On Labor Day weekend in 1995, a 28-year-old Pierre Omidyar sat down at his computer to write the code for what would become the business known as eBay. Today, the San Jose, California-based company has 31,500 employees and $14 billion in revenue and has made Omidyar, now eBay's chairman, one of the richest people in the world. He has lately focused his energies on philanthropy.

Through the Omidyar Group, he has donated and invested more than $1 billion in both non- and for-profit organizations focused on economic, social, and political progress. But Omidyar is not interested in random acts of charity. Instead, he is inspired by something he discovered about leadership in the early days of eBay: If you empower others to do good, they will.

Below, his story as he tells it. 

 --Issie Lapowsky


When I first started working as a software engineer, I had really high standards, and I often felt other people weren't meeting them. But over time, I realized that even if others on the team weren't doing everything as perfectly as I wanted them to, if they got 80 percent of the way there, then that's awesome. Because there are five of them, and five times 80 percent is much larger than 100 percent of me. That led me into this idea of leveraging other people. Let them bring their own skills and talents to the table. They'll solve problems in a different way than you would yourself.

In 1991, I co-founded my first start-up, Ink Development, which made software for an early tablet computer. The company, which was later renamed eShop, was acquired by Microsoft in 1996. It wasn't a huge acquisition, but it definitely gave me a larger appetite for risk.

Around the summer of 1995, I started thinking about the idea of building an online marketplace. I had always been interested in markets--specifically, the theory that in financial markets, goods will trade at a fair value only when everyone has access to the same information. That's a pretty cool theory. But the practice of it hit me when I had a little bit of extra money, and I wanted to invest in an IPO for a gaming company. The company went public at $15 a share. My broker calls me and says, "Well, you got the stock at $24." I'm like, "How come?" He said, "Well, $15 was the ideal price, not the price that people like you can get." I was like, "What do you mean, 'people like me?' " The takeaway was that the theory of efficient markets is really great--in theory. In practice, regular people are locked out.

I started thinking, This Internet thing--maybe I can use it to help bring the power of financial markets to regular people. Of course, regular people aren't selling stocks in their households. They're selling stuff.
I thought, There's a real opportunity to create a marketplace that could bring the power of efficient markets to regular people. So that's what I did that Labor Day in 1995.

In February of 1996, about six months after I created eBay, I started receiving a spate of complaints. Everyone was complaining about each other. I felt very much like I was a parent who had to adjudicate the brothers beating each other up. It was like, "He started it!" "No, he started it." I realized this was going to be a big problem if it kept going this way. So I wrote the community a letter and posted it on the site. I said, "I'm giving you a tool, a feedback forum. If you have an honestly bad experience with someone, post it publicly. And if you can take the time to give positive praise when someone does something good, please do that."

It was a real experiment, and I didn't know what to expect. But in the days and weeks that followed, I was enormously gratified to see that the vast majority of the comments coming in highlighted the good things people were doing that went above and beyond the transaction itself.

That experience led me to believe that this is what we had to do internally at eBay, too. Instead of telling my executives what to do, I should try to inspire them with a vision of where we're going and let them translate that in their own terms, based on their own experience, their own expertise. Inspiration is much more effective than delegation.

By August of that year, I started talking to my friend Jeff Skoll and persuaded him to leave a wonderful job at Knight Ridder and help me build eBay. But I was never the founder-CEO type like Bill Gates or Steve Jobs. Even in those early days, my feeling was Jeff and I would build the company to a certain point, and if we were successful, we'd bring in professional management. My skills were innovation and creation, but in order for all that to thrive, I knew we would need real managers, people who knew how to build big organizations.

It was my idea to bring in Meg Whitman as CEO in 1998, and I have to say, I really believe we set an example of how that transition should be done. What often happens is a founder grudgingly brings on a more experienced CEO and sticks around and still tries to run the company. That wasn't the case with us. I stayed at eBay for a year to help with the transition, but from the very first day I said, "I'm just going to advise Meg behind the scenes. She's running the show."

The year after I left eBay, for example, the site was down for about 22 hours. It was a disaster. What Meg decided, and it was really a key moment in her leadership, was that we were going to call every one of our top 10,000 sellers and apologize. She wanted to make sure the company internalized that we're here to serve real human beings, and when we make mistakes, there are consequences.

We went public in 1998. I had not in my wildest imagination expected the IPO to be so successful. We priced the shares at $18 and closed on the first day at about $47. It was more money than I could ever use. I really felt this immediate sense of responsibility. All I could think was, I'm now the steward of a fortune. How do I make sure this gets put to good use?

As a new philanthropist, the literature tells you you have to work through the nonprofit sector. We did that through 2002 and 2003, until I started feeling frustrated. I couldn't tell you exactly what it was, but I felt like we weren't meeting our potential. That led to the formation of Omidyar Network, which was built on the insight that in order to have large-scale positive change in the world, you can't limit yourself to working in the nonprofit sector.

My entire approach to philanthropy is rooted in what I witnessed at eBay, the way millions of people used it to create their own businesses. As a philanthropist, I try to help people take ownership. Everything I've done is rooted in the notion that every human being is born equally capable. What people lack is equal opportunity. My goal has been to expand opportunity to as many people as possible so they can reach their potential. That's the approach we took with eBay. It's kind of hard to make bad decisions when that's in the top of your mind. 

As told to Inc. staff writer, Issie Lapowsky

Omidyar's Next Act: Media Mogul

Pierre Omidyar describes his life's mission as helping people realize their potential. Next up: a digital-media venture, launched with journalist Glenn Greenwald, who first broke the news about the NSA surveillance scandal in The Guardian last summer.

The as-yet-unnamed site will specialize in investigative journalism designed to "convert mainstream readers into engaged citizens," Omidyar wrote in a blog post in October. The expected price tag for the venture: as much as $250 million.

--Issie Lapowsky