March 12th, 2006
Pierre Omidyar's three laws
Pierre Omidyar, eBay founder, talked about his notions of choice, sustainable business models and social good. "Businesses can be a force for good. I recently rediscovered Adam Smith….If the baker sells bread to the shoemaker, the profit in the transaction is evidence that quality of life of baker and shoemaker increases. What we really want to do is to enable individuals everywhere to pursue their self interests in an environment, which doesn’t lead to harm," Omidyar said. "When you unleash people to pursue their self interest, it ultimately leads to a better place."
Adam Smith has his rules, and Omidyar has his basic three laws for creating businesses the improve quality of life and enable social good. First, open access, which means a level playing field and transparency. "Anyone can join the club and there is transparency around the rules," he said. Secondly, individuals must be enabled to connect (Skype, for example)and interact with one another, leveraging collaboration and the wisdom of crowds. "It will inevitably lead to individual self empowerment within a given structure."
Third is "skin in the game." Individuals have to make an investment to participate and be accountable for how they behave.
Creating a set of rules about the environment can limit choice. "You don’t have the choice to behave contrary to the rules, Omidyar said. "We can’t be all things to all people." Designing such an environment requires an organic process to avoid the overlord syndrome . "When you design a system, it means you start with as little structure as possible–watch and learn from users and try to limit behavior that contradicts the value of environment you are trying to create. If try to legislate good behavior, you are generally not successful."
Pricing in a market system has an impact similar to the way a government uses taxation policy, Omidyar noted when asked about pricing changes at eBay. For example, the government tries to minimize the bad effects of smoking through taxes; eBay raises its rates to reduce the use of features that they don’t think are great ideas, without legislating them out of existence, Omidyar said.
"If you are providing a service of value to users, and put users at the center of attention, you should create a sustainable business model," said Omidyar. The best way to accomplish that is to drive revenue from the core value, such as eBay generating its value from the transaction, not from the side, he said. "We need to be looking for businesses are a force for social good. If you can charge fair price for service, and you can use that to build more services, and have a profit, and pay employees."
Dan Farber, editor-in-chief of CNET News.com, has more than 20 years of experience as an editor and journalist covering technology. See his full profile and disclosure of his industry affiliations.
