Schadenfreude, hotshots!

What a striking contrast. If you look for keywords such as "financial", "bank" and "stock exchange", you now have a hard time finding many interesting results. Barely two years ago, a large number of "companies" were competing for a market of financial services and stock exchange listings.

I cannot resist schadenfreude (a German word that means "unexpected delight at somebody else's misfortunes") when seeing how most of the hotshots who drove that industry are gone from SL or at least quiet.

Let me say this up front: I do understand that the investors among you are disappointed with the many failures you witnessed and probably lost money in. And you are right. On the other hand, I am rather happy reality brought the "moguls" back to Earth.

I won't name names here but there was a time when I got in touch with a few of them. With one, I had a deal to display art for sale at his place. The whole time, the best attitude I saw was one of light arrogance instead of consideration as an equal human being.

Another one gave interviews to the SL media, telling them how he racked up millions of Linden dollars per month in revenue, but was crossed by the first guy mentioned above. Another one simply took his stock exchange and ran with it, without leaving anything to the people who trusted him.

Today, the rare players who are surviving, such as the Ancapistan Capital Exchange, have been serious and well-grounded.

While we shouldn't shed a tear for the people who cannot run ventures in SL anymore, it is sad that they took an industry down with them. When Linden Lab banned interest payments, any honest and conservative banking model went down with it. So did credibility of SL financiers when the World Stock Exchange vanished.

At the heart of the problem you find privacy. Of course, individuals who use SL need to be protected but for investment to be worth more than a leap of faith, real disclosure of information is needed. This is what many failed ventures used as a shield to take money without being accountable to the market. Real trust will be earned by those who disclose.

I leave the final word to the founder of Ginko, a "bank" that crumbled because of a bank run in 2007. His post on the ACE forums is delicious if you can read with a smirk.

Interview With BCX CEO Travis Ristov

Checking out the BCX bank in Second Life, I was able to get a chance to interview it's CEO, Travis Ristov.

Read the full interview in FINANCE

Q & A

These may help to clear some questions, but the questions in finance are far from answered!

There is No Banking Crisis

No, the Linden ban on fake "banks" that offer high interest rates and other such events in-world has nothing to do with a banking crisis. The problems and panic at JT Financials either.

Why? Because, as I have written in this newspaper last year, no banking has taken place with these institutions. There was nothing but an old-fashioned scam to take advantage of people's innocence in SL.

For some reason that I never understood, there were people who deposited money and who thought that their "banks" were legitimate. Did they fall for the promise of "high risk, high return"?. Did they fail to realize that 0.15% interest daily means almost 55% annually, a kind of unsustainable interest rate? No matter what, this kind of investor behavior shows that rules have always been and always will be necessary in finance. It is not because finance is bad, or that even finance in SL is bad. It is because a skilled minority will always look for ways to pig out with people's savings. It is a human condition.

As for what this could mean for Second Life and Linden Lab, this is a first step forward in terms of financial credibility. But for heaven's sake, why did they wait so long to act? How could the Lindens fail to step in earlier when some of their honest citizens were exposed to highway robbery?

This question remain unanswered.

I hope they will set up an official governing body called the SL Exchange Commission.