this is a well documented system that is frequently audited and questioned by congress. This system is
This really isn't tin-foil hat time, you can read the minutes of the meeting. Part of the power of the USD is the ability to attract foreign investment. So really, you don't even have to trust me or trust the Fed, but if you trust greedy corporations to be greedy, then consider how they are reluctant to invest in countries which have poor monetary policy compared to the willingness to invest in the US. The stark contrast will illustrate that this system isn't just a "have faith in it" scheme, it's a system that greedy corporations have enough belief in to dump billions of dollars.
Nothing suitable comes up from acronymfinder.
Quattuor res in hoc mundo sanctae sunt: libri, liberi, libertas et liberalitas.
Stock markets finance companies that have the potential of providing goods and services that were not available before; in a growing economy, the stock market produces long-term gains in the aggregate, because the companies that it finances create wealth.
Pyramid schemes, on the other hand, don't create any wealth; they just redistribute existing wealth.
Are you adequate?
You are correct in at least one respect: if you ask anyone why they accept dollars as payment, they answer is always: "because other people will take it as payment". But isn't this fundamentally a house of cards?
No more so than the expectation that all English speakers around you will continue to take the word "dog" to mean canis familiaris. In other words: what you're dealing with here is a complex social situation, and a breakdown is well within the realm of possibility. Ultimately, value is not a property of an object, but rather, a relation between people and objects; and people are social beings.
Are you adequate?
The 'goods' that are sold within SL have no value in real life, which makes the SL a closed system, which sustains itself only due to the new users who are constantly joining as you yourself stated. It is a pyramid scheme.
You're assuming an untenable boundary between the "real" and the "virtual" here. If people are paying real money to obtain those goods, they certainly have a real value.
There are plenty of business models that rely on more money coming in constantly for an indefinite amount of time. For example, the food industry. What's missing from this argument is a condition that's critical for something to be a pyramid: it must rely on an unsustainable continuous inflow of new money. There is no reason in principle that forbids that from happening in the Second Life case; if the demand for Second Life goods can be sustained indefinitely, then it's no different than any other commodity.
If you read TFA and think about it, you'll notice that the "pyramid" claim is the least precise and careful claim made in it. The real smoking gun, to my mind, is the claim that Second Life currency is controlled by a cartel that accepts real money in exchange for virtual money, and then puts in a price structure designed to do two things: (a) keep the said virtual money from being converted back to real money, and (b) prevent other people with big pockets to come in and compete with them. They certainly earn short-term interest on the real money that people trade into their pockets; TFA notes that the penalties they were looking at for big trades closely matched short-term interest rates, which supports the hypothesis that these penalties are, essentially, the cartel's way of charging you for the interest they projected to earn on the real money they're trade you back.
Are you adequate?
You're lucky! I got stuck with the Beta version, and the pre-natal EULA ("Do you want to be born? Please click 'Yes' or 'No') obligates me to play until my avatar dies. Due to one of the many bugs in this crappy game, I just take lots of damage, but never quite die. I have to grind experience at this thing called a "job" to make enough in-game money to feed my avatar and its "dependents". (Don't get me started on in-game "marriage".) The only things I can kill are rodents or the occasional deer, and all they ever drop are turds. I still haven't figured out for sure how to tell the NPCs from the PCs, and if you make a mistake you get put in prison and maybe killed! No joke! (Actually, this would be an option...except for the non-death bug.) They've got a pretty good raid going in the "Iraq" zone, where you get to kill anything you want--but the uber players get all the good loot. I'm sure glad they have these in-game forums to whine on.
Great men are almost always bad men--Lord Acton's Corollary
The exchange of the stuff is gambling, regardless its underlying value.
Of course it's not a pyramid. I've noticed a distinct lack of mummies!
I love, love, LOVE this slashdot meme.
People who leave their computers unsecured deserve to get hacked.
People who get taken in by con men deserve to get scammed.
I have a question : do girls who wear skimpy clothes deserve to be raped? Does a black guy who whistles at a white woman deserve to get killed?
Here's one for you : you're an idiot, and for that travesty, you deserve nothing bad to happen to you! You deserve the same love and respect as any other human being!
Although the forum abuse -- you definitely had coming.
DRM works.
By hiding the "code" that drives the objects, making them, in essence, uncopyable, there is scarcity that can be capitlized upon.
As soon as duplication becomes effortless, the motivation to spend $10 for the item goes away.
A work that expires before its copyright never enters the public domain and thus enjoys eternal copyright protection.
This is yet another classic example of why content creators want DRM so badly. No one wants to go to the effort to create the content for free.
A work that expires before its copyright never enters the public domain and thus enjoys eternal copyright protection.
The trick to making money in SL is sell *experiences*, not objects. Experiences are unique to the avatar experiencing them, and can be re-experienced.
How many clothes have you bought in SL? vs. How many times have you played Tringo? I rest my case.
DNA is a Turing machine. You, however, being dynamic and emergent, are not.
The in-game banks that arose and pretty much fell in Second Life flat out were pyramid schemes. The "interest" was based on money from all those other people putting money in the bank, not loans or anything. Oh, and one of the Second Life banks, the dude running the bank cashed out like $150,000 (or a more impressive L$35,000,000) and skipped out of SL 8-).
On the other hand, the base economy for SL is based on reality.. someone with a free account isn't paying LL anything.. there's some "money trees" in SL to get a bit of cash for the first week or two depending on the tree, so if you want to "make free money" or whatever you might get L$100-200 which is like US $0.50-0.75. After that (unless you're already making in game currency...) to have any in-game cash, people pay $9.95/month.. the L$300/week you get in game amounts to about US $4.51 a month at current exchange rate. The other $5.44 goes to Linden. I doubt this alone would pay for a grid as big as they probably have. But, there's fees for new islands (since creating new land directly invovles Linden pluging extra machines into their cluster..), some kind of monthly island fee for islands and land tax on the mainland. For smaller parcles, you usually pay rent, to someone who owns a larger block of land. Those fees pay for maintenance and power. Oh, and of course if you want extra L$ for something you directly pay Linden some dollars. If Linden has the L$ completely US $ backed (which I think is likely..) they would have it in an actual bank, and can get interest back without any pyramid schemes 8-).