I believe that we have fundamental problems in our economy that are not going to be solved anytime soon. We are not, in my opinion, in an economic dip that we will come out of in a few years. The good news is that we have all the technology we need to have a successful civilization. Given the plethora of technology available to us, we have sure made of mess of things, economically and otherwise. If catastrophe is to be averted, Americans are going to have to turn off Two and a Half Men and turn to studying the economy.
Hurricane Katrina brought proof that a major U.S. city could be wiped out and pretty much stay that way for a very long time. We have long thought our economy to be virtually invincible, but like New Orleans, our economy is not invincible. We need to shore up our financial levees, and the only way to do that is to start rethinking the fundamentals of our economy. How is money created, for example? It is a travesty that millions of young folk graduate from college every year, and 99.9% of them do not have a clue as to how money is created.
In this article I want to rethink the necessity of the gigantic corporation. We have all accepted that these behemoths of industry are necessary. I want to propose that giant for-profit corporations are not, for the most part, necessary to a civilized society. Indeed we have become so comfortable with the idea of mammoth corporations that we now readily accept monopolies without complaint. Microsoft is an obvious monopoly. We all carry a VISA, MasterCard or American Express in our wallet — three companies — do you call that competition? A half-dozen giant firms control most of our media, book publishing is the same, and the trend continues throughout all the industries that matter. Eventually you will have your choice to bank at either Bank of America or Wells Fargo. There won’t be any other banks.
An economy that is dominated by monopolies (or something close to it) is an absurdity. However, we have become so desensitized to the idea of colossal corporations that we fail to ask the fundamental question: are giant corporations necessary in a civilized society? I will dare to opine that gargantuan for-profit corporations are a sign of an economy that is out of step.
I will ask you a question. Which U.S. website ranks higher — craigslist.org or ebay.com? You might be surprised to know that Alexa ranks craigslist.org higher than ebay. Craigslist comes in at #8, ebay at #10. The interesting thing about these two companies is that they do essentially the same thing. The primary difference between the two companies is that eBay auctions are open bids whereas craigslist auctions are sealed bids. eBay is the modern online version of the “going once, going twice” old-fashioned auction house. In the case of craigslist, however, the bids are secret. The seller posts an ad to sell a bicycle for $75, but interested buyers send emails offering different bids. The seller selects the best bid (or perhaps pays the advertised price — or what amounts to the buy-it-now price), and the sealed auction comes to an end. The other difference is that eBay charges money. Although craigslist started out as a non-profit, it was incorporated as a for-profit company in 1999. The company still uses the “.org” domain name because they say it “symbolizes the relatively noncommercial nature of craigslist.” Posting on craigslist is free, for the most part. Craigslist makes money by charging below-market fees for job postings in 18 cities and for brokered apartment listings in NYC.
I think you will agree that the two companies do virtually the same thing. They offer a place where people can buy and sell stuff online. When you boil it down, both companies are nothing more than websites. They don’t grow anything, they don’t ship anything, they don’t build anything, they keep no inventory. They simply maintain websites. The companies are so similar that they rank almost side-by-side at Alexa — eBay at #10 and Craigslist at #8.
There is, however, one glaring difference between the two companies. The difference is found in the number of employees it takes to run both companies:
eBay: 16,200 employees
Craigslist: 28 employees
Yes, as of the end of 2008, eBay employed approximately 16,200 people compared to the mere 28 employees it takes to run craigslist. In fact, craigslist employees — all 28 of them — work happily out of a Victorian house in San Francisco. Craigslist is so small that I could afford to take the entire staff of craigslist out to lunch.
The question is: why does it take 16,200 people to do what craigslist is able to do with only 28 people? I would contend that eBay in its current form is unnecessary. If I were king-for-a-day, I would de-privatize eBay and hand over the website to the good people at craigslist. They seem to be far more efficient, wouldn’t you agree? eBay — in its current form — is unnecessary. After all, it’s just a website. In a truly civilized society people would not tolerate such an economic absurdity.
You won’t be surprised when I tell you that eBay acquired 25% of the equity in craigslist from a former shareholder in 2004. You bet they did. If I had competition like that, I would want to buy them up too. If a company could perform the same function for free that I was charging billions of dollars for, I would certainly want to quietly buy up that company.
Hey Craig — if you ever come across this article, it’s really too bad. You had a really good thing going with your website that was largely noncommercial. Putting your stock up for sale and allowing a very commercial company to purchase 25% of your baby sort of defeats your noncommercial mission, wouldn’t you say?
Craigslist is proof that we don’t necessarily need giant for-profit corporations to have a civilized society. And we certainly don’t need to pay billions of dollars for a service that could be provided almost for free. When it comes to the economy, we had better start rethinking everything so that we don’t get hit with an economic Katrina.
I like this statement Wade: “and 99.9% of them do not have a clue as to how money is created.”
I'd be willing to hedge a bet that 99.9% of people also have no clue that the Federal Treasury is not “Federal” at all – It's a private banking institution that is about as “Federal” as “Federal Express.” Haha – My little factoid for the day.
One more fact before I go. Not only did Ebay buy into Craigslist, but they also got involved in another direct competition site: Kijiji. Nice choice of name Ebay… So what's it mean?
Interesting post. I was just thinking about this the other day – companies always want to create shareholder value and grow, but we do have to ask ourselves if growth all that good? At some point, a company just becomes too big and instead of being operationally efficient, they become cumbersome and disconnected – kind of like the big mortgage banks! Almost like a government entity instead of a company.
I personally have been trying my best to give my money to small mom & pop businesses now. I am a capitalist through and through, but every industry seems to be turning into a monopoly or oligopoly and consumers definitely aren't winning in the long term. Maybe some short term savings, but long term we are definitely losing out.
I'm not sure where you did your research; however, Craig most definitely did not “allow” eBay to purchase 25% of his company. If he had any say in the matter, it never would have happened.
eBay did this as an underhanded deal with someone that Craig was nice enough to share equity, not realizing this person would eventually turn around and seek to capitalize against the very objectives of the person who provided him with that equity.
To comment so definitively “…it's really too bad. You had a really good thing going…” implies that you are intimately familiar with their model. Before making such statements, you may want to do a bit more research..
Interesting information here Wade. eBay looks nicer though I get a headache out of it coz' there's too much stuff (junk) in it. Just shows how they are plagued with inefficiency.
Apparently somethings are VERY misunderstood about ebay vs craigslist. Your comparison is absurd. One reason CL only needs 28 people can be explained in the layout (Simple, but crappy interface) and the spam (They make YOU flag the ads) – cheap, cheap, cheap.
Ebay makes everything attractive, easy, and simple while delivering high tech solutions to sell almost everything. The ability to feature your products using the hottest multimedia…CL gives you some text and some pics.
Craigslist is proof that if you're fine with cheap, spammy, ugly experience then sure go ahead with the light-weight approach. If you want something that's many steps/years ahead of what CL does, that is what eBay is for.
I can't remember where I read, but something like over 50% of CL traffic is for the casual encounters and erotic services sections…makes you think differently for a second.
RM-
By letting the stock out of his hands — selling it to anyone — Craig did indeed “allow” eBay to purchase 25% of his company. That is the real danger of selling stock to people. Once it's out of your hands, that person can sell it to anyone.
As far as being familiar with their model, I believe I am familiar with it. It' pretty straight forward.
I'll take ugly at the cost of nothing any day. I don't want to pay billions of dollars for an “attractive” interface. They do basically the same thing. As far as their traffic coming in a significant way from erotic sections, you would need to provide some proof.