Virtual world's supposed economy is 'a pyramid scheme'

As I discussed this type of stuff with a self-fashioned hedge fund manager friend, he determined to sink a more sizable amount into testing the Second Life market. After all, talk about uncorrelated returns. He’d read about Second Life in increasingly more sophisticated business and financial press. The Economist, The Financial Times, etc. All of which touted the large and exponentially growing size of the SL “economy”. So a mere $10,000 USD shouldn’t be but a drop in the bucket, given the fact SL was supposedly producing virtual millionaires.

Once we started playing with real money in SL, however, the truth about the supposed economy therein quickly came to light:

  • You can earn a lot of Linden dollars in SL, in fact fairly rapidly sometimes, but…

  • If you can actually collect your SLLs from your counterparty – which turns out to be an enormous problem – you can’t cash them out for USD easily or profitably.

It turns out that inside the game, counterparty risk is tremendous. In fact, entire banks will suddenly disappear. —Virtual world’s supposed economy is ‘a pyramid scheme’ (Valleywag)

I don’t know what any of this means, but I wouldn’t have considered investing any money in SL anyway. I really haven’t the time to play subscription-based games. Still, I had been a bit surprised by all the mainstream press that SL has been getting.

3 thoughts on “Virtual world's supposed economy is 'a pyramid scheme'

  1. MyWikiBiz has been taking paid-editing work from clients again (after the Wikipedia “community” clearly ruled that his non-paid participation even was not welcome), with a 100% success rate in publishing to Wikipedia. I guess they didn’t want the content written in the sunlight of full disclosure, so “underground” it goes!

  2. Dennis: Here’s an interesting article about a guy in Pennsylvania who started a company to write paid entries for Wikipedia and was subsequently shut down after a personal phone by Wikipedia’s founder, Jimmy Wales. It appeared today in Yahoo! News. Raises some interesting issues about collaborative media and the marketplace.
    ————————————————————
    Idea of paid entries roils Wikipedia By BRIAN BERGSTEIN, AP Technology Writer
    Wed Jan 24, 6:19 PM ET

    When a blogger revealed this week that Microsoft Corp. wanted to pay him to fix purported inaccuracies in technical articles on Wikipedia, the software company endured online slams and a rebuke from the Web encyclopedia’s founder for behaving unethically.

    The imbroglio will soon pass, but it raises a bigger question: Why is it so bad to pay someone to write something on Wikipedia?

    The “free encyclopedia that anyone can edit” requires articles to have a “neutral point of view.” But most contributors surely have some personal motivation to dive into a subject, whether it’s adoration of “Star Trek” or a soft spot for geraniums.

    What’s to say contributors who get paid have a harder time sticking to the golden path of neutrality? And doesn’t Wikipedia have a built-in defense mechanism ? the swarms of volunteer editors and moderators who can quickly obliterate public-relations fluff, vanity pages and other junk?

    That is precisely what ran through Gregory Kohs’ mind last year when he launched MyWikiBiz, a service that offered to write Wikipedia entries for businesses for $49 to $99.

    A market researcher in West Chester, Pa., Kohs believed that the corporate world was underrepresented in the sprawling Web encyclopedia, which is dense with obscure topics.

    “It is strange that a minor Pokemon character will get a 1,200-word article, but a Fortune 500 company will get … maybe 100 words,” he said.

    Kohs, 38, said he was committed to having MyWikiBiz create only legitimate Wikipedia entries ? neutral, footnoted and just on companies or organizations with a sizable presence.

    “I was not going to write an article for Joe’s pizza shop at the corner of Main and Elm,” he said. After all, Kohs was fine with Wikipedians editing his clients’ entries however they saw fit, but he didn’t want the articles to be taken down entirely for being irrelevant.

    Kohs researched Wikipedia to see if his idea violated the site’s communal spirit. He found what appeared to be an answer in his favor: Wikipedia’s Reward Board.

    The board is Wikipedia’s internal forum for people who would like to see certain topics introduced or improved so they have a chance of achieving the rare status of “featured article,” earned when editors consider an entry supremely well-written and fair.

    Here’s what got Kohs’ attention: Offers for barter or even cash are common on the forum, and the person making the offer can remain anonymous. Indeed, on Wednesday, someone was ponying up $55 for whoever could get an article about Lithuania to reach featured status.

    So Kohs and his sister decided to launch MyWikiBiz. But a few days after they put out a press release in August, MyWikiBiz’s account on Wikipedia was blocked. Wikipedia founder Jimmy Wales called Kohs to tell him MyWikiBiz was “antithetical” to Wikipedia’s mission, as Kohs recalls the conversation.

    Kohs noted that he was openly identifying himself as the author of his clients’ pages. And he cited the Reward Board.

    Wales was unswayed. But he told Kohs he could create Wikipedia-like entries for his clients on MyWikiBiz.com. Then Kohs could reach out to Wikipedia editors and see if they’d like to “scrape” the pages ? use them as Wikipedia entries.

    Kohs says he got about 10 clients into Wikipedia this way over the next few weeks. (He won’t name the clients because he wants their entries to stick.)

    Around that time, however, Wikipedia’s volunteer crews were tweaking the site’s conflict-of-interest policy. As Kohs read one new rule, he could post his clients’ copy on his own personal user page inside Wikipedia, rather than on MyWikiBiz.com. Presumably that would make it easier to attract Wikipedia editors’ interest.

    Wales had earlier told Kohs that step would be forbidden. So Kohs wrote Wales that it appeared the community now disagreed with him. Wales shot Kohs down in a terse e-mail.

    “Absolutely unacceptable, sorry,” Wales wrote.

    Ultimately, Kohs was permanently shut out of Wikipedia. Instead he launched Centiare.com, a Wikipedia-esque ? but paid ? directory for businesses.

    “I think I was rubbing him the wrong way,” Kohs says now. “I probably should have just kept my mouth shut.”

    Wales agreed in an interview that companies and regular people likely are surreptitiously editing their own entries, doing in secret what MyWikiBiz was open about. But that doesn’t mean the site should give up trying to prevent public-relations efforts, Wales said.

    “It’s one thing to acknowledge there’s always going to be a little of this, but another to say, `Bring it on,'” he said.

    Wales was asked why it mattered if Microsoft or anyone else paid to have copy written on Wikipedia, since there’s no guarantee that the site’s vigorous editors and moderators would let it remain. He called that notion akin to a city with stellar trash collection telling its denizens to go ahead and litter, since the garbage wouldn’t be around long.

    It’s certainly understandable that Wikipedians would want to limit the rubbish they have to sweep away, given that they spend a fair amount of time fighting PR’s more nefarious cousin: use of the site to denigrate rivals. Last year, for example, Wikipedia temporarily blocked access from some computers assigned to Congress after a series of partisan pranks. In one, the entry on Sen. Robert Byrd (news, bio, voting record) was altered to give his age as 180 rather than 88.

    Still, Wales said he realizes the payments issue has some gray areas. Participants on the Reward Board, he said, have to be sensitive about avoiding conflicts of interest.

    “It’s all tricky, you know,” he said.

    The founders of one new information site, Helium.com, argue that Wales has it all wrong. As they see it, prohibiting payments is bad for Wikipedia ? and an opportunity for them.

    Helium.com lets anyone write an article on a topic. But unlike at Wikipedia, one contributor doesn’t overwrite another. Instead the community votes on which entries are more valuable. As a result, multiple articles on a subject appear together, with top-rated ones listed higher.

    Authors are encouraged to write on something they know about, of course, but they are given an extra incentive: a cut of Helium’s ad sales.

    Andrew Ressler, a Helium vice president, argues that Wikipedia’s ban on perceived conflicts of interest shuts out lots of people with “valuable insights and knowledge,” and tends to leave the site to a small clan of diehards.

    “Everybody is getting rewarded somehow,” Ressler said. “Whether it’s intangible or tangible, what’s the difference?”

    Copyright © 2007 The Associated Press. All rights reserved. The information contained in the AP News report may not be published, broadcast, rewritten or redistributed without the prior written authority of The Associated Press.

    Copyright © 2007 Yahoo! Inc. All rights reserved.
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