 I'd like to welcome you to the 11th annual undergraduate economics debate presented by the Department of Economics and the Undergraduate Economics Club. I'm Zach Baer, so you may have seen my face here before. I'm a senior political science and economics major, and I'm going to be moderating the debate today. I hope you find it engaging and the evidence convincing and informative. We're debating the motion, high-tech employee antitrust litigation should formal or informal agreements between companies be allowed which prevent the poaching of newly trained employees. In support of the motion over here we have David Chassire class of 2017, Tristan Deschler class of 2018, Ryan Manning class of 2015, and Brian Wells also class of 2015. Against the motion we have Willis Chen class of 2015, Matthew Harmon class of 2018, Ryan Salem class of 2015, and Sonya Shuka class of 2017. I'd also like to introduce our judges. We have Bill Troy, class of 1976, Paul Lawrence class of 1978, and Sam Jordan class of 2014. The rules of the debate are as follows. First, our team in support is going to have 15 minutes to present their argument, followed by the team in opposition, they'll have 15 minutes as well, and the time will be divided equally among three members of the team, so five minutes each. Then we're going to have a five minute period of deliberation between the teams followed by rebuttals. During the rebuttals we're going to switch the order, the team in opposition will have nine minutes, and then the team in support will have nine minutes. The judges will then be able to ask one question each. For each question the teams are going to have three minutes to deliberate, and then we're going to have alternating order again, the team in support will have two minutes to speak followed by the team in opposition, and then vice versa for each following question. The judges will then have 15 minutes to deliberate during which time we're going to have our scholarship awards presentations, and then we'll have the announcement of the winner and the closing remarks. So without further ado, we can begin with the team in support. Now many arguments against anti-poaching are from the assumption that it is anti-free market, and that in a free market economy, markets will always work as they should, whether laws of supply and demand always set the demand for the price of a good. Theoretically this is sound and definitely true in numerous sectors, but it would however be dangerous to assume that free market practices are exactly effective across all markets at all times. The tech industry is an example of an industry that isn't necessarily governed by these conditions. It operates on quite different economic access to the rest of the economy because it uses the most advanced technologies available. This has led to, on average, higher investments at higher rates and higher risks with a greater emphasis of capital invested into training and proportionately less into fixed assets. Because the industry operates under these very different conditions, its policies too should be observed through this lens. The agreements between firms in Silicon Valley not to poach each other's employees should not be viewed as a defiant move against capitalism, but rather a recognition of the limitations of the free market economy. The aim of the agreement was to bring about sustainability in the industry, which is important not only for the firm, but for all stakeholders, employees and shareholders alike. Collusion industry has proven to be successful in the past. The airline industry is one example of how important it is for firms to understand each other in context to their industry. The Airline Regulation Act of 1978 was a federal law that was aimed at removing regulation in the industry and reducing collusion between firms to not pursue each other's workers and set ticket prices. This increased exposure to market forces and led to upheaval in the labor market as the disruption brought about major losses in the industry. Between 1978 and 2001, nine major carriers and 100 smaller airlines went bankrupt and were liquidated as thousands lost jobs. The technologies industry is in many ways very similar to the airline industry of the late 70s. They both explore the boundaries of human innovation. They both have seen spectacular growth and investment and they both have employed self-regulation at some point. It would be therefore irresponsible as economists not to learn from history, especially now that the tech industry accounts for such a significant proportion of the US economy. It is therefore no longer about the financial gains of a few employees. This is in the interest of the US and global economy. So as mentioned, the technologies industry is very large. It accounts for 6% of the US GDP and in 2013, the average annual wage for high-tech workers in Silicon Valley was $196,000, compared to the average of $54,000 in the US. From this, we can see that the average employee in Silicon Valley is already well-compensated for their work in comparison to the rest of the economy. Now this is mainly a problem when looking at its effect on inequality. Census data on the right shows that wealthy people with incomes of over $100,000 are twice as common in Silicon Valley than in the rest of the United States and in California. This has caused costs of living in the area to be virtually unaffordable for most people outside of the industry and no community is built in binary. The agreement would result in a lower inflation of these wages. This high wage rate would be expected due to the rapid growth of the industry and the growing importance of technology in the long-term economic growth. Economists have even coined this term as the state of the technology. However, the largest contributor to this high wage rate has to be the scarcity of skills following the principle of supply and demand. So in this book, The Wealth of the Nations, Adam Smith describes the labor's a commodity and small firms have invested a lot more in comparison to larger firms given their access to capital. And because of this, I believe that these agreements would go a long way in incentivizing firms to invest more in training for their employees in the aim of to further promote innovation due to greater security on their investment. Now, considering that intellectual property is the number one asset in the tech industry, it is reasonable to deduce that firms would look into securing their place in the market by acquiring as much of it as possible. Then we look at blue chip companies of the Silicon Valley and consider that most of them have revenues that dwarf small country economies. Apple, for example, has reserves of over $146 billion, twice that of the federal government and in direct competition with talent with a startup that just left a dormant. The ability for companies to be able to retain their clients will go a long way in increasing their investment and the competition and innovation in the industry. First and foremost, I would like to make a clarification about anti-poaching agreements. Anti-poaching agreements do not stop people who want to leave the company willfully from leaving. Actually, on the contrary, they're aiding them. Previous methods of enforcement, such as non-compete agreements, do not allow individuals from leaving and working for other companies. APAs, on the other hand, just state that the company under agreement will not recruit or poach from each other. If an individual is not satisfied in their current job, why force them to work it? People who do not enjoy their job will have a lower productivity, which brings me to my next objective. Without anti-poaching agreements, productivity decreases. Unnecessary movement, which is employees who wouldn't have moved in the first place, will cause said drop in production. In today's world, where this poaching is being done on a daily basis, individuals leave certain high-tech companies. Now, since most high-tech companies have a team-based working environment, a quintessential part of the team is missing. This means that this company will now also need to hire someone new, which in most cases will also be poached. This employee needs to be trained in ways of the team, be caught up on the project at hand, and learn the specific systems necessary to successfully complete this goal. Matthew Bidwell, a professor at University of Pennsylvania Wharton Business School, states in an article pertaining to the issue. In noting that external hires need about two years to get up to speed in their new jobs, Bidwell suggests it is because outsiders need that amount of time to learn how to be effective in their new organization. Specifically, how to build relationships. This all costs money and time that these companies do not have. In some cases, it can cause as large of a problem of where a product release date must be delayed or canceled. That is a serious drop in productivity. On the other hand, the receiving company also needs to take similar action. While theirs may be willful, they still need to train and educate the employee on the new systems and projects. But in this case, it makes it more difficult to train this new employee as they are used to an old system and may be working in a certain way. This issue can be solved if the company hires new employees and trains those employees from the ground up. A certain pattern of poaching can be seen that seems quite cyclical, almost as if the industry is playing a game of musical chairs. Employees keep moving over, whereas there are less seats and more people being poached. In the end, there is a massive amount of people poached, but the productivity of the entire industry is slim. This is a major problem for the economy of the high-tech industry. Bidwell concludes in his research and I quote, results show that internal mobility allows the firm to staff higher-level jobs with workers who have better performance but are paid less. Concluding, poaching is not as effective as hiring new employees and training them from the ground up. Secondly, I would like to talk about product innovation within the high-tech industry and how anti-poaching agreements actually benefit innovation rather than prohibit it. Anti-poaching agreements are a small step in what seems to be a larger issue, the theft of intellectual property, the currency of the high-tech market. Anti-poaching agreements prevent certain companies from recruiting individuals from other companies working on the same project and therefore forces them to find an alternative solution. The technology market in this reference can be compared to Darwinist evolution. If multiple companies build different products fulfilling the same goal, then it benefits the consumer as they now have a multitude of products to choose from. Following the model of survival of the fittest, the best product will survive or have the largest market share in this case. Isn't that what the free market is about? Letting the consumer choose what product is best? This is what creates healthy competition among the tech firms to innovate more. The more choice, the better the economy will be in the long run and that is the ultimate goal, a better, more advanced, and stronger economy. Good afternoon. My name is Brian and my teammates have already done an excellent job telling you about how anti-poaching agreements will give companies an incentive to invest more money in training their employees as well as the macroeconomic effects to the entire high-tech market. Now, I'm going to finish by talking about the microeconomic effects. That is, how will individual workers and individual firms behave? If our team loses today and we end up in a world without anti-poaching agreements, what will firms do? Well, they won't do nothing. They're still investing a lot of money in training employees and they'll still want to find a way to protect that investment. And we already have a good idea how they'll do it. Like Tristan mentioned, that's a non-compete agreement. This is the most common thing going on right now in high-tech. Recent research from the University of Illinois found that about 30% of employees in high-tech jobs are currently subject to a non-compete agreement. So to clarify, anti-poaching is when two companies agree not to recruit each other's employees and a non-compete is one company and one employee saying, if you leave, you can't work for our competitors. So both of these accomplish the basic goal of protecting the company's investment and therefore encouraging more training. But that's where the similarities end. And our team has found that anti-poaching agreements are a much better alternative and therefore they should be allowed. So let's go through some of those reasons. First of all, a worker who wants to leave their job is prohibited from doing so if they've signed a non-compete. But anti-poaching only stops the other company from calling. If the worker wants to leave, wants to leave, they can leave. So we think it's more fair to workers. Next, anti-poaching agreements basically enforce themselves. The companies just don't call each other's employees. Non-compete agreements, on the other hand, have to be violated first, then the recourse is to go to court, file a lawsuit that costs a lot of time and money. Anyone who's ever paid a lawyer's bill knows my next point. The anti-poaching agreements enforce themselves for free. The non-compete agreements cost companies a ton of time and money going to court. All that time and money would be better spent by the company doing whatever their primary business is, hopefully building cool new smartphones and software for us. Finally, there's a potential for abuse. A recent investigation by the Huffington Post revealed that Jimmy Johns requires every employee to sign a non-compete agreement. And I'm sure you'll agree that a minimum wage sandwich maker doesn't need to be under a non-compete agreement. Why did Jimmy Johns do that? Well, non-compete agreements are basically free. Companies don't have to pay much. Employees don't argue with them. And so there's a likelihood to use them too much. That's less likely to happen because an anti-poaching agreement requires a company to give something up. They gain employee retention, but they give up the ability to easily recruit. They have to weigh those two things. Because there's both a cost and a benefit, it's less likely to be overused. Here's an interesting consequence of all of this. Anti-poaching agreements actually benefit startup companies. Why is that? Well, an anti-poaching agreement only involves the companies who are part of the agreement. Usually startups aren't. That means startups are free to poach. That means they have an advantage to recruit employees. Well, why do we want startups to have an advantage? I'll bet you already know the reason. Startup companies are more innovative than larger companies. They're better at making cool new things. That's not just my opinion. Some research that was funded by the Small Business Administration compared the productivity of dollars spent on research and development and found that dollar for dollar startup companies are five times more productive in research and development than larger companies. For all those reasons, we believe the anti-poaching agreement should be allowed. They're better than the alternative that's currently being used in the market. They cost less. They're more fair to employees. Why not allow them? It's just common sense. Thank you. Now we'll move on to the team in opposition. Hi, everyone. My name's Ryan Salem. As has been mentioned, labor is an asset for companies and individuals in our free market economy, especially in the high tech industries where innovation is crucial. You can see here on this entry level intro to economics graph, which demonstrates supply and demand of labor in our economy. On one side, you have employers who are looking at the cost-benefit analysis of hiring an employee. And on the other side, you have the employers who are selling their labor on what is supposed to be a free market. Our concern is protecting these employees. These tech giants such as Apple and Google and IBM and Adobe, they have resource and power beyond imagination. As of 2014, this is what their market caps look like. These are huge companies. They control a large portion of the technology market and I assure you they don't need protecting or favorable collusion. Firms can already protect their intellectual property through many different legal frameworks. They have copyrights, patents, trademarks, trade secrets, non-disclosure agreements, even garden leave agreements in the UK. There's plenty of ways for firms to protect their intellectual property. With anti-poaching agreements, these companies are effectively creating a monopsony due to their market power and domination. A monopsony exists when a large buyer or buyer is effectively control the purchasing price, in this case, labor. If anti-poaching agreements are allowed, the smaller firms outside the agreements who would be willing to pay more for an individual's labor are cut off. Allowing firms to stop poaching is effectively a violation of Section 1 of the Sherman Act, which states the following. Anti-poaching laws suppress competition and drive wages down. The same effect the monopsony of tech companies demonstrates. The individuals are selling their labor to the firms. The employees are already at the mercy of these companies, and thus, laws and concerns need to be directed toward protecting and aiding employees' rights in the market. With that said, employees also research and understand the field and profession they're getting into. The high tech industry, the massive company, the startups, the spin-offs, the hiring and maintaining the most elite employees. And these employees know this. They know the profession they're getting into, and they know the possibility of being poached as a luring. Poaching exists because these employees are so sought after and are such talented individuals. That's the only reason firms would go through the effort of poaching and attempting to attract other employees. Poaching or the movement of employees increases labor efficiency. Employees find where they belong, and which company and culture they fit in best. It is proven that our generation moves and switches companies more than any previous generation in history. We are a very mobile group of individuals in the workforce. But poaching also serves another important purpose, as an information disseminator. The tech companies are able to learn about opportunities in the open market by receiving poaching offers. Information has always been power and information asymmetry destroys the free market. In a market that doesn't allow perfect competition or poaching in this case, the wages of these employees are kept artificially low. Not allowing poaching mainly affects the knowledge of opportunities for the individual. Allowing poaching does not mean that every employee will leave a firm and jump ship. On the contrary, they may decide to stay with a company for a lower salary, or bargain for a higher salary they deserve, or they may leave a company in hopes of starting their own. These all frequently happen. The issue here is the knowledge and the freedom within the labor market, the dissemination of information. Preventing cold calling or poaching opportunities is cutting that link between tech employees and the knowledge of opportunities within an open labor market. It's not fair to them, and as you'll hear, it's not efficient for the economy as a whole. It's proven to prevent mobility, and it clearly hurts the formation of clusters and economic hotspots through these lost mobility opportunities and possibilities. These aspects are paramount to a thriving economy, to innovation, and to a free market economy. Remember that anti-poaching law's biggest effect is destroying this link between an employee and the knowledge of opportunities or bargaining power. The Department of Justice has already agreed with us on many of its recent findings. Thank you. Good afternoon, ladies and gentlemen. I will begin my case by saying anti-poaching does not support innovation, change, and expansion in the market. Companies should not hold information that can benefit the employees. Companies, in addition to the non-poaching offer, can improve the offers that can benefit the employee. This drives up the salaries giving more power to the employees. Non-poaching transfers the balance of powers to the bank companies from the individual workers who want to bring their ideas to the market themselves, but cannot, unfortunately, do to not knowing other opportunities out there. Although employee does gain experience and information that is valuable to the company, the tradeoff is much more beneficial to not allow anti-poaching legislation or contracts. This is seen in the Cambridge University Press, as it says. And since some of the benefit from training falls on the poachers, there is no way for the worker demanding the training and the firm supplying it to capture all the rewards from this training. Inevitably, therefore, the free market mechanism provides insufficient incentives to acquiring skills. As Ryan previously said, these companies do not need protecting. These companies already have enough power and money to produce the innovation they want. If companies should have anti-poaching laws or contracts, their power is increased a lot. And this does not benefit individual intellects that maybe would want to be approached with better opportunities that can lead to big breakthroughs and thus more innovation in the economy. The market would be unfair and biased toward the big companies, giving them more power and generating bigger and more powerful monopolies. In the article, Silicon Valley non-poaching case, the growing debate over employee mobility, UPenn management professor Ivan Brinkley says, there have to be two factors in determining wages and compensation, employees, productivity and bargaining power. When employees are more productive, they generate more profits and how much of these rents they can appropriate for themselves depends on their bargaining power. Companies can make attractive offers to employees so that they will not leave or walk away with intellectual capital. They do not need to, as the other team said, force people to sign non-copied agreements. If there is bargaining between companies and individuals, there will be better salaries and better conditions giving to the employees. As Ryan said, in a market that doesn't allow perfect competition or poaching in this case, the wages of these employees are kept artificially low. Ivan Brinkley also said, when companies use methods to retain employees their increased power most likely leads to decreased wages and also a drop in productivity since it is an increased price externality which is essential in today's economy. He also says big companies do not include the benefits of the information sharing across firms that raise overall productivity in the economy. According to Bidwell, a productive economy is one where employees are in the right jobs, the jobs that both fit their interests and make their best use of their abilities. When you restrict that mobility to some extent, you are limiting the employees' ability to get those matches. In Bloomberg business, Tesla's co-founder and chief executive offers says, Apple has been trying to poach Tesla employees too offering $250,000 signing bonuses and 60% salary increases. Apple tries very hard to recruit from Tesla, he said but so far they've actually recruited very few people. Companies like Apple have the means necessary to replace employees but this was not caused a complete disaster in their finance. Tesla's ability to lure talent from Apple could give it an edge as cars become more like computers. This is the innovation that we need to have in the market for better and more improved opportunities for the good of companies and the market. In conclusion, information should not be withheld from the employees but rather their opinion, their options should be broadened with bargaining from both sides. Companies would rather not do this however and thus choosing to restrict mobility between companies with anti-poaching laws or regulations making it harder for the workers to find better opportunities elsewhere. Today, I will be talking about spin-offs and clusters and how anti-poaching agreements inhibit the positive benefits that spin-offs and clusters bring to the economy. Before I start, I like to give a brief description about spin-offs on clusters. Spin-offs are companies that are started by employees from bigger established firms who develop technological invasions during the research and development phase. They then capitalize on these newly discovered innovations by creating a separate company to focus on developing the innovation for the specific market of a particular industry. Furthermore, clusters are created when many companies within a particular industry are formed and are based in a certain geographic area. In short, employee mobility allows employees from different firms to meet and network with each other and share ideas on possible technological innovations with each other. If these employees have like-minded interests, they may be motivated to go out and form their network companies specifically for the focus of capitalizing on their ideas and developing specific technological innovations. As David Price from the Federal Reserve Bank of Richmond he argued that research has shown that spin-offs prove to be an important factor in the rise of Silicon Valley during the 1960s. Furthermore, research by other academics show that in industries in certain geographic areas that have employee mobility have seen substantial, yet positive economic benefits. For example, research conducted by Phallic, Fleischmann and Reichster have shown that high mobility in the tech industry cluster in the Silicon Valley have resulted in the rapid reallocation of talented employees ideas and knowledge to the firms with the best innovations and a pattern of hyper-employed mobility seen in Silicon Valley has spread to other industry clusters within the same other geographical areas within the state of California. This shows that the similar economic benefits are seen in Silicon Valley due to spin-offs in clusters are similarly replicating other clusters throughout in other geographical areas throughout the state of California. Furthermore, they also found that hyper-employing mobility in California's tech industry contributes to modular innovation by having smaller companies focus on specific technological innovations. This simple, yet important divisional labor arrangement plays an important part towards facilitating and increasing innovation within the overall industry. And as for the economic benefits and relations to the anti-poaching agreements, one can be seen in the drastic contrast of employment growth between the two tech corridors. Silicon Valley in California and Route 128 within our very own Commonwealth of Massachusetts. In 1965, Route 28 had approximately three times more tech employment compared to Silicon Valley. But, within a decade by 1975, Route 120's employment had only tripled, but Silicon Valley's employment had quintupled five times. With resulted in a 15% higher total employment in Silicon Valley, from 1975 to 1990, Silicon Valley had tripled Route 120's new job innovation. In addition, from 1985 to 1990, the number of fastest growing electronic firms in Silicon Valley increased significantly, while the number of fastest growing electronic firms in the Route 120 tech corridor decreased in general. The reason for this discrepancy in economic employment growth and the number of fastest growing high tech firms between Silicon Valley and Massachusetts Route 120 tech corridor can be attributed to the difference in between these two tech corridors. Within Silicon Valley, their industry cultures features a regional network-based industrial system that promotes learning and mutual adjustment among specialist producers of complex yet related technologies. The region's social networks and open labor markets encourage entrepreneurship and experimentation and as a result, boundaries between firms are blurred and opportunities for exchange of ideas and technological innovations are substantially increased. The promotion of employee mobility and collaboration, instead of utilization of anti-poaching agreements to achieve similar goals, encourages spin-offs to be created, which leads to increased job creation and economic benefits to emerge from these companies that would otherwise stifle this dynamic by being involved in anti-poaching agreements. In comparison, the industry culture in Route 120 corridor is dominated by self-sufficient employees who prefer to have vertical integration throughout their entire production process. As a result, they are self-reliant. High-tech employees are frowned on employee mobility and prefer loyal employees and prefers secrecy and corporate loyalty. And as a result of this closed employee arrangement, social networks are more internalized and boundaries between firms and local institutions are more distinct and thus opportunities between ideas for exchange of ideas and technological innovations are suddenly flawed. So in conclusion, technological innovations happen in spin-offs and clusters because of high employee mobility between firms. High employee mobility can facilitate the formation of clusters of companies within the same geographic areas and promote the exchange ideas and technological innovations. As a result, the creation increases economic activity within the industry when anti-poaching agreements are implemented. It stifles employee mobility between firms which consequently stifles the exchange of ideas and inhibits technological innovations within companies that are involved in anti-poaching agreements. Thank you. So at this point both teams are going to have five minutes to deliberate and form their rebuttals so we can have some quiet conversation. Good afternoon. My name is Matthew Harmon and I would like to begin by addressing research and development. A firm must invest in its employees and it must do R&D independent of the status of anti-poaching in the area. According to the American Society for Training and Development, U.S. businesses spent 171.5 billion dollars on learning and development in 2010, the most recent year for which data is available. Firms across the country are increasing employee investment in California tech companies are leading the way. Google has Google EDU, a focus training program for new employees. Karen May, Google's Vice President of Leadership and Talent who has led the revamping of Google EDU notes that it is evident in employee satisfaction scores that it does make a difference when we invest in people. Moving on, the sharing of technologies should be seen as a good thing. We have multiple, while having multiple avenues to solve the same problem may sound like good competition from a macro scale it is inefficient. Say company A solves a problem that company B can't solve. The sooner company B solves that problem the sooner those two companies are competitive once again. If ideas are shared at a greater rate companies will have to push each other to innovate faster. This higher level of competition makes the industry as a whole move faster. Regarding small firms and startups small firms and startups are not as vulnerable as they're made out to be. Small firms and startups do have venture capitalists backing them so their funds aren't significant and they have some financial freedom when it comes to experimentation and research. More importantly, the magnitude of these reserves in one company do not determine on a case-by-case basis whether or not they will poach a given employee. If a firm has billions of dollars yes it allows for flexibility however just because they can afford to buy numerous employees doesn't mean that these employees add value to their production. The only thing any poacher has to do regardless of whether they are big and small is a cost-benefit analysis as to whether or not poaching a given employee is worth it, as Ryan mentioned. As far as intellectual theft goes firms take into account that people will leave. For any given technological project there's a large team composed of numerous people who all have specialized tasks. If intellectual property theft is a concern then consider that Lisa the programmer is a member of a team who likely only knows one piece of a much much larger puzzle. This programmer doesn't know every facet of the project nor does she necessarily know all the other pieces of this how all the other pieces of this puzzle are put together. So poaching Lisa doesn't mean that you're getting the whole technology you're just getting a good programmer. As Ryan mentioned earlier there are many many ways to protect against intellectual property theft. Now onto the final idea of excessive mobility the opposing or the affirmative team has suggested that excessive mobility creates great inefficiency in a marketplace. However I think well I think this is slightly exaggerated. If everyone can poach if all companies can poach other companies will have to guard against poaching by making strong incentives for workers to stay loyal. Again they won't spend more than employees worth but if they can keep an employee that's just competition. Allowing for poaching does not mean that people will leave. People still have free will. As Sonion mentioned with Tesla and Apple workers just like to work at Tesla. They get bit away from Apple and they just prefer to work at Tesla. So yeah people will go to the place that's best for them. Workers will go where they're paid the most where they're most comfortable. When a worker finds a place they will either they will either remain loyal or they will get a better offer to leave that firm. A person will never be paid more than the worth so people will eventually find a resting place where they can't possibly be bit away from that place. A company can't offer them any more and they can't be bit away from it. And even if an offer is made to an employee they're very social and personal frictions associated with changing one's environment. Perks and benefits also play a strong role. This concern over excessive mobility or as musical chairs as they've mentioned is somewhat inaccurate because someone will eventually find a chair that fits them and they'll stay in it. This emphasis on productivity loss assumes that employees are constantly in motion yet this is not feasible they will likely find a place and settle down. Thank you. So I'm not sure how this became anti-poaching versus non-compete. These are very different things. Anti-poaching is company to company and non-compete agreements are employee to company. The mobility is lost because employees don't know about the opportunities. They are kept in the dark. Yes it's obvious that non-compete restrict mobility more. That's not the question. The problem here is that mobility is restricted because the opportunity is not known. Firms already use non-compete that's not going to happen more or less with anti-poaching agreements. And then as far as the airline industry I don't think the tech industry is looking at collapse anytime soon. These employees make so much money because of the knowledge they have in the work they do. Does anyone here not have a smartphone? Exactly. They get these salaries because of this knowledge and this workability. So thank you. Thank you for coming out. My opposing team here would have you believe that companies don't need these anti-poaching agreements because employees are selling their labor to the firms and so they need to be able to do that very freely. And they would also say that these agreements keep wages artificially low by restricting the freedom and information about opportunities for employment by employees at these firms that employ these agreements. I would argue that there are still plenty of other companies that are not involved in non-compete agreements that can seek out and offer employment to these really high skilled coveted employees if they want to. So it is not necessarily restricting the information in its entirety. It's only restricting information from certain companies. And usually the companies that have these agreements are large companies and most people who work in the high-tech industry are going to know that there are job opportunities available to these firms like Google, Microsoft, Apple. They're going to take the initiative if they want to leave their company to look for opportunities at these firms. The smaller companies that typically don't have these anti-poaching agreements are not as well advertised. Employees might not be able to find these jobs at small firms but that's okay because the small firms are perfectly capable of poaching these employees. What they do is prevent large firms from driving up the cost of high-skilled employees because as you can imagine if Google and Apple are competing over an employee they have trillions or some ridiculous amount of money that they can throw at this person and they can go back and forth increasing the wages that they offer him. And it creates a leapfrog effect possibly maybe not just two companies maybe it's one employee many big firms competing for him that these large tech companies can afford to pay them a very high wage and these smaller companies might not be able to do that and if you don't allow the small companies to be able to hire the highly skilled workers you're going to decrease the amount of variety in the firms and therefore in the products which is bad for the economy overall. Thank you. So I want to confront the opposition's view on investment and poaching. Firstly Ryan I want to thank you for redefining what's the difference between anti-poaching and non-compete. In your argument you cited articles that constantly referred to non-compete. For example the Cambridge article does not necessarily argue that anti-poaching discourages investment but rather non-compete do. In fact I had the pleasure of reading Bidwell's article as well that anti-poaching reduces mobility it doesn't prevent it and if anything discourages hyper mobility and this has huge this has huge effect when you look at motivational theories. Now the basis of the opposition's argument is that money is the largest motivator whereby you pay somebody X amount of money and the next person comes across and plays X plus one they'll be more likely to work more for that extra dollar but this is not true if we look at motivational theories for example Herzberg's hygiene factors or Maslow's hierarchy of needs monetary factors are definitely in there but they're at the earliest and most preliminary rounds. For workers to really start to pay back on their investment we really have to look at the impact that the company has on their self actualization and their self their self standing and those are the factors that anti-poaching would really help a company build within an employee. Hello one of my opponents drew an analogy between California and Massachusetts and in economics it's often difficult to do large scale studies because you can't control the behavior of companies and put them in a control group so you have to look at the real world and try to find a natural experiment. Unfortunately we don't think they've done a good job of that so there are a lot of differences between Massachusetts and California other than anti-poaching agreements which could account for the difference maybe all the programmers like the better weather not today there's lower taxes in California we all know that Massachusetts is a very high tax state maybe that has to do with difference in business activity in any case the analogy just isn't well drawn. Next there's this idea of limited information hurting workers and anti-poaching agreements usually only involve a small number of firms big firms you know them Google, Microsoft, Apple and workers who are looking for a new job so that those firms exist and can easily call up the human resources department or call their friend from college who works there so we're not convinced that the lack of information is significant or widespread enough to have a big impact is mobility always a driver of innovation we're not sure of that stealing is certainly not the same thing as innovation and if the whole argument is just that engineers leaving one place take an idea and take it to the other company that doesn't drive innovation in the economy next I want to respond to this idea of comparing non-compete agreements with anti-poaching agreements the reason that comparison was drawn is because a non-compete agreement is a real thing that's happening every day that accomplishes the same goal as an anti-poaching agreement let's say you were cooking a batch of chili and you wanted to make it less spicy and you took out the black pepper but you left in the cayenne pepper that wouldn't accomplish your goal likewise a non-compete agreement is something more restrictive an anti-poaching agreement is less restrictive so if you're going to allow non-compete you might as well allow anti-poaching and if you want to remove restriction make it more fair to employees you should remove non-competes first thank you now we're going to have our question and answer period with the judges the judges who want to ask questions can come up and ask them at the podium then both teams will have a minute to deliberate and then we'll start with the team in support on the first question they'll have two minutes to answer followed by the team in opposition who will have two minutes hi everyone I'm Sam Jordan I'm in this debate so my first question will be for the support team you noted that high wages were a reason to to utilize anti-poaching and perhaps to cap those wages shouldn't those high wages or I'd like to know your thoughts on the high wages themselves being the incentive for young people to join that industry or career path and then increase the supply of labor there and minimize wages in that sense so I'd like to hear your thoughts on that and then for the opposition you provided an analysis of the difference in growth rates between Silicon Valley and the 128 corridor and you noted that industry culture was a big contributing factor there I'd like to know the other attributes of that analysis that you took under consideration besides industry culture thank you most people aren't as tall as I am so I understand that your question is why these high wages restrict the industry am I right having the high wages the reasoning behind implementing the fact that the wage themselves should act as incentive okay so without anti-poaching agreements these large companies such as Apple and Google can compete for certain employees and can poach them which like both teams stated these companies have very large budgets they can kind of throw money at the problem and say like just artificially these wages which restricts the startups or the smaller companies from actually acting upon maybe poaching one of or hiring one of these employees and we all know that these startups are the drivers of innovation take for example Apple Apple wasn't always this huge company Apple started in a garage and they were competing against IBM this multinational billion-dollar corporation and look at them now they're the largest company in the world so I mean these high wages are not always an incentive to go somewhere maybe it's the innovation also and if these large companies are always driving high that may become an incentive but that maybe shouldn't be the incentive okay so Samuel you asked a question about the difference between Silicon Valley and Route 120 and other attributes that can contribute to the difference between those two tech corridors one of the factors is that employees can leave on their own if they choose to do so and it's all bringing back to the fact that about employee mobility and how Silicon Valley was created first place and in fact Silicon Valley was created first place because of employee mobility because it was resulted from one big company that was established there during the 1950s and employees thinking that they could do better on their own because they developed technological invasions and I could have more freedom more room to further develop these technological invasions without the company essentially bothering me and so this was one of the reasons why the famous chip maker Intel was created just because from the spin-offs and clusters that was creating Silicon Valley during that time that's a fun fact and also employee mobility has shown has allowed other employees to meet with each other even from competing firms to bounce off ideas of one another maybe they might talk about for example they might talk about with each other about what they're working on within their respective companies and then they realize hey our interests, our work are almost interrelated with each other why can't we just leave the companies are working for go into the business ourselves and create a product based on the idea, based on the things that we're working for and focus specifically on that sub-marketing with specific industry and help foster technological innovations through this simple division of labor strategy and we even agree with the opposition with the, sorry the affirmative that small businesses drive innovation and the way startups formed by spin-offs and clustering has resulted in plenty of technological innovation in Silicon Valley that even continues today and also in our attribute that I would also consider is company culture benefits and perks and while they are usually not measurable by its monetary value it is clear nowadays that clearly when they think about which companies they want to join and work for it they want to see what kind of culture, environment benefits and perks they offer because they want to be happy in the first place and be the most productive ever. Now I have to adjust this. Oh no oh no he's made an error okay hi I'm Bill Troy I don't usually need a microphone but I need a good stand so I was a high tech executive for 17 years so I have more than a little interest in this topic so for the for the change team I I don't know why we would change supply and the reason for that is if we're seeing above market wage rates isn't the real problem we're not training enough scientists engineers to fill those jobs and isn't that all we really need rather than worrying about suppressing wages that's for you for the other team having been in high tech a long time I'm troubled by a lack of definition of what high tech means what industries would you count for example the 1960s were a time of defense and the 1960s the main issue besides training is big clearances and that probably takes more time than actually training people and getting their software engineering skills up so I'm asking that team to think about what do we mean by that industry and don't tech industries change in definition and scope every three to five years thank you so I understand that the question is what are these companies like these tech companies and as we are progressing this is changing so what makes them tech companies and I'd like to answer that question by saying first of all that's a tough question because you know we didn't know 20 years ago we would be at this point following the progression of everything that has been leading up to this point like companies like Facebook for example which just came from a college dorm and so for my example where I talked about Tesla they took they poached a programmer from the Google company and he in this example he used his knowledge from building computers to advancing taking that and working with Tesla with their auto company and now they're thinking about building better cars more efficient and they're becoming more computer like generally just more innovative and we never know where that can go in the future but we know that it is improving everyone is working hard to just come up with creative ideas that can reduce global warming can just be more innovative and support values that the market should bring up and these companies like Google and you know Facebook they have like millions of workers and they will not be damaged by just trading off a couple of employees who want to who can be poached by other companies and bring more innovative ideas and that's why I think that is the question, thank you Hi, so from what I understand your question was kind of do you think that the real problem is that there's not enough supply of engineers, labor supply of these skilled workers and I think that I would agree with that if these firms were poaching people that were more run-of-the-mill programmers with people with less experience in that world so maybe come right out of college, stuff like that increasing labor if they were poaching those kinds of people then increasing the labor supply would be good but what happens is that these people are usually these firms are usually targeting really high skilled workers so there's a smaller pool of them increasing, getting more people trained on the basics of it is going to create a lot of low skilled workers and these people poaching employees are really looking for high skilled workers so I think that increasing the supply of engineers in this case would not bring down the wages because they're still going to be poaching the people who are really skilled at what they do Good afternoon, I'm Paul Lawrence I have two questions one for the support side could you explain to me the micro-economic incentives for my large firm to join this organization that I cannot identify all the other participants in the agreement and to the antifirm early in the argument these guys over here I'm sorry early in the debate your opposition made an argument about the airline industry and deregulation leading to decrease in wages of the employees offer an alternative explanation for what happened to the airline industry in the 1970s no no no I'm asking you to offer an alternative explanation for their argument Paul, thank you for your question and I have no clue what it will look like in the future but in the recent case that was just settled in federal district court there was transparency it was just a network of agreements but each agreement just had two parties and Google made a separate agreement with Samsung a separate agreement with Apple etc perhaps in the future a hypothetical network without transparency could form and I hadn't thought through that but to answer your basic question about micro-economic incentives the primary incentive for a company to join an anti-poaching agreement is to keep their employees prevent them from leaving because they've been enticed away by a job offer from a competitor thank you for the question if I'm correct the question is to explain alternatives for what could have taken down the airline industry so first off the airline industry is very service based most tech companies are very commodity product based so in a service base you can only put a couple hundred people on an airplane you can make so many iPhones and sell them out so that's one big reason and if we remember Southwest they never posted a loss they've always had profits they had a very intelligent business plan so this wasn't the entire airline industry this was a large portion of them secondly they faced a lot of huge costs the airline industry that the tech industry doesn't have like the cost of fuel the cost of products a lot of different personnel different airline control people so I believe there's a lot more than went into the airline a lot more expenses that exist in the tech industry and also the airline industry is very substitutable so people could drive a car instead they could take a bus instead they could take a train instead I think the airline industry especially a while ago was a very luxury idea versus technology now where everyone's got technology I think even the lowest end of the spectrum has technology all over the world so I think they're very different services and very different commodities thank you so our judges are now going to have 15 minutes to deliberate and choose a winner and in that time acting chair of the department of economics professor Jerry Friedman will present the department of economics scholarships and awards and after the scholarships and awards are presented the winner will be announced so the judges were very impressed with the preparation that both teams had done we all noted the public speaking skills of the teams were very very good and where I work we look at what we call executive presence do the people convey an idea in a way that you're confident and it is believable and that was very high on everybody side at the heart of this what we talked about was this being a discussion of the importance of a competitive market and so we felt that the team actually in favor of competition and keeping the marks probably could have done a better job driving that point home so I think your argument was very very solid based on sort of all our knowledge that was perhaps could have been a little more rigor in explaining why competitive market is so important conversely the team that none of us intuitively believed in did a very good job of trying hard to leverage economic arguments some of which had some holes but they weren't for lack of trying and you know understood the kind of arguments and so therefore winning is always a tough term but as we say in the marketplace that's how it works we ruled you as the winner so congratulations.