Windows or Walls

When eBay co-founder Pierre Omidyar looked at the auction business in 1995, he saw walls everywhere.

Not just the bricks-and-mortar kind that differentiated stodgy, old-line companies from eBay, Amazon, and other dotcom upstarts, but also the bureaucratic barriers the old guard had erected between buyers and sellers. At venerable auction houses like Sotheby’s and Christie’s, these walls were meant to reassure prospective buyers that the paintings and antiques on offer had been thoroughly authenticated.

But Omidyar recognized that these walls were also stifling the free flow of communication and commerce—a bottleneck that kept the auction houses in a niche market. Even worse, operating under a fundamental mistrust of their own customers actually encouraged fraud and corruption.

Omidyar has been credited for the insight that the auction business could be streamlined online. But his real innovation was far more profound. He designed his company based on the presumption of trust, tearing down the walls between buyers and sellers and replacing them with windows. On eBay’s website, buyers could see sellers directly and rate them for their honesty. Sellers who delivered on their promise got top ratings; those who didn’t quickly were weeded out. By designing for trust, Omidyar actually built a system that was more democratic, more robust—and ultimately more secure.

It was also more valuable. By 2000, the five-year-old eBay’s market cap was $17 billion—20 times that of the 256-year-old Sotheby’s.

Omidyar was at the vanguard of a new desire for openness among consumers. In the last decade, the hunger for transparency fueled the explosive growth of Facebook, Twitter, and other social networking sites.

The same desire led companies like Zappos.com to post internal emails from their CEO and COO, providing customers with a window into their inner sanctum.

And it led companies like Netflix to scrap bureaucratic vacation policies in favour of trust. Today, all of the company’s salaried employees can take off time whenever they want. Nobody tracks vacation days. The company simply assumes employees will keep excess in check themselves.

This is part 1 of 2, check out part 2.

Photo of framed brick wall by Leonski. Photo of ebay sign by Ryan Fanshaw Photography. Licensed under CC.