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Hardbound

Pirate Mastermind
Nick Bilton reports on the rise and fall of the man, who ran a billion-dollar online drug empire 

Every founder goes through it.

When Facebook introduced the “timeline,” its few-million-strong user base grew enraged at the privacy violations that came with involuntarily sharing everything you did with others. But Mark Zuckerberg had no choice; he needed to grow his revenue, and this was the path forward. Uber went through it when the company defiantly refused to eliminate its “surge pricing” model, which would make customers’ car rides double, triple, and in some instances even octuple without much warning. But Travis Kalanick had no choice; he needed to grow his revenue. Every tech company has faced these challenges: Twitter, Google, Apple, Yahoo! All seemingly screwing over their customers for their own gain. People don’t realize that these are simply some of the tough decisions a CEO must make in order to survive. So if Ross wanted to continue to grow the Silk Road, he had to make these kinds of grueling decisions too. And just as in the revolts at Facebook and Uber and every other start-up in Silicon Valley that had pissed off its users, the drug dealers on the Silk Road were outraged at the latest decisions of the Dread Pirate Roberts. So much so that there was talk of a mutiny on the HMS Silk Road.

Rumors had been rumbling up through the decks of the ship for weeks about such a rebellion. At first Ross had justly brushed them off as just that, rumors, assuming they were just hearsay from a couple of unhappy vendors who were spreading gossip. Yet now the chatter was growing louder, and there was talk of an insurgency, or even of a mass exodus, that could be in the works on the site.

The turmoil had begun earlier in the year when Ross had made the decision to raise the commission rate he was charging dealers on the site. Back then, whether someone bought a tiny baggie of weed seeds for $5 or $5,000 worth of cocaine, the Silk Road would take a 6.23 percent commission for helping facilitate the deal.

This tax worked out really well for the little guys, who ended up paying pennies for each transaction. But the dealers who were moving the largest volumes of drugs were being forced to pay massive commissions. To get around the fee, some of the top dealers had started doing side deals off the site, in which the Silk Road got nothing.

So the Dread Pirate Roberts and Variety Jones had a plan. They penned a “State of the Road” address, announcing that the commission rates were going to change. “Now, instead of charging a flat commission,” Ross wrote in a letter to the site’s users, “we will charge a higher amount for low priced items and a lower amount for high priced items, similar to how eBay does it.” The announcement went on to explain that the site would take a 10 percent commission on orders less than $50 and 1.5 percent for orders more than $1,000, with a few other fees in-between, hopefully balancing out the scales of commissions. Ross ended his State of the Road address in the same way Fidel Castro ended a homily in 1962 after he had successfully led the Cuban revolution: I believe our future is bright and we will emerge victorious.”

But not all of the buyers and sellers on the site agreed about this new future. Some were happy about the rate hike (especially those who hawked larger shipments of drugs), but others were furious, specifically the dealers who trafficked vast numbers of small doses. In a matter of minutes a chaotic debate ensued on the Silk Road forums.

Ross was genuinely perplexed by the reaction. He was even hurt by the response. Didn’t these people realize that if it weren’t for him and his revolutionary ideas, there wouldn’t be a Silk Road? Didn’t they understand that he was putting his entire life at risk for them? If it weren’t for his work, they would all still be buying and selling drugs on the street, risking arrest or, worse, caught up in violent turf wars, being robbed, beaten, or even killed in a deal gone awry. And yet they had the audacity to complain about a small commission change. Didn’t they know that this entire thing couldn’t run itself? That this wasn’t a fudging nonprofit? It was a gosh darn business!

Ross became so worked up over the backlash to the commission changes that he responded in a way that essentially told everyone on the site to go fuck themselves. “Whether you like it or not, I am the captain of this ship,” he shouted in response to the outcry. “If you don’t like the rules of the game, or you don’t trust your captain, you can get off the boat.”

It was not the best pep talk for the troops.

Thankfully, as time went by, the uproar simmered down and most people accepted the rate changes. But a select few disconsolate dealers were still unhappy. And rumors of what they were planning started making their way to Ross.

“I suspect that several are talking about making backup plans to jump ship, or create competing sites,” DPR wrote to VJ in a chat. “I don’t want a mutiny.”

This is an extract from Nick Bilton's American Kingpin published by Random House

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