Benevolent dictatorship

Noun: A dictatorship in which the leader has power only because the people choose to allow them to remain. This necessitates a wise use of power and generally prevents abuses since the benevolent dictator loses power if they are unsuitable. (From the Wiktionary)

Why this post? There is currently some debate going on here at Your2ndPlace and at the International Stock Exchange.

The debate seems to be "Bottom-Top Vs. Top-Bottom" management/regulation and according to someone the VSTEX has moved from the first to the second stance, effectively aligning with the WSE.

This post will be probably disappoint someone. It won't be a deep analysis of the pros and cons of both stances. Here I won't be trying to change anyone's mind. People have been arguing on issues since the human race was born. They'll still do after this post of mine.

First off, to me financial markets on Second Life could be related to the situation in the US before the Securities Act of 1933. You can translate that into "an unregulated situation" if you like. Since that Act, more steps were taken but we won't go over the whole process now.

Let's just say that in SL we lack a lot of things (when it comes to policies, regulations, governing bodies and applicable laws) that we can have in "real life".

When the VSTEX was started there was an optimistic view of a community wanting and willing to work together, in order to build a lively virtual stock exchange. That was the philosophy before I joined the VSTEX (which happened a few later of it going public) and I must admit I quite liked it.

It did not work that way though. Now one may say that we just changed our mind, that we woke up one day saying "To the hell with shareholders, we'll do what we want and so be it".

Over the time we found out (the hard way) that exchange users were of 2 kinds: educated and uneducated (with the latter group being apparently the majority). Educated users know what they do, they often know how to game the system, sometimes they are not so well intentioned and they may resort to practices that would be frowned upon in the real world (when those practices are not outright illegal).

Of course there is nothing wrong with educated users per se, on our exchange there is plenty of well intentioned, honest, educated users.

Maybe we failed to create the conditions to develop a thriving community capable of setting standards and rules. That's a possibility. At the beginning we were too new to have a significant amount of honest, well educated users. There were the WSE, the SLCAPEX, the ISE. Extablished, bigger markets.

It didn't take much time before we had to face the Jasper Tizzy issue. Everyone who's been following SL financial news for a while should know about it. That led us to the conclusion that extra steps had to be taken, steps that the community wasn't still asking for. Almost all the requests we got at that time were along the lines of "Where's my money, I want my money, give me back my money".

Following that, we had to take a decision (someone here may argue "You really had to?" to which I would answer "Hell, yes") because we really did not like the "The CEO has fled, there's no money left, the company is delisted. Have a nice day." attitude that was standard for other exchanges I believe, before WSE's WTF (World Traders Fund) was born.

That decision was, to look for someone willing to take over the company (actually, the name and the listing with us since no money was left behind by the old CEO), trying to revive it and turn disgruntled shareholders into happy ones. At that time we did not realize it, but it was the first step for top-bottom management and regulation. Nobody ever asked for that (maybe because it was so unusual?), yet we did it. In the aftermath of the AVC history, I can tell we opened a canning of worms. However, I don't regret that decision. None of us VSTEX managers does.

Since then there have been issues with other companies and while the rules we've been adding have been implemented without directly asking the investors or running polls, the investors (of course, some of them) themselves have been asking us via emails and support tickets to build up our rules and make our control on listed companies more tight.

I'll quote Konner McDonnell:

"Evolving. Changing. Remembering. Like I expect all virtual exchanges SHOULD."

And Cocky Dagger:

"Sometimes issues can be more complicated than they appear and I would say the obvious choice is not always the best choice. I actually started out early on with one belief and time and experience has caused me to do a 180 from where I was at."

We reckon that some sections of our website should be updated and that we may want to rethink our strategies and goals. I could go on for miles here, however I'll cut it short here. I'll just invite everyone to our General Discussion forum (a VSTEX account is needed to login update: now everyone can browse our forums). We're always open to discussion.

Let the Games Begin!

With the WSE's announcement that it is leaving the Linden Dollar behind and going to trade solely in World Internet Currency units (WICs), the competition has begun for companies to be from the WSE to other exchanges. Already two have jumped ship: MAI and HOT, and one has sworn allegiance: DDE. As for the other side of the coin, to my knowledge two of the exchanges, VSTEX and CapEx are offering incentives for companies to switch. VSTEX is offering 10% off their IPO/relising fees, and CapEx is offering 100% off of them, both for a limited time.

It's an interesting battle, really. DDE's decision to stay surprised me greatly, as I would have thought that a business being conducted in Linden dollars, established in Linden dollars, and (until now) paying dividends until Linden dollars would have wanted to stay away from changing currencies and paying loads of transaction fees in order to bring any kind of value to their shareholders. But Delicious tends to know what she's doing, so maybe she's got something up her sleeve that I don't know about.

The question in my mind is how many of the WSE's 42 companies will jump ship in the next month. I really can't understand any retail or land company wanting to stay on the WSE now. Scripters and investment firms could still survive in WICs, since the scripters can simply request payment in USD and the investment firms should be savvy enough in whatever currency. I had originally thought the flight would be more severe, but so far it seems like companies are proceeding as normal, much to my surprise.

As to WSE 4.0 itself, I can only conclude that Luke Connell is attempting to reach outside the walls of Second Life, probably for at least two reasons. The first is that if he leaves Second Life and keeps the companies with him, he's outside the reach of Linden Lab's mighty ban hammer. The second reason is that he allows himself to list firms from other worlds, perhaps the Entropia Universe or IMVU. If it works, it could be amazing.

However, also I've got to wonder about the profitability of HCL at this point. We know HCL has defaulted twice on its bonds, and has had no income for 50-some days and counting. HCL owns an island with low occupancy, but tier still comes due, as well as a hefy (and ad-free, I believe) web server. According to the HCL income statements, HCL had L$8.3 million in profit (neglecting the L$2.78 million they owe in bond interest currently*) ending January 1, which is about USD$31,300. I'm not saying they're going bankrupt right away, but between all the expenses (who pays for Connell's RL expenses, anyway?) I've got to wonder if this conversion to WICs isn't just all smoke and mirrors to mitigate some deposit liabilities.

With no one demanding Linden dollars, who is to say what's happening to those dollars? While there may be an initial "dump the WICs" session, I imagine the WIC will be fairly illiquid. Some hefty transaction fees could make sure people keep their "game tokens" as WICs and not as Lindens, allowing Connell free use of all the Lindens deposited into the WSE.

But enough of the theories, I have a more important question to the CEOs of the WSE: Which of you will stand by a twice-defaulted exchange moving away from your primary transaction currency? Which of you will remain next to the CEO who has played a major role in the collapse of not one, but two of Second Life's major banking institutions? And how will you justify it to your investors?



*If anyone can explain to me how you can manage to post an L$8.3 million profit and yet not have L$2.8 million to pay your bondholders with, I'd love to hear that reasoning. Please include the mathematics behind it.

Tic Tac (Toe)

If you're wondering about this blog post title, it's meant to represent both the clock accompanying us to January 22, when the new LL policy on inworld gambling will have effect and the tic-tac-toe game that apparently SL financial institutions have been playing with our beloved San Francisco company, in an attempt to get those 3 Xs on a straight row.

We've seen a lot of drama, the run on banks, all kinds of creative minds coming up with more or less viable ideas. One of the best I've seen around is the application inworld of the contractum trinius (which is not really a new idea, but proves that some issues can bite at us over the centuries). So far so good, but I've seen people cheering because the new policy was bypassed this way.

That's not right, for a simple reason. The company controlling the Second Life Grid could ban red hats and whatever, and for every workaround new policies can come up and they can be expanded, in a almost endless armfight.

Let's get back to the contractum trinius. At that time the Catholic Church prohibited usury and that's why our creative ancestors came up with a solution. Now, Linden Lab started from a completely different premise. Some think that they wanted to ease the work for RL banks and their future appearance in full force in our metaverse. Personally, I don't think this is true.

I'll make a long story short: too many frauds related to inworld banking. No need to provide links here, most likely you know of at least one. Those scandals got Linden Lab too much unwanted attention and bad press.

It's about time for the SL financial institutions still operating to do something in order to make things so Linden Lab won't have again to take a stance like the recent one. Over the last days almost everyone has been "flying solo" and with the only intent to keep operating past January 22. Period. At least that's what I gathered from the web. If I have missed something, my apologies. It's not been easy to surf through all the posts, blogs, websites and comments.

This may be the right time for the SLEC (Second Life Exchange Commission) to get its acts together and do something meaningful. This may be the right time for the Second Life Exchanges (as you may know I am the Communication and Public Relations Director for the VSTEX, virtual stock exchange in Second Life) to enforce their rules (which sometimes are unattended by the listed companies, with no consequences) and maybe expand them, so that listed companies are required to meet higher requirements and standards. Here I'm not talking about going "full GAAP", but looking at the companies on the VSTEX exchange, the situation can be disheartening.

Recently I started a simple audit of our companies. The first I started with failed to update the company prospectus for the last month cycle and most important they were reporting substantial profits that had not been distributed as per their dividends policy. Do I think that they did not distribute dividends as promised? No, I think that the numbers on their company prospectus were made up to make the company look good. Maybe those numbers were "hopes about profits", that they just forgot in the company prospectus. Whatever the reason, this is no good.

I can see why the exchanges can be "soft" when enforcing their rules, or why they requirements are pretty loose. They fear to lose ground to their competitors, to lose companies to other exchanges. This tactic is not gonna pay in the long run, 'cause it's just screaming "Linden Lab, do something about me".

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So, you're in the trading room...

Let's say you're the "Oompa Loompa Duffo Inc. SL" CEO. Your virtual company has recently gone public and you had your IPO on a Second Life stock exchange.

You did your homework and you followed the guidelines to the point; your IPO has been an outstanding success or, even if you failed to achieve that, you raised a nice amount of money and now your company has a solid foundation to build up from.

This blog post isn't about what you're gonna do with your money, anyway. This post is about you should deal with investors, present and future.

Working for a virtual stock exchange as I do can be pretty interesting. I see everything the general public can see and a lot of the things "behind the curtains" and in my 4 months (more or less) service for the VSTEX I observed some common trends.

Most CEOs will be very proactive about their IPO, but usually their excitement will tone down once they are in the trading room. It's been a month or more (in the worst cases several months) since the IPO and the company prospectus hasn't changed a word, except for the financial data (eventually). The business plan is still a few lines long and there isn't an in depth risk analysis.

Your last news item on the stock exchange website dates to a month ago, or to several months ago; and let's be honest: your last news weren't that great, short and with abundant exclamation marks.

I believe that one of the issues behind stock prices dropping to ridiculous levels (0.1x L$ per share) is lack of proper and regular communication with the investors and the traders.

You may argue that nor you as a CEO, nor your company, earns anything from people buying and selling your company shares. While that's quite true, that's only the minor part of the picture.

First, would you like the CEO of a "0.1x company?". I certainly would not, as I wouldn't be happy to be the CEO of a company who had a successful IPO and in just a month is trading at values 5, 6 times lower than the original IPO price (can you say "unhappy investors"?).

Second, your share value is part of your company (and sometimes personal) reputation. An healthy share price is perceived as the result of an healthy, well run company. It makes people want to buy your shares and your investors are maybe the first in line to buy your products or services.

Third, being perceived as a "valued company" helps you stand out from the crowd. Gets your name in the news, people look at you. And it's free advertising.

I could go on for miles on this subject, but I think I told you the most important things. When writing, you don't have to be telegraphic (unless you're writing a newsflash or a telegram), but you don't have to flood your readers with words too (unless you're writing a novel or a poem).

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Ethics (or lack of)

For those of you thinking SL is a game, or a "3D chat", a post about ethics may seem totally unrelated, or misplaced.

Well, I believe that no matter your opinion of SL and how you "live" it, ethics (or talking of) definitely have a place, here or anywhere else.

Ethics (and lack of) are strictly inherent to us humans. Every day we act, talk, write; there are many instances where ethics are (or should be) involved.

Before I get carried away, I'll get to the point and I'll specify that I'll be dealing with business ethics in this post. As I wrote in my first post here, I am the Director of Communication and Public Relations for the VSTEX, a "community based virtual stock exchange".

I won't go over all the issues most of us have seen, either directly or not. Most of us know that the range of "bad things" goes from CEOs running away with the company treasury to all sorts of blackmail attempts.

Those are the things getting the attention of the press and the general public. Of course on the other side there are a lot of good businesses, but as it happens in real life, most of the times who just does his business the right way, doesn't get much press. You may or may not agree with me here, but that's how I feel.

Before joining the VSTEX team I have been a "virtual trader/investor" and a few times I have stumbled on unethical people. Being in my new office I said to myself "What should I focus on, now?".

First thing was to improve the exchange rules which they are far away from being perfect now, but any improvement is a good improvement if you ask me.

Then I started digging into business ethics and that led to the VSTEX Code of Ethics and the VSTEX Public Disclosure Policy .

Of course even the best codes and policies won't mean much if you don't live by them. A Code of Ethics should not be a collection of phylosophical mumbo-jumbo or marketing jargon and at all costs shouldn't be a trap to lure people into thinking you're all good and white.

I believe ethics to be a major factor in the competition equation. SL is a social environment, a good reputation will take you up to the stars, a bad or tarnished reputation may hinder you seriously. Who will prove to be an ethical business will have a definite advantage in the race for success.

You may be thinking "So let's get ethical now", but please stop a little before you run for your desk, to write the "Ultimate Code of Ethics".

You don't learn ethics, though by reading some good documents you may improve your ethical inclination/awareness. You must have an ethical DNA. If it isn't in you veins, in your heart, you may get close, but in the long run you may give up or fail to live by your own code.

I would encourage you to discuss ethics with your team, or fellow businesses, whomever. Look around you and ask yourself "How could I do it, in an ethical way?" or "Could I be more ethical?". Asking questions, even to yourself, is a great way to learn. Great human discoveries and inventions came out of more or less simple curiosity.

As for myself, I'll see what I can do over at the VSTEX where I found a management very incline to follow my calls and ideas. Future will tell and I'm looking forward to a bright one.

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Let me introduce myself

This night I happened to meet Guardian Market over at the AVC Finance Center, where I do have an office.

We chatted a bit and he asked me if I would have liked to write here. After some thinking, I said yes.

You may not know me (most likely); I am the Communication and Public Relations Director for the VSTEX, a community based virtual stock exchange in Second Life.

I do have a blog of mine but it's more a personal diary (sort of) and it's hardly updated (spare time is such a rare commodity!).

Here I'll talk about the SL financial world and maybe something else related to the metaverse we love so much.

I won't use this blog as free advertising for the VSTEX and I'll try to be neutral, anyway remember who I am when you'll read my posts.

Hope the relationship between me as a writer and you as a reader will work.

Happy trading!

Samantha Goldflake