Why George Lucas, Eric Schmidt, (and yes, Steve Jobs) Should Go to Jail: Conspiring to Reduce Wages of 100,000 Tech Pros

One big difference between West Coast and East Coast oligarchs is that a lot fewer people lionize the Eastern ones. Even though the media and sadly too many regulators treat the likes of Lloyd Blankfein with far too much deference, the broader public has wised up. Even MBAs, who normally side with the rich and powerful, have asked me, “When is Jamie Dimon going to jail?”

But Silicon Valley’s royalty occupy a class of their own, the toast of TED talks and the model for aspiring entrepreneurs the world over. And the admiration is particularly strong among the rank and file workers in the San Francisco area. So it’s more than a bit ironic to see that these titans of technology engaged in a formal arrangement to suppress pay to the tune of $9 billion across Apple, Google, Intel, Adobe, Intuit, and Pixar.

Here you thought it was only those poor Foxconn workers making iPhones in China who were being exploited. Silly you.

It’s surprising to see the Obama Administration, which has not even done a good job of faking interest in pursuing criminal charges against major financial firms or their top executives for nearly destroying the global economy, make a frontal assault on some of Silicon Valley’s biggest names. But the conduct in question, namely price fixing, is slam-dunk criminal if the charges prove out. For instance, an early 1990s price rigging investigation involving lysine and citric acid at ADM led to $100 million in fines and jail time for top executives, including the vice chairman, who was also the heir apparent, and criminal fines from other corporate co-conspirators. That success also led to other successful price fixing prosecutions, yielding billions in fines. This victory led to other successful cartel-busting prosecutions.

The government’s case, as summarized by Mark Ames at Pando, is chock full of damning e-mails among top executives, which reveal Steve Jobs to have been the lead actor and main enforcer of the pay-containment pact, which dates to 2005. But its real mastermind was George Lucas, who had a similar scheme in place in the 1980s and enlisted Jobs when he sold the computer animation division of Lucasfilm to Pixar. As Ames explains:

One of the more telling elements to this lawsuit is the role played by “Star Wars” creator George Lucas, who emerges as the Obi-Wan Kenobi of the wage-theft scheme. It’s almost too perfectly symbolic that Lucas — the symbiosis of Baby Boomer New Age mysticism, Left Coast power, political infantilism, and dreary 19th century labor exploitation — should be responsible for dreaming up the wage theft scheme back in the mid-1980s, when Lucas sold the computer animation division of Lucasfilm, Pixar, to Steve Jobs.

As Pixar went independent in 1986, Lucas explained his philosophy about how competition for computer engineers violated his sense of normalcy — and profit margins. According to court documents:

George Lucas believed that companies should not compete against each other for employees, because ‘[i]t’s not normal industrial competitive situation.’ As George Lucas explained, ‘I always — the rule we had, or the rule that I put down for everybody,’ was that ‘we cannot get into a bidding war with other companies because we don’t have the margins for that sort of thing.’

Translated, Lucas’ wage-reduction agreement meant that Lucasfilm and Pixar agreed to a) never cold call each other’s employees; b) notify each other if making an offer to an employee of the other company, even if that employee applied for the job on his or her own without being recruited; c) any offer made would be “final” so as to avoid a costly bidding war that would drive up not just the employee’s salary, but also drive up the pay scale of every other employee in the firm.

Jobs held to this agreement, and used it as the basis two decades later to suppress employee costs just as fierce competition was driving up tech engineers’ wages.

Fast forward, and here is the guts of the government’s allegations:

Between approximately 2005 and 2009, Defendants Adobe, Apple, Google, Intel, Intuit, Lucasfilm, and Pixar allegedly engaged in an “overarching conspiracy” to eliminate competition among Defendants for skilled labor. The conspiracy consisted of an interconnected web of express bilateral agreements among Defendants to abstain from actively soliciting each other’s employees. Plaintiffs allege that each agreement involved a company under the control of Steve Jobs (Co-Founder, Former Chairman, and Former CEO of Apple) and/or a company that shared at least one director with Apple’s Board of Directors. Defendants memorialized these nearly identical agreements in CEO-to-CEO emails and other documents, including “Do Not Call” lists, thereby putting each Defendant’s employees off-limits to other Defendants. Each bilateral agreement applied to all employees of a given pair of Defendants. These agreements were not limited by geography, job function, product group, or time period. Nor were they related to any specific business or other collaboration between Defendants.

One of the critical elements of this alleged conspiracy is that the way these tech giants would ordinarily have gone about recruiting would be to try to poach each other’s best employees by cold-calling them. This of course would have the effect of bidding up their prices and would likely over time drag up pay levels of some of the next-tier workers. Instead, the companies in this scheme shared their wage data with each other so they could coordinate and reduce compensation. As Intel’s senior HR executive put it:

While we pay lip service to meritocracy, we really believe more in treating everyone the same within broad bands.

And the companies had other devices for coordination and pay suppression. Again per Ames:

The evidence includes software tools used by the companies to keep tabs on pay scales to ensure that within job “families” or titles, pay remained equitable within a margin of variation, and that as competition and recruitment boiled over in 2005, emails between executives and human resources departments complained about the pressure on wages caused by recruiters cold calling their employees, and bidding wars for key engineers.

Google, like the others, used a “salary algorithm” to ensure salaries remained within a tight band across like jobs. Although tech companies like to claim that talent and hard work are rewarded, in private, Google’s “People Ops” department kept overall compensation essentially equitable by making sure that lower-paid employees who performed well got higher salary increases than higher-paid employees who also performed well.

What is stunning is all the exchanges among top executives. The filing quotes numerous e-mails among Jobs, Sergey Brin, Adobe CEO Bruce Chizen, and other Silicon Valley heavy-hitters that talk openly about the agreement and various threats when a member to an agreement falls out of line. By contrast, in the ADM case above, the parties to the lysine cartel were very careful to hold meetings where they’d discuss price fixing overseas, where that action was not criminal. The brazenness is remarkable.

A jury trial in San Jose is scheduled to start May 27. This should be great fun. I’ve included the filing below.

October 24, 2013 Class Cert Order

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123 comments

  1. Rostale

    Martha Stewart, anyone?
    Not that I disagree this was illegal, and if it gets people to take another look at the H1-B issue in a more negative light it is helpful, but I think by going after targets with potentially greater public sympathy, it will undermine the case for going after the real targets.

    1. Ben Johannson

      The most public figures are the real targets. And I forsee they won’t serve a second of jail-time or pay any significant price for their malevolence.

    2. lambert strether

      You don’t consider Eric Schmidt a “real target”? Pull the other one; it’s got bells on!

      1. Rostale

        Which do you think is a greater priority for the administration, going after price fixing, or keeping the tech sector in-line on the NSA issue?

    3. Jay Goldfarb

      Professor Norman Matloff of UC Davis documented how the industry, led by Microsoft, used the bogus Y2K scare to propagate the myth that there was a programmer shortage and vastly increase the number of foreign programmers and drive down wages. His testimony to Congress at the time was ignored. Many resources on this are available http://heather.cs.ucdavis.edu/h1b.html.

    4. NotTimothyGeithner

      Greater public sympathy?

      I don’t know between the Star Wars blitzkrieg from Disney which will assault our sense at all times with plot holes and false sentiment courtesy of JJ Abrams and Indy surviving a nuclear blast in a refrigerator model which couldn’t be opened from the inside I think America is ready to turn on George Lucas.

      Martha Stewart seemed to be railroaded by an overzealous Republican justice department out to get a Democratic donor. In her case, she came in the aftermath of Enron and amid scandals rolling out of Iraq. Due to her high profile support of the other party and the absence of GOP prosecutions, she took a hit. Silicon Valley has a neo-liberal bent about it which will make it a much easier target for the neo-liberal king.

      1. Yves Smith Post author

        No, actually Stewart went to jail because she was stupid.

        Her broker called with inside info about a company where she sat on the board when she was in a cab between meetings. She did the trade. The SEC came calling.

        What you are SUPPOSED to do is say, “Yes, what I did was wrong, I realized it as soon as I hung up but it was too late. I was busy and didn’t even think I was trading on privileged information.” You grovel and pay the fine.

        Instead she lied (I believe under oath, at least to the SEC in official proceedings, which is almost as bad) AND altered records. The coverup is why she did time.

        1. TimmyB

          Actually, trading on information one receives from one’s stockbroker is NOT a crime. However, lying to federal agents and destroying evidence are crimes. So if she told the truth and didn’t destroy evidence in a foolish attempt to coverup her involvement in non-criminal conduct, she never would have been arrested. Why she didn’t just call a criminal lawyer when she first learned of this investigation is beyond me.

  2. Bahb

    Nah. Going after Lucas, the legacy of Jobs, et al. moves the Overton Window to make it easier to go after the “real targets.” That is, everybody else.

    Once the perception sticks that these big shots are pond scum, it’s easier to envision all of them as pond-scum for the future. Especially if I were a future juror.

  3. jjmacjohnson

    Horrible Hobbit director threatening to leave the land of Kiwi if extras and others got paid more.

  4. Ben Johannson

    What is stunning is all the exchanges among top executives. The filing quotes numerous e-mails among Jobs, Sergey Brin, Adobe CEO Bruce Chizen, and other Silicon Valley heavy-hitters that talk openly about the agreement and various threats when a member to an agreement falls out of line.

    Can you say, “arrogant schmucks?” didn’t think they’d be caught up when they were the government’s go-to guys for collecting everyone else’s emails.

    I LOVE IT!

    1. Cal

      This was common knowledge in the film industry the San Francisco Bay Area. It’s all an insider’s club. Didn’t you know?

      Lucas, when not allowed to violate zoning and environmental standards on the land he owned to expand his studio, handed it over to a developer with instructions to build a low income housing project to punish his neighbors.
      http://www.savemarinwood.org

      1. Ray Cathode

        Oh, so people on lower incomes aren’t to be allowed to live near people higher up the food chain? How is that any better than Lucas? At least Lucas was allowing for the provision of housing to those on lower incomes – what about the greedy bastards that wanted to stop it. Progressives, the land of the I’ve got mine, so screw you. That attitude is so much worse than Lucas’s it makes me want to puke. At least Lucas makes no bones but that it is for the sake of the bottom line. Those who protest about the low income housing in their area – thus preventing people with lower incomes than you 6 and 7 figure whiners from rising. Talk about kicking the ladder out from those beneath you. You are committing exactly the same act, in principle, as Lucas – then you have the effrontery to attack him and try to disguise your act by saying, “Well, just look at that! Nothing to see here, move on folks…”

        1. Phil

          Agree with Ray, here. Whilst the principals who conspired should do time, the fact is that a bunch of progressive Marin County NIMBYs stopped the Lucas development a few years ago. You can see the same phenomena at work in the more tony cities in Silicon Valley. Palo Alto is a perfect example.

    2. scraping_by

      Obviously, they didn’t take the obligatory written communication computer based training class the legal department made everyone else take. Or at least, at my office.

      The big takeaway was anything even the least bit dicey shouldn’t be written down, but if it was, it had to be kept nearly forever. Unless a lawyer said it was okay to get rid of.

      One of the legal reasons for getting rid of a document, any document, was lack of server space. Perhaps if they hadn’t access to mega femtobytes of storage, they’d skate on this.

    3. Barry

      “Can you say, “arrogant schmucks?” didn’t think they’d be caught up when they were the government’s go-to guys for collecting everyone else’s emails.”

      Somebody described this about Christie (a former federal prosecutor, and a malevolent and corrupt b-start of one): the tools do not get used against those who are In, only against peons. If you’re In, you’ve got immunity from the normal abuses (barring real dumbf*ck stupidity). If you are not In, then they can do as they please.

  5. marcum

    Software developer here so I’m NOT an economist but wouldn’t this scheme affect salaries for ALL software developers in the US and not just in the Bay Area and NOT just at the big tech firms? If pay at TOP firms was 30-50% higher it would seem that better (smarter / younger) developers in 2nd-tier tech cities (like Chicago where most software dev work is not very glamorous) would ditch the Mid-West and head for the coasts. Leaving lower-tier (ie washed-up developers like myself) less competition and better job prospects??

      1. Barry

        In addition, this mean that if Joe Blow at Company A was a good recruit for a better position at Companies B, C,..Z, he was not recruited, which meant his career was stunted. Secondly, HR and upper management at these companies knew the game, and therefore didn’t have to give a rat’s *ss if valuable employees were not happy, because their options were reduces. Many, many people’s careers were f*cked over by this.

  6. Working Class Nero

    The political acumen of tech billionaires is increasing exponentially since the bad old days of 2005 when they engaged in such maladroit maneuvers such as the wage fixing described in this post. If Moore’s law charts the increase in computer speed; Moore-Money’s law delineates the increase in our computer titan’s Machiavellian ability to get the public to support ways to make them even richer. For example, Mark Zuckerberg launched FWD.us; which is a group that lobbies to allow in as many foreign (and lower paid) tech workers as possible into the US to compete with American programmers; who we are told are in such short supply that without this influx of cheap labor, the code will be rotting in the fields of cubicles. Or the truth actually is that foreign programmers are willing to do the jobs at a salary that American programmers are just are not prepared to accept.

    Since many good people hold to the simplistic formula that being pro-immigration is progressive and virtuous; and conversely trying to limit the supply of labor so that American wages and standards of living could have a chance to rise is contemptible and right wing; therefore Zuckerberg is a hero in the eyes of many progressive Americans as he lowers wages and increases his own massive holding of wealth. He and his fellow Silicone Valley plutocrats have created a veritable National Association of the Advancement of Billionaire People with the full backing of most left leaning citizens, not to mention that naturally most right wingers (except paleos) support this further concentration of wealth under the cover of supporting diversity and open borders as well. After all there is nothing more right wing than cheap labor.

    1. Andrew Watts

      I suspect many of those good people are members of the upper middle class and self-styled liberals/progressives. Though they will not do anything to threaten the system that provides their economic privileges. After all, they need gardeners and nannies too!

    2. MyLessThanPrimeBeef

      You’re right about the moral manipulation that goes into the issue.

      I would add that it could be more than just working at a salary people here won’t accept.

      It could be that the new guys or gals are more pliant.

      Cheap workers are available everywhere.

      The trick it to get them from cultures with thousand-year old traditions of strict hierarchy respecting and authority kow-towing.

      1. BradK

        …The trick it to get them from cultures with thousand-year old traditions of strict hierarchy respecting and authority kow-towing…

        With the H1-B program, there’s no need for even this. H1-B’s are essentially indentured servants. They can’t shop around for a better job or better salary, they are chained to the U.S. employer that sponsored the visa.

        A win-win for everyone. Except American programmers.

        1. Phil

          @BradK Ah, but the new rules would let them move to other companies more quickly AND let their spouses work, immediately. So, H1-B engineer with her H1B husband makes a nice 2-for-1 import. Nice! For the tech Plutocrats, that is.

          Also, add to this that India’s *corrupt* politicians who stand by and watch their people starve; who fail to create jobs unless they’re bribed. THAT crowd is really upset because they want to keep the cork off the bottle of frustration from young granduates who can’t find jobs at home, in India, because their SOB political representatives are on the take for *everything*, all the way to the top.

    3. MyLessThanPrimeBeef

      Another trick to looking good to left leaning citizens while making billions is

      1. ignore or suppress ‘less consumption’

      AND

      2. promote your latest technological gimmick – ethanol, solar energy, etc.

  7. Hugh

    The only way anyone can amass a billion dollars is by stealing it, be it from workers, investors, taxpayers; or consumers. It’s really that simple.

    Note too that this is a class action lawsuit by the tech engineers. The DOJ under corporate career lawyer Eric Holder let the billionaire felons and their corporations off.

    “The DOJ also filed stipulated proposed final judgments in each case. See DOJ Adobe J.; DOJ Lucasfilm J. In these stipulated proposed final judgments, Defendants did not admit any wrongdoing or violation of law, but they agreed to be “enjoined from attempting to enter into, maintaining or enforcing any agreement with any other person or in any way refrain[ing] [from] . . . soliciting, cold calling, recruiting, or otherwise competing for employees of the other person.” DOJ Adobe J. at 5; DOJ Lucasfilm J., at 4; CAC ¶ 115. The District Court for the District of Columbia entered the stipulated proposed final judgments on March 17, 2011, and June 3, 2011.”

    I think the only reason the DOJ got involved was to effectively immunize the corps and billionaires from any future criminal liability. As for the class action suit, it will take years. Our reactionary SCOTUS has been generally hostile to class action suits. But even if this suit stands and an eventual settlement is made it will likely be pennies or less on the dollar of the thefts. The corps will scream. The billionaires will shake their head at the sad and wrongheaded nature of the judgment and America. Then they will laugh their asses off all the way to the bank. And the rest of us will be wondering how many other scams we don’t know about they are still getting away with.

    1. Katniss Everdeen

      “The only way anyone can amass a billion dollars is by stealing it, be it from workers, investors, taxpayers; or consumers. It’s really that simple.”

      This is, without a doubt, the most undeniably true statement ever made. EVER.

      There is simply no way any one human being can single-handedly or legitimately create enough value, in any context, to be worth a billion dollars.

      1. j gibbs

        If this is a class action suit only the lawyers will get anything out of it. The engineers will each get $1.64.

      2. Dan H

        Indeed. And this needs to be the motto dripping from every global citizens lips if any real progress is to be made. As it currently stands, too many of us are sympathetic to billionaires…temporarily emabrassed millionaires an all that nonsense.

        Find a child. Explain how democracy and inequality are directly opposed. Repeat as often as possible, with as many children as you can reach. Break any TV within eyesight while there.

        1. psychohistorian

          I think that we need to expose more people to a clearer history of capitalism

          I have recently read a very powerful book by David McNally called Monsters of the Market: Zombies, Vampires and Global Capitalism that I think clearly shows the centuries of vampire capitalism we have lived under. You can get a taste of the author and book here: http://www.youtube.com/watch?v=WeyKvT2YYSE

          Wake up zombies!

      3. rps

        Same argument, since 1795, about individuals amassing ill-got fortunes upon the backs of civilizations. And here we are 220 yrs later debating the same injustices of a despotic government kow-towing to the dominant minority class. The class system is institutional slavery of the majority

        “Separate an individual from society, and give him an island or a continent to possess, and he cannot acquire personal property. He cannot be rich. So inseparably are the means connected with the end, in all cases, that where the former do not exist the latter cannot be obtained. All accumulation, therefore, of personal property, beyond what a man’s own hands produce, is derived to him by living in society; and he owes on every principle of justice, of gratitude, and of civilization, a part of that accumulation back again to society from whence the whole came.” T. Paine

    1. j gibbs

      Larry is my poster boy for sleeze. Who else could have single handedly vaporized Harvard’s endowment fund? And they wanted to make him chairman of the Fed!

      1. rps

        Summers is your basic run of the mill public servant sleaze. Him and his ilks work in the public sector to acquire future cushy private servant jobs. He’s no different than: Clinton, Geithner, Rubin (“You’re buying the government” to Weill), Greenspan, Rumsfield, Cheney, Bush (all of them), Paulson, Bernanke,…Obama and Holder. etc. Their self-serving interests lie in post-presidency consultant jobs for the kings of Wall Street or -homeland insecurity armaments industry. They sell out their country for pennies on the dollar.

  8. Ep3

    Yves, this sounds like to me an opportunity for Obama to target wealthy liberal contributors. Most Hollywood folks (think clooney) donate & rally folks for things like clean climate, starving kids, etc. So if Obama goes after these folks, he cuts off funding to campaigns against pipelines, cutting wages, etc.

  9. Ramon Creager

    There can be no doubt there is something serious in these charges. Those of us working in tech jobs have suspected this for awhile now. However the DOJ could also take down Wall Street targets just as handily, if they wanted to. So why this? Why now? My guess is that this is payback for the tech industry pushing back on the NSA front. The NSA’s commercial playmates can be classified into two groups: The willing and enthusiastic, and the reluctant. The telcos are firmly in the former group, and the tech giants, once exposure of NSA shenanigans has hurt their business and reputations, are in the latter, and in some cases have become openly hostile.

    1. NotTimothyGeithner

      It could be that Obama, Holder, and company are really believers that prosecuting banks would cause an economic crisis, and these tech companies are run by guys in hoodies not businessmen. Steve Jobs wasn’t an inventor, but he was portrayed as an artist and visionary when he was really was just a crummy guy. Even in his pop culture narrative, he was never compared to the business titans of yore. Jobs and the Tech billionaires are not the ivory tower gurus like JP Morgan who can be trusted with the U.S. economy. Yes, I do think Obama and the inhabitants of Versailles on the Potomac are this shallow.

      Two, the lobbying efforts of tech giants which have focused on piracy, combined with their participation in the NSA scandal means they aren’t the heroic companies outside of California enclaves to the people who might become aware of this problem. Feinstein and Boxer are defense contractor employees, but even though these tech companies do defense work, much of the work they do can be moved to other companies in relatively short order because its often the work of their employees, not employees and machines/resources. Are Feinstein and Boxer going to bat for these Tech CEOs or for their more traditional MIC cronies? If Joe Biden was still a Senator, he would probably wrestle on the floor of the Senate Liz Warren if she said something critical about credit card companies. Two Senators from the same state who aren’t a threat to be President only have so much pull.

      As for the size of these companies, a quick search has shown that IBM employed more people in 2009 than Microsoft, Intel, Cisco, Apple, Dell, Amazon, and Google combined. They may have plenty of cash, but when it comes to defending a company like Boeing or Google which is largely valued by brand awareness*, a company wide memo has more pull with voters than all of Apple’s cash and hipster appeal. These tech companies don’t have good relationships with their representatives, and being situated in Silicon Valley, they don’t have a Congressional bloc.

      *They have a great search engine and do quality software, but with a small labor force.

    2. Yves Smith Post author

      These cases take a long time to develop and this was just unsealed. It got past summary judgment. So this wasn’t ginned up in response to NSA. Also some of the most aggressive refusniks not involved (like Twitter), while Apple, the lead perp here, hasn’t pushed back.

  10. Chris Maukonen

    Though I have little use for those silicon valley gang mentioned, I don’t have any sympathy for the over pay computer scientists and engineers there either. A pox on all their houses.

    1. Francois T

      If I understand you correctly, your lack of sympathy for computer scientists override the need for thwarting criminal behavior of executives?

      Lovely!

      1. Barry

        Yes, standard American ‘crab in a bucket’ attitude – if anybody even a teeeny bit higher up than me gets f-ed, I’m good with it.

    2. Klassy

      Why would you say they are overpaid? Obviously you could make a case that government policies makes their employer more profitable than they should be, but it is not like they are getting their fair share of those profits.

      1. JTFaraday

        They would say that because in is in the news that everyone is getting driven out of the San Francisco housing market because the tech company employees are out bidding them.

    3. JTFaraday

      I suspect that you will not be alone in this, and that many people will be no more sympathetic than they are with regard to public employees with benefits and job security.

      What jobs aren’t part of one sort of collusive “price fixing” scheme or another? If an entire industry decides to off shore its production or its teleservice center, do we really need e-mails?

      Legal matters are driven by technicalities, but public sentiment doesn’t necessarily make those fine distinctions. They just want to know where the hell were you when it was them.

      1. JTFaraday

        And if they ever grind down the pay of MBAs, there will be dancing in the streets!! Even though, arguably, many of those people are primarily the agents of other actors.

        1. Klassy

          Maybe it is more like public sympathy towards ballplayers. Sure, NFL players make a lot, but it pales in comparison to the members of the cartel that own a franchise.

          1. JTFaraday

            Well, maybe things have changed. When I taught Freshman comp in the mid 90s, one of the popular paper topics volunteered by students was the outrageous pay of sports stars and celebrities, in comparison to things that really matter.

            I know there’s a new urban creative class cohort (momentarily) employed in social media marketing, etc but when is the last time Silicon Valley did anything socially constructive– other than maybe pool all our information and share it with the government?

            1. JTFaraday

              Personally, I am sympathetic to contemporary collusive practices against tech workers, which are much more extensive than just this case.

              I’m from NJ, which was major tech employment market in the early days of technical development. I have a lot of tech people in my family and they all made and/or make normal middle class salaries.

              But I can see a lot of people not being sympathetic for this particular California cohort, for all kinds of reasons.

            2. jonboinAR

              I never bought into the sports/entertainment-celebrities-are-overpaid meme. Hey! They generate the revenue. Why shouldn’t they grab as much of it as their leverage allows them to? Their careers are brief. But then, seemingly unlike a lot of people I’ve known, I’ve always had an amazing awareness (amazing only because my friends couldn’t seem to get it) that the athletes, as rich as they seemed to get, were by no means the holders of the real money

              1. NotTimothyGeithner

                jonboinAR,

                You might be overlooking the obvious issue. Why was everyone losing their mind over Richard Sherman when compared to lovable Peyton Manning? Only one owns a company which led the charge of reclassifying workers as part time in response to ACA (Papa John’s), but he has been on SNL. Admittedly, I think this was done before he bought into Papa Johns. Where is the outrage? When people said Obama was a nice speaker, that was code for he wasn’t using ebonics.

                No one mentions Carey Grant’s income or lifestyle which was high for its day. We don’t hear much about the pay of Taylor Swift.

              2. Klassy

                I agree. A lot of people seem be enjoying A Rod”s implosion. I realize he is not the most sympathetic character, but I can’t help feeling this is all about the owners saying “don’t think we can’t destroy any one of you.”.

                1. NotTimothyGeithner

                  I’m of the opinion its about freeing up the Yankees payrole. What did they Yankees do with arbitration agreement? They went out and got Tanaka.

                  Cano didn’t want the Yankees offer. They paid a fortune to a guy who has played three seasons in the last six. A-Rod is a hole at Third right now for the NYY next to Jeter coming off of injury at 39?ish. They need to replace Second. I don’t know what their plan is at 1st. What will Granderson be like? If the Yanks have cash, they could help team who want to blow up during the season because they still won 85 games. Toronto took on all those disasters.

            3. NotTimothyGeithner

              But wasn’t that prompted by fluff pieces in rags such as Time after being ghost written by Major League baseball in light of the ’94 Strike?

              MLB and the players union are like cats and dogs until recently with the new tv deals which have generated quite a bit more revenue to share. Being rich and staying with one team is the goal for many players, not being the richest.

              Jordan’s commercialization during a time when the NBA viewership was in decline was an added factor. Woods’ endorsement deals. Those college age kids probably started paying attention to the news when 41 was pushing his volunteer nonsense as a means to cure social ills. Combined with a latent racism which can be most recently illustrated by the reaction of people to Seattle’s Richard Sherman*, being confronted by rich black athletes and rappers** was a little off putting for white upper middle class America. ESPN exposed to more than people were used to especially since Ali who was widely disliked did have causes with his bravado.

              *I would love to see interviews with defensive and offensive linemen. I bet that would be fun. Patriots Offensive Lineman John Hannah was asked why it didn’t work out for Patriots QB Tony Eason, and Hannah said, “he should’ve played in a skirt.”

              **They had a blast with their money like the Hollywood legendary drunks of yesteryear.

    4. JCC

      Only a few of the “computer scientists”, the stars, make the big bucks, most are standard day laborer programmers who, on the face, make what looks to most like a good deal of money, but in order to do so they have to deal with a very high cost of living.

      For example, at $60K a year I could put a greater amount of my salary into a savings account at the end of the year than I could making $120K a year in the Silicon Valley area. I’ve done the math (I have friends that live in the area and inform me of the daily costs they deal with) and I’ve turned down jobs because of this disparity.

      And even the stars make very little compared to the top-level Administration.

    5. scraping_by

      Think of professional athletes. It’s popular, nay expected, to rant about multimillionaires playing kid’s games. But, two things.

      Overdressed accountants can’t perform athletics well enough so ordinary people will pay to watch it. So the owners better recognize the players, or they won’t have a product that sells.

      Second is the fact the money’s there. Ticket prices, sponsorship fees, product licensing, all are priced at what the market will bear. Which means there’s going to be a certain level of revenue. Then it’s just a matter of who gets how much.

      Similarly, ‘tech entrepreneurs’ have between little and no idea how to get done what needs done. And the price of a movie or an Ipad won’t go down a nickle even if every programmer was a summer intern.

      Somebody’s going to get the money. Might as well be the people who do the work.

  11. diptherio

    But…but…neoclassical theory assures me that competitors can’t collude to hold down costs (or drive up prices) because one of them will inevitably violate the agreement to benefit at the others’ expense. If this story is true, then neo-classical econ is full of sh–, and that simply cannot be.

    1. Barry

      Then they switch to the long run, and stall some more.

      What amazes me is the Econ 101 spouting net libertarians who will simply assert that idea, with no backing whatsoever.

  12. Banger

    Mere court intrigue, but interesting. The west coast oligarchs haven’t yet learned the Machiavellian/Byzantine details of Washington intrigue–they’ll learn.

  13. Ishmael

    Progressives love Jobs, but if you have spent any time in Silicon Valley like I have, you would know people hated him there. He was sociopath. One story I heard was at Apple one day and an employee got into the elevator with Jobs and said something like “Good Morning Mr. Jobs” or something like that. Jobs looked at him and said, “What company did you use to work for.”

    Yeah, progressives get all excited about immigrants, both legal and illegal, coming into the country and taking jobs for significant less. Wonder why I call them libertards! They believe in environment but then don’t believe in attempting to decrease population growth which is the number one destroyer of the environment. They want people to earn more but then support immigration which destroys the compensation for the laws. If something is an outlier idea then the progressive will support it.

    Check out the articles on drought across the US (I just drove from California to Oklahoma and it is dry) and the impact on food supply. Then you want more immigration.

    1. jonboinAR

      Everything I’ve heard, read or seen about Jobs is consistent with saying he was extremely effective sometimes in building and managing Apple Computers, but personally was an utter jerk.

    2. MyLessThanPrimeBeef

      There is a build-in bias for more humans, meaning more customers, more consumers, etc.

      Having more people, in general, or more people here, in this case, is good for

      1. corporations with overcapacity
      2. police, with bigger departments and more staff, to police more people
      3. teachers, with more students to teach
      4. lawyers, with more people, more friction
      5. army recruiters with more people to recruit from
      6. mayors, governors, etc – more people, bigger budgets, more power
      etc.

      I can’t see why anyone would be against having more people in the world, except maybe workers whose jobs are not protected or if you are concerned about over-taxing the planet, beyond species-centric.

  14. OMF

    To play Devil’s advocate, should we not contrast the wage restraining practices in the software industry with the rampant wage inflation practices in Banking?

    It’s puzzling to make this contrast because in both industries we have young, creative, workers, un-unionised, and who routinely work enormous hours to deliver results. Yet in one these workers are exploited, and in the other the workers exploit everyone else.

    I think the difference is explained by social talents. Tech workers are geeks, generally naive, at most passive agressive, largely non-confrontational, and wide open to generaly manipulation and exploitation. Bankers on the other hand are ruthless sharks, manipulative, cunning and unscrupulous. I think the constrast in fortunes between tech and finance workers shows why cultures and social castes/class/archetypes cannot be ignored when considering industrial policies.

    1. Adam S.

      You’ll also notice in stories of bankers versus tech workers that bankers almost always know what everyone else around them is making. It’s always a big deal, for instance, that “the guy next to me is making $1 million, and my bonus was only $470,000″ to a banker. I’ve never heard of that kind of thing from tech workers.

      It may have to do that management at most companies actively discourage (if not forbid to the extent that they can) employees with sharing wage figures with other employees. Notice that in the complaint that the tech giants were sharing wage figures with all of their co-conspirators. You don’t think that the sharing (or knowledge) of wage data for employees around them wouldn’t give leverage to workers?

      From my own experience, it has been that the excuse of not sharing wage data was that you might hurt someone’s feelings, or that you might be ostracized because it becomes perceived that you (or they) are making too much for the work that you do. But in terms of a fair and competitive market, how can wage workers even start to come from a fair bargaining position if they don’t have any knowledge (or little, if BLS stats are considered ‘useful’ in a generic sort of way) of what comparative salaries are?

      Am I just being naive?

    2. F. Beard

      Bankers on the other hand are ruthless sharks, manipulative, cunning and unscrupulous.

      So let’s give them government-deposit insurance and a legal tender of last resort to make them ruthless sharks on steroids!

      Lib-tards? Yes, plenty of those but Prog-tards take the cake for all-time greatest blunders.

      Hint: Do you see a man wise in his own eyes? There is more hope for a fool than for him. Proverbs 26:12

    3. rusti

      I’m not so sure about your characterization of tech workers. As a former California tech worker I can say with absolute certainty that many of the most talented design engineers are often ruthless egomaniacs who are highly confrontational.

      Some people get bullied into working long hours, but mostly people know what they’re signing up for and take a perverse pride in it. I’ve interviewed with two of the companies listed, and both of the interviewers were taken aback by my question about working hours.

  15. Johnny

    I worked as an IT consultant for one of the remaining auditing firms. Past-tense. I was replaced by H1-B workers. I trained my replacement. He was an idiot. I was among the last to go. They now hire about 50% H1-B during college recruiting. This depresses wages. However, diversity and so on. We outsourced a larger chunk to India every year too.

    1. Ishmael

      I have worked with some of those so called professional people that the Big 4 (the biggest users of h-1 b’s in the country) bring in to do work. Ended up that the whole crew of h-1 ber’s had to leave because there was never such a big group of idiots assembled in one place. What they call a bachelor’s degree is usually comparable to an associates degree in the US – if you are lucky!

  16. Johnny

    Also, we had an informal policy among the remaining American workers to rat out the H1-B’s when they drank and drove. We may have encouraged it… Get them drunk, they won’t pay for taxi, call coppers, destroy them. Isn’t it grand?

    1. John

      Way to go Johnny and crew.
      Never met one that wasn’t arrogant way beyond their skill level.
      I think once they get that H1-B their ego must sky rocket.

  17. F. Beard

    Otoh, if common stock was widely used as private money instead of credit from government backed banks then the benefits of automation, outsourcing and guest laborers would be widely shared.

  18. Andrew Watts

    I’m not sympathetic at all. The tech industry is legendary for their anti-union and libertarian politics. The worker bees emulate their bosses in this regard making the IT workers more subservient than industrial/service economy workers. When the people I know who work for Silicon Valley and other tech companies stop quoting Ayn Rand I’ll start to care.

    Otherwise their feeble attempts at labor solidarity are opportunistic and their self-serving wailing amounts to a bunch of disingenuous fools reaping what they sow.

    1. JTFaraday

      It’s funny that we’re talking about having sympathy with others given that at least some part of the California geek culture has reportedly embraced asperger syndrome as an explanation for its geekiness–because it means they’re preternaturally smart, I guess– but one of the defining characteristics is a geeky inability to understand the emotions of others.

      I have no real way of evaluating any of this, I just think it’s ironic.

      1. Andrew Watts

        I really don’t like the fact they try to pass off their anti-social behavior as aspergers or that they think this makes them genetically superior. Individuals with different forms of autism enjoy socializing with other people.

        We just suck at it.

        1. scraping_by

          It’s a very right-wing era. It’s smart to on the side of winners. Otherwise you’re with the losers.

          High salary, winner. Otherwise, loser.

          Guess they can live out their Heinlein fantasy, if they want.

          1. Andrew Watts

            Great catch. It is undeniable the strong influence Heinlein had on New Left / libertarian thought. Just like the man himself, they soon abandoned their economic causes in favor of an illusion of a society where social struggles between differing groups were finally settled into an everlasting peace.

  19. Andrea

    quote:

    “Google, like the others, used a “salary algorithm” to ensure salaries remained within a tight band across like jobs. Although tech companies like to claim that talent and hard work are rewarded, in private, Google’s “People Ops” department kept overall compensation essentially equitable by making sure that lower-paid employees who performed well got higher salary increases than higher-paid employees who also performed well.”

    In one sense, what these Cos. did was by-pass the ‘free market’ system and set up a cartel. They did what is considered ‘good to do’ – keeping it kind of vague – the kind of actions practised elsewhere (perhaps in other forms, in other ways), keeping salaries ‘in a tight band’, with no super-star-salaries or acrid competition, and ensuring that lower pay scale workers were compensated correctly, and/or got better raises.

    In Switzerland, for ex. such goals are not only considered morally just, but pragmatically positive for the business at hand and the country as a whole. (Cartels /monopolies are tolerated to some degree, that is another story.)

    (Note I am not arguing for low salaries or anything like that. Most ppl should have been paid double to triple..)

    So, while perhaps motivated by ‘greed, or keeping costs down’, aka overall paying employees less, these people were not fools, seen under one light, and actually understood what was essential to keep ppl happy and adhering to a ‘collaborative spirit’, required in this kind of ‘knowledge type’ biz where some freedom to ‘do things as one thinks is best, propose’ and the need to ‘discuss, cooperate, coordinate, have teams who work smoothly together’ etc. are the only way of progressing.

    Contrast: for ex. a Taylorist machine factory, overloaded with vicious management, controls, no (or v. little) rewards for ‘good work’. Or, at the other end of the scale, the football industry, where ‘stars’ and their ‘fantastical compensation’ are bought and sold, poached – traded, in fact. Neither could suit Google.

  20. Larry Barber

    This is just a message to Silicon Valley that they need to get more “involved” in politics. You know, give more money to lobbyists, political campaigns and other forms of bribery. Didn’t go after Wall Street types because they already know to do that.

    1. onthemoney

      exactly what is going on. a shot across the bow to hand over a piece of the action. sadly justice has nothing to do with this.

  21. Berial

    I’ve shared post with some friends in the tech industry. Their first response was, “I KNEW IT!”. They then asked if this has anything to do with “non-compete” clauses. I think they jumped to the ‘non-compete’ clause because it’s another method to prevent them from jumping ship for more money.

  22. EmilianoZ

    I fear Lucas has gone to the dark side.

    It’s funny how our dashing captains of industry love the Free Market except when it threatens their profits.

    No mention of Microsoft. No one wants to poach their engineers?

    Anyways, just yesterday NC had a post about Google employees driving the rents too high in the Silicon Valley. Their bosses were just trying to help reining in those skyrocketing rents.

    1. MyLessThanPrimeBeef

      I have a bad feeling that in a few years, after the ‘inevitable’ and complete triumph of Big Technology*, we will be looking back at the ‘good old days’ of 2014.

      * Who is going to resist looking hip, avoid being sent to a concentration camp for Luddites, and, especially, when the transmission of one’s DNA is involved in many cases?

    2. punk


      No mention of Microsoft. No one wants to poach their engineers?

      I hear it’s one-way street from Microsoft to Google. Nobody wants to go in opposite direction.

  23. RTC

    I’m an older engineer with thirty years of experience but also with a recent graduate degree and plenty of energy. While this price fixing is a bad thing and helped depress compensation, the current job market and age discrimination are much worse problems. Employers seem to have the idea that because the job market is so bad they can simply hire a new college grad for less money and tell them to produce the same work as an experienced person. I realize that sounds silly but it really does happen.

    Another question I wonder about is quality: am I the only one tired of so many buggy electronics devices? Phones that have to rebooted every few days, apps that crash and don’t work as advertised, everything taking thirty seconds or more to turn on. Every day I encounter something that doesn’t work right and think, “It doesn’t have to be this way.”

    (Case in point: first time I tried to post this comment everything hung and I had to enter it again. I’m so used to this I had copied what I had written so wouldn’t have to type it again.)

    1. Ishmael

      I can feel your pain. I see it all the time. A company a while back was hiring a person with an associates degree in accounting who worked as a store assistant manager but had never worked a day in accounting was going to replace the CPA controller with 20 years of experience. I laughed my ass off! What did they get — implosion!

  24. NotTimothyGeithner

    I suspect the real issue is the second housing and finance bubble blown by the Fed and supported by capital flight is about to hit home. Obama’s victory lap on a “recovery” is going to present a problem if American’s don’t feel their has been a recovery. Can Obama go after the banks? No. He is too associated with them, and they probably have the goods.

    Obama is apparently going to ask Congress to work with him to address the economy on Tuesday. He will certainly demand horrible stuff such as TBB and immigration “reforms” or neo-slavery, but Obama is going to have present why he is talking about the economy when it was supposed to be saved just a few months ago. Maybe he is using Silicon Valley as an example.

  25. Hugh

    It is interesting how much we have internalized the themes of the class war waged against us that we instantly start cutting down any group of workers fighting to improve their lot. They are unsympathetic. They are already paid too much. They are geeky, confrontational, bullies. You could replace “IT” workers with “union” workers and you would get the same response. There are reasons that a word like “solidarity” has been beaten into a pulp by the rich and elites. Together we are infinitely stronger than they are. We must relearn this and that our well being is tied to the well being of others.

    Pick a number. For purposes of discussion, I use $20 million although I am not terribly tied to this amount. Do you really think anyone needs more than this no matter what their contributions to society may have been? How many houses, cars, mistresses or boytoys must they have? At what point does their wealth start taking away from the wealth of others? Consider further if we had universal healthcare, free education, a universal right to meaningful work at a living wage, affordable housing, and solid retirements, how much more than this would anyone need? What wealth would they need to transmit to their children?

    In class war, upward transfers of wealth are always portrayed as either the natural or virtuous way of things. Downward transfers are always to the undeserving, the lazy, the unsympathetic. We really need to start learning the games that are being played against us. We need to start thinking about the kind of society we want and ask ourselves, does this help or hurt its realization. If we think about it this way, it becomes easy to see that billionaires figure nowhere in the societies most of us would like to have for ourselves, for our children, for each other.

    1. EmilianoZ

      I totally agree with you. The reason we feel no solidarity for them is that we know for a fact that in return they couldn’t care less about us. Society is completely fragmented.

      You talk about $20 million. I’ve thought about this simple rule:

      ( max(asset/income) ) inferior or equal to ( 1000*min(asset/income) )

      I’m not sure about 1000. This could be determined by trial and error. A lot of problems would solve themselves after enforcing this rule.

    2. MyLessThanPrimeBeef

      Hugh, it would be great if you or Yves would make a post on the topic of wealth tax and maybe on how much it would take for one person to be happy, assuming universal healthcare. free education and one pension plan for all – a few main drivers, that I can see, for personal hoarding.

      I mention these drivers because with the threat of hyperinflation (sorry, inductionists…not to mention the fact that we are looking for universal models applicable to other nations as well), no wealth is security enough.

    3. JTFaraday

      That’s true, but it’s also true that the meritocratic attitudes of clever people– and especially clever people with the right credentials who are also the only white people in the country who still think they can get away with claiming genetic superiority without finding themselves a pin point on some map in the Southern Poverty Law Center– are part and parcel of the class war, and the basic justification upon which the whole hierarchy rests. So, sometimes you have to recognize what part you’re playing.

      It’s nice that they have a class action lawsuit because they want to exercise their natural rights in the free market by jumping from company to company to company, but like I said, what job is isn’t subject to some sort of collusive “price fixing”?

      Isn’t the whole US tech industry in the 21st century “price fixed” through global trade deals? Or, more importantly, the large H-1B visa requests put in by these very same companies? Where’s that “class action law suit”? (I know, technicalities).

      Or is it that this doesn’t matter much because it primarily impacts their co-workers who are non-geniuses with the wrong credentials down the corporate hierarchy, or in less sexy parts of the field in less sexy parts of the country?

      So, no, I don’t think it’s a bad thing to be talking critically about these things. The last thing I’m going to internalize is some sort of fake “solidarity” that simply doesn’t exist in reality.

      1. Andrew Watts

        It never ceases to amaze how the dwindling middle class clings to empty slogans. As if the words alone contained any real power.

    4. JTFaraday

      That’s true, but it’s also true that the meritocratic attitudes of clever people– and especially clever people with the right credentials who are also the only white people in the country who still think they can get away with claiming genetic superiority without finding themselves a pin point on some map in the Southern Poverty Law Center– are part and parcel of the class war, and the basic justification upon which the whole hierarchy rests. So, sometimes you have to recognize what part you’re playing.

      It’s nice that they have a class action lawsuit because they want to exercise their natural rights in the free market by jumping from company to company to company, but like I said, what job is isn’t subject to some sort of collusive “price fixing”?

      Isn’t the whole US tech industry in the 21st century “price fixed” through global trade deals? Or, more importantly, the large H-1B visa requests put in by these very same companies? Where’s that “class action law suit”? (I know, technicalities).

      Or is it that this doesn’t matter much because it primarily impacts their co-workers who are non-geniuses with the wrong credentials down the corporate hierarchy, or in less sexy parts of the field in less sexy parts of the country?

      So, no, I don’t think it’s a bad thing to be talking critically about these things. The last thing I’d want to internalize is some sort of fake “solidarity” that simply doesn’t exist in reality.

    5. El Guapo

      Well said. Support them even if they are a bunch of cretins. Solidarity is essential. Without it we are doomed.

    6. A Real Black Person 2: Electric Boogaloo

      . There are reasons that a word like “solidarity” has been beaten into a pulp by the rich and elites. Together we are infinitely stronger than they are. We must relearn this and that our well being is tied to the well being of others.”

      What sort of society were were suppose to expect a highly socially stratified competitive society (i.e., capitalist) to produce? Unfortunately, technology doesn’t help. We think we can solve social problems like crime with technology, i.e. guns? Why should I care about my neighbor becoming so desperate that he’d attack me, when I can kill him with my gun? Allowing people to express any individuality ALSO doesn’t help, because of the strongly ingrained human impulse to hammer away at any nail that stick out. Social solidarity, I think goes hand-in-hand with a homogeneous group of people “stuck” in the same area, so they “have” to get along, work together, and support each other in order to survive. The homogeneous component is usually a social construct, but in some instances, can come down to personality. Social solidarity comes at a price, just like social liberty , capitalism, urbanization and industrialization have. As you may have guessed, I don’t think the other side is necessarily greener because we have a tendency to take things to far. Doesn’t the desire for socially solidarity often lead towards repression or a purging of some sort?

    7. rps

      We need to start thinking about the kind of society we want and ask ourselves

      Well, we did have this debate during GD1, and class reform was instituted with the New Deal. However, thanks to good ole’ christian southern boy -Jimmy Carter, he went after the UAW not only demanding contract concessions but demonizing them as “the haves” against the non union private sector worker ‘have nots.’ Instead of the have nots demanding workers rights to gain a solid footing on the economic ladder of living wages and representation; they were media-fed group think to knock the UAW down the economic ladder to their subsistence standards.

  26. EmilianoZ

    What can you do? Those keyboard pushers have no loyalty for the hand that feeds them. Technology cannot be held hostage by greedy screen gazers.

    1. Barry

      “What can you do? Those keyboard pushers have no loyalty for the hand that feeds them. Technology cannot be held hostage by greedy screen gazers.”

      The whole actual point of the article was that much of it could be.

  27. TC

    in the AMD case above..

    That would be ADM (Archer Daniels Midland), not AMD (Advanced Micro Devices); Considering this article is reporting on an alleged conspiracy by Intel, that typo is probably worth correcting.

    1. Yves Smith Post author

      Aargh, and I wrote about the case back in the day.

      If they hadn’t officially changed their name to ADM I would have been fine :-)

  28. bob smith

    multi millionaires, and multi billionaires were actively colluding to keep working people poor.

    that is what i take away from this story.

  29. bob goodwin

    Who said west coasters lionize our tech leaders? I’ve met them. Out here all we can talk about is the genius’s of Wall Street who infiltrated the US government and got out of Dodge with a trillion dollars. You guys on the east coast are impressed by our billionaires?

    1. rps

      Microsoft has done a fine job of infiltrating DC. Most public sector offices uses microsoft devices and services…..just saying

      The difference between the goons on the east and west coasts are the east coast wine-swilling vegan eating limousine liberals display of their obnoxious pat on the back philanthropists accolades (you have reached the Bill Gates tax dodging foundation, please hold for the next feel me good non-taxed but tax write-off contribution). Let me legally steal billions under the guise of personal innovation/patent rights and I’ll be a good tax-dodging philanthropist too.

  30. nola

    Oil companies do this same practice to suppress wages to their engineers and technical experts. They have agreements not to poach, when an offer is proffered it is very close to the current salary of the person who gets the offer. This should be investigated as well. As other commenter have said, suppressing wages for some groups suppresses wages for all in that same profession.

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