Is the Second Life an elaborate pyramid scheme?

[Kunikos]

What do you think? Is Linden Labs secretly ripping everyone off, in addition to their upfront and unconcealed costs? Is this just a setup for an Enron-style scandal or DotCom burst? Is government regulation of virtual economies sure to follow such a collapse?

I found some other interesting comments about perceived value in the virtual world/economy as well.

Discuss!

[Rollory]

Complete, utter, raving, bonkers, nonsense.

In the first place, the argument you quote (obviously, without understanding one whit of its implications) starts from a zero-sum assumption, that wealth cannot be created or added into the system by what people do. This is false in general and false in the virtual world particular; people get entertainment value out of the virtual events and items, value that would never have existed _anywhere_ had they not assigned value to them on their own.

In the second place, the pyramid scheme is in no way analogous to how these companies bring in business. They have customers who pay for a while, because those individuals find they are getting something worthwhile in return for their money. That's it. It does not depend on endlessly bringing in more people; many companies can and have lasted many years on a relatively fixed population. Once a product is profitable, that does not in and of itself require an end to profitability; such an end _will_ probably happen but due to market forces rather than built-in limits to the value people get out of the service.

You could more easily argue that magazine or newspaper subscriptions are pyramid schemes. It's ridiculous.

This is just ... no clue, man. You have no clue. Or you're uncritically quoting someone who doesn't, which is nearly as bad.

[Gordon Cameron]

This is just ... no clue, man. You have no clue. Or you're uncritically quoting someone who doesn't, which is nearly as bad.

No, it's not nearly as bad... he's throwing out a topic for discussion, which is kinda what you do on a discussion forum. Expertise in virtual economics is not something that is de rigeur for being a poster on these boards, last I checked. I consider it worse to jump all over someone out of the blue as you just did.

[Mark L]

Rollory's right. Mean, but right. Though I guess it's also mean to call someone's business a pyramid scheme when it clearly isn't.

[Damien Neil]

Originally Posted by Kunikos

Do we know that Linden Labs isn't already siphoning off $1000's of dollars from the economy of SecondLife already?

That's nothing. I hear that Blizzard is siphoning off millions of dollars from WoW subscription fees!

Seriously, what does this even mean? What do you think happens to the money people pay Linden Labs for Linden Dollars? They aren't a bank. You can't withdraw your money. That's a usage fee that you paid, and they're going to take that money and use it to pay their bills and (maybe) make a profit.

[Coca Cola Zero]

Originally Posted by From original post link

there was nothing to stop the person or people who created the game from creating their own fake money and cashing it out at real world value through other people (ie buying SecondLife items with cheat-created Linden bucks from real people then reselling them to real people for real world dollars).

Yeah and there's nothing to stop Blizzard from cheat-creating uber level 60 WoW characters and then selling them on ebay.... and... there's nothing to stop upscale boutique stores from making bars of soap out of 50 cents of raw materials and selling them to the rich and stupid for $25 each. In each case, the only person that is being screwed is the person who is over-paying for whatever item they are buying (be it real or virtual) and they are consenting to the screwing, so that's just basic capitalism, not a pyramid scheme.

[Flowers]

The best part of capitalism is that it's not a trick.

[Mark Crump]

I can see using $20-50 to get Lindens to have fun with, or to start your business, etc. But the amount of cash people are spending for private islands is just nuts.

[Coca Cola Zero]

Yeah, well the world has always had people with more wealth than sense. The Internet just makes them easier to see.

[Mordrak]

Originally Posted by Flowers

The best part of capitalism is that it's not a trick.

Umfortunately, as capitalism has been implemented*, it kind of is a trick. Capitalism* is a pyramid scheme, just of a different sort.

[Mark L]

Wow, Mordrak. That's so deep. You just blew my mind.

[worm]

It's a chat program people can pay for. Yes, they're being screwed.

[Mordrak]

Originally Posted by Mark L

Wow, Mordrak. That's so deep. You just blew my mind.

Wow, Mark L. That's so moving, I'm hurt.

[extarbags]

Originally Posted by worm

It's a chat program people can pay for. Yes, they're being screwed.

How is that different from any other MMO? They're all, at their core, chat clients that come with subjects for you to chat about.

[worm]

Originally Posted by extarbags

How is that different from any other MMO? They're all, at their core, chat clients that come with subjects for you to chat about.

Second life is more core than others, so I'd guess, it's not that different.

[Tom McNamara]

Originally Posted by extarbags

How is that different from any other MMO? They're all, at their core, chat clients that come with subjects for you to chat about.

I've always thought of them as persistent multiplayer dungeon hacks with a chat client built in. (I guess I'm not much of a chatter.) In WoW, I can go for long stretches without talking to anyone, even tuning out the chat window altogether -- and then I'll get on a gryphon or head back to town to dump my loot, in which case I might stop and chat for quite a while.

In the long run, I guess it depends on the pace of the action. When I played DAOC and I was in a party camping for mobs, we would all sit around in a virtual circle and shoot the breeze, with the discussion usually revolving around the disappointing waiting game that we nevertheless came back to every single day. I understand DAOC changed drastically some time after I left, to make leveling much, much less grindy. It was pretty bad, even by MMO standards.

[Mike O'Malley]

Hate to break it to you, but everything's an elaborate pyramid scheme.

Work? You work so that the people you work for can make money off you.
Religion? People convert you so that they themselves can go to heaven.
Love? Sheesh, you should know that one by now.

[Mordrak]

Originally Posted by Mike O'Malley

Hate to break it to you, but everything's an elaborate pyramid scheme.

Work? You work so that the people you work for can make money off you.
Religion? People convert you so that they themselves can go to heaven.
Love? Sheesh, you should know that one by now.

Yeah, too bad I'm too close to the bottom to make jumping off worthwhile. hehe

[shift6]

Originally Posted by Mark Crump

I can see using $20-50 to get Lindens to have fun with, or to start your business, etc. But the amount of cash people are spending for private islands is just nuts.

Think of it as a private, market-driven redistribution of wealth. :)

[Kunikos]

Originally Posted by Rollory

In the first place, the argument you quote (obviously, without understanding one whit of its implications) starts from a zero-sum assumption, that wealth cannot be created or added into the system by what people do. This is false in general and false in the virtual world particular; people get entertainment value out of the virtual events and items, value that would never have existed _anywhere_ had they not assigned value to them on their own.

The whole reason I started the thread was discuss the topic and to see if maybe I just don't understand how Second Life works. You have to pay a membership fee to be anything other than a consumer, fine, pay to own land, fine, whatever; upfront and disclosed costs. I'm not talking about anything of that nature. What I'm talking about is the game's player economy itself. If you put money into L$ to buy some SL item or developed property, such as the kind that Chung makes, is it possible for the creators of the game to devalue the game currency so that people *making* things in the game can lose *real* dollars?

Also, if you look at other virtual world economies, they frown on users buying in-game currency and people exploiting the game. For example, stealthed single-person Dire Maul runs with a cheat to reset the instance were able to generate certain item drops very easily for a while which made all those who purchased those items for speculation on the AH or reselling on the AH lose a lot of in-game currency trying to get rid of them. Now try to think of that scenario happening in Second Life. The CopyBot program allows you to cheat to make an object, as long as it doesn't have script code attached. So basically anyone making static objects, such as clothing, avatars, architectural complex buildings, etc. have had the rug pulled out from underneath them. If they paid L$, derived from their real $, to make their creations-- well, then they were screwed because nobody in their right mind would pay for anything ever again. Let's go copy all of Chung's real estate, right? $1 million estimated worth for Dreamcountry becomes $0.

All in all, I'm just trying to generate some conversation about it and there isn't really any need to be a total dick. But I guess it's par for the course for you.

[Matthew Gallant]

Yawn. Wake me up when it's a Pyramid Head Scheme. Here's his most famous scheme:

[Kunikos]

Yawn. Wake me up when people stop posting cliche images in non related thread topics to make inane jokes.

[Kunikos]

Originally Posted by Damien Neil

That's nothing. I hear that Blizzard is siphoning off millions of dollars from WoW subscription fees!

Seriously, what does this even mean? What do you think happens to the money people pay Linden Labs for Linden Dollars? They aren't a bank. You can't withdraw your money. That's a usage fee that you paid, and they're going to take that money and use it to pay their bills and (maybe) make a profit.

Yes, you can withdraw your Linden Dollars into real world dollars. And there are banks within Second Life as well.

[Derek French]

I thought Real Life was an elaborate pyramid scheme...

[jeffd]

Not a pyramid scheme so much as a bizarre virtual economy. Yeah they could devalue the Linden whenever they felt like. Probably be pretty stupid of them to do (since no one would "invest" in them ever again) but hey, that's life.

[Damien Neil]

Originally Posted by Kunikos

If you put money into L$ to buy some SL item or developed property, such as the kind that Chung makes, is it possible for the creators of the game to devalue the game currency so that people *making* things in the game can lose *real* dollars?

Yes.

Also, the US government can (and does) put more money into circulation, thereby devaluing the cash in your pocket.

The CopyBot program allows you to cheat to make an object, as long as it doesn't have script code attached. So basically anyone making static objects, such as clothing, avatars, architectural complex buildings, etc. have had the rug pulled out from underneath them.

In other news, people can pirate movies, music, and games.

None of these things are unique to Second Life, and none of them have anything at all to do with pyramid schemes.

[Aeon221]

I thought it was about Egyptians =/

[Kunikos]

Originally Posted by Damien Neil

None of these things are unique to Second Life, and none of them have anything at all to do with pyramid schemes.

I'm pretty sure you can't make a copy of someone's estate and mansion in the real world with zero invested resources. Obviously the analogy for scripts, videos, and music works though. I'm just not a big fan of the whole "pirate" metaphor, since pirates take ownership of the original things while people on the internet make a duplicate (which may or may not be inferior to the original).

[Damien Neil]

Originally Posted by Kunikos

Yes, you can withdraw your Linden Dollars into real world dollars. And there are banks within Second Life as well.

Linden Labs's site states: "Residents who have amassed lots of Linden Dollars are matched with residents who want to buy Linden Dollars at LindeX (our official currency exchange), or at other unaffiliated third-party exchanges."

That isn't a withdrawal, it's a transaction between two third parties mediated by Linden Labs. Once you've paid for your L$, the only way to convert them back into real-world currency is to sell them to someone. LL isn't going to give you squat for them.

[Damien Neil]

Originally Posted by Kunikos

I'm pretty sure you can't make a copy of someone's estate and mansion in the real world with zero invested resources. Obviously the analogy for scripts, videos, and music works though. I'm just not a big fan of the whole "pirate" metaphor, since pirates take ownership of the original things while people on the internet make a duplicate (which may or may not be inferior to the original).

I'm pretty sure you can't make an estate and mansion in the real world with zero invested resources either. So?

CopyBot enables copyright infringement. It's exactly the same as copying any other piece of information, and the issues surrounding its use are essentially identical to the ones surrounding CD ripping software.