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Non-Competes As the DRM of Human Capital
An anonymous reader writes "Techdirt has an interesting look at how non-compete agreements are like DRM for people, doing just as much damage to innovation as DRM has done to the entertainment industry. It includes links to a lot of research to back up the premise, including some studies showing that Silicon Valley's success as compared to Boston's can be traced in part to the fact that California does not enforce non-compete agreements."
So you can't use your expertise to make a living for 5 years? Or does you contract have your employer paying you severance for 5 years? I'm betting it doesn't. I'm also betting that your employer is happy with the knowledge that he doesn't have to pay you market, or give you decent benefits because if you leave you can't compete with him for 5 years. It's just another form of indentured servitude and you're a willing participant.
Competition is the core of good Capitalism and you agreed not to. Oh yes that's great for your employer, no doubt about that.
"The avalanch has already started, it is too late for the pebbles to vote." -Kosh
That's their motivation for the non-compete: it's better for them. By the same token, not having a non-compete would be better for you, since you could easily turn around that argument saying "why should I fill their pockets with money just to have them lay me off in bad times". If it's OK for an employer to look after their own interests, then certainly it is OK for an employee, too.
TFA, on the other hand, suggests that the practice of non-competes reduces overall innovation. So what's good for an individual employer is not necessarily best for society at large. So society might have an interest here in looking out for its own, also.
BTW, if you view your employees all as potential enemies, you might not be getting their best efforts.
I am not a crackpot.
That reminds me of the note I have taped to my monitor:
Warning: Do not look into goatse with remaining eye.
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
It seems to me that non-competes are a classic example of what economists refer to as the Tragedy of the commons. For any individual company it makes sense to get your staff to sign a non-compete, to stop them taking elsewhere the knowledge you've paid them to acquire. For a technology cluster as a whole (e.g. Silicon Valley or Route 128) the overall effect is negative due to stagnation in the workforce. The problem is that existing firms don't have an immediate incentive to worry about stagnation in start-ups; they are more concerned about loosing good employees to their competitors.
The Tragedy of the Commons crops up all over the place - the most frequently seen cases are things like over-exploitation of natural resources. Generally there are only two ways to deal with the problem; one is to legislate against the behaviour that is detrimental in the longer term and the other is to convince the players to take a longer term view. What's interesting about this debate is that there are people who do have a longer-term interest as well as some sway over the companies: the venture capital firms that invest in not just one start-up but many start-ups over a period of time. They have an incentive to make the environment the best for all companies to thrive. I hope Bijan Sabet manages to convince a few more of them!
If intelligent life is too complex to evolve on its own, who designed God?
And I'm in the process of trying to negotiate that BS line away in an employment
agreement I got presented.
There is no way I will sign an agreement of that nature without serious modifications.
I've walked away from contract gigs in recent times where the client's HR outsource
insisted that I couldn't start work without signing the document and that there would
be no modifications to the document (Effectively dismissing me before I even started-
the hiring manager went into a panic and went charging around to get permission to
get me to submit an amendment to the agreement that protected their interests, but
by that point in time, I'd already got another comparable contract and was off the
hook from the other. Don't play games with me. You wouldn't tolerate this stuff
out of me, I won't tolerate it out of you as an employer.
In the end, it's standard boilerplate and it's from businesses or their lawyers
thinking they're "clever" and trying to avoid losing anything that might be theirs.
The problem is, for me, it IS indentured servitude- and they're in no way even remotely
paying me enough to lay claim to everything I might come up with, nor could they.
The HR people all invariably say "that's not what we're intending"- BULLSHIT. If you
intended otherwise, you would have put it in the agreement- what is on the paper is
what you intended. If it's not, you need to fire your damn Counsel and find one that
will do what you actually intend.
I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
I don't normally pay attention to anonymous cowards, but in this case it deserves a response.
What this contract really prevents is your employer keeping you happy and on the job. Does your contract guarantee your benefit plan? Your retirement plan? Cost of living minimum yearly raises? Severance should you be released?
A fair contract is one that benefits both parties. A non-compete only benefits the employee if they get something in return for the duration of the non-compete. If the contract only protects the companies interests then your interests are being thrown out the door. Don't accept their word that they will "do the right thing." If it's not in writing they don't have to and most likely won't.
"The avalanch has already started, it is too late for the pebbles to vote." -Kosh
Yeah, because those stupid statisticians at Stanford etc. don't consider other variables when they do their statistical analysis
For example - from the article.
Gilson looks at a few of the other possible explanations for the difference and shows how they're all lacking, leaving the difference in noncompetes as being the key difference between the two regions in terms of the flow of information and ideas leading to new innovations.
You can even follow through and read the sources linked from the original article
eg.http://papers.ssrn.com/sol3/papers.cfm?abstract_id=124508
Why are people on the internet always so eager to think that highly qualified economists at world class Universities will have failed to consider the one blindingly obvious thing to consider about a situation, simply based on reading a one line summary of the relevant paper, in order to prove some clearly stupid point?
- My rate will increase because I can't use this work elsewhere and could potentially be working at another client where my work could be reused and make me more valuable.
- My time estimates will at least double since I have to recreate everything I've done elsewhere that I had previously planned on using for this project
When companies realize they get a benefit from not using non-competes, they quickly change their mind, and so far, not one has forced their version of the IP agreement on me.I have dealt with this before. My lawyer told me that only one or 2 of these cases have ever made it to the court. Judges throw these cases out as soon as they see them. Your previous employer cannot tell you where you can and cannot work. It is taking away your ability to earn a living. I had worked for a company for 2 years, went to their direct competitor for more money for a year, then came back to the first company. Both times I got a very official and long letter from the former company's law firm chastising me about the non-compete and asked me to respond within a certain time limit to some questions in the hope that I would write something that was actionable. Both times I ignored the letters, the time limit came and went, and nothing further happened. I have a friend who was in a similar situation and his former company decided to press the issue. It never made it to court, judge just threw it right out. I believe that the only way that a non-compete can be enforced is if the company can show significant monetary damage has occurred. Working for whomever you want is still perfectly legal in the USA!
The strongest arguments against DRM are not economic, but moral, and concerns the loss of consumer rights.
Trying to define the "strongest" arguments is itself an additional layer of value judgment, but setting aside that, one should not underestimate the various economic arguments against DRM.
Just to cite one example, the recording industry slit their own throats when they got the Audio Home Recording Act to legislatively mandate DRM be included in all new audio recording devices. It strangled the audio hardware industry, which in turn strangled music sales. The Audio Home Recording Act's imposed DRM in Digital Audio Tape and in the Minidisc and in all technology for an entire decade. It effectively exterminated all new devices and strangled hardware sales and strangled music sales for an entire decade. People sat around holding onto their CD collection and NOT buying (or re-buying) music on DAT formate and Minidisc formate or anything else, because no one owned or wanted a DAT player and no one owned or wanted a Minidisc player or anything else. The DRM-extermination of all hardware and formats since the CD is one of the major contributing factors in declining Recording Industry sales numbers.
The hardware industry was economically devastated and by direct follow-on the content industry economically harmed by DRM for an entire decade. It was only with the introduction of the MP3 player that ANY economic and technological advance has been possible in the audio hardware industry (and the far far too lagged sale of MP3 content), and the sole reason it was possible for the MP3 player to break that DRM-imposed economic wasteland is that the MP3 player slipped through a loophole in the Audio Home Recording Act's DRM mandate. The sole reason that we are seeing economic and technological stimulus in the hardware industry... and the all too delayed stimulus in music industry innovation and sale of old and new content in MP3 format... is exactly because of the escape from the negative economic effects of DRM.
I certainly agree with the "moral" consumer arguments against DRM, but don't let the situation sound like some wishy-washy "moral" anti-DRM battle against pro-DRM economics.
DRM is anti-consumer.
DRM is anti-technology.
DRM is anti-economic.
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- - You can't take something off the Internet! That's like trying to take pee out of a swimming pool.
Why are people on the internet always so eager to think that highly qualified economists at world class Universities will have failed to consider the one blindingly obvious thing to consider about a situation, simply based on reading a one line summary of the relevant paper, in order to prove some clearly stupid point?
I call it the "101 phenomenon." It goes something like: "Any moron learned in physics 101 that that's not possible..." Or "This is statistics 101 stuff, what a bunch of idiots..."
People take course XXX 101 and think they are now experts. When in fact, the true experts took not only 101, but 201, 301, 401, and probably all the way to "40001." And then they TAUGHT each of those classes. And then they wrote a book on it. They know all the little places where XXX 101 actually made simplifications or glossed over complex topics, or made statements that were NOT strictly true but did so for the sake of teachability. In other words, they know so much more than you do that they already thought of your petty objection within the first microsecond and addressed it not much more than a millisecond later. They counter your objections in their sleep, with no conscious effort -- literally.
Usually the hard science is left out of the reporting. That doesn't mean it isn't there. But everybody loves to be an expert just because some journalist worded something badly or took it out of context. If your exposure to a topic is only "101 level," you really have no clue at all and certainly no basis to make a meaningful criticism.