Boston papers are atwitter this morning over Dell’s acquisition of local favorite EMC, the data storage company. With that the once proud Boston area, which birthed the mini-computer and software booms with companies like Digital, Data General, Wang, and quite a few others, is without a serious leading computer hardware maker today. Not to worry, there is still a robust tech sector in robotics, biomed, and software (there are more but let’s not quibble). In light of the rise and fall of Boston as a tech hub let’s see if there are lessons to carry away.
First, and for many years, the non-compete agreements that many companies make people sign as conditions of employment are very much enforceable in Massachusetts, though other states, notably California, take a much more relaxed approach in employment law. It makes no sense to keep people on the payroll when they’d rather be inventing something for themselves. In Silicon Valley you can quit your job on Friday and start up something on Monday as long as you’re not taking a lot of valuable IP with you. The Massachusetts model assumes the most valuable thing you can take is customers. I might disagree.
I once had to deal with a similar situation regarding a non-solicitation agreement in which I could not approach former customers for a year, though in my reading they were free and unencumbered (this is America after all) to seek me out. Issued a few press releases, started my company and blog and went on with life. The former employer didn’t like it but there was little they could do. I knew I’d won when they sent me a FedEx letter containing nothing but a dog biscuit (for Beagle Research, get it?).
As a very practical matter people who leave jobs don’t have a lot of discretionary cash to pursue lawsuits and the state legislature displayed a stunning lack of intestinal fortitude last year when it failed to deal with proposed changes to the non-compete laws. People vote with their feet and they’ve discovered in droves that the climate is much nicer in California.
Of course all the changes to statutes won’t change an iron law of economics: Companies and products trend toward commoditization. The mini-computer that I started my career on now comfortably fits into a pocket and costs thousands of times less. Massachusetts, which is home to Harvard and MIT has forgotten the lessons packed into Clay Christenson’s books (The Innovator’s Dilemma series) and they stop innovating at some point. It must be very nice for a while when you stop investing in the new, new thing and your employees are more or less stable because they can’t as a practical matter go elsewhere without significant economic displacement. But that only lasts a little while.
Massachusetts and Boston are not unique in all this. As we move further into the era of apps and the GUI and operating system take more of a back seat, we can observe the same troubles besetting Microsoft. So it goes.
Perhaps biotech, the IoT, and robotics will be more forgiving to Massachusetts but don’t bet on it. Massachusetts is an expensive place to live and while it can thrive on innovation thanks to the brainpower lodged here, commoditization forces products out the back door to places where they can me made cheaper, so the ace up our sleeves has to be our willingness to invent the future every day and not rest on our laurels.
The academic-commercial partnership
Massachusetts is expensive because of all the well-paid jobs that are here and the competition for limited resources like schools and real estate. But one of the greatest inventions of the last hundred years that has come out of the area is the tight relationship between academic R&D and venture capital. It’s common to see this kind of thing in California today and certainly the VC community there is big and brash and it attracts a lot of investment capital. But it got started in Boston just after WW2.
The relationship continues today in other fields and is one reason the area’s future is so bright. I remember being in a conversation with a couple of VC’s a few years ago in which we were discussing “small” and “large” molecule R&D. The fact that they get down to that level tells me things overall are okay.
The Red Sox, Patriots, Bruins etc.
The Boston teams in general provide an indirect definition of our culture and why we live and work in this land with too little summer, rocky soil, funny accents, and a penchant for celebrating weird holidays like Evacuation Day (look it up). The Puritan work ethic got going here and it still informs much of our lives. We’re a competitive race, we like to win, and we don’t suffer fools, truth be told. EMC has been bought, fine. Commoditization continues on all fronts as it must but in Boston you can bet there are more than a few people hard at work inventing stuff that we’ll all need in the not too distant future, and so the cycle renews.
(Cross-posted @ Beagle Research Group)