scrambled channel

This is the question posed by Randolph Harrison at Capitalism 2.0. He caused a storm of controversy with this post which suggests it is. He received his share of criticism from Second Lifers, including a raft of people claiming to run profitable businesses. He has responded by offering to “prepare a business valuation of one typical Second Life business.” I will be watching this intently….

I found the orginal article fascinating. They were able to take advantage of a large arbitrage opportunity due to mispriced interest rates offered by in game banks. Although they had problems with people failing to honour deals, he asserts they were able to make a significant Linden Dollar (SLL) profit. However, they were then unable to change these SLL into USD without dramatically skewing the exchange rate. This was when he had his epiphany:

As we scratched our heads trying to figure out if there weren’t a more clever way of disguising our trades, or perhaps creating our own in-game banks and exchanges in order to arbitrage the other direction, it suddenly dawned upon me.

This game was just a pyramid scheme.

Unsurprisingly, he was quickly attacked by the Second Life faithful. The most reasoned criticism (I read it here) is that selling large sums of SLL causes the price to drop. This indicates a lack of liquidiity in the market, not that Second Life is a gigantic Ponzi scheme. I think that if you accept that the currency exchanges are honest (Harrison isn’t convinced), this argument is rather plausible.

To be fair to Harrison he anticipated this argument to a degree. He conceeds that it’s possible to make relatively small amounts of and to transfer this back into USD. He feels however that this runs contrary to the hype surrounding Second Life and looking at the sort of money that’s been invested, it’s difficult not to agree. Failing to live up to it’s own hype doesn’t make it a Ponzi scheme though, yet this lack of liquidity is a real problem.

And this is a problem I don’t see being resolved any time soon. We’re currently seeing big business scrambling for a foothold in Second Life. They will be hiring Second Life experts to help build their presence. I suspect though that these experts are going to want to be paid in USD not SLL. So most of that investment will simply bypass the Second Life economy altogether. This sort of reminds of the time when websites were the newest game in town, everyone paid exhorbitantly

Admittedly, I have approximately no economic knowledge nor do I know much about Second Life - but doesn’t it seem obvious that the bottom will drop out of this eventually? I just don’t buy the argument that Second Life is the realisation of a Gibson style metaverse. I don’t think it will be popular forever and when the market crashes people will get burned. So maybe Ponzi scheme doesn’t sound so far from the truth. In any case, I will look forward to the results of Harrison’s evaluation.

I’ve come across an a (really) short film competition that’s being run by Doc/Fest Sheffield. They are asking you to upload your 2 minute film to myspace by February 22nd.

The rules are a bit vague but essentially they’re looking for a 2 minute film on the environment.

It could be about an obsession with recycling the smallest scrap of paper; always taking the bus instead of the car; maybe your mad neighbour has plans to build a kooky contraption for powering their house? Or, maybe you know someone who refuses to do anything to help save the planet. Tell us your story.

It sounds like they want it shot with your camera phone and it’s not clear if editing is allowed. In any case it’s a cool idea and should be fun. Plus there are prizes -

the winner of Mini Green Docs will have their film screened at the launch of the Sheffield Docfest Tour in association with the BFI on the 7th March, at The Barbican. They will also receive a free Delegate Pass to The Sheffield Docfest in November 2007. The winner and two runners up will be given tickets to the launch of the Sheffield Docfest Tour and will be invited to attend a VIP drinks reception.

Interestingly, I also learned that Doc/Fest is the world’s first carbon neutral film festival. They had a CO2 audit done (which is available for download from their site) and have procured sufficient carbon credits to offset the 83 tonnes of greenhouse gases said to be associated with the festival.

I have just stumbled across Warren Ellis’ thoughts on Second Life entitled Second Life Sketches. They’re an interesting read for this non-Second Lifer and have me thinking about test driving the linux client, though I suspect that my video card might not handle it.

Ellis touches on the problems that Second Life will face as it receives more attention as well as some of the exciting things happening. One interesting project is Terminus, which aims to create artificial life. He also muses over the price of land and just when the bottom might fall out of the market, noting that a number people buy land only to fill it with a bland imitation of IKEA life. I particularly like his final word on property ownership:

I have a month’s rental to go on my own mainland property, which I mostly use as a place to introduce people to the notion of exploring the mainland [..]. Since no-one’s about to donate me an island on which to create my own cult compound, I think I’ll probably give it up at the end of the month, and wander around Second Life like Caine in Kung Fu. Only without, you know, the kung fu.

Now the thought of starting a cult online sounds kind of cool. Perhaps I could start a business in Second Life selling in-game priesthoods and degrees? Although, someone’s probably already beaten me to it.

And if you need still more convincing that Second Life is hitting tipping point, these stories are hosted at the Reuters Second Life News Center. The Reuters site provides graphs of the exchange rate between Linden Dollars and US Dollars and also shows how much money is chagning hands each day - a cool $1,251,595 in the past 24 hours, even more statistics are available from Linden Labs themselves.

As far as I’m concerned though, the artistic and philosophical possibilities of Second Life are far more interesting than graphs of exchange rates. That said a virtual economy is pretty interesting…. Anyway, I’m really enjoying Ellis’ columns and they will have to do until I can afford a new video card. I guess I’m missing the gold rush.