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Second Life 2003 - Life, Death And Taxes In The Early Days

Perrie Juran

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Several weeks ago I finally made the pilgramge to the Governor's Mansion in Second Life.  While I was there I picked up facsimilies of some historical records, among which were some of the FAQ Notecards explaining Second Life.  One of them was entitled "FAQ - Economy And Taxes 02/04/03"

I found it a fascinating bit of information about the early days of Second Life.  While it is slightly lengthy, I am posting for your enjoyment (or disdain as the case may be) the full text of that Note Card.

If you haven't made the Pilgrimage, I'd highly suggest it.  Also close by and fascinating to tour is the "Ivory Tower of the Primitive."

"FAQ - Economy And Taxes 02/04/03"


This explanation of the Second Life Economy refers only to Linden Dollars -- it has nothing to do with "real" money. (So don't worry about your credit card being charged -- or credited -- for the things mentioned here.)


The purpose of the Second Life economy is to fairly allocate resources among residents and create incentives for player-driven exchange. By "resources," we mean the amount of land and number of objects in the world. Both of these can be thought of as finite natural resources, though the total resource pool will expand as more simulator machines and more land come online.

As Second Life's population grows, and resources -- land, objects and the processing power required to maintain them -- become more scarce, they become more valuable. To control growth and prevent the world from getting cluttered with all sorts of less-than-wonderful practice buildings and objects, money will come into play as a regulating force. The scarcer the resources, the tighter the money and the higher the prices to acquire space and build wonders.

The Second Life economy is flexible. It will evolve and be tuned over time to maximize sustainable fun in the world.

The money supply will be tightened or loosened, depending on the current situation. If there is a lot of open space waiting for people to claim it and build, money will loosen up. As things get crowded, money will tighten to reflect the scarcity of space and related resources. Above all, the economy will grow, expand and evolve as the people who inhabit Second Life contribute to it.

Second Life is an entrepreneurial world. You can create your own segment of the economy, create new goods and services that other inhabitants will be willing to pay for. Your creativity in simulated business can be as important -- and fun -- as your creativity in other aspects of Second Life.

Everyone will get a basic sustenance stipend every week. This will be enough to explore, have fun, participate in all sorts of events and practice building objects. The actual stipend will change, both as part of tuning the economy and in reaction to the available resources.

If you need or want more money than your stipend, you'll have to find a way to earn it, and this is where the fun -- and reality -- of Second Life begins. Just like in your first life, making money in Second Life is all about other people. Wealth in Second Life will mean that other people chose to give you money, not that you "leveled up" or performed a rote activity 1,000 times over.

* If you're a good builder of homes or furniture or ... whatever ... you can build them and sell them.
* If you're a good script writer, then you may make a great Second Life living writing custom scripts for others.
* If you're an artist, you may start up an in-world texture design business or take up fashion design.
* If you like to arrange social events, throw a great party, or enjoy building attractions (for instance, a house of horrors), you can charge admission.
* If your home is so cool with so many great features that people want to see it, you can charge admission -- and sell copies of your furniture, artwork or even the whole house to the guests while they're there.
* If you're a good teacher or tour guide, you can supply those services to residents who need them.

There are almost unlimited possibilities ... what can you come up with? Where do you excel? What do you enjoy doing?

Your stipend is also influenced to a certain degree by your actions in-world -- high reputation scores mean more money. You voice (and everyone else's) always counts.

If you've built something wonderful, or you put on an open house or workshop, place a voting station nearby. There are cash prizes for the highest number of votes each day and each week.

Another way to make money is to donate time, energy and creativity to the community: Second Life will be sponsoring a number of public works projects, and will pay you to contribute to building public spaces, buildings, infrastructure, roads, playgrounds and other common and useful objects. (Government work is great if you can get it.)

Also, on the fun side, we'll be having regular events, like scavenger hunts, where you can pick up a few dollars in prizes. You'll be notified in advance of these events.

One more way to get more money is to borrow it. In the Second Life entrepreneurial spirit, some residents with cash to spare are starting banks or lending services.


There are many ways and reasons to spend your money.

First is land. You can only modify land that you own. And you have more control over objects on land that you own -- you can prevent others from building on your land, and if someone does build or leave something you don't like on your land, you'll be able to delete it. You'll also be able to restrict access to land that you own to those you choose to allow in. In return for this power and ownership, you'll be charged to own land -- both a one-time charge to buy it and a regular maintenance land tax as well. (See Economic and Tax Notes below for details.)

Another thing to spend money on is building. You are charged for every object you create, on a per-primitive basis. You'll still be able to do a lot of practice building to get the hang of it, and if you delete whatever you've built afterwards, you get your money back. Try it and see -- there is no penalty for experimentation in Second Life. There is, however, a regular maintenance fee/tax for objects you have created but haven't deleted. (See Economic and Tax Notes below.)

Customization is another reason to spend. There is a small one-time charge for each texture or sound you upload to the system.

Other uses for money are:
* Teleporting: too impatient to walk or fly somewhere? Just teleport. But it'll cost you.
* Buying objects, furniture, textures, clothes, artwork or whatever from others,
* Attending parties, events, workshops and extravaganzas,
* New things we haven't thought of yet -- but we will, and so will you.


* You will always be able to see your account balance (lower-left corner of the screen), and will be able to access a list of recent charges to your accounts (Select Account History from the View menu). When fees are charged to your account or you receive stipends while you're offline, you'll be notified at your next login.

* The exact cost of things appear as (actually before) you buy them.

* Because of the relatively small size of the world, the tendency for early economies to possess less peer-to-peer exchange and the still-evolving tax structure, the economy is a little tighter right now than we'd like it to be. We'll continuously launch multiple experiments intended to loosen things up.

* Land taxes have a discount awarded for land located close to other land owners. The discount is based on the percentage of resident-owned land near the center of the chosen parcel, and can reach as high as 50% (this number is subject to tuning). In other words, if you buy a plot which is completely surrounded by neighbors, it could be as much as 50% cheaper to maintain than a plot sitting alone in the countryside. Additionally, the rate applies to your own plot as well, making it somewhat cheaper to buy one large plot versus several small ones scattered around. The land tax discount rate (for all property owners) will change dynamically as new residents move in, so you drop the taxes of your neighbors by moving in next to them, and vice-versa. This should make choosing neighbors fun -- you make their taxes lower by living near them! Our design goal is to help people of like minds or interests own more land by creating neighborhoods together.

* The tax for maintaining objects that you own in the world is on a per-primitive basis, with a sliding rate that increases both with the size and height of each primitive. The per-primitive tax ranges from L$1 per week for a small object at ground level to L$30 or more per week for a 10 meter box 20 meters above the ground. The exact tax rate will continue to evolve and be tuned over time. People with large, elevated structures may want to rethink their designs before the taxman comes. (This sliding tax scale allows us to use taxes as an allocation tool, allowing most people to own and easily maintain many objects in world, but castles in the sky will be rare. Our design goal is to encourage density but make objects which are highly visible (being both big and tall) more pricey to better match the aesthetic impact and computational expense associated with their existence.

* There is also a higher charge for lights and glowing objects. Small, unlit things on or below ground will be taxed less than towering structures and castles in the air.

* If you want to keep things you build in-world but don't want to pay for them, you can release them to public ownership. Releasing things to the public, however, means that others can modify, copy or delete them.

* There may eventually be additional charges established that relate to system energy. For instance, transparent objects take more processor time, so they may eventually cost more. Also scripts that tax the system may someday have related charges.







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Storm Clarence wrote:

Was this a post where you did not expect a response? 

Have a cocktail, my friend.  Easy!  

Thank you for the drink my friend.

I was slightly surprised to see no responses but I am never completely surprised any more here.

Maybe every one already had seen this.  I found it to be a fascinating piece of history.

I wonder how many people catch the fact that there was no way to buy Linden Dollars then (as far as I have been able to discern).  Beyond the stipend you had to do something to earn them!

I do envision a day when a future Mel Brooks produces a movie, "A History Of Second Life."

Or will it be a future William Shakespeare writing "A Comedy Of Errors, Part Deus."


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Just adding a random note here, the Governess (yes the Governor is actually a woman) was not in when I visited the Mansion.  She must be rather secretive because I have been told almost no one is ever granted an audience with her or has ever seen her.

On the rare occasions when she has appeared in public it has always caused a major stir in the Media.

You can view her profile here.

For some history about the Mansion itself, there is more information here.


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I had to read it a couple of times to make sure, but I got the same thing you did: there was no way to buy Lindens.

It describes a situation so different from the current one that I can't get my head around it. Since I have earned about enough Lindens in four years to make a down payment on an average pair of shoes, I'd have to think I'd have contented myself with the stipend (however much it was) had I been here then. I still haven't found a way to give myself enough inworld time for really learning to do things that might be marketable—there's always a shiny to distract me.

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the bit about how the unregulated SL banking industry was going to be awesome is pretty funny

like somehow it was going to end up different than unregulated RL bankers

 jejejejjee (:


also how taxes was going to curtail the depletion and advance the better use of resources. bit like how the RL carbon tax is working really well to do the same thing (not) (:


still it was worth a go i suppose

even if to show that laissez faire for the peasants and not for the king dont really work out very well

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Nice post for those that don't know much about the early days of SL. I highly recommend the trip to see the mansion and the SL history museum in the basement. The mansion was considered revolutionary at the time it as built. It was a different world then for sure and it really shows  how far SL has come.  You will appreciate your own home now even more once you see this one.

The reputation scoring was still in effect when I joined.  Basically you could award a point to someone in various categories involving both behavior and SL skills.  Everyone's profile had a list of how many points you were awarded in each category. Unfortunately as with so many things, people started to game it and pay others to give them points. Eventually it was discontinued.

It is interesting to note that those residents that were around in the early days and are still active in SL now, still get stipends at the same rate they got back then, which is higher than today's premium account stipend.

It was also easier to earn money back then. Today you work for tips mostly.  Back then most jobs paid you in addition to tips.  If you owned a club or event venue, you could get paid what was called 'dwell' by LL based on the number of people that visited and how long they stayed.  Making money as a content creator was easer too.  Freebies weren't around as much as they are today or near the quality either.  If you wanted a nice avatar, home, toys etc.,you had to buy them and people were willing to do that.  The current attitude of not wanting to pay for anything and living off freebies that some part of the current population seems to have, just wasn't as prevalent back then.

When I came, the southern continent existed and the northern continent had just opened.  There were no private islands. You actually saw Lindens around all the time and could talk to them.  If you needed help, you could click help in your viewer and a Linden would actually show up and help. If some one was misbehaving, an AR would result in a Linden promptly showing up and dragging the guilty party off to the Cornfield which was like jail.  You avi remained there until you had served your sentence.

When the 10,000 resident mark was hit a grid wide announcement was made almost immediately.  It was hard to believe and people celebrated but also wondered if the grid was going to crash LOL.  When LL actively started to promote SL to the greater world and the population exploded, we saw a higher percentage of not so nice people coming in.  It is only to be expected once the residents represented a broader slice of the RL population, but before then there was a great attitude among most residents that we were pioneers and all in this together.

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Really interesting. I wonder what happened to a lot of those things? Did they decide to take a more hands off approach to the citizens?

* There is also a higher charge for lights and glowing objects. Small, unlit things on or below ground will be taxed less than towering structures and castles in the air.

Hmm. I wish this one were still on the lawbooks. LOL. I might be written up for some of my landscaping, though. But not all of the grasses and flowers are modifyable (yeah, that's it.) Still, I have never rezzed a glowing building.

* If you want to keep things you build in-world but don't want to pay for them, you can release them to public ownership. Releasing things to the public, however, means that others can modify, copy or delete them.

I wonder if that is one reason why there was so many old full perm freebies? It would seem to encourage that. 


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Thank you for posting that, Perrie.  I'm like Dillon in that a lot of that info, especially the economic intricacies (such as lowering a person's tax by purchasing the land next to theirs - that could be a nightmare for LL to keep track of today!) were hard to wrap my head around.  Paying for each prim caused me to wrap duct tape around my head so it wouldn't explode, and I had a good laugh at there not being many castles in the air.

When I first began SL I purchased the book "Second Life: The Official Guide" copywrite 2007, so it was current when I read it.  There is a very interesting section in it called "A Cultural Timeline" (Chapter 12).  It lists the timeline as:

First Era:       2001-Early 2003: Pre-Historic, Pre-Beta

Second Era: Summer 2003: Natives vs. Colonists

Third Era:      Winter 2003: A New Nation is Born

Fourth Era:   Late 2003-Early 2004: Expanding the Frontier

Fifth Era:       Mid 2004-Mid 2005: Industrial Revolution

Sixth Era:      Summer 2005-Present (that would be 2007): Boom Time

Since the book was published in 2007, it would be interesting what more recent "eras" would be called.

Re: the taxes, there was apparently a "revolution" - Quoting from the book:

"As society forms, so does social upheaval.  The most pronounced example in SL was the reaction to Linden Lab's "tax policy."  Residents were being taxed (L$ were deducted from their accounts automatically) for objects they instantiated in-world.  To the Lindens, this seemed like a simple way to prevent residents from overheating the servers with too many objects.  But the Lindens got way more than they expected.

The Tea Crate Rebellion of July '03

Objecting most strongly to Linden's tax policy was Americana, a group devoted to US landmarks.  Feeling punished for their public-works project, Americana unleased a protest suitable to their name, dropping giant tea crates across the world and setting their American landmarks on fire.  A cat named Fleabite Beach sent out a Thoreau-style proclamation against "Mad King Linden," and led the revolutionaries into the streets with muskets and signs emblazoned with the words "Born Free: Taxed to Death!"  Much of the citizenry was drawn into the insurrection, either as rebels or redcoat "Linden loyalists."

But, from conflict comes community, because it was one of the first times residents saw themselves together in a grid-wide struggle.  And though the Lindens may not admit it, the protests heped encourage them to end the tax system.

Third Era - Winter 2003: A New Nation is Born

During this period, Linden Lab made three policy decisions that were considered radical at the time:

1. To end monthly subscriptions (the standard revenue model for almost all MMOs) and instead, begin charging monthly "land use" fees for virtual land.

2. To announce a laissez-faire policy on buying and selling the official in-world currency on the open market for real money.

3. To recognize residents' legally enforceable intellectual-property rights over the objects and scripts they created within the world."  (pp.281-283)

There's a lot more in this history chapter, but this section shows how the land tier structure began as well as the beginning of content creator IP rights.



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Czari Zenovka wrote:

2. To announce a laissez-faire policy on buying and selling the official in-world currency on the open market for real money.


seems like linden gave up on that one quite a while ago. seems they been manipulating the money supply for quite a long time now. nobody like a linden has ever said but people like Desmond Shang and other barons and L$ money market dealer people not silly and have commented at times on what they see happening

like massive inputs and outputs of L$ on the lindex at strategic times that they think/know that only Supply Linden has the capacity to do


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Knowl Paine wrote:

I have read that.

Another good read, is, The Great Erase.

Data which may be unavailable, but an interesting read, are Journal Log entries, from the former XstreetSL.


Not sure if you were replying to me or Perrie...is The Great Erase a book (just tried looking for it) or a blog?  Would be interested in reading it. :)


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IvanTwin Rogers wrote:

Yours dont know Governor Linden?

Governor Linden LOL,:matte-motes-evil-grin:

I know all about the Gobernor Linden, but i cant say its a secret.

but i love Governor Linden to the End!

at least you still got a sense of humour. so is lots of hope for you yet (:

i think you going to do pretty good in SL. end up being a great survivor of SL like quite a few of us else. despite all the stuff that linden seems to want to enrage us with (:

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