It's a Wonderful Life

The term the kids all use about making a profit in Second Life -- is "making bank". It helps them swagger around and feel like something bigger than the losers in their moms' basements. A reporter contacts me all indignant about "the Ponzi schemes in Second Life" and can't get past his own emotionality and has no feel for this. The math spells fraud. Therefore, the math is right, and there are no extenuating circumstances. I maintain that they are more like corrupt football pools or something -- and not always deliberately corrupt, something more stupid and inane.

I have seen that some of the same people involved in creating these banks and exchanges are prone to such shady activity in real-life sometimes out of desperation, or gullibility, or naivity. They are non-wealthy, minorities, disabled, women. After all, if you were a highly-paid programmer or prominent journalist with a secure career, why would you bother to play penny ante stocks in SL with the fees, the risks, the long payout?

But if you aren't wealthy and important in RL, there's nothing that makes you feel like a million bucks than to call yourself a "CEO" and then "IPO" your little SL company, even if all you do in RL is work at a call center in Atlanta, and all you do in Second Life is put together a box of textures swiped from the Internet to sell. SL is an enormously powerful tool for the imagination -- with real play money! So it's a great temptation to play store and bank -- and people do. And there's also the objective situation of this pioneering Wild-West like world -- it needs capital. The Lindens pulled all their subsidies in 2005 pretty much, so today, it's this helter-skelter network of exchanges and loan companies and banks and whatnot that launch businesses.
They made the world that the Lindens didn't want to bother to make.

Ted Castranova claimed that my question at VW07 about banks on every corner like Russia could be a disservice to Russia, but anybody who remembers Russia in the 1990s and even today knows exactly the story -- banks on every corner. It's a natural phenomenon for a country in transition -- which is what SL is. It is transiting from the game-gods feudal MMORPG medieval system to something like state communism, and then perhaps some day, to parliamentary democracy with a mixed economy!

Meanwhile, there are the banks, which most people find to be a scam. I tend to agree. I don't put money in them. I tend to prefer *taking* money from anonymous avatars and offering to return it to them through a rental box with a "refund" button than "putting in" money into a box attached to someone I can't trust -- and that means pretty much anybody in SL, at the end of the day, because even your best friend you met in real life may not be square, or could get caught in a bind.

This reporter asked me if I stood by my call to people to deposit in Ginko, made some months ago, as if this was a "gotcha"? Huh?. Um, well, there isn't anymore depositing in Ginko today, it was closed and subsumed into the maw of WSE. I sure stand by it at the time, as I think it was a reasonable community response, and none other than Eloise Pasteur of Second Life Insider said the same thing, and even Nobody Fugazi appears to have deposited a fairly large amount at the time. I didn't put in more than some $6000, but that was still an amount that little depositors would take back. There is a widespread notion that Ginko's "hurt the little guy, " but frankly, that's not what it's about. Most depositors in Ginko's were people themselves in the sex trade, casino biz, or other cash-intensive businesses who didn't find it reasonable to cash out on the LindEx because it is kept stable and putting too large amounts on it only leads to losses. You can't play the LindEx successfully due to its synthetic control by Supply Linden, who sells Lindens to keep it at an essentially fixed rate of 265-266.

What we're likely to see now is a lot of rabid coverage of banks collapsing, scams, schemes, outraged people pushed to yelp even more by reporters eager for a story in the hope that they can now get something out of it. We'll likely see dithering Lindens, possibly a Linden Policy, maybe even a real lawsuit! Various aggressive young men will imagine they can make careers on this story, even though they didn't lose anything.

It's like regular RL news. You can tell when the next scandal is about to happen, because when they've wrung the story of Brittany Spears and O.J. Simpson absolutely dry, something new has to happen -- or they'll just find it and make it into a similar scandal. Right now, we're due for another one of these in RL for the holidays, and we need to get one for SL too, because two lawsuits now have ended in settlements, ending the cash cow that that particular news feed had for some reporters for quite some months. Game over. 40 beds for $40 US dollars in Second Life are only worth $525. Not exactly a robust endorsement of pixelated property, eh? So now that we've rung every chime on the property-is-really-valuable story, let's see if we can ring all the chimes on theft-is-really-theft story, OK?

I don't pretend to follow the bank scandals -- I leave that to Busybody, who has fairly good coverage, although, of course, not without his usual biases. Of course Benjamin Duranske is circling for the blood in the water now -- he got his Google cred from Ginko's but his stats have been slipping and he needs a new lawsuit to cover -- and help incite.

Well, geez, can't anybody run a lawsuit against any of these Ponzi schemes? Um...hello? Cue crickets?

The fact is, those most burned by Ginko's or some of the other capers are going to have a lot of explaining to do if the try to make their businesses appear legit, i.e. registered, paying taxes, etc. -- which they might have to do if they go public with their books.

This evening's shocker -- shocked, shocked! your winnings, sir! -- was that Intlibber is alleged to have committed blackmail against Arbitrage Wise. The folks at SLReports have the story.

Let me say that given Intlibber's capacity for hiring goons and tacitly supporting their griefing and crashing of my sims, I'm not finding his side of this story compelling. It's highly unsavoury that he has essentially taken over the SLEC -- but the SLEC isn't even a proper institution anyway, not made by, or controlled by, even a virtual government, let alone a real one.

What should the Lindens do? Nothing. They are a common carrier. They aren't guilty of Internet fraud. They control their LindEx, where they themselves have suffered fraud losses. They watch suspicious activity; they halt trades, etc. More than protecting their "license to access content" they can't do. They simply cannot. And should not. Not only for pragmatic RL reasons about not controlling what you don't want to become liable for. For lofty Metaversal reasons having to do with efforts to create some kind of new leveraging of social capital and actual cash to enable people to advance their positions in life in ways they can't in real life. That's a noble goal. The ideal of the Grameen bank remains as a beacon (although I think emigre credit unions are more of a model, I don't think it's particularly praiseworthy to charge interest on giant loans from international institutions like the UN to pass out to women who are then browbeaten by collectivist peer-pressure.).

If financial activity becomes too heavily regulated, it will kill the possibility of creating new kinds of financial institutions. As I've often written, there is nothing sacrosanct about the financial institutions we have in real life. My God, look at the savings and loans scandals, the Enrons, the sub-prime mortgage collapses -- the works. Look at the whopping $39 a bank now takes for returning a check -- with no longer an option to simply have it go unpaid. Look at the whopping amounts credit card companies chisel from people. Look how hard it is for women to obtain credit in many countries or even to inherit property. And so on. So let's not get too dewey-eyed about "the financial system" as if this represents all that is righteous in the world.

In fact, I view some of the media coverage and the Duranske activity and outrage some others are ginning up around this mainly about a kind of class warfare. Essentially, the message is this: we are the wealthy and privileged of real life and we will not let you low-lifes gain any upper hand; we will do everything in our power to declare your criminals and make sure you remain criminalized. Or rather, let me recast that: we *wish* we were the wealthy and privileged of RL and therefore we most keenly feel the differences between those people and the low-lifes, and want to make *sure* that the low-lifes know their place.

I ask these questions not because I think there is something sterling about these schemes in SL. I don't. But I think they deserve due process and proper investigation just like anyone. What, everybody can be coy and all "alleged this" and "alleged that" and "miscommunication of a service" about the Bragg case involving a sim heist, but they nail to the wall somebody who gave everybody a free $100 sign-up bonus and .15 compounded daily interest for 2 years?! Hello???

I think you have to ask in covering this story: what is the difference between a Ponzi, and a failed loan company? An overvalued investment company? Bad investment decisions? The original RL Ponzi took about 6-9 months to collapse, and was conceived as a scheme at the get-go. Can we prove that an investment group that a) warns you of the risk and doesn't promise withdrawals b) pays out over a long period of time; c) appears to make reasonable investments d) makes public statements and attempts to resolve the situation when it collapses and e)cooperates with those trying to fix it is therefore a classic Ponzi? Sure, it makes good wire copy. But is it true?

"It's a Wonderful Life" is a popular story starring Jimmy Stewart that is in part about a building and loan bank in a small town in the 1930s struggling after collapse, and how one man -- George Bailey -- was able to keep people's faith in the bank and keep them from making a run on it. Really, the whole "It's A Wonderful Life" story is very much like Second Life, if you study it.

There is too much spite and malice in the Second Life community, however, for anything like this to happen -- especially with the reputation-enhancement avatar marketing game that people like Duranske play -- and the reporters ready to run with this story.

Comments

[Prokofy Neva]

Oh, I forgot to include my polls:

Question:

Have you deposited money in banks or stock exchanges in Second Life?

Object-Name: Banks
Region: Ross (259584, 254720)
Local-Position: (192, 57, 41)

Total Voters: 225
Total Ballots: 225

71,Yes, and I lost money in Ginko's collapse

53,No, I would never risk such deposits.

42,No, I didn't know there were banks or stock markets

42,Yes, and I have made interest or dividends.

17,Yes, and it has lost value.