7 ms·

I can vouch for this story. My parents went through this scenario exactly. They had gotten into office cleaning because it was relatively well paying in the 90'

by dba7dba 10y ago

I can vouch for this story. My parents went through this scenario exactly. They had gotten into office cleaning because it was relatively well paying in the 90's. But in the 90's middle men came into the mix. Someone with better sales ability would win the contract for cleaning office, and subcontract it to someone else. And even that 2nd person might subcontract it to someone else. Eventually, the person really doing the actual cleaning barely made above minimum wage. What does MBA school call this? Reducing cost? Increasing efficiency? Reducing risk?

tarsinge 10y ago
Intrigued by how can it be cost competitive for the middle men, why aren't small business selling directly? Is the sales part the only edge of middle men?
- edent 10y ago
  Because a small company has the ability to supply cleaning to X square metres across one city. A middle-man can say "We will supply your cleaning in several cities no matter your office size." So a company pays a higher cost - but only has to deal with one contract, which saves them effort elsewhere. It's the same as taxi companies. It would be cheaper for you to call a small firm with lower overheads, but you're happy to pay a premium for convenience.
  - leni536 10y ago
    Hmm, Uber for office cleaning?
    - flukus 10y ago
      So the yellow pages was basically just an uber uber?
  - flukus 10y ago
    A lot of this played out with single location companies and single city contracting companies (before they start merging). So I don't think that's the reason. I suspect it was cost. The middle men would just under bid and then under deliver.
  - djsumdog 10y ago
    You need the pigs. They're helping all the animals. That horse isn't really going to the glue factory. We just reused that glue factory truck, but really he was going to a retirement home (paraphrasing Orwell's Animal Farm). When people plant themselves in the middle, they essentially sell themselves as being necessary. Are they necessary? It depends .. but usually not.
    - DomreiRoam 10y ago
      Middleman have some utility but I think often they extract more money than the value they provide.
  - jaclaz 10y ago
    I see it in a slightly different angle, it is the company's Chief Officer for Cleaning Matters ;) that manages to work less (have convenience) at the expense of the company which pays more money for the service (besides the wage of the COCM ). Coincidentally that is also the same person that will convince everyone else in the company on how convenient the "global" contract is. There are a lot of activities for which sub-contracting makes sense, particularly when there are possible economies of scale, but when the activity is merely (or largely) labour, there are only four possible overall outcomes: 1) the actual workers are paid less than what would be fair 2) the service is inferior to what was expected/agreed upon 3) the service costs more (the middlemen somehow have to take their part) 4) the contractor or sub-contractor has made wrong estimation of the costs and before or later they close or go bankrupt
  - trprog 10y ago
    >So a company pays a higher cost - but only has to deal with one contract, which saves them effort elsewhere. They have fewer contracts at any given time but also the contracts can last longer. If I directly hire people to clean an office, when they don't want to do it anymore I need to find other people to do it. Selecting people, negotiating, getting payments set up with accounting etc. Its a distraction from more important stuff so I want to do this as rarely as possible. If I hire a company/agency/middleman they can replace people without me having to even be aware its happening. At the point "keep the office clean" is essentially solved. Its possible I will never need to think about office cleaning ever again and I can get on with running my business.
maze-le 10y ago
That is a nice example of why the free market is not neccessarily the guarantor of efficiency.
- leni536 10y ago
  But why? It exactly looks like a problem that free market should be able to solve.
  - maze-le 10y ago
    I am not an economist, but I think it is a problem with information assymetry. The cleaning worker does not have many connections to CEOs, to wich he can sell his services, but the middle men have. The middle men can leverage this situation to gain the profit, the cleaning worker would have gained. But I have no idea, why this would evolve into a pyramid scheme. One level of "management" would have solved the "information assymetry"-problem, without inefficiency (and this could be done in a fair way, so the worker can profit too).
    - deleted 10y ago
      [deleted]
    - flukus 10y ago
      > The cleaning worker does not have many connections to CEOs, to wich he can sell his services I think you might of hit on a possible explanation there, maybe it's wealth inequality? When there was more equality that CEO (or company owner, or just someone near the top) might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city. Politics lately has been an example of this divide.
      - patrickk 10y ago
        > might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city. I don't think this ever the case, in any era. Rich people in many countries definitely send their kids to posh schools through their connections (e.g. slots available for those with a parent who attended), go to different bars and follow different sports (e.g. rugby union vs football/soccer, depending on the country obviously).
djsumdog 10y ago
Read "Debt: The First 5,000 Years." I cannot endorse this book enough. It is the most influential non-fiction book I've ever read. Basically it's called using money as a means to make money, and this was frowned upon in many civilisations. Even today, in much of the Muslim world they do not charge interest. They do have higher bank fees (no free accounts, no free checking or electronic transfers). Keep in mind if we travelled back in time even 100 years ago, charging 29.9% interest would be far beyond the limit of usury. Today in the western world, we accept the idea of being able simply move around money as a career that is beneficial to society, versus simply using money for trade and exchange. I really think this is one of the worst things we could have accepted as being morally acceptable. Board executives at JPMorgan Chase, PNC and the other banks that caused so much destruction in 2008 should have been thrown in jail next to rapists, paedophiles and murders. Instead they destroyed thousands of lives and made off with millions in bonuses.
- fennecfoxen 10y ago
  > Board executives at JPMorgan Chase, PNC and the other banks that caused so much destruction in 2008 should have been thrown in jail next to rapists, paedophiles and murders. What strange ideas of justice the world has! In an ostensibly advanced country, America, one side of the political spectrum would be have us remain willfully oblivious to police abuses, corrupt prosecutors withholding or fabricating evidence, and the systematic dehumanization not simply of prisoners, but of any peripherally involved with the machinery criminal justice system, especially for the purpose of deporting undesirables. (The prison guards who put an inmate in the shower and turned on the hot water until the skin was peeling off his corpse? Normal. The immigrant detained by ICE for months and months, given aspirin for his developing penis cancer despite agency doctors' recommendation to get him to a proper examination until it was far, far too late? Incredibly normal. Predates Trump.) The other side of this political spectrum skims over meaningful questions of actual fraudulent or unethical business practices, issuing instead a blanket equation of the practice of making loans to people who assumed their house would apprecuate in value with crimes such as murder and child abuse. And these aren't even extremes. Both positions are pretty mainstream, real crowd-pleasers. What the hell is wrong with us? Can we not aspire to build a world where there is actual justice, and not mere retribution against our political foes and other un-persons?
chii 10y ago
> What does MBA school call this? Reducing cost? it's called making money on someone else's dime!

by dba7dba 10y ago

tarsinge 10y ago

Intrigued by how can it be cost competitive for the middle men, why aren't small business selling directly? Is the sales part the only edge of middle men?

edent 10y ago
Because a small company has the ability to supply cleaning to X square metres across one city. A middle-man can say "We will supply your cleaning in several cities no matter your office size." So a company pays a higher cost - but only has to deal with one contract, which saves them effort elsewhere. It's the same as taxi companies. It would be cheaper for you to call a small firm with lower overheads, but you're happy to pay a premium for convenience.
- leni536 10y ago
  Hmm, Uber for office cleaning?
  - flukus 10y ago
    So the yellow pages was basically just an uber uber?
- flukus 10y ago
  A lot of this played out with single location companies and single city contracting companies (before they start merging). So I don't think that's the reason. I suspect it was cost. The middle men would just under bid and then under deliver.
- djsumdog 10y ago
  You need the pigs. They're helping all the animals. That horse isn't really going to the glue factory. We just reused that glue factory truck, but really he was going to a retirement home (paraphrasing Orwell's Animal Farm). When people plant themselves in the middle, they essentially sell themselves as being necessary. Are they necessary? It depends .. but usually not.
  - DomreiRoam 10y ago
    Middleman have some utility but I think often they extract more money than the value they provide.
- jaclaz 10y ago
  I see it in a slightly different angle, it is the company's Chief Officer for Cleaning Matters ;) that manages to work less (have convenience) at the expense of the company which pays more money for the service (besides the wage of the COCM ). Coincidentally that is also the same person that will convince everyone else in the company on how convenient the "global" contract is. There are a lot of activities for which sub-contracting makes sense, particularly when there are possible economies of scale, but when the activity is merely (or largely) labour, there are only four possible overall outcomes: 1) the actual workers are paid less than what would be fair 2) the service is inferior to what was expected/agreed upon 3) the service costs more (the middlemen somehow have to take their part) 4) the contractor or sub-contractor has made wrong estimation of the costs and before or later they close or go bankrupt
- trprog 10y ago
  >So a company pays a higher cost - but only has to deal with one contract, which saves them effort elsewhere. They have fewer contracts at any given time but also the contracts can last longer. If I directly hire people to clean an office, when they don't want to do it anymore I need to find other people to do it. Selecting people, negotiating, getting payments set up with accounting etc. Its a distraction from more important stuff so I want to do this as rarely as possible. If I hire a company/agency/middleman they can replace people without me having to even be aware its happening. At the point "keep the office clean" is essentially solved. Its possible I will never need to think about office cleaning ever again and I can get on with running my business.

maze-le 10y ago

That is a nice example of why the free market is not neccessarily the guarantor of efficiency.

leni536 10y ago
But why? It exactly looks like a problem that free market should be able to solve.
- maze-le 10y ago
  I am not an economist, but I think it is a problem with information assymetry. The cleaning worker does not have many connections to CEOs, to wich he can sell his services, but the middle men have. The middle men can leverage this situation to gain the profit, the cleaning worker would have gained. But I have no idea, why this would evolve into a pyramid scheme. One level of "management" would have solved the "information assymetry"-problem, without inefficiency (and this could be done in a fair way, so the worker can profit too).
  - deleted 10y ago
    [deleted]
  - flukus 10y ago
    > The cleaning worker does not have many connections to CEOs, to wich he can sell his services I think you might of hit on a possible explanation there, maybe it's wealth inequality? When there was more equality that CEO (or company owner, or just someone near the top) might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city. Politics lately has been an example of this divide.
    - patrickk 10y ago
      > might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city. I don't think this ever the case, in any era. Rich people in many countries definitely send their kids to posh schools through their connections (e.g. slots available for those with a parent who attended), go to different bars and follow different sports (e.g. rugby union vs football/soccer, depending on the country obviously).

djsumdog 10y ago

Read "Debt: The First 5,000 Years." I cannot endorse this book enough. It is the most influential non-fiction book I've ever read. Basically it's called using money as a means to make money, and this was frowned upon in many civilisations. Even today, in much of the Muslim world they do not charge interest. They do have higher bank fees (no free accounts, no free checking or electronic transfers). Keep in mind if we travelled back in time even 100 years ago, charging 29.9% interest would be far beyond the limit of usury. Today in the western world, we accept the idea of being able simply move around money as a career that is beneficial to society, versus simply using money for trade and exchange. I really think this is one of the worst things we could have accepted as being morally acceptable. Board executives at JPMorgan Chase, PNC and the other banks that caused so much destruction in 2008 should have been thrown in jail next to rapists, paedophiles and murders. Instead they destroyed thousands of lives and made off with millions in bonuses.

fennecfoxen 10y ago
> Board executives at JPMorgan Chase, PNC and the other banks that caused so much destruction in 2008 should have been thrown in jail next to rapists, paedophiles and murders. What strange ideas of justice the world has! In an ostensibly advanced country, America, one side of the political spectrum would be have us remain willfully oblivious to police abuses, corrupt prosecutors withholding or fabricating evidence, and the systematic dehumanization not simply of prisoners, but of any peripherally involved with the machinery criminal justice system, especially for the purpose of deporting undesirables. (The prison guards who put an inmate in the shower and turned on the hot water until the skin was peeling off his corpse? Normal. The immigrant detained by ICE for months and months, given aspirin for his developing penis cancer despite agency doctors' recommendation to get him to a proper examination until it was far, far too late? Incredibly normal. Predates Trump.) The other side of this political spectrum skims over meaningful questions of actual fraudulent or unethical business practices, issuing instead a blanket equation of the practice of making loans to people who assumed their house would apprecuate in value with crimes such as murder and child abuse. And these aren't even extremes. Both positions are pretty mainstream, real crowd-pleasers. What the hell is wrong with us? Can we not aspire to build a world where there is actual justice, and not mere retribution against our political foes and other un-persons?

chii 10y ago

> What does MBA school call this? Reducing cost? it's called making money on someone else's dime!