Commentary: Washington state legislator Derek Stanford (D-Bothell) just introduced a bill that would eliminate the enforceability of non-compete agreements in Washington State. Microsoft will do everything in their power to kill this bill, and we — the innovation community — should do everything in *our* power to get it passed.
Why should we care?
Because we all know two things that Microsoft — and most other big companies — will never admit:
1. Real innovation almost never comes from incumbent firms, because they’re too focused on defending their existing franchises to pursue really big new ideas that might disrupt them (yes, the iPhone and AWS are exceptions, now name another).
2. The capital requirements of technology innovation have collapsed — thanks to open-source software, cloud infrastructure and the global penetration of internet-enabled smartphones — and entrepreneurial *talent* is now the scarcest and most valuable ingredient to high-impact innovation, not big brands or global distribution networks.
Microsoft — and other large firms — will swarm Olympia with lobbyists who claim that they *need* non-compete agreements to keep their trade secrets from walking out the door. This is bullshit, and (again) there are two good reasons to doubt this line of argument:
1. We have a very strong (arguably too strong, but that’s a fight for another day) system of trade secret and patent protection for specific technology innovations. Most big company employees sign an assignment agreement that gives their employer clear title to any innovation that they create while on that company’s payroll. So if you create a secret innovation for your employer and quit the next day the employer owns that innovation free and clear. Ideas can be owned, people shouldn’t be.
2. California — and specifically the Bay Area (for tech) and Los Angeles (for entertainment) — is the undisputed global leader in innovation, and has the huge public companies and massive wealth- and job-creation to show for it. California banned non-compete agreements in 1872 — over a hundred years ago — and many economists point to the free movement of talent between companies and to new startups as one of the most important enablers of California’s massive lead in the global innovation economy.
So if non-competes aren’t an enabler of innovation, what are they good for? As it turns out, the only thing that non-competes are really useful for is keeping employees in their jobs against their will. In Washington, both Microsoft and Amazon have filed lawsuits against individual employees not only to keep them from jumping ship to competitors, but also to keep them from leaving to create new startup companies.
What happens when one state allows non-compete agreements and another doesn’t? The most talented and entrepreneurial people pick up and move from the state that holds them back to the one that helps them succeed.
Before anyone labels me a basher of big companies — a biter of the hands that have fed our regional ecosystem so abundantly — let me be clear: I am incredibly grateful to Microsoft and Amazon for putting Washington State on the global innovation map and drawing so many talented people to the region. I firmly believe that eliminating the enforceability of non-competes in Washington State will make both companies stronger — by ensuring that every person who works for them does so with absolute commitment to their mission, and not because their professional options have been constrained by legal strictures that disrespect and dishonor them.
RELATED POST: Cracking down on non-compete deals: Bill would change Wash. state law to mirror Calif. approach
I don’t want Washington to be like California. I want us to be different, better, more humane and more focused on creating sustainable prosperity for all, not just a chosen few. But I sure as hell don’t want us sending our most promising entrepreneurs south just because a few big companies want to keep their hard-won recruits from seeking opportunities elsewhere. We’re better than that, and it’s time our laws reflected our belief in the right of the individual to choose their own work on their own terms.
Thank you Rep. Stanford for having the courage to pick this fight. I’m with you, and I know others will be as well. Let’s do this!
Founder’s Co-op partner Chris DeVore is a Seattle entrepreneur and investor, and the managing director of Techstars Seattle. Follow him on Twitter @CrashDev and read more of his writing at his CrashDev site.
