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Apple and Google wage fixing cartel


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#1 Alex

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Posted 22 March 2014 - 02:31 PM

interesting big tech collusion story, basically:

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Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees.
http://pando.com/201...lion-employees/

#2 PLEASUREMAN

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Posted 22 March 2014 - 07:22 PM

It's by Mark Ames so you basically have to recheck all of his claims.  Unsurprisingly, a number of them don't pan out.

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This week, as the final summary judgement for the resulting class action suit looms, and several of the companies mentioned (Intuit, Pixar and Lucasfilm) scramble to settle out of court, Pando has obtained court documents (embedded below) which show shocking evidence of a much larger conspiracy, reaching far beyond Silicon Valley.

Shocking hyperventilation, check.  Let's take a look at those court documents:

Posted Image

Notice where Ames sticks his thumb.  He doesn't want you to read this too closely because you'll realize it's about restrictions on hiring managers, not ICs (individual contributors, non-managers in hiring jargon).  And engineering candidate hiring was completely unrestricted by this agreement.

Why did they "collude"?  Well part of this is the history of tech poaching.  It goes back to the beginning, when companies moving up would poach high level people from competitors.  One reason was to gain access to that person's skills, another was to get inside information about how competitors operated, and another, less talked about reason was simply to hamper competitors.  Say you're one of the top Exchange guys at Microsoft.  Not only do you know a ton about building an enterprise email system, but you have lots of knowledge about Microsoft's internal politics, institutional knowledge about the Exchange product, future plans for Exchange--and if Microsoft loses you it could cause considerable upset re: the current Exchange roadmap.  Google might well hire this person away even if it has no real use for him, because the trouble it causes Microsoft can give them an opening.

So this didn't go on for too long in the early days before companies like Microsoft, Lotus, Borland made agreements not to poach certain levels of employees.  Not because they were concerned with suppressing salaries, but because it caused a lot of chaos.  It's a side effect of the way software scales--the key Exchange people are not that numerous, but their product is used everywhere because it's the standard in enterprise email and network effects apply in mature product categories like this.

There's a "do not cold call" list because recruiters would literally go down the internal phone directory of a competitor and cold call people to feel them out for positions.  This is also disruptive so they agreed not to do that, but as the memo says, "do not cold call" does not mean they won't hire ICs who actively reach out to them, or if they get a reference from someone else (say a co-worker they've already poached) that the IC is unhappy.

Ames is painting this as wage suppression, but it's actually a peculiarity of the software business.  There aren't many other professions where people might actually get cold called by competing businesses, and in software there's a constant churn of people and businesses that makes this even more likely.

Posted Image

This letter is more damning because Schmidt mentions Whitman's complaint that Google was driving up salaries.  In fact, Google was--they were making very handsome poaching offers to high level people because a) they were making more money than they could possibly spend, b) they were very intentionally disrupting competitors like Microsoft.  That's the reason Steve Ballmer threw a chair--Google had just poached Mark Lucovsky.  This is what Lucovsky reported in a sworn statement:

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At some point in the conversation Mr. Ballmer said: "Just tell me it's not Google." I told him it was Google. At that point, Mr. Ballmer picked up a chair and threw it across the room hitting a table in his office. Mr. Ballmer then said: "f**king Eric Schmidt is a f**king pussy. I'm going to f**king bury that guy, I have done it before, and I will do it again. I'm going to f**king kill Google."

Lucovsky had worked on Windows NT and some other important products.  But note that in Lucovsky's version, Ballmer doesn't even care as long as it wasn't Google--that's because Google was intentionally poaching simply to f**k with Microsoft.  Of course, Google's lure, aside from its rep as the next big thing, was offering substantially better pay.  Microsoft for its part had done exactly the same thing when it was the next big thing.  The structure of the software biz makes it very tempting (Facebook has also been accused of poaching).

Similarly, Steve Jobs' threat was obviously motivated by the same thing as Ballmer's tantrum.  As Ames himself writes:

Quote

The “effective date” of Google’s first wage-fixing agreements, early March 2005, follows a few weeks after Steve Jobs threatened Google’s Sergey Brin to stop all recruiting at Apple: “if you hire a single one of these people,” Jobs emailed Brin, “that means war.”

Was Steve Jobs going ballistic because he might have to pay his programmers more?  It's a nonsensical claim (remember, we're talking about managers who are already well compensated).  Jobs was telling Google he was on to Google's real motivations and had no intention of becoming a victim like Microsoft.

Now through all this Google never agreed to stop poaching from small companies, and that's why this wasn't true wage suppression.  This was really about pissing off executives who could eventually decide to gang up on Google.  After all, that's what really damaged Microsoft--all those OEMs and competitors got together and tarred it as a monopoly and aggressively pushed governments in the US and Europe to take action against it.  The same could be done to Google, which has a virtual monopoly on search.  So Google decided to play nice with key competitors.

Does this mean none of these companies are trying to suppress wages of the rank and file?  No, I think all businesses above a certain size tend to aggressively negotiate salaries downward as a matter of course.  Internal pressure on salaries, use of permatemps and offshoring, and pushing H-1Bs is a much more obvious route to suppressing industry wages.  At the end of the day, Google really doesn't poach that many people, so these agreements (which again mainly concerned managers) didn't affect enough of the workforce to seriously impact wages.  The main problem was that poaching was disrupting relationships with other companies that could hurt Google's future plans.

I read all of the Pando article and Ames just doesn't back up his claims with anything real.  He's full of s**t and either doesn't know anything about how the software industry works or he's prepared to play dumb in order to get page views on a sensational article.  That's nothing new to anyone familiar with Ames.

#3 BB: Full-Time Zionist

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Posted 22 March 2014 - 07:34 PM

Recruiters do this stuff all the time in law firms. I upgraded firms recently and my cold calls/emails are out of control now, literally multiple times/week and daily email spam.

As far as highjacking the roadmap, denying capability to your closest competitors is a great way to grow. Look at recent prestige firm partner laterals in PE, including real estate PE, and it's pretty obvious this is going on.

#4 PLEASUREMAN

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Posted 22 March 2014 - 07:39 PM

Here is one of the documents from the Google case.  Note that Google also lied to itself about its plans to put together a browser.  I'm sure it had Chrome in mind, and remember that Chrome is really just a rebadged version of Safari with its own Javascript engine.  Even when Google decided to make a browser they did it in the laziest way they could.  But that's why they wanted Safari devs.  I mean why else would you want a Safari dev?  Not to work on your Mozilla coding.

Posted Image

#5 PLEASUREMAN

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Posted 22 March 2014 - 07:58 PM

For the Mark Ames Code Red effect, read his account of how the Exile got shut down by Russian government thugs:

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They came exactly on time, 11am—just like Stalin’s proverbial trains. There they were, all fitted out in their crusty retro-Soviet outfits, subjecting us to a three-hour interrogation about Edward Limonov and the Recession Penis and why did we write the things we write and why do we mock and insult Russia’s great culture and great traditions… The officials were surprisingly polite and by-the-books during the audit, but that didn’t matter, because they still scared the s**t out of anyone with an understanding of Russia’s past and present. The Ministry to Defend Russian Culture (since renamed the “Federal Agency for Media and Communications”) is merely the least scary ministry in the extremely-scary Russian state apparatus—so saying that the RosOkhranKultury wasn’t all that scary is like saying that the eyeball-like pits on the sides of a Flecker’s Box Jellyfish’s bell aren’t all that scary compared to its 60 deadly tentacles—which pack the most toxic venom in planet earth’s seas. The slightest contact with one of the box jellyfish’s 10-foot-long tentacles, and you’d wish that you could trade places with one of Mengele’s victims: the box jellyfish’s venom literally sizzles through your flesh like Alien blood, eating its way into your blood vessels, racing through your circulation system like a burning gunpowder fuse, until finally the venom reaches your vital organs and napalms the entire f**king thing like it’s a Vietnamese village, turning your organs into a pot of boiling jelly, and transforming you—brave, chin-up little you—into a screaming, gargling, blood-puking freak—a one-note freak, to be precise—that note being: “PLEASE SOMEONE f**kING KILL ME NOW! AGGGHHHH!!!!”
http://exiledonline....ery-pissed-off/

I'm sure this is partially tongue in cheek and was written while shaking off a heroin binge.  The takeaway is its heavy atmosphere of shitthatdidnthappen.txt goonfiction about the time THE MAN gave you trouble because he found a baggie in your car after stopping you for a defective taillight at 3am.

#6 Dr. Hasslein

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Posted 22 March 2014 - 11:52 PM

Yet another example of price fixing: Magic Mexican Coders!

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The idea is to take a bunch of Mexican immigrants and teach them computer coding to liberate them from the tomato fields and get swell jobs in tech. They are getting a bachelor’s degree in computer science in three years, even though many start not knowing calculus and some require remedial English. What could possibly go wrong?

...

Check out the Mexican mom in the video who thinks she can get a job at Google. “Being Latina, a woman and bilingual, I have the opportunity to help them, be able to create programs and solve problems for that culture,” she chatters in Spanish. She can barely speak English, and her school-age child doesn’t do much better. Is this embarrassing example the best KQED can present for its diversity fairy tale?

It probably is, Brenda.  It probably is.

#7 Wickliffe Draper

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Posted 23 March 2014 - 09:05 AM

Seriously I think there are folks who would love to turn software development into glorified data entry. I can imagine it's possible.  There certainly is way too much boilerplate in modern web framework code.  Of course one solution is to improve the frameworks but since they are mostly written by autists that's unlikely.  Another option is to bring in stoop labor and turn as much of it into piece work as possible.



#8 Alex

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Posted 24 March 2014 - 04:56 AM

Thanks for the excellent reply and moving it to a new thread.

I agree that Mark Ames, whose name I could vaguely recall but not link to Exile, seems to choose his words for effect. The other articles on that Pando website also seem to be clickbait. The latest is about how eBay founder Pierre Omidyar, who financed a media outlet for the journalists to whom Snowden leaked the documents, made some White House visits and donated to some pozzed NGOs pushing American foreign policy (Pando says "co-invested with the US government" :lol:).

I did not buy his (or USDOJ's) argument about wage suppression... it's likely that the tech companies involved cared more about disruptions to their projects--or, as you explain it in Google's case, not being ganged up and routed.

However, I can see how bilateral CEO-to-CEO agreements regarding cold calls or poaching key employees could look like (and be) antitrust violations, and indeed several tech companies had to settle with the DoJ.

I'm curious about your thoughts on what the legal environment ought to be, given that currently such sidedeals are apparently illegal. E.g. Should exemptions be granted regarding entering into such agreements for software/tech companies? If not, should they be allowed tailor their hiring-from-others policies based on the size (financial and otherwise) of the competitor but otherwise with no (documented) sidedeals? Or should the hiring practice be enforced across the board: e.g. cold call everyone or don't cold call.

My impression is that the agreements are problematic because smalltech have what they deem to be key people too, but zero bargaining power in terms of striking such deals.

As an aside, here is a PDF (86pp) of a court order concluding that a class-action lawsuit (to start in May) is valid. The relevant pages are probably 25-51 & 75-78. http://www.lieffcabr...der.pdf#page=25 On 29-30 there's a claim from the Palm CEO that Jobs had threatened to sue him for patent infringement if he does not enter into an agreement that neither company would hire the other's employees even if they request it.

#9 Shrill

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Posted 24 March 2014 - 06:29 AM

Don't silicon valley types (especially those in middle management) have to sign noncompetes? I don't know the field, but this seems to be a way to get something that, by rights, ought to be negotiable for free. And if negotiating noncompetes for employees like this isn't done, then that's a market distortion. When I think of the kind of circumstance that might justify the existence of antitrust law, I think of something like this. Hell, for that matter, if continuity of so crucial, why not put these guys on as long-term independent contractors? I can't see anything here other than the artificial suppression of wages.

#10 Ricin Beans

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Posted 24 March 2014 - 06:39 AM

Noncompetes are illegal in california with limited exceptions.  Most places they are difficult to enforce.

#11 Shrill

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Posted 24 March 2014 - 06:59 AM

I wasn't aware. Good to know. They pass them out like thin mints in Ohio, even for people whose job knowledge isn't even vaguely proprietary.

#12 Ricin Beans

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Posted 24 March 2014 - 07:02 AM

View PostShrill Kiners, on 24 March 2014 - 06:59 AM, said:

I wasn't aware. Good to know. They pass them out like thin mints in Ohio, even for people whose job knowledge isn't even vaguely proprietary.

FWIW, I don't know Ohio law but I know a lot of people force people here (Texas) to sign noncompetes that aren't really enforceable.  The burden is on the person looking to enforce a noncompete to prove that it's reasonable in quite a few different ways, and judges have a lot of discretion in refusing to enforce them.  But of course if nobody tries it...

#13 PLEASUREMAN

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Posted 24 March 2014 - 12:29 PM

View PostRobert Gostfson, on 24 March 2014 - 04:56 AM, said:

I'm curious about your thoughts on what the legal environment ought to be, given that currently such sidedeals are apparently illegal. E.g. Should exemptions be granted regarding entering into such agreements for software/tech companies? If not, should they be allowed tailor their hiring-from-others policies based on the size (financial and otherwise) of the competitor but otherwise with no (documented) sidedeals? Or should the hiring practice be enforced across the board: e.g. cold call everyone or don't cold call.

My impression is that the agreements are problematic because smalltech have what they deem to be key people too, but zero bargaining power in terms of striking such deals.

These are good points.  It tells you a lot about Ames that none of them end up in his article, which is zero calorie clickrage.

My gut feeling is that this is a side effect of industries which experience massive growth and/or fluctuation.  New entrants behave like a bull in a china shop and do cutthroat deals and then as the market settles everyone tries to form a more stable consensus of practices.  It could probably be ameliorated by more monopoly protection.  Once Google has an obvious monopoly position in search, force it to break apart into smaller companies or regulate its behavior if a quasi-monopoly is desired (but in this case there's no real benefit to a search monopoly).

I'm not that concerned that poaching (which as BB has pointed out is practiced in other special cases) is really that big a deal.  In tech it tends to reflect a certain enthusiasm and hype about new entrants--gold rush mentality where people want to get in on the ground floor at Google or Facebook so they become millionaires when the company goes public.  So apart from my natural inclination to make sure companies don't get too big as to become destabilizing, I think you can just leave it alone as with non-tech businesses.  There's a case to be made for regulating tech so that it does not experience explosive growth.

#14 PLEASUREMAN

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Posted 24 March 2014 - 12:33 PM

Also that Jobs thing with Palm sounds very dicey, I'm not surprised it is causing Apple legal trouble, and I don't have a big problem with DOJ forcing these companies to stop colluding on recruiting practices.  In general, as Adam Smith warns, when businessmen get together they sooner or later start talking ways to divvy up the consumer pie for mutual benefit.

#15 boogerbutt

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Posted 24 March 2014 - 04:18 PM

I don't know s**t about business practices, but couldn't some of this be the end result of "managers", who aren't truly invested in the company?

What I mean by this, is how we've moved away from promoting from within, and building the employee, and instead have created a culture where management is trained to be interchangeable, which fosters a need to move out to move up.

#16 Indian Toilet Witch

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Posted 26 March 2014 - 06:49 AM

You also have to look at Pando's demographic. It's all valley wonks or would-be wonks. Pando bought out ames & co from NSFW Corp after they flopped. I can't imagine they'll employ them for long because if you read most of the comments from Ames and Levine on Pando most of Pando's audience can't stand them.

#17 PLEASUREMAN

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Posted 26 March 2014 - 06:12 PM

Sailer wrote about it here:  http://isteve.blogsp...uppression.html

He seems to have fallen for Mark Ames' argument, although in his defense he got it at the end of a telephone game involving two other blogs in the middle, so he maybe didn't diligently click through every link.  Not that it matters, as one blog just copies and pastes Ames' gibberish and Cowen links to the first one without forming any conclusions (although he adds some stupid thoughts of his own).

iSteve readers, of course, are gullibly enraged and splutter a bunch.

Yes, it's all about Indian Democrats:

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And the nice thing is that by refusing to bid up the wages for Silicon Valley engineers they suppress the Silicon Valley wage structure ... which then becomes the "prevailing wage" for all the Indians (dot not feather) they hire under H1B visas ... as they simultaneously tell Congress "we just can't get good American help".

If I were Holder I would have settled this deal differently.

Instead of seeing it as a good way to (1) drive down white wages and (2) bring in loyal Indian Democrats to replace white people, I would have told Silicon Valley that they couldn't hire any H1B's for the next five (5) years until white wages got jacked back up to where they would have been without white wage suppression.

Yes, it's all about Obama:

Quote

Meg Whitman's involvement is intersting, as she was a big booster of Mitt Romney. While the smartest President ever hasn't exactly distinguished himself since the election, neither have many of Romney's cronies. Ryan revealed himself to be an open borders nutjob, and Mike Leavitt (former Utah governor and Romney's would-be chief-of-staff, just led an effort to help the rich gain more control of Utah's nominating system - an effort endorsed by Romney. So it's quite clear that Romney wouldn't have been much better than Obama, if he would have been better at all.

Yes, it's all about proper spelling and grammar:

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THERE involvement is quite irrelevant. Reminds me of certain immigrants who can't speak a lick of english but, there children are at the top of the class.

Looks like you weren't up THERE at the top of the spelling/grammar/punctuation class either

A level-headed group of people.



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