You are currently browsing the category archive for the 'Second Life' category.
For those living creatures that are unable to form compacts not to harm others or to be harmed, there is neither justice nor injustice. It is the same for all tribes of men unable or unwilling to form compacts not to do harm or be harmed — Epicurus, Principle Doctrine 32
I think history will eventually say, Chris Anderson’s “The Long Tail” was an interesting book for the fact that it was probably one of the most damaging ever to be applied to the digital economy. One is better off reading The Black Swan: The Impact of the Highly Improbable by NNT, Steven Strogatz Sync: How Order Emerges From Chaos In the Universe, Nature, and Daily Life, and Benoit Mandelbrot’s The Misbehavior of Markets: A Fractal View of Financial Turbulence – for a better idea of how bad power laws can be in economics. The “Long Tail” is very correct in that this is how the market works, it is incorrect in letting anyone think that you will get rich from it, and that it is “good for you”.
You might get lucky. You might lose your shirt. You might run around in the end of the Long Tail like a rat in a maze. Indeed, the rats in the maze are most content creators in Second Life.
If you all want a taste of history, then read the last book (Book 6) of De Rerum Natura by Lucretius, for his poetic retelling of the plague of Athens (David Sedley commentary), based on the Plague of Athens account of Thucylides.
Lucretius bears a message about Epicurus. From Book Six no. 17
He (Epicurus) understood that the pot made the flaw, and that by this flaw an inward corruption tainted all that came in from without as though it were a blessing; partly because it was leaking and riddled, so that nothing ever sufficed to fill it; partly because it preserved it befouled, as one may say, with a noisome flavor everything that it received, as soon as it came in. Therefore with truth-telling words he scoured the heart, he put a limit to desire and fear, he showed what was the chief good to which we all move, and pointed the way, that straight and narrow path by which we might run thither without turning; he showed what evil there was everywhere in human affairs, which comes about and flies about in different ways, whether by natural chance or force, because Nature had so provided, and from what sallyports each ought to be countered, and he proved that mankind had no reason to roll the sad waves of trouble within their breasts.
For Epicurus’ Swerve in Lucretius’ epic poem is exactly this phenomenon, too. Sadly, it is also Adam Smith’s Invisible Hand. It doesn’t lead to good markets, not without good money management, and right now, this especially does not exist in the USA with Bernanke at the helm.
If you want a taste of physics research, then check out the UPenn research on Brownian motion, where the scaling is asymmetrical. The good news about this is that Daniel Dennett’s Freedom Evolves is probably right about free will though. But too bad for Chris.
http://www.upenn.edu/pennnews/article.php?id=1035
I view “The Long Tail” as a plague now. I once liked it, but after seeing it used in practice everywhere, I see how bad it really is. Richard Dawkins is your man (The Selfish Gene) if you want to know how bloody nature is, tooth and claw.
Nature is not intrinsically good. It is not intrinsically evil, either. It is wild, untamed, rough, and undomesticated. The waves can rise high and crash suddenly like a tsunami. It sure as heck isn’t improving the human condition to go back to nature. We want freedom, but maybe not that much freedom. Justice is desirable too.
Seeing this book applied to currency markets is an even bigger disaster. No wonder Chris Anderson doesn’t like Second Life anymore.
Adam Smith was missing something from the whole picture.
http://www.upenn.edu/pennnews/article.php?id=1035
This is the swerve, the clinamen of Epicurus. This is what Louis Bachelier and Adam Smith didn’t know about motion.
You cannot have one invisible hand bringing the market into equilibrium. You need TWO HANDS. The money needs to observe equilibrium in order to be stable.
This is the motion of things that are self movers. When there is an asymmetry. Human beings are self movers, and this is the most basic of self movers, a tiny object that is longer in one direction than another.
Money itself needs to be smooth like Brownian motion and it is not!
As said by my friend Sin Trenton: The invisible hand snatches your money and gives you the finger when it can.
Epicurus says there are two kinds of motion, the straight and the swerve. Aetius 1.23.4 Dox.Gr.
I have a few ideas regarding money that would probably work for the brewing LindeX problems. I visualise good money as the stable pipes in which the flow of profits from goods and services pass through. The pipes are subject to high stress, from both the volume of trade and unforeseen natural occurrances and business cycles. They must be built well to withstand the pressure. Though pipes may occasionally fail, I want the failures to be manageable and foreseeable, so they can be replaced and fixed as needed.
Two major problems and some suggestions to fix them:
- L$ is being used as a store of value, and fiat currency or inworld land ownership is a better choice.
- The velocity of L$ exiting Second Life is too slow.
L$ is being used as a store of value, and fiat currency or inworld land ownership is a better choice.
Using L$ as a store of value, corresponds to a reduction in land tier fees which are not being paid for. The LindeX has taken this role over, as well as other currency exchanges, as the transaction fees are passed on to the buyer of the currency for the most part. It’s free as in beer money, no recurring subscription fees or even a bank charge. And its not surprising that those who are profiting from the free money train do not wish to change it.
The velocity of L$ exiting Second Life is too slow.
Our money supply situation is like a sink slowly filling with marbles of various sizes, and only smaller marbles are falling through the drain. The obvious way to deal with the sink issue is through charging a demmurage fee, for storing the L$ . The intent is to speed up the velocity of money, thereby helping relieve Supply Linden of the task of selling more L$ to maintain the velocity of money through the system.
My suggestion would be to subtract a fixed x amount for every y number of lindens, at the end of each month. Say 1 linden for every 50 lindens, for example. Once you hit zero lindens in your account, you are no longer charged the fees for holding L$. Fees are only due if you have L$ on your account. An exemption can be granted to special avatars who run currency exchanges, but must be a designated avatar, and should be charged for the privelege.
The other issue is to deal with the speculation problem on the LindeX. This is best met with a percentage rate US dollar fee depending on the amount of L$ you had for sale at the end of each month. The issue here is that it will be gotten around by cancelling and relisting.
Easy way to deal with that is to charge it over an average of the money held over a period of time with limit sales and buys, and once money is set for a limit sale on the Lindex it automatically counts against this fee and the ticker is on. If you have sold the amount that month that you originally listed, great you don’t owe the fee. If you cancelled the remaining order, you still have to pay a fee for the whole amount you bet, sorry. Market sales and buys are exempt from the demurrage fee.
Call it risk management fees to penalise people for risky behavior. As the L$ is emphatically not meant to be a store of value, this would be the most useful for the inworld problem.
While these will raise the velocity again, another issue is that there are already many many L$ that need to be swept out of the system. This can be dealt with through charging L$ for land setup fees and all auctions of land in Second Life for a time, to quickly drain the excess money supply temporarily, getting people back into land ownership. This is a temporary stopgap to drain the supply.
A further idea for internationalisation and stability, is to integrate L$ to US dollar or Euro sales, allowing a choice of fiat currency in which to sell to. This is to allow stability to invest your L$ into a variety of currencies, better reflecting market conditions in fiat currency trading. A main feature of this plan is that the L$ cannot be exchanged directly into any other virtual world currency, it can only be exchanged into other fiat currencies, which can be then transferred out through Paypal. It is possible to add other ecurrency options besides Paypal as well, to extend reach to other countries that cannot use it.
I hope I have put forth some useful ideas to help make the money supply situation in Second Life more shockproof. While markets are wild and difficult to control, we can still build something better than a liferaft to surf the market’s giant waves.
“Poor Wretch”, men tell themselves. “One fatal day has stolen all your gains” — Lucretius, De Rerum Natura 3.898 – 899
It’s well known that volcanoes can undergo a long dormant period before they erupt in a cataclysm. The dormancy may span over many human lifetimes, but the volcano still lives. This is why geologists place monitoring stations around volcanoes, to detect the movements of magma underneath.
Sometimes, geologists are able to predict an eruption with enough forewarning to evacuate nearby residents and divert jet aircraft, through use of such monitoring. Still, the volcano may launch a surprise high into the air. Such is the world of complex systems, and they are both terrifying and awe-inspiring.
The profits and prices of commerce, and magma seem to have something in common. A plug in a volcano can create the illusion of a sleeping giant, but a keen ear to the earth may detect something different. Perhaps a new bulge on the side of the mountain might signal a worrying sign that the magma is actually on the move and pooling in new locations.
Unfortunately, profits and prices are too often confused with money. They are all separate things. Money is simply the medium that economic information flows over. It is the pipes for the information that flows through it. Profits and prices are the information which flow through the pipes of the money system. We need better pipes, and not lava tubes one sees in volcanoes in nature. I would prefer to have indoor plumbing, and possibly a toilet and sewage system also!
So now I will concentrate on money, and not on the profits and prices which are entirely separate.
While we can do nothing about the fickle whims of volcanoes except improve forecasting, money is an invention of human society and possible to domesticate. Money is an instrument, a tool, an invention. While it may be affected by events in the natural world, it does not have to follow a cycle, an oscillation, or a severe eruption.
Imagine money as a high pressure water line. Most of the time, it’s completely safe. But if poorly maintained, or an unforeseen disaster that breaks the line, then we may have a failure. Disasters can and do happen in real life, and they are often unavoidable. Generally workers can cap the line, and bring the system back to stable conditions. Unfortunately, economists often behave more like astrologers than engineers, using sound math to describe a world that doesn’t actually exist in reality. I would describe this as “poor maintenence”. It’s much like staffing the astronomy department with astrologers. Sadly, this is not far from the truth for much of Western civilisation’s existence. Astrology is the last remnant of the completely debunked Ptolemaic model of an Earth-centered universe.
So as they say, follow the flow of money and there may lie the answer to your problems.
Stipends were reduced from their former 500 L$ benefit to 300 L$, making it no longer advantageous to own a Second Life premium account due to the amount of the stipend. But this did nothing actually. All users did was not upgrade to a subscription account, while many downgraded, and all began buying more L$ over the LindeX.
As I showed before in my previous article, fewer merchants are making enough money to cover land tiers through content sales, it has shifted disproportionately to top tier content creators, thanks to content theft sharply reducing the middle range content sales. This means less land rented overall inworld, and a shift to cheaper land rentals on mainland, where tiers are lower. Land barons bicker and fight with each other as they compete for what’s left of people who are willing to buy L$ for paying tiers, and fight over innovation of the Second Life platform in general. Blaming different groups of content creators, such as scripters or sculptie makers, who have in demand and difficult to learn skills. But they are not the cause, this is just a scapegoating, not unlike the screaming about Jews poisoning the wells during the Middle Ages in the Black Death. Just a cynical ploy to eliminate a marginalised group of people doing a job many Christians at the time weren’t allowed to do (moneylending) to better one’s own economic position during a disaster. It was wrong then, it is still wrong now.
Innovation for the Second Life platform is vitally important and will go a long way to alleviate content theft. Scripters do valuable work for hire and sculpt and texture makers create full perms items for use in derivative products. While the full perms trade is not a bad thing, the content theft has insured that there is less variety of full perms items for sale to the middle and lower range content creators. No ability to determine if an item is a derivative of a full perms item, or if its a high value original good. This causes errors in signalling value and actual scarity of resources involved in creation of goods. No ability to determine a copy from an original or an authorised derivative places ripped goods at an even competition with legitimate content sales. Of course, even popular full perms building supplies are ripped and resold in competition with the originals, sometimes in an effort to quell competition from a rising rival, sometimes just to make quick L$, or both. If the item is popular on Xstreet, one can be certain it will be ripped to ride on the back of the new fad.
So now I have established that we have well off content creators, and land barons pushing L$ through the LindeX.
Where is their money going?
Content creators and land barons sell their L$ on the LindeX to get dollars which they then cash out. The LindeX automatically matches buyers with sellers. I documented in May 2006, a hole, a gap, a “spread” that widened when Linden Lab changed the website to include a “Basic” interface. Some may explain this away as “arbitrage” but it is a classical case of information asymmetry in transactions. One side has better information than another, and it was those people who paid enough attention to the LL blog, who found out when the interface had changed and how to set it back to advanced to place limit sells again. Many content creators did not realise what to do, and switched to selling their L$ through “Market Sell”. The site did not indicate to these sellers clearly that they were cashing out for the worst rate. Naturally people listed limit buys to take advantage of the mistaken market sells. A lot of free money was made during that time, as it took a while for sellers to realise they could list limit sells again and close the transactions gap. This further expanded a sizable class of currency speculators, who do nothing but play the spread on the LindeX, waiting for opportunities for people to do dumb things, and take advantage of a widening in the spread.
The tide eventually flipped after stipends were reduced. More people started to buy through the viewer through market buy. Limit sell allows someone who is speculating on the LindeX, to often get a better than the 3.5 transaction fee that LL charges, so they can make a profit from buyers in the viewer and small market buy sales on the website..
At all times, users who buy through the viewer don’t get the best rate on their L$. Alongside the currency speculators, are also land barons and some high tier content creators, as all of them have to push L$ through the LindeX to dollars in order to cash out and pay tier.
However, the one thing that prevents this from being a frozen and deflated economy, and who is stopping customers from getting completely fleeced from making accidental market buys during a “fluctuation”, is Linden Lab with Supply Linden. They are selling L$, lots of them. While I do think they are doing a good short term job, preventing the prices of L$ going through the floor unexpectedly, they are doing something bad for the longterm, too.
Supply Linden is increasing the money supply, and much of this money is going into the hands of speculators, top tier content creators, and land barons who don’t sell it quickly. Many people who are smart enough to list limit buys of currency likely buy their L$ to Supply Linden, who takes your dollars and the transaction fee for them.
I can see why inflating the currency might be a good thing for LL in the short term.
It keeps the L$ from having a significant value, which could cause them serious issues with the Federal Reserve and other central banks. Most western countries forbid complementary currency. LL surely doesn’t want a strong L$ competing with the US dollar. As soon as it did, the US government would be around eventually to haul the computers off.
LL also wishes to keep the money stable, that it doesn’t fluctuate in price a whole lot. This is not only to help customers buying through the viewer not get fleeced too badly, although it sometimes happens, as in December 2008, when the LindeX precipitously dipped as someone must have fallen asleep at the Supply Linden wheel. It is also so that prices remain more stable in Second Life.
So what’s the problem?
Supply Linden is pretty risky. Although the speculators make less money than before, LL is having to pump the economy full of L$ which are not leaving the economy through enough sinks. Speculators are actually more risky now than they ever have been before, and the toilet is stopped up.
The money remains in SL as the sinks are not sufficient, or in the LindeX buy sell orders, or on other currency exchanges, but its not circulating in the economy, and Supply Linden was slowly deflating it. This is good and bad. Good in that the money is not moving. Bad in that the money could move FAST in a point of financial crisis and destabilise the whole Main Grid. At the moment, large amounts of L$ remain on the LindeX, recycled as much as possible to get extra money on the LindeX like a free cash machine.
Sometimes Supply Linden falls asleep, and the exchange rate falls through the floor. The exchange rate however is masking the money supply issues. The money supply is inflating, while we are technically in a deflation due to shifted increased demand for L$ from the premium accounts to buying over the LindeX. If there is a panic of the high powered money in the hands of speculators sold over the exchanges, it’s highly possible we will be in a full blown hyperinflation. This would be devastating on inworld business, both content creation and land. Imagine prices having to change by the minute because of the exchange rate becoming weaker and weaker to the dollar.
Linden Lab is not making enough money on the LindeX, while watching their profits eaten by fraud. Sales from Supply Linden and transaction fees don’t cover the fraud issues. User growth in SL is now flat, while transactions remain high. A worrying trend if anything goes wrong.
So yes, I want to suggest some fixes to the LindeX so that we have the velocity of money, which Supply Linden provides, but without the money supply inflation problem. If that’s not possible, one can glean from my critique of the current situation, how to lay the groundwork for a possible sensible working money system for other virtual worlds, in order to enable a stable commerce system.
“Bernard of Chartres used to say that we are like dwarfs on the shoulders of giants, so that we can see more than they, and things at a greater distance, not by virtue of any sharpness of sight on our part, or any physical distinction, but because we are carried high and raised up by their giant size.” — John of Salisbury
A few things are going wrong in Second Life for quite a while. Mostly, it’s framed as a debate around copyright. But the more I think about it, its actually an explosive demand for money. This is my first installment of the series, and following this posting is “The Lava Tubes of the LindeX”, and “How to Build High Pressure L$ Pipes”.
This posting concerns the demand for L$, which is exacerbating the content counterfeiting situation in Second Life. “The Lava Tubes of the LindeX” concerns the actual nature of our monetary system and how its causing the economy to falter. “How to Build High Pressure L$ Pipes” concerns what Linden Lab could do to fix it.
Content creators say they are being stolen from. And they are right.
There is a vocal group of people in Second Life, who, for purely selfish reasons, shout them down screaming that there is no theft taking place. Well, let’s examine the basis of this economic position. Wages are the product of your labor. When you make an item to sell in Second Life, this is your wages. I cite Adam Smith.
The produce of labour constitutes the natural recompense or wages of labour.
When you make something in Second Life, this is your wages.
When demand for your wages is driven down by someone counterfeiting your products, this is a form of theft from any reasonable economic view. As we are mainly still in the “natural state of things” in Second Life, most people in Second Life are not paid in wages from L$. The L$ is not actually a good store of value, and therefore it is not used for this. People in SL who earn money from wages more generally earn them through US dollars directly or by exchanging their L$ to dollars.
Content creators earn money when they sell items they have made in Second Life. The content they create is their wages. END.
So what about this argument: “immaterial property” can’t be stolen?
Let’s destroy this fallacy forever. Actually, there is no immaterial property involved in duplication of digital content. Everything in Second Life is bits of data that resides upon a network on real life physical hard disks and transferred across physical communications networks to and from your very physically existing computer. The only thing that has changed: reproduction is insanely cheap to duplicate digital goods.
The costs of creating the data in the first place have not significantly reduced.
This is no less important than another Industrial Revolution, and I am talking about counterfeiting when creating unauthorised copies of products and then transferring it to others for sale or for free.
That being said, I do not support draconian copyright laws whatsoever and support shortening the term, plus broadening fair use rights. Art needs to be displayed so we can enjoy it after all, and this constitutes the basis for an expansion of fair use from a consumer rights perspective from my point of view. I simply support the right of artists to make a fair wage from their labor if that was their choice, in balance with consumer rights to use the content fairly, in the effort to see a more stable economy emerge
The only true “immaterial” property is something that cannot only be duplicated over and over on a hard drive or removable media, or transferred on a computer network. Rather it is something that can be invented and duplicated over and over in the wetware of your human brain as well. These are your ideas, and no computer has ever been shown to create original ideas, and I doubt they will be able to do it in the next 100 years, or the next 100,000,000. Never, in fact. Sorry to all the Transhumanists out there waiting for the Rapture on the backs of hard working content creators, I think you’re all a bit goofy. Better off going to church, for all the good that will do you.
I believe its better to keep making infinite copies of good ideas and spreading them to others! May Plato’s world smile, for we are all still in the cave watching patterns of shadow dance on the walls without quite understanding what they mean, or even what they are. This is life in physical reality. The shortcut to computer heaven simply can’t help anyone to reach understanding of Plato’s world. Besides, some cheeky bastard will just wait till you’re all uploaded, then turn the power off. 
And heaven help you if you’re uploaded in San Francisco and the Big Earthquake finally arrives!
Back to seriousness.
Copyright relating to a particular expression of an idea is an obvious way to provide a limited benefit to someone using good ideas in digital form, as the product can be reproduced cheaply. Call it symmetry. Patent seems like a mirror image of copyright to me. That bastard Trademark is just survival of the fittest though.
I believe good ideas are prevented from spreading by setting up a monopoly on these ideas and filing a patent, preventing people from innovating and producing a new expression or improvement on that idea. Others may disagree and I am not expressing a legal opinion (I am not a lawyer). I do see the need for some patent protection, but only in extraordinary cases involving expensive manufacturing, and I support the idea to shorten the length of term generally.
So when someone takes things in Second Life and resells or gives them away, what happens?
They have taken the wages of another, as Adam Smith long ago explained. The time to create, physical work, skill, and good ideas involved to create the item all not yet compensated for. All these things are scarce goods. It has taken a possible sale from either the original content creator, or worse, from other content creators who sell legitimate competing products that were perhaps more desirable or originally cheaper. But now, these are not getting sold either, as the best quality items are getting resold by multiple outlets at similar or lower price points. A race to the bottom has started.
It is true that the top tier merchants may actually dominate the market in the long run when customers realise where to go to legitimately acquire items that they have mistakenly bought from a ripper, or received for free. However, this is at the expense of other content creators who have made original midrange and low priced products. So a self reinforcing pattern occurs, that allows top tier merchants to stay at the top making the most income, and more people are actually not making a great deal of money for their work anymore.
This seems to help explain one part of the “war on freebies” phenomenon. While I am completely in support of people making and giving away items as their free choice, it is no longer a free choice when the market is flooded with low priced and free items that were supposed to be expensive to buy and cost a great deal to produce. The price no longer accurately signals the cost of the item.
A monoculture of cheaply farmed trees has taken over what once had been a complex and varied market forest at the flanks of our LindeX mountain. And this sets up a fragile market condition for producers and products for sale.
Less people who produce items for sale, and fewer unique items available for sale. The “Long Tail” has emerged, a power law has taken over what might have been a more stable “bell curve” of producers and unique products for sale. I maintain this is a fragile market, far more prone to wild swings of consumer demand. With fewer sellers, the market changes to one of a few producers who cash out most of their earnings to dollars, not spending inworld. Those who had a less popular store, make less money and must buy more L$ to pay their land tiers.
More people have to buy L$ in order to buy products, and there are fewer unique items for them to buy now. The quirks of consumer behavior are more freely able to influence the market in all its very human wild ways. People will rush to buy all the same item in one fad, spreading like an epidemic, leading to that item getting copied over and over by counterfeiters in a rush to earn some easy L$ while the fad rides high. Then, the fad dies off and nobody wants to be seen dead in that anymore… the designer now out of fashion.
Once consumer demand falls off, and it always does in fads, so will buying L$ for that product, perhaps even a LindeX lull if the fad was large and fell off sharply. Talented creators who benefit from the fad do better,despite the thieving and the oscillations of these consumer ups and downs. Talented creators who didn’t produce something in the fad fashion, get pushed out further than they might have ordinarily from lack of sales. Either they make similar products to the fad, or they stop producing.
The flood of similar products and lack of ecological diversity in the economy sets up a monoculture waiting for the disaster to happen. A vicious cycle of hunting ripper stores and filing DMCA’s to the roof, with no end in sight. Even the “beneficiaries” of this “unauthorised copying” aka counterfeiting, don’t make enough money to spend all the time it takes to file DMCA’s as it takes away time from producing new items. The DMCA is seriously flawed, as small creators generally can’t afford to drag all these people to court. We must seek a long term solution to our problems, not using the legal system.
Time and ideas are the scarcest resources of all.
When no longer worth the time involved to produce new ideas that go into products, it is near certain that production should slow as well as demand. Many creators stop producing. Closing up shop, less shops getting rented, less tier paid to LL, less rent paid to middlemen landlords, who then close sims. And with a drop in both production and demand, goes a drop in valuable information in the society. Eventually a drop in the volume buying of Linden dollars can be expected. Especially when the next fad for a virtual world takes place and Second Life is not quite as cool as it once was, in the wake of emerging competition with the ideas of others in new virtual worlds.
Recent Comments