Second Life bank crash foretold financial crisis

I wonder if Nostradamus foresaw Second Life.

There's some false information in this article that leads to faulty logic. There is no "skill ups" in EVE. The only reason to create anything is purely for profit. The real reason why some products cost less then the minerals to create them is because a large percentage of the players has the mentality of "I mined it myself so it's free". When a player mines minerals and thinks his time spent mining is not worth anything then uses those same minerals to built a product he'll often times put it on sale for less then its worth.

Exactly why some of us call this game for what it is, GAMBLING......... I have nothing against gambling, but if you want to play with money this way, don't expect me as a taxpayer or whatever, to support your game with my dollars, get it MR. Bailout..........

No, no, no - they knew about SUBPRIME going back as far as 1998 with the failure of BESTBANK (Boulder, CO).  Google it and you will wounder why they let subprime mortgages run ramped.

CHING CHING now we all suffer.

On the comment of EVE online

"For instance, raw materials often become more valuable in-game than finished products, because many players covet the raw materials to "skill up" professions and churn out products."

Is completely wrong. In EVE skills are trained in real time without regard of "skilling up" by just building stuff. The reason ships can cost less then their build cost is because some people are just that clueless. They think that becaused they mined the ore themselves that it is "free" and disreguard what income they could have made from selling the raw ore instead.

Again though, they aren't running a serious buisiness and it's a very part of the EVE economy that is different from reality.

The Disneyworld comments on Warcraft are a little harsh.  The person commenting should play the game before making general comments like that.  Players in WOW can create items and sell them to other players on the auction house.  If too many players are selling the same item then the demand goes down so the price drops.  People use the auction house like Ebay to buy and sell goods with other players.  There is definitely a economy in WOW even though the game is more cut and dry instead of completely open like Second Life.

The people dumping money into Second Life should have realized that a 40% gain on your investment was a scam.  These people must be the same people falling victim to the Nigerian check scams if they are that gullible.

"A fool and his money are soon parted."  True then, true now, but now  more like "fools and their money are always parted"

If you substitute the reference to Ginko Financial with “the 2007 collapse of Second Life’s financial sector,” then it is a pretty good description of my view.  As I describe in my article SL markets were simply never able to regulate themselves to provide the transparency needed for financial markets to function effectively.  The lack of transparency is so profound that we can only guess at how these businesses made money, and what they did with receipts from deposits or stock sales. However, Ginko Financial itself was probably done in by other factors as well (including the banning of gambling).

 

As far as my Disneyworld analogy goes, that actually comes from an article I published in the National Post (). 

Hindsight is always 20/20. Second Life is often used as a scale model for architecture and design, which is then successfully executed in the real world. Perhaps in some twisted way, this was a financial exercise in 'what if', born in the virtual world. This story is a really good example of real life imitating virtual life. What can we learn from this? We should have seen this coming.

Actually, some claim they did see it coming, years ago. But, that's another story...

As a Second Life Resident, it appears that Mr. Hsu has gotten his facts pretty much correct, at least in terms of the Ginko affair.  (I cannot say for EVE or WoW.)  I commented on the SL banking crisis at the time in three articles on my own blog, Around the Grid ( and search for "banking" in the Search box). 

As for Bloomfield's disappointment that banking was banned outright on the Grid, the only thing I could offer up is that Linden Lab, the owners of Second Life's computers, probably had little choice.  It would be absurd, of course, for them to "bail out" the banks built in world when those banks were the complete responsibility of the Resident or group of Residents who ran them.  Second Life, despite the many aspects of parallelism with Real Life, is still a game (or at most, a virtual setting for social and business exchange) that Linden Lab merely supplies the computer power and support for; the Lab was under no legal or moral obligation to prop up a failing business.  Indeed, the best reason for the Lab pulling the plug on banking is that some sharp lawyer somewhere could possibly drag Linden in as co-defendant on any civil suit filed against a failed bank's management, seeking refund of deposits and even damages.  Better to get rid of the whole problem.

Mikeadee said "We need to elect a cartoon character to run this country." 

Sarah Palin ran for VP this time around and she lost, and I am pretty sure she was a 'toon :-)

Second Life used to be a place you could thrive in business. Now there are websites to teach people how to cheat and steal. In other games "cheats" might get you to a new level... in Second Life you are literally stealing from people's real life pockets. They rip off items people have spent time and effort to make and sell. Then the market gets littered with the item and no one buys it, or they turn around and sell your creation for much less than you so that they get the profit.  Then you aren't making enough money to even pay for your land and you have to sell. I know many people this has happened to... they went from making 1000+ profit a month to making nothing. All because the thieving has gotten so bad and Linden does nothing about it.