July 26, 2007 by Nobody Fugazi
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The rumor mill has been working overtime; on the heels of Mystik's comments on WSE came another rumor that I heard from about 5 different people. There's nothing substantial to it, of course, but - then again, there was no real warning when it came to the complete ban on casinos - which Sarah wrote about.
The rumor is that [w:Linden Lab] is planning their own stock exchange.
Whether this rumor is true or not, it is interesting. Could Linden Lab run a stock exchange? More importantly, should they run a stock exchange? When I first heard the rumor, I immediately thought of the nationalization of industries which is common in third world countries. Given the issues which are being seen with banks and stock exchanges within Second Life and the handicaps which both face within the structure of Second Life - if anyone could do a stock exchange in Second Life, it would be Linden Lab.
But then, is there a reason that the US government doesn't run the [w:NYSE]?
It would be more interesting if Linden Lab facilitated stock exchanges and banks, but Linden Lab hasn't demonstrated much interest in facilitating businesses within Second Life, and as a service provider they have been pretty ambivalent about businesses entering Second Life. Yes, there is a lot of negative hype going on in the marketing circles - but frankly, the marketing circles did it to themselves. What has Linden Lab done that enables businesses better? And have they demonstrated consistency in governance, much less transparency?
If there is substance to the rumor, nothing has been said publicly. Linden Lab doesn't seem to do things that way. If there is substance to the rumor, perhaps Linden Lab should change the way that they do things. There's enough cloak and dagger with the present stock exchanges... do we really need a third which is run by Linden Lab?
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Linden Stock Exchange
I'm not convinced I can see LL playing this game, but I can only see positives if they do.
People who can actually track transactions, run fraud checks, report dodgy dealings directly to the police and at least theoretically have the clout to enforce good practise running a Stock Exchange. Like the various RL ones perhaps?
Of course they might be even less forthcoming than WSE have been, but they'd instantly reduce one of the levels of trust issues. To invest in WSE I currently have to decide do I trust the owners of the Stock Exchange AND do I trust the owners of the company.
If I give up trusting LL will run it honestly and fairly, I might as well just give up on SL altogether.
The reasons I think it's likely BS rather than likely: LL would be at risk of getting sued if things go wrong. I suspect they'd have to hire at least one, if not more full time staff member pretty rapidly. Ain't gonna happen.
EL.
I see what you mean.
I agree on the trust issue. There's something brewing I shall write about shortly (if it isn't working yet), but still - there should be a separation between governance and business. That separation is what some have been talking about in light of real estate.
For what it's worth, LL has been pretty self serving over the last year that I have been in SecondLife. Where there are community issues, they cast their glass eye. Where there are issues that come hammering on their doors with lawyers, they plead the fifth as much as possible. And when something affects the way that they do business, they become suddenly hyperactive.
But they have done little for those who are doing business within Second Life. In fact, what they have done in many cases is simply make it more difficult for residents such that it is easier for them to manage.
Given that history - is it fair to say that a Linden Lab exchange would be good?
Not perfect, but possibly better
I was there when Phillip GOMed GOM.
It worked... somewhat to my surprise, and whilst it's had the odd bit of downtime (GOM did too of course), I would suggest it's just as reliable a system as GOM was. Linden Lab have a vested interest in LindeX working well, because they derive a fair bit of cash from it, through Supply Linden sales (about US$0.5M this month so far).
So, let's posit a situation where there's "Chancellor Linden" who is responsible for both LindeX and Linden SE (and possibly Linden Bank, why not). You'd think they're earning enough from LindeX alone to pay for such a post after all. Let us additionally posit that all elements become money making activities, so there is a business interest in keeping them all going, and going well.
Under those conditions, would I trust LL to do it? Their track record suggests yes on issues where the bottom line is affected. I have a LOT of issues about LL taking over and/or competing with resident run activities. However, I'm inclined to believe if LL do the job, they're in a position where they have to do it right, or someone will take court action, as the stick, and, of course, increased profit as the carrot. Better regulation and better tools to spot fraud - all excellent for the trust issue.
The issue of separation of state and business, I'm not entirely sure about. Most states have a state bank as well as independent ones after all. Most if not all states have a raft of regulations, checks and balances etc. about how banks, stock markets etc. are allowed to behave. Nick Leeson not withstanding, the rules by and large work OK (and are changed when loopholes are discovered) - and they were introduced to stop situations just like WSE's recent mess. LL has, at least until recently (broadly offensive and gambling). been loathe to regulate and is certainly loathe to offer extra "powers" to residents to investigate others. Island owners have extra powers of ban and investigation over their estate, but that only applies to their estate.
So do we:
Keep a series of totally unregulated financial institutions, and wait to see what scandal hits next?
Encourage LL to move to a situation where it offers some residents extra powers to look into others grid wide?
Hope that LL decide to step in to the market and offer a well regulated system for all our financial concerns?
Forget it all, and hope it goes away?