More negative economic forecasts on Second Life

I previously wrote about Randolph from Capitalism2.0, who had a very dismal (but perhaps accurate) outlook on Second Life’s future. Now he’s at it again. This latest article is very detailed, and contains more figures and graphs than one can shake a stick at. It’s hard to argue against, and even harder to dismiss out-of-hand, which is what some people did with Randolph’s last post.

Randolph has backed off on the rhetoric a little bit. He no longer thinks Second Life is a pyramid ponzi scam. He does, however, see a significantly negative economic outlook. In particular, he says that Second Life will need to maintain a staggeringly high 40% monthly growth over the long term to prevent rampant currency devaluation. Linden Lab has been very busy selling currency in-game (making them lots of money), but Randolph questions how willing they will be to buy a lot of back to prevent an economic collapse when the growth rate inevitably slows down. The whole economy seems to be based on rapid growth, with the large influx of new people supporting the established users. What happens when this hierarchy of spending collapses?

Randolph also makes some good points about how the Linden dollar isn’t actually a real currency by any financial definition of the term, but rather, can best be summed up as a virtual microtransaction token. He also has all sorts of interesting numbers on average hours of playtime per character and such. I’ll be following this saga with fascination. The potential of virtual worlds seems so high, but who knows if Second Life is actually sustainable? One wonders if they even have an economist on-staff to help manage their virtual currency. If not, all it could take is one Black Tuesday (which meatspace economies tend to experience a couple times each century) to shut down the whole endeavor permanently.

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