How California’s ban on non-competes saved the tech industry from eugenics.
In 1956, the Nobel prize in physics went to William Shockley, John Bardeen and Walter Brattain for their work on silicon transistors. Shockley, a Bell Labs alum, had already gone to work commercializing this invention, moving from New Jersey to Mountain View, California and founding Shockley Semiconductors, the first “silicon” company in Silicon Valley. In an important sense, Shockley invented Silicon Valley.
He was a terrible person.
After the Nobel, Shockley turned brooding and paranoid. He installed wiretaps to spy on his engineers and family members and administered polygraph tests to employees.
He lost interest in semiconductors and threw himself into eugenics and the extermination of “inferior” people. He offered cash bounties to Black women who underwent sterilizing surgeries. He toured the US, debating biologists to prove that the human race needed to be purified through “race science” to preserve and refine the superior genes of the very best white people.
All of this would have posed a significant barrier to inventing the commercial silicon transistor, of course. But even without the racism and paranoia, Shockley was a genuinely terrible manager. He was prone to starting and then halting projects, switching up the corporate priorities based on his whims without regard to the work that his employees had put into work that he was scrapping or de-emphasizing.
Within a year of the company’s founding, eight of its top engineers had had enough. They quit Shockley Semi and founded their own rival, Fairchild Semiconductor. Less than a year after that, Fairchild launched its first silicon transistor, the 2N696, dooming the germanium transistor to the scrap heap of history. Silicon Valley was finally making silicon.
As you might imagine, Shockley wasn’t pleased about this. He was, in fact, furious. He branded the engineers who started Fairchild “The Traitorous Eight.” He railed against them to his dying day.
But that was all he could do, really. You see, none of Shockley’s employees were bound by a noncompete agreement. In fact, no worker in California was bound by such an agreement, because California prohibits noncompetes. They are unenforceable in the whole state.
What’s sauce for the goose is sauce for the gander. California’s prohibition on noncompete agreements let the Traitorous Eight found Fairchild — and then, a decade later, it let two of the Traitorous Eight leave Fairchild and found Intel. A year after that, another Fairchild alum quit his job and founded AMD (AMD, Intel and other companies founded by Fairchild veterans are often called “Fairchildren”).
Nothing could stop this: not Shockley’s shrill and paranoid denunciations, nor the cold corporate might of Fairchild.
Noncompetes are illegal in California, but they’re rampant elsewhere in America. The less you’re paid, the more likely it is that your boss will force you to sign a noncompete: one in six American food prep and service workers is bound by a noncompete, and they are widely used in fast-food restaurants to stop burger-flippers and cashiers from changing jobs to earn a few badly needed cents per hour.
When I tell people that fast-food restaurants have come to dominate the noncompete league-tables, they’re aghast, and then they often say something like “I can understand using noncompetes to protect proprietary company information in knowledge-intensive industries like tech, but fast food?”
The thing is, we know for a fact that knowledge-intensive tech industries absolutely don’t need noncompetes. The most successful tech companies in the history of the world are headquartered in a state where noncompetes are outlawed. If noncompetes had been legal in California, then Mountain View would have been the silicon transistor’s graveyard, not its birthplace.
Shockley’s founding employees consisted of nearly every person in the world who understood silicon transistors and was qualified to make one — if he’d been able to bind them with noncompetes, they’d have had to choose between being chained to his deranged, racist ass for years, or changing fields.
Noncompetes allow bad people with good ideas to create roach-motels for smart people who might execute them — talent checks in, but it doesn’t check out.
Silicon Valley’s meteoric, noncompete-free rise to global dominance demonstrates the importance of making policy based on societal needs. If you believe in the singular genius and heroic vision of corporate founders, noncompetes sound like terrible policy: how will you lure the Business Heroes to your state if they can’t keep their ex-employees from “stealing” the know-how and skills the company’s founder generously allowed them to acquire?
If, on the other hand, you believe that good ideas show up repeatedly when the moment is right, then it’s more important to ensure that good ideas and good people can find each other and make stuff happen.
In Kevin Kelly’s 2010 book What Technology Wants, Kelly describes something he calls “the adjacent possible”: new inventions appear when the underlying technologies they require are widely available. Lots of people thought of helicopter-like inventions for hundreds of years, but no one invented a helicopter until engines, materials, and aerodynamics had advanced to the point to make them practical, and then lots of people invented helicopters more-or-less simultaneously.
The adjacent possible means that Business Heroes aren’t singular visionaries, they’re just people who happen to be in the right place at the right time, and nothing about that guarantees that they can turn their ideas into working inventions that benefit the world (or their investors, for that matter).
The US has had a robust Federal trade secrets law since 2016. Patents and copyrights date back to the nation’s founding in 1776. Businesses have no shortage of tools for preventing ex-employees from “misappropriating” knowledge when they go to work for a rival. Silicon Valley proves that employers can thrive even if they don’t get the right to ruin their ex-employees’ careers.
No employer should have that right. Not a Silicon Valley company offering millions in stock options, and certainly not a fast-food joint paying the federal tipped minimum wage of $2.13/hour.