This article is an embarrassment. He does not offer any evidence at all for his claim that the no-poaching agreement drove down programmers' salaries. It may have been anticompetitive enough for the participants to get sued, but how much did it actually decrease salaries? 10%? 1%? 0%? If this guy knows the answer, he doesn't tell us.
And I know for a fact that Facebook is not the only reason programmers' salaries are rising. There are a huge number of new startups all competing for the best people.
You can prove it had an effect on the employees that worked there, and to a fairly exact number. The agreement covered all employees, not just tech workers. Combined that makes up about 350k employees, and you can then extrapolate how many were engineers in silicon valley, or engineers in general. That means that there was at least a proportion of the population that was affected very inversely by these agreements. If you then realize that other companies use the larger more successful companies' salary policies as the model for their own, then it would have impacted other companies as well, and the employees that work there.
That alone disproves your implied statement: That these agreements did nothing to anyone. It definitely did something, and just the fact that those companies amount to tons of employees and tons of salaries is enough to show it had an effect.
You however are pulling the oldest trick in the book. You want conclusive proof that these completely illegal actions by corporations had a measurable effect before you'll admit that they were wrong. But, it was a conspiracy. You're not going to get exact numbers. It's not like these guys are keeping a ledger of money saved by not-poaching. You are basically demanding the impossible.
But, you are also demanding more than you give yourself. Where's your proof this did nothing? I know, you didn't explicitly say it did nothing, but that's your clever trick. You just imply your counter argument and then run around dumping links to logical fallacies on Wikipedia rather than give real numbers.
So, Paul, stop being a hypocrite and give us your bet on what impact this really had. If you demand exact socio-economic evaluations before you'll believe this did anything, then I demand that you give the same evidence it did nothing.
And your first task will be to disprove what's already been proven in court: That these agreements did impact all the employees at these companies, that it did reduce salaries or they wouldn't have bothered, that reducing salaries was their goal, and that they did fire employees over it.
Until then, your demand for exact evidence violates the standard in philosophical argument that your own argument can't be used against itself.
Your comment suggests you don't understand the distinction between saying something is false and saying there's no evidence either way.
I'm not saying the no poaching agreement had no effect. I'm
saying he offers no evidence for his claim that it had a big effect. Complaining that someone has offered no evidence for
a claim is not an "implied statement" that it's false. Do
you understand that distinction?
Totally agree with zedshaw here. When a long-running, highly-secret conspiracy with demonstrable follow-through (HR staff being fired) is uncovered, the onus is clearly on the conspirators to prove that their conspiracy was harmless, rather than on the uncoverers to quantify its harm. I understand why a venture capitalist would be nervous about the implications of this conspiracy's discovery (higher programmer salaries = shorter runway for investments), but trying to downplay (with no evidence) the impact of the no-poach on developers is disappointing to see on a site called Hacker News.
Can't we use New York software engineer salaries as an analog here? It's another market where good engineers are highly sought after. $200k for an engineer with 8 years work experience is not uncommon.
Hedge funds pay $250k consistently.
Wouldn't SV look something similar?
Your argument is technically right but It sounds like an excuse to punt on a practice that most of us find f$cking despicable.
I think I speak for everyone here when I say that we'd love to have your brain figure out how much of an effect this collusion could have had on engineer salaries or how to make sure this doesnt happen again.
It is very hard to give numbers. But I think it is hard to argue direction though. If there was a no-poaching agreement in place amongst a "cartel", would salaries of the employees of the cartel be higher than normal? Certainly not. They could be the same (assuming there is a sufficiently large number of non-cartel employers) or lower.
This sort of argument is often made in Economics, and is logically sound. Ceteris Paribus aka everything else being the same.
I agree the article smells of link-bait. I don't understand why Facebook's IPO is different from every other IPO that has happened in the past. Why does the author feel that this IPO will raise wages of developers in the valley?
To claim that it's unclear what the effect of a no poach cartel is on engineering salaries is at the same time to claim that it is not necessary that there should be legislation preventing no poach cartels from existing.
Do you believe this to be the case? If so, do you really mean to say that engineering salaries should not be set by market forces?
PG is just saying that if it had been a competitive market we dont know the extent of how much it would have increased engineering salaries. Thats true.
However lets take the case of NEw York where you can get program trading jobs for $300K and I have friends who got these kind of jobs. Hedge funds routinely pay $250K plus.
I think this is what would have happened in the valley.
I don't think that at all makes sense. The finance business in general distorts pricing. There are a whole host of professions that pay significantly more in NY than they do anywhere else.
Trading companies. They're writing software in house to control stock trading (or that of any other financial instrument that's on the market. The software is so directly responsible for profit margins that the companies are forced to be very competitive with their compensation.
I was hoping for a more specific answer. I currently work at an algorithmic trading firm making software that trades securities, but I didn't find a position like this at $250K/year.
There is evidence that collusion in the job market does not necessarily have an effect on wages: http://ideas.repec.org/p/esx/essedp/626.html. Interestingly enough, the research "provide[s] strong evidence of a negative effect of collusion on labour productivity growth"
It doesn't seem to relate to this situation at all. I could only make it through about 15 pages due to the author's writing style.
Collusion for these firms was price-based collusion for products, not collusion to suppress the input costs of highly skilled labor. Manufacturers are said to have engaged in establishing minimum or fixed prices for their products.
Consumers will tend to absorb this form of market inefficiency. After the cartel agreements were broken, consumers reaped the benefits in the form of the "intensification of price competition" (lower prices).
It suggests that only in one case was there collusion in R&D, which might be a relevant example.
Additionally, the article cites outside competition from the USA as a factor. Competition from foreign sources on engineer wages such as India is still nascent. US manufacturing during this period was mature and robust.
> I don't understand why Facebook's IPO is different from every other IPO that has happened in the past.
its important because FB is the biggest social network on the internet. Believe it or not, many people still dont understand or get what "social web" means. Having FB stock publicly traded (company more transparent) and strong earnings would prove to the masses that web and social net is sustainable AND profitable AND here to stay. And it already works! look what happened with Zynga stock after FB IPO papers hit the daylight.
If we take into account that on Wall Street, there are engineers making $330K + for program trading jobs, then why would that not have happened here in the valley.
HEdge funds routinely pay $200+. With a fair market I think we should have seen similar numbers here in the valley.
There are many times more engineers in New York than in SV.
I was a trader at an investment bank's prop desk. My salary was $200k+bonus when I was 20. When I left a year later I was offered 350+150 guaranteed minimum bonus to stay. But I built algorithms from concept, testing, all the way through to design.
I had a team of coders and optimisers working for me whose salaries topped off at 150 all in, 200 for the one who could turn out assembly that ran in milliseconds.
I always saw my job as being finding in-efficiencies and irrationalities; they saw it as coding. I happened to code (and not all that brilliantly, hence the support). But the argument that pure developers should be compensated richly doesn't gel with the argument that programming is the new literacy.
This conversation is not about the "programming is the new literacy" - but I do agree on that part.
I'm trying to find an analogous system which could help us figure out what would have happened to developer salaries in SV given what tech companies pay in NYC.
How comparable would a web app developer and Wall Street dev be?
The basic financial literacy these guys are desired to have is higher than naught. Further, there are different technologies, paradigms, and cultures involved (though at a hedge fund the last part converges).
A test for this would be tech dev salaries in NYC versus SV.
The economics are different. I'm assuming you mean the guys writing the programs that run trading platforms. Those guys are super specialists and for their employers a small boost in performance means a huge boost in revenue for the day. Also from some first hand account I've read from here and on Reddit the job is very demanding. You can get called in at any time to write something that needs to be done by the next morning. It comes with its perks of pay but the trade off is freedom.
This gave me an interesting thought. You mention that those trading jobs are supposed to be very demanding, implicitly citing this as a reason for their higher salaries. Well, any time a subjective factor like that affects a salary, it is based purely on people's perception of the job. It seems to me that the typical perception of startup work is equally demanding. It's odd that instead of resulting in higher salaries, the benefit is diverted to the (statistically poor) hope of a big IPO or acquisition. This is ironic since the trading firms paying $250k+ to programmers are all about maximizing profits in an environment that could be even more volatile and risky than the startup world. It makes me wonder who has the smarter approach to risk...
Would be instructive I think to compare the average total compensation of startup engineers vs the average total compensation of hedge fund engineers. I wouldn't be surprised if the former were skewed a bit higher by the Microsoft, Google's, Facebooks.
I agree with this but it's tough to prove that there's a causation effect between the two (other than the one person who was fired, which by itself probably is enough to make a valid argument). But it seems like when the value add of a programmer is so high, it's a lack of mimicking the finance market to structure your compensation package that seems to be more closely correlated to the (low) average income. I say finance market because it's probably one of the few markets where compensation is directly and proportionally related to performance.
I was thinking that too. Though to be fair in this particular case they seem to be following the TechCrunch tradition of running linkbait guest posts on weekends (when there is less real news).
It's sad, given that so many good startups would love to get any kind of press coverage, weekend or not. Every time I see a worthless article on TC, I think, "There's 500 words that some good startup would have loved to have, and the audience probably would have enjoyed it more, too."
Would be interesting to see what percentage of posts covered the really big companies vs startups on there. Feels pretty skewed towards the ever small and often pointless detail of the big tech companies rather than startups.
Quoting another comment on this topic I made while inebriated to back up the idea that this is economics 101 material:
Libertarian views assume that free markets regulate themselves basically due to perfect competition. (Trying to keep this short and simple.)
Realistically, you do not always have perfect competition and you have problems with monopoly, oligopoly, etc. Firms are potent enough that their collective decisions can manipulate markets, and in this it would be labor markets. (Perfect competition assumes that firms cannot manipulate markets.)
Libertarians oppose a government presence in markets because they believe the result is inefficiently functioning markets, and we are all worse off.
In this case, the firms collude and are manipulating labor markets so that they behave inefficiently to the advantage of the manipulative firms and disadvantage of labor. (This is usually where people try to justify labor unions as a counter to the influence of firms.)
Agreed with most of what you said. However I find the cost of living in silicon valley to be an issue.
I think companies should do something really crazy. They should go and develop a new area which would eventually beat silicon valley. Where engineers can find very affordable rents, and very affordable modern deco houses. Where the weather is sunny, driving engineers who sit all day in offices to go outside and get some vitamin D. Where the gender ratio is balanced. Where your neighbors are good at other stuff and are willing to share there knowledge, like a real world quota.com.
A engineer, earning 120k from year 0 - 4, should very easily be able to save 250k and live comfortably in a 5 year timespan and not have to cut corners.
PG, there is a real problem here with silicon valley. I don't think the salaries are too low but I think the cost of living is too high.
If you truly want to be innovative and crazy, broaden your world beyond the web.
> I think companies should do something really crazy. They should go and develop a new area [...]
If they do that and it succeeds at all, here is what will quickly happen.
1. The area will be full of smart well paid people, and will be a place where those people want to live. House prices and rents will go up.
2. Since it was aimed at engineers, and prices are (now) expensive, it will tend to be occupied largely by engineers and other highly-paid people. Which, society being what it presently is, will lead to the same sort of sex ratio as you see in Silicon Valley.
End result: just one more SV-like area. And that's if it works, which it probably won't. (It's very easy to say that "companies should" develop an area with sunny weather and a balanced gender ratio and neighbours who are good at other stuff and willing to share their knowledge -- but not so easy to do it.)
Gender ratio is a consequence of our industry being gender imbalanced and tech being the superstar industry of the area. If you want to find all of that except for the climate, you can find it in Seattle. The wages are almost bay area levels, the housing significantly cheaper and better quality usually, no reams of crappy 1930s craftsman track houses everywhere. You have no state income tax and tech doesn't dominate as much, so it's significantly more gender balanced.
Austin also has that potential I hear too and it's a sunny place. Texas also doesn't have state income tax.
These agreements haven't gotten in the way that most engineers in the valley know there are a ton of other places they can work, including the "no poach" companies. Valley engineers switch jobs with an ease and frequency uncommon for the tech business in general.
Facebook alone certainly doesn't hire enough engineers for it to matter THAT much.
Compensation includes equity. One of the primary ways that programmers become millionaires is by gaining lots of stock grants and options by being early employees at quickly growing companies that go public. That whole system has been curtailed somewhat in recent years by SOX.
And I know for a fact that Facebook is not the only reason programmers' salaries are rising. There are a huge number of new startups all competing for the best people.