Evolution and non-competes

You sometimes hear people talking about the evolution of businesses. This irritates me a little. Evolution happens through reproduction. Slowwwwly.  Entities don’t “evolve”. Species evolve. If anything business-ish can be likened to evolution, it’s when new businesses are born out of old ones.

I’ve read some discussions recently on the merits of non-competes. Seems to me that if a non-compete means that a business can’t easily “reproduce”, then it’s going to mean a given business will have fewer descendants.

You might or might not regard this as a good thing. If you’re an owner of the business, you might look upon descendant businesses as the owner of an apple tree would regard other trees growing very close to his apple tree: with horror, disgust, and an axe.

If you regard companies as being mechanisms for human beings to work together for the betterment of humanity – by doing something somebody wants them to do – then you might regard business offspring as a good thing.

Empirically, it does seem that countries with high “churn” of businesses do better – in terms of doing things that people want – than countries with low churn. This would lend credence to the second point, that churn is good for (a) society. But these countries tend be the richer countries. This would tend to suggest that churn is good for business owners.

How exciting. Business evolution is good. Therefore non-competes are bad, not just for society, but for investors too!


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