Until he was caught by a security firm hired to investigate a suspected hacking, an employee of an unnamed company took advantage of an extreme inefficiency in the job market. He was reportedly earning a six-figure salary as a computer programmer — I suppose programmers are called developers in the parlance of our times — but not doing much of his work. That by itself isn’t very shocking. The interesting part of his particular daily routine will follow.
Keep in mind that companies often outsource coding assignments. It’s cheaper to find developers working outside of the United States. While code developer positions might command a six-figure salary by employees living in the United States, take the location component out of the job requirement, and the pool of potential employees now stretches across the globe. Where financial needs for living are more modest and workers survive and even thrive on much lower salaries, companies can find skilled employees at a much lower expense.
Free market capitalism should embrace outsourcing, as borders are semi-arbitrary, man-made constructions, not market-driven limitations. A free market implies that supply and demand meet without external interference, and in an age and in a situation where location is irrelevant, the drive to maximize profit points companies in the direction of the cheapest labor available. This is of course contrary to what we would like.
But on an individual level, we outsource or subcontract all the time. We pay barbers or hairstylists. We pay housekeepers and maids. Business owners, even those with no other employees, hire assistants. Writers hire publicists. When a person or a business has extra cash flow, and some of this money can be used to pay someone to handle activities that take time away from our lives, it can make financial sense. This is my justification for hiring a cleaning service to take better care of my apartment than I had been doing myself.
Every good code developer I know works incredibly hard. They often take on hours over overtime, whether paid or unpaid, to make their code perfect. Having project deadlines is a way of life, and they will work through the night if necessary. The employee mentioned earlier takes an entirely different approach. And the reviews from his superiors were extraordinarily positive. He used the same theory that informed my decision to hire a cleaning service to justify his approach to the job.
That is to say he took a small part of his salary and paid a developer in China to do his job. In the meantime, the employee spent his time at the office surfing Reddit and eBay and updating his Facebook status. His subcontractor in China logged into his computer using a virtual private network (VPN), with the access key fob provided by the employee, so the work was done virtually from his desk in the office.
The company, however, suspected that the access to the VPN from China was the work of a hacker. They brought in a security firm to analyze the situation, and that’s when they discovered the employee was not doing his job on his own.
The work, however, was still getting done. And the company could well be thinking now that if they can get such great performance for much less money, perhaps it makes sense to implement this scheme on a larger scale.
From the employee’s perspective, he was just taking advantage of a market inefficiency. At the same time, it’s likely he ran afoul of his employment agreement with the company, not to mention violating a fairly common and expected ethical code that calls for not submitting other people’s work under your own name. While the work was getting done and was considered exemplary, the employment’s actions are grounds for termination.
The employee didn’t stop with just the one company. According to the report, he may have had similar arrangements with other companies. He was taking home several hundred thousand dollars while outsourcing or subcontracting his work to China at a cost of only $50,000.
From a financial perspective, this guy seems to be smart. He’s taking advantage of an inefficient system and getting closer to financial independence. He’s building wealth. But he made some serious errors in judgment with his responsibilities to his employer (or employers). I can’t imagine that this type of behavior would be tolerated at a corporation of this sort.
How would this situation be different if the employee was a contractor instead, without an agreement that explicitly required the person actually doing the work to be the contractor? Why not farm out aspects of the assignment that can be handled by someone overseas, a girlfriend, or a random high school student if the work they do is indistinguishable from what the primary contractor would do? Does that raise any ethical concerns other than, in some cases, possibly perpetuating compensation below minimum wage?
Some of the discussion about the story about this employee has called him ingenious. NPR’s Bill Chappell compared this approach to the philosophy promoted in Tim Ferriss’s The 4-Hour Work Week. I think it’s dishonest in an employment situation when your boss expects you to be doing the work yourself, and I doubt he was authorized to allow his passwords and access credentials to be used by anyone other than himself. But maybe there are situations where this type of scheme is not a bad idea and is less of a scam. I’ve seen subcontracting often in the world of blogging and publishing.
Many published books are not written by the author whose name is on the cover. Ghost writing is a big business, and the bigger the name on the cover, the bigger the likelihood they have had more than just a little outside help writing the book. I’m not criticizing the approach, I’m just pointing out that subcontracting is a popular strategy. While sometimes it may be clear that the work is being handled by someone other that the person whose name is attached, sometimes it is not so clear.
What do you think of the employee’s strategy (call it a scheme or a scam if you will) to get his work done for much less money without the approval of his employer, while pocketing a nice profit?
Published or updated January 16, 2013.