High Impact

Patrick Byrne describes himself as a "rapacious capitalist" so frequently, it's obvious he wants to prove he doesn't think of himself as a saint. But he's also not the standard-issue dot-com entrepreneur.

Byrne started Overstock.com Inc. three years ago with $28 million of his own money, amassed during his years as an entrepreneur and CEO at companies such as tools manufacturer Centricut LLC. Overstock sells products, often brand names, at prices below retail. The company's annual sales more than doubled last year to $92 million, but it lost money through most of the year until posting a $1.1 million fourth-quarter profit.

Nearly two years ago, during a trip to Asia, Byrne was touring the villages of Cambodia on a motorcycle when he encountered small groups of weavers, silversmiths, and silk makers. One afternoon, he crashed his motorcycle and was invited to recuperate from his cuts and bruises at the home of a local farmer. Byrne spent the evening thinking about his trip and decided what he'd seen could fit into Overstock's business model of moving goods from highly fractured supply channels through a single Internet channel. Thus was born the idea for Worldstock Socially Responsible Goods.

Worldstock, a division of Overstock, buys goods crafted by disenfranchised people throughout the world and sells them on the Overstock site, restricting the net profit to the company from those sales to no more than 1% beyond its costs to operate. "I'm fond of saying that 23 hours a day we're rapacious capitalists with Overstock, but one hour a day we're practicing social responsibility with Worldstock," Byrne says.

Byrne started Worldstock with the help of Marilyn Garson, a New Zealand woman who'd been trying to help a Cambodian group sell its products. She wasn't dazzled by the dot-com message. "I was Patrick's first cynic on this, because there were others before who claimed they could do the same thing," she says. "I called it the messiah-of-the-month club." But in each of the previous cases, the terms weren't viable for the crafts producers. When Byrne started talking about a miniscule profit margin for the parent company and cultural sustainability, such as ways to provide producers with steady business instead of demanding they crank out crafts for a month and then disappear, Garson started to listen. "He didn't have a bunch of preconceived notions and wasn't looking for a yes-man," Garson says. "I was convinced that this was a different quality of opportunity than what I'd been approached with before."

Garson works with Byrne to find and investigate crafts groups and associations for Worldstock. They include victims of war and land mines, aboriginals and traditional people living outside modern development, and former prostitutes or otherwise disenfranchised women in poor countries. Worldstock has sold the wares of 2,160 craftspeople--goods such as drinking glasses, vases, and rugs--from more than 40 nations. Garson projects working with 10,000 craftspeople in the coming year.

Through investigation, on-site visits, and clear policies, Worldstock tries not to buy products produced under inhumane conditions, though Garson notes that the company can't police groups on a daily basis. Byrne considers that the greatest risk. "The only thing that can kill this idea now is if I end up on 60 Minutes along with footage of kids in a sweatshop," he says. "We're visiting groups and disclosing everything we know about them to consumers, and letting them decide."

So far, Overstock's shareholders have taken Byrne's Worldstock project in stride. "We have one corner of our site that's a nonprofit," he says. "Some people seem a little bit baffled by it, but it only accounts for a few percentages of our company. But I don't take a salary [from the parent company], and think the company can indulge me this one project."