no advertising, no sales force, no distributors, every product sold out

Nickell started talking about his company. Threadless, he explained, ran design competitions on an online social network. Members of the network submitted their ideas for T-shirts -- hundreds each week -- and then voted on which ones they liked best. Hundreds of thousands of people were using the site as a kind of community center, where they blogged, chatted about designs, socialized with their fellow enthusiasts -- and bought a ton of shirts at $15 each. Revenue was growing 500 percent a year, despite the fact that the company had never advertised, employed no professional designers, used no modeling agency or fashion photographers, had no sales force, and enjoyed no retail distribution. As result, costs were low, margins were above 30 percent, and -- because community members told them precisely which shirts to make -- every product eventually sold out. Nickell's company had never produced a flop.

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In a superficial way, Threadless resembles these Web 2.0 firms. It is an online business, built around a social network, in which users collaborate with one another. The difference is that Threadless is not a software or media company. It designs, manufactures, and sells actual stuff. "They're the beginning of a new wave," says von Hippel, the author, most recently, of Democratizing Innovation. Von Hippel envisions a future in which most companies essentially abandon market research and product design and instead rely on communities of users to figure out which products to sell. Tim O'Reilly, the founder of O'Reilly Media and the guy who coined the term Web 2.0, goes even further. "As manufacturing technology gets richer, this model will be much more widely applied," he says. Already, the prices of rapid prototyping gadgets like three-dimensional printers and laser cutters are plummeting, a fact that O'Reilly believes will allow for open-source electronics, furniture, and toys. "How far off," he asked in a 2006 essay posted to his blog, "is a future in which the creative economy overflows the thin boundary that separates 'information' from 'stuff'?"

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This rabid engagement propelled the company through four years of phenomenal growth, beginning around 2004. The user base grew tenfold, from 70,000 members at the end of 2004 to more than 700,000 today. Sales in 2006 hit $18 million -- with profits of roughly $6 million. In 2007, growth continued at more than 200 percent, with similar margins. Though Nickell refuses to disclose the exact revenue number -- perhaps because he now counts Insight Venture Partners, a New York venture capital firm, as a minority shareholder -- it seems fair to assume that Threadless sold more than $30 million in T-shirts last year.

- The Customer is the Company