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As an example: if Coca Cola’s secret is worth $100 but the employees are making $1 each then a rival can poach them for $10 and still get a great return. Coke
by heads 3y ago
As an example: if Coca Cola’s secret is worth $100 but the employees are making $1 each then a rival can poach them for $10 and still get a great return. Coke could split the $100 more fairly but Pepsi still only needs to pay $100/N + 1 to outbid for the secret.
Industries based on secret keeping would, over time, corrupt each other out of business until only a few are left. I can see a how the authorities would argue that this eventual monopoly is bad and look ways to artificially put moats around the secrets.
I can also see an argument for this kind of business being allowed to natural cease to exist altogether.
Are Wall St secrets different in some way? I suppose for a start we’re talking about sales Rolodexes and client relationships which are much more readily available than cola recipes. In that example the employee’s network is the business value, so why shouldn’t they shop around and take their clients with them?
Is there a better analogy to help understand the economics of the situation?
- ImPostingOnHN 3y agoStealing or receiving stolen trade secrets is a crime on its own. One of the prescribed penalties is disgorgement of 3x the value of the secrets.
- heads 3y agoI suppose therefore that the basis of a non-compete agreement is that an employee will be so saturated with secrets that they couldn’t possibly work for a competitor without implicitly revealing those secrets? Garden[ing*] leave is the usual solution to this: the employees are paid a salary to stay at home and do nothing during their notice period. They are cut off from the secrets so that by the end of their employment they no longer pose the threat of a leak. That feels like a fairer deal — are the non competes in NY state a kind that are effectively requiring unpaid gardening leave? That does indeed seem wrong *I always preferred the British version of this where the City gentleman spends the leave period tending to his roses rather than just lounging around on the lawn, hence gardening rather than garden leave.
- ghaff 3y agoWhile leave arrangements do put some company skin in the game, I'm not sure how I feel about them overall. They make non-competes more palatable but how many employees are really going to be happy with getting some fraction of their total comp for a year or two. Yeah, there's probably some number of people for whom that fraction to travel the world or work on their startup idea sounds like a really good idea. But there's probably far more who see the potential to derail their career and miss their mortgage payments.
- devman0 3y agoYou just made a great argument for why Non-Disclosure Agreements should and do exist. This conversation is about Non-Compete Agreements which are entirely separate.
- 4death4 3y agoI fail to see how the conclusion of your scenario is monopoly power. If anything, it seems like it would create a marketplace with more players because secret knowledge is no longer a barrier to entry.