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Comment by dba7dba | Hacker News Reader

I can vouch for this story. My parents went through this scenario exactly. They had gotten into office cleaning because it was relatively well paying in the 90's. But in the 90's middle men came into the mix.

Someone with better sales ability would win the contract for cleaning office, and subcontract it to someone else. And even that 2nd person might subcontract it to someone else. Eventually, the person really doing the actual cleaning barely made above minimum wage.

What does MBA school call this? Reducing cost? Increasing efficiency? Reducing risk?

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Read "Debt: The First 5,000 Years." I cannot endorse this book enough. It is the most influential non-fiction book I've ever read.

Basically it's called using money as a means to make money, and this was frowned upon in many civilisations. Even today, in much of the Muslim world they do not charge interest. They do have higher bank fees (no free accounts, no free checking or electronic transfers).

Keep in mind if we travelled back in time even 100 years ago, charging 29.9% interest would be far beyond the limit of usury.

Today in the western world, we accept the idea of being able simply move around money as a career that is beneficial to society, versus simply using money for trade and exchange. I really think this is one of the worst things we could have accepted as being morally acceptable. Board executives at JPMorgan Chase, PNC and the other banks that caused so much destruction in 2008 should have been thrown in jail next to rapists, paedophiles and murders. Instead they destroyed thousands of lives and made off with millions in bonuses.

> Board executives at JPMorgan Chase, PNC and the other banks that caused so much destruction in 2008 should have been thrown in jail next to rapists, paedophiles and murders.

What strange ideas of justice the world has!

In an ostensibly advanced country, America, one side of the political spectrum would be have us remain willfully oblivious to police abuses, corrupt prosecutors withholding or fabricating evidence, and the systematic dehumanization not simply of prisoners, but of any peripherally involved with the machinery criminal justice system, especially for the purpose of deporting undesirables.

(The prison guards who put an inmate in the shower and turned on the hot water until the skin was peeling off his corpse? Normal. The immigrant detained by ICE for months and months, given aspirin for his developing penis cancer despite agency doctors' recommendation to get him to a proper examination until it was far, far too late? Incredibly normal. Predates Trump.)

The other side of this political spectrum skims over meaningful questions of actual fraudulent or unethical business practices, issuing instead a blanket equation of the practice of making loans to people who assumed their house would apprecuate in value with crimes such as murder and child abuse.

And these aren't even extremes. Both positions are pretty mainstream, real crowd-pleasers.

What the hell is wrong with us? Can we not aspire to build a world where there is actual justice, and not mere retribution against our political foes and other un-persons?

What you're implicitly arguing is that since we don't prosecute injustice evenly, we shouldn't prosecute injustice at all. There's always going to be something worse happening, it shouldn't distract us from doing what is right. You could easily make the argument that since we allow North Korea to have prison camps, we can't throw murderers into prison because actual justice doesn't exist evenly around the world.

Also finish the food on your plate, there are starving kids in Africa.

The bankers did more than make shaky loans. In some cases they committed actual fraud, amounting to billions of dollars, which had effects like wiping out people's retirement accounts.

I think you're right that they deserve less punishment than murderers. But what they got is less punishment than some people get for standing on the wrong street corner.

For details, on both the bankers and the people on street corners, see The Divide by Matt Taibbi.

A murder destroys a single life, or handful of lives, directly. Is a bank executive who wilfully commits fraud that damages million of lives better or far worse?

Regardless of how bad it is (and I do think there are arguments to be made both ways), being allowed to effectively escape punishment because the distributed nature of the crime makes it hard to comprehend its real impact is both wrong and damaging to society in the long run.

>Basically it's called using money as a means to make money, and this was frowned upon in many civilisations.

I was watching the history of York castle on Netflix. In England the Christian people wouldn't charge interest on loans but the small Jewish community did, I assume it meant a person could borrow more?

Anyway there was a huge riot by the Christian townsfolk they wanted to kill the Jewish men, women and children. Which also meant all debts held in Jewish books were wiped out.

All the Jewish people of York took refuge in the York castle keep but in the end were going to be killed by the people of York. The men slit the throats of their wives and children then the mend committed suicide.

http://www.historyofyork.org.uk/themes/norman/the-1190-massa...

> I assume it meant a person could borrow more?

It meant the lender was more willing to lend. The lender could make a business of lending if he charged interest, and not if he did not.

Intrigued by how can it be cost competitive for the middle men, why aren't small business selling directly? Is the sales part the only edge of middle men?

Because a small company has the ability to supply cleaning to X square metres across one city.

A middle-man can say "We will supply your cleaning in several cities no matter your office size."

So a company pays a higher cost - but only has to deal with one contract, which saves them effort elsewhere.

It's the same as taxi companies. It would be cheaper for you to call a small firm with lower overheads, but you're happy to pay a premium for convenience.

>So a company pays a higher cost - but only has to deal with one contract, which saves them effort elsewhere.

They have fewer contracts at any given time but also the contracts can last longer.

If I directly hire people to clean an office, when they don't want to do it anymore I need to find other people to do it. Selecting people, negotiating, getting payments set up with accounting etc. Its a distraction from more important stuff so I want to do this as rarely as possible.

If I hire a company/agency/middleman they can replace people without me having to even be aware its happening. At the point "keep the office clean" is essentially solved. Its possible I will never need to think about office cleaning ever again and I can get on with running my business.

You need the pigs. They're helping all the animals. That horse isn't really going to the glue factory. We just reused that glue factory truck, but really he was going to a retirement home (paraphrasing Orwell's Animal Farm).

When people plant themselves in the middle, they essentially sell themselves as being necessary. Are they necessary? It depends .. but usually not.

Middleman have some utility but I think often they extract more money than the value they provide.

A lot of this played out with single location companies and single city contracting companies (before they start merging). So I don't think that's the reason.

I suspect it was cost. The middle men would just under bid and then under deliver.

I see it in a slightly different angle, it is the company's Chief Officer for Cleaning Matters ;) that manages to work less (have convenience) at the expense of the company which pays more money for the service (besides the wage of the COCM ). Coincidentally that is also the same person that will convince everyone else in the company on how convenient the "global" contract is.

There are a lot of activities for which sub-contracting makes sense, particularly when there are possible economies of scale, but when the activity is merely (or largely) labour, there are only four possible overall outcomes:

1) the actual workers are paid less than what would be fair

2) the service is inferior to what was expected/agreed upon

3) the service costs more (the middlemen somehow have to take their part)

4) the contractor or sub-contractor has made wrong estimation of the costs and before or later they close or go bankrupt

Hmm, Uber for office cleaning?

So the yellow pages was basically just an uber uber?

That is a nice example of why the free market is not neccessarily the guarantor of efficiency.

But why? It exactly looks like a problem that free market should be able to solve.

Because "free market" in practice means "what the big fish allow to happen with the help from their friends at office".

The only one who can guarantee a free market (e.g. big players not monopolizing, abusing their position, underbidding and then killing small more efficient players, etc) is the government/law.

But the government is also often in the hands of big players, and passes laws to their favor.

And even when it isn't, they have the upper edge in other ways (purchasing and negotiating power, better lawyers, more money to burn, etc).

Heck, even the simple fact that "bigger player = more advertising money" can make free competition from a newcomer a non-starter. Even if the new company can make something for cheaper (despite the better economies of scale of the big players) people don't buy cheaper, they mostly buy what they know.

Hence, free market is a myth, perhaps even more so than communism.

I am not an economist, but I think it is a problem with information assymetry. The cleaning worker does not have many connections to CEOs, to wich he can sell his services, but the middle men have. The middle men can leverage this situation to gain the profit, the cleaning worker would have gained. But I have no idea, why this would evolve into a pyramid scheme. One level of "management" would have solved the "information assymetry"-problem, without inefficiency (and this could be done in a fair way, so the worker can profit too).

> The cleaning worker does not have many connections to CEOs, to wich he can sell his services, but the middle men have.

Bingo.

Additionally, in many cases the person/team carrying out a procurement process may require (often by law or company policy) a ridiculous set of documents that some sleazy company is an expert in navigating, and exploiting any loopholes or poorly-written selection criteria. They deliver crap service that barely qualifies, but the procurement person/team can say, "well technically they fit the criteria" so their ass is covered. The procurement team is not rewarded for selecting the best candidate, so they minimise their own exposure.

Also the problem is in many businesses the person choosing the cleaning company isn't spending their own money. So if company A is more expensive but Company B will take more effort to onboard due to the fact they aren't familiar with the paperwork. The employee (often on salary for unlimited hours) will pick the easier option.

Another reason to support small businesses, it helps keep markets honest.

Not a free market if there is information assymetry, it's there in the first paragraph:

https://en.wikipedia.org/wiki/Free_market

It says that there is a less assuming version, but I'd always heard the information thing.

Well, if that is the case, the free market is a pureley theoretical concept, that is not realized anywhere in the world. And it cannot be realized, because there is always inevitable some form of information assymetry.

Something can be a theoretical concept and still useful. For politics you might want to favour transparency instead of obscurity.

As an employee in software I've been working through intermediaries for a good part of my career, so obviously interested.

I suspect that, at least in my country, it's more a matter of bad regulation than of information assymetry. But the mere fact that we're not sure which are the causes is in itself information assymetry.

economics 101 right here. free market is a theoretical model.

Since there is inevitably going to be information asymmetry, this is rather a "no true scotsman" approach to redirecting blame away for the problems that plague free markets in the real world.

"I support our free market! But since our free market isn't really a free market, I'm still right and it's not my fault if things go wrong!"

> The cleaning worker does not have many connections to CEOs, to wich he can sell his services

I think you might of hit on a possible explanation there, maybe it's wealth inequality? When there was more equality that CEO (or company owner, or just someone near the top) might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city.

Politics lately has been an example of this divide.

> might have been going to the same bars or been part of the same local sports clubs as the cleaner, their kids might have gone to the same school. Now they probably live in other parts of the city.

I don't think this ever the case, in any era. Rich people in many countries definitely send their kids to posh schools through their connections (e.g. slots available for those with a parent who attended), go to different bars and follow different sports (e.g. rugby union vs football/soccer, depending on the country obviously).

>Rich people in many countries definitely send their kids to posh schools through their connections (e.g. slots available for those with a parent who attended), go to different bars and follow different sports (e.g. rugby union vs football/soccer, depending on the country obviously).

Yes, but company owners in many countries weren't that rich that the other people they provided services to. Consider a company with 10-20-100 people, serving a city.

Now, those jobs go to huge conglomerates and companies with 1000s upon 1000s of employees, and CEOs that are 100x as rich as the people buying their services.

I'm not thinking CEO of MEGCORP here, but a typical business owner or office manager of a 5-50 person office, they aren't so detached. I'm not sure which end of the wealth divide the fall on though.

Markets exist to magnify political inequalities, not to deliver cost-effective and efficient solutions.

Businesses don't compete for customers. They compete for investor and shareholder cash. For most businesses, the point of optimum return for investors is in a completely different part of the graph to the points that keep customers happy and employees secure and well-paid.

The free market is only efficient when

- property rights exist, and are enforced

- there are few barriers to entry

- transaction costs are low

My money's on transaction cost issues. BigCorp has teams of people dedicated to making customer acquisition more effective and efficient.

A free market doesn't guarantee a free society. Over time, people who have more political power can deny that to others, forming de-facto monarchies and serfdoms.

Don't forget that the state humanity started from was a totally free deregulated market, the consequences of which was the formation of tribes ruled by the strongest, most vicious guy and his spear-happy friends. When you don't have regulations, the person with the most power can impose their regulations.

> What does MBA school call this? Reducing cost?

it's called making money on someone else's dime!

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