Remembering eBay

eBay was created in 1995 by Pierre Omidyar, a recognized libertarian who believed that people were basically good and that, if given the opportunity, they would do good. Pierre wanted to create a market in cyberspace governed by moral values, where the government did not have to threaten to use force since the community’s implicit social contract would prevail. In 1996, when the first conflicts and disputes appeared, Pierre reacted with a brilliant idea: he created Feedback Forum, which has since become the current eBay reputation system. A system whereby users could grade the other party and complain about abuses. Pierre stated in his announcement:

“(…) some people are dishonest. Or deceptive (…) We can live with that. We can still make deals with that“.

However, the disputes continued. Omidyar hired Jim Griffith, a regular user of eBay’s forums (Uncle Griff) who was popular and loved by everyone, for an amicable dispute mediation. eBay’s growth was so spectacular that its offices were full of mailbags with uncollected checks due to lack of time. In 1997, Pierre asked Bob Kagle of Benchmark Capital (venture capital investors in eBay) to help him find a one-of-a-kind CEO. The chosen person was not a man but a woman: Meg Whitman, an executive with experience in companies with strong brand names (Procter & Gamble, Disney, Hasbro), just what eBay needed. Soon after she joined, eBay banned the sale of firearms. Pierre Omidyar recalls:

(…) the reason is that the regulations in all the states [in the USA] are so different and so varied that it was hard. It was very easy for a member [of the eBay community] to accidentally trip over a regulation, and we didn’t want them to get into trouble and, at the same time, frankly, Meg’s point of view was, if somebody buys a gun on eBay and uses that to harm somebody, we don’t actually want that. So in her mind she was uncomfortable with it, actually from the day she joined the company, so we got rid of that [the firearms]“.

eBay continued to grow, and so did the fraud: fake limited editions, fake Rolexes, fake autographs, fake Porsches!, articles that were never sent, etc. “Uncle Griff” did not scale up. In 1999, eBay hired some tough guys: federal prosecutors, former DEA (Drug Enforcement Administration) agents, etc., and created a fraud investigation squad. The only mission of the “eBay Cops” was to locate the fraud and prepare the lawsuit for a physical world court. Pierre Omidyar explained the initiative:

“We’ve had to evolve our strategies and our policies from what I built in the beginning, which was a self-policing community of people, to one where we take a more active role in trying to help identify the bad actors. We work with the authorities to go find them and make sure they don’t come back.“

The dream of a self-policing market had died. It was no-one’s fault. Pierre Omidyar failed (while getting rich at the same time) but at least he tried with all his heart.

Do you remember Marc Knobel? After his victory against Yahoo in January 2001, he wasted no time in writing to eBay, asking why it allowed Nazi articles. eBay reacted promptly. In early May, not only did they ban trading of Nazi memorabilia but they also banned articles created by notorious murderers (letters, artwork, personal belongings) and novelty items (T-shirts bearing murderers’ names, crime scene photos, electric chairs, etc.). Did they do this to protect the community from the various regulations? Did they fear a lawsuit similar to that of Yahoo in the physical world? Or, did they establish themselves as judges of what can and cannot be traded? Questions, questions, questions…

In a Business Week interview in December of that year, Pierre Omidyar justified his decisions:

“eBay seems to be becoming more of a government, though, with explicit “laws” against certain conduct, such as selling firearms.

The community really is no longer the way it was in the early days. My philosophy then was let the community govern itself. That philosophy didn’t really scale up. I would have wanted it to. But I realized in early 1998 that at a certain point, you have to say, well, there is a part of the community out there that isn’t appropriate, such as alcohol and firearm sales.“

Tomorrow: Google.

By David Blanco
Saved in: Internet | 1 comment » | 19 September 2006