13 ms·

How Entire Industries Become Unethical

94 points by thesyndicate 16y ago

ohashi 16y ago
So in short, it's a slippery slope but no one step looks particularly bad to the participants, but after a while, everyone else see's you playing in the mud at the bottom.
donaldc 16y ago
I think the real problem here is that the owners and leasers of an office space are the ones who are responsible for reporting the "square feet". The system would work just fine if an unbiased third party did the measurements.
- VengefulCynic 16y ago
  Unfortunately, there's no incentive for the landlords to do this. That just leaves legislation or the sudden emergence of ethical competition. Oh, and don't forget that most of the larger commercial land lords have lobbying arms (at a local level at the very least) in order to oppose just that sort of thing.
  - donaldc 16y ago
    This need not be legislated. If commercial renters were sufficiently biased in favor of places with an objectively determined square footage rating, landlords would provide it regardless of the lack of a legal requirement. The key is getting demand started. This is currently an inefficient market, and more information would substantially improve it. And objectively measuring square feet is not particularly difficult or expensive. What will probably happen is, eventually the misrepresentation of square footage will get so egregious that there will be a movement by commercial renters toward some sort of third-party measurement. The landlords will go along, because they want to rent their office space.
    - eyecon 16y ago
      That's a reasonable suggestion if you're willing to wait a couple of generations (or potentially forever) for any improvement in the situation. The first complication with this suggestion is that in cases of exploitation of information asymmetries like this, you don't know what you don't know. It's nice that this issue is getting a little public scrutiny here now, but one has to wonder how long it's been going on? And getting an issue like this more widely recognized, to a point where demand for transparency would be self-sustaining, is likely to require a lot of someone's time an effort to bootstrap. If a subset of buyer/leasers were to take this on openly, real estate owners would almost certainly seek to punish them directly, in addition to mounting their own counter-education campaign >>> politicization. Alternately, some third party might sense a commercial opportunity here, e.g., to provide public education and neutral measurement services -- but that's the same sort of business model that makes "trial lawyers" so popular... It's unrealistic to assume that commercial renters are going to be broadly responsive to individual demands for transparency before the overwhelming majority of real estate seekers permanently embrace transparency as a make-or-break requirement for buy/lease decisions.
ryanjmo 16y ago
>>>The airline industry is also clearly trending in this direction, as is higher education. Once an industry is at the bottom of an ethical slope, it is ripe for disruption by young companies that can sell through an honest, straightforward process.>>> Sometimes I hope that companies like YC will disrupt the higher educational system in the US. Going through YC is a much more strait forward process than education. The process is essentially join YC and work your ass off to make yourself a job. This makes a lot more sense to me than, pay a bunch of money for college, learn a bunch of random junk, get a degree after a set period of time, then show that degree to people who will hopefully be impressed and possibly give you a job.
- ryanlchan 16y ago
  While I do think that higher education needs an overhaul, the larger problem is that HE is too often misunderstood. It's not a place where you learn skills that explicitly help you get a job; that's called vocational training, and a whole bunch of places do that extremely well. Hell, if all you're looking to do is work, you probably don't need college at all. Zoho's been hiring kid straight out of high school, with no discernible difference in productivity with their college educated counterparts (http://blogs.zoho.com/general/how-we-recruit-on-formal-credentials-vs-experience-based-education http://blogs.zoho.com/general/how-we-recruit-on-formal-crede...). HE is a place where you go to interact with people and ideas fundamentally different from what you know, receive mentoring on how to consider such ideas, and how to create those ideas on your own. It does not claim to make you a smarter individual, and its value is largely dependent on your own drive to make the experience a success. In essence, it is exactly the same as YCombinator - even in the obfuscated and oft frustrating admissions processes, which is what I believe the article refers to.
  - krakensden 16y ago
    What you are describing is a finishing school for the rich, which is what higher education used to be, a long time ago. That is no longer true. If you want a white collar job in the US, you must go to college. Yes, there are some outliers, but having a degree is damn close to a hard requirement. Pretending that is no longer true and indulging the liberal arts fantasy just makes the problem worse. There are too many kids who come out of college with debt and a degree in not having people take them seriously.
VengefulCynic 16y ago
It seems to me that the industries that trend to the most unethical (airlines, commercial real estate, cell phone carriers) also have the highest barriers to entry. Unfortunately, this only leaves cumbersome instruments like government regulation and unpredictable changes in the marketplace to impose ethics on industries that appear most likely to trend unethical.
- ryanlchan 16y ago
  Oligopolies, which are dependent on a limited number of competitors, are ripe for corruption, collusion, and cooperative behavior. This is pretty much exactly why the US has antitrust law. Its history is an interesting read on wikipedia if you have the time.
  - tptacek 16y ago
    In exactly what sense is commercial real estate an oligopoly?!
- billswift 16y ago
  Government regulation is what creates most barriers to entry. In general, the most unethical industries and professions are those that are most tied in to government in the first place. Especially where government provides the barriers to entry - professional and occupational licensing being just the tip of the iceberg.
  - praptak 16y ago
    "Government regulation is what creates most barriers to entry." Maybe the government regulation as practised by cronyist goverments. Seriously, I don't think that a hypothetical government enforcing standards for square feet measurement would create a huge barrier to entry into the property business.
    - wake_up_sticky 16y ago
      One little thing like this isn't a huge barrier to entry, but a hundred little things like this make a whopper of a barrier to entry.
tptacek 16y ago
Apart from the semantic goofiness, how is this worse than the landlords simply raising the rent every year (which is clearly not unethical)?
- djburiedalive 16y ago
  What's not worse about it? If a landlord raises the rent on a 400 square foot space, they're simply asking more money for it the same space. If a tenant wants to pay that price for 400 square feet, that's his choice. On the other hand, if the landlord claims it's 420 square feet, no matter how much he charges per square foot, the tenant is paying for something that simply doesn't exist.
  - tptacek 16y ago
    Landlords can phrase things in terms of $/rsf, but the lease specifies a monthly flat rate. It can't change until the lease expires. What am I missing about the bind this puts tenants in? I get the semantic dishonesty, but not the practical issue.
    - praptak 16y ago
      Searching for offers, as explained in the article. The nonexistant square feet put the offer undeservingly high in the sqft/$ order which is what many tenants search by.
      - tptacek 16y ago
        That's silly. It's unethical like SEO is unethical: annoying, but hardly damning. There must be something more to it than that.
        praptak 16y ago
        Yeah, but the SEO might cost you a click while such an offer might cost you a physical visit to a crappy office.
yxhuvud 16y ago
I'd sue in a minute if someone tried this []. Seriously. They will not be delivering the area you pay for. [] Well ok, I would measure the area myself to find that the area actually differed from what I was paying for.
- glhaynes 16y ago
  Seriously, why isn't this litigated so that it becomes a uniform part of commerce/law?
wcarey 16y ago
Rather than an ethics problem, this seems like a unit of measure and communication problem. The comparison to higher education is apt. Prices at community colleges (and many universities) are set in dollars per credit hour. Credit hours, though, aren't the same as clock hours. I taught a three credit hour class that met three times weekly and lasted fifty minutes a session. The school, naturally, advertised this discrepancy well in advance of taking payment. (I do wonder whether there's any case law about that.) It seems that office managers are setting prices in dollars per real-estate square foot, which is a different unit of measure from the commonly understood measure of area. Maybe they should advertise "real-estate square feet of office space" instead of "square feet of office space" to eliminate the confusion that comes from overloading that phrase? (Whether this sort of linguistic imprecision and flux is a good idea is a separate argument, to be sure. This sort of shenanigans increases the burden-- and therefore the cost-- for people trying to purchase a good or service.)
- chopsueyar 16y ago
  Credit hours are "points towards graduation".
lkozma 16y ago
This seems to be due to asymmetric information between seller and buyer. The buyer can not measure exactly the true area, which only the seller knows (buyer doesn't have access to the standards, the criteria that have been used, doesn't understand them, doesn't have time or is physically not allowed to measure it.)
- rglovejoy 16y ago
  You mean that when the buyer does a walk-through before signing a lease, he or she is not allowed to bring a tape measure?
- tptacek 16y ago
  No. The buyer absolutely can measure the exact area, and can probably do so with a children's plastic ruler, since as near as I can tell nobody rents office space anymore without looking at a PDF of a floorplan first.
  - lkozma 16y ago
    Makes sense, but then I don't understand how owners get away with the practices they describe in the article.
    - tptacek 16y ago
      Because rsf includes building common spaces, which tenants are in fact renting. This is not complicated. Yes, it does appear plain that this "common spaces" business is a fig leaf that covers annual rent increases. And yes, that's dishonest. But it's of no practical import, since every tenant knows their rent is going up one way or another once their lease expires. We're really making a big deal over whether "rent increase" is called "rent increase" or not.
noonespecial 16y ago
Used car dealers, real estate agents, building contractors, even pool cleaning services, whatever: Whenever I hear something or see something questionable or confusing in a contract or agreement that's explained to me as "boiler-pate" or "industry standard", I now just assume that its institutionalized dishonesty designed to screw me and give it an extra careful look.
- joe_the_user 16y ago
  Like the subject of the article, I think this is a kind of low-grade dishonesty. Annoying but basically how people a living. I'd see really high-grade dishonesty in the entertainment industry, the gambling industry, in defense contracting or oil and extractive industries. These are the industries that occur to me who wield monopoly power and/or buy governments.
  - abalashov 16y ago
    Why is this perfectly reasonable, civil comment being downvoted?
mleonhard 16y ago
The hard drive industry also has this problem. They adopted an incorrect yet defensible definition for 'MB', 'GB', etc. The result is that consumers and engineers have to multiply the advertised MB by 95%, GB by 93%, TB by 91%, PB by 89%, EB by 87%, etc. This will only get worse as storage sizes increase.
- mcosta 16y ago
  In this case they are using for its profit the difference in GB and GiB. They do not make the GB smaller each year, or add the caches to the total size.
callmeed 16y ago
Don't forget to add title insurance to the list http://www.forbes.com/forbes/2006/1113/148.html http://www.forbes.com/forbes/2006/1113/148.html
known 16y ago
I think http://en.wikipedia.org/wiki/Megacorporation http://en.wikipedia.org/wiki/Megacorporation are doing more harm than good to mankind in the long term.
scotty79 16y ago
http://www.worldlingo.com/ma/enwiki/en/The_Market_for_Lemons#Milk_in_India_in_the_1970s http://www.worldlingo.com/ma/enwiki/en/The_Market_for_Lemons... Probably in this case it would be enough to require inclusion of quotient between exclusive and total space in all advertisements and agreements. There should be some bounds on advertisement. Can commercial lie about facts? Can it promote alcohol? Can it promote medication without obligatory warning?
chopsueyar 16y ago
Is this all commercial real estate in the world, or just NYC?

94 points by thesyndicate 16y ago

So in short, it's a slippery slope but no one step looks particularly bad to the participants, but after a while, everyone else see's you playing in the mud at the bottom.

donaldc 16y ago

I think the real problem here is that the owners and leasers of an office space are the ones who are responsible for reporting the "square feet". The system would work just fine if an unbiased third party did the measurements.

VengefulCynic 16y ago
Unfortunately, there's no incentive for the landlords to do this. That just leaves legislation or the sudden emergence of ethical competition. Oh, and don't forget that most of the larger commercial land lords have lobbying arms (at a local level at the very least) in order to oppose just that sort of thing.
- donaldc 16y ago
  This need not be legislated. If commercial renters were sufficiently biased in favor of places with an objectively determined square footage rating, landlords would provide it regardless of the lack of a legal requirement. The key is getting demand started. This is currently an inefficient market, and more information would substantially improve it. And objectively measuring square feet is not particularly difficult or expensive. What will probably happen is, eventually the misrepresentation of square footage will get so egregious that there will be a movement by commercial renters toward some sort of third-party measurement. The landlords will go along, because they want to rent their office space.
  - eyecon 16y ago
    That's a reasonable suggestion if you're willing to wait a couple of generations (or potentially forever) for any improvement in the situation. The first complication with this suggestion is that in cases of exploitation of information asymmetries like this, you don't know what you don't know. It's nice that this issue is getting a little public scrutiny here now, but one has to wonder how long it's been going on? And getting an issue like this more widely recognized, to a point where demand for transparency would be self-sustaining, is likely to require a lot of someone's time an effort to bootstrap. If a subset of buyer/leasers were to take this on openly, real estate owners would almost certainly seek to punish them directly, in addition to mounting their own counter-education campaign >>> politicization. Alternately, some third party might sense a commercial opportunity here, e.g., to provide public education and neutral measurement services -- but that's the same sort of business model that makes "trial lawyers" so popular... It's unrealistic to assume that commercial renters are going to be broadly responsive to individual demands for transparency before the overwhelming majority of real estate seekers permanently embrace transparency as a make-or-break requirement for buy/lease decisions.

ryanjmo 16y ago

>>>The airline industry is also clearly trending in this direction, as is higher education. Once an industry is at the bottom of an ethical slope, it is ripe for disruption by young companies that can sell through an honest, straightforward process.>>> Sometimes I hope that companies like YC will disrupt the higher educational system in the US. Going through YC is a much more strait forward process than education. The process is essentially join YC and work your ass off to make yourself a job. This makes a lot more sense to me than, pay a bunch of money for college, learn a bunch of random junk, get a degree after a set period of time, then show that degree to people who will hopefully be impressed and possibly give you a job.

ryanlchan 16y ago
While I do think that higher education needs an overhaul, the larger problem is that HE is too often misunderstood. It's not a place where you learn skills that explicitly help you get a job; that's called vocational training, and a whole bunch of places do that extremely well. Hell, if all you're looking to do is work, you probably don't need college at all. Zoho's been hiring kid straight out of high school, with no discernible difference in productivity with their college educated counterparts (http://blogs.zoho.com/general/how-we-recruit-on-formal-credentials-vs-experience-based-education http://blogs.zoho.com/general/how-we-recruit-on-formal-crede...). HE is a place where you go to interact with people and ideas fundamentally different from what you know, receive mentoring on how to consider such ideas, and how to create those ideas on your own. It does not claim to make you a smarter individual, and its value is largely dependent on your own drive to make the experience a success. In essence, it is exactly the same as YCombinator - even in the obfuscated and oft frustrating admissions processes, which is what I believe the article refers to.
- krakensden 16y ago
  What you are describing is a finishing school for the rich, which is what higher education used to be, a long time ago. That is no longer true. If you want a white collar job in the US, you must go to college. Yes, there are some outliers, but having a degree is damn close to a hard requirement. Pretending that is no longer true and indulging the liberal arts fantasy just makes the problem worse. There are too many kids who come out of college with debt and a degree in not having people take them seriously.

VengefulCynic 16y ago

It seems to me that the industries that trend to the most unethical (airlines, commercial real estate, cell phone carriers) also have the highest barriers to entry. Unfortunately, this only leaves cumbersome instruments like government regulation and unpredictable changes in the marketplace to impose ethics on industries that appear most likely to trend unethical.

ryanlchan 16y ago
Oligopolies, which are dependent on a limited number of competitors, are ripe for corruption, collusion, and cooperative behavior. This is pretty much exactly why the US has antitrust law. Its history is an interesting read on wikipedia if you have the time.
- tptacek 16y ago
  In exactly what sense is commercial real estate an oligopoly?!
billswift 16y ago
Government regulation is what creates most barriers to entry. In general, the most unethical industries and professions are those that are most tied in to government in the first place. Especially where government provides the barriers to entry - professional and occupational licensing being just the tip of the iceberg.
- praptak 16y ago
  "Government regulation is what creates most barriers to entry." Maybe the government regulation as practised by cronyist goverments. Seriously, I don't think that a hypothetical government enforcing standards for square feet measurement would create a huge barrier to entry into the property business.
  - wake_up_sticky 16y ago
    One little thing like this isn't a huge barrier to entry, but a hundred little things like this make a whopper of a barrier to entry.

tptacek 16y ago

Apart from the semantic goofiness, how is this worse than the landlords simply raising the rent every year (which is clearly not unethical)?

djburiedalive 16y ago
What's not worse about it? If a landlord raises the rent on a 400 square foot space, they're simply asking more money for it the same space. If a tenant wants to pay that price for 400 square feet, that's his choice. On the other hand, if the landlord claims it's 420 square feet, no matter how much he charges per square foot, the tenant is paying for something that simply doesn't exist.
- tptacek 16y ago
  Landlords can phrase things in terms of $/rsf, but the lease specifies a monthly flat rate. It can't change until the lease expires. What am I missing about the bind this puts tenants in? I get the semantic dishonesty, but not the practical issue.
  - praptak 16y ago
    Searching for offers, as explained in the article. The nonexistant square feet put the offer undeservingly high in the sqft/$ order which is what many tenants search by.
    - tptacek 16y ago
      That's silly. It's unethical like SEO is unethical: annoying, but hardly damning. There must be something more to it than that.
      - praptak 16y ago
        Yeah, but the SEO might cost you a click while such an offer might cost you a physical visit to a crappy office.

yxhuvud 16y ago

I'd sue in a minute if someone tried this []. Seriously. They will not be delivering the area you pay for. [] Well ok, I would measure the area myself to find that the area actually differed from what I was paying for.

glhaynes 16y ago
Seriously, why isn't this litigated so that it becomes a uniform part of commerce/law?

wcarey 16y ago

Rather than an ethics problem, this seems like a unit of measure and communication problem. The comparison to higher education is apt. Prices at community colleges (and many universities) are set in dollars per credit hour. Credit hours, though, aren't the same as clock hours. I taught a three credit hour class that met three times weekly and lasted fifty minutes a session. The school, naturally, advertised this discrepancy well in advance of taking payment. (I do wonder whether there's any case law about that.) It seems that office managers are setting prices in dollars per real-estate square foot, which is a different unit of measure from the commonly understood measure of area. Maybe they should advertise "real-estate square feet of office space" instead of "square feet of office space" to eliminate the confusion that comes from overloading that phrase? (Whether this sort of linguistic imprecision and flux is a good idea is a separate argument, to be sure. This sort of shenanigans increases the burden-- and therefore the cost-- for people trying to purchase a good or service.)

chopsueyar 16y ago
Credit hours are "points towards graduation".

lkozma 16y ago

This seems to be due to asymmetric information between seller and buyer. The buyer can not measure exactly the true area, which only the seller knows (buyer doesn't have access to the standards, the criteria that have been used, doesn't understand them, doesn't have time or is physically not allowed to measure it.)

rglovejoy 16y ago
You mean that when the buyer does a walk-through before signing a lease, he or she is not allowed to bring a tape measure?
tptacek 16y ago
No. The buyer absolutely can measure the exact area, and can probably do so with a children's plastic ruler, since as near as I can tell nobody rents office space anymore without looking at a PDF of a floorplan first.
- lkozma 16y ago
  Makes sense, but then I don't understand how owners get away with the practices they describe in the article.
  - tptacek 16y ago
    Because rsf includes building common spaces, which tenants are in fact renting. This is not complicated. Yes, it does appear plain that this "common spaces" business is a fig leaf that covers annual rent increases. And yes, that's dishonest. But it's of no practical import, since every tenant knows their rent is going up one way or another once their lease expires. We're really making a big deal over whether "rent increase" is called "rent increase" or not.

noonespecial 16y ago

Used car dealers, real estate agents, building contractors, even pool cleaning services, whatever: Whenever I hear something or see something questionable or confusing in a contract or agreement that's explained to me as "boiler-pate" or "industry standard", I now just assume that its institutionalized dishonesty designed to screw me and give it an extra careful look.

joe_the_user 16y ago
Like the subject of the article, I think this is a kind of low-grade dishonesty. Annoying but basically how people a living. I'd see really high-grade dishonesty in the entertainment industry, the gambling industry, in defense contracting or oil and extractive industries. These are the industries that occur to me who wield monopoly power and/or buy governments.
- abalashov 16y ago
  Why is this perfectly reasonable, civil comment being downvoted?

mleonhard 16y ago

The hard drive industry also has this problem. They adopted an incorrect yet defensible definition for 'MB', 'GB', etc. The result is that consumers and engineers have to multiply the advertised MB by 95%, GB by 93%, TB by 91%, PB by 89%, EB by 87%, etc. This will only get worse as storage sizes increase.

mcosta 16y ago
In this case they are using for its profit the difference in GB and GiB. They do not make the GB smaller each year, or add the caches to the total size.

callmeed 16y ago

Don't forget to add title insurance to the list http://www.forbes.com/forbes/2006/1113/148.html http://www.forbes.com/forbes/2006/1113/148.html

known 16y ago

I think http://en.wikipedia.org/wiki/Megacorporation http://en.wikipedia.org/wiki/Megacorporation are doing more harm than good to mankind in the long term.

scotty79 16y ago

http://www.worldlingo.com/ma/enwiki/en/The_Market_for_Lemons#Milk_in_India_in_the_1970s http://www.worldlingo.com/ma/enwiki/en/The_Market_for_Lemons... Probably in this case it would be enough to require inclusion of quotient between exclusive and total space in all advertisements and agreements. There should be some bounds on advertisement. Can commercial lie about facts? Can it promote alcohol? Can it promote medication without obligatory warning?

chopsueyar 16y ago

Is this all commercial real estate in the world, or just NYC?