Ninety percent of all millionaires become so through owning real estate.
As my regular readers know, I occasionally take a look at the economic situation in Second Life (SL). I know, I know. Real Life (RL) is depressing enough with all its economic problems these days. Why go looking for them inworld?
Besides the argument that I’m a masochist (frequently made by Significant Other, and assorted RL and SL friends which is not true despite my recent visits among the BDSM community) I do this because I firmly that RL economics, The Great Recession in particular, affects SL and may ultimately decide what happens there.
So, when my friend, Lindal Kidd, recently blogged about the current glut of land inworld and the consequential falling prices for rentals, I decided to drop by and see what was going on for myself. I haven’t blogged about The Great Recession and SL since last year so the timing was appropriate.
I meet Lindal as she is conducting a class on SL land for another resident. (Lindal is a very good instructor and I encourage anyone wishing to learn more about the inner workings of SL to either read her blog or to attend her classes.) Lindal deftly moves between my questions and those of her student. (This woman has definitely mastered multitasking!)
The interview begins with my question about what is causing the price of rentals to fall off. Lindal cites the ready availability of Linden Homes at the low end of the market (I must confess to being an owner of one.) and the purchase cost of land being down at the high end of the market. She sums it up as definitely being a buyers’ market.
Lindal continues her explanation by highlighting three things that Linden Lab (LL) has been doing over the past year or two. First, LL created Linden Homes and the land for them. (That’s the beauty of virtual worlds, slap on a few more servers and, voila, new worlds. Too bad, LL doesn’t put the same resources and time into improving performance. But, I digress.) Next, they created the adult continent, Zindra. Finally, LL created the themes areas of Nautilus City and Bay City. What all of this means, according to Lindal, is that there’s a lot more land in SL. (Looks like Spain and Las Vegas weren’t the only ones to have overbuilt recently. At least they can blame the banks. What’s LL’s excuse?)
Meanwhile, the number of avatars using all this land did not increase observes Lindal. In fact, she notes, the number of avatars during this period went down some resulting in too much land and too few people. (Anyone remember their ECO101 classes about supply and demand?) To compound all of this, Lindal adds LL offered Homestead regions to estate owners and sold a lot of them. (A SL friend of mine, who will remain nameless for his own protection, told me once of being invited to one of these sales sessions and of being pounded to buy more land but no one ever spoke to him about what he might receive in exchange in terms of service and performance for all the land he’d already purchased let alone if he bought more.)
About this time, Lindal goes on, LL realized their mistake in making these offers too attractive and changed the price/performance ratio in an effort to compensate which, in other words, meant that the land area to resident ratio deteriorated. (For the non-tekkies out there, this is the equivalent of the US Federal Reserve printing money to inflate themselves out of their debt problems. Forgive me Adam Smith!) In the meantime, Lindal says that cheap land on the Homesteads drew off many mainland renters with the subsequent downward pressure on rents there.
Now here’s the part where I get up on my soapbox for a bit. The parallels with what was happening in RL at the time are startling for me. Only because in a virtual world like SL, I wouldn’t have expected this type of economic gerrymandering. (OK, call me naïve.) Take a look at my recent story about whether or not SL is viable as a civilization and decide for yourself if this type of behavior on LL’s part helps or hinders the question.
About this time, Lindal’s student has left and she and I arrive at her property, Masocado Resort. It’s located on the mainland where she owns about three-quarters of a region. Not being a scripter herself, she purchased the necessary scripts.
Lindal describes Masocado as a “Miami style condo resort”. The build contains seventeen units of which eight, or 47%, are currently rented. Typically, only two residents ever seem to be onsite at the same time. She tries to have a sense of community across the rentals and tenants have ranged from furries to members of the BDSM community.
Lindal doesn’t make a profit on her investment and would settle for breaking even. She says her losses are covered by the entertainment portion of her RL budget.
We go to one of the available units and I see an impressive ocean views from floor to ceiling windows. The rooms are large and are unfurnished. Many amenities come with a rental (a lot more than I have in my Linden Home) and the cost is a bit less than a Linden Home. Lindal’s blog has a detailed list of features and prices. Her property is well worth considering for any resident thinking of getting a stake inworld or upgrading from what they have now. (No, I don’t get a commission or any other form of remuneration! As always, I look for places and services that I feel are worthwhile for my readers.) Lindal says this is a typical path for many property owning residents in SL. They begin with a Linden Home, move up to a place like hers, and, finally, buy a parcel of land and either build or buy a house of their own. Hmm, I wonder if I’ll go down that path?
My last question for Lindal is does she believe that The Great Recession of 2008 has had an impact on real estate in SL? She says that she’s been thinking about to answer that question as she prepared for this interview.
Lindal believes that there are two schools of thought here. The first is that people have less money and therefore spend less of it on SL. The second is simply the reverse that people want entertainment and escape in bad times so they spend more money in SL. (Not as crazy as it sounds, during the Great Depression many people went to the movies.) She did research on the Web looking at blogs, forums, posts, and economic articles. Lindal came away with nobody knows.
Lindal does believe though that the Great Recession is less of a factor on SL’s fortune than other things such as LL’s business decisions. She also cites SL’s age (getting close to ten years) and the normal growth curve for new things. She feels it’s leveling out these days as SL matures. Which for me means that the inflection curve can’t be too far behind.
I cheat and ask another question. I ask Lindal what she thinks of SL’s future. She answers that SL will be around for quite some time yet until someone else develops a very superior form of virtual world. She doesn’t think SL will grow but will either remain static or shrink slowly. (Those big, open sims may get even lonelier.)
Lindal says that SL appeals to a certain type of person and they are not a large segment of the RL population. She supports her contention by saying that it takes a lot of effort to learn and use SL with “fluency”. Lindal ends by saying that we can recapture our youth inworld and that is very appealing.
Our appointed time draws to a close and I take my leave. I thank Lindal for her time and depart.
Thinking back on Lindal’s and my conversation as I write this story, I can’t help but feel that SL’s economy leaves a lot to be desired. It’s is neither open market nor is it a command economy. It reminds me more of a banana’s republic’s from some cheap nineteenth century comic opera. As Lindal said, SL can be around for a long time. The question is will LL permit the type of open economy that will permit it to thrive and grow.
As always, I’m grateful to all for their kindness and time in stopping to talk with a stranger who was passing through their lives.
Below are a few pictures of some of the communities I’ve visited inworld, which at the time seemed a little humorous. I hope you find them that way too!
I welcome feedback from readers, please either comment on my blog or e-mail me at firstname.lastname@example.org .
If you would like to read about my other adventures in Second Life please click here.
If you would like to read about my other adventures in Second Life please click here.
Photo No. 1 Lindal Kidd
Photo No. 2 Masocado Resort
Photo No. 3 Masocado Resort Lobby
Photo No. 4 Masocado Resort Vacancy