HR/BENEFITS

How Steve Jobs Undercut Silicon Valley's Greatest Asset: Engineers

Court documents reveal the anti-competitive hiring practices imposed by Apple on other Silicon Valley stalwarts were the norm for years.
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Steve Jobs is considered one of the greatest innovators of the 20th and early 21st centuries.

But in some respects, the Apple founder was also profoundly anti-competitive. And in his final years, he may have gone out of his way to thwart the innovation of the underclass of software engineers responsible for Silicon Valley's inventiveness.

That portrait of Jobs emerges from court documents related to a recent class-action lawsuit involving tens of thousands of software engineers pitched against the titans of Silicon Valley. In these documents, it appears Jobs called the shots with major competitors, such as Google, Adobe, Intuit, and others--which at Jobs's behest, kowtowed and agreed not to hire one another's engineers out of fear that Jobs would retaliate.

Some background

The suit began as a Department of Justice investigation in 2010, which ended in a consent agreement in which Adobe, Google, Intel, Intuit, Pixar, and Lucasfilm--all companies with close ties to Apple--agreed to refrain from collusion in their hiring practices. None of the companies admitted any wrongdoing. The current class action could award damages from $3 billion to $9 billion to more than 60,000 engineers.

"If you [Sergey Brin] hire a single one of these people that means war," Brin recounted Jobs saying during a particularly vitriolic exchange over Google's practice of cold-calling engineers at Apple.

A cowed Brin later sent Google's executive management team an email that said: "Lets [sic] not make any new offers or contact new people at Apple until we have had a chance to discuss."

Similarly, Bruce Chizen, the former Adobe chief executive, expressed concerns about the loss of top engineers if Adobe failed to have an "anti-solicitation" agreement with Apple. "If I tell Steve [Jobs] it's open season (other than senior managers), he will deliberately poach Adobe just to prove a point," Chizen said, according to court documents.

Though these epistolary exchanges are revealing for any number of reasons, they also document illegal activity and amount to price fixing in Silicon Valley's market for engineer wages, experts say.

"This is an exceptionally well-documented antitrust case from the plaintiff's perspective," says Alan Hyde, professor of law at Rutgers University and author of Working in Silicon Valley: Economic and Legal Analysis of a High-Velocity Labor Market. "The emails are very damaging, that there was a conspiracy not to hire each other's employees, and the motivation was to hold wages down, because they did not want bidding wars for talent."

The cost of collusion

Such revelations may be surprising, given the common perception that Silicon Valley has a labor shortage, and that its engineers command huge salaries. The truth is not nearly so pat.

The agreements are "a restraint of trade, and it reduces the options available in the marketplace for the engineers," says Andrew K. Jacobson, president and lead attorney of Bay Oak Law, of Oakland, California, and a participant in the Rocket Lawyer network. "The engineers become beholden to one company and they cannot maximize their value out on the market if these huge market players don’t participate."

Ultimately, such collusion also squashes a free-flow of ideas that leads to startup creation, and it squelches the opportunities for startups to gain access to the best and brightest engineers.

"This is not how you attract people to a field with a massive shortage of workers," says Russ Harrison, government relations director for the Institute of Electrical and Electronics Engineers-USA, an association with more than 200,000 members, including computer programmers and software engineers. Harrison adds that on average, computer engineers have experienced stagnant wage growth for the past 10 years, of about one to two percent a year.

"It is very important for these companies and individuals that they be allowed to switch jobs like anyone else, and efforts to limit them is bad for both the companies and the engineers," Harrison says.

 

 

 

 

 

 

 

IMAGE: Getty Images
Last updated: Apr 22, 2014

JEREMY QUITTNER | Staff Writer | Staff Writer, Inc. and Inc.com

Jeremy Quittner is a staff writer for Inc. magazine and Inc.com. He previously covered technology for American Banker and entrepreneurship for BusinessWeek.




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