Last Friday I moderated a panel discussion on financial markets. We quickly hit our limit of 50 avatars on Dr. Dobb's Island's, and convinced them to risk crashing the sim to let in a few more. And a few more.....ultimately, we had 70 people attending, including several members of the RL and SL press. Nick tells me this was by far the best-attended Metaversed geek-meet so far.
Three topics were particularly contentious. First, when I noted the *possibility* that the markets could be "viewed as a game," the audience chat when off the charts, mostly in vehement disagreement. However, the exchange leaders clearly agreed with the view that the exchanges are a game.
From there, the discussion moved right into the prevalence of fraud. The heads of the exchanges (Maelstrom Baphomet representing AVIX, LukeConnell Vendeverre representing WSE) emphasized the relatively low rate of fraud, and their strong attempts to limit it, but from the extensive post-panel audience discusion, many were clearly unconvinced.
Some people seemed to think that the efforts of the Second Life Exchange Commission (SLEC, headed by TraderJohn Susa) were encouraging, but that led to the third point of controversy: whether self-appointed regulators would do more harm then good, by being in the pocket of the exchanges, or annointed friends of the Lindens.
I tried to remain carefully objective during the panel, but for the record, here is my own take on these three issues. First, I don't believe that the exchanges are a game. After all, these exchanges have raised about $1.5 Million (US, not linden), and there is no objective other than whatever the individuals involve are seeking (which I am guessing is money).
Second, I think fraud is a real concern in this markets, and the exchanges themselves could do more to improve investor confidence, such as having better disclosure about trades, and better separation between managers who issue shares and the businesses they control. (More first-life disclosure would be nice too).
Finally, while I understand the *potential* for problems with self-appointed regulators being extortionists or annointed busy-bodies, I think those concerns are far outweighed by the likely benefits of regulation done right. I hope the SLEC will be able to succeed in their task, or if not them, another group.
Were you at the panel? What did you think?
The clash between those who think it's a game (platformists or augmentationalists) and those who think it's a world (immersionists or worlders) is what is used by fraudulent exchanges to extract money out of gullible people.
For these stock exchanges and their managers, and the companies mainly listed on them (the managers own companies or friends' companies), it's a distraction to talk about "low percentages of fraud," as if the problem is only fraud that occurs *against them* by little companies or investors or day traders.
The real issue is the fraud permeating *the structures of the exchanges themselves*. And that they refuse to face, and this panel was no different, as we heard a barrage of justifications in a variety of colourful world English-speaking accents in real voice. The fact is the *valuation* of the property is very much at issue; Intlibber can construct a "World Trade Center" and decide it's hugely expensive and can command scads of revenue, and nobody challenges it, there's no independent assessor, no auditing commission even as there is in Russia. So the properties like buildings or undeveloped real estate can be wildly overvalued in issuing shares or announcing IPOs, and then that in turn leads to windfalls for those early investors who are the managers themselves and whoever they shill into the scam.
The lack of transparency not only about the RL information, which we could live with in fact, is overshadowed by the lack of transparency of the operations themselves, with no press releases about property and its sales and no notification of liquidation/failures of companies listed.
Robert, your notion that this "SLEC" is a good thing strikes me as something you've determined simply from a) lack of information and b) a narrow focus on the interests of your field. Go and talk to a polysci or history or governance professor at Cornell and ask what they think of a federal agency springing full-blown into the Wild West without any of the context or checks or balances that affect such agencies in RL.
In RL, the SEC is an independent but federal U.S. Government entity. It's not founded by some guy named Frank. It is an arm of the democratically elected and more or less (less these days, but hey, contrast it with Russia or China) accountable U.S. Government with a Congress, a judiciary, as independent branches, and the 4th Estate, the press, all affecting its transparency and periodically challenging it. It's not like corruption breaks out in Wall Street, or the public loses faith, and Fred comes along and says, oh, let me make an SEC.
Frank and Fred may say, oh, but we're of the best intentions, we have clean hands, we have RL experience, let's just get started, isn't that what's important? And so like the SLBB, which is another illegitimate an unaccountable entity springing fullblown out of one person's agenda without any reference to a RL BBB and its functionings, the SLEC just emerges, and "just Fred" tells us all what to do. My critique of these Snowcrash-like "Mr. Lee's Hong Kong" types of bodies that spring up in anarchic capitalism isn't that they are in the Lindens' pocket (though they often are) or that they are the plaything of oligarchs (though they often are) but that they take on federal or national governance functions that in RL would have many, many checks and balances that are utterly missing in SL.
It's like when you take an institution like "The White House" and "the U.S. Presidency" and graft it on to Russia, with its history of the General Secretary -- the results are the opposite of what is intended, and how something functions inside its original setting.
What is the answer? I don't believe you start by saying "Oh, start somewhere, let's all just make the anarcho-capitalist dream of Snowcrash or the libertarian utopian ideal (nightmare) and just have fullblown "Supreme Courts" run by Ashcroft Burnham or "voting systems" run by Angel Fluffy or for that matter, "land preserves run by Prokofy Neva". To make a real country or functioning governance system, you need separation of powers, checks and balances -- but that would have to be preceded by *sharing power*. That is why I believe all these governance shenanigans that busybodies get so busy with are rooted in sand: until the Lindens *share power* (the prerequisite for political governance in RL) by providing a seat on the board collectively to tier-payers; by providing a seat on an ombudsman commission to a resident for justice issues and ultimately to open-source the product I suppose (although I have many concerns about that), then we can't talk about proper, functioning regulatory commissions. Everything else leading up to that is playing police and playing commissioner while other people play house and play store.
Prokofy makes some good points here about the potential for fraud without regulation, and the potential for inappropriate regulation. However, the absence of regulation makes the potential for fraud severe, while regulatory institutions can, in theory, be developed with enough transparency and checks-and-balances to be reliable. I don't see why regulators would *necessarily* be corrupt. But it will be a challenge for SLEC, SLBB and Metaverse Republic to create the apparatus needed to guard against these problems.
As far as Linden Lab's role, I am not sure they need to "share power," but it will be far easier for SL residents to govern themselves if they are given more flexible tools that allow moderate sanctions less extreme than banning. (For example, Joe can run scripts but Jane can't, even neither owns my land).
More generally, it seems to me that LL has a choice, if they want their world to be regulated appropriately: they can get personally involved in dispute resolution and regulation, or they can create the tools that let others do it. While I know the programmers at LL are working overtime with a long backlog of to-dos. But creating more granular power to landowners and more functional groups will take a LOT less time than dispute resolution and governance.
what about governed sims? which allow for a diversity of governance systems (or lack thereof). then residents can wander, choose, create...
I agree that no serious forms of governance are going to emerge from the community as long as the community has no "executive power".
Having said that, I disagree that there is no point in creating such governance bodies now. Whether they are just a game or not, they can be a foundation for the future. They can be a prototype, a model, or a learning tool for future, "real" governance bodies. More importantly, they also create social networks that will always be useful.
A model plane is usually just a toy, cannot carry people, and even takes very different skills to build or to navigate compared to a "real" plane. And yet, a lot of experience can be gathered from building a model plane that can be used in building a "real" plane.
Here's the problem: some people making these "institutions" are merely prototyping, making models, playing a hobby or using the platform for configuring ideas. All well and good. Then, some guy named Fred makes an SLEC, that's fine, he's just play-acting, or doing a kind of Model UN or Moot Court.
But...other people *live here*. It's our home, where we work and live *for real*. That is, it's a job, work, or art, or an avocation, or something that is more serious or more intense than just somebody's model on a whiteboard. So the admixture of people taking SL seriously with those not really having any skin in is deadly. It's deadly in the direction of giving amplification of those from wacky cults and sects and homeless political theories that wander Europe like specters, and its deadly in the direction of harming people with real money by giving those with malice a playground.
That's why I think movements, committees, civil society sort of organizations should be a precursor to "building institutions". You can't build institutions when you do not have separation of powers, and more importantly *sharing of power*. All truth resides server-side, say the Lindens. No, truth resides client-side, too, and we need an adversarial defense, say the residents. The models SL is built on, stripped of all the cyber gadgetry, are company towns, tsarist-era estates with serfs and quit-renters, bantustans in South Africa, and many other awful analogies.
When you prematurely "make institutions" founded on sand or on idiocy and sectarianism and a false sense of freedom, you risk solidifying bad models and hindering progress later, when you need good ones. Why this unseemly rush to make full-blown, out of the box, courts, commissions, stock markets -- my God, people, take it down a few notches here, and make more simple stuff like "the Ukrainian Samo-Pomosh (Self Help) Society" which functions like a credit union -- simple, easy-to-understand, friendly, normal groups with no moveable or breakable parts.
Prok, it is a risk. But it is not a certainty. And it is also a risk that when LL finally open source the server software we will be caught unprepared. Who will we trust to form the new institutions? Why do you think that would-be unknown candidates will not be corrupted or merely incompetent?
It may be a couple of years until LL open source the servers. So it's also a risk to wait for that long because it may stifle the community's creativity for ever. That creativity needs to be fed and "toy" institutions can help in that.
I am actually reluctant to be involved in any organized institutions myself in the present conditions, because of the risks. But there is enough upside that I would definitely not discourage anyone else.
I don't wish to play government with strangers on the Internet, especially *loony* strangers on the Internet with Big Ideas and sectarian little cults. I don't see why I need a full-blown justice system heavy on the magistrate and lite on the civil rights, either. I think we need some really good RL litigators to appear in SL and roll up their sleeves. I'd love for one to launch a class-action suite against the Patriotic Nigras for denial of service and destruction of property.
I wish to do just a few simple steps of cooperation with other independent land owners. Like, "Let's all agree never to put spinning junk in the sky, shall we?"
Baby steps.