A Small Thing Called, “The First Amendment”

Posted: Thu Jul 12, 2007 2:30 pm Post subject: A thing called, “the 1st Amendment”

Hi.If the WSJ is to be believed, it appears that the CEO of Whole Foods, Inc. has been going on message boards anonymously for years bashing a competitor’s stock and pumping his own. A number of journalists have contacted me today to discuss the subject of a CEO going on message boards. All have been professional, two even noted quickly at the outset the vast gulf that separates what Mackey did and what I have done, and I heard nothing in their questions that suggested an inappropriate agenda. That said, as is my wont, I am going to post here the answers I am giving, so there can be no mistake about it later, and also, for ease of reference for other journalists who have the same questions.1) What is the limit of what is appropriate when it comes to executives going online?Some obvious points first: I think the Achilles heel of the Internet is anonymity. People behave in an uncivilized fashion when they are anonymous, but when they are stripped of anonymity, those same people begin behaving politely. So in general, I tend to discount the thoughts of anyone who insists upon anonymity (unless there is a real security concern). This applies to everyone, whether they be executives or not.Second, no executive (or for that matter, any employee) should ever go online to talk up her own company’s stock or try to bash a competitor’s stock price.

It is almost a tautological truth to note that an executive of a public company is in some sense a public figure (more accurately, the company is a public figure and the executive is a component of that). Anonymous posting by public figures is especially distasteful to me: put differently, I think that when a person decides to become a public figure he is relinquishing his ability to take part in public discourse without identifying himself, simply as a matter of etiquette, not law. The only exception I would suggest to this principle is if it concerned a subject well divorced from that area in which he is a public figure (e.g., if Henry Kissinger were into model airplanes, then I think there would be nothing wrong with him being on message boards about model airplanes without identifying himself).

All that said, there is nothing about being a public figure compels one to surrender one’s 1st amendment rights.

2) What do I think of Mackey?

From what has been reported, he sounds pretty crummy: he bashed a competitor, their stock and management, and touted his own, all anonymously. That violates every principle I articulated below.

Incidentally, it may be neither here nor there for your story, but in case you are interested, there is a Yahoo poster who uses the names “netmargin15” and “can_i_use_this_alias” who both pumps Amazon and bashes Overstock. The first is the smart sock-puppet, the second is the basher. I know:

• He or she is an Amazon employee.
• He or she is of a rank high enough to have access to Amazon’s VPN service.
• He or she displays a very high level of business knowledge, commensurate in my experience with a senior executive.

As a journalist, I cannot reveal my source for this information. But you can also ping this person through Yahoo.

3) When it comes to my online activities:
a. What have I done?
b. Where?
c. What names?
d. Why?

In the very early days of the company (1999-2000?, well before we went public) I used to go to a website called F___ckedcompany.com, seeking information on businesses that might be looking to liquidate their inventory. Eventually I posted a couple-few times under the name “Hannibal” suggesting that if anyone had inventory to liquidate to please contact me.

Incidentally, I chose “Hannibal” as an allusion to the Carthaginian general (one of history’s great underdogs, in my view), and not to the cannibal of modern fiction. However, given that our business model at the time was liquidating the inventories of failing dot-coms, the irony was not lost. I believe I did reveal my real name, but I am not sure.

I have not been back in 5 or 6 years.

I have read some bashers claim that my posts are hard to find there, and that I must have caused them to be removed. I have no idea if my posts are hard to find (as I said, I think there were just a few), but I have had nothing to do with it either way: the assertion is pure fabrication.

A couple years ago I started posting on Fool.com. I continued using “Hannibal” (and added “100” because of some requirement of Fool) but revealed who I was right away, signed my postings, and generally made sure that it was common knowledge to everyone on the board that Hannibal100 = Patrick Byrne. I was there for other reasons than to discuss our stock. Of course, I disclaimed any attempt to encourage anyone to buy our stock, any opinion on our stock, etc.

In time, the discourse on Fool was hijacked by the same people who hijacked Yahoo, using the same methods (clogging, non sequitors, sock-puppeting, etc.) A site called “InvestorVillage” started up. Some people there asked openly if I would switch. So I did.

Somewhere in there Overstock created an auction site, and in it, an auction message board. My original name on auctions was “Hannibal” but anyone who checked my user page would see that Hannibal was Patrick Byrne, and in addition, it was widely known (that is, everyone who communicated with me on the auction message board knew they were communicating with the CEO). In time, however, I created an area on our auction message board called “Take 5 With Patrick”. I noticed that I could post there and others would repost them in the other places, so I gradually narrowed my posting to our own site. Also, most of my posts there generally started as small columns added to our marketing emails that go out to 10 million people, with my name on them (again, I was doing anything but trying to be anonymous).

In recent weeks, we have created a small blog area as well within Omuse, a nascent social networking area of our site, but so far all I have done is move my posts over from the other places.

Other than that, I have twice, I think, posted on some shopping blogs, using my real name to answer some question about our site, or customer service (I offered free Club O memberships to anyone who wrote me within a few days: I got 1,000 requests). On both of these shopping/customer service blogs I used my real name.

I have not posted anywhere else under any other name.

Here are some examples:


Author: Hannibal100
Number: of 13190

Subject: Watch 60 Minutes Tonight Please! Date: 3/26/06 1:16 PM
Post New | Post Reply | Reply Later | Create Poll
Report this Post | Recommend it!

Recommendations: 23
Dear Fools,

For all who have not gotten the word, please watch 60 Minutes tonight. I believe that it does not even mention “Overstock.com.” However, the facts it presents and the story it tells are well known to me, as are the witnesses who will appear on camera. I expect the piece will tell precisely the story of which I became aware in the autumn of 2004.

If my behavior has seemed a little strange since then, perhaps it will appear a bit more explicable if you watch this and reflect on the wider market ramifications of the behavior described. Ask yourself as you watch it, “These guys are making money from someone: whose money is being siphoned off?



PS Remember the story you see tonight is itself just a chunk of the issue of the looting of the savings of Americans. But how do you get someone to eat an elephant? One bite at a time.


Msg: 155 of 8668 7/22/2006 2:47:31 PM Recs: 26 Sentiment: Not Disclosed

By: Hannibal Send PM Profile Ignore Recommend Add To Favorites

Posted as a reply to msg 77 by ostkprtnr

Re: Any chance Patrick will start posting here?

This is Patrick.

Probably not a great idea for me to post often. I want to respond substantively to folks’ points (both good and bad), but the more substantive it is, the more there is a Reg FD issue.

That is a shame, because I sure would like to level the playing field for you guys. I try to keep it as level as possible by being scrupulous about FD. As much as I wish I could answer some of the questions you post here, I am pretty sure that this would not count as fair and public disclosure.

Still, I will be watching: folks always email me the best posts, so I’ll be reading those. And maybe I will answer the occasional question that presents no Reg FD issue. I may have to do that on my auctions board. Or else, I might occasionally post a link to something public that answers a question someone raises.

Good luck.

Your humble servant,


PS It is nice to see that a certain Guy With much time on his hands and who could not Get With the program over here at investorvillage has now Gone Wholly mad.

Hours go by without anyone posting on Yahoo. He tries a couple of his old tricks, but there is no one to clog, all sane people having fled to investorvillage. After silence, silence, silence, he suddenly goes back and posts half-a-dozen clogs, and then when there is still no response, he writes:

Much better since the scam artists left (Not rated) 7 minutes ago

Too many people were getting suckered by low life, scum sucking, penny stock pumping grifters and it’s good to see that Yahoo has forced them all to leave.

They were unable to continue to clog the boards and stifle discussion under the new message board formats and as a result engaged in a hasty retreat to Guyana.
Rate it: 1 star + unrated 5 stars &&&


By: Hannibal Send PM Profile Ignore Recommend Add To Favorites

Posted as a reply to msg 164 by Biopharmer

Re: Any chance Patrick will start posting here?
Actually, I have always used as my nom de guerre “Hannibal” after Hannibal of Carthage. The Romans were 10 and 0 until they went and screwed with the wrong guy, who through a series of brilliant tactical and strategic moves took them 2 falls for 3. He didn’t just think outside the box, he didn’t care where the box was (end-running the Romans by crossing the Alps on elephants? I bet that was not one the Romans had anticipated.)

Yes, he lost in the end to Scipio Africanus, fled to Syria and when the Romans caught up with him 10 years later, drank poison. But he fought the good fight.

I am also aware of the George Peppard and Anthony Hopkins versions. Nothing wrong with those. One has to set one’s sights high.

< EOM >

Joined: 24 Sep 2004
Posts: 62 Posted: Mon Jun 26, 2006 9:34 am Post subject: My Favorite Zen Story
Dear Honored Guest,

In a remote village in Japan there lived a Zen master named Hakuin. He was known for his devotion to the pure and simple life of a monk.

One day, a beautiful, unmarried girl in the village fish market was found to be with child. As it was a conservative village, the family was furious. The girl refused to say who the father was, but after much pressure, she finally admitted that the father was the master Hakuin.

In great anger the family confronted the master, criticizing him for taking advantage of the trust he had been shown. They asked him, “How could you have betrayed our trust so badly?” Hakuin’s only response was to say calmly, “Is that so?”

Hakuin’s reputation was destroyed, but he did not appear to mind. When the baby was born it was brought to Hakuin. He took great care of the child, though he now had to beg to survive. The villagers would scorn him, saying, “We will never forget that you betrayed our trust, you miserable monk.” Each time, Hakuin would reply calmly, “Is that so?”

Several years later, the young mother finally confessed the truth: the baby’s father was not Hakuin, but another young man from the village who had not been willing to accept his obligation, so she had accused the monk knowing that he would do the right thing.

The villagers went to Hakuin to request the return of the child, saying, “We are so sorry, how could we ever have believed this of you?”

Relinquishing back to the family the child who had become his own, Hakuin said gently, “Is that so?”

Respectfully submitted,
Patrick M. Byrne


Dear Honored Guest,

Worldstock is special in a way that can best be explained with a few stories.

Worldstock launched in September, 2001. In Peru, we found a small co-op of artisans making leather-and-wood furniture, and asked them to make ten Ottomans for us: we sold out in a day. Then they half-filled a container: again, we quickly sold out. When we wrote about placing larger orders, we received this reply:

“The artisans literally wept tears of joy and danced in the streets yesterday when queried about their ability to produce these orders. They promised to do what was necessary — work night and day — to make all that was ordered as soon as possible, and more if things continued to sell for you. While many had expressed their sadness at the events of September 11, and to say they were united in solidarity with the USA against terrorism (which many of them have faced years before us), no one had mentioned work. Silently, they had feared that the repercussions of the terrorist attack would harm our economy, and that since they were producing ‘gift’ items, no one would be thinking of buying them. How would they feed their children? they worried. How would they pay tuition for their schools? How would they pay the rent? Could they pay their workers? Or should they fire them now? Should they wait to visit the doctor or buy medicine, not knowing if they’d have any income to pay for it next week? I just wanted you to know that your success with our products means food, schooling, medicine and hope for dozens of families in Peru. On behalf of a lot of happy artisans, thank you.”

Now we get one container every two months from them, and their small co-op has mushroomed into a federation of hundreds of wood-and leather-workers earning good livings. Similarly, in Nepal Worldstock has been able employ metal working artisans who would otherwise be out of work have lost business due to a Maoist insurgency. In a village near Chiang Mai, Thailand, a small family business employs artisans to make us handmade furniture. In total, thousands of artisans in 35 countries are working to offer you their quality handicrafts in our Worldstock department. We abide by principles of fair trade. A detailed explanation of the history and principles of Worldstock can be found here, but the short version is, we are trying to double or triple the income of less fortunate people around the world, while offering you exotic products at a fraction of the price at which you would find them in expensive boutiques.

Respectfully submitted,
Patrick M. Byrne

In one post I even reposted all my posts from the past:


3. Why do I post?

I assume these are of less interest to you, but there are simple cases where I am just giving my take on things, or discussing a new program at Overstock (auctions, Worldstock, etc.), or in one case, mourning the passing of a friend, Milton Friedman:


However, for the more controversial posts, I give two explanations:

1) I am a big admirer of Reg FD. From my time on Wall Street (years ago as an analyst, now as a CEO), I can tell you that the gestalt of Wall Street is that corporate executives get behind closed doors and are expected to cough up information that gives Wall Street elites an information asymmetry versus the ordinary investor. I think that is wrong, and think FD is one of the best regs to come along in decades. Because of this, I think that executives going into a public forum that really is open to the public, and communicating with the public directly, could be healthy for the capital markets. That said, while I go on message boards to discuss what I see as a financial scandal of enourmous consequences for our cotunry, I have made it a point not to discuss anything material about Overstock (and in general, I stay away from discussing Overstock qua Overstock, though I may discuss the scandal in ways that touch upon Overstock).

2) The second reason for why I do it is this: I have for two years thought that we are approaching a calamity in our capital markets caused by unsettled trades: these have accumulated to the point that they represent a massive latent derivative risk to which no one wants to admit. I think that if it is not addressed it will become a national disaster (the Economist noted late last year that new capital formation, the best measure of the health of an economy, has dropped in this country from 57% of global IPO capital formation to 16% over 7 years, as I recall). I have tried to stop this before it is too late. The Establishment has elements which have reaped billions by exploiting this crack, and they do not want to see it sealed. Those same deep financial interests have captured the regulatory body that oversees our capital markets (the SEC), and much of our financial press as well: CNBC, Barron’s, and the Wall Street Journal. Barron’s is nothing but marketing literature for a few hedge funds. They meet any attempt to expose this scandal by saying, “Oh, that is just some CEO who is mad about his stock” (though I started this nwhile the stock was going up, and have done everything I can to divorce it from me, Overstock our share price, etc.) Thus, I turned to the Web. If Rathergate (i.e., Dan Rather versus the bloggers) was the Concord of the 2.0 Revolution, then I believe this scandal is going to be its Yorktown, for the financial press will be shown to have not simply ignored a scandal, not simply turned a bling eye to it, but to have actively taken part in the cover-up.

This post from a couple months ago says it all.




Posted: Sat May 12, 2007 1:03 am Post subject: Gotterdammerung of the American mainstream media
Ha ha – this is a great one. An all-time classic from Joe Nocera, New York Times.

Below you will find an email Joe Nocera sent me asking for my “reaction” to some odd claims he wanted to include in his weekly column. Alas, he sent the email Friday afternoon at 12:11 PM his time (note the “10:11 AM” time stamp of our email system, which is in Salt Lake City, that is to say, Rocky Mountain Time) and, as I was in Texas this afternoon in a meeting, I missed the window of a few hours that I theoretically had been offered to respond before Joe’s deadline for his weekly column. Congratulations are due Joe, who has crossed a line never previously crossed (not even by Carol!) by those engaged in their desperate efforts to keep the wig in place.

—–Original Message—–
From: Joe Nocera [mailto:XXXXX] Sent: Friday, May 11, 2007 10:11 AM
To: Patrick Byrne
Subject: david rocker

patrick– David Rocker made a speech a couple of weeks ago in which he said, among other things, that your lawsuit was nothing mroe (sic) than an effort to silence critics. He also said that Gradient did its first report about Overstock a year before Rocker Partners even became a client. And he said that Mr. Anafantis (sp?) has been discredited with the SEC’s “no action” letter. Your reaction?

Joe Nocera
[email protected]

Had Joe actually abided by the principles of Ethics in Journalism 101, I would pointed out the numerous flaws in his attempt to whitewash the criminal activity of his friend Rocker with a “Free speech in America is very important” spin. Remember, from the start Rocker’s lawyers have tried to spin his illegal activity as being about free speech, and this is how the argument has been met by the adults who have examined it:

1) On 8 counts versus 0, the trial judge in Marin Country sided with us and against Rocker’s claim that this suit was about free speech. In fact, the judge said in the courtroom that after his initial review of the evidence there was a “high likelihood” that we would win the suit. Rocker appealed.

2) The California Attorney General appeared out of nowhere and filed an amicus with the appellate court supporting our side and against Rocker’s attempt to spin this as about free speech.

3) The appellate court recently heard Rocker’s arguments. This Law.com article gives a good sense of how the appellate court responded to the hysterical attempts by Rocker’s lawyers to spin his illegal conduct as being about free speech. www.law.com/jsp/article.jsp?id=1176282246984

The Law.com article captures one judge’s reaction nicely: “Justice Ignazio Ruvolo indicated there was evidence even ‘at this stage of the proceedings’ that could substantiate Overstock.com’s claims.” Somehow Joe missed that.

I’d also have pointed out that Rocker does not seem to think “Free speech in America is very important” when someone criticizes Rocker: Rocker famously sued some message board posters a few years back for daring to criticize him and his unethical behavior (incidentally, that case got laughed out of town). Free speech doesn’t seem to be that important to Rocker, Joe.

In the face of these facts, Joe blithely asserts that “The facts are not on Mr. Byrne’s side” without mentioning that the trial court, the California attorney general, and the appellate judge have indicated exactly the opposite, even at this extremely early stage.

Joe notes without question that, “Mr. Rocker wasn’t even a client of Gradient when it began writing its tough-minded reports on Overstock,” neglecting to mention that ex-employees of Gradient assert that the firm had a relationship with Rocker even before he formally became a client.

Joe writes about his friend Rocker “But you know how lawsuits are: a year and a half later, the thing has barely gotten started” without mentioning that we have been most eager to move forward, but that his friend Rocker has stalled and delayed at every opportunity, rejecting the appellate court’s offer to rule without delay for a hearing: there was even one article where an attorney for the miscreants promised to appeal the appellate court ruling. That is, Joe bemoans the fact that “the thing has barely gotten started” while conveniently neglecting to mention that it is his friend Rocker who is doing everything he
can to keep it from getting started.

And so on and so forth.

Is anyone else noticing that something seems to be going on this week? First, after a year of criticizing me for my decision to issue a press release celebrating my receipt of a subpoena from the SEC, the shills are now trying to make a case that I should have sent out a second press release when I received another addressed to me as a person, though it was a small fraction as long as the first, covered sub-issues of the first, as well as issues related to a broader investigation that is not about me or Overstock at all. As though there is a world of difference between a subpoena addressed to our corporate lawyer asking for our CEO’s materials, and one addressed to me at our corporate address: I hate to disappoint, but that distinction is such a fine one it did not occur to me it was worthy of a second press release. The funny part is how it still has not dawnede on the miscreants that a fair bit of the material being requested by the SEC concerns them, not me or Overstock.

What would have made them so angry this week? Perhaps they are mad that last Sunday, at an event hosted by The Economist (a publication with infinitely more credibility than Joe, Roddy, Herb, Gary etc. could ever aspire to), the bad guys lost control of the narrative?



I think these fellows better hope that the scandal whose lid they are trying so desperately to secure never blows off, because if it does, in the aftermath not only with their journalism come under examination, but more importantly, the publications which have blithely published it will be seen to have been part of the cover-up. Which is entirely right and approrpiate. And then that will be the end of it.

Can anyone doubt at this point that we are witnessing the Gotterdammerung of the American mainstream media?


Posted: Fri Jul 13, 2007 8:05 pm Post subject: Auction marketing

Some people are wriiting onto these boards to discuss auction marketing.It would be better if you wrote Meghan about that directly, but since you asked: we have not found it wise to market auctions separately from the general website. What we are having some luck with is the Omuse tab. Partners of our B2C tab are going into Omuse and writing guides to their products, then linking to them from their guides.I hope that helps.Best all.Patrick

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