Just wrapped up 1 month in Valencia. The longest I’ve stayed in 1 spot since leaving Australia 3 months ago.

Here are 8 things I've learned in “La Terreta” (‘The little land’):

1. The "slow" culture made me realise how much day-to-day urgency you experience everywhere else.

2. Europe is the best timezone - 4 hours of deep work before US Eastern gets online.

3. The city is easy-going and beautiful, but so inefficient. Restaurants with lines out the door and empty tables, busses show up 15 mins late (or not at all), 'the system is down' is almost a daily occurrence.

4. I love a siesta but find it nearly impossible to refocus afterwards. Better for marking the transition from work → life.

5. Meeting people as a digital nomad requires more intentionality than I thought.

6. Everywhere you look, you see someone's creative touch. Tiles, balconies, door handles. Everything is decorative, even if in a small way.

7. I didn't see a single person on a laptop in a cafe.

8. Paella is more than just a regional dish. People can’t help but recommend their favourite spot, share tips and rules for ordering it correctly, and tell their Paella-based memories. They worship it here (rightly so!)

If anyone reading this happens to be in Granada/Madrid this/next week, reply to this email and let me know!

If not, I hope you enjoy today’s breakdown :)

— Tom

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How eBay solved stranger danger

Chess Move

The what: A TLDR explanation of the strategy

Before eBay, if you wanted to buy a rare baseball card online you had to put a $50 bill in an envelop and mail it to a stranger.

Unlike traditional retail with institutional guarantees (stores, brands, credit cards) there were no effective trust mechanisms in the world of anonymous internet transactions.

Buyers feared sending money into the void.

Sellers feared shipping products without payment.

Neither party had recourse if something went wrong.

Credit card companies and banks weren't set up to mediate disputes between individuals. The entire commercial trust infrastructure assumed transactions happened with established businesses, not garage sellers.

eBay's breakthrough wasn't building a better auction platform. It was manufacturing trust in a zero-trust environment.

Between 1995 and 2010, eBay pioneered several mechanisms that transformed peer-to-peer commerce from impossible to scalable.

Founder Pierre Omidyar called it the "grand experiment in Internet commerce": proving total strangers could safely conduct business online.

The result → A $10 billion marketplace built on engineered trust, and the blueprint that every modern peer-to-peer platform (from Airbnb to Uber to Etsy) would eventually follow.

Breakdown

The how: The strategic playbook boiled down to 3x key takeaways

1.  Reputational collateral

eBay's genius was making trust quantifiable.

Six months after launch, Pierre Omidyar introduced a feature that would change ecommerce forever: the two-way feedback system.

Every buyer and seller could publicly rate each other (positive +1, neutral 0, or negative -1) and leave comments after a transaction in the Feedback Forum.

He announced it in a now-legendary letter to the few-hundred person community:

eBay built several structural safeguards supporting this self-governing mechanism:

• Only verified purchasers could leave feedback

• Each unique user's rating counted once (preventing gaming)

• Each user’s net score (positive ratings minus negative ratings) was displayed prominently throughout the site

• Rolling 12-month windows meant recent performance mattered more and low-score users could recover over time

• Coloured star badges (yellow → blue → purple → red → green → shooting star) gamified progression and incentivised behaving positively - the ultimate achievement was the shooting star series beginning at 10,000 points, ending with a silver shooting star at 1 million points - an almost mythical status only elite sellers achieved.

• In 2003, eBay added feedback percentage alongside the net score, calculated as positive ratings divided by positive plus negative ratings, multiplied by 100.

• In 2007, they added Detailed Seller Ratings, providing granular 5-star ratings for item description accuracy, communication, and shipping time.

The feedback system created reputational collateral - buyers and sellers had something to lose.

Established sellers with 2,000+ positive ratings commanded 8.1% price premiums over newcomers. A huge benefit for seller margins, but one that required several years of consistent honest behaviour.

The system worked because both parties knew their actions would be rated in a visible, lasting way.

2. Institutional safety nets

Reputation alone wasn't enough - eBay needed mechanisms to make buyers and sellers whole when transactions went wrong.

A way to guarantee outcomes, not just vet parties.

They partnered with SquareTrade in 1999 for independent dispute mediation, then built an integrated Resolution Centre where users could file claims for items not received or not as described.

When eBay acquired PayPal in 2002, about 60% of PayPal's business already came from eBay users.

The integration brought speed and security to payments, but more importantly, it brought guarantees. PayPal Buyer Protection (initially covering up to $500, later expanded) meant buyers could get their money back if a seller failed to deliver.

PayPal's trust infrastructure included:

• Verified identities and addresses

• Fraud detection algorithms battle-tested by high early digital payment fraud rates

• Payment holds for new sellers until item delivery was confirmed

• Cross-border currency conversions and refund protections enabling global trust

Users no longer relied solely on a seller's reputation - there were formal safety nets too.

Fear of "I'll send money / products and get nothing" was effectively mitigated when transacting with PayPal.

eBay expanded from community-driven trust to institutionalised fairness.

3. Trust as competitive moat

A new auction site could copy eBay's interface or undercut its fees, but it couldn't recreate years of accumulated reputation capital.

Sellers with thousands of positive ratings had built an advantage that they could only leverage on eBay, creating high switching costs.

The more trust data accumulated, the more valuable the platform became, which attracted more users, generated even more trust data, and made it even harder for sellers to leave.

Any upcoming competitor would need to recreate all of eBay’s trust mechanisms from scratch (spoiler: they did).

Ultimately, eBay was dethroned by Amazon, who borrowed heavily from eBays innovations (reviews, public transaction volume, native dispute resolution). Amazon vs eBay probably deserves its own breakdown, but the TLDR is Amazon won because they:

• Owned the experience: Amazon handled payments, shipping, and support; eBay left it up to individual sellers.

• Prioritised convenience: Amazon made buying effortless with one-click checkout and standardised ‘The Everything Store’ UX; eBay treated each transaction as a mini decentralised exchange between 2 parties.

• Built an ecosystem: Amazon created infrastructure (Prime, FBA, AWS) to lock in customers and sellers; eBay conceptually remained a listing site.

The influence of eBay’s trust mechanics extended far beyond their battle with Amazon:

• Airbnb adopted two-way reviews with a double-blind twist (reviews only publish after both parties submit).

• Uber built mutual star ratings for drivers and riders that can lead to deplatforming of low-ranked users on both sides.

• Etsy modelled its star ratings and verified reviews directly on eBay's system, proving the model also worked for handmade goods where sellers are less interchangeable.

20 years later, every two-sided marketplace still follows eBay's trust playbook: make reputation visible, make it costly to lose, and make it impossible to fake.

Question for the builders reading: what other markets are constrained by trust that could be unlocked the same way?

Rabbit Hole

The where: 3x high-signal resources to learn more

Our History - eBay Inc. ↗

[22 minute read]

eBay’s self-reported highlight reel, including:

• 1997: $500M in Beanie Babies alone

• 2008: First National Medal of Technology to an internet company

• 2022: Lunch with Warren Buffett sells for $19 million

Well worth a scroll.

eBay Founder's Letter ↗

[2 minute read]

The actual letter that created online reputation systems. Preserved on eBay’s servers since 1996.

Favourite line: "Most people are honest. And they mean well... But some people are dishonest. Or deceptive. This is true here, in the newsgroups, in the classifieds, and right next door. It's a fact of life. But here, those people can't hide."

Bezos on how Amazon beat eBay ↗

[18 minute read]

July 2020. House Judiciary antitrust hearing. Bezos gave testimony under oath:

Amazon's strategy:
"We know that the success of our store depends entirely on customers' satisfaction with their experience in our store."

“We did not start out as the largest marketplace—eBay was many times our size. It was only by focusing on supporting sellers and giving them the best tools we could invent that we were able to succeed and eventually surpass eBay. One such tool is Fulfillment by Amazon, which enables our third-party sellers to stow their inventory in our fulfillment centers, and we take on all logistics, customer service, and product returns.”

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