A Possible Explanation of the Recent Surge in High End Business Profits Within SecondLife

Via Reuters, 'Surge in high-end Second Life business profits':

SECOND LIFE, Dec 5 (Reuters) - The number of Second Life residents making profits over US$5,000 a month surged more than 40 percent in November, according to data released on Tuesday by Linden Lab, while the total number of profitable residents rose 11.5 percent from the prior month...

The economic statistics of SecondLife do have some problems as Reuters reported in November, and as officially responded to by Linden Lab. These aren't really a major factor, but it demonstrates some flaws in the statistics provided.

An Example

For example, I could deposit money into a bank such as GinkoFinancial - let's say 10,000 Lindens from business profits. Over the course of a month, I may withdraw 2,000 Lindens - leaving me with a balance of 8000 Lindens plus interest in SecondLife. In a business sense, this is a profit. But in the economic statistics, it would be shown differently.

My transaction records would show the sales or payments which allowed me to have the original 10,000 Lindens. But then it would show me paying Ginko Financial 10,000 Lindens - so as far as the economic statistics would know, I would be at a 0 balance in my SecondLife account. I would have broken even. If I withdraw 2,000 Lindens in a month, suddenly I would have made a profit for the month of 2,000 Lindens during the same period.

That skews statistics, and since Ginko - as one such instance of a bank in SecondLife - has 11,326 accountholders and an average of 35.68 transactions per hour with $ 24,198,247 Linden in volume and a total balance of L$71,164,172¹ - it can be easily seen that this would affect some of the Linden statistics. Money flows between SecondLife accounts in this manner pretty regularly, though it's difficult to say that this is a majority.

In Context

Let's say that someone makes the equivalent of $1,000 US in a month, but invests it within SecondLife, leaving them with a near zero balance. As far as the Linden Lab statistics are concerned, the business would not have profited.

But, let's say that I have a business generating $100 US/month - a realistic figure, I believe - and let's say that every month I stick that money in a SecondLife investment. It's not worth the PayPal charges to me to pull it out, especially if I'm seeing good returns on my investment. But let's say a big event is coming up where people exchange gifts and lots of food and beverages are involved. Maybe something like Christmas.

People might pull money from their investments and cash in. And during the period that they do this, it would look like some people made a substantial amount of money during that period where they may have simply had it working for them within their investments within SecondLife.

Of course, this would have to be demonstrated by the valuation of the Linden dollar. But if no one cashes out at the same time, and they trade carefully, the Linden could theoretically be held fairly constant without it becoming volatile.

It's not a 100% fit to the data, but it may explain some of the 'recent upsurge'.

It is also apparent that the way economic statistics provided by SecondLife needs to be addressed. Maybe there is something to accusations of the numbers being 'juked' for better public relations, but then - given the system of financial transactions within SecondLife, no one seems to have come up with a better way. Yet.

¹All statistics current as of the time of this writing.