Silicon Insider: Behind the Birth of eBay

June 26, 2003 -- — Coming soon to a Diagon Alley near you …

Last weekend I donated my biannual day to reading the newest Harry Potter book.

At least with the earlier books in the series, you could whip through one with the loss of a single morning and part of an afternoon. But the last couple have been (literally) monstrous tomes and now require at least a couple hours after the midnight purchase, followed by the entire next day until well into the night.

Is it worth it? Yeah, probably. J.K. Rowling has done a pretty good job of looting Lewis, Chesterton and Bullfinch's Mythology. She's constructed a nice clockwork plot. And some of the characterizations are terrific. For example, speaking as the parent of a 12-year-old, Harry Potter does a terrific turn in this one as an obnoxious, confused and ultimately decent teenager. Unfortunately, other characters, notably Dumbledore and the frustratingly uninteresting villain Voldemore, remain as cardboard as ever.

In other words, the new Harry Potter is about as good, and as bad, as the four that came before it.

So, why is J.K. Rowling the most popular novelist on the planet? The greatest contributor to childhood literacy since McGuffey? Most of all, why are millions of adults joining this phenomenon, spending time out of their busy lives on a featherweight Bildungsroman about a British teenage wizard?

The answer, I think, lies beyond Platform Number 9 ¾.

The real glory, I think, of the Potter books is Rowling's genius for creating an alternative reality. Harry's real world life with the Dursley family, besides being a shameless rip-off of Roald Dahl, is both cartoonish and tiresome. You can almost sense that Rowling herself is anxious to get out of there and return to her own imaginative world of Hogwarts, the Weasleys and the London-behind-London of her magic world.

It is this other world, with its odd characters and locales and its strange malleability of space and time, that I think most attracts readers both young and old. And it is this other world that stunned me with the shock of recognition as I read the new Harry Potter last weekend.

You see, I've been there.

An Idea Whose Time Has Come

There is a phenomenon, described by cultural historians, of an idea whose time has come. Lately, brain scientists and linguists have taken to calling it a "meme." It is an idea, often expressed as metaphor, that arises in one field of endeavor and soon sweeps across all of society. It becomes the defining notion of that age, coloring everything from scientific theories to the latest trends in the arts.

Evolution was such an idea. So was the Marxist dialectic. Relativity. The Freudian unconscious. The atomic bomb. The Uncertainty Principle. Artificial intelligence. The Web. These are technological, or scientific or economic theories, yet each in turn has transformed the world in which they appear, changing not only industry and education, but even politics and human imagination.

Thus, I find it no coincidence that just about the same time that a homeless J.K. Rowling was sitting a British coffee shop scribbling notes on napkins about her magical world, I was sitting at a folding table in a rented Campbell, Calif., office staring at a similar world slowly being created on an industrial whiteboard. Rowling had her scones and coffee, we had cases of Coca-Cola and a jar of red whip licorice — but we were thinking the same thoughts.

There were four of us at that table: Pierre Omidyar, Jeff Skoll, Mary Lou Song and myself. The other three were co-founders of an 18-month-old company called AuctionWeb. Mary Lou had brought me in to help the company find venture funding and to help brainstorm a long-term vision for the company. And so, for much of that day, we sat and pondered scenarios.

AuctionWeb had been created to exploit the power of the newly emerging World Wide Web by giving people a site to auction off items to the highest bidder. At the time it had only about 25,000 users, but was showing signs of exponential growth.

But what did it all mean? Where did this idea go from here? That was the question we attacked that day. And as the hours passed, and the whiteboard filled up, it suddenly struck all of us that we were just looking at the future of a little Internet company, but the future of the world.

Medieval Marketplace on the Web

The crucial metaphor was that of the city. Or more accurately, the history of the modern city.

It struck us that AuctionWeb was the digital equivalent of the medieval crossroads, the Arabic agora, a place where traders and customers would gather to buy, barter and sell wares. What was the key to the success of these places? Minimum interference — you set the basic rules, provided a safe and functional setting, charged a small fee for rental space and then got out of the way. That's what AuctionWeb had done and why it was thriving over its more controlling competitors.

But then, we asked, what came next at this medieval crossroads? Better merchandise, for one thing, and more elaborate presentations, entertainment, and a growing recognition of the most trustworthy sellers.

And after that? History showed that the most successful sellers and craftsmen would begin to build more permanent structures around the periphery of the marketplace. Banks and moneylenders would arrive to offer credit. So too would service providers; restaurants, inns, etc. And, as these operations, freed from the vagaries of weather, were able to operate year round, we would begin to see the rise of homes and other dwellings, churches and schools. Now, to continue our metaphor, we would have the Web-equivalent of the medieval trading town.

Then, with further growth, the town would begin to segment into districts — retail, governance, sports and entertainment, commercial and retail, industrial, and residential — into a city. The marketplace, the historic heart of this city, would slowly recede into history.

Could all of this apply to a virtual city? Yes, it hit us with a shock. Companies were already building permanent shops on the Internet, setting up their own "home" pages, and even taking their mail there. But why would they ever live in this city, shop there and go to school?

And that's when we saw the magic that J.K. Rowling was just starting to imagine. In the other world there are no constraints on space and time. Sitting at that folding table we imagined a virtual street in perpetual rain and mist and gaslamps. Your virtual self walks past an Edwardian storefront of mahogany and brass and glass with a carved sign that reads "London Fog." You step through the tiny door and enter a modern store six blocks deep containing every umbrella, trenchcoat and scarf in the London Fog inventory. An avatar who looks and talks like John Gielgud (or Elizabeth Hurley), greets you by name and asks what you'd like to try on.

The Birth of EBay

Does that image sound familiar? Of course, it's Harry Potter's Diagon Alley, the shopping district for wizards, a place where everything is changeable, and you can travel a thousand miles just by stepping into a fireplace, or in our case, pressing a key.

Rowling's vision has become the most successful book series in history. And little AuctionWeb? You may have already guessed: it became eBay, the most successful start-up of our time. And that was the original vision of the company — the medieval marketplace turning into the modern city, all in virtual space.

Though I've heard Jeff Skoll reference it in passing in some of his speeches, you are reading the story here in total for the first time. It doesn't even appear in the books about eBay. Meg Whitman, I am certain, knows the vision, but I suspect most eBay employees do not.

Of course, it's much easier for a novelist to realize her vision than it is for a corporation dragging along millions of customers and the daily challenge of keeping one of the world's busiest Web sites running. EBay is still barely out of the crossroads; though each month I notice new permanent structures being built on the site, not to mention banks and other services. The process has begun.

Will eBay ever fully realize that founding vision of the virtual city? Yes, eventually, as more powerful hardware and software technologies emerge. EBay (and every other company) has no other choice; otherwise it will fade away.

And will we all ever shop on Diagon Alley? Yes, I'm certain of it. It is an idea whose time has come.

Michael S. Malone, once called “the Boswell of Silicon Valley,” most recently was editor-at-large of Forbes ASAP magazine. His work as the nation’s first daily high-tech reporter at the San Jose Mercury-News sparked the writing of his critically acclaimed The Big Score: The Billion Dollar Story of Silicon Valley, which went on to become a public TV series. He has written several other highly praised business books and a novel about Silicon Valley, where he was raised.