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.
Then the Goog enters the picture and is willing to add another $200k premium to that, in order to prevent you from working for that employer. This isn't sustainable; you're still you and your direct value to Goog is only $100k. The additional amount represents how much damaging a competitor is worth to Goog. As soon as the competitor goes out of business or Goog stops having piles of cash laying around to fight with other companies, that additional value evaporates.
If you decide to leave Goog, you should probably not expect to get $300k or more. In fact you may get less than $100k, if Goog has eliminated the competitors to whom you are valuable.
"Market rate" is extremely unstable.
This is true of everyone of course. Even a more or less commodity junior Javascript developer isn't worth much more than their generalized ability to do random tasks to a company that doesn't do any software development.
But some people have a skillset and track record that is very valuable to some companies but that would make it hard to be hired at most.
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
Maybe 50 of the other 99 bakers at the 10 bread-selling companies are also capable of making good bread and will feel bad, maybe the company that lost the baker will feel bad, maybe that company will even fail because it turns out that really was their best baker... but in that case, it just proves that the water company was paying the market price for that baker. Which they were.
Spending more on talent is not predatory pricing.
Yes it does: Google makes money from advertising, not from self-driving cars.
This is not possible according to the usual definition of "market rate".
If Google is willing to pay X, that is the market rate.
edit - I see how my post was misleading. I should have said X is a "lower bound" for the market rate.
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.
Single-firm anticompetitive behavior, as defined by FTC: (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."
Staff aren't a product or commodity.
I have a relative who bought a very nice beach house from his legal fees suing a hospital network for doing something similar.
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?
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.
This doesn't mean that the market price of a McDonalds burger is $0
If all I can afford to pay a developer is minimum wage, is he or she now obligated to work for me at my "market rate?" At what point does it go from not having enough money to afford a highly qualified developer to becoming "poaching?"
ed: Toned it down a little. I think tech is making an absurd amount of money and it's exasperating to see people complain about paying their workers too much.
Let's say you're a company in a field, competing against other companies in that same field. Everyone is basing wages on how much money they expect to make and so on. Not everyone has the same estimations, but in the end they're all grounded in that market.
Now comes a company with virtually limitless from some other market, who doesn't care about making money but about achieving dominance. All of the sudden, they're throwing wages around you can't compete with because they're not trying to be profitable.
Did I miss something?
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.
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.
But of all the things that Uber has gotten in trouble with, do you know what they have not been prosecuted for? They have not been prosecuted for selling taxi services for too low of a price to consumers.
Breaking taxi laws = yep prosecuted
But price dumping = nope, not in trouble for that.
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
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 :)
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.
https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...
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_L...) or because the threat of startup founding (which is both easier and more normal relative to 10y ago) has pushed salaries up.
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.
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.
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.