Silicon Valley Tech Wage Suppression

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Some of the scope of the Silicon Valley tech wage suppression agreement has expanded recently, and now covers a much more vast section of the tech industry.

"Confidential internal Google and Apple memos, buried within piles of court dockets and reviewed by PandoDaily, clearly show that what began as a secret cartel agreement between Apple’s Steve Jobs and Google’s Eric Schmidt to illegally fix the labor market for hi-tech workers, expanded within a few years to include companies ranging from Dell, IBM, eBay and Microsoft, to Comcast, Clear Channel, Dreamworks, and London-based public relations behemoth WPP. All told, the combined workforces of the companies involved totals well over a million employees."

– Mark Ames, Pando.com

I'm going to pick on Google here, because they represent themselves as a company who bears the unofficial motto of "Don't be Evil". By doing so, they justify people calling them out on it when they do something which is absolutely, 100% evil.

"Don’t be evil. We believe strongly that in the long term, we will be better served — as shareholders and in all other ways — by a company that does good things for the world even if we forgo some short term gains."

– Google in 2004 IPO (page 32, near the top)

I'm not saying any of these other companies come out clean here. Far from it. But the hypocrisy and deception employed here is astounding. I think the only solution is to do the same thing with employee salaries as we've done with CEO salaries: make them more transparent. I think efforts like Glassdoor help to allow employees to more adequately estimate their own worth in a very complex job market. Pay transparency has been shown to account for the rapid increase in CEO pay over the last 20-30 years.

"the drive for [CEO pay] transparency has actually helped fuel the spiraling salaries. For one thing, it gives executives a good idea of how much they can get away with asking for. A more crucial reason, though, has to do with the way boards of directors set salaries. As the corporate-governance experts Charles Elson and Craig Ferrere write in a recent paper, boards at most companies use what’s called “peer benchmarking.” They look at the C.E.O. salaries at peer-group firms, and then peg their C.E.O.’s pay to the fiftieth, seventy-fifth, or ninetieth percentile of the peer group—never lower. This leads to the so-called Lake Wobegon effect: every C.E.O. gets treated as above average. With all the other companies following the same process, salaries ratchet inexorably higher. "

– James Surowieki, The New Yorker, Oct. 2013

TL;DR version: Transparency in pay gradually forces salaries higher, because as the average pay rises with talent, average workers get paid more to account for the rising median pay.

Tech companies of this magnitude are pulling in money hand over fist, and rather than putting that money back into the pockets of the employees who are working to make it happen, they're busy holding it in off-shore accounts, likely hoping for a "repatriation tax holiday" as employed by the Bush administration in 2004. 

Here's the thing, though. If they were to put those funds to work paying their employees more, those same employees would be able to afford more purchases, which grows the economy. The more money employees have, the more they can spend. The more they can spend, the more companies make. The more companies make, the more they can pay their employees. It's a virtuous circle that works to increase everyone's living standard, from the CEO to the janitor.

Intelligence Agency Data Collection

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The White House has a new survey up that asks us some pertinent questions about how we feel about our data and privacy. It's worth taking a few minutes to fill it out, because this is probably one of the few chances you have to directly put forth your views on the matter in a way that might be taken into account by a branch of our government.

My problem with government surveillance is this: Intelligence agencies are misrepresenting (or flat out lying about) their use of data to Congress and the Senate, but drawing their funding from us, the American people, through the budget created for them from the legislative branch. 

In essence, this creates taxation without representation – if our representatives aren't properly informed as to what our money is being spent on, then how can we be assured that our Congressmen and Senators are able to do the job we elected them to do?

We don't vote for the NSA or the CIA chiefs, so we have to be able to trust that our elected representatives can do that, both by selecting appropriate choices to head these agencies (the President), and by holding the purse strings (Congress). But when intelligence agencies aren't answerable to either their appointer or funders, then we are no longer able to call ourselves a democracy. Our elected officials are no longer able to effectively govern the unelected officials.

The government must be accountable to the people, yet bulk surveillance means that we, the people, are forced to be accountable to the government, regardless of whether we are criminals or law abiding citizens.

No matter what you feel on the subject, I recommend weighing in and filling out the survey – if you don't speak up, you can't complain when bad things happen. Or at least, you can't complain without looking like an idiot.

Overstock.com on Bitcoin

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At the beginning of the year, Overstock.com sought to adopt Bitcoin as a payment processing method for their business.

“On January 1st, our people said they could do it within 10 days if I gave them enough people,” says Byrne. “So we put a team of 40 people on it. We locked them in a room and slid pizzas under the door, and gave them hotel rooms when they needed them. The technique of swarming to form a team was incredibly efficient.”

- Overstock CEO, Patrick Byrne to Forbes

This is a company that did $1.3 billion in sales in 2013. They added a completely new payment method to their site in 10 days, including legal, and front end user interaction. That's pretty great. I wonder what their results have been?

Well, we found out. From the Coinbase blog, Overstock's Bitcoin processor:

"Today, we are excited to announce that Overstock.com has surpassed $1,000,000 of sales in bitcoin transactions."

Not an enormous amount, considering the overall sales expected in those 50 days. Quick napkin math says that Bitcoin sales probably amounted to a little over 0.5% of Overstock.com's sales during that period of time. What else?

"The average order size for a bitcoin customer ($226) was 34% greater compared to customers paying in USD ($168)."

That's pretty good. More than that, it's huge – but we can honestly chalk that up to the exuberance of people with a cause trying to promote it. Also, possibly people who have recently come into more money (Bitcoin's rapid rise in value over 2013) being able to spend it in a legitimate fashion.

"...over half of all customers paying in bitcoin were new to Overstock.com (58%), having never purchased goods from the site before."

Well that's pretty fantastic, actually. That means that nearly 60% of the growth from Bitcoin adoption is straight revenue growth, and didn't cannibalize from existing customers. However, we can still probably attribute these gains to people having a great outlet for their new-found wealth, can't we? It seems the most likely explanation, but it is still great for their bottom line.

What I was most interested in, though, was what this did for Overstock.com's payment processing. Bitcoin has the nice advantage that it doesn't require the traditional clearinghouse pricing - so let's see what that saves them.

"Net profitability has also improved, with processing fee for bitcoin transactions averaging less than 1% vs. ~ 2.2% plus $0.20 for credit card card transactions. For a low-margin, high volume business like Overstock.com, these savings are substantial and, ultimately, return greater value to shareholders."

Of all of the information presented, this should be the most exciting to businesses thinking about adopting Bitcoin processing: it literally saves you more than 1.2% on every single purchase. Think about the math behind that for a company like Overstock that did $1.3 billion in 2013, with a net income of $88 million. If they were to convert those sales to bitcoin, that 1.2% would have amounted to $15.6 million, or a 17.5% benefit to the company's net income for the year. That is absolutely staggering.

I think this is what I find most frustrating about explaining what Bitcoin does for business. The second it gets mentioned in conversation, people tend to be in one of two camps:

  1. "A fad, not real money, have fun getting your stuff stolen, hur hur hur." folks.
  2. "Yeah, bitcoin's awesome, I can't wait for its value to go to the moon!" folks.

I'll admit I used to be in the latter category, however, it's become extremely clear that the value of the currency is not as a store of wealth – its value is as a medium of exchange, the actual use of currency.

Even for a small business doing $2-300k in sales, rolling over to Bitcoin for processing could add up to $2400-3600 yearly if VISA/MasterCard purchases were swapped over to Bitcoin purchases. That's a lot of money for that kind of shop.

If Apple were to have adopted Bitcoin, imagine how much they could save on credit card processing for iTunes, where they try and group your purchases for a day or two so that they avoid eating processing fees on every single song or app purchase. $.20/transaction adds up fast when you're selling billions of songs and apps.

Widespread adoption is not going to happen overnight, but companies like Overstock.com are starting to show how Bitcoin can substantially improve a company's bottom line.

Mobile Handset Makers & Profits

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... or lack thereof, if your company's name is not "Apple" or "Samsung". 

Apple and Samsung continue to soak up all the industry's profits, McCourt says. Apple claimed 87.4% of phone earnings before interest and taxes in the fourth quarter, he said. Samsung took in 32.2% of industry profits. Because their combined earnings were higher than the industry's total earnings as a result of many vendors losing money in Q4, Apple and Samsung mathematically accounted for more than 100% of the industry's earnings.

A year ago, Apple accounted for 77.8% of mobile phone industry profits, followed by Samsung with 26.1%, McCourt said.

Mobile phone market hits 'the great moderation' - Investors.com

Given that they tally to roughly 120% of the mobile handset profits, and they make rather a lot of profit, a 20% loss across HTC, Nokia, Motorola, Sony, etc. is huge. Not only is no one else making money, but no one else is even close to being a viable competitor.

I suspect the biggest reason Samsung is so competitive among the Android handset makers is that it's able to control its own supply thanks to its semiconductor, memory & screen fabrication business.

When Companies Profit from Users' Misery

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One of the employees of RealNetworks (you remember them, right? RealPlayer?) put up an article on Medium talking about what happened when the company tried to do the right thing.

One day my manager showed me a horrible graph. It was pretty simple: the graph was steady, then it dropped straight down, then after a short period, the line shot straight back up and stayed level again:

Jon's Graph

“That’s what happens when we do the right thing”, he said while pointing at the drop, “and that’s how much money we lose. We tried it just to see how bad it was for our bottom line. And this is what the data tells us.”

When you build a business, you absolutely have to think about what your revenue model is going to look like and how your users will react to it. That's why I don't feel that much of Silicon Valley is geared for anything more than short-term success - they're companies fundamentally built on giving users one thing to start out (great, free products), and then slowly shift over time into something completely different (bloated products subsisting on ad-supported revenue or worse).

It's like Yoda said, "...once you start down the dark path, forever will it dominate your destiny."

The sad state of the TSA

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Politico has a great article up about the experience of Jason Edward Harrington as an employee of the TSA. Some choice bits below:

"It was May 2007. I was living with a bohemian set on Chicago’s north side, a crowd ranging from Foucault-fixated college kids to middle-aged Bukowski-bred alcoholics. We drank and talked politics on the balcony in the evenings, pausing only to sneer at hipsters strumming back-porch Beatles sing-a-longs. By night, I took part in barbed criticism of U.S foreign policy; by day, I spent eight hours at O’Hare in a federal uniform, solemnly carrying out orders passed down from headquarters."

Let me be the first to say that this is probably not the guy that should be an employee of the TSA, which makes me question their hiring practices.

"Once, in 2008, I had to confiscate a bottle of alcohol from a group of Marines coming home from Afghanistan. It was celebration champagne intended for one of the men in the group—a young, decorated soldier. He was in a wheelchair, both legs lost to an I.E.D., and it fell to me to tell this kid who would never walk again that his homecoming champagne had to be taken away in the name of national security.

There I was, an aspiring satire writer, earnestly acting on orders straight out of Catch-22."

Blanket rules applied without situational awareness are problematic, to say the least. At least the irony of the situation is not lost on the author (nor the opportunity).

"In private, most TSA officers I talked to told me they felt the agency’s day-to-day operations represented an abuse of public trust and funds."

While anecdotal, it's still more than a small issue when the employees find (almost) as much fault in the agency as the people who are subjected to its invasive practices.

I'm just left wondering when this little experiment can finally be called off. The TSA is an absolute waste of both time and money.

An Interesting Analysis of Google's Nest Acquisition

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The Verge has an interesting article up on Google's acquisition of Nest.

Sad Nest via http://www.wiredprairie.us/

Sad Nest via http://www.wiredprairie.us/

"But outside of the players directly involved in the deal, there was a second, more visceral reaction: disappointment. Nest was the first in a new wave of hardware startups built by engineers and executives eager to apply their experience building smartphones to new markets — a mission captured perfectly by Fadell's irrepressible upstart spirit in interviews and appearances. But by selling Nest seems to have undercut the optimism those companies represented, and perhaps not coincidentally, underlined a growing distrust of Google itself — a distrust shared by regular consumers, tech investors, and privacy advocates alike."

We tend to root for the underdog. It's in our DNA that we, as humans, prefer to see David defeat Goliath. There's something about the 'against all possible odds' style story that resonates with us, makes us feel engaged, and gives us hope. Perhaps because we tend to feel powerless so often when it comes to our daily lives we appreciate it when someone or some group prevails against the big guy.

Google's purchase of Nest for 3.2 billion turns that on its head. The big guy wins. Again. It's a story that almost nobody likes, unless they're the big guy (and in this case, the small guy). From the outside looking in, fans of Nest feel like they've been cheated out of seeing what this little startup can do, and that's going to sting.

It probably also doesn't help that there's a valid reason to distrust a company that sells consumer data having access to data about your home.

It Begins...

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It's about time to see if people are really interested. Here's hoping they are.

As a side note, I do think that it's a perfect time for this kind of project. It's kind of a hard road to get publishers onboard with games that aren't intended to be a huge mass-market success. In part, because publishers are interested in mitigating risk while maximizing return. From a business perspective, it makes complete sense - nobody should expect that they'd make business decisions that aren't in their own best interest. But I think we have a chance now to show that there are communities going unserved by the current market, and maybe, just maybe, they're going to be as interested in us as we are in them.

Gmail, Google+ and Your Inbox's Privacy

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A new "feature" today allows anyone on Google+ to directly message you, unless you specifically opt-out. This means that advertisers, hated rivals, Somali warlords, serial killers or whomever can simply type your name into their 'To:' field and Google will try and send you the mail.

Fortunately, there is a way to stop this from happening. Go to your settings, and midway down the page, you'll see "Email via Google+:"

Screenshot 2014-01-09 17.37.24.png

You'll notice that it's set to the default of 'Anyone on Google+'. Which is to say, a significant portion of the internet's denizens (after many iterations of Google's insistence that anyone using their services be required to have a Google+ account, whether you like it or not).

So what you should probably consider doing is setting that drop-down to 'No one'. Like this:

Screenshot 2014-01-09 17.37.12.png

This sets the options back to the way they were – namely, the person emailing you needs to actually have your email address.

There are some other options here, 'Circles' and 'Extended Circles', which basically mean 'Friends' and 'Friends of Friends', but it's probably worth not bothering with that.