No Mercy / No Malice: Compete

As read by George Hahn. https://www.profgalloway.com/compete/ Learn more about your ad choices. Visit podcastchoices.com/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:01Scott Galloway?

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• 0:49Speaker 01

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• 1:34Scott Galloway?

  I'm Scott Galloway, and this is No Mercy, No Malice. Your ability to rent your human capital to whom you choose is a fundamental right. Compete, as read by George Hahn.

• 1:53George Hahn?

  Heraclitus, a 6th century B.C. Greek philosopher, famously said, quote, "The only constant in life is change," unquote. He also disliked people and was depressed and irritable. He was right on several fronts. Change is inevitable, as the cosmos has determined its essential.

• 2:19George Hahn?

  Growth and innovation are the product of change. New ideas, companies, and people replacing old ones. Churn. Change brings risk to incumbents, who are incentivized to suppress it. Thus, a key role of government is to ensure efforts to suppress competition are blocked. Unfortunately, lawmakers have become addicted to expensive sleeping pills supplied by incumbents, presenting a compelling offer. Here's a shit-ton of money, and all you have to do is... Nothing. Our regulators at the FTC and DOJ are stirring, but still not awake from a four-decade slumber.

• 3:05George Hahn?

  As we've written before, yesterday's iconoclasts pull the ladder up behind them the moment they become today's icons. We are in general agreement that anti-competitive behavior is bad and have laws against it. Yet companies have been able to convince regulators to look the other way on an increasingly popular weapon of mass entrenchment. They're passing out OxyContin during an AA meeting. The oxy? Non-compete agreements. Making good on a Biden campaign promise, the FTC has proposed a rule banning non-competes across the board. FTC Chair Lina Khan wrote an excellent op-ed detailing why.

• 3:49George Hahn?

  The agency is presently seeking comments, so here's mine. Words, sister. Non-compete clauses are what firms use to sequester your human capital from competitors. When a new employee signs a non-compete with, say, Johnson & Johnson, they agree that when their employment ends, they won't work at another pharmaceutical company for a designated period, usually one to two years. If you're familiar with non-competes, you likely associate them with technology jobs, where employers want to protect valuable intellectual property. And that's the defense most often offered for the restrictions. By the way, the argument is bullshit.

• 4:33George Hahn?

  A confidentiality agreement does the trick. The irony of non-competes is they only serve to dampen growth. One of the few places where they're banned is also home to the world's most innovative tech economy: California. Job hopping and seeding new acorns have been part of Silicon Valley since the beginning. In 1994, a Berkeley economist theorized that California's ban on non-competes was one of the main reasons Silicon Valley existed at all. And in 2005, economists at the Federal Reserve put forward statistical evidence supporting the theory.

• 5:14George Hahn?

  Apple, Disney, Google, Intel, Meta, Netflix, Oracle, and Tesla were able to succeed without limiting the options of their employees.

• 5:34George Hahn?

  Yet outside California, corporate boardrooms love non-competes. Historically, they were attached only to high-skilled, high-paying jobs. Now, they're becoming ubiquitous across different industries at all levels. Fast-food workers are being forced to sign non-competes, as are hairstylists and security guards. Roughly a third of minimum-wage jobs in America now require such agreements. If forcing non-competes on America's lowest-paid workers sounds like indentured servitude, trust your instincts. Employers claim non-competes give them the assurance

• 6:16George Hahn?

  to pay for training and other investments in their employees. There is some evidence that non-competes are associated with more worker training, but there's a catch. They also decrease wages. The good news is we'll train you to operate the fryer. The bad news is we won't pay you a living wage to do it, and you can't take a better job across the street.

• 6:41George Hahn?

  The FTC estimates that non-competes reduce employment opportunities for 30 million people and suppress wages by $300 billion per year. That's far more than the total value of property stolen outright every year. Multiple studies also show that non-competes reduce entrepreneurship and business formation, which makes sense. It's difficult to start a business when talent pools are not accessible or allocated to their best use. Downstream, the lack of competition leads to entrenchment, which eventually results in higher prices for consumers, as one study found has occurred in healthcare.

• 7:25George Hahn?

  Everybody loses, except, of course, the incumbent's shareholders. Most of what gets written about business, my work included, focuses on the output: the dangers of social media, the potential of AI, or shifts in streaming. But inputs matter too, and the most important input is our labor. It's important because our work defines us, even more than the things we consume. Everything good in my life has come from work or relationships. The relationships, especially with my kids, have burned brighter as I can provide economic security, and it helps that dad has a sense of self.

• 8:10George Hahn?

  However, an increasing number of prime working-age people, men in particular, are no longer seeking work at all. One in nine American men aged 25 to 54 do not work today. Seventy years ago, that number was one in 50. These aren't crypto bros who got out before the crash, or stay-at-home dads — fewer than a quarter of them have working wives. Some of the increase is accounted for by growth in the disability rolls and by our shockingly high incarceration rate. Ex-cons have a difficult time re-entering the labor force. But the number of people dropping out of the workforce is much bigger than these

• 8:55George Hahn?

  trends explain. Often low skilled with job prospects that offer low compensation and lousy working conditions, they've simply given up. This isn't a uniquely American trend. In the UK, one in 10 young men are economically inactive, but the decline in labor participation in the US is the second largest among OECD countries. Economically inactive, meaning not working and also not looking for work. This term should not exist in any developed society. It means our nation's most basic and important resource lies fallow.

• 9:37George Hahn?

  The FTC's proposed ban on non-competes includes a significant exception, one that I've experienced firsthand. Where the sale of a company is involved, the buyer can make a non-compete clause a condition of the sale. That's fair. There's often a great deal of money involved, and the employees of the acquired firm are foregoing career options in exchange for economic security. Though even a fairly negotiated non-compete is a straitjacket. When I sold my company L2 to Gartner, they required that I sign a non-compete. About three weeks later, I realized I was not a cultural fit at Gartner.

• 10:19George Hahn?

  The previous sentence is the mother of all understatements. I left several million dollars on the table so I could leave before my earn-out was over. But my non-compete remained in effect, and they threatened me repeatedly with legal action if I started anything in any near-related field. Multiplied millions of times, this creates a chilling effect on the economy.

• 10:45George Hahn?

  Even if the legal action has no merit, raising capital for a startup under the shadow of a lawsuit is almost impossible. Sort of the mob meets blue blazers and pleaded khakis. Relationships and having a purpose, i.e. work, are the pillars of happiness. School, motivational bestsellers, and TikTok remind us we need to invest in them. But our nation also needs to invest. Last month, the US invested in relationships, passing laws that somewhat protect your ability to love and marry who you want to.

• 11:27George Hahn?

  The country needs to invest in work, too, and let people decide who they want to be in a relationship with during most of their waking hours.

• 11:42Scott Galloway?

  Life is so rich.

• 11:48Speaker 03

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• 12:19Speaker 04

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