Is the Second Life an elaborate pyramid scheme?
I was talking to a friend about SecondLife, and in my explanation of what it was (since he had never heard of it) he commented that it sounded like a pyramid scheme in which there was nothing to stop the person or people who created the game from creating their own fake money and cashing it out at real world value through other people (ie buying SecondLife items with cheat-created Linden bucks from real people then reselling them to real people for real world dollars). So I did some searching around the net to see what other people have thought on this issue, but it seems that real world companies are too entranced with the supposed "business opportunities" to be had in this world. The only thing that I've read thus far in my googling has been the blog of one Eric R.A. Priezkalns:
How long will it be before such "real economy" virtual worlds are regulated by the real world governments? How long before the bubble bursts or an Enron style collapse occurs? Do we know that Linden Labs isn't already siphoning off $1000's of dollars from the economy of SecondLife already?
Economist JM Keynes pointed out that people often invest in things not because they think they have any value, but because they think other people think they have value. Or because they think that other people will think that other people will think they have value. And so on. So if somebody else thinks a virtual space station is of value, who am I to argue? Keynes was thinking of the great Wall Street crash of the 1920's but you wonder if people ever learn. Tech-savvy punters should probably be familiar with the idea that not everyone got rich out of the flood of money in the dotcom stock market mania, though I personally would go further. I think that the so-called market economies of virtual worlds have more similarities with Albanian pyramid schemes than anything else. The great thing about running a virtual world, and the bad thing about investing in one, is that the people running the world could just cash it all in whenever they like. Which means investors would have no way to get their money back. This is what it says in the SL terms of service:
"You acknowledge that the Service presently includes a component of in-world fictional currency ("Currency" or "Linden Dollars" or "L$"), which constitutes a limited license right to use a feature of our product when, as, and if allowed by Linden Lab. Linden Lab may charge fees for the right to use Linden Dollars, or may distribute Linden Dollars without charge, in its sole discretion. Regardless of terminology used, Linden Dollars represent a limited license right governed solely under the terms of this Agreement, and are not redeemable for any sum of money or monetary value from Linden Lab at any time. You agree that Linden Lab has the absolute right to manage, regulate, control, modify and/or eliminate such Currency as it sees fit in its sole discretion, and that Linden Lab will have no liability to you based on its exercise of such right."
So they can just take your money away, or make it worthless, just like that. In the real world that might lead to a riot or a revolution. But where does it leave you in a virtual world? Pretty much stuffed, unless you plan to riot outside the Linden Lab offices in the real world.
How long will it be before such "real economy" virtual worlds are regulated by the real world governments? How long before the bubble bursts or an Enron style collapse occurs? Do we know that Linden Labs isn't already siphoning off $1000's of dollars from the economy of SecondLife already?
