7 ms·

I really fail to see the distinction. If someone is willing to pay 600k for something, then the value of that thing on the market is 600k. That is what a market

• benrbray 6y ago
  If Google is willing to pay 200k above market rate to hire an employee from a competitor, chances are part of the "value" of that employee is that they will no longer be working for someone else. Yes, literally speaking, it's "worth it" to Google, or they wouldn't do it. Being so large, Google can throw advertising money on their self-driving car division, no problem. They can take a loss for 5-10 years, no problem. However, it's extremely anti-competitive, which is the problem others are pointing out here.
  • FartyMcFarter 6y ago
    > If Google is willing to pay 200k above market rate This is not possible according to the usual definition of "market rate". If Google is willing to pay X, that is the market rate.
    • benrbray 6y ago
      I disagree with your definition of "market rate", but let's suppose you're right: Do you not see it as a problem that Google alone decides the cost of entry to an entire market?
      • FartyMcFarter 6y ago
        Why do you think that Google alone can afford to hire software engineers? edit - I see how my post was misleading. I should have said X is a "lower bound" for the market rate.
        • benrbray 6y ago
          Do you mean upper bound?
      • whatshisface 6y ago
        Google isn't the only well-paying software company. If they were, they wouldn't throw money away by paying so much in the absence of competition. Furthermore, there's nothing stopping you from paying $100,000/hour and beating Google if you wanted to. If your business can't make good enough use of programmers to justify paying more than Google, then maybe their talents would be best allocated where they would be most valuable.
      • msla 6y ago
        > Do you not see it as a problem that Google alone decides the cost of entry to an entire market? This puts Google in the position of being a monopsony for the labor of programmers; that is, they're the only or primary buyer of that commodity. Part of antitrust laws is preventing that, so, yes, there is a problem if a monopsony arises, but Google isn't in that position anyway because jobs aren't completely interchangeable the same way programmers aren't completely interchangeable. For example, companies can compete on the basis of not being Google, which attracts some people. Companies can compete on the basis of being based in some other geographic location, or having other things to work on, or having a different mix of salary and benefits. Google offering the highest salary doesn't mean they automatically get everyone. It means they get people who want the highest salary to do what Google's interested in as opposed to wanting to work on some kinds of technology Google isn't pursuing.
    • mh8h 6y ago
      That's assuming that the thing Google is buying is a commodity, and its value is the same to all parties.
    • Spooky23 6y ago
      The law defines practices that, while they happen in a marketplace, are anti-competitive and thus problematic. It is not anti-competitive to own the gas station next to the airport and charge a premium for gas. It is anti-competitive to buy out surrounding gas stations and close them to extract higher prices, or to conspire with competing stations to coordinate pricing. Single-firm anticompetitive behavior, as defined by FTC: (https://www.ftc.gov/enforcement/anticompetitive-practices https://www.ftc.gov/enforcement/anticompetitive-practices) Single Firm Conduct: "It is unlawful for a company to monopolize or attempt to monopolize trade, meaning a firm with market power cannot act to maintain or acquire a dominant position by excluding competitors or preventing new entry. It is important to note that it is not illegal for a company to have a monopoly, to charge “high prices,” or to try to achieve a monopoly position by aggressive methods. A company violates the law only if it tries to maintain or acquire a monopoly through unreasonable methods." Horizontal Conduct: "It is illegal for businesses to act together in ways that can limit competition, lead to higher prices, or hinder other businesses from entering the market. The FTC challenges unreasonable horizontal restraints of trade. Such agreements may be considered unreasonable when competitors interact to such a degree that they are no longer acting independently, or when collaborating gives competitors the ability to wield market power together. Certain acts are considered so harmful to competition that they are almost always illegal. These include arrangements to fix prices, divide markets, or rig bids."
      • cptskippy 6y ago
        That's in relation to creating artificial scarcity of a product or controlling supply. Staff aren't a product or commodity.
        • Spooky23 6y ago
          Labor certainly is a commodity. I have a relative who bought a very nice beach house from his legal fees suing a hospital network for doing something similar.
  • whatshisface 6y ago
    If Google is willing to pay $200k over your current employer for you, your employer is paying you $200k under your market rate.
    • mhaberl 6y ago
      You can view this issue from another standpoint. Imagine some market where 10 companies sell bread and it costs $5. And lets assume that the costs are $4 and $1 is profit. Then comes a company that makes its money on selling water and it is doing very well. It comes to a bread market and starts selling bread for $3. The competition is quickly destroyed and the bread prices rise. Edit: as a sibling comment mentioned: https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
      • whatshisface 6y ago
        Google buys labor using the proceeds from the stuff they assign the labor to do. Their money does not come from a second market unrelated to programmers. Even if you flipped buyers and sellers your analogy would be inapplicable.
        • a1369209993 6y ago
          > Their money does not come from a second market unrelated to [those] programmers. Yes it does: Google makes money from advertising, not from self-driving cars.
      • pepemon 6y ago
        Are you sure that there's the direct analogy between pricing and salary models like that?
      • shard 6y ago
        I believe a better analogy would be that the 11th company comes and is willing to pay higher costs while still selling at the same price. That company gets the best ingredients at that cost, the suppliers prefer to sell to that company, and denies it to the first 10 companies. The 11th company might even raise prices since their product is better. I don't think predatory pricing would apply in this situation.
  • echelon 6y ago
    If Google is stopping forward progress to entrench their moat, they need to be broken up by the DOJ. There's plenty of antitrust fodder already with their stranglehold over the web and the behavior they've taken to protect their search/ad business. But if they're hiring people away in cutting edge areas of research simply to destroy startups, that's abhorrent. That means they're pouring their obscene wealth from advertising into unrelated fields in order to dominate them. Monopoly.
    • sumtechguy 6y ago
      This is true but long term Google can not sustain that. MS did the same in the 90s. Google is failing to execute on many 'big ideas'. Not because of a shortage of talent. But because of a shortage of follow through and nothing moves the needle anymore. That means any new product that has a shot of being interesting (say 1%) has to produce 1.6 billion pretty quickly. There are very few new businesses that start at that position. MS should have owned the cell market. Not for a lack of trying or talent. But they kept changing positions and tech stacks every few months. They lacked the will to do it. Google is in a similar position now with most of its projects outside of its 'core' ideas. What happens, fairly quickly, is the talent figures out that the company does not really value their ideas. They move out of the company and do something else.
  • biztos 6y ago
    If I hire Brad Pitt to be in my (post-pandemic) summer blockbuster film, part of the value he adds is that he is not simultaneously in your summer blockbuster film, and so people who really want to watch Brad Pitt will choose my film over yours. I don't think what you're describing is anti-competitive behavior, rather it's omni-competitive. Pretty much all the money Google throws at anything is "advertising money" but if they are really trying to make self-driving cars, what's wrong with that? Should my Brad Pitt Summer Blockbuster profits not be able to bankroll my Teletubbies Christmas Special?
• danudey 6y ago
  As legality and morality are two different things, so too are market forces and monopolistic behaviour.
• ianai 6y ago
  I agree in this case. Though there’s probably a good economics lesson to be learned here about how to instrument what’s a market move to a new price level and what’s above or below that. Without getting into it-when the employers typically have much much more power than their employees at a broad level (even legalistic levels) then I’m inclined to conclude the worker was being undervalued as opposed to inappropriately hoarded by a competitor.
• inetknght 6y ago
  > If someone is willing to pay 600k for something, then the value of that thing on the market is 600k. That is what a market is. Arguably. But, if 10 average people are worth $200k and one exemplary person is worth $500k... and the company pays the 10 average people $100k instead, then the company can hire two exemplary people where it only needed one. Scale it down to minimum wage and you end up with people who are worth way more than they're paid -- you literally don't have a business without their work -- who are held under by telling and treating them like they're worthless. That's what predatory behavior disguised as a market looks like.
  • deleted 6y ago
    [deleted]
• thereare5lights 6y ago
  Monopolies are a part of a market too but that doesn't mean it's a good thing. Identifying anti-competitive tactics practices is a good thing.
• nhumrich 6y ago
  The correlary is that McDonalds could offer free burgers for a year, they have enough money to handle the cost. They could do it just so that other business cant stay affloat. This doesn't mean that the market price of a McDonalds burger is $0
  • ISL 6y ago
    It does if McDonalds decides that it wishes to dump burgers. The ask price would fall to $0. The market will correct very quickly, as competitors will immediately head over to McDonalds to purchase $\infty$ burgers at $0, killing MCD dead in seconds. The moment McDonalds applies a purchase limit (Free burgers! Limit 5 per customer), the burgers have non-zero cost, as they require a person's time in order to purchase. If McDonalds does have enough capital to buy long-term customers and kill off competition with free burgers, perhaps they should consider it. I assume that they've considered such a strategy on occasion and concluded that it isn't worth it. Burgers are probably worth more than $0 to McDonalds, too.
    • jefftk 6y ago
      > If McDonalds does have enough capital to buy long-term customers and kill off competition with free burgers, perhaps they should consider it. I'm pretty sure they should not consider it, because it is generally illegal. https://en.wikipedia.org/wiki/Predatory_pricing https://en.wikipedia.org/wiki/Predatory_pricing
      • stale2002 6y ago
        > I'm pretty sure they should not consider it, because it is generally illegal. It is really not. At least in America. In America, where laws are based on consumer benefit, it is extremely difficult to prosecute companies for having too awesome of a service, that they give away for too good of a price, in a way that helps consumers too much. It really just isn't something that gets prosecuted, except in absolutely exceptional circumstances.
        • 6y ago
• codegeek 6y ago
  I would argue that FAANGs have the ability to overpay in many cases and still acquire talent which skews market wages. A FAANG can possibly pay 200K to an average developer who would otherwise may be make 120K in a regular company. So now the developer thinks they are worth 200K everywhere.
  • ISL 6y ago
    That is how a market works. I think the S&P is overvalued today. The market thinks otherwise. No matter how much I would like to purchase reasonable stocks at P/Es of 15, by and large, I can't. If someone else wants to buy them at P/Es of 21, they are going to attract every single seller.
  • jefftk 6y ago
    What makes you think they are overpaying? If they offered less the employee would go to a competitor, and the company gets more value from the employee than they do from $200K/y.
    • codegeek 6y ago
      True that Google itself sees value in paying 200K and they need to do that to attract the best talent compared to their competitors. But google has so much money that it almost makes it difficult for the little guys who could pay a good salary but not the inflated ones like google. I am not convinced that suddenly "market rate" is decided by FAANgs. No FAANG existed before 2004 (some did but weren't as powerful back then) and there were plenty of good developers/programmers even then.
      • jefftk 6y ago
        I think it's a combination of: a) These companies are much bigger than they were, which increases the impact a programmer can have. This means the amount of money a programmer can bring in for one of these companies is much higher than previously, and so they're willing to pay more. b) Previously, programmers were capturing a much smaller share of the value they were creating for their employers. Either through explicit collusion to keep employee salaries down (https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_Litigation https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...) or because the threat of startup founding (which is both easier and more normal relative to 10y ago) has pushed salaries up.
• mumblemumble 6y ago
  In this case, it's a market distortion, and is arguably an example of anticompetitive behavior.
• setr 6y ago
  Im not sure thats a useful model -- google would be in this case bringing in money from one market (eg ad revenue) to overprice in another market (self driving r&d) If walmart takes its surplus capital and decides to sell toilet paper at a loss, to run everyone else out of business (till they're the last man standing), I'm not sure its correct to say that the market value of TP has reduced during that time period. Walmart has undercut the market value (the point where buyer and sellers generally meet) -- it hasn't actually changed the market value, except temporarily, in whats effectively a hack. The permanent shift in this case would occur when the dust has settled, and all competition has been eliminated
  • vosper 6y ago
    > it hasn't actually changed the market value, except temporarily, in whats effectively a hack All market values are temporary. Walmart absolutely has changed the market value in this scenario. It might be anticompetitive in the Walmart example, but in the case of one company paying their staff better than another I don't think the company paying less and complaining about it is going to get much sympathy :)
• war1025 6y ago
  > If someone is willing to pay 600k for something, then the value of that thing on the market is 600k. That is what a market is. And if a bunch of homeowners are willing to drive up housing costs and prevent building out an adequate supply of housing in an area, that's just the market. I don't have a horse in either race, but I think there is an appreciable difference between paying a premium for a resource that you use, vs paying a premium solely to prevent someone else from having access to it.
• dijit 6y ago
  I'd agree. but as a contrapoint; in capitalism there's a trend of selling a product or service substantially below market rate as a way of gaining significant adoption, once you have significant adoption- you raise the price as best you can. This is called: undercut, corner and squeeze. Often this results in monopoly positions or at least significant leads which are hard to overcome. (Uber, is a famous example). Obviously this is only possible with significant financial capital, which google have. I can see how the undercutting analogy has synergies with overpaying for talent. It's worth making a loss on hiring me if it means that someone else doesn't get the (lesser) value of me.
• RobRivera 6y ago
  Correct, if I place a market order for 100 shares I expect to pay a premium for current national best bid price. Same thing here - it's the price you pay for taking liquidity from an illiquid market (the labor market)