On Ending Non-Competes

Saw an article on VentureBeat about ending non-competes. I agree with basic outline. Besides, Trade Secret provisions already cover the core ground necessary for critical, hard to replicate, never publicly disclosed, unique investments in solutions and processes. Surely, free mobility is part of the social contract. 

Richard Rumelt wrote a deeply excellent book a while back called Good Strategy Bad Strategy. If you want to know why it is not enough to just know something, secret or not, read the book. A non-compete as a guarantor of continued success and operational viability? Read the book and learn why knowing what a company does, what a company makes, what market they are in, what their culture consists of is not enough to imitate them and win. The true trade secret it turns out is Why a company does what it does and Why it came to the Why of what it does and so forth.

The true backdrop true secrets and mechanisms that make companies run and run well are more amorphous than tangible. The chain-link structure (that Rumelt talks about in Chapter 8) of a company cannot be replicated. It is unique in every case. The things companies have access to as resources are not the foundation of success. Rather, it is the definition of and application of good strategic thought and analysis that makes the difference. Or, you get lucky for a time with what you do have and find a way leverage it. Software patents, non-competes, and intellectual property constructs are those things designed for the lucky few that under serve the overall environment in which we all participate.

Trade Secret provisions do have immense value in defense and intelligence contexts. Clearly, there are times and activities in which secrets are crucial to maintain. Lives and necessary strength truly depend on it. Similarly, there are times when the importance of matters can be overstated in comparison to those life/death situations. Commercial enterprise can be one of those situations in which some seemingly important things are over emphasized.

In the commercial enterprise, Trade Secret should be narrow in scope. If I was running a company, trade secret would be non-existent from a legal standpoint (natural secrets are okay but are fully unworthy of litigation), with my winning formula essentially based on reputation, trust, and the commitment to healthy worker and customer relations. That is the way forward.

While it may not appear so on the surface, intellectual property and software patents are closely related to this issue of non-competes. These things are part of the same philosophical system of restraining the emergence of competing merchants and innovators. We need more innovation, more ideas, more inputs into the economy, not less. We need individuals to boldly go forward on great and even the not-so-great ideas. I like vertical integration in theory but could not imagine it as a reality. It just does not work for the advancement of the sciences, technology, and the living condition of society. The philosophical system were a few confine and retain the best intellectual and creative capacity is surely against our natural sense of freedom.

I applaud the quest to re-balance these things such as the Supreme Court and other justices looking at software patents. It is good to see that some are working to strive towards a healthier technology innovation environment. The right decisions in these matters, I believe, will be important to small businesses and would be entrepreneurs. The growth of small business is sure to benefit larger enterprises who will have a much wider portfolio of options to draw upon for their productive efforts. A vibrant small business climate perpetuates monetary circulation and that is good for economic security.

By Michael Gautier


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