eMeg

Similarity to Reagan isn’t what makes Whitman exceptional. Nor does the possibility she might copy a fellow billionaire, New York mayor Michael Bloomberg, and dip into her own fortune to win high office. Gobs of personal money in a campaign rarely elevates a candidate and never guarantees success. Her only prior role in politics was as an adviser to two losing presidential candidates in 2008, first Mitt Romney, then John McCain. Yet she’s not entirely a novice. “Business has always been my passion,” Whitman says. “But I’ve always followed politics closely.”

That’s fine, but what distinguishes Meg Whitman and makes her a fascinating political figure is one thing: eBay. Her decade as CEO of eBay, one of the most successful Internet startups ever, is the foundation of her campaign. “My philosophy of government is almost entirely driven by my 10 years at eBay,” Whitman told me. Her philosophy is not new. Her foremost lesson from eBay is that individuals with little or no capital will thrive as entrepreneurs when offered unrestricted opportunity, an efficient market, a level field playing field, and low costs. Now Whitman would apply that lesson–and many others from eBay–to California in the form of streamlined government, fewer bureaucrats, deregulation, less spending, and lower taxes.

Her years at eBay did another thing for Whitman. They made her a celebrity known to millions simply as Meg. Lucky for her, an attempt in her first corporate job at Procter & Gamble to be called Margaret quickly failed. Margaret Whitman? In politics, Meg works better. At eBay, she developed a likable, if not exactly charismatic, public personality. And as eBay flourished, she became a favorite of business journalists. Fortune named her the most powerful woman in business in America in 2004 and 2005. When she jumped into the governor’s race, Fortune put Whitman on the cover, standing beside a horse.

EBay is an online auction and swap meet that began in 1995 as a marketplace for collectibles such as PEZ dispensers. (A collection of PEZ dispensers, assembled by the wife of eBay founder Pierre Omidyar, is on display at eBay headquarters in San Jose, California.) Now buyers and sellers deal in everything from baby clothes to a Gulfstream II jet that auctioned for $4.9 million. In 2001, Bob Dylan’s boyhood home in Minnesota was sold on eBay for $94,600.

Contacted in 1997 about the job of eBay chief executive, Whitman politely refused to meet with Omidyar in California. At the time, she lived outside Boston and ran the division of Hasbro, Inc., that markets Mr. Potato Head and other toys. She had moved east in 1992 when her husband, Griff Harsh, a brain surgeon, became head of neuro-surgery at Massachusetts General Hospital. (Whitman is her maiden name.) Persuaded a few months later by a Silicon Valley headhunter to fly to California, she spent a day at eBay. One day was sufficient. She called her husband that evening and announced she was ready to uproot their family (two sons) and move to California. When she arrived in 1998, eBay had 30 employees, $4 million in revenues, and 300,000 registered users. When she left in 2008, it had 15,000 employees, $7.7 billion in revenues, and nearly 300 million registered users worldwide, more than 12 million of them in California. From 2002 to 2004, eBay was the fastest growing e-commerce company in the world.

“No company changed my life the way eBay did,” Whitman says. It shows. The corporate culture at eBay is unique. The headquarters is in a nondescript building on the outskirts of San Jose. Executives, even the CEO, have cubicles instead of offices. “It creates a very non-hierarchical company,” Whitman says. “People who will stop by your cubicle would not go to an office.” The room set aside for conferences is smaller than the living room of Whitman’s home a half-hour’s drive away near the campus of Stanford University. Her husband heads the brain tumor unit at Stanford University Medical Center.

Whitman is chronically pleasant. She’s garrulous but not given to small talk (at least in my three conversations with her). She once described herself to Patricia Sellers of Fortune as “frumpy, but she delivers.” Indeed she has delivered. When eBay’s website crashed in 1999, was out of commission for 22 hours, and later suffered periodic outages, Whitman spent weeks at eBay 24/7, sleeping on a cot. “I was scared,” she says. She feared eBay would collapse. She wound up hiring a new technology chief at better than twice her own salary. At her insistence, eBay users were offered refunds for listing fees.

The egalitarian culture at eBay grew out of the company’s extraordinarily democratic, libertarian, and populist business model. It’s a laissez-faire model that’s wildly out of favor today in Washington. The eBay idea: Create a minimally regulated market and let the users decide what’s for sale. Business permits aren’t required, nor do users pay local or federal taxes. “We inspired people to start businesses,” Whitman says. “Your next door neighbor has an equal chance of success as a big corporation. We made a small number of rules, we enforced those rules, and we got the heck out of the way. We kept taxes low–which were our fees–so that people could keep more of their money and grow their businesses on eBay. We didn’t try to tell the market where it was going to go.” One result is that 1.3 million people now make some or all of their living on eBay.

Whitman’s oft-repeated example of the eBay model at work is what she calls “the car story.” In 1997, Whitman was informed that 300 used automobiles were listed for sale on the website. She was completely surprised. Cars on eBay? This was unexpected, but she and her team quickly decided to open a separate section on eBay for cars. Today eBay is the largest retailer of cars in the world.

Political writers in California have been unimpressed by Whitman’s entry into electoral politics. They’ve watched successful CEOs collapse in past statewide races. The veteran reporters at the popular Calbuzz website, Jerry Roberts and Phil Trounstine, mock her as “eMeg” and “her Megness.” Whitman came off poorly in February in an interview by Michael Finnegan of the Los Angeles Times. He asked why her voter registration until 2007 was “declined to state,” though she called herself “a lifelong Republican.” She said she felt the CEO of eBay should appear politically neutral. She registered as a Republican to vote in the presidential primary in 2008 for Mitt Romney, her former boss and longtime friend.

Despite press skepticism, Whitman looks like the frontrunner for the Republican nomination for governor. Evidence of this comes from her chief opponent, California insurance commissioner Steve Poizner, the lone Republican currently serving in statewide elective office apart from Governor Arnold Schwarzenegger. Poizner has begun criticizing Whitman for decisions she made at eBay and for skipping a debate on the referendums in the May 19 special election. She ignores him. California is a Democratic state, yet the Republican primary a year from now matters. In 2010, Republicans will have held the governorship for 23 of the past 28 years, 84 of the past 109.

When Whitman spoke at a fundraiser for House Republican whip Eric Cantor in Richmond, Virginia, in February, she played up her experience at eBay. She turned down an offer of a limousine to take her from Washington to Richmond, by the way, and drove herself there in a rented car. “I was president and CEO of eBay for 10 years,” she said. “And eBay reinforced two important Republican concepts with which I had been raised.”

The first: Americans are “motivated by economic opportunity to achieve great things.” By creating e-commerce, eBay “became the home of so many inspired individuals, Americans with the courage and passion to create businesses and jobs. I ran eBay with those folks in mind. We purposely kept regulation on eBay to a minimum so that small business could innovate.”

The second: “Less government is simply better.” Her career before eBay “had not involved me too closely with taxation, government bureaucracy, or regulation,” she said. “But after years of watching government try to tax and regulate the success of eBay sellers, I left eBay with a strong belief that government’s role in our lives should be limited.  .  .  .  Government can only help create the conditions for prosperity. Prosperity itself is up to each of us.”

The concepts are free market bromides, but they serve Whitman’s purpose of linking eBay and politics. She makes the same points in her stump speeches in California. But the lessons from eBay–lessons applicable to the cause of saving California–go far beyond the two broad concepts. When I interviewed her in Washington and later in California, she mentioned at least eight more, some small, some large.

* Count heads. We were having lunch three months ago when the subject came up of where to turn if revenues decrease. “Head count,” Whitman said. “Any person who’s ever run a business, whether it’s a dry cleaning business, a flower shop, or Boeing, they totally get it,” Whitman explained in a later conversation. “When you see revenue drop, you have to bring your costs into line or you’re out of business.” That means cutting the number of employees.

Schwarzenegger hasn’t done that in California. The state payroll (345,000-strong) has grown 2 percent as revenues have fallen in the past year. The governor “has 4,000 appointments,” Whitman notes. “Think about that for a minute. I mean, 4,000 appointments? First of all, what do these people do? Maybe you only need 2,000.” Whitman has her own lingo. Non-online companies are “land-based.” OPM? That’s “other people’s money.”

* Listen to people. Whitman responded to emails and implemented suggestions from eBay users. Her car story reflects this policy. Whitman, who studied economics at Princeton and has an MBA from Harvard Business School, insists “a bunch of MBAs sitting in a room, I promise you, would not have figured out” the value of selling cars online. “But eBay users did.  .  .  .  We provided the tools, and it is eBay users who created eBay. And it’s not the California government that created California. It’s Californians who create California. So the analogy, I think, people really understand.”

* Focus, focus, focus. Her words. Whitman is skilled, according to her associates at eBay and other Silicon Valley firms, at concentrating on a few big problems and coming up with solutions. She says this is what she would do as governor. “You’ve got to focus on three things: jobs, government spending, and education,” she says. “Beginning, middle, and end of story.” If you try to do too much–“boil the ocean,” she calls it–“you get eaten alive by the bureaucracy. You get eaten alive by the legislature. You get eaten alive by the entrenched interests. You get eaten alive by the lobbyists.”

* Compete. California is hemorrhaging jobs, mostly to Arizona, Nevada, Texas, Utah, and Colorado. “It’s because those states are easier to do business in,” Whitman says. “Lower taxes, simplified regulation, and they compete. California is not used to competing because for so long we were the Golden State.” No more. “If we’re going to compete, we’ve got to get state spending under control so we can save money to compete.”

* Cut the layers. “There’s a rule in business that for every layer of management, decisions take twice as long,” Whitman says. “It’s exponential. If you have three people, they take four times as long. Five, they take 20 times as long. In a government bureaucracy, if you’ve got layers and layers of people, it’s really easy to say, ‘no, no, no, no, no,’ and there’s 27 reasons you can’t get anything done.” By streamlining decision making, “you’d get more done.”

* Face bad news. “I used to say at eBay, ‘Do not sit on problems.’ Bad news is much better early because you have a chance to do something about it. So no surprises. I want to know the worst case all the time.” In California, with a $150 billion budget and a huge bureaucracy, “you just don’t decide that you’re going to change something next week,” Whitman says. Something like the state’s “spending problem of epic proportions.”

* Save to invest. At eBay, “every year, you would try to save money from doing the things you did last year and the year before–either stop doing things or do them better, so you free up money to invest in new things,” Whitman says. That idea–basically operating more efficiently to free up funds–“is a very foreign concept in government.”

* Use information technology. Sacramento, the state capital, “is the most inward looking place I’ve ever seen,” Whitman says. Information technology, constantly updated, runs eBay. “But the information infrastructure that runs the state of California is stuck in 1982.  .  .  .  We run 17 financial systems at the state on 1982 Oracle financials. We don’t actually know what the high school graduation rate is because we don’t have the IT infrastructure that tracks the kids.”

Mitt Romney is Whitman’s mentor. He hired her in 1981 to work for his business consulting firm, Bain & Co., in San Francisco when she was two years out of business school. “You’re basically looking for intelligence,” Romney told me, and getting-along skills. Whitman had both.

In 2006, as he was gearing up to run for the Republican presidential nomination, Romney had breakfast with Whitman at the Stanford Park Hotel near her Silicon Valley home. After she agreed to join his campaign as financial co-chair and part-time adviser, Romney broached another subject. “Meg, you really ought to get in this yourself.” Whitman laughed. Later, after Romney lost, she signed on with John McCain’s campaign. McCain, too, urged to her to run for office. By then–fall 2008–she’d hired Jeff Randle, a talented Republican consultant who’d worked for Schwarzenegger and former Governor Pete Wilson, and had already spent a year studying California’s staggering problems and the obstacles to solving them.

Whitman is energetic, as well as smart and knowledgeable on issues. On the Romney campaign, she was expected to be a celebrity surrogate with business credentials to reinforce Romney’s message. But she quickly became a policy adviser and strategist. “She learned the entire federal budget cold and referenced it from memory when we were brainstorming on policy prescriptions,” says her friend Dan Senor, a partner at a New York-based investment fund who met her on the Romney campaign.

What has struck me about Whitman is how normal she seems. She’s rich. She donated $30 million to Princeton to build a sixth college on campus (dubbed Whitman College). But she routinely flies Southwest, travels by rental car to save money, and appears unfazed by her fame. Senor watched the third presidential debate at her home last fall, during which she cooked dinner. That was the debate in which McCain said Whitman was the kind of person he would want as treasury secretary. “Meg heard her name, looked up at the TV for a second, and then went back to the tuna steaks,” Senor says. “It was like she barely noticed.  .  .  .  No commentary, analysis, or patting on the back.”

Whitman’s virtues don’t automatically make her a good candidate. Romney says her eBay experience brought out “the other part of Meg,” her people skills. “She was not your typical CEO who does well in the boardroom but not on the shop floor,” he says. “Being CEO of eBay is quite different. It was a people movement. It made over a million people entrepreneurs. She was more a leader than a CEO.”

With Randle’s help, Whitman has gained the support of two heavyweights in state politics, ex-Governor Wilson and Representative Kevin McCarthy of Bakersfield, the deputy Republican whip in the house. With Whitman, “it won’t just come down to party politics,” McCarthy says. Indeed she has considerable support among non-Republicans in the high-tech community and Hollywood (she worked for Disney from 1989 to 1992). But those elites are a tiny fraction of the electorate. When I talked to Michael Reagan, the president’s son and a talk radio host, he wondered about her popular appeal. So did Marc Andreessen, the designer of the first popular web browser, Mosaic, now a high-tech entrepreneur and Democrat who’s backing Whitman.

California has been cruel in recent years to first-time candidates from the business world. Northwest Airlines boss Al Checchi spent $40 million in the Democratic gubernatorial primary in 1998 and got 12.5 percent of the vote. Bill Simon, a wealthy investor who was the Republican nominee in 2002, lost in a landslide. Neither Reagan, elected governor in 1966, nor Schwarzenegger, who won in 2003, had previously been elected to statewide office. But they were popular actors. For others, winning a down-ticket office helped.

Checchi and Simon found their business records were their greatest vulnerability. Since Whitman has made eBay her chief talking point, her opponents are scrutinizing her tenure there and at other companies. Steve Poizner, her primary challenger, has pointed to eBay’s purchase of online telephone company Skype as evidence her business prowess is overrated. Skype is now for sale by Whitman’s successor at eBay for less than she paid for it.

Whitman faces a daunting collection of rivals. Poizner too is wealthy, and he is backed by one of California’s most influential Republicans, former state senator Jim Brulte. A third Republican candidate, former congressman Tom Campbell, is also a serious threat. The three Democratic candidates aren’t slouches either: Mayors Gavin Newsom of San Francisco and Antonio Villaraigosa of Los Angeles, and former Governor Jerry Brown.

Whitman’s success depends largely on how Californians feel about their state next year. California is an economic basket case. It has the highest tax rate and biggest budget deficit in the country, third highest rate of home foreclosures, an unemployment rate (11.2 percent) that’s never been higher, and, as Whitman says in every speech, its schools rank 47th of the 50 states in math, 48th in reading, and 43rd in science. Only 14 percent of Californians are satisfied with the state’s performance. “Those are the people who aren’t paying attention,” says Wilson.

The question is whether California voters are ready to gamble on an untried newcomer. Whitman says she and she alone has the know-how and background to revive the state. “Look at where California is and what we need,” says McCarthy. “The skill set? She has it all.” Her supporters in the business orbit say the same. A second question–an unanswerable one for now–is whether she can master Sacramento. Democrats and unions dominate the town and the legislature. And they’ll still be powerful after the 2010 election.

But let’s assume Whitman is elected. She’d be governor of the biggest state, a brainy, conservative, accomplished woman at the top of the Republican ladder with precisely the experience that Sarah Palin lacks. That she’s a social moderate may be worrisome to conservatives. She’s pro-choice on abortion but voted for Proposition 8 last year, which barred gay marriage. When Reagan was elected governor in 1966, the speculation about national office–president, vice president–erupted instantly. If Whitman is elected in 2010, it will erupt again.

Fred Barnes is executive editor of THE WEEKLY STANDARD.