Iโve spent some time today thinking about noncompetes. My initial reaction to the proposed ban was borderline emotional. I can tell you firsthand that it sucks to work for a company and have this overwhelming belief that you have the ability to build a better product but not have the freedom to do so.
Here is a thread by Lina Khan, along with a few of my thoughts.
It cuts to the heart of the problem. I often think about how noncompetes undermine competition by preventing employees from starting new companies. But making it hard for people to switch jobs and using that as leverage to underpay people might be a bigger issue.
I suspect legal experts might talk about the enforceability of noncompetes in various worker-friendly states. That doesnโt matter. Even if a noncompete is not enforceable, it can still suppress earnings and deter competition through fear alone. The average worker does not have a personal lawyer to help defend their economic rights.
Iโm shocked by some of the data here. The FTC says removing noncompetes could DOUBLE the number of companies competing in various industries. I think mileage may vary, but thatโs an exciting number.
To put this into perspective, the market cap of Amazon is $1T. We could create a new Amazon composed of small businesses about every 3 years by eliminating noncompetes.
That prospect might make environmentalists cringe. The environment is a fair thing to consider. Iโd love to see the data on how much additional CO2 we might pump into the air and how we might offset that.
I love that the proposal would require rescinding existing noncompetes. There is no reason to grandfather in contracts that violate worker rights.
Out of curiosity, I read through ~50 of the 2.5k public comments. I had to go through roughly 25 comments in favor of the change before finding the first pro-noncompete comment.
It would be nice to know how much research went into this. It doesnโt look like a willy-nilly proposal which I appreciate. But there could be more transparency into the data that supports the proposal. Or maybe the data is there and Iโve missed it.
Itโs inevitable that companies benefiting from noncompetes will fight this. They will argue it hurts innovation by putting trade secrets at risk. In some cases that might be true. Iโm not overly sympathetic, but I do think there are better solutions to that problem.
If an employee learns an industry from a company then invents a superior solution, I would be in favor of the company owning a small stake in the new solution. Such a system could incentivize companies to share ideas rather than protect them. I know the implementation would be challenging. Itโs worth it if we can protect worker rights and build a more collaborative future.