David Rosenthal: belief

Transcript context

…Listeners who are new to the show, this is Hamilton Helmer’s framework from the book Seven Powers. What is it that enables a business to achieve persistent differential returns to be more profitable than their closest competitor on a sustainable basis? The seven are counter positioning, scale economies, switching costs, network economies, process power, branding, and cornered resource. David, my question to you to open this section is specifically about RenTech’s lifelong non-competes. That feels like a big reason that they maintain their competitive advantage. I’m curious if you agree with that, what would you put that under? I think it’s lifelong NDAs and non-competes as long as the state of New York legally allows for, but that it’s not lifetime. I’ve heard various figures, six years, five years, something like that. At the end of the day, non-competes are more like what is one side willing to go to court over? But the reality is people don’t leave. People don’t leave, period, and people especially don’t leave and start their own firms. I was thinking about this in the middle of the night, and I think there are three layers to the effective non-compete that happens with RenTech. There’s the legal layer, the base layer that you’re talking about—it’s like the agreements you sign—then there’s the economic layer of what we spent a long time talking about in tapestry of it would just be dumb to leave. You’re better off staying there as part of that team with a smaller number of people than going to Sigma with a lot more people. I think that’s the next level up. And then I think the highest level is just probably the social layer. You’re there with the smartest people in the world in a collegial atmosphere where you’re all working hard on something that has direct impact on you. It’s your community.…

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