Last night, there was another meeting of the Second Life Exchange Commission (SLEC). Like the previous meeting it was long on contentious discussion, and short on actionable items.

Like the previous meeting, issues of how the SLEC can establish credibility were discussed, with plenty of comments about people needing to check their egos at the door. Unfortunately, no one seems able to check their egos at the door, and SLEC remains mired.

One framework that I like to work with in is the Tavistock, or Group Relations tradition, based on the work of Wilfred Bion. My friends in the Group Relations tradition often speak about the primary task of any group. It seems as if a fundamental problem with the SLEC is that its primary task is not clearly defined. Is the SLEC a regulatory body? If so, then it can only regulate those people that it has authority over. As a self regulatory committee, it could have regulatory authority over any exchange that grants the SLEC such authority. Yet if it is trying to regulate an exchange or businesses that are not granting such authority, then it is doomed to fail.

Is it more like a business association where it attempts to coerce other exchanges to behave in a more ethical manner, and inform potential investors of the issues of other exchanges? To do this, it needs to have the highest level of credibility and not allow itself to be portrayed as an attack by people from one exchange against people from another exchange. Of course this gets us back to the issues of the egos.

As soon as anyone mentions that having members of different exchanges on the board of the SLEC might damage the credibility, the fur on the back of everyone’s neck goes up. If someone goes so far as to suggest that members of the board need to be careful about what they say, you start hearing everyone talking about freedom of speech.

Yes, the board members should be free to say whatever they want. In doing so, they may be freely undermining the credibility of the SLEC and making it ineffective. Of course, the members should be free to replace the board with people that will be more effective, as well.

All of this strikes a sharp contrast to the Investment Education Team (IET), which held its first round of public classes this Monday and Tuesday in Second Life. They started off talking about the mechanics of investing in the Second Life financial markets, and moved on to helping people think about what investments are wise investments. They are very careful not to make any comment that might disparage any particular exchange or company.

I asked about what role an exchanges reputation should play in making trading decisions, and it took a bit of pressure to get them to talk about this. Clearly an exchanges reputation should be an important part of an investor’s decisions about which stocks to purchase in Second Life. How much liquidity or volatility is there in the exchange itself? If no one is trading in a given exchange, it will be much harder to sell stocks that you have bought when you want to. Does the exchange have policies to require companies to provide the information that investors need? If not, the investors may be trading blind. How likely is a stock to become delisted on the exchange because of policies of the exchange? An exchange that is quick to delist companies is likely to leave investors holding worthless and untradable stocks. It is a risk factor an investor needs to think about.

By reluctantly addressing these issues, the IET may have the potential to have a greater impact on the viability and ethics of trading in Second Life than the SLEC has demonstrated so far.

Yet I do not want to end on a bleak note. Towards the end of the SLEC meeting, a suggestion of attempting a media blitz to point out the issues of how the World Stock Exchange handled the Merlin Bank situation was discussed. If they can do this in a manner closer to the educational approach of the IET, or in a better business bureau advisory like manner, and not come across as people from one exchange bashing people from another exchange, there may be hope for the SLEC. Focusing on defining their primary task and then executing it will help immensely.