Conversation

I think the bar has to be pretty high for the government to ban voluntary transactions. What is it about non-competes that’s so terrible that nobody could possibly be paid enough to make up for the opportunity cost?

Adam Nash

@adamnash

Interesting question. Certainly empirical evidence here is that labor gets almost nothing for non-competes. Is that because they have little value? Or is it because of some flaw in the transaction due to power imbalance? Forgive me, but (1/3)...

1/ Chicago trading firms will pay out many years of salary for leavers to take a vacation rather than take up employment with a competitor. The prop algo/strategy is everything but employees might need to know it from day 1 to be effective. How else do you counter espionage?

2/ guys making $1m+/yr should be trusted to make the call. I’m sure the government’s top secret nuke program wouldn’t be cool with scientists taking up a similar job with a foreign enemy, even if they super pinky swear not to breach their NDA.

3/ less sophisticated workers probably do misprice the cost/value of the non-compete. It goes both ways though — they might not appreciate the incredible value to them that will result from the opportunity to work on a particular, highly competitive project area.