Remember the "War on the 1%" rant by the poor, embattled multimillionaire Tom Perkins? Well, Kleiner Perkins Caufield & Byers, the venture-capital firm he cofounded, is backing Secret, a hot new social-networking app that has captivated Silicon Valley with commentary that could have come from Perkins himself, for all we know. A sort of anti-Facebook, it lets users post updates to their "circles" (friends and friends of friends) anonymously, which means that instead of cheery wedding announcements and cute cat photos, you get friends bragging and bitching in a fashion you may not have seen at your last dinner party. Given that Secret's early adopters skew towards the tech world, the app is, at least for now, a revealing window into what people in the Valley really think—or at the very least, a fascinating study in trolling. Here are some fairly typical posts from circles in San Francisco and beyond.
Whether waxing poetic about net neutrality or defending the merits of outsourcing, Silicon Valley execs love to talk about how a free market breeds innovation. So it might come as a surprise that some of those execs were engaged in a secret pact not to recruit one another's employees—in other words, to game the labor market. The potentially illegal deals suppressed salaries across the sector by a whopping $3 billion, claims a class-action lawsuit scheduled for a May trial in San Jose, and were done to juice the bottom lines of some of the nation's most profitable companies.
"I don't want to create a paper trail over which we can be sued later?" Google's Eric Schmidt wrote in an email.
Documents filed in conjunction with the litigation, first reported last month by PandoDaily's Mark Ames, offer a fascinating behind-the-scenes glimpse of interactions among the likes of Apple's Steve Jobs, Google's Eric Schmidt, and Intuit Chairman Bill Campbell. In early 2005, the documents show, Campbell brokered an anti-recruitment pact between Jobs and Schmidt, confirming to Jobs in an email that "Schmidt got directly involved and firmly stopped all efforts to recruit anyone from Apple." On the day of that email, Apple's head of human resources ordered her staff to "please add Google to your 'hands off' list." Likewise, Google's recruiting director was asked to create a formal "Do Not Cold Call List" of companies with which it had "special agreements" not to compete for employees.
A few months later, Schmidt instructed a fellow exec not to discuss the no-call list other than "verbally," he wrote in an email, "since I don't want to create a paper trail over which we can be sued later?"
Eric Schmidt Google
Good luck with that. The "no poaching policies," as they were known among senior-level executives at companies such as Adobe, Intel, Intuit, and Pixar, were first exposed by a 2010 antitrust lawsuit filed by the Department of Justice. The DOJ complaint is the basis for the current class action, which was filed in 2011 by the San Francisco law firm Lieff Cabraser Heimann & Bernstein, alleging that some 64,000 tech workers were harmed.
The case, interestingly, has garnered little attention outside of the tech world. Sure, the average middle-class worker probably won't shed a tear for the most likely victim here: Silicon Valley code jockeys and junior execs banking six-figure salaries and perhaps million-dollar stock options. The Bay Area, after all, is recently ablaze with animosity over tech-fueled gentrification and income inequality. And yet the collusion of CEOs to artificially suppress high-end salaries speaks to an economic malaise that affects every working stiff: The widening gap between the rich and poor isn't some accident of free-market capitalism, but the product of a system that puts corporate leaders and their shareholders ahead of everyone else.
"I'm sure you realize the asymmetry in financial resources of our respective companies," Steve Jobs emailed Palm's then-CEO.
The lawsuit describes the rapid spread of anti-recruitment pacts between 2004 and 2007—arrangements perhaps facilitated by the overlap on Silicon Valley's corporate boards: Jobs, who became Disney's largest shareholder after it bought Pixar, served on Disney's board until his death in 2011. Schmidt sat on Apple's board until 2009, and Intuit's Campbell (a former Schmidt adviser) still does. Intel CEO Paul Otellini has held a seat on Google's board since 2004. Such close ties have long been seen as a problem for shareholders, but the nonrecruitment pacts suggest that such cozy relationships could harm workers, too.
Steve Jobs, according to unsealed court documents obtained by Mother Jones, was a leading advocate and enforcer of the nonrecruitment pacts. Two months after entering into the agreement with Google, he emailed Bruce Chizen, then Adobe's CEO, complaining that Adobe was poaching Apple employees. Chizen's reply, that he thought they'd agreed only to avoid "senior level employees," didn't satisfy Jobs. "OK, I'll tell our recruiters that they are free to approach any Adobe employee who is not Sr. Director or VP," he shot back. "Am I understanding your position correctly?"
Chizen responded that he would rather the arrangement apply to all employees:
The next day, Adobe's vice president of human resources announced to her recruiting team that "Bruce and Steve Jobs have an agreement that we not solicit ANY Apple employees, and vice versa."
In one instance*, Jobs allegedly played hardball with a reluctant CEO. In mid-2007, he called Edward Colligan, then president and CEO of Palm, to propose "an arrangement between Palm and Apple by which neither company would hire the other's employees," Colligan testified in a sworn deposition. When he refused, citing the deal's possible illegality, Jobs threatened to sue Palm for patent infringement. "I'm sure you realize the asymmetry in financial resources of our respective companies…" he wrote Colligan in a follow-up email. "My advice is to take a look at your patent portfolio before you make a final decision here."
The Valley's hush-hush wage-control policies have been in play at least since the 1980s, soon after Jobs bought Lucasfilm's "computer graphics division" and renamed it Pixar. As George Lucas later put it in a deposition, firms in the digital-filmmaking realm "could not get into a bidding war with other companies because we don't have the margins for that sort of thing." Lucas and Pixar's then-president, Edward Catmull, made the following agreement, according to the lawsuit:
(1) not to cold call each other's employees; (2) to notify each other when making an offer to an employee of the other company even if that employee applied for a job on his or her own initiative; and (3) that any offer would be "final" and would not be improved in response to a counter-offer by the employee's current employer (whether Lucasfilm or Pixar).
After its purchase by Disney in 2006, Pixar made the same "gentleman's agreement" with Apple, according to unsealed emails from the lawsuit. (Last year, Pixar, Lucasfilm, and Intuit settled their part of the class-action lawsuit for an undisclosed sum in a deal that allows the affected employees to file anonymous claims.)
There's "no evidence that our policy hindered hiring or affected wages," a Google attorney wrote.
In its earlier antitrust suit, the DOJ argued that the Valley's no-poaching agreements were patently illegal—clear violations of the Sherman Antitrust Act's ban on restraining interstate commerce. In 2011, without admitting fault or paying fines, Google, Apple, and four other tech firms settled with the DOJ and agreed to discontinue their anti-competitive behavior.
Representatives for Apple and Google declined to comment for this story, but Google argued at the time that its pacts hadn't hurt workers. There's "no evidence that our policy hindered hiring or affected wages," a Google attorney wrote on the company's public-policy blog. But "we abandoned our 'no cold calling' policy in late 2009 once the Justice Department raised concerns, and are happy to continue with this approach as part of the settlement."
Whether and how the pacts truly affected wages is at the heart of the ongoing suit, which is slated for trial May 27. The defendant firms insist that their employees' salaries weren't widely suppressed because they were based on a "pay for performance" model. That is, workers got raises based on their accomplishments, not on what their coworkers earned.
Tom Perkins, cofounder of the storied Silicon Valley venture capital firm Kleiner Perkins Caufield & Byers, could have used a forum at San Francisco's Commonwealth Club to row back from his much-maligned comments comparing the treatment of America's wealthy by the left to that of Jews under the Nazis. Instead, the man who provided seed money for Amazon and Google doubled down, telling the audience that "I think the parallel holds."
It was hardly the only bombshell Perkins dropped during a Q&A with Fortune's Adam Lashinsky, provocatively entitled, "The War on the 1%." Asked to offer one idea that could change the world, Perkins proposed a change to Americans' voting rights: "You don't get to vote unless you pay $1 in taxes…If you pay $1 million in taxes, you should get a million votes. How's that?" (In an interview after the forum, Perkins said he was simply "trying to be outrageous.")
Remember the SOPA blackout? The 2012 protest against the expansion of online copyright enforcement was pretty hard to ignore, with Google and other major sites blacking out their homepage logos or going offline entirely.
Yesterday's "The Day We Fight Back" protest against NSA surveillance was supposed to have been similarly huge, but unless you follow this sort of thing closely, you might have missed it. It was covered lightly in the press, and only briefly trended on Twitter. Given how much Edward Snowden's revelations have supposedly insulted the sensibilities and threatened the profits of Silicon Valley, the "we" in "The Day We Fight Back" has proved surprisingly small.
It's not such a huge leap from protesting NSA spying to protesting the practices of private data-miners.
This is not to say the NSA protest didn't get any attention: It generated 350,000 Facebook shares, some 75,000 phone calls and 150,000 emails to Congress, and 215,000 signatures on an online petition. Yet that can't touch the impact of the protest against Stop Online Piracy Act—the largest protest in the short history of the internet. The SOPA campaign took off because "people find it much easier to rally around a specific 'ask'" such as killing SOPA, says Adi Kamdar, an activist with the Electronic Frontier Foundation, which helped organize yesterday's protest—"a much broader ask and a much more nuanced ask."
Yet the anti-NSA action might have gone viral had major tech companies put their weight behind it. While the Reform Government Surveillance Coalition (which includes Twitter, Facebook, and Microsoft) endorsed the protest, and Google and Twitter issued supportive statements, you wouldn't have known it from their homepages.
The reluctance of Big Tech to ally too publicly with NSA critics reflects the complexity and geopolitical sensitivity of surveillance in the digital age. On one hand, American tech companies need to side with the privacy advocates to reassure their users—especially noncitizen users—that their data isn't simply being handed over to the feds. On the other, appearing too anti-establishment could make them look unpatriotic, jeopardize government contracts, and hurt their other legislative priorities, such as immigration and tax reform.
And then there's the question of whether Silicon Valley really wants to stoke the fires of indignation about online privacy. It's not such a huge leap from protesting the collection of personal data by government spies to protesting similar practices by private data-miners and online advertisers.
The SOPA blackout represented the perfect storm of consumer indignation and corporate self-interest. People wanted to upload and view songs and movies without getting thrown in jail and the owners of file-sharing sites such as Facebook and YouTube wanted to keep selling ads based on all of those uploads and page views. The NSA battle is different: A creeping police state could be a much more serious threat, but it's also much harder to figure out how it would affect surfing the Net, or the strength of the next quarterly earnings report.
Colorado and Washington were just the start. The movement to end the prohibition of pot is catching fire, with legalization bills and ballot measures now being discussed in 19 states and the District of Columbia. Marijuana activists predict that recreational pot smoking will become legal this year in Alaska, Oregon, and quite possibly Rhode Island, which could be the first state to take the leap by a vote of its legislature. But that's not all: 24 states are looking at creating or expanding medical-marijuana programs, or are vastly scaling back penalties for small-time possession. With a slew of polls now showing that most Americans think pot should be taxed and regulated like alcohol, it's probably only a matter of time before legalization sweeps the nation.