Web 2.0: Conversation with eBay Founder Pierre Omidyar

Omidyar founded eBay, and has since started Omidyar Network, a for-profit company that invests in companies that drive economic, political, and social change. The conversation was really interesting, and it's heartening to hear about a guy who belives that businesses should exist to do good.

Q: Why did you step back from eBay?
A: If I was lucky I could build it to a certain point and then turn it over. Wasn't an idea of whether I could scale it or have a good time or whatever, but more about bringing in an experienced management team who shared my values and who could turn it into something really cool. I wanted to bring in interesting people with diverse perspectives who could handle making decisions without me there.

Q: Then you started a foundation, what did you learn?
A: We did the usual things, then had an epiphany: if we want to make an impact, what makes you think that you can only do it limited to this non-profit space. eBay has 150M customers, in the nicest terms, that's 150M people who have learned to trust strangers. so that a business could help strangers trust was interesting. We restructured into a for-profit network. We're not a VC in the traditional sense, but a mission driven fund. Our mission is for individual empowerment in economics, policy, etc. 750k people make their living selling fulltime on ebay.

Q: What are details of fund?
A: Mission-based investment fund. $400M, all Omidyar's money, treating it like a new VC fund, hope to deploy all $400M in the next five years. Looking at businesses that we'll only invest in if they power individual self-empowerment. Business can be a force for good (applause). It's a fundamentally Good Thing. Adam smith: given the right environment, the pursuit of individual self-interest leads to an betterment of the common good. So an increase in profit is evidence of an increase in the level of general welfare. We need to figure out how to encourage the environment that needs to exist for this to be true.

Q: Is it easy to tell which companies will be consistent with those values?
A: We look for three things:

1. Does the industry have a level playing field.
2. Is the company open acess and transparent, does it facilitate connecting shared interests?
3. Do participants have skin in the game, are they engaged in it?

Then the business model: have you developed a biz model that's tied tightly to the three factors?

Q: How do you measure social impact?
A: Looking for economic, social, political self-empowerment. Since we want to have a social impact, how do we measure it? If the environment is right, and the biz model is one that can only be successful if it has a social impact, then evidence of success is evidence of positive social impact.

Q: Are we in a bubble? Are some companies killing each other by innovating in the same industries (mentions Joe Kraus' fratricide concept.)
A: There are so many creative people innovating right now. Tools have gotten cheaper, and you need less capital to start up a business. This means more competitors because the barrier to entry is much lower.

Q: Talk about the eBay platform.
a: At eBay we're trying to foster innovation outside the company's walls. I tell our engineers, "no matter how bright you are, there will always be more people outside the company's walls that are brighter so we need to provide them with tools to innovate."

Q: Would you invest in eBay right now?
A: Yes, here's why: people are connecting around shared interests. If you went to a non-profit 10 years ago and said they had to reach 150M people to get them to trust each other and gave them $10k as all the capital they'd get, you'd be nuts. But we did it.

Q: How does the concept scale? A for-profit company is ultimately responsibile to its shareholders.
A: A non-profit that focuses primarily on social good tends to have more difficulty scaling that businesses. That's why I'm into this model where financial success means social success. As i brought in managers at eBay who would grow the business I had full confidence that the world would be a better place.

Random bits:

If you're going to make the world a better place by following your passion, it's good.

In order for the pursuit of self interest to lead to positive impact, there can't be externalities not priced into the product. The government has a responsibility to foster the environment that ensures that self interest leads to positive change.

If you start with my basic belief that people are inherently good, then connecting people enables the good.

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Sujal has some more thoughts.

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About

Hi, I'm Kareem Mayan. I co-founded eduFire, an online video tutoring company.

I've done time at ESPN and FIM.

I advise WorldBlu, helping them build democratic companies.

I moderated a council for Creative Good.

And, I helped bring Barcamp, a technology un-conference, to LA, which is where I live. I am now living and working in cool cities around the world.

More about me.

Opinions stated here are mine alone.

Contact: blog -at- reemer

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