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Dinner with the FT: Auction man

January 23, 2009

March 25, 2006 - Pierre Omidyar, the 38-year old founder of the mammoth online auction site, eBay, doesn't do media interviews that often, let alone over dinner. But here he is in Bar Americain, a busy American-style brasserie in midtown Manhattan.

We're sitting between a raw fish bar laden with oysters and clams, and a crowded cocktail bar where an athletic barman is mixing drinks. Black-suited waiters sail by, oblivious to the fact that they've got the world's 35th richest man in their midst. (The latest Forbes rich list says he is worth $10bn.)

Omidyar does not, it has to be said, look like a billionaire. He seems much too young and unassuming with his cherubic smile, heavily gelled black hair and metal-framed glasses. And although he is wearing chinos and a freshly pressed checked shirt, he gives the impression that he would be more at home in jeans and a T-shirt.

He isn't so interested in being interviewed, he says, because he doesn't think his views, or those of any other business leader, are nearly as important as individuals working together to create change.

"I really believe everyone has the power to make a difference," he says. "And by working together we can help make the world a better place."
It would be easy to dismiss this as trite utopianism if it was coming from anyone else. But Omidyar founded eBay just over 10 years ago on a similarly idealistic belief that "people are basically good", which later became the company's mantra.

What was initially an experiment to create an efficient online market, where buyers and sellers had equal access to information, is now a $50bn corporation. You can buy anything on the site, from a brussels sprout to a $5m Gulfstream jet. A car is sold on eBay every second and some 750,000 people make their living from it.

It was the ultimate internet fantasy: a good idea that caught fire. And when it went public in 1998 it made Omidyar one of the wealthiest men in the world. Almost overnight. "We didn't do moderately wealthy. We went straight to ridiculous," he said later.

eBay's success, according to Omidyar, was largely accidental. "It was just a side project. Efficient markets are really neat but individuals usually can't participate in them. The internet changed that. I never thought the business could have this kind of impact. I am a software engineer, a technologist, I was focused on the technology."

Omidyar and his family moved from Paris to America when he was six years old and he grew up in Maryland, where he always had a fascination with gadgets. He studied computer science at Tufts University and is still interested in technology, but more as a tool to empower people than anything else.

Though he is still eBay's chairman, he has gradually stepped down from the day-to-day running of the company and is now one of the most active philanthropists in the US.

Omidyar is in New York to attend an international conference on global poverty, where he is speaking about microfinance: small- scale loans for impoverished entrepreneurs in developing countries, often women, who want to, say, set up a market stall or sell chickens.

It is not a new idea, but Omidyar says he has a new take on the subject. "I am not sure that I will be able to get my message across at the conference in less than 10 minutes," he says, and as soon as we order drinks (a glass of wine for me; a diet coke for him), he explains his ideas.

"I believe microfinance has huge potential, not only to eliminate global poverty, which is remarkable, but also to help people achieve social, economic and political empowerment. But in order to have any real impact, microfinance companies need to sustain themselves and grow. And to do that they need to focus on profits, not only social outcomes."
In other words, business can be a force for social change.

He has been so caught up in the discussion that he has ignored the menu. When the waitress comes over a second time to take our order, Omidyar quickly passes over the more exotic seafood options and orders a steak. I opt for salmon and we both agree on the green salad as a starter.

Ordering over, Omidyar says he learned a lot of lessons from eBay that help his philanthropic work. "I wondered, how could I use this incredible opportunity to make the world a better place?" he recalls. "I started thinking about the social effect of eBay. It has 150 million customers and these are people who have in a sense learned to trust a stranger because of eBay. That's an amazing result."

Even so, eBay has faced many controversies: fraudulent sellers; people trying to sell human organs, sex videos and even military arms on the site. Omidyar says these were relatively isolated incidents and overall the percentage of reported fraud on eBay is tiny and the company speedily removes offending auctions.

Companies such as eBay can only succeed if they achieve a positive social impact, he says. "eBay didn't set out to create a trusting environment on the internet, but it could never have been successful if it hadn't. I think that there is a class of businesses like eBay: they need to create positive social change in order to succeed themselves."
After five years of following the traditional approach to philanthropy - setting up a foundation; donating to non-profit organisations - Omidyar changed direction in 2004. He and his wife Pam, a fellow Tufts University graduate, set up the Omidyar Network, an investment group that funds not only non-profit organisations, but also profit-making businesses.

"I have learnt that you if you want to have a global impact you can't ignore business," he says. "Nor should you. I don't mean corporate responsibility programmes but business models that provoke social change. The big difference between companies and traditional charities is that companies can grow in a self- financing and sustainable way, while charities cannot, as they need a continuous injection of capital to survive."

The companies that the Omidyar Network has invested in have a common theme: self-empowerment. They include several companies involved in "open source" software, or computer programs that are freely available and can be changed or improved for all sorts of individual uses.
The Network has also funded groups trying to increase government transparency, such as the Center for Public Integrity, and others trying to encourage more people to vote.

But the area in which Omidyar has made the biggest investment has been microfinance. He has put more than $15m into a range of microfinance organisations and in early November 2005 announced a gift of $100m to his old university, Tufts, for international initiatives. "Microfinance is a great example of how companies, by pursuing profits, can make the world a better place," he says.

As we begin our main course, Omidyar tells me he has recently rediscovered Adam Smith. "He is a very eloquent proponent of the notion that individuals pursuing their self-interest in the right environment will make society a better place. And I really believe that."

But does he think that the US, with its well-documented social inequality, embodies Smith's principles today? "I think the core principle is true. Sure, there are lots of examples of bad businesses, self-interest gone amok, but it shouldn't be that way. That's when I say go back to Adam Smith and he will show you in the right environment that profits are a sign that society is better off."

Omidyar's faith in Adam Smith's theories reminds me of the joke about the French engineer who asks: "That's fine in practice, but will it work in theory?"

"Although I left more than 30 years ago, I think I still have some of that French spirit," he laughs. Having roots in two cultures "changes the way you think, shows that there is more than one way to think about something".

This is a recurring theme throughout the meal: "We need to look at things a little differently," he says, or "lets redefine the question" or "turn that idea on its head". No problem, it seems, is too big to be solved by human ingenuity.

What about the impact of China's rapid industrialisation on the environment? Surely that's a potential problem? Not for Omidyar. "Take energy. I fully expect the Chinese to figure out how to do low cost nuclear energy because they are going to have to do it for their society to survive. They are a smart people and they know if they continue on their trajectory that there is going to be a problem."

What about the decline of community in the US, then? It's hard to see that changing. "I like to think aspirationally about challenges like this. I look at how I would prefer to see the world and to understand the attributes necessary to create these conditions, rather than focusing on the ills of today."

As we near the end of the meal, I ask what he wants his legacy to be. He seems surprised by the question.
"I shy away from anything that's about putting your stamp on the world. Who knows? Maybe in the next 10 years, we can inspire people to think about the world a little differently, as eBay has done. If we could just move the needle a little bit, I would be pretty happy."

Bar Americain, New York
2 x mesclun salads
1 x hanger steak
1 x wild salmon, Pinot Noir, cracked wheat, hazelnuts
1 x cauliflower and goat cheese gratin
1 x hot potato chips, blue cheese sauce
1 x Diet Coke
1 x glass Hayward red wine
1 x decaf coffee
1 x Earl Grey tea
$124

 

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