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The Cult of the NDA
Anonymous Coward writes "After looking at hundreds of business plans during the tech boom of the late 1990's, and starting my own company two years ago, I've long been bothered by the near obsession with secrecy shown by many tech startups. This is especially striking considering how few startups are actually pursuing unique ideas. I finally wrote an article about this, The Cult of the NDA, where I argue that too much secrecy can actually hurt a company's chances. Open-source startups, anyone?"
But I signed an NDA saying I wouldn't. Sorry.
How would you like to know that six months from now something is going to come out that makes the product you're selling obsolete?
Welcome to the computer hardware industry. There is something bigger, badder, and better just around the corner.
Intel's Roadmap, AMD's Roadmap and Apple's product line come to mind
As a rock-in-roll Physicist once said, No matter where you go, there you are.
It's called a bluff. By denying something, changing the topic, etc. you can make people think you have something. It's comparable to taking the 5th at trial. People KNOW what's going on, but it can't be legally used for or against you.
It's just like UFO's. At first the Govt said experimental aircraft were just aliens. Then it bit them on the ass. It still worked though. People weren't talking about the SR71 or the U2. They were too busy building a better tinfoil hat to protect them from martian rays.
if your company makes spellchecking and grammar software, send me a copy. I can use it for posting on /.
New year Resolution: Don't change sig this year
You don't talk about our business plan!
The second rule of our business plan...
The company I interned for over the summer had everyone under NDA: Our subject experts, recruiters, even us low level interns doing the real work. Our NDA was more for the fact that any of us interns couldnt run out and do the same thing, not that i'd want to. While It seemed like nothing at the time, even telling people what i did over the summer becomes a process of "umm, well, i can tell you that i programmed..." and them not understanding. But it was fun, and i wrote mountains of PHP that are being shown at trade shows.
"Something's wrong with you...and I hope we never do meet again." - Deftones When Girls Telephone Boys
First of all, even if you don't believe that a given company's ideas are "unique", chances are far better than not that they DO. Amazon.com probably honestly believes that "one-click shopping" is a unique idea, and that they deserved their patent on it. And you can bet your buttons that every programmer, managers and janitor who worked on that project signed NDAs out the wazoo.
As the SCO debacle should amply demonstrate, today's corporate culture is not about who's doing what uniquely, or even who "owns" what, but who can best convince/bribe a judge and/or jury. The business plans for many corps seem to be "Try to make money the old-fashioned way (i.e. selling useful products and/or services), and if that fails, sue somebody." To do that, you need reams and reams of paperwork, both to demonstrate that you were "duly diligent" in covering your butt (this is where the NDAs come in) and to document every little thing you've done. (Hence taking minutes of meetings, keeping archives of email, and other time-consuming corporate activities).
Honey, I shrunk the Cygwin
So many companies were being started so fast on such simple ideas that if someone else knew what you planned to do they could start up a company before you, or at the same time and compete. The lack of ideas and simplistic business models are also why the dot com boom ended so fast. There really was nothing special about it and it was easy to compete/use the same technology to accomplish the same things.
NDA's are a very different animal in a large, established company. They don't just cover new technology, but product plans, personnel changes, financial information, employees' personal information, vendor's and customers' proprietary information, and all manner of things that a company has a duty to keep confidential.
Whenever I've shopped an idea around for funding, I haven't been to tight-lipped about what the idea was, because I've found that for the most part, people like their own ideas, and just aren't much inclined to steal mine. Getting them to back my idea is a lot of hard work. The real task in getting an idea to market is to convince the backers and the other participants in the venture that you have the right team to develop and deliver the idea.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
NDAs are probably most useful in a society in which just about anything, no matter how trivial or obvious, can be patented. That seems like about where we are right now.
Letting your competitors know anything about your business model gives them opportunity to undercut and end-run.
Your only real profit may come from being first-to-market and unique for a short time; the rest of your company's life will be spent breaking even or dying.
Secrecy is essential.
Secrecy under the right circumstances, and with just a tiny little tease of information, can turn into a whole pile of hype.
He'll find an exhaustive list here.
I've worked for several different companies, manufacturing, not software. ;)
And I must say, this is everywhere, and its a real annoying problem.
You sit through the same mettings no matter where you work.
Secrecy is important.. no photos, dont talk to family about what you make.. dont say this, dont answer the phone and talk about this.
And I agree. GET OVER IT
So what if other people make the same things you do, so what if they start making it cheaper. Whoever makes the best product, will keep making the product, the rest, can make whatever else they make and SO WHAT.
If everyone concentrated just a little harder on actually making sure you produced something that people would like, maybe your budget wouldnt be so huge with the 5 layers of people and meetings telling everyone to keep their mouths shut.
The second problem being how companies look at market share. I once worked Kraft foods, pizza, and they had at the time, 19% of the market share.
Problem, they were constantly whining they needed more.
WTH for! So you got 19% and a pile of garunteed income, STICK WITH IT, and stop being such a whiney bunch of greedy money grubbing corporate a-holes.
*There's Klingons on the starboard bow, scrape em off Jim!*
Yeah okay, I'll bite : my company, Acme Inc., makes a device that creates unlimited amounts of electrical energy from common household dirt. I was about to patent it and show it to big investors under serious control. But now I'm convinced : where should I upload the blueprints for all to see ?
...
I mean come on, I know it's Slashdot, but let's be serious for a minute
"A door is what a dog is perpetually on the wrong side of" - Ogden Nash
Consider the case where your business opportunity has a very limited time frame.
1. you have knowledge that circumstances in an area are about to change (Airport being built, large employer moving out).
2. Your'e business idea is fragile and competitors could concievable kill it still born if they knew about it. ( You have a customer list, that a competitor might litigate against you using is an example)(SCO's business plan is another example)
3. You feel you really are doing something novel and you dont want everybody and their brother doing it. (Ever notice that hollywood will make half a dozen movies at a shot that all seem to be the same idea ?)
More importantly most people don't like blabbing their business around and if they have to tell others what their business, and they certainly don't want their potential investors going out and blabbing.
The idea is somewhat linear, just applying software on a large scale to an area which has never had it before, but the execution is vastly more difficult.
Through luck and creativity, it appears that I've found various ways to execute this. Two and a half years to build one part of the software, another couple of years of building and testing, two years of working for "the man" to pay off my debts run up during the first four years.
Now I've got this fairly decent product which I've just started to roll out to some large customers. And I've had many people sign NDA's along the way. If they are violated, would I have the money to pursue the violators? No, of course not. So that makes them worthless, right?
No, they're not, because people don't know that I don't have the money to fight. So NDA's are just a harmless bluff for me and probably everyone else. But in the interests of thoroughness I should use them.
Yes they're useless. Yes you should use them. Not everything has to be useful to be used.
The baby's fine -- please stop sending business cards.
Just for comparison's sake:
W .h tml
/EJS
"Full Disclosure on Full Disclosure"
http://www.nytimes.com/2003/09/27/opinion/27BLO
"Confidentiality agreements were once primarily used to protect commercial secrets. More recently, celebrities have adopted these contracts to protect themselves against checkbook journalism and embittered assistants. This isn't such a big deal. But increasingly, confidentiality agreements ban their signers from revealing information that furthers more meritorious public debate. The Catholic Church, for example, used them to silence victims of sexual abuse by priests, possibly allowing that crime to continue longer than it otherwise might have.
These agreements aren't made merely out of a concern for privacy. Confidentiality agreements have become a tool used by the rich and powerful against people who can't afford to turn down a job, as a way to stifle public discussion of embarrassing issues, and as a means of ensuring that a whistle-blower can't throw a wrench into the image-making machinery of a public figure."
Read the rest of the editorial to fully appreciate his view point.
While the NDAs discussed in the Slashdot article and NDAs discussed in the Times editorial are different beings (one to protect potential business plan secrets, the other to protect public debate), they still point towards a disturbing trend to use these things in almost all circumstances where they can possibly be used.
Make discussion and conversation illegal, and you've just halted the exchange of ideas.
Just some food for thought.
>I've found that for the most part, people like their own ideas, and just aren't much inclined to steal mine
I can't remember who said this:
"Don't worry about people stealing your ideas. If your ideas are actually good and helpful, you'll have to cram them down people's throats at gunpoint."
Don Lancaster has made the same point about secrecy as the article did. There's only one smartest person in the world, the odds are overwhelming that it's not you, your idea will have occurred to someone else, and the way to make money is to kill bad ideas quickly.
I'll start with the obligatory acknowledgement that a ton of bogus patents are issued.
But some patents are legitimate.
If a technique is publicly disclosed prior to filing a patent, then a one-year timeclock starts in which you must file for a US patent on the technique or lose the right to file. In addition, the ability to file is lost immediately in Europe.
So, NDAs are very useful if one intends to file patents.
The NDA has taken the rap for being super-secretive. However the NDA covers more than just technology or a product. It also covers expressions and variations on ideas. It's not a bad idea at the beginning (before you produce it), because the NDA allows you to feel free to openly discuss things with others, without the possibility of them running away with your variations on thought processes. Maybe it just provides a bit of mental ease.
Rarely is somebody going to run away with your idea anyways, because they already have their own.
The funniest is when you were already toying with an idea, and then somebody else asks you to sign an NDA, and then you find out in the meeting that their idea is very similar to yours. Then what do you do?
The first rule of NDA Cult is - you do not talk about NDA Cult.
The second rule of NDA Cult is - you DO NOT talk about NDA Cult.
Third rule of NDA Cult, someone yells "Stop!", gets an attorney, or finds shredded documents then deny all knowledge.
Fourth rule, only two guys to a fight(When beans are spilled).
Fifth rule, as many NDA's at a time, fellas.
Sixth rule, no wires, no cell phones.
Seventh rule, NDAs will go on as long as they have to.
And the eighth and final rule, if this is your first night at NDA Club, you have to shut up about what you see.
To think that there is nothing to learn from Microsoft, and what they have done to become the #1 is a rather big mistake.
While I don't agree with Microsoft's ethics, nor their illegal activities, there are still many other things that they did well. As the article stated (and many things in the article are just common knowledge items, but good discussion starters), a lot of being successful comes from "dumb luck". It was actually cited as being the MOST important factor. Microsoft was in a position to supply a Quick & Dirty Operating System (and even called it QDOS!) when IBM originally was in a business relationship with Microsoft for applicationware. Bill Gates, for all the mostly-deserved ill will sent his way, saw the opportunity for what it was and got Microsoft set up as the OS supplier.
If a business can quickly take advantage of opportunities in a sharp, decisive manor like Microsoft did, then they will have taken advantage of "dumb luck". Luck is 90% random, and 10% how events are reacted to... or something close to that (YMMV) ;)
At my last position, I was in charge of winning new business, particularly at startups. The evaluation process was challenging to say the least, in terms of funding, management experience, etc..
One particular company, involved in one of the latest and greatest tech crazes, had requested that we design ASICs (custom chips) for them. At our first meeting, they made it known in no uncertain terms that we (the vendor) were not to ask any deeply probing questions regarding the end product, or they would promptly and henceforth terminate all discussions. This was the first clue, since we already had a comprehensive NDA and it's a very atypical request.
At one point in a subsequent discussion they wanted to include an embedded processor from one of the well-known embedded processor providers. They claimed another vendor could run it at some number of MHz, and asked what we could do ours at. I replied that I wanted to understand some basic things regarding the processor's use - MIPS rating, types of ops like multiply-accumulates, any add-on DSP functions, etc.. The response I got: "Well, we're not sure, we just want the fastest one." I said "we are quite comparable in process performance and can rework it to at least as good a standard depending on your needs." The impression from other engineers working with me was that they had no clue what they were doing.
Needless to say, soon thereafter they had undergone a major reorg and we didn't hear anything until many months hence, when a different individual with very specific requirements came by and who was very easy to make a business case for. As we found out, the thing that made them "special" had nothing to do with us directly anyway.
The point I'm trying to make is that, in a rush for secrecy, you can end up hiding a lot of the issues from vendors, customers, and investors. Most startups that I have dealt with are basically taking one or more old ideas and adding their "special sauce" to the equation. That "special sauce" needn't be revealed, but if they want some cooperation and funding (and ultimately survival), they should be a little less secretive. At best, you will appear incompetent, and at worst, you will look like so many swindlers in the business world before you.
I worked for an "open source startup" a few years back. We were producing accounting software for a specific market niche. No NDAs and public betas of our upcoming products. Worked alright, except our competition always seemed to have our latest features in their latest releases. Wonder how they knew? Seriously, it would be nice if there wasn't a need for NDAs, but truth is, unless you hold something back, your competition will eat you alive.
The Case Against Patents
What does he say about NDA's? Publish your ideas in trade journals ASAP!
He's a wise old man. Go read his whole site. It will do you, and the economy good.
It won't happen, because VC's usually will request 75-100%.
"Don't worry about people stealing an idea. If it's original, you will have to ram it down their throats." -Howard Aiken
Having said that, I have seen two large organisations work themselves into NDA deadlock over something that both of them agreed would be mutually beneficial. In large organisations, NDAs also place an extra cost on any simple transaction, as the legal departments go to work.
It occurs to me that start-ups use NDAs as a sort of mixture of puffery ("see, we're big, too") and cargo-cult behaviour ("the big companies use this, so if we behave like them ...").
Open source startups? Simple: Red Hat is just one of such examples.
Less is more !
I often have to sign an NDA, sometimes just to get a job interview. If the terms are reasonable, I have no qualms about this: the agreement is just a written form of an implicit agreement I see as part of my professional ethics. If somebody trusts you with sensitive information, it is simply wrong to be careless about passing that information on.
It occurs to me this argument is partially about the attitude gap between the open-source (or "free") software community and the closed-source (or "commercial") software community. Thing is, these two communities don't have to be enemies. Yeah, some OS people think that commercial software is evil, and some commercial software people think that the OS movement is economically clueless. But the reality is that no one model is the best possible one for all kinds of software. Some projects will prosper if they're driven by volunteers who just want to advance the state of the art. Others will only succeed if they're driven by well-capitalized entrepeneurs out to make a buck. Neither model is likely to go away, and I predict that more and more companies will come to rely on both.
I was just amused to see this paean to openness being credited to "Anonymous Coward."
An NDA is a tool. Properly applied, it can be a very powerful protection as well as a marketing tool. Overused, and it becomes useless and unenforceable.
Regardless, personal integrity is the key to real secrecy: don't hire/work with/partner with people you don't trust. And that trust has to extend to the decision to share information.
-- $G
I work for a small research and development company, and yes, we have very strict NDAs. You need one just to get into the building. But in our case, we need them because we actually do develop new ideas. And I don't think that saying that all these tech companies aren't developing new ideas is giving them a fair shake.
We are much more of a tech company though. We develop new technology, but we also do a lot of design projects, for instance the SmarTruck 2
Geek to VC: We gots a great biz plan. We're going to spend your money devloping a product that will be downloadable for free!
VC: SECURITY!!!!!
"Have you ever thought about just turning off the TV, sitting down with your kids, and hitting them?"
File a patent on all new ideas. If you're lucky, one of your visitors will implement your idea and you can collect. The other reason you want to file a patent, is defensive. Otherwise, the company that just visited might file their own patent, and when your device is ready to go to market, they'll shut you down.
The other comment I have to the article, is that it is not always such a good idea to have something new and unique. In the very early phases of funding, VCs or angels have no idea if it will fly or not. If they can find at least one other company with the same basic idea, they consider that a validation of the market, and thus, the investment to be less risky. Being first on any market is such a two edged sword. Anyonme remember the Apple Newton?
-- Another senseless waste of fine bytes.
I agree wholeheartedly with the message. Too many startups are under the impression that it's the product and the protection of the product that is to make their company sucessful. Ask yourself if you could make a better hamburger than McDonalds? It's the system that makes a business... how well the business is managed, how sales are produced.
Of course the product matters, it has to be something that the market needs or thinks it needs after you show your clients how much it will improve their lives. Produce the best product you can but really more companies should focus not so much on the NDA but on developing their business.
I helped start up an Internet business in '96 that sold for three-quarters of a billion dollars in 2000. We produced innovative products but so did our competitors however we produced a system that allowed us to have better customer service, instant reporting and faster turnaround times. It was the models that we created that attributed to our sucess far more than our products. Of course most people reading this will say that it was just an issue of timing and they are probably right with respect to the purchase price of our business but not the fundamental growth that we produced.
Football Sports Contest - Win $500 for having an e
Well - I have tried a few times to get funding for ideas that was partly based on Open Source. The problem is not the engineering side but the VC side of it. I have yet to find a way to convincingly explain to a VC that by using open source I can cut the development cost down to 1/10th of what it would have been if I was to develop everything from scratch, and that it actually will lead to a better quality "version 1" product. But VC's seems completely focused on the IP of the product. Without that it seems that even a good business based on knowhow and delivery of services are unworthy of investment.
I for one would love to hear some good arguments that could convince VC's to invest in Open Source based projects.
Give me one example of a succesful business that would have failed if someone else had known what they were doing. Transmeta was supersecret about what it was they were doing. Do you really think they'd have been less succesful (is that possible?), or that someone else would have tried to take away their idea if they'd taken out a front page ad in the NYT describing their plan? So give me one example.
"The legitimate powers of government extend only to such acts as are injurious to others." Thomas Jefferson.
Once we come to market, sure, somebody else will be able to make copycat products (limited perhaps by our patents), but we still get the first mover advantage with a new kind of device.
Now in this case, there is genuine uniqueness to the product. With a lot of software companies, their uniqueness is all about 2 or 3 features that somebody else can easily nab and throw into a competing product. In fact, since "manufacturing" in the software business involves clobbering in some new features and releasing a new build, which can usually be done in a few days, the time from reading some documentation to coming out with 1-for-1 matching feature sets is often measured in a matter of weeks, not months or years. I think that's why people in the software business are so paranoid about NDAs - keeping featurization and product details secret until it's on the market.
I think the other reason is many companies don't want anybody outside to hear how ugly and dirty their software is and what a big nasty hack it was to kludge it all together.
So does this change the...
1. [Insert crazy idea or technology here]
2. ??????
3. Profit!!
business model to...
1. NDA
2. [Insert crazy idea or technology here]
3. ??????
4. Profit!!
???
-- Gun
-- Stu
/. ID under 2,000. I feel old now.
Well, I guess it's hardly surprising that two people involved in the same kind of business should have the same views, but still...
A Good Hard Kick In The Ass, by one Rob Adams. I borrowed it from the library (sorry Rob :) mainly because I thought it was a catchy title... but it turned out to cover almost exactly the same notions as included in this guy's "Cult of the NDA" article (except, obviously, in a lot more depth and with a lot more entertaining anecdotes). There's an entire chapter of the book that essentially just says "You think you have a unique idea you need to keep secret? You don't and you don't."
Adams also insists on what he calls "execution intelligence" being one of the key pillars in a business-that-might-have-a-chance (as opposed to a business that has no chance because it's still hung up on worshipping its own not-unique and not-even-very-good idea).
Some good stuff in the book. Certainly worth a read - even though a few bits of the book are rather amusing from a post-dotcom perspective (the book was published in 2002 according to Amazon, but I suspect most of it was written quite a bit earlier).
Pete.I have a world changing idea. (Yeah!) It took an enormous effort for my company to build it. (OK.) It has a market waiting for it. (Good, maybe we can make some money.) There are several big companies that have the resources to reproduce our effort, and once we are successful, they will have the motive to do so. (Uh, oh.)
But wait! There is an answer. This great country (U.S.) has decided that software ideas can be patented. Now this is usually done by those big companies to raise the barrier of entry so startups can be killed or at least threatened if they become competitive. Luckily our idea is far from mainstream and requires much specialized technical knowledge to implement. We will be first to market, and our solution answers many issues that are in the news today.
But we cannot advertise the features AND get a patent on those features UNLESS every prospective customer signs an NDA. Once the NDA is signed, the customer is considered part of the development team, and does not count against the application for a patent.
---
This is a true story. In our favor, several of us involved in the effort are consultants to our target market, and have the contacts to create a market for the product under the terms specified above. We are also able to identify that our product is unique. To answer the article:
1) A unique new product or idea is essential to a startup's success.
In this case, yes, but only because we need the patents before a big company decides to clone us. The business plan includes the need for patents, and NDAs are required for the patent application to be successful.
2) The first company to capitalize on a new product or idea has a unique and sustainable advantage.
No, we may be unique today, but that is not sustainable without patents. We are not counting on being "first", we are counting on being "only".
3) I have a unique idea for a new product or service.
Yes, because the idea requires much technical ability to implement, and (so far) no one else has thought of it. And because of our unique skill set, we would probably be contacted to help if anyone planned a similar product.
4) If others find out about my unique idea, they could bring it to market first, and steal the advantage from me.
Yes, but today they would not care. We are protecting it to get the patents that will protect us later when they do care.
5) Therefore, by disclosing my idea only under the strictest confidentiality, I preserve an advantage for myself.
Yes, we need the NDAs to get the patents to have an advantage later.
We also have what it takes to make a startup successful:
- Dumb Luck: We have customers before we have a product.
- Execution: We have a business plan, and several high-level managerial types that believe in it.
- Stay focused: This is the hard one. If we dedicated the resources to the product, it might have been released a few years ago. We actually thought the code was done, and had dates for installing it at customers, and then found a major problem with the platform under it that causes the product to crash under heavy load. Oops. And we have consulting careers that limit the time we dedicate to it. We believe the product can be delayed because the IT world has stagnated. So far, this is accurate.
I spend my life entertaining my brain.
Then I'll direct you to a URL with my comments on this article.
John Kerry is a Joke!
Larry Stark, a professor at Berkeley, tells the story of sitting around with a group of other researchers including Warren McCulloch (of the McCulloch-Pitts neural net model), who was expounding on his current research ideas. At one point Larry broke in and asked "Warren, why are you telling us all your ideas? Aren't you afraid someone will steal them?" to which McCulloch snorted "Steal them?! I can't force them on my own graduate students!"
Far from other people stealing your idea, you may put them off. If you have several startups working in secret on essentially the same idea, they'll probably all come to market within a few months of each other. Specially if, as in most cases, it was an idea whose time had come. So they will fragment the market and none will do well.
If you go public, you will probably put others off starting up projects to do the same thing. If you pull your PR bullshit well, you might possibly drive others to pull out. "If they are ready to go public, they must be ahead od us, so we might as well pull out".
If the idea is really original, you shoudl be able to get a patent on it. And a patent is a form of going public, so once you have made your initial filing, shout up. And a patent is likely to impress the VCs too. But if you can't patent, bullshit. It works for evryone else, so why not for techies?
Consciousness is an illusion caused by an excess of self consciousness.