No, High-Tech Thuggery is NOT All In China
The Market Ticker ® - Commentary on The Capital Markets
Posted 2012-01-29 11:47
by Karl Denninger
in Employment
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No, High-Tech Thuggery is NOT All In China
 

You don't really believe that if corporations in the high-tech space will abuse employees by "contracting" with firms that have access to effective slave labor, along with poisoning the air and water, that they'd be "good citizens" here in the United States, do you?

Last week, we got our first glimpse at the (heavily redacted) evidence behind a Silicon Valley scandal dating back to 2005 — Apple, Google, Adobe, Intel, Intuit and other tech firms, it was revealed, had agreements not to poach one another's employees. Technically, the Department of Justice settled an antitrust lawsuit in 2010, but employees who claim they were injured by the arrangement are still fighting for more, with a proposed class-action lawsuit that's having its day in court this month. Today, we obtained an unredacted court document that reveals just how deep the proverbial rabbit hole goes... and how it personally involved Steve Jobs, Eric Schmidt and other prominent executives.

What's being talked about here is an apparent agreement between various Silicon Valley firms that they would not hire workers from one another -- between firms that are at least in theory competitors.

There are legitimate reasons to not "hire away", with the most-serious being trade-secret related.  But employment agreements of this sort have to be limited to improper use of proprietary information or be between related firms (e.g. companies that have close continuing business ties); those are legal as they promote innovation and competition. 

A blanket "no poach" agreement is another matter, especially when it extends between multiple companies, as there is no link to proprietary information and proper business purpose.  Instead, the intent is to suppress wages by preventing employees from marketing themselves in the business community, seeking the highest wage return for their talents.

This is an illegal practice as the intent is to suppress wages through limiting competition and all such agreements entered into for such a purpose, where market power exists, are per-se unlawful under The Sherman Act (among others.)

The Department of Justice settled an anti-trust lawsuit on this premise in 2010, but there's a private class-action suit that remains active.  The firms involved have tried like the devil to keep the details of their agreements out of the public eye, but discovery is a bitch, and they appear to be (slowly) losing that battle.

One example:

"Mr. Jobs wrote: "I would be very pleased if your recruiting department would stop doing this." Mr. Schmidt forwarded Mr. Jobs's email to undisclosed recipients, writing: "I believe we have a policy of no recruiting from Apple and this is a direct inbound request. Can you get this stopped and let me know why this is happening? I will need to send a response back to Apple quickly so please let me know as soon as you can."

Mr. Geshuri told Mr. Schmidt that the employee "who contacted this Apple employee should not have and will be terminated within the hour." Mr. Geshuri further wrote: "Please extend my apologies as appropriate to Steve Jobs. This was an isolated incident and we will be very careful to make sure this does not happen again."

Three days later, Shona Brown, Google's Senior Vice President for Business Operations, replied to Mr. Geshuri, writing: "Appropriate response, thank you. Please make a public example of this termination with the group."

Oh I see.  A public example eh?  So not only was the firm apparently engaged in this conduct, but it went out of its way to make sure that anyone who got caught in the recruiting community trying to do what they're paid to do (find the best talent and entice them with money) was "flogged" so as to serve as example to anyone else who might get "uppity" and think they could actually work in a form and fashion that enhanced competition -- that is, performance of price discovery for high-tech labor.

Not all firms cooperated, however, and some appear to have recognized that irrespective of their desire to do so, it was probably unlawful.  One example from the attached filing:

On August 24, 2007, Ed Colligan, then CEO of Palm, Inc., wrote to Mr. Jobs, refusing Mr. Jobs’s request to enter into an illegal agreement with Apple. Mr. Colligan wrote: “Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.” (231APPLE002153.)

Note who, it appears, initiated the request.

Now these are allegations and the case is still ongoing, but there's a hell of a lot of material that has thus far surfaced, and you know the old rule, right?  When you see one of these scampering on the floor....

smiley

There's usually something like this behind the wall:

smiley smiley smiley
smiley smiley smiley

It will be interesting to watch this case, but remember that the firms settled the DOJ case rather than allow a jury to hear it, and that there is still an active class-action private lawsuit in process.  While everyone is always entitled to the presumption of innocence, in a civil case you need only prove preponderance of the evidence (rather than beyond a reasonable doubt.)

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User Info No, High-Tech Thuggery is NOT All In China in forum [Market-Ticker]
Truthseeker
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There's a little tarnish showing up on St Steve's halo...

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Themortgagedude
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Didn't we have this in MLB back around 1988? And the courts came down rather hard on the owners IIRC. It's collusion and the principals involved should be prosecuted as well if they violated laws.

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Krs
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Just one more example where the Crony Corporatism seems to indicate the rule of law no longer matters. The speed at which our laws and the Constitution itself are being dismanteled and silenced are just astonishing. It gets difficult to think about for to long without getting physically sick in my stomach.

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"The Good Ol' Boys Network" writ large.

smiley

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Rjazz117 wrote..
"The Good Ol' Boys Network" writ large.


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What's this?! More crimes, settled with fines? No Grey-Bar Motel time?

I betcha I'll get the same consideration, should I fall afoul of the law - and so will you, right?

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The agreement distinguished between actively recruiting from competitors versus engaging a competitor's employee who inquired first. The latter was OK. At least that's my impression.

What the law says I don't know, but from a moral ethics standpoint I would have a lot less trouble with an agreement that left the door open to employees moving of their own volition.

Cold-calling a competitor's employees to lure them away has never been a "nice" thing to do and I imagine it can blow up in the caller's face, agreement or no agreement.

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Too bad we can't have an agreement like this with employers of ex Congressmen and Senators.

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Timetrader
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Seems to me that this is excellent proof there is not a big giant global illuminati being run by efficient super men intent on turning the masses into dying blights on their planet. Steve Jobs and the rest on that list, are just some ordinary kids who grew up to become rich and are guilty of very bad business behavior. Interesting what ordinary people become when given the opportunity. A little tarnish on his halo? I'd say we are clearly seeing that halo is made out of a unicorn horn.
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Ed Colligan, then CEO of Palm, Inc. wrote..
Your proposal that we agree that neither company will hire the other’s employees, regardless of the individual’s desires, is not only wrong, it is likely illegal.

Hey, look, a CEO with some sense of right and wrong. He obviously wasn't in the club, and this stuff clearly is wrong. Employers competing for workers is clearly a necessary element of a functional market economy, just as workers competing for jobs is.

-Uwe-

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Should do something about the blatently illegal use of H-1B's, and the fraudulent practices around obtaining Green Cards that many Silicon Valley firms use.

With tech firms receiving dozens, sometimes hundreds and thousands of resumes from highly qualified people, their is no need whatsoever to use foreign guest workers.

If SV tech firms would just bother to open their resume queues and start hiring domestic grads (something they've mostly not done in the past decade despite record domestic enrolments in EE/CS/IT programs) -- with the sort of glut of qualified people available in the market, I find it rather unlikely they would face any escalation in labour costs.

Quote:
Employers competing for workers is clearly a necessary element of a functional market economy, just as workers competing for jobs is.


Absolutely. Which is why it is critical that employers actually bother to interview a significant cross-section of qualified applicants, before they are allowed to run to the government and demand a H-1B.

If domestic applicants are so deficient in skills, this would be the process by which those domestic applicant actually receive meaningful feedback.

I personally would, as a precondition of H-1B or Green Card issuance, require that firms interview all qualified applicants who apply (the only acceptable 'qualification' being a Bachelors Degree in the field), *and* provide feedback, in writing, of any skills that are deficient.

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When I worked in electronic engineering years ago, I tended to be employed by smaller companies. As I did not have an EE degree, the larger firms were not interested. At one firm, when someone, likely a headhunter, called up and wanted to speak to an engineer, the secretary would almost always forward them to me. Then, the game would start. They would ask about some of the things I was working on, or had done, and we would converse for quite a while. Eventually they would mention that there were lots of jobs available for people with these sorts of skills, and ask if I had ever considered working somewhere else. At that point, I would casually mention that I was self taught, with some great mentoring by my colleagues, and that my degrees were all in political science. Usually they would just hang up. Despite my showing that I could do the necessary work, I lacked the formal credentials. My experience has been that the large companies tended to value credentials much more than demonstrated abilities. The late Irwin Feerst tried mightily to push the IEEE into supporting American engineers over imported ones, but was not successful. Not only are Americans with engineering degrees being shafted by the various visa scams, but so are those of us who came up the ladder via on-the-job training.
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Pitz, you know it has always baffled me is why someone from Canada incessantly rails against H-1B visas. How does US immigration policy affect you?

The H1B program is easy to fix. Leave the quota lower than the industry wants, and let companies "bid" for the available slots with salaries. Right now, if the number of applications exceeds the number of slots, they select applications using a random lottery. This can prevent a company from hiring a particular individual with rare skills no matter how much they're willing to pay that person, while letting various "Consulting Firms" get as many cheap and fungible Indian or Chinese bodies as they want simply by filing enough applications, knowing that some percentage of them will be rejected by the lottery process. Instead of using a random lottery, we should select applications based on the salary proffered. This will ensure that those employers who really want a particular individual can get him, if they're willing to pay enough. It will also bring a quick end to the complaints that the program is being abused to bring in cheap labor.

As for Green Cards, they don't help at all with keeping "cheap" employees. The moment a person has their Green Card, they are no longer beholden to their current employer in any way. They can quit and go to work for anyone they want. I've been involved in this process twice, once about 20-25 years ago when I was working for a Fortune-200 company, and once again more recently in my own business. It was a major pain in the ass both times, and any employer who goes through it is nuts unless they really want a particular individual and are willing to lock that individual up with golden handcuffs.

But you know what? That isn't what this Ticker is about. smiley

-Uwe-

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Quote:
Pitz, you know it has always baffled me is why someone from Canada incessantly rails against H-1B visas. How does US immigration policy affect you?


The Canadian/US labour markets, particularly in IT and engineering, are very tightly integrated. Canadian engineering/IT professionals work in the USA on the TN-1 visa and vice versa. H-1B's hired in the USA (or their equivalents in Canada) directly displace both Americans and Canadians in the North American labour market for that sort of talent.

Since neither Canadian nor American professionals require employer sponsorship on either side of the border, they are indistinguishable from the employer's perspective, or the perspective of the broader labour market. Immigration policy that negatively affects Americans also negatively affects Canadians, and vice versa.

edit: The TN-1 visa for Canadian professionals working in the USA is issued at the border, costs $100 or so, and if a person presents suitable evidence of professional qualifications and a job offer, the border guard has almost no discretion in whether to authorize the visa or not. Quantities are unlimited. The visa is issued initially for 3 years, and can be renewed an unlimited number of times.

Quote:
The H1B program is easy to fix. Leave the quota lower than the industry wants, and let companies "bid" for the available slots with salaries.


That would work, but really doesn't get to the root cause -- if Americans are so unqualified for the jobs, what qualifications do they need in order to meet the employers' requirements? That is why my suggestion that employers be required to interview all applicants with the pre-requisite Bachelors degree prior to a H-1B visa being authorized, *and* provide feedback (including, if skills deficiencies are present, worksheets detailling training courses that could be taken) is especially pertinent.

The sheer cost of meeting such a proposed requirement, IMHO, would mean that tech firms would, instead of trying to discharge such a burden, would simply start to treat their domestic applicant stream in good faith. Instead of discarding millions of resumes like Microsoft does, and then claiming a need for H-1Bs.

True 'best and brightest' can, as always, be imported under the O-1 visa, which allows for unlimited numbers of top-tier professionals in all sorts of fields.

Quote:
This can prevent a company from hiring a particular individual with rare skills

This will ensure that those employers who really want a particular individual can get him, if they're willing to pay enough. It will also bring a quick end to the complaints that the program is being abused to bring in cheap labor.


Such individuals are already importable under the O-1 visa program, which is not subject to limits, but requires the employer to prove that such an individual has made extraordinary contributions to their profession.

Quote:
That isn't what this Ticker is about


Actually it is, its about the abuses towards labour that are present in the US tech industry. And using H-1B, when there are millions of unemployed or underemployed US tech workers pounding the resume queues for jobs that are just being given to foreigners (without considering the domestic applicants), is a very abusive practice. Probably even more abusive/damaging to domestic engineers than these Silicon Valley tech firms engaging in an illegal conspiracy to restrain trade.

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pitz wrote..
Which is why it is critical that employers actually bother to interview a significant cross-section of qualified applicants, before they are allowed to run to the government and demand a H-1B.
A year or so back I ran across a position posting for an engineer to, as best I could tell, test GPS receiver software.

That's a non-trivial task.

And the position was in the Los Angeles area.

And they were willing to pay $33 per hour.

To live in that area on that pay you've got to bunk four guys in a two-bedroom apartment.

They clearly had an Indian waiting in the wings for whom they were building justification for the H1b visa application.

"We can't find qualified domestic applicants"

At that price, of course not.
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The H1B program is used by US companies to suppress compensation for engineering staff, it has nothing to do with the fraudulent claims that they have to go to foreign engineers to get qualified personal. That is utter nonsense. The bull**** never ends.
Morla
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Quote:
My experience has been that the large companies tended to value credentials much more than demonstrated abilities.
That's to be expected, it's called cognitive dissonance. Expensive credentials are the right way to learn, otherwise why did they spend so much time/money obtaining similarly expensive credentials? Smart guys like them wouldn't make such a silly mistake, so clearly it wasn't a mistake.

Of course if enough people in a given business believe it, it self-fulfills :)

P.S. It's very possible to pass a college course and forget the material in a matter of months. I've taken C++ classes in the past, nowadays I couldn't code a "hello world" program if my life depended on it. If I need to I can self-learn it in a few weeks, but I could have just done that in the first place. So yeah, credentials should be taken with a grain of salt, there are nerds in high school that know more than a guy whose comp-sci degree has been on the wall a few years.

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Qtrng
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Pitz wrote..
That would work, but really doesn't get to the root cause -- if Americans are so unqualified for the jobs, what qualifications do they need in order to meet the employers' requirements? That is why my suggestion that employers be required to interview all applicants with the pre-requisite Bachelors degree prior to a H-1B visa being authorized, *and* provide feedback (including, if skills deficiencies are present, worksheets detailling training courses that could be taken) is especially pertinent.

The sheer cost of meeting such a proposed requirement, IMHO, would mean that tech firms would, instead of trying to discharge such a burden, would simply start to treat their domestic applicant stream in good faith. Instead of discarding millions of resumes like Microsoft does, and then claiming a need for H-1Bs.

I've recently spent a year and a half screening and interviewing candidates for the position of "software engineer" (this is actually the same thing as "software developer", except located in the SF Bay area). The sheer volume of applications that we received from candidates who had no idea how to solve trivial problems, but nonetheless had been awarded one or more college degrees in computer science, was absurd. If we had a choice between hiring idiots, writing thousands upon thousands of reports about idiots in order to be able to hire all of the good applicants, or hiring only the good applicants that were from the US, I would guess we would pick the third option. That is, this policy would cause us to stop hiring foreigners, but it would not cause us to hire any additional US citizens.

Flyingillini wrote..
The H1B program is used by US companies to suppress compensation for engineering staff, it has nothing to do with the fraudulent claims that they have to go to foreign engineers to get qualified personal. That is utter nonsense. The bull**** never ends.

I sincerely hope this pertains to actual engineering. If the claim is meant to include software, then it is simply wrong.

Reason: spelling
Pitz
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Quote:
I've recently spent a year and a half screening and interviewing candidates for the position of "software engineer" (this is actually the same thing as "software developer", except located in the SF Bay area). The sheer volume of applications that we received from candidates who had no idea how to solve trivial problems, but nonetheless had been awarded one or more college degrees in computer science, was absurd.


With software developers in particular, one problem that frequently arises is that developers often are so immersed in their work that they develop a 'belief' that certain 'trivial problems' in their particular domain of expertise are trivial to the overall universe of CS grads/practitioner. When such is not the case.

As is often the case, software people tend to be arrogant, socially maladjusted individuals who are not very forgiving of lack of immediate domain knowledge. Thus, they come down overly harshly on people who may lack a certain piece of knowledge that the interviewer wants to corner in on.

How arrogant are firms? I was once telephone interviewed by Microsoft. The interviewer started asking me questions on a proprietary tool only used inside of Microsoft and not available to non-Microsoft personnel. Of course I couldn't answer. Was this a reasonable test? Of course not. But they applied the 'dumbass' label on me and threw my application out anyways on the basis of their phoney and innappropriate interview.

Another example, I've heard of guys who applied to Google, claiming no programming qualifications, for networking/sysadmin/systems management type jobs, being given coding tests. Testing skills on a resume is one thing, but testing on skills with minimal relevance to a job is quite another.

Quote:
If we had a choice between hiring idiots, writing thousands upon thousands of reports about idiots in order to be able to hire all of the good applicants, or hiring only the good applicants that were from the US, I would guess we would pick the third option. That is, this policy would cause us to stop hiring foreigners, but it would not cause us to hire any additional US citizens.


Idiots, hardly. I think you would be hard pressed to support your stereotyping with anything but anecdotal evidence.

Of course you wouldn't fill out massive piles of paperwork on the candidates you reject -- firms like yours would simply stop being intransigent, and start treating the applicant pool in good faith. You know, like responding to top quality candidates that actually apply, instead of leaving them to die.


Quote:
I sincerely hope this pertains to actual engineering. If the claim is meant to include software, then it is simply wrong.


I disagree with your assessment. The vast majority of software professionals aren't even given the 'time of day' at tech firms when they apply. Its not unheard of to hear of top CS grads sending out hundreds, sometimes thousands of resumes, not even to hear a response from tech firms.

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The vast majority of so-called "software professionals" simply suck donkey balls.

Sorry, that's the facts, and I've seen plenty of the code these so-called "professionals" produce and had to rewrite more than my share of it.

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What part of "shall not be infringed" was unclear?
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Quote:
The vast majority of so-called "software professionals" simply suck donkey balls.

Sorry, that's the facts, and I've seen plenty of the code these so-called "professionals" produce and had to rewrite more than my share of it.


And I'm sure you weren't writing top-notch software on your first attempt either... At some point, an employer had to take a chance on you, give you an office in which to work, and some meaningful feedback on whether or not your work sucked.

H-1B totally short-circuits that process, to the point where someone like yourself, especially without a fancy CS degree, probably wouldn't even have a chance of having their application considered because some dude in India is willing to work for an all-in rate literally less than you would pay to drive your $500 car to work daily (nevermind eat!).
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Quote:
And I'm sure you weren't writing top-notch software on your first attempt either... At some point, an employer had to take a chance on you, give you an office in which to work, and some meaningful feedback on whether or not your work sucked.

I wrote a metric ****load of code before I ever did it as an employee and I knew what I was doing. Most "graduates" do not, and they suck. That's not the employer's fault, it's the applicant's.

If you think colleges are worthwhile in this regard you're dead flat wrong. While I'm sure some are not worthless far too many are.

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What part of "shall not be infringed" was unclear?
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While the whole H1B mostly seems to be about suppressing wages, my latest interviewee with a masters in CS listed assembly on his resume and admitted he shouldn't have put it there when questioned about it and couldn't reverse a string with a language of his choice.
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Pitz wrote..
With software developers in particular, one problem that frequently arises is that developers often are so immersed in their work that they develop a 'belief' that certain 'trivial problems' in their particular domain of expertise are trivial to the overall universe of CS grads/practitioner. When such is not the case.
I agree that many interviewers and many firms have this problem. I do not think that was the case for us. We were not particular about the languages or libraries the candidate used; if he wanted to use Smalltalk or Scheme or Boost, that would be fine.

Even after screening out many resumes, we spent a great amount of time interviewing people who could not (http://www.codinghorror.com/blog/2007/02....) FizzBuzz or perform the slightly more difficult tasks "Write me a binary search," "Generate the Fibonacci sequence," or "Print out the contents of a binary tree in breadth-first order, one level per line." We were generally pretty forgiving. If the candidate wrote buggy code and was able to fix it once a case that triggered the defect had been pointed out, even if this happened several times, he or she would still advance. If he or she could not get one problem but could get others, he or she would still advance. There is a valid point to be made that people who have been out of university for many years may no longer have such trivia fresh in their minds, but the majority of people who failed these phone screens were fresh graduates.

Facebook (which I have never worked for, but have interviewed with) uses problems of a similar difficulty in its phone screens.

Recalling the other companies that I've applied to, I now realize that we would actually have a fourth option that is more attractive than only hiring people from the US. These companies would post much more difficult tasks (http://itasoftware.com/careers/work-at-i....) on the internet and require each applicant to solve one. People who attempted to apply directly would be bounced to the list of tasks. I think an approach like this would allow a company to continue hiring the best candidates available if your policy were instituted, but I am not sure. Some people in the industry have said that requiring large amounts of effort up-front drives away top talent.

Of course, over the long run it may be better for companies to hire people who are not qualified but have relevant four-year or graduate degrees and teach them how to do their jobs. However, doing so would be a big competitive disadvantage, so if we instituted policies to encourage this behavior I'm sure a great many people would expend a lot of effort trying to be more competitive by circumventing the policies.

Reason: missing words
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