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Financial Analyst Calls Second Life a Pyramid Scheme

CmdrTaco posted more than 7 years ago | from the get-in-on-the-ground-floor dept.

The Almighty Buck 334

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.'"

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334 comments

Can't the same be said about the stockmarket? (3, Insightful)

ArsenneLupin (766289) | more than 7 years ago | (#17736932)

... or any other thing that may give money to the lucky?

Re:Can't the same be said about the stockmarket? (5, Insightful)

FleshMuppet (544521) | more than 7 years ago | (#17737006)

... or any other thing that may give money to the lucky?

No, because the value of a company's stock is based on real assets, liabilities, and income: all of which are easily translatable to real money, and which commonly pay cash dividends. This is commonly referred to as liquidity- the ability to transform whatever type of investment one has made into actual cash. The article asserts that transferring money from Second Life 'assets' to real-world cash is much more difficult than people are being made to believe, and that the only way to make money is to pass off those 'assets' to some other sucker.

Re:Can't the same be said about the stockmarket? (2, Insightful)

ArsenneLupin (766289) | more than 7 years ago | (#17737070)

No, because the value of a company's stock is based on real assets, liabilities, and
That would be the so-called "book value". However, many healthy companies are worth much more that their assets...

income:
This is a more realistic source of value. Value is based on income versus risk. However, even here, many companies are/were tremendously overvalued (no way the company's income (even future income) could justify the share price), especially during the period before the bubble burst...

...the only way to make money is to pass off those 'assets' to some other sucker.
... as is the case with most shares as well (yes, some companies do have share buyback programs, but these are the exception, rather than the rule...).

Liquidity of the stock is usually the result of having enough "suckers" around to be interested in the assets.

Re:Can't the same be said about the stockmarket? (5, Informative)

FleshMuppet (544521) | more than 6 years ago | (#17737538)

Okay, I realize that you are simply making snide comments about the value of traditional investment vehicles, and that I might be feeding a troll here, but I am simply explaining the argument the analyst takes in the article, which you seem to not have read or are ignoring altogether. It does not matter what you think of the stock market, etcetera. The analyst has stated clear, identifiable criteria that differentiate the stock market and what they regard as a market in Second Life. You can dismiss the value of trading ownership in a company, but that doesn't change the fact that it is different than what the analyst claims is happening in Second Life.

Roughly speaking, a Ponzi scheme is one in which the perpetrators make false claims in order to lure investors. Once they have some investors coming in, they begin to pay back the earliest investors in order to create hype and garner more investors. People make money in ponzi schemes, but only by being at the top of the pyramid. What separates a Ponzi scheme from an actual market is that in an actual market, the items being traded have value outside of the system itself, and that access to liquidity is therefore available at levels other than the top. The article claims that because cash exchanges and the corresponding exchange rates are controlled by the people at the 'top', they are the only people with the ability to achieve substantial liquidity, and therefore, to make any money. This is why they say it resembles a Ponzi scheme more than an actual market.

That would be the so-called "book value". However, many healthy companies are worth much more that their assets...
This is a more realistic source of value. Value is based on income versus risk. However, even here, many companies are/were tremendously overvalued (no way the company's income (even future income) could justify the share price), especially during the period before the bubble burst...

Differences in valuation and perception are what make the stock market work, and why people make and loose money speculating in the market (and in other markets and industries as well). You can pay too much for anything, be it a stock, a pig, a bushel of corn, or necklace with fake diamonds you find on ebay. That doesn't make the market a pyramid, because those things have value outside of the market itself, and can be transfered independently of the market place. On the other hand, in a pyramind scheme, the items traded generally have all of their value because of the scheme itself, not because of their value to the outside world, and access to liquidity is not independent of the people who sold you the item.

... as is the case with most shares as well (yes, some companies do have share buyback programs, but these are the exception, rather than the rule...).

This is simply false. Shareholders not only control the company, determine who gets serves on the board, and other items of fiscal policy, but they have very well-defined avenues of legal recourse. Not only that, but the company itself has no control over the valuation of its stock other than how it presents its performance to the outside world. Which once again, is strictly regulated. Once again, you may have issue with the way that the stock market works, but it is clearly different than the way that a pyramid scheme operates. TFA claims that all access to valuation is controlled (and manipulated) by the people at the top to their financial gain, and the detriment of others, and you can make snide comments about how the stock market operates, but it does clearly operate in a manner different than that of a Ponzi scheme.

Re:Can't the same be said about the stockmarket? (0, Troll)

tentimestwenty (693290) | more than 6 years ago | (#17737800)

Roughly speaking, a Ponzi scheme is one in which the perpetrators make false claims in order to lure investors. Once they have some investors coming in, they begin to pay back the earliest investors in order to create hype and garner more investors. People make money in ponzi schemes, but only by being at the top of the pyramid.
So, you mean like the stock market?

Re:Can't the same be said about the stockmarket? (2, Insightful)

Mr. Slippery (47854) | more than 7 years ago | (#17737328)

No, because the value of a company's stock is based on real assets, liabilities, and income: all of which are easily translatable to real money, and which commonly pay cash dividends.

Not for a long time. Most do not pay dividends, and their value has little relation to any actual assets a company might have.

Stocks are like baseball cards: pieces of paper with collector's value.

Re:Can't the same be said about the stockmarket? (1)

Hassman (320786) | more than 6 years ago | (#17737746)

Stocks are like baseball cards: pieces of paper with collector's value.

...said the man who doesn't understand the stock market or how it drives the economy, and how the economy drives the market.

Re:Can't the same be said about the stockmarket? (2, Interesting)

MicktheMech (697533) | more than 6 years ago | (#17737834)

This is absolutely false. The stock markets (at least in developed countries) are efficient, so the share price is a good estimate of the company's value. There are many ways to value a company, it's more an art than a science. However, it's generally agreed that the value is the sum of discounted future cash flows. So, while income and book value do contribute to the estimation of those cash flows they aren't the only drivers behind share price. The price a stock is trading at is then basically an average of analysts' estimates of the company's value.

If a company is not paying dividends there will still be future cash flows, since every company will eventually either start paying dividends or it will be bought out. Assuming the company is earning a reasonable return on retained earnings (i.e. the market rate), shareholders should theoretically be indifferent whether the company pays dividends now since that cash will be as valuable to them when they get it as it is today.

Re:Can't the same be said about the stockmarket? (1, Funny)

Anonymous Coward | more than 6 years ago | (#17737662)

No, because the value of a company's stock is based on real assets, liabilities, and income: all of which are easily translatable to real money, and which commonly pay cash dividends.

Thats right. And thats also why I'm putting all my money in Enron!!!! Errr....umm.....you know what...nevermind.

Re:Can't the same be said about the stockmarket? (1)

KDR_11k (778916) | more than 6 years ago | (#17737706)

Now let's apply that to a downloadable content service that uses DRM to prevent resale.

Also, don't you have to pass real assets onto some sucker to get your money, too?

Re:Can't the same be said about the stockmarket? (1)

Svartalf (2997) | more than 6 years ago | (#17737782)

No, because the value of a company's stock is based on real assets, liabilities, and income: all of which are easily translatable to real money, and which commonly pay cash dividends.


Heh. That's RICH.

Stock valuation might be based on that if you're talking IBM or GE, but unless it's one of the stocks on QQQ or one of the NYSE blue chips, you're not investing against that- and the valuation is based on a lot of things utterly unrelated to the things you mention. Working the stock market (or any securities market, for that matter...) you're purely gambling on the valuation going up (Going long...) or going down (Shorting a stock...). And Second Life is a LOT like the Stock Market- a lot more than you think. In fact, most of the money in the stock market is made precisely the way you describe making money out of Second Life or in playing games like Arbitrage right at the moment.

Re:Can't the same be said about the stockmarket? (3, Informative)

PrvtBurrito (557287) | more than 7 years ago | (#17737032)

No. First the stock market is guided by US and International law. Second, much like copyrights and IP, they too are also protected by law. Second life property and currency has no more value than selling property on the moon. Finally, the stock market does not only give money to the lucky, the past 80 years have shown that, over time, it gives money to everyone.

Re:Can't the same be said about the stockmarket? (4, Insightful)

JeffSh (71237) | more than 7 years ago | (#17737364)

The US Dollar isn't based on anything other than trust now - fiat money. What makes second life, or any other currency, any different?

Currency gets its value thanks to simple acceptance.

Re:Can't the same be said about the stockmarket? (1)

RattFink (93631) | more than 6 years ago | (#17737554)

What makes second life, or any other currency, any different?

Two things,

1. The US has a fricking huge military to back it up. While it's certainly not self sustaining now it really doesn't need to be. But if it ever came to the point where they had to be, leveraging the military it could just take what it needs to become that. Second life on the other hand is largely at the whim of their suppliers. If their power company suddenly decides that they don't want to serve them any more they are SOL and the economy collapses. Disgruntled employee destroy a single database the economy collapses.
2. The US dollar has 70 or so year track record of being accepted regardless of it's age of the money or the owner's citizenship. I really doubt that my money will will still be in Second life the time I played it for 2 months in 2003.

Re:Can't the same be said about the stockmarket? (3, Informative)

UbuntuDupe (970646) | more than 6 years ago | (#17737712)

This is an important issue that's kept my attention. How do I know my dollar will keep any value? Why do people value dollars? I've spent a lot of time researching this question, and quite frankly, monetary theory will drive anyone insane because of the intricacies involved in thinking about money. There's no limit to the number of crank theories about money (social credit, Freigeld, bimetallism, gold bugs) that it's hard to even know if the Federal Reserve is not itself based on a shoddy theory.

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? ("I thought you were watching the kids." "But I thought you were watching the kids!") With no *separate* reason to value them, we're forever exposed to the risk of the value quickly evaporating (cf. hyperinflation).

However, based on what I've learned about the Fed, large financial institutions expect it to sell its assets for dollars if the dollar drops too low, in effect, propping it up that way. It's like this: let's say I get investors to give me 100 silver ounces and I issue them 100 notes redeemable for a silver ounce (ozAg). But then, let's assume I suspend convertibility on demand. Can the notes still have value? Yes, if people expect me to buy them back. Let's say on the market, merchants start demanding more than one note for an ozAg. Well, then I can dump my ozAg's on the market at the prevailing price. If the price of an ozAg on the market stubbornly refuses to return to exactly one note, then I can buy back all the notes, and keep the extra silver as a profit. And merchants won't let that happen.

So yes, it's possible for dollars to have value, even if they're "unbacked" like in the above, as long as people expect the central bank to do what's necessary to keep its value up. Once that stops ... well, then we're screwed.

Mod parent funny (0, Offtopic)

Brunellus (875635) | more than 6 years ago | (#17737694)

It's amusing that a statement like this can be treated with dead seriousness on /. Is this because geeks have an aversion to markets?

Re:Mod parent funny (0)

Anonymous Coward | more than 6 years ago | (#17737848)

Is this because geeks have an aversion to markets?

No, it's because some of us have the ability to remember. (*cough* Enron Worldcom Global Crossing *cough*)

Re:Can't the same be said about the stockmarket? (1)

Cinnamon Whirl (979637) | more than 7 years ago | (#17737056)

Surely its only a pyramid scheme if it guarantees a return?
The stock market, or "any other thing that may give money to the lucky" is legal, because it is sustainable due to losses other people make, and are fully aware of.

Re:Can't the same be said about the stockmarket? (4, Informative)

CreatureComfort (741652) | more than 7 years ago | (#17737106)


Except that if you rely on luck for your stock picking, you really need to get out of the market. No, really. Day traders and the ignorant make the jobs of real investors much more difficult. Not impossible, and really not even less profitable, just more difficult.

On the other hand, if you do your research, long term investing in well run businesses with good financials has far less risk and higher return than almost anything else you can do with your money.

Re:Can't the same be said about the stockmarket? (0)

Anonymous Coward | more than 7 years ago | (#17737436)

Day traders and the ignorant make the jobs of real investors much more difficult.
Day trading is gambling; therefore it should be illegal everywhere gambling is illegal. Even worse: You know all those penny stock spam mails you get? They won't stop until day trading becomes illegal.

Tell your congress person that you think day trading should be illegal. Maybe if this gets decent moderation at least one person will do just that and this post won't have been in vain.

<gollum>We hateses the nasty, dirty spam. We hateses it!</gollum>

Re:Can't the same be said about the stockmarket? (5, Insightful)

mumblestheclown (569987) | more than 6 years ago | (#17737556)

Day traders and the ignorant make the jobs of real investors much more difficult.

Arguably the dumbest 'smart' statement I've seen on slashdot in a while. The reality is that without day traders and the ignorant, things like heuristic trading schemes set up by large investment banks would be far less profitable. Real investors LOVE day traders and the ignorant, as they are the ones who are giving them money.

Re:Can't the same be said about the stockmarket? (1)

vertinox (846076) | more than 6 years ago | (#17737570)

Except that if you rely on luck for your stock picking, you really need to get out of the market. No, really. Day traders and the ignorant make the jobs of real investors much more difficult. Not impossible, and really not even less profitable, just more difficult.

Except that is how the market works now. Apple's stock just dropped like a rock right after they announced their quarterly earnings and they have the highest earning yet. What gives!

Of course... Apple tends to follow a general pattern in which it spikes right after Steve gives a keynote, but what if Steve dies or gets booted from the company?

I'm sure it would devastate the stock price and that is pure luck of the matter unless you happen to be in the know of Steve's condition.

Sure it sucks for long term investors, but the vampires are out in force on the stock market with pump and dump schemes and hardly anyone holds on to long term investments anymore in the technology center.*

*Except for Google and Oil companies.... My suggestion for long term is to buy IRBT when the robot bubble hits around 2010 ;)

Re:Can't the same be said about the stockmarket? (5, Informative)

UbuntuDupe (970646) | more than 6 years ago | (#17737586)

On the other hand, if you do your research, long term investing in well run businesses with good financials has far less risk and higher return than almost anything else you can do with your money.

Actually, that's about as wasteful as day trading. Don't bother figuring out which company is good or bad. Other people are already doing that in an attempt to appropriate value the stocks. It's not enough to know which businesses are good; you have to know which ones are good relative to the price their stock is selling for, which is a much, much, much more difficult problem.

The alternative? Buy an index fund. They simply track the relevant broad market (large cap, small cap, foreign, bond, whatever). They don't have to pay for research and they don't rely on a manager's hunches.

No, this isn't sarcasm. Anyone not trying to sell you on a manager's stock picking ability will tell you the exact same thing. Slate has a great series going on now detailing this: see here [slate.com] .

Re:Can't the same be said about the stockmarket? (1)

Marillion (33728) | more than 7 years ago | (#17737126)

Second life is too unregulated. Also the stock market has a goal of developing wealth for the investor. The same isn't true of second life. Second life has a very high overhead for infrastructure (sims) and they have other economic forces that make ridiculous things like camping chairs profitable for their owners.

Re:Can't the same be said about the stockmarket? (1)

nelsonal (549144) | more than 7 years ago | (#17737256)

The wealth of the stock market comes in part (for most companies) from dividends which changes a zero sum game to a postitive sum game, less directly but equally positive, share repurchases also infuse new money into the markets.

Yes and you would be right (1, Insightful)

Anonymous Coward | more than 6 years ago | (#17737634)

The simple truth is that the more money you have the more easily you can make more money. So the people at the top of the scheme rake in all of it and the bottom still struggle.

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.

You mean like First Life? (2, Informative)

jesuscyborg (903402) | more than 7 years ago | (#17736938)

Sounds a lot like the promises of becoming rich in real life that few actually obtain due to those pesky land barons^W^Wcorporations.

Re:You mean like First Life? (1)

$RANDOMLUSER (804576) | more than 7 years ago | (#17737090)

Yeah, it's a lot like First Life. Most people are simply trying to exchange their time/labor (virtual or real) for stuff they perceive they want, while a few have figured out how to game the system and win big. So yeah, it's a lot like First Life.

WoW! (2, Interesting)

Kirin Fenrir (1001780) | more than 7 years ago | (#17736950)

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!

Re:WoW! (1)

Bert64 (520050) | more than 6 years ago | (#17737522)

Real life is exactly a pyramid scheme too, all the money gradually filters upwards to the top 5% of people who are filthy rich. Those who are filthy rich will remain so, while those who are not never will be.

Now on computers! (1, Insightful)

Anonymous Coward | more than 7 years ago | (#17736974)

"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?

Re:Now on computers! (4, Insightful)

udderly (890305) | more than 7 years ago | (#17737254)

"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"
Just like the lottery.

One born every minute... (3, Insightful)

Zeek40 (1017978) | more than 7 years ago | (#17736978)

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.

Re:One born every minute... (1)

kylben (1008989) | more than 7 years ago | (#17737088)

So can we assume you don't work as a programmer? Afterall, nobody that writes software produces any product whatsoever, just "a collection of bits on a hard drive somewhere". SL is a game, it is entertainment, and the content of the game is created mostly by the users. Those who produce a better entertainment experience make some money. Those who just want a better entertainment experience pay money for that. It's no different than what Sid Meiers does, except that the work is distributed.

Re:One born every minute... (1)

Zeek40 (1017978) | more than 7 years ago | (#17737394)

Actually, I am a programmer. I write battle simulation software for the Army. I create a product. That product has value. That product is NOT something that i would invest money in and expect a return on, because the product can't be expected to increase in value without more effort being put into it. You seem to misunderstand the difference between an item having value and an item being a good investment, which was the focus of my argument. A brand new Porche certainly has value, but is not a good investment, because in the future it is unlikely that its value will increase without significant effort on my part ( and according to my paycheck, that effort has value as well). In the same way, the "collection of bits on a harddrive somewhere" may have value, but it is unlikeley to increase its value without continued effort on my part, making it a bad investment.

Re:One born every minute... (1)

Z0mb1eman (629653) | more than 6 years ago | (#17737530)

>So can we assume you don't work as a programmer? Afterall, nobody that writes software produces any product whatsoever, just "a collection of bits on a hard drive somewhere".

Except a programmer usually works in an environment with well-defined and stable social and economical rules. They have reasonable certainty that, if there is demand for their product, they will be able to sell it on a market with an enforced system (however imperfect) that protects their ability to do so.

As long as you treat Second Life as entertainment, it's all good (in the same way that gambling is entertainment - I'm usually not entertained by losing my own money, but that's personal bias). When someone starts treating Second Life as a way of making money - as the article and the grandparent are discussing - you have a problem.

Chances are you don't invest your money in unstable third-world countries. Corruption means that the rules - such as they are - are usually not enforced. The system is pretty much an unknown unless you're actually running it. Laws and economic situation might change rapidly. In the worst cases, the government might collapse entirely, or decide to seize all your money.

From my point of view, something like Second Life is even worse than the above. You have no certainty that Second Life will still be around in a year (how is that NOT like a pyramid scheme?). The rules are set and enforced by Linden Labs, whose stated purpose is to make money off you, not to serve your best interests.

It's a great environment to scam people... or a great environment to be scammed in. None of this matters if you only treat it as a game, yes, but as soon as you start treating it as more, those are the only two outcomes I see.

Re:One born every minute... (1)

Half a dent (952274) | more than 7 years ago | (#17737164)

Ahh, but investing in virtual property and selling it for a profit...

If someone is willing to pay for it then it is a commodity, regardless of if it is virtual or physical - just think of sales of IP.

Re:One born every minute... (1)

El Torico (732160) | more than 7 years ago | (#17737418)

If someone is willing to pay for it then it is a commodity, regardless of if it is virtual or physical - just think of sales of IP.

That is correct, but some objects have little or no intrinsic value, because they have no utility. In the city of Ahmedabad, Gujarat, India in the 19th century, there was heavy speculation on a currency that was printed by no bank or government. Its value mushroomed and then collapsed. The Tulip Bulb Mania of 1630s Holland is another case. At least the tulips were pretty, which is more than I can say about Second Life. Web 2.0 will be followed by Bust 2.0.

Re:One born every minute... (1)

GuyFawkes (729054) | more than 7 years ago | (#17737172)

The united states dollar, along with the united kingdom pound, and most other currencies, is no more than virtual money, with as much true innate value as linden dollars or any other virtual money.

we live in a fiat economy, the chinese discarded it a thousand years ago, the problems they had then are rearing their ugly heads yet again, with the same end result, more than likely.

http://en.wikipedia.org/wiki/Fiat_currency [wikipedia.org]

At the quantum level... (-1)

Anonymous Coward | more than 6 years ago | (#17737736)

It's all just information to the universe anyway. ;-)

Just like first life.... (4, Interesting)

BVis (267028) | more than 7 years ago | (#17736998)

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.

Re:Just like first life.... (0)

Anonymous Coward | more than 7 years ago | (#17737124)

"It's generally referred to as 'capitalism' [by socialists]."

Re:Just like first life.... (1)

BVis (267028) | more than 6 years ago | (#17737532)

Point. I'll qualify that to say "people who take advantage of others or of circumstances for financial gain."

So long as greed and materialism exist, socialism can't work. And I don't see those going away any time soon.

Wait, why am I reasoning with an AC? Seems like anytime anyone suggests replacing greed with altruism someone screams "socialist."

Re:Just like first life.... (4, Interesting)

kalirion (728907) | more than 7 years ago | (#17737310)

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.

You must just love it when grandmas who have only just discovered the internet lose their life savings to PRESIDENT UBUNTA OF NIGERIA.

Re:Just like first life.... (1)

BVis (267028) | more than 7 years ago | (#17737484)

Did anyone warn Grandma about anything before she started using the Internet?

If not, well, there's your problem. The stupid is not located within Grandma, it's located within anyone that allowed Grandma within 15 feet of a computer with Internet connectivity before educating her (or at least attempting to.)

Again, conventional wisdom applies.. "If it sounds too good to be true, it usually is." I would hope that someone with grandchildren would at least be familiar with the concept.

Re:Just like first life.... (4, Interesting)

kobaz (107760) | more than 6 years ago | (#17737604)

You must just love it when grandmas who have only just discovered the internet lose their life savings to PRESIDENT UBUNTA OF NIGERIA.

[rhetorical]Why does the internet have anything to do with this?[/rhetorical]

If grandma received a letter in the mail from the PRESIDENT UBUNTA OF NIGERIA what are the odds of the scam working? I would say it's less likely to work with snail mail based on purely nothing other than I think that since the internet is much more convenient and "magical". It's almost effortless to for people to just click reply and think, well, it can't hurt.

A previous landlord of mine, who I figured was quite intelligent (he did have a phd in geology and was a professor) received a friendly note from our friends in Nigeria. He mentioned it to me and I explained to him how the scams work in detail. He said he was going to try seeing what he can get out of it, since some guy from "Canada" (since it's not Nigeria it's okay right?) had contacted him. Four checks came in with the sum of about 100k, he cashed them. I told him to not do anything at all, don't send these guys money, ever. Few weeks later he stopped by my place and said: "I'm sorry, but, you were right, I'm in the hole 300k. I've made arrangements with the bank to start repaying the money". The bank actually managed to recover all of it eventually (he had wired some people money and then the Nigerians withdrew even more). I can't believe he was actually thinking about just paying the bank back over 40 years.

I really don't know if it's just pure stupidity or not.

Why shouldn't he? (1)

Rix (54095) | more than 6 years ago | (#17737760)

If they managed to make off with the money, why shouldn't he be on the hook for it?

Re:Just like first life.... (1)

140Mandak262Jamuna (970587) | more than 7 years ago | (#17737332)

there are people who will seek to take advantage of others for financial gain. It's generally referred to as "capitalism."

It would appear on the surface that Capitalism will inevitably lead to a highly oppressive society where rich people rule over large masses of poor people. But it is not true. Proven scientifically.

Robert Axelrod of Univ of Mich, showed, based on simulations of Prisoner's Dilemma problems, how cooperation emerges due to purely selfish reasons. He showed that nice, forgiving, non-envious strategies lead to prosperity, when nastiness is consistently punished. He showed later how enclaves of cooperation can form even in highly nasty selfish societies and how they can overhelm the oppressive selfish nasty behaviour. He also showed that the fundamental tit-for-tat strategy is not an Evolutionarily Stable Strategy, once the nastiness has been reduced to zero. Then this strategy is no different from purely altruistic strategy. Once pure altruism, where nastiness is not punished at all, emerges in the population, it allows a foothold for nasty strategies. So you cant just equate Capitalism with nastiness and selfishness. Capitalism and enlightened self interest will always lead to cooperation and mutual benefit.

http://en.wikipedia.org/wiki/Tit_for_tat [wikipedia.org]

http://en.wikipedia.org/wiki/Robert_Axelrod [wikipedia.org]

Re:Just like first life.... (1)

Jussi K. Kojootti (646145) | more than 6 years ago | (#17737672)

It would appear on the surface that Capitalism will inevitably lead to a highly oppressive society where rich people rule over large masses of poor people. But it is not true. Proven scientifically.
That may be. The problem is that it's not proven in practice -- or can you point to a pure unregulated economy that actually works?

Re:Just like first life.... (0)

Anonymous Coward | more than 6 years ago | (#17737786)

What we do know is that general prosperity was much better in the USA and Europe as well, when those countries were largely unregulated. If you got screwed, you could still sue; after all there have been laws against bad things for millenia. There's nothing in capitalism that lets you hurt other people without punishment. Well, there is now, and it's called corrupt government influenced by big business lobby groups. Get the government out (restrict its power), and things will get better.

Upward mobility (i.e. working-class people rising up to middle class) was much better as well in the past. It has gotten real bad by now.

The last several decades, with increasing regulation everywhere, with increasing government involvement (like, every other buck goes through government now, instead of circulating in the actual productive *economy*), things have deteriorated extremely. We are seeing many problems that societies didn't have that much decades ago. And no, it's not violent cartoons on TV, it's not video games, and it's not evil capitalism that's to blame. The system is simply screwed up.

Probably more like Vegas than pushy realitors (4, Insightful)

antifoidulus (807088) | more than 7 years ago | (#17737022)

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.

Second Life? (5, Interesting)

EveryNickIsTaken (1054794) | more than 7 years ago | (#17737034)

I'm beginning to think that some media conglomerates must hold a stake in Second Life, and that's why we keep reading/hearing "news" on it.

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."

Re:Second Life? (2, Interesting)

cybermage (112274) | more than 7 years ago | (#17737142)

Not because they "heard how much money they can make off it."

I think that you are right about the majority of people using Second Life, but I personally know people who do Second Life for a living.

There are people who hear stories about making money from Second Life and pick it up for that reason, but I think the point that the article fails to get is that it is not the creators of the game saying it.

Re:Second Life? (2, Insightful)

HorsePunchKid (306850) | more than 6 years ago | (#17737644)

I'm beginning to think that some media conglomerates must hold a stake in Second Life, and that's why we keep reading/hearing "news" on it.
You may be on to something [reuters.com] ...

Deceived by whom? (5, Insightful)

Rob T Firefly (844560) | more than 7 years ago | (#17737042)

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?

Re:Deceived by whom? (4, Insightful)

cowscows (103644) | more than 7 years ago | (#17737230)

Exactly. There are some people who've had the mixture of talent, time, and luck with SL, and have managed to make some money through the game. For many of those people, as their SL bank account grew, so did their ego. And so they make a big deal about themselves, it gets picked up by some of the media because it's kind of a strange story, and some lazy people with free time think they can maybe get in on that action.

These people are only fooling themselves, making money in SL requires time and effort just like in real life. If you want it to provide income, you're going to have to treat it like a job. A job in a bizarre and very unpredictable economy, but still a job.

The really sucky part about this whole phenomena is that as these people gain publicity, their clout with the SL developers grows, and so the whole setup starts shifting in the favor of those who treat it as a job, at the expense of the majority, who treat it as some sort of a game. Linden Labs needs to be very careful with how they balance those two sides, because if all the "gamers" leave, then the bottom of the economy falls out, and all those virtual moguls won't be able to save SL.

Re:Deceived by whom? (1)

jandrese (485) | more than 7 years ago | (#17737352)

Frankly, in SL I think you're doing pretty good if you make enough money to pay your tier (basically rent on your land), and that's an absolutely pathetic amount of money you need to make if you put your stipend towards your tier.

I think the article misses the point that people put actual value into virtual items. Heck, the entire online porn industry is built on this (all you get are some bits that happen to represent naughty images with no resale value). The thing is that they're only focusing on land prices, because that's the only area in SL were the money involved isn't tiny, but in reality outside of the land barons nobody makes money on the land. It's the kind of business you get into only if you're willing to invest tens of thousands of dollars into buying islands and breaking them up for resale. Like most SL articles, this one is stupid.

Re:Deceived by whom? (-1, Troll)

Anonymous Coward | more than 7 years ago | (#17737294)

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.

Sure. I had to do with the fact the you have no real life?

Pyramid Schemes of FUD (0)

Anonymous Coward | more than 7 years ago | (#17737064)

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.

Why is a story about MAKE MONEY FAST in /.? (-1, Offtopic)

Anonymous Coward | more than 7 years ago | (#17737072)

Air this kind of crap on ponzi-schemes-R-us, not here.

Crap (1)

shirizaki (994008) | more than 7 years ago | (#17737078)

Second life is full of peoepl trying to stela my monies!!!!

Quick, someone make a Thrid Life!

Deskwork (0)

Anonymous Coward | more than 7 years ago | (#17737258)

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!

What happened to fun? (1, Informative)

Anonymous Coward | more than 7 years ago | (#17737100)

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.

Ads (4, Funny)

Cutie Pi (588366) | more than 7 years ago | (#17737166)

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

Load of junk (5, Insightful)

Anonymous Coward | more than 7 years ago | (#17737214)

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.

Seriously (0)

Anonymous Coward | more than 7 years ago | (#17737226)

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.

Be Worried About Taxes (1, Insightful)

cybermage (112274) | more than 7 years ago | (#17737246)

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! [boingboing.net]

Problems (2, Funny)

Fist! Of! Death! (1038822) | more than 7 years ago | (#17737266)

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!

Re:Problems (1)

kalirion (728907) | more than 7 years ago | (#17737360)

You're doing it all wrong. Why worry about the appearance of your avatar? The real appeal of First Life is the minigames (like Second Life).

Re:Problems (1)

Fist! Of! Death! (1038822) | more than 7 years ago | (#17737478)

But they are just crappy implementations one layer up the stack! We need more flexibility damnit! I want the source code for the physics engine, THAT's what I want!

Re:Problems (1)

Rob T Firefly (844560) | more than 6 years ago | (#17737624)

My main gripe is the freaking gold farmers. Also, I'm still waiting for a bot I can use for the dull grinding bits.

Well.. (4, Interesting)

argStyopa (232550) | more than 7 years ago | (#17737290)

...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.

Re:Well.. (1)

Aladrin (926209) | more than 6 years ago | (#17737618)

The article writer only used the term 'pyramid scheme' for the effect he knew it'd have. Those are 'evil' and he's trying to make SL out to be evil by association.

It's not like a pyramid scheme in any way shape or form.

I have my own reasons for hating Linden Labs (customer service, especially) but call it like it is.

SL economy is not a traditional economy (3, Insightful)

bitkari (195639) | more than 7 years ago | (#17737334)

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:

  • Apart from land (the price of which is set by Linden Labs), there is no real scarcity. If I want something (anything!), I can make it myself.
  • In the world you have no needs. You don't need any food to eat, you don't even need a place to live.
  • While it is described as a "game", there is no real game in SL. As such there is no struggle to gain resources to achieve game success.

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.



Re:SL economy is not a traditional economy (4, Interesting)

vadim_t (324782) | more than 6 years ago | (#17737822)

SL has scarcity of a kind. Boxes in SL are everywhere. Custom made things are scarce.

People in SL won't abandon the economy for a "FOSS approach", and I say that as an OSS advocate myself.

The thing is that no real cash would actually make SL a less impressive place. Let's suppose you want for whatever reason to look like your RL self. Right now you can hire an artist who will tell you what sort of photos they want of you, and will then create textures and clothes in the right shape. They get cash, and you get to look like yourself.

On the other hand, who will bother with that in a pure "FOSS" environment? It's tedious work. The same way, OSS does badly in areas like accounting packages. Working on the kernel is interesting. Writing code for dealing with some obscure tax regulation is boring. Making some random guy's nose look just right is boring.

Yes, people can and do release all sorts of things for free. Say, avatars. But who wants to be cybergoth #12342? All of them would look exactly the same. If you want to look unique there are only two things you can do: make it yourself (which is hard unless you're skilled), or get somebody else to make it. And so far we haven't come up with a better way to motivate people to make custom stuff than paying them for it.

Bullshit (5, Informative)

vadim_t (324782) | more than 7 years ago | (#17737370)

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.

Wait a minute, lets break this down. (0)

Anonymous Coward | more than 7 years ago | (#17737386)

>"Silicon Valley gossip rag Valleywag is carrying a story about Second Life being a new >spin on the old pyramid scheme.

um ... ok?

> 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_ ./ NO I did not rtfa

Read the Article? (1)

Zelos (1050172) | more than 7 years ago | (#17737400)

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?

Re:Read the Article? (0)

Anonymous Coward | more than 6 years ago | (#17737642)

More like: He read some articles about how you can make real money in Second Life, tried to play it like a stock market, found out that he didn't earn any money that way, and concluded that it's like a pyramid scheme because he didn't get money by doing nothing. A pyramid scheme is about tricking people into believing that they can get money for nothing, and since that's what he believed, it must have been a pyramid scheme.

You shouldn't PLAY to make money (1)

hajo (74449) | more than 7 years ago | (#17737424)

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

Banks? (0)

Anonymous Coward | more than 7 years ago | (#17737468)

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.

KoL Addiction (1)

kahei (466208) | more than 6 years ago | (#17737492)


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.

It's a game! (3, Interesting)

Thumper_SVX (239525) | more than 6 years ago | (#17737504)

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.

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 :) 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.

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.

I sold my virtual booty for $500L (0)

Anonymous Coward | more than 6 years ago | (#17737508)

How many games allow you to do that?

Tulips anyone? (1)

BillGatesLoveChild (1046184) | more than 6 years ago | (#17737520)

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...

Re:Tulips anyone? (1)

Pym (8890) | more than 6 years ago | (#17737744)

I've had a SL account for little over a year now, and know a few people who are making in the four and five figures a year profit from it (mostly land). My impression is that unless you're actually doing a scam, it's very time consuming to make a lot of money. People join thinking that just because it's a game, and it has a real money output if they make enough in-game, it must be less work and time than it would be to make money in the real world. I'm seeing that that just isn't true. Most of the big earners I know end up spending huge amounts of time tending their business, so it's far from get-rich-quick.

Me, I keep out of the earning part of the game. Like any entertainment, you should spend only what you think the entertainment is worth. The whole idea of it becoming so important because of earnings seems... I got a full time job already!

Nothing to see here, move along... (1)

itwerx (165526) | more than 6 years ago | (#17737534)

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.

Poor Judgement costs money (3, Insightful)

DLG (14172) | more than 6 years ago | (#17737544)

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.

and this is different from real life... how? (1)

oohshiny (998054) | more than 6 years ago | (#17737588)

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.

I don't know much about the game... (1)

brennanw (5761) | more than 6 years ago | (#17737602)

... 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.

Yes and no (2, Insightful)

bytesex (112972) | more than 6 years ago | (#17737646)

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.

Profit!! (1)

Soulshift (1044432) | more than 6 years ago | (#17737714)

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!!

The Linden is just another fiat currency. (2, Interesting)

gd23ka (324741) | more than 6 years ago | (#17737764)

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.
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