John Whitfield - People Will Talk

CONTENTS

Also by John Whitfield

In the Beat of a Heart: Life, Energy, and the Unity of Nature

Copyright 2012 by John Whitfield. All rights reserved

Published by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

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For Tom

Introduction

Cassio: Reputation, reputation, reputation! O! I have lost my reputation. I have lost the immortal part of myself, and what remains is bestial.

Iago: As I am an honest man, I thought you had received some bodily wound; there is more sense in that than in reputation. Reputation is an idle and most false imposition: oft got without merit, and lost without deserving: you have lost no reputation at all, unless you repute yourself such a loser.

William Shakespeare, Othello , act II, scene III

As 1996 began, an increasing amount of Pierre Omidyars time was taken up with a site called AuctionWeb, which he had launched a few months earlier as a hobby. One chore of Omidyars was fielding about a dozen e-mails a day from buyers or sellers who were in dispute. AuctionWeb made no attempt to control its users, charged no fees, and gave no guarantees; it was simply a digital market, a place for buyers and sellers to meet. When complaints came in, Omidyar, who had a day job as a computer programmer, would forward the message to the other person involved and ask the parties to resolve the matter between themselves. This usually worked, but Omidyar would have preferred not to get involved at all.

AuctionWeb was possibly the least reassuring trading environment ever devised. Buyers were invited to bid on products they hadnt seen and then send money to people they didnt know, who were identified by usernames and virtual storefronts that had cost them nothing to set up and would cost them nothing to replace under different names. In such a situation, the obvious risk was that without someone in charge who had the power to punish bad behavior, AuctionWeb would become what economists call a market for lemons. Buyers, worried that their purchases would arrive in worse condition than advertised or not arrive at all, would bid low. High-quality sellers would take their goods elsewhere, and a race to the bottom would start, resulting in a yard sale where junk was sold for pennies.

Omidyar, and those who were using his site, had run up against the question of how to work out whom you can trust. AuctionWeb, because it seemed to demand blind faith from its users, highlighted the matter, but its a question that we all face every day, just about every time we meet another human being, online or in the flesh, in business, romance, friendship, politics, or simply while listening to the morning weather report. When we decide to trust, we invest some combination of time, energy, and resources in other people, in the belief that they will keep their side of the bargain. The other guys do the same.

Omidyar could tell that blind faith was not getting the job done. He needed a machine for manufacturing trust that AuctionWebs users could fuel and operate. The solution he came up with was to allow users to rate one another, awarding +1 as a reward, 1 as a punishment, and 0 as the neutral option. If users wanted, they could also leave a short written comment. What everyone said about everyone else would be on public display. By creating a record of past behavior, this feedback aimed to give honest sellers of high-quality merchandise an escape route from the market for lemons and give buyers a way to find these sellers.

In February 1996 Omidyar unveiled this system and posted a letter on the site:

Most people are honest. And they mean well. Some people go out of their way to make things right. Ive heard great stories about the honesty of people here. But some people are dishonest. Or deceptive. This is true here, in the newsgroups, in the classifieds, and right next door. Its a fact of life. But here, those people cant hide. Well drive them away. Protect others from them. This grand hope depends on your active participation. Become a registered user. Use our feedback forum. Give praise where it is due; make complaints where appropriate.

That month, Omidyar also began to charge sellers a percentage of the sale price to post listings on AuctionWeb, because the site was getting so much traffic that his Internet service provider had upped its fees. Fast-forward fourteen years, and in the first quarter of 2011 eBay, as AuctionWeb is now known, announced revenues of $2.5 billion.

EBay feedback is whats known as an online reputation system. If you like to measure a things significance in dollars, Omidyars feat of alchemy proves the power of reputation. He used other peoples willingness to gossip about one another and to act on that gossip to turn his hobby into a multibillion-dollar business.

As a summary of human nature, Omidyars manifesto is hard to beat. But its common-sense assertions open out into a hall of wonders and mysteries. Most people really are honest and well-meaningmost of us, most of the time, can be trusted. Why, given the advantages of being otherwise, is that? Why, on the other hand, are some people dishonest and deceptive? And why could Omidyar count on his users to unmask and exclude such people? After all, even if I get a good deal, I may never buy anything from that seller againso why bother to praise him? And if I get ripped off, I know not to deal with that person againso why take the time to warn others about him?