The Prof G Pod with Scott Galloway - No Mercy / No Malice: Compete

Episode Date: January 14, 2023

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

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cards, savings accounts, mortgage rates, and more. NerdWallet, finance smarter. NerdWallet Compare Incorporated. NMLS 1617539. 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. Heraclitus, a 6th century BC 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 it's essential.

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. 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 Lena

Kahn wrote an excellent op-ed detailing why. The agency is presently seeking comments, so here's mine. Word, 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. 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. Apple, Disney, Google, Intel, Meta, Netflix, Oracle, and Tesla were able to succeed without limiting the options of their employees. If I was in L.A., California, California, dreaming, I'd touch your waist.

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 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. 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. Everybody loses, except, of course, the incumbents' 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. 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 1 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 roles 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 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, 1 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. 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. 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. 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 pleated 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 U.S. invested in relationships, passing laws that somewhat protect your ability to love and marry who you want to. The country needs to invest in work, too, and let people decide who they want to. 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. Life is so rich. What software do you use at work? The answer to that question is probably more complicated than you want it to be.

The average U.S. company deploys more than 100 apps, and ideas about the work we do can be radically changed by the tools we use to do it. So what is enterprise software anyway? What is productivity software? How will AI affect both? And how are these tools changing the way we use our computers to make stuff, communicate, and plan for the future? In this three-part special series, Decoder is surveying the IT landscape presented by AWS. Check it out wherever you get your podcasts.

Hello, I'm Esther Perel, psychotherapist and host of the podcast, Where Should We Begin, which delves into the multiple layers of relationships, mostly romantic. But in this special series, I focus on our relationships with our colleagues, business partners and managers. Listen in as I talk to co-workers facing their own challenges with one another and get the real work done. Tune into How's Work, a special series from Where Should We Begin, sponsored by Klaviyo.