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A T U R E SFEBRUARY 20 20 FORBES ASIA
The company’s prized crypto offering, Tzero, is
the subject of an SEC investigation, and a highly
anticipated private equity investment into the
fledgling exchange has withered. Its blockchain
investment arm, Medici Ventures, has yet to gen-
erate meaningful revenues and lost $61 million
in 2018. With many big companies now embrac-
ing blockchain—including Facebook—Byrne’s
shift to blockchain looks as challenging as Over-
stock’s online retailing business.
Eventually even Byrne’s most loyal sharehold-
ers revolted. Fumed Byrne in May, after investors
bombarded him with calls and emails when he
sold 900,000 shares of stock: “Frankly, I had no
idea that shareholders would demand explana-
tions of why and how I might want to use my
cash derived from my labor and my property to
pursue my ends in life.”
yrne is the son of the late John
“Jack” Byrne, a University of
Michigan-trained mathemati-
cian and insurance executive
renowned for turning around
Geico in the mid-1970s and persuading Warren
Buffett to invest in the auto insurer. Buffett once
described Byrne’s father as “the Babe Ruth of in-
surance” and was an occasional house guest. By-
rne’s parents would allow Patrick to skip school
to spend time with the investment maven.
Byrne now refers to the Omaha billionaire as
his rabbi. “My mom would get a case of Pepsi,
and Buffett, who is a teetotaler, always carried a
hip flask of cherry syrup like a drunk. We’d sit
there and over an afternoon polish off 18 Pepsis.”
Byrne’s father later went on to create his own in-
surance holding company, called White Moun-
tains Insurance. His stake, worth hundreds of
millions at his retirement in 2007, formed the
basis of the family’s wealth.
Patrick was the youngest and most precocious
of Jack’s three sons. In 1981, he headed to Dart-
mouth to study philosophy and Asian studies.
Shortly after his graduation, he was diagnosed
with testicular cancer. After treatment, he cel-
ebrated with a cross-country bicycle ride with
his brothers. The cancer would come back twice,
keeping him hospitalized for much of his 20s.
To stay occupied while bedridden, he pursued
a graduate degree in mathematical logic from
Stanford. In 1988 he headed to Cambridge Uni-
versity as a Marshall Scholar and earned his phi-
losophy doctorate from Stanford. Byrne speaks
Mandarin and several other languages. “I was
one of those guys who actually studied philoso-
phy because I was trying to figure out man’s place
in the universe,” says Byrne.
B
2010 2019CRYPTO UNCOUPLED
DURING THE CRYPTOCURRENCY BUBBLE IN 2017 AND 2018,
OVERSTOCK SHARES SOARED AND CRASHED IN LINE WITH THE
PRICE OF BITCOIN. HOWEVER, BITCOIN’S MOST RECENT RALLY
HAS DONE LITTLE TO HELP OVERSTOCK’S AILING SHARES.OVERSTOCKBITCOINByrne pivoted hard to the pursuit of wealth in the late 1980s. “I
had grown up in a very business-oriented household... I never an-
ticipated staying in a university setting,” he says. In 1987 he bought
a bankrupt hotel with his older brother for about a million dollars,
which they sold several years later for $4 million. In 1989, they started
buying distressed consumer debt at 5 cents on the dollar during the
S&L crisis. In the early 1990s, Byrne led a $1 million investment into
a Colorado casino that was later sold for $5 million. He also invested
in distressed strip malls, office space and apartment buildings across
the country.
Nothing kept Byrne’s attention long. In 1994, he led an invest-
ment into Centricut, a New Hampshire-based industrial torch-part
manufacturer, serving briefly as CEO. In 1997, he left to run Berkshire
Hathaway’s Fechheimer Brothers, which made uniforms for police,
firemen and military. In 1999, seeing an opportunity to sell leftover
inventory online, his investment holding company acquired a major-
ity stake in D2-Discounts Direct for $7 million. He renamed it Over-
stock, and when 55 venture capitalists declined to fund it, he turned
to friends, family and his own checkbook.
The company began scooping up inventory from bankrupt dot-
coms, whether consumer electronics, jewelry or sporting goods, and
reselling it cheap. In 2002, Overstock’s revenue hit $92 million and
Byrne took the company public via Dutch auction, which allows inves-
tors (not bankers) to set prices for the stock themselves. (Google went
public the same way.)
By 2005, the company’s stock, which had skyrocketed post-IPO,
began to slide as its losses widened. Byrne became convinced it was
because of naked short-selling, an illegal practice in which investors
sell shares in a company without actually borrowing them. In a now-
infamous August 2005 conference call, he ranted about how hedge
funds, journalists and regulators were conspiring to push down the
company’s stock price under the direction of a faceless menace he
called the “Sith Lord.” Overstock sued short-selling hedge fund Rock-
er Partners and research firm Gradient Analytics, which had been
critical of the company. Then, in 2007, he filed a $3.5 billion lawsuit
against 11 of Wall Street’s biggest banks (Goldman Sachs, Morgan
Stanley and Credit Suisse among them), accusing them of participat-
ing in a “massive, illegal stock market manipulation scheme” that fa-
cilitated naked short-selling.