I am sorry folks, but
all a corporation provides is access to capital. It does a lousy job of preserving capital
through legal handcuffs. The talent
inevitably walks and the shell left behind is held up by place holders.
Thus reinvesting in
spin offs is actually the corporation’s best strategy. As always, no one will exploit himself quite
like the owner. Thus the valley boomed.
There are presently
huge pools of core theoretical knowledge sequestered by large corporations and
the militaries worldwide to little consequence.
The proper approach is to publish and be damned but open the door to
patent sharing. This allows thousands to
worry the problem and come home for financial and management support.
I have taken that approach
with my own output knowing that establishing the time stamp allows me to block interference
directly. Besides, all knowledge needs a
champion in house or elsewhere for it to advance. Without that it merely sits on the shelf
awaiting that champion. I have now
opened up billions of dollars of future revenue on this blog if not trillions
if we include the natural expansion of agriculture developed here. It is all there to be discovered by its
champions and I welcome them.
Free Your Talent and
the Rest Will Follow
Why
Silicon Valley flourishes and cognitive controls are dangerous
OCTOBER
14, 2013 by ORLY
LOBEL
Imagine
two great cities. Both are blessed with world-class universities, high-tech
companies, and a concentration of highly educated professionals. Which will
grow faster? Which will become the envy and aspiration for industrial hubs all
around the world?
Such
was the reality for two emerging regions in the 1970s: California’s Silicon
Valley and the high-tech hub of Massachusetts Route 128. Each of the regions
benefited from established cities (San Francisco and Boston), strong nearby
universities (University of California-Berkeley/Stanford and Harvard/MIT), and
large pools of talented people.
We’ve
all heard about Silicon Valley; not so much Route 128. Despite their
similarities, and despite the Bostonian hub having three times more jobs than
Silicon Valley in the 1970s, Silicon Valley eventually overtook Route 128 in
number of start-ups, number of jobs, salaries per capita, and invention rates.
The
distinguishing factor for Silicon Valley was an economic environment of
openness and mobility. For more than a century, dating back to 1872,
California has banned post-employment restrictions. The California Business and
Professions Code voids every contract that restrains someone from engaging in a
lawful profession, trade, or business. This means that unlike most other
states, California’s policy favors open competition and the right to move from
job to job without constraint. California courts have repeatedly explained that
this ban is about freeing up talent, allowing skilled people to move among
ventures for the overall gain of California’s economy.
And
the data confirm this intuition: Silicon Valley is legendary for the success of
employees leaving stable jobs to work out of their garages, starting new
ventures that make them millionaires overnight. Stories are abundant of entire
teams leaving a large corporation to start a competitive firm. Despite these
risks, California employers don’t run away. On the contrary, they seek out the
Valley as a prime location to do business. Despite not having the ability to
require noncompete clauses from their employees, California companies compete
lucratively on a global scale. These businesses think of the talent wars as
a repeat game and find other ways to retain the talent they need most.
In
fact, the competitive talent policy is also supported by a market spirit of openness
and collaboration. Even when restrictions are legally possible—for example, in
trade secret disputes—Silicon Valley firms frequently choose to look the other
way. Sociologist Annalee Saxenian, who studied the industrial cultures of both
Silicon Valley and Route 128 in Massachusetts, found that while Boston’s
Route 128 developed a culture of secrecy, hierarchy, and a conservative
attitude that feared exchanges and viewed every new company as a threat, Silicon
Valley developed an opposing ethos of fluidity and networked collaborations.
These exchanges of the Valley gave it an edge over the autarkic environment
that developed on the East Coast. In Massachusetts, firms are more likely to be
vertically integrated—or to have internalized most production functions—and
employee movement among firms occurs less frequently.
New
research considering these different attitudes and policy approaches toward the
talent wars support California’s modus operandi.
A
recent study by the Federal Reserve and the National Bureau of Economic
Research examined job mobility in the nation’s top twenty metropolitan areas,
and found that high-tech communities throughout California—not only Silicon
Valley—have greater job mobility than equivalent communities in other states.
Network mapping of connections between inventors also reveals that Silicon
Valley has rapidly developed denser inventor networks than other high-tech
hubs.
Researching
over two million inventors and almost three million patents over three decades,
a 2007 Harvard Business School study by Lee Fleming and Keon Frenken observes a
dramatic aggregation of the Silicon Valley regional networks at the beginning
of the 1990s. Comparing Boston to Northern California, the study finds that
Silicon Valley mushroomed into a giant inventor network and a dense
superstructure of connectivity, as small isolated networks came together. By
the new century, almost half of all inventors in the area were part of the
super-network. By contrast, the transition in Boston occurred much later and
much less dramatically.
Michigan
provides a natural experiment for understanding the consequences of
constraining talent mobility. Until the mid-1980s, Michigan, like
California, had banned noncompetes. In 1985, as part of an overarching
antitrust reform, Michigan began allowing noncompetes, like most other states.
Several new studies led by MIT Sloan professor Matt Marx look at the effects of
this change on the Michigan talent pool. The studies find that not only did
mobility drop, but that also once noncompetes became prevalent, the region
experienced a continuous brain drain: Its star inventors became more likely
to move elsewhere, mainly California. In other words, California gained twice:
once from its intra-regional mobility supported by a strong policy that favors
such flows, and once from its comparative advantage over regions that suppress
mobility.
A
virtuous cycle can be put into motion geographically where talent mobility
supports professional networks, which in turn enhance regional innovation.
Firms can learn to love these environments of high risk and even higher gain. Rather than thinking of every
employee who leaves the company as a threat and an enemy, smart companies are
beginning to think of their former employees as assets, just as universities
wish for the success of their alumni. Companies like Microsoft and Capital One
have established networks of alumni, showcasing the achievements of their
former employees and practicing re-hiring of their best talent, hoping that at
least some of those who leave will soon realize that the grass is not always
greener elsewhere.
Most
importantly, motivation and performance are triggered by commitment and
positive incentives to stay, rather than threats and legal restrictions against
leaving. In behavioral research I’ve conducted with my co-author On Amir, we
find that restrictions over mobility can suppress performance and cause people
to feel less committed to the task. Cognitive controls over skill, knowledge,
and ideas are worse than controls over other forms of intellectual property
restriction because they prevent people from using their creative capacities,
not just firms from using inventions that are already out there. So instead of
requiring noncompetes or threatening litigation over intellectual property,
California companies use rewards systems, and create the kind of corporate
cultures where employees want to work and do well. Again, a double
victory.
Unsurprisingly,
when Forbes recently looked at the most inventive cities in the
country for 2013, using OECD data, the two top cities were based in California:
Bio-tech haven San Diego, and the legendary home of Silicon Valley, San
Francisco. Boston, still vibrant and highly innovative despite its most
restrictive attitudes, came in third. Competition is the lifeblood of any
economy, and fierce competition over people is the essence of the
knowledge economy.
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