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Free Your Talent and the Rest Will Follow – Article by Orly Lobel

Free Your Talent and the Rest Will Follow – Article by Orly Lobel

The New Renaissance Hat
Orly Lobel
October 17, 2013
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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 region 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, but 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.

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 non-compete 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 supports 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 20 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 have.

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 non-competes. In 1985, as part of an overarching antitrust reform, Michigan began allowing non-competes, 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 non-competes became prevalent, the region experienced a continuous brain drain: Its star inventors became more likely to move elsewhere, mainly to 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. They showcase their former employees’ achievements and practicing rehiring 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 because they prevent people from using their creative capacities, they don’t just prevent firms from using inventions that are already out there. So instead of requiring non-competes or threatening litigation over intellectual property, California companies use rewards systems, creating 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 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.

Orly Lobel is the Don Weckstein Professor of Law at the University of San Diego and founding faculty member of the Center for Intellectual Property and Markets. Her latest book is Talent Wants to be Free: Why We Should Learn to Love Leaks, Raids, and Free-Riding (Yale University Press, September 2013).

This article was originally published by The Foundation for Economic Education.
Liberty Was Also Attacked in Boston – Article by Ron Paul

Liberty Was Also Attacked in Boston – Article by Ron Paul

The New Renaissance Hat
Ron Paul
April 28, 2013
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Forced lockdown of a city. Militarized police riding tanks in the streets. Door-to-door armed searches without warrant. Families thrown out of their homes at gunpoint to be searched without probable cause. Businesses forced to close. Transport shut down.

These were not the scenes from a military coup in a far off banana republic, but rather the scenes just over a week ago in Boston as the United States got a taste of martial law. The ostensible reason for the military-style takeover of parts of Boston was that the accused perpetrator of a horrific crime was on the loose. The Boston bombing provided the opportunity for the government to turn what should have been a police investigation into a military-style occupation of an American city. This unprecedented move should frighten us as much or more than the attack itself.

What has been sadly forgotten in all the celebration of the capture of one suspect and the killing of his older brother is that the police state tactics in Boston did absolutely nothing to catch them. While the media crowed that the apprehension of the suspects was a triumph of the new surveillance state – and, predictably, many talking heads and Members of Congress called for even more government cameras pointed at the rest of us – the fact is none of this caught the suspect. Actually, it very nearly gave the suspect a chance to make a getaway.

The “shelter in place” command imposed by the governor of Massachusetts was lifted before the suspect was caught. Only after this police state move was ended did the owner of the boat go outside to check on his property, and in so doing discover the suspect.

No, the suspect was not discovered by the paramilitary troops terrorizing the public. He was discovered by a private citizen, who then placed a call to the police. And he was identified not by government surveillance cameras, but by private citizens who willingly shared their photographs with the police.

As journalist Tim Carney wrote last week:

“Law enforcement in Boston used cameras to ID the bombing suspects, but not police cameras. Instead, authorities asked the public to submit all photos and videos of the finish-line area to the FBI, just in case any of them had relevant images. The surveillance videos the FBI posted online of the suspects came from private businesses that use surveillance to punish and deter crime on their property.”

Sadly, we have been conditioned to believe that the job of the government is to keep us safe, but in reality the job of the government is to protect our liberties. Once the government decides that its role is to keep us safe, whether economically or physically, they can only do so by taking away our liberties. That is what happened in Boston.

Three people were killed in Boston and that is tragic. But what of the fact that over 40 persons are killed in the United States each day, and sometimes ten persons can be killed in one city on any given weekend? These cities are not locked-down by paramilitary police riding in tanks and pointing automatic weapons at innocent citizens.

This is unprecedented and is very dangerous. We must educate ourselves and others about our precious civil liberties to ensure that we never accept demands that we give up our Constitution so that the government can pretend to protect us.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission.

Congress Exploits Our Fears to Take Our Liberty – Article by Ron Paul

Congress Exploits Our Fears to Take Our Liberty – Article by Ron Paul

The New Renaissance Hat
Ron Paul
April 24, 2013
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This week, as Americans were horrified by the attacks in Boston, both houses of Congress considered legislation undermining our liberty in the name of “safety.” Gun control continued to be the focus of the Senate, where an amendment expanding federal “background checks” to gun show sales and other private transfers dominated the debate. While the background check amendment failed to pass, proponents of gun control have made it clear they will continue their efforts to enact new restrictions on gun ownership into law.

While it did not receive nearly as much attention as the debate on gun control, the House of Representatives passed legislation with significant implications for individual liberty: the Cyber Intelligence Sharing and Protection Act (CISPA). CISPA proponents claim that the legislation is necessary to protect Americans from foreign “cyber terrorists,” but the real effect of this bill will be to further erode Americans’ online privacy.

Under CISPA, Internet corporations are authorized to hand over the private information of American citizens to federal agents, as long as they can justify the violation of your privacy in the name of protecting “cyber security”. Among the items that may be shared are your e-mails, browsing history, and online transactions.

Like the PATRIOT Act, CISPA violates the fourth amendment by allowing federal agencies to obtain private information without first seeking a warrant from a federal judge. The law also allows federal agencies to pass your information along to other federal bureaucrats — again without obtaining a warrant. And the bill provides private companies with immunity from lawsuits regardless of the damage done to anyone whose personal information is shared with the federal government.

CISPA represents a troubling form of corporatism, where large companies cede their responsibility to protect their property to the federal government, at the expense of their customers’ privacy and liberty. In this respect, CISPA can be thought of as an electronic version of the Transportation Security Administration, which has usurped the authority over airline security from private airlines. However, CISPA will prove to be far more invasive than even the most robust TSA screening.

CISPA and the gun control bill are only the most recent examples of politicians manipulating fear to con the people into giving up their liberties. Of course, the people are told the legislation is for “limited purposes,” but authority granted to the federal government is rarely, if ever, used solely for the purpose for which it is granted. For example, the American people were promised that the extraordinary powers granted the federal government by the PATRIOT Act would only be used against terrorism. Yet soon after the bill became law, reports surfaced that it was being used for non-terrorism purposes. In fact, according to data compiled by the American Civil Liberties Union, 76 percent of the uses of the controversial “sneak-and-peak” warrants where related to the war on drugs!

Sadly, I expect this week’s tragic attacks in Boston to be used to justify new restrictions on liberty. Within 48 hours of the attack in Boston, at least one Congressman was calling for increased use of surveillance cameras to expand the government’s ability to monitor our actions, while another Senator called for a federal law mandating background checks before Americans can buy “explosive powder.”

I would not be surprised if the Transportation Security Administration uses this tragedy to claim new authority to “screen” Americans before they can attend sporting or other public events. The Boston attack may also be used as another justification for creating a National ID Card tied to a federal database with “biometric” information. The only thing that will stop them is if the American people rediscover the wisdom of Benjamin Franklin that you cannot achieve security by allowing government to take their liberties.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission.