Punchinello’s Chronicles

September 29, 2008

Own Stock in eBay?

Filed under: View from the Bottom — Punchinello @ 2:04 am
Tags: , , , ,

High-level executives, people who get 6-figure salaries to run major enterprises and publicly held corporations, are fond of saying that low-level employees don’t really know what’s going on. Those at the bottom haven’t the skills or brains to understand high finance, corporate strategy, complex business principles, or to see The Big Picture.

Right!

One of those utterly incomprehensible and complex ideas is that no matter how big a company gets, it ultimately must rely on having customers to buy things, and manufacturers to sell things. If it’s a retail company, then they have to have products to sell to the public. Someone has to get those products and put them on the shelves. That’s not high finance, it’s plain old logic.

EBay started as a brilliant idea. It would be a place for people to place classifieds and sell whatever items they wanted to sell. They could auction them off to the highest bidder, paying a small “listing fee” to run an ad for a couple of days, a week, or ten days. If the item sold, eBay would take a small commission — the “final value fee.” In other words, whatever the item sold for was its final value, and you’d pay a commission for that.

Brilliant idea! But not only that, since e-commerce was very new, people were afraid to send money over the Internet. The concept of buyer and seller feedback would promote a community referral and recommendation system. If a daring soul decided to buy something from an online seller, they could rate that seller for honesty, timeliness, and so forth. Fantastic!

EBay got bigger and bigger, the idea caught on, bazillions of people started selling all sorts of things. Money came pouring in, the original developer retired with all kinds of money. The company went public, people started buying shares in eBay. And therein lies the rub, the modern American business model.

The actual, real business of eBay is to provide a place for someone to sell, and a way for someone to buy. That’s every different than offering shares of “the place” to people who never buy or sell anything at all on eBay. Stockholders have the option, of course, to actually sell their watch or tires, but the main reason they’re stockholders is they believe that lots of OTHER people want to sell things or buy things.

The stockholders are the audience, doing nothing really other than watching what’s going on. They pay a ticket price, the share(s) of stock, and that gets them a seat in the auditorium. But how interesting really is it to watch a customer buy something, or a checkout person to ring up their sale?

For a couple of years now, eBay top management has been making more and more stupid decisions. When anyone at the sale counter or any customer asks how come there are so many stupid decisions, they’re told they just don’t have the brilliance of mind to understand.

There were a lot of people who became very powerful sales figures on eBay. They took advantage of consolidated “eBay stores” to offer and sell hundreds of thousands of items. Even a few millionaires made their money selling on eBay. So the first thing eBay did was to raise fees for those people. It wasn’t important to raise fees for someone selling one item a year, only for the people selling thousands of items.

Then they started charging more for listing fees. Even if your item didn’t sell, you still pay the listing fee. So if you want to sell something for $1, and the listing fee is 10-cents, if it sells you get 90-cents (minus final value fee). But if you list it 8 times, you pay 80-cents. If it sells, the final value fee means you make nothing, or you lose money.

Now they’ve decided to dictate how much people can charge for shipping. They also dictate whether or not you can accept checks and money orders. Mandate after mandate is coming down, and people who actually sell items are leaving in droves. It’s like nationalizing an industry.

When a country takes over the businesses within that country, they have a problem. Do any of the politicians know how to run any of the businesses? Actually, they don’t care. To them (and the brainstems at eBay), a business “just happens.” Items show up for sale on a regular basis as a sort of weird aspect of computers. Nobody knows how they get listed, it’s a mystery.

What happens when all the business owners and store owners, um…leave? That’s as in exit, split the scene, quit, shut down, and terminate! What happens then?

The brilliance of Executive-ness says that nothing will happen! Things will continue exactly as they’ve been in the past. Remove all the people selling things, and remove all the buyers who might be interested in those things, and absolutely nothing at all will change.

Because, you see, it’s the Stockholders who matter! As long as the stockholders are happy, nothing else matters one whit. So what if nobody has anything to sell? So what if nobody is visiting the empty stores? Who cares, as long as IF someone wanted to list something, they would pay ten times more than in the past. IF someone wants to buy, they can only use certain approved methods of payment. IF someone does buy, the seller pays ten times more in secondary commission.

Would you run a business this way? Probably not. But would you invest in a business like this? Sure. Lots of people do it all the time. They invested in Enron, Worldcom, California energy companies, and lots and lots of banks.

There’s only one problem: If nobody is selling, and nobody is buying, is there a business? Does the number of new locations opening up each year, and the number of people in the audience matter? Would you go to a concert if the stadium was packed, but no bands ever showed up to play?

That’s the state of modern American business in so many instances. It can run on only one, single premise: that nobody in the audience (the stockholders) will ever find out what’s actually taking place. To accomplish this, the smart executive buries reality under pages and pages of small print, phoney reports, and bizarre accounting results.

Every single share of stock anyone buys includes the warning: You may lose all your money! Nobody cares, really, they just want the money that MIGHT show up if nobody figures out the executive scams. But ultimately, money is only a symbol. It represents real things, real people, and real work.

Right now eBay is staying afloat because it’s “too big” to have anything rotting away the core principles. It must be successful, otherwise how would it be so big? Therefore, someone must be listing and someone must be buying. The fact is, though, as seen by someone at the lowest levels, that’s not really true anymore.

Only the flea-market shoppers scavenging for deals are there. The one-time seller, trying to get rid of some junk is there. Few people with any desire at all to make honest work of sales remain. As one of those with too little knowledge to understand how a house of cards works, I’ll take the risk of projecting that eBay starts to collapse within the next year or two.

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4 Comments »

  1. That is a generous time frame- I don’t give it that long with that lunatic John Donahoe around

    Comment by Mechelle — September 29, 2008 @ 2:46 am | Reply

  2. […] I found this great article that says it all- Own stock in eBay? […]

    Pingback by What’s going to happen with eBay? « Ibdesignsusa Weblog — September 29, 2008 @ 11:03 am | Reply

  3. The man is an egomaniac who is absolutely conviced he knows more than everyone else. Welcome to your kingdom of nothing, JD. Imfamy is not something to be sought after…unless of course you truly don’t know any better. I think that’s called mental illness.

    Comment by Marcus — September 29, 2008 @ 6:06 pm | Reply

  4. Hmm..it seems Marcus isn’t actually saying anything in the comment.

    Comment by Punchinello — September 30, 2008 @ 2:47 pm | Reply


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