The otherwise amazing book by Ben Horowitz (of Andreessen-Horowitz fame) called The Hard Thing About Hard Things has a chapter that basically lays out and encourages this type of illegal behavior (called "Is It Okay to Hire People from Your Friend's Company?").
It literally recommends that companies maintain a "do not hire" (aka "do not poach") list of other organizations from which HR is forbidden from recruiting. It also recommends calling the CEO of the other company on the down-low to ask permission before extending an offer.
It really disgusted me when I read it. Such smart people doing such dumb things, and encouraging would-be CEOs to do the same.
It really disgusted me when I read it. Such smart people doing such dumb things, and encouraging would-be CEOs to do the same.
Wow, just wow. I'm reading that same book, but haven't gotten to that part yet. All I can say is... we (Fogbeam Labs) would never, ever, ever do something like this. When the day comes that we have money to hire employees, we are going with a strict policy of "We will poach anyone, anytime, from anywhere. If you want to keep your employees, treat them well enough that they won't want to leave".
I feel like you're selling it short here. He said "If you would be shocked and horrified if Company X hired several of your employees then you should not hire from them. This should be a very small list and require CEO sign off before happening" At the macro level what he's saying is you have to protect the overall health of your company. If one or two key hires from a competitor result in poisoning the inter company relationships then the negative outweighs the positive so don't do it. Or, at the very least, understand that your internal argument "well that employee was looking so they were lost anyways someone was going to get them" can create a much bigger problem for you down the road (if new employee X enjoys your company chances are she'll tell her friends at old company and HR will see inbound flow and create an unintended "raiding" scenario)
I think he's guilty of trying to overly engineer management here and don't agree but he does have a logic around a really narrow use case.
I did not find it especially disgusting. The specific approach Ben advocates is asking candidates at the interview stage whether they would be okay if you checked with their company. It is your choice whether to say yes or no. You have total latitude to walk away.
Ok, you can walk away, but that's not the point. The point is that if I want to get a better offer, and I seek that at another company, it's not fair to ask my current employer if they're willing to let me take that offer, because they may also not be willing to improve your compensation, so you end up stuck where you are just because your company wants you and you are skilled enough for other companies to want you too.
All you are saying is that you are free from reprisal in that situation, OK, great, but that doesn't improve your compensation situation.
There is a really profound, fundamental mismatch in power between employers and employees: an employee depends upon the employer for the means of basic existence, while the employer does not have the same dependence on any given single employee.
That disparity in power means that there must be very strong legal and social constraints on employers to make the labor market reasonably fair and equitable. Since essentially the only means the employee has at their disposal to better their situation is leaving or seeking better offers elsewhere, this fundamental right must be strongly protected.
Employers can't have it both ways: laws that allow them to fire for any reason or no reason, set any level of compensation they choose (including cutting pay at any time for any reason) all in the name of the free labor market, but at the same time making secret backroom deals to limit compensation or employee attrition. It's either a free labor market or it isn't.
Your definition of a "free labor market" is a contradiction in terms. A free labor market is one where people are free to exchange their labor (collusion), not one where a third party decides who gets to exchange what labor and for how much.
Laws against hiring and pricing agreements are interventions in the market. Laws against hiring agreements are not consistent with a free market.
There's nothing wrong with people (employers) making agreements with other people (employers) regarding the things they own (their money).
I'm familiar with anti-trust theory. The idea of collusion reducing competition is fallacious because market competition is not a quantity, but a process by which goods and services are exchanged.
Price fixing and hiring agreements do not involve force, fraud, or misrepresentation- yet the regulation or prohibition thereof directly violates the property rights of the market participants.
I've read the Wikipedia entry you've linked to in its entirety, so I kindly ask that you will read this one: https://mises.org/daily/4397
The problem with libertarianism is that it starts with a tiny set of axioms, and then attempts to derive how the world should be. Any deviations from that are then taken as evidence that the world is wrong, unjust, etc. In reality, humans are hierarchical social creatures with complex dynamics, and you kind of have to play by the rules that other people set for you. In this case, a group of people broke the rules and some other people think they should be punished, and I think most of the people here have no problem with that.
> In this case, a group of people broke the rules and some other people think they should be punished, and I think most of the people here have no problem with that.
The percentage of people who agree with what I've asserted here has no bearing on the validity of my arguments. And attacking my argument for being libertarian is argumentum ad hominem. Shooting the messenger does not address the message.
"attacking my argument for being libertarian is argumentum ad hominem"
No. Saying that the framework you're basing an argument on is flawed isn't dismissing the argument because of a personal flaw of the person asserting something. It's saying that the core axioms/assumptions are flawed.
Maybe you over-identify with that ideology and are taking criticisms of the ideology personally since it feels personal, but it's not at all about you, it's about the ideas you're espousing.
Why do you distinguish force and fraud arbitrarily from collusion? Me bashing you over the head and taking your stuff is the ultimate freedom of action.
It's not arbitrary. Hiring agreements (collusion) do not involve force or fraud. Do you truly not distinguish between bashing someone over the head for my stuff from agreeing to exchange something for it? The latter is voluntary and the former is forced.
>Hiring agreements (collusion) do not involve force or fraud.
Hiring agreements are where an employer uses the power of their position (and those they are colluding with) to control their employees. I would argue this is just another form of 'force'. You don't need to physically harm someone to control them.
A shop that opens across the street from another shop doesn't "force" the other shop to lose money. Your definition of force is contradictory, as it leaves no room for anything that is not pre facto considered force.
I don't distinguish between a group of people colluding to beat someone up, and colluding to subvert the market by suppressing wages. I think it's entirely arbitrary to say that the state should use violence to prevent one kind of harmful activity and not the other.
What aspect of the market is subverted by hiring agreements? A price is what two parties agree to trade. Hiring agreements in no way prevent parties from agreeing to trade. McDonald's isn't subverting anything if they won't sell you a burger for 50 cents.
In my view, the only problem with slavery is that it's involuntary. It's important to make a distinction between voluntary servitude and involuntary servitude (real slavery). To prevent someone from voluntary servitude would require their involuntary servitude to whomever is preventing them.
To put it another way: If person A is forcefully preventing me from voluntarily serving person B, that makes me person A's involuntary slave.
There is nothing preventing you from engaging other employers if you wish to improve your compensation level. We saw this with Facebook ultimately being responsible for the breaking up of the downward pressure on salaries.
That's because Facebook had no part in the agreement. Their policy was to hire from anywhere they could, and they've poached plenty of Google employees. If every company was colluding to fix wages, where would you go?
Google does not owe you a job. If every company had an agreement to not to hire with any other company and there was nobody who didn't work for any of these other companies, then they would have to terminate their agreement or go out of business. But of course, that wouldn't happen because that situation would incentive companies to break their agreements or not form them at all (such as Facebook). Sure, Google and Apple drive wages down in the same way that Facebook drives wages up.
But to answer your question directly: Yes, if nobody wants to hire you... nobody wants to hire you. I don't see why Google should be forced to hire you anymore than you should be forced to work at Google.
if maintaining a positive relationship with another company is more valuable than the hire, (and when is this not the case?), obviously you will clear it with the other CEO first. I haven't read the book but you haven't quoted enough context to label this disgusting.
There's a difference between 'do not poach' and 'do not hire'. A 'do not hire' list is in essence a Blacklist, which if employed between companies with overlapping skill sets (IE trying to block an engineer moving between Apple and Microsoft) then this is certainly disgusting.
Poaching is the active targeting of employees of other companies, which when done in the umbrella of an investors holdings is bad form (don't bite the hand that feeds you). When done to another company is generally a bad idea if you expect to have to have amicable dealings with them (license patents, buy parts, etc). However, if they're a direct rival and there's no foreseeable reason to be on good terms with them, there is no reason to not poach their employees other than the reason you know you're not acquiring a loyal employee, but one loyal to the money.
A 'do not hire' list is an attempt to blacklist anyone who essentially leaves whatever the umbrella is of its reach, which is an attempt to place a monetary cost on anyone trying to leave the corporate fold. It would be like a bartender breaking the legs of anyone trying to leave. Anyone else who was planning on leaving isn't going to, but they're certainly not going to be buying drinks and that's really going to drive down profits when the bar is at capacity and no one is drinking. There's a reason companies are employing "quitting" incentives, and that's for the very reason that happy employees are productive employees and the notion of one bad apple spoils the bushel.
So lets pretend I am a tech lead at a AcmeCo, I quit and start a startup, and an old teammate wants me to hire him. But he is an important employee at AcmeCo and my old CTO will be unable to replace him & his knowledge. I care about my relationship with AcmeCo & the CTO in particular, he is a potential client, we share ownership of some open source offerings, he still mentors me.
How could I possibly take any action that damages this relationship?
Because when two people freely work together peacefully to break the law, it's called conspiracy. What is wrong with two people freely working together to burn a factory down? To collude to deny others the right of free association and free employment is just as wrong. The CEOs of major corporations that dominate an industry can have a disproportionate impact on an industry, so this is especially wrong.
> What is wrong with two people freely working together to burn a factory down?
I think this should be obvious, but burning a factory down is fundamentally different from hiring agreements, in that it is destruction of someone elses property. A hiring agreement does not involve the destruction or restriction of property, but laws against such agreements do.
> To collude to deny others the right of free association and free employment is just as wrong.
Hiring agreements do not deny anyone the right of free association or free employment. Employment is a free exchange between the employee and the employer. Not coming to an agreement (not offering you a job) in no way is a restriction of your right to make an agreement in the first place. If I don't want to work with you, that doesn't restrict your right to form an agreement with me or with someone else.
> The CEOs of major corporations that dominate an industry can have a disproportionate impact on an industry
I don't see how that's relevant to the fact that laws against hiring agreements are laws against free association.
Take the argument to the extreme, is it OK for every employer in every industry to agree on wages and no-poach? What about on child labor? Minimum Wage? What about colluding on prices? Aren't these all the same infringement? The truth is sometimes society has to take away the rights of the few for the sake of the many. While I agree we tend to do it too often, you will be hard pressed to find many who agree with you on this matter. The fact is rules like this almost certainly make our economy more productive as a whole.
> Take the argument to the extreme, is it OK for every employer in every industry to agree on wages and no-poach?
Why isn't it? Those agreements don't restrict or infringe on the freedom of others to form different agreements, or avoid forming them.
> What about colluding on prices?
Same exact situation. Price agreements don't restrict the freedom of other parties to set prices contrary to that agreement.
> Aren't these all the same infringement?
Without getting into specifics... Yes.
> The truth is sometimes society has to take away the rights of the few for the sake of the many.
I truly commend you for your honesty about what these laws are.
> The fact is rules like this almost certainly make our economy more productive as a whole.
I don't see where that's been demonstrated here. They certainly aren't productive for the firms who are punished for, or prevented from, forming such agreements. I would argue that the fact that firms do form such agreements when free to do so, means that they are productive for the economy as a whole by definition.
How is this productive for the economy as a whole. This was done to keep salaries low, so a handful of people could make more money. How does that benefit the economy as a whole?
By allowing those firms to make more money. They are the economy too. The economy does not exist for one persons or class of persons benefit.
> This was done to keep salaries low, so a handful of people could make more money.
People cooperated to reduce their expenses without restricting the right of anyone else to cooperate. Just because people make money doesn't make it wrong. Conversely, a handful of people (the defendants) colluded to make more money by keeping salaries high, except they did it by restricting the rights of everyone else.
You seem to think that the "economy" in its (mostly or completely) unregulated form is some kind of ideal. Why? Such an economy is dependent on rational actors and perfect information, neither of which are present in human society.
It seems more reasonable that each human in a group will try to maximize their own economic outcomes as well as to assist the other humans that they personally care about in maximizing their economic outcomes. In the modern world, it's often expected that humans are able to extrapolate that the people that they don't know are similarly worthwhile human beings. So while it's generally considered acceptable to try to maximize things for themselves, doing so while knowingly making other humans worse off is seen as morally detestable.
It's important to remember that humans generally care much less about abstract ideals than they do about themselves, the people they care about, and their social standing. The "economy" as it exists in reality does in fact exist for the benefit of one class of persons: those persons who are willing to tolerate it and have the power to change it. When this real-life economy is no longer tolerated, it is changed, in ways like antitrust legislation, class action lawsuits against companies that participate in wage collusion schemes, and the French Revolution.
It wasn't demonstrated, it was assumed. Mostly because you will need broad understanding of economics. I'll try to do my best to demonstrate it. Imagine a smaller economy where there is only 1 firm. They have complete power to set wages, you don't like it you don't work. (We've already established this would happen eventually if agreements like this were allowed because it is far easier to control wages than it is to create new and competing firms.) What happens when they decide not to pay a living wage? More importantly, what is to stop them from influencing laws such that what becomes fair practice is changed over time? Is it fair to allow a single entity the power over not just the economy but the power to define what is just? We have to be very careful in a capitalist society about confining the limits of what actors are allowed to do because quite literally money often equates to power and with time power defines law. I hope it goes without saying that enough bad laws over a long enough time span are trouble for everyone in society. Unregulated capitalism will always lead to issues for a society because it always concentrates wealth. (Those with the most information and the best decisions always come out more ahead than the rest.) Remember, capitalism isn't the best way to run an economy its just the least bad.
Also, please remember you can't look at a statement in a vacuum. "Why isn't it? Those agreements don't restrict or infringe on the freedom of others to form different agreements, or avoid forming them." Perhaps not technically, but realistically they absolutely do. If we had a million worlds with a trillion firms and easy travel between them then such actions would automatically correct, but we don't and thus people do not realistically have the option to turn them down. The whole point of capitalism is to reward and penalize decisions. It kind of breaks down (predictably) when one side has enough power to prevent the downside of a bad decision.
Remember, free speech doesn't mean you can run into a theater and yell fire.
How about more than two people working together peacefully? How about many? And what if it was the employees instead of the employers? Maybe call it something like.. a union.
In a [post] on his blog Horowitz describes a scenario in which a person currently employed at a company that is "important" to you comes in for an interview. The recommended course of action is to 1: block the hire, 2: inform said company about it. There are two things i just can't agree with at all:
* The part about informing the current employer: about 50% of the time it will end with ruining the next few weeks or months of his/her life. I.e. getting them fired, with ruined prospects of getting the job they took the risk for. Note that at e.g. apple the standard procedure when they find out that an employee is looking for a job is to escort them out of the building right then and there.
* Note it's not about "poaching", he explains thoroughly that it applies to people who ask for an interview on their own accord too.
If you don't want to read the whole thing, at least read this gem:
It is important to note that just about all of these kinds of policies violate the Right to Work laws in California. Specifically, if you block a hire based on this kind of policy and the employee loses their job and cannot find work, your company is liable for his wages. As a result, the business relationship with the other company must be extremely important for you to employ any kind of “hands off” policy.
> Note that at e.g. apple the standard procedure when they find out that an employee is looking for a job is to escort them out of the building right then and there.
Do you have a source on this? I couldn't find anything with a quick Google search.
You are taking it out of context, though. BH is basically talking about an issue that could kill your startup. Whether or not you like that reality, there is a real risk that the other company will retaliate for something they see as an adverse breech of trust.
Note that logic: the problem is not with the company ben is advising. The issue is at the third part company. If that company decides to "go nuclear" and sever all ties because you poached/goaded or otherwise got involved in their "interal politics" (note: this is not a per-se issue of math/economics/money), bad things might happen to your firm.
CEOs of startups have a fiduciary duty to avoid "bad things", and even that choice is a catch-22 (ie, two bad things...) you pick the worst-bad one. And that is what he is saying.
In other words, he's talking about something that is a real-world problem. If you want to vent out about the issue, it really sits with the third part company. They are typically the one with all the power in the situation.
Example:
Startup A had 80% of its business tied to a single company, BigCo B. Like it or not, the CEO of startup A needs to avoid a situation where the CEO of BigCo B comes to the conclusion that he won't do business with A becaus of Politics (note: not economics).
Whether or not poaching is politically sensitive (or offensive) and/or warrants this type of "nuclear" response, is a function of many thing. But none of that is BH's responsibility in the larger world.
This dynamics is something that has played out for millenia from kings and queens and royal courts to how the predisent and Y combinator select their staff and senior leadership.
At a certain level of the game, its all about trust. And polticial power is essentially a combination of trust and goodwill. And its easy to disolve and can reak havok on any company of any size when systemically undermined. So you need to pay attention to it.
In other words, this is a much bigger issue. The tack of trying to shoot or lynch the messenger is sort of misplaced. Because the startup is the employer and may have a power asymmetry with a potential hire; but that startup is in itself subject to potential power assymetries at much higher levels.
(This goes for pissing off BOD members, VCs, and Key clients alike...maybe it suck/isn't fair...etc... but the reality is you need to pick your battes as a small company. And picking fights with the consituents you need to help you build your biz is ~dysfunctional and needs to be understood as such.)
The thing that irks me the most is not the practice itself. My problem is with everything else in that post.
Note that he has not described it as a morally ambiguous but sometimes unavoidable choice (like you did) but as the most righteous and noble option. That he's openly admitting he knows that it's illegal. Pay attention the sugar-sweet language of his parable and how its tone gets more colorful whenever the story takes a darker turn (from pov of the employee).
I mean, this entire thing is something out of a dilbert strip. I'm serious. This is something you'd expect Dilbert's CEO to write. The self deceit, the contrast between the language of "hurt feelings" vs the unstated reality of a person getting fired as a consequence and the stupidity of it all are mocked in hundred different Dilbert strips. Remember when this wage fixing story surfaced and the surprised comments that they were stupid enough to put it in email? If Mr Horowitz ever gets in similar trouble the paragraph i quoted above will make these troubles a lot worse.
There's plenty of scope to fairly critique the BH piece. He's not perfect or beyond taking a few shot across the bow on a controversial subject.
But the situation of apple and google colluding (ie, this linked article) IMHO is a ~different situation here than the subject of the BH piece.
1> Google and AAPL as of the time of the lawsuit were not small players (fighting for their lives). They were 'fat cats' essentially at the top of the food chain.
2> Their motivations seem inherently economic/greedy, and fundamentally anti-competitive. They were not even vaguely 'customer centric' or otherwise constructive (except at the most tenditious levels).
3> The defendents were self aware their actions were unethica/illegal, and in the context of (1) and (2), were actively taking steps to hide/bury/conspire/collude regarding the illegal activity.
So this type of context is not the same. Calling out the BH essay seems to add a layer of useful sophistication to the discussion here. Half the utility, tho, is understanding the difference.
Your comment is spoken from a perspective that favors the investors... not the worker who is seeking better employment.
Workers should be free to seek to improve their lives without old white men making back-room deals against them. In this regard the tech industry is no more progressive than any other, and that's incredibly disappointing. We're supposed to be such an intelligent bunch.
Not convinced this helps the investors either, if the employee is staying within their broader portfolio of companies. Yes, he may cost a bit more, but presumably he's moving to do more valuable and / or productive work, so the uptick in salary should pay for itself several times over.
I wasn't saying that he wouldn't be right to or they shouldn't pay market rates. I was just refuting the idea that an employee working at a company in a portfolio that interviews at another company in the same portfolio could only do so at a benefit to portfolio shareholders. That's really naive.
Yes, my comment favors investors, by way of favoring companies (and the potential return on investment), but it does not (in my opinion) hinder employees.
I believe you misunderstood my point based on the following comment:
> Workers should be free to seek to improve their lives without old white men making back-room deals against them
I support the "Do Not Poach" rule. "Do Not Poach" does not prevent workers from seeking employment. It means, me as an employer, will not actively solicit employees of other companies if we have shared investors (given the size and complexity of the investments).
"Do Not Hire" on the otherhand, seems to be what you are taking umbrage with, and I concur. Employees should (generally speaking) be allowed to seek employment opportunities without back-room deals preventing that.
There's no practical difference. If I hire Ben away from you, then protest "he came to us! we didn't poach him!" it matters not one bit to our now shattered relationship.
And how many entry level recruiting employees or their immediate managers do you think even want to have this conversation with someone like Steve Jobs? No single candidate is going to be worth having to defend yourself to the CEO, whether it was unsolicited or not. Practically speaking, these people are going to be the untouchables.
There is a difference between active poaching and simply getting a resume (or some other expression of interest) from somebody for an open position.
a) If you get sent a resume in response to an open req and you reject them based solely on the current employer of the applicant being a "friendly company" ("do not hire" list), that is illegal and wrong.
b) If you realize the applicant is from a "friendly company" and so you make a subtle threat along the lines of: "We are going to call your current employer to get a reference check before we decide to extend any offer, are you sure that's ok with you?" (also recommended in Horowitz's book), it's also wrong and unfair. I'm not a lawyer so I don't know if that is overtly illegal however.
How is that a subtle threat? That's not a threat at all. That's just being upfront about it. And if you don't like that you can tell them: "No that's not okay with me" and then walk away.
"Those who do not remember history are doomed to repeat it." -Santayana
This is yet another iteration of American labor politics. That it involves workers with greater skills than in previous iterations is not germane. The reason that labor unions arose in the first place was that capitalists actively exploited workers. And, guess what? Capitalists still exploit workers, even when the workers tools are laptops and VMs rather than steam engines and Bessemer converters.
How easily we forget that our grandfathers fought and died for the forty-hour work week. How easily we give that up, because we're working for "disruptive startups".
This is the market reacting to malicious behaviour by large organizations. As far as I can tell, in this situation it seems to be working. The court system nor the market isn't putting up with their shit.
I'd much prefer courts handle this than solving the problem by creating a second problem. Which in your example, the unions themselves eventually become too powerful or negatively effecting the job market and upward mobility of smaller players. We would see benefits in the early days then eventually reach by a stasis where everything starts moving extremely slowly and consumed by bureaucratic process.
Then only those embedded within the union system benefit, while competing global markets without constraints operate more efficiently. While smaller players in the job market start hiring less due to the high bar needed to hire union workers.
I've witnessed this first hand as an electrician in my family ran a successful business, until the workers organized into a union and he had to shut it down because their demands made it completely unprofitable (they demanded expensive benefits programs and high wages, keep in mind we live in Canada with public healthcare). The workers lost their jobs and most ended up working for another much larger company. Unions create bigger companies and bigger unions.
The court system isn't putting up with it? You must have a liberal definition of punishment, if you expect $300mm to change behavior. If you add a zero it may have an actual impact, but at $300mm it's possible the companies net saved money.
edit: for a (very rough) estimate of how much money google saved, remember that in late 10 they gave their entire staff a 10% raise, effective 1 Jan 11. So if you look at their 2011 10k [2], a very rough underestimate of their comp expenses -- looking at R&D alone -- is $5,162 (numbers in millions). So if 1.1x = 5162, then x = 4692 and that 10% raise cost google $470m. A fine less than the savings of one year of your illicit behavior -- and for just one company! -- discourages behavior exactly how?
Considering it is not a criminal offense and instead a civil one, the only option for the courts is to fine them.
But I actually agree with you, as an alternative to unions the reaction I'd like to see is strengthening the courts ability to punish malicious acts by corporations and have more individual responsibility. As we've seen where banks destroy thousands of peoples lives by purposely gambling their savings away. Or pharma companies mislabeling products every year: https://en.wikipedia.org/wiki/List_of_Largest_Pharmaceutical...
While these cases are much worse than conspiracy to not hire people, I agree settlements aren't always the best solution because it seems to keep happening. There needs to be stricter and real punishment for businesses. One reason is we need to stop protecting those executives directly involved with the conspiracy from being shielded by corporate legal entities, who can easily pay out the fines.
Which is why I agree with the judge the current settlement is insufficient. Unfortunately a greater fine is the courts only option, that is the real problem IMO.
>The court system nor the market isn't putting up with their shit.
If the court system does not deliver damages that equal or exceed the amount of money these companies made by fucking their employees over, then the court is making it clear to the American people that they fully support such behavior.
We keep seeing large corporations taking part in unethical moneymaking schemes because they always come out ahead, even when they get caught.
that this was a laughably low amount considering the scope of the collusion and the time-scale over which it happened.
that it looks like a good deal to all the companies concerned on two fronts - 325 Million is a pittance compared to what Apple, Google or Adobe make in a month.
and the perception of the non-tech folks that this is about the rich whining about not getting caviar rather than a real issue.
At least the first one is being addressed (somewhat). I hope the final settlement really makes them hurt financially so that it becomes one more item in the HR manual - "thou shalt not enter into illegal no-hire agreements even when pressured by an asshole" .
For the second issue there needs to be some effort put in towards communicating with the non-programmer public and educating them about why shit like this is a VERY bad idea no matter who does it or who is impacted.
The fact that this settlement was rejected by the judge should be an embarrassment for the plaintiffs' lawyers, and IMO is a great example of the problems with the incentives in class action settlements. Basically, the judge is saying there is substantial evidence that the plaintiffs would win considerably more if the case went to trial. From the lawyers' perspective though, if they settle they get a sure thing, and, importantly, they don't have to do any more work.
So in other words, if this settlement had been approved, the employees would have gotten a raw deal, while their attorneys would have gotten tens of millions for poor work on a pretty clear cut case.
It would be interesting to see an analysis of what the economic impact of these depressed wages has been. $3 Billion is probably not too far off the mark. Probably not $3 Billion directly to the programmers impacted, but definitely to the broader economy.
3B$ is around 11k$/year/programmer[1], which is less than a 10% raise at the salary levels these developers have. Sounds quite fair or even low for what they could have gotten had they decided to move.
[1] Assuming 4 years and 64000 developers, which after some googling seems to be what's at stake in the lawsuit
Across the industry, the number of employees affected is easily in the high hundreds of thousands, at a direct cost to them of tens of thousands of dollars per year. So billions to maybe low tens of billions is not an unreasonable range. And would that get trebled under California employment law?
This, right here, at multiple levels. A company paying market rates have benefited from this collusion. Any company still paying market rates after this is knowingly taking advantage of this illegal behavior.
What I'm saying is that the amounts of cash held by - and available to - these companies is so eye-poppingly astronomic that even an twelve digit settlement - which the law may allow - is nowhere near enough to bankrupt them.
Agreed. Even 3 decimal places wouldn't do justice to what they have done to us. Fuck those greedy bastards. If we were smart we would unionize ... err, sorry, I mean form a professional association to represent our interests. Like doctors, lawyers, accountants, etc.
Why has no one mentioned jail time for breaking the law and potentially damaging people's lives and livelihood? Why do we always think money is the solution. Jobs is burning in Hell, so no hope there, but anyone else this can be attributed to should do time, not pay their body servants salary and laugh at how the poor struggle to eat.
I think after 2008 it's pretty clear that executives personally don't have to fear any consequences from wrongdoing. Either someone way down the chain of command goes to jail or the shareholders pay for a settlement.
So you think $324 billion dollars is appropriate? Wouldn't that essentially bankrupt all the companies involved? Who needs to worry about jobs when some of the biggest tech firms on the planet are wiped out! Not to mention that $324 billion spread across 64000 plaintiffs is $5 million each... You wouldn't be looking for that easy windfall, now would you?
If I go with your figure of 64,000 * 5,000,000, it's not the tech-apocalypse. It's not like that money is going straight into a crack pipe.
People with a lot of technical know-how would suddenly be set loose in a cash rich environment full of new millionaires who are looking to build their own empires.
That scenario could very well be a second dotcom boom.
More to the point, when one of the little people gets caught breaking the law, we don't question the consequences their punishment will have on any industry. These companies not only broke the law but were terrible corporate citizens.
Anything that doesn't hurt a lot will not be an appropriate punishment, it'll just be considered the cost of doing business.
The effect of this scenario on the high end real estate market in the Bay Area would horrifying / amazing depending on whether or not you were already holding property.
You go directly from "tech firms wiped out apocalypse" to "64000 plaintiffs [..] $5 million each" and don't notice the disconnect?
Frankly, that needs to happen, and not only when theres cause. We need a Netflix chaos monkey that breaks up big companies and redistributes their wealth to let creative destruction create something better.
It need not be instantly due and there cash flow positive. 15b each per year and there done in 10 years and still profitable.
Also, free cash is hardly their only capital. Google could for example sell YouTube. They could also sell bonds or stock etc.
PS: Not that I think 300B is the right penalty, but there needs to be some real risks to prevent such behaviors or the penalties simply become yet another cost of doing business.
True but it seems hard to argue that the amount can reasonably be more than all of the cash on hand, since the companies wouldn't have been able to pay the employees anything like that amount, so it can't reflect the market value of the lost salaries.
The only real effect of bankruptcy would be that guys like Page and Brin would be worth $13 billion instead of $26.
Assuming that it would actually bankrupt them, how does bankruptcy cost jobs?
The cash goes to employees who will likely spend / re-invest in the startup economy, this will likely create more jobs as there are economies of scale in software companies.
The capital remains and would be sold to a new owner... since these companies are profitable the jobs remain and the company just has a lower bank account with new owners.
If you had the opportunity to buy Google/Apple/Adobe for 50 cents on the dollar, why would you fire everyone? It makes no sense, they are all extremely profitable companies.
> Wouldn't that essentially bankrupt all the companies involved?
The sensible thing to do in these types of circumstances is to pay the settlement using newly issued shares in the company. That dilutes the interest of all the existing shareholders (effectively the money comes out of their pockets because the price per share goes down) but it causes no damage to the company's operations.
Is there any recourse for the engineers who weren't directly affected by the collusion but were affected by the indirect effect on the market as a whole?
It's strange that even the NYT got this wrong -- the bulk of the agreement was not in fact about poaching engineers, but rather sales and product people[0].
the bulk of the agreement was not in fact about poaching engineers, but rather sales and product people
Do you have a better citation for this claim? The linked Business Insider article does not claim such a thing, and the court filings the article cites do not support the claim.
The article cites Google's Special Agreement Hiring Policy that divides companies into three categories: Restricted Hiring, Do Not Call, and Sensitive. Only the protocol with respect to Restricted Hiring companies is constrained to Sales, Product, and G&A. Google's protocol for the Do Not Call companies seems to prohibit actively recruiting any employee at those companies. The article does not address whether other companies limited the scope of collusion to, "sales and product people."
By the way, Judge Lucy Koh estimated that fees would be $82885000, so each of the 64466 class members would have received $3750, not quite the “essentially zero” that Alex at TechCrunch claims in the article you link.
Relative to the damage caused, sorry but $3750 (minus the regular income tax that will be levied on top of it) does in fact work out to "essentially zero".
It amounts to basically saying "Yeah, we artificially suppressed wages for years and years, sorry. But take this.... it is about what you would have made working for us for a week (at the suppressed wage level we created, lol!)".
The lawyers will make out really, well, though, which is why I'm generally anti-class action but happy that this decision was made.
Note how the plaintiff's attorney actually argued against this ruling (to protect their very large slice of the bird-in-the-hand pie). If they were acting for the right reasons they would be pushing for a much higher sum (even if it meant more risk) in the hope of causing sufficient punitive damage to the companies involved to really change behavior. $325.4 million split among these companies is peanuts.
$3750 is about a week's pay for a tech worker, so essentially zero.
Salaries jumped by about $30K/year when the pact collapsed, so the commenters above who are calling for the decimal point to shift a place to the right aren't all that unreasonable.
Assuming that is the true effect, it should probably 2-3x that in punitive damages otherwise the collusion was still a good idea, and next time it will be more adequately paranoid corporate types covering their asses instead of the self-assured Jobs forwarding evidence around with smileys.
I bet $3750 can barely cover one month of mortgage on a place in San Francisco. It's no small amount, but in the context of their location and cost of living it's a pittance.
I'm curious if this will have any impact on the practice other than companies getting better at not leaving a paper trail.
If it doesn't, the only people this settlement will help is those at the named companies and not the trickle down effect it's had on the rest of the industry.
A case like this leaves institutional scar tissue. There will be new sections in HR policy manuals and training programs. Executives will be gun-shy about any conversations that even come close to those at the heart of this lawsuit. There will definitely be an effect.
For a while. As time passes and this case fades from memory I expect such collusion to eventually happen again.
Unless you're an idiot you either stop doing it, or get better at it. That's why when you commit a crime they send you to criminal school, so you can swap notes about all the other ways guys got caught.
>In her ruling, Koh repeatedly referred to a related settlement last year involving Disney and Intuit. Apple and Google workers got proportionally less in the latest deal compared to the one involving Disney, Koh wrote, even though plaintiff lawyers have "much more leverage" now than they did a year ago.
>To match the earlier settlement, the latest deal "would need to total at least $380 million," Koh wrote.
$380 million??!!?!?! That's not really any better when they're suing for $3B, and having it come from a judge's mouth is NOT helping. I'm glad she turned down $324m, but the new number is still insulting.
Now the judge tells them "you have much more leverage". So tey have to work out how much more leverage they have. 5 times the leverage would be $1.9 billion.
That's at least how I understand the text, and I find it very honest of the judge. I guess she can't give them the exact sum she thinks is appropriate.
> After the plaintiffs’ lawyers took their 25 percent cut, the settlement would have given about $4,000 to every member of the class.
> Judge Koh said that she believed the case was stronger than that, and that the plaintiffs’ lawyers were taking the easy way out by settling. The evidence against the defendants was compelling, she said.
Can anyone explain this from the perspective of the economic/sociological motivations of the lawyers? People often complain about a huge chunk of the money going to the class-action lawyers who are too eager to settle, but the traditional argument is that a fixed percentage structure (rather than an hourly or flat rate) gives the lawyers the proper incentive to pursue the interests of the class by tying their compensation directly to the legal award.
Here's my best guess: Lawyers, like most people, are risk adverse for sufficiently large amounts of money. (They would rather have $10 million for sure than a 50% chance at $50 million.) On the other hand, the legal award will be distributed over many more plaintiffs. Since it will be much smaller per person, the plaintiffs are significantly less risk adverse. So the lawyers settle even thought it's not in the best interests of the plaintiffs.
This suggests the following speculative solution for correctly aligning the incentives of the lawyers and the class action plaintiffs: either (a) spread the legal work over many lawyers such that the potential compensation for them is small enough that their utility function is at least as linear as the plaintiffs or (b) turn the class-action lawsuits legal team into a corporation which must answer to many shareholders.
Proposal (a) has problems because it might require the number of lawyers to be comparable to the number of plaintiffs, which could be thousands or millions. Proposal (b) strikes many people as weird, and introduces other principal-agent problems, but it does have precedence:
I know this is illegal but I wonder whether any, most, or even all of the plaintiffs will be blackballed from most large companies in the future? Yes it's wrong, but in practice it's both easy to do and get away with it.
National collusion against talented individuals born by chance within the boundaries of another administrative area seems more like an entrenched privilege than a worthy "battle", especially given how much of US companies' revenue comes from outside the US.
... Or get ready to compete a little? ;) Like getting to a level which justifies your high price and differentiates you from that cheap labor from Asia?
There's nothing wrong with "collusion." Collusion is nothing more than free association. Same with "poaching" for that matter. There's nothing wrong with two people agreeing to work for each other. People should be free to negotiate their own agreements.
The arguments for criminalizing such free association are based in sentiment not reason.
What's artificial is that it's based on an agreement between two producer not on market discovery of price by the consumer. Do you understand how markets work?
Let's say all companies form an agreement to not hire from any other company. They're now in a situation where either they must terminate the agreement in order to hire, or bid against other companies for labor that is not currently working for any of the firms. Companies bidding over labor drives wages upwards... not downwards.
I don't agree with GP's argument, but presumably in such a hypothetical new entrants to the market could get the best engineers by paying slightly more than the collusion wage. This phenomenon would tend to raise wages, but we shouldn't imagine that it would raise them back to a "fair" level.
I hope the perception leans more towards 'uber rich tech execs conspired to pay their employees less' and not 'some of the best paid employees complain about how little they make'.
I deleted the comment you've replied to because of the rapid downvotes... but screw it... I'm putting it back here. Who needs karma anyway...
To the rest of the public, we probably look like complaining oil or Walmart execs. While the rest of the general public is dealing with insane commutes and thankless/soul-crushing jobs, we got things like "The Social Network" movie, San Francisco gentrification issues, fancy catered parties and Google Glass. I can't even explain this to the rest of my family. They're like "Why are the people in your field complaining? Aren't they partying like it's 1999?" And seriously, my life is basically a dream compared to the rest of my family and past classmates not in tech. I make more money than I ever thought possible, I have no commute because BART is so close, I can WorkFromHome just about anytime I want, I work in San Franciso with lost of food options and my job is something I'd be doing on my free time anyway. I have the flexibility to be at my standing-desk on HN debating with people online while drinking my fancy glass bottle VOSS water from Norway. And the icing on the cake is probably the minimum 2 recruiter LinkedIn emails I get a week offering even more money. Also, I never negotiate salary. I just take the first offer so I assume I'm in the lower-range compared to most of HN.
Seriously, go try and explain this to the average lower/middle-class American outside of tech. This must look ridiculous. I'm right in the heart of this tech scene and I'm not even convinced we should be complaining.
No we shouldn't be 'complaining'. As tech workers we have it better than most professions in the United States. However that doesn't mean we should be happy that the powers that be are conspiring against us to not pay us what we are truly worth. Any profession shouldn't accept collusion against them by corporations, regardless of what they're currently paid.
Lawyers can charge hundreds of dollars an hour but no one begrudges them that because that is what the market for their services is. Maybe the market for strong IT workers will land in that range too if the market was allowed to work.
I am not in SV, and completely agree with you. The optics are terrible. And beyond that... the reality is pretty bad. I don't think there's a way to spin it, a lot of the citizens of the US have had a very bad run for a very long time and would be very envious of the terms of most HN members' jobs.
I think baseball players are a fairer analogy. People love to hate on baseball player salaries, but it's not their fault that the market value of their skills is what it is. They are obligated to fight collusion and have a union anyway, though.
It doesn't help that this is non-recruitment/poaching vs blacklist. That seems greedier that people are complaining about lack of inbound recruitment vs more heavy-handed/less abstract techniques.
I think it has to be fought, because of the precedent, like companies defending copyrights.
Why are you drinking expensive water from halfway around the world? As someone who subsists on lowly tap water, I had to google it, and my mind is absolutely boggled. Not exactly doing yourself any favors with that whole perception issue. A glass bottle too! Despite the ease with which you might think glass would be recycled, its place in the waste stream actually makes it much more difficult (sorting difficulty and disparity between glass). Many places that have plastic and paper recycling won't take glass.
I was walking around lake Elisabeth in Fremont just this afternoon marveling at the massive water pipes. There are two continuous strips of undeveloped land that go through Fremont and the South Bay that mark the travel of San Franscico's water supply.
I completely agree except for your implication that the behavior of Steve Jobs, Eric Schmidt, etc was just some sort of trivial Silicon Valley nonsense. They actually committed a serious crime if it is true which it seems to be based on the released emails I have seen. The companies involved having to pay some money as punishment is just a slap on the wrist.
It's easy to explain to lower/middle-class Americans outside of tech who are in union jobs. That's because they understand that one thing a robust union does is help prevent (or at least mitigate) this kind of collusion before it starts. My wife earns 1/3 of my salary, but does a far more important job for society. She comes from a state in which the unions used to be strong. She immediately understood what the implications of this collusion were, and didn't need me to even explain why the lawsuit is a good thing.
They understand that different workers earn different salaries, and they get that "paid below fair market wage" means what it means, regardless of what "fair market wage" is the calibration.
But we can't have unions or talk of unions in the software industry, because that might upset the rather hilariously mistaken insider perception of this industry as being a meritocracy.
Yes, it's true that the tech industry has bad optics right now, and that this probably looks like ridiculous entitlement to just about everyone else.
That's a shame, because collusion of this sort is illegal, full stop. If our industry "complains" about it, and wins, this precedent sends a very clear message to companies - including, and perhaps especially, those in other industries - that wage-fixing pacts of this sort are not tolerated. This may not completely stop other companies from attempting similar antics, but it certainly changes the cost-benefit analysis.
Based on your account name I find it hard to take your comment seriously, but:
The 20s called. They want their cliches back. Most of the world is richer than US poor people these days. Of course, even if "most" are, there's still 1 billion people barely making enough for food, I'll grant you that.
> Most of the world is richer than US poor people these days.
> Based on your account name I find it hard to take your comment seriously, but:
Yeah. If you spout shallow nonsense like this, I cannot take you seriously. But out of pity, here goes:
Don't let my username fool you. I am probably much younger than you are. I grew up poor in a third-world country in awe of the average American. Now, people like me are being called "techie scum" by the same kind of people I used to adore and envy.
My point is this: Don't hate on people more hardworking or just plain lucky than you are. If you are commenting on the internet you are probably at the top of the world.
You say "US poor" then say that you were in awe of "average Americans". Make up your mind.
Oh, and "most" = "majority" = >51%. World population = 6.5 billion people sans US. US poor = probably less than 10k dollars per year (maybe less at PPP). So at least 3.5 billion people should be making more. Middle class Europeans, Chinese, Indians, Japanese, etc, should definitely cover my claim, based on PPP prices.
This isn't a PR case, it's a court case, fuck what anyone who is not the judge thinks, lawyer up and go get some money.
Do you think the execs at Google/Apple care what Joe the plumber thinks about how much money they make. No, they're going to court to beat the settlement down.
You can be broke and have the adoration of the poor, or you can be rich and hated by the poor.
(There is a 3rd option which is chuck a few thousand at a democratic politician, and write an op ed piece in the NYT every few years about how the rich should pay more taxes, and enjoy not paying taxes.)
It's frustrating that this perspective doesn't get more attention. HN and tech in general pays lip service to addressing social problems, but it's primarily concerned with congratulating its own success and getting defensive against the concerns of the rest of the economy.
No, it's not our fault that others aren't as well off. But that doesn't make mean we can't do anything to help; it does mean we should complain about getting paid marginally lower six figures with a little more self-awareness.
It is disappointing that you got downvoted. Hopefully it was an accidental downvote due to HN's poor mobile browsing support, as opposed to someone being unwilling or unable to explain why they disagree with you.
Sure you're drinking your VOSS but can you afford a home in SF? I would say it's a middle class aspiration to raise a family near your work. You'd be in for an "insane commute" if you had 3 kids and tried to work in the valley.
Engineer's pay pales in comparison to the value they create. That's an issue.
Average office drone X probably shouldn't even have a job so yeah, they shouldn't expect to get paid as much as a developer at Google.
My point is that it is not the execs fault for it being expensive. There is an artificial limit on supply. If supply is kept low, the producers (the landlords) usually benefit at the expense of poorer consumers.
My point is that people CAN afford to live in these places and those people built their fortunes on the back of a labor supply with artificially suppressed wages.
I think that's pretty unlikely. The tech industry has done a poor job of endearing itself to the rest of the economy over the past few years. My non-tech friends have been through the struggle of finding jobs in general throughout the recession. Few of them are going to shed a tear for engineers making less than fair market wages who already pull down six figures in their early twenties.
Someone I know in SF posted a picture today of their new Audi with a caption about how they were finally a real adult now that they owned one. I think that's pretty disconnected from reality, and sadly I think it is somewhat typical of the mindset that a lot of engineers have in this industry.
Yep, it's poverty morality, as soon as you make 50 cents an hour more than the next guy you're rich, and have no right to complain about anything.
Even when I was making $15 an hour answering phones, I'd hear no end about how the bus drivers on strike shouldn't get paid $20 an hour. Yet no one wanted to quit their job and become a bus driver.
Reality isn't real only if you're poor (and many of the poor in America live like kings compared to the poor in other parts of the world or in the recent past). There are a large number of fuzzy groups of people in the world whom have little concept of how it is to live in any group significantly distant from their own.
"The ruling by U.S. District Judge Lucy Koh in San Jose, California, said the proposed settlement amount "falls below the range of reasonableness," before dashing back to her new two million dollar home to pack for her European vacation.
Their collusion depressed the price of engineers generally. I spent a lot of the years in question ignoring recruiting emails from those companies, and this affected the amount my employer needed to pay me to do that. We should dig up the corpse of Steve Jobs and tar and feather it.
That last sentence right there is one of the few times I really wish I was able to down vote. I valued your opinion until you felt the need to include that.
It literally recommends that companies maintain a "do not hire" (aka "do not poach") list of other organizations from which HR is forbidden from recruiting. It also recommends calling the CEO of the other company on the down-low to ask permission before extending an offer.
It really disgusted me when I read it. Such smart people doing such dumb things, and encouraging would-be CEOs to do the same.