The eBay Way

The site's founder wanted to know how best to give. He asked, he listened. Here's what he learned

After becoming one of the richest 31-year-olds in history, eBay Inc. (EBAY ) founder Pierre Omidyar cleared out his cubicle, sold his modest home, and set off for his native Paris with his wife, Pam. It was a change born partly of the Omidyars' need to escape Silicon Valley's bubble frenzy of 1999, when they got mobbed at cocktail parties and endlessly hit on by business-plan-pushing MBAs. But the Paris chapter also stemmed from a deeper dilemma. From the moment Omidyar became rich, it was apparent to his friends that he was overwhelmingly uncomfortable -- embarrassed even -- by the money. "Don't make it grow," the accidental billionaire once told an investment adviser, so fearful was he of the burden of his multiplying commas.

In Paris, the Minitel-entranced French didn't care much about the Web or the e-commerce mogul. So Omidyar had the time and space to sip black tea at smoky cafés and ponder his next big question. What does a ridiculously rich man with so little interest in money do? Solving the first part of the problem was easy: The Omidyars had already vowed to give away virtually all their wealth. The next part was harder: how to spend their billions and have an impact as immense as eBay's.

Today, Omidyar's frizzy ponytail has turned into a short, spiky haircut. The shorts and black socks worn with gnarled flip-flops have morphed into a uniform of pressed pants and leather dress shoes. The goatee is gone. And the '96 VW has been traded in for a Mini Cooper. After the Paris sojourn, the Omidyars decided to settle with their two kids far from Silicon Valley, where it bothered them that teachers and cops can't afford to live in the communities they serve, in favor of a gated community outside Las Vegas. In June, Omidyar, who still serves as eBay's chairman, showed up at the company's annual meeting in a crisp suit with a shirt and tie.


Omidyar's thoughts about his philanthropy have matured even more than his appearance. Just as his vision of the perfect marketplace revolutionized commerce, so too are his ideas about philanthropy likely to disrupt the rules of traditional giving. Omidyar is at the forefront of a new trend that is starting to blur the old church-state divisions between the for-profit and non-profit worlds, creating structural shifts that could lead to a new, hybrid philanthropy. In March, he shocked the philanthropic community with news that instead of investing purely in nonprofits, the Omidyar Network would house both a foundation and an arm that would also invest in for-profit companies. All the money made from the stakes in those companies -- chosen by Omidyar and his team of due-diligence specialists for their emphasis on open information, giving power to the little guy, and fostering social capital -- would flow back into the investing arm to leverage into yet more charitable giving. "I don't see why we ought to make an artificial distinction that says for-profit is all about making money and only nonprofit is about helping people," says Omidyar in an interview in the library of the network's offices, which sit amid the thrift shops and antique stores in blue-collar Redwood City, Calif.

What influenced Omidyar most in this decision was the inspiration he took from watching eBay users learn to trust 125 million total strangers. Disabled people on public assistance turned into self-supporting entrepreneurs; Guatemalan villagers started selling their handwoven wares to people on Park Avenue. Says Omidyar: "You have to ask yourself, is it really true that business can only be about making money? And is it really true that if you want good things to happen in a community it has to be through a nonprofit?"

That's not the only radical move Omidyar is making. In many ways, Omidyar is the anomaly among BusinessWeek's Top 50 givers. Philanthropists like Bill Gates, Gordon Moore, and Michael Dell went beyond old-school giving, where you give your money to a foundation, which then doles it out for you. Instead, the new superphilanthropists applied the same brilliance that built their businesses to their philanthropic causes. They are deep on vision and heavily hands-on.

Omidyar is pioneering a third way, a philanthropy that's fanatically bottom-up. It's anti-vision. Anti-dictate. And, in a sense, Omidyar isn't even choosing how his $10 billion is given away -- or to what causes it goes. He wants you to do that. How? For starters, there's, where Pierre and Pam recently opened up a conversation with the world to discuss the direction of their philanthropy. People already engaged in solving social problems know a lot more about how to fix them, they figure, than a cloistered elite ever could.

Secondly, the foundation arm of the Omidyar Network, which still hands out the vast bulk of the money, focuses on grants to individuals who are already creating social change through their nonprofits. The critical tool of these mostly smallish groups is the Internet, which enables people to take tiny ideas and give them a global launch, in much the same way Omidyar created what fans call the "first truly democratic marketplace" after selling, among other things, his broken laser pointer online. (It went for 14 bucks.)

By taking out the middleman and shifting decision-making power from experts to practitioners, Omidyar believes something more efficient and innovative -- and with a far bigger impact -- will happen. "This is a revolution, and you can hear the ice cracking," says Bill Drayton, founder of Omidyar grantee Ashoka, which seeds social entrepreneurs. Adds Dennis Whittle, CEO of Global Giving, another Omidyar recipient that provides an online marketplace for nonprofit projects to hook up with funders: "What I like most about Pierre is that he's not about doing wild, wow things himself. He's about enabling millions of people to do wow things themselves."

Rather than dictating bold prescriptions, then, the nonprofits Omidyar funds flank problems, attacking them from the sides. Consider the story of the toilets. Two years ago, Whittle's Global Giving designed a site that allowed anyone, from anywhere in the world who was properly screened and vetted, to post projects for funding. One such group was a slew of schoolteachers in Coimbatore, India. Every year, they watched scores of girls leave school when they hit puberty. And they had a sneaking suspicion as to why.


The teachers posted a small, bedraggled project on Global Giving -- so tiny, in fact, that it initially embarrassed Whittle, who had quit his job as a lead economist at the World Bank to start the nonprofit. The project ad read: "New Toilet Block for School. $5,000." Within a few weeks, four donors from around the U.S., including a writer from New York City and a banker from J.P. Morgan (JPM ), put up the money. In less than three months, the school had its own separate toilet block for girls; the donors had thank-you letters and photos from the kids. Turns out the teachers had guessed right: The girls were dropping out in droves because of the embarrassment they felt once they started menstruating and had no private facilities. Now, two years later, 100 of them have stayed in school because of this tiny addition. Within 10 years, Global Giving estimates that 440 will have stayed through graduation. And the ripple effect from this one simple fix is huge, given the fact that attaining an education makes it much more likely some of these girls will eventually climb out of poverty.

With conventional giving, whether it be to the Red Cross, United Way, or small local charities -- once you write your check, you're often clueless as to any particular outcome achieved. What's unique about Omidyar's projects is that, like eBay, there's often a transparent system in place that allows donors to monitor where their money goes and who receives it.

DonorsChoose, for which Omidyar became a major funder this month, is a case in point. The site allows people to become philanthropists for as little as $10, monitoring their money's journey every step of the way. It works like this: Any public-school teacher in New York City, North Carolina, the Bay Area, or Chicago can post a project that needs funding. Last year, Cynthia Rosado, a first-grade teacher at P.S. 169 in Brooklyn, where kids often went without pencils or paper, put up a request on the site called "Is That a Fact?" that asked for a set of nonfiction books. The kids were fascinated by narrative nonfiction but didn't have a single copy of such a book in their classroom. Project cost: $244, including shipping and fulfillment.

That was just the start. Over the course of the past year, donors from 12 states, plus Canada and Australia, have paid for 42 projects, transforming Rosado's formerly bare classroom into one as rich in resources as that of a private school.

Omidyar's donations to nonprofits are also making a difference abroad. With the help of the foundation arm's donations to the Grameen Foundation USA, 1,152 women in Uganda now have their own businesses selling wireless phone time to villagers. The income enables them to build homes and send their kids to school. In India, women sell classes in computer centers, usually earning a living wage by their fifth month of operation.

Like the nonprofits Omidyar invests in, the for-profits also use technology to hand more and more power to regular people. The for-profit investing is in its earliest stages, but so far the network has invested in open-source software site Source Forge; Web-collaboration software maker Socialtext, and the gaming firm Linden Lab, creator of an online virtual world called Second Life, where users can create a virtual identity online. The game-playing allows "residents" to form social relationships. Some have even started businesses on the site that actually make money.

The Omidyars didn't start out wanting to radicalize philanthropy. At first, they did what anyone in their situation would do. They studied the Gates's giving. They visited world-renowned foundations, including the Packard Foundation. There, Chairman Susan Packard Orr told them, "don't do what we do. Do something completely different." Little did she know just how innovative the Omidyars' brand of giving would turn out to be.

By Michelle Conlin

With Rob Hof in Redwood City, Calif.

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