Posted May 16, 2014on:
Happy Friday Widdershiners. Here’s hoping the climate change deniers are warm and comfy this May morning of thirty-degree temperatures. Perhaps they can warm themselves by burning environmental reports authored by scientists who researched the old-fashioned way — by not being paid by oil companies.
My Widdershin friends, I have failed you. My failure comes from writing so often about the effects of income inequality while only using statistics to amplify the points. That was stupid. Statistics are antiseptic for a reason — they are the product of wringing out all the emotion and noise. That being so, statistics fail to adequately convey the human impact metastasizing from the concentration of wealth.
I’ll try to do better today. But first, let’s reminisce for a moment about a bygone era in American history, the coal mining company towns. Southern Appalachia was dotted with mining camps beginning shortly after the Civil War. Easy-to-mine Appalachian coal fueled the industrialization frenzy from the 1870s to mid-1900s. At one time, over 700,000 men were mining the hills of Pennsylvania, West Virginia, and Kentucky.
Companies like U.S. Steel soon learned the concept of vertical integration — owning every manufacturing component from the ore to the factories to the coal mines that powered the whole enterprise. To maximize productivity and profitability, the barons of industry built “company towns”.
It was in these towns the men wore Levis and the ladies cooked with Dorothy Perkins flour because that is all the company store sold. The goods were bought with “script” — the currency of the coal companies‘ exchequers. Each day miners began the same jobs their fathers and grandfathers did before them. Reminders of the ancestral work ethic were the headstones dotting the scrub hills they passed on their way to work.
By today’s standards, a pretty dismal and miserable existence — a gulag without the walls. It was the best of times for most — they enjoyed the best paying jobs of their lives and were living in the only place they had ever wanted to live. They accepted their lot in life because “that’s the way it had always been” and the company gave them what no one else would — a job.
Fast forward to today — there has been a little heralded case winding its way through the federal courts of northern California. It is a class action case filed on behalf of more than 64,000 programmers and systems engineers.
The wrong giving rise to the suit was a systematic conspiracy among the biggest tech companies to not raid one another’s workforces. The effect — stifling competition, suppressing wages, and running afoul of antitrust laws.
The royal fiefdoms of the tech world — Apple, Google, Intel, Adobe, Intuit, Pixar, and Lucasfilm — were all a part of a secret cabal from 2005 through 2009 which secretly forged a series of no-recruit agreements.
Something so brazen in scope was impossible to conceal. The U.S. Department of Justice got wind of the situation, leading to a federal investigation and a court-approved settlement in 2011. The companies didn’t admit wrongdoing or pay fines, but agreed to refrain from restraints on “soliciting, cold calling, recruiting, or otherwise competing for employees.”
The impotent nature of the DOJ action inspired the private class action litigation. There is a settlement in the offing. Intuit, Pixar, and Lucasfilm took an earlier litigation off-ramp paying a mere $20 million toll, but Apple, Google, Intel, and Adobe reportedly are agreeing to pay out $324 million to settle without admitting any wrongdoing. The $324 million represents about 0.4 percent of the combined total revenue for the companies’ most recent quarter. Zero point four percent of their revenue for the most recent quarter — not year, but quarter.
The schemers behind this “company town” mentality weren’t uninformed underlings. They were the names you know — Steve Jobs, Eric Schmidt, Google co-founders Larry Page and Sergey Brin among others.
They weren’t ignorant of or misinformed about the law. They knew what they were doing was not kosher. The secret bilateral agreements began in February 2005 when Jobs demanded that Brin instruct his HR troops to cease recruiting from Apple’s ranks. According to Brin’s deposition account, Jobs threatened, “If you hire a single one of these people, that means war.”
Both Brin and Page were acolyte disciples of Jobs — admiring him and being cowed by his brutal steely resolve. Very little was ever written down with Google’s Eric Schmidt going so far as to instruct a junior executive to disseminate the non-recruiting pacts “verbally,” because, “I don’t want to create a paper trail over which we can be sued later.”
These secret alliances propagated by the aristocratic practice of cross-pollination between Boards of Directors. The cross-pollination was only available to the royalty not to the worker drones. The tech royals were doing what aristocrats do — they talked and mingled with one another giving rise to nearly identical preclusions on recruiting one another’s employees.
This systematic plotting is unusual to say the least. Even the defendant companies’ experts admitted, “We are unaware of these types of long-term, all-employee agreements ever occurring between other firms.”
These practices were the other side to the Alger-esque lip service to meritocracy and market forces so often echoing out of Silicon Valley. One private equity partner specializing in technology and media said, “This is one of hundreds of examples in which our economy has been corrupted by the intense concentration of power and wealth.”
This practice worked because just like the mining company towns populated by uneducated, impoverished miners, these educated, six-figure earners wanted to work in the technology dream factories of Apple, Google, Intuit, and Pixar. They acquiesced to becoming captives of their own aspirations.
Is the mentality of the 19th century company town moguls any different from the 21st century electronic aristocrats? With the accumulation of wealth comes the coalescing of power. That amalgamation has always been the recipe for overcoming whatever inherent goodness there is in the human spirit and replacing it with the convenience of expediency.
These technological overlords of the One Percent got away with their scheme. They will pay cushion change for the convenience of corralling their talent into indentured servitude for five years. Isn’t that what the moneyed elites have always done? Only this time the penalty will be memorialized in a footnote and amortized by accountants as the cost of doing business.
Siri-ous hubris indeed.
This is an open thread.
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