john larson on signing an nda

2020-07-02

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~8 min read

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1447 words

Non-disclosure agreements are an interesting feature of today’s world. They’re potentially useful instruments, but in my experience, along with non-compete agreements, they’re used more to coerce and threaten than actually protect a company.

I had a friend recently share this blog post, ”Why I Won’t Sign Your NDA” by John Larson who used to run a blog “Programmer for Hire”. It’s currently saved on the web archive, so it’s likely to stick around - but I’ve copied it below as it’s also good for me to remember.

Why I Won’t Sign Your NDA

April 11th, 2012 John

The other day I got to chatting with a lovely woman who reached out after reading my blog. She was interested in talking about an idea she had, how she might get it off the ground, and if I might be a good fit into the process in some capacity or another.

“I saw what you did with Spotlight Denver, and I’ve got an idea that could revolutionize the whole deal-of-the-day industry.” is how she broached the subject.

It’s always a treat to chat with folks who have taken a shine to me from my online persona alone, and taking 20 minutes to offer up whatever perspective and insight I can is a welcome break from programming. I was happy to lend an ear and wax entrepreneurial.

It wasn’t long into the conversation when she mentioned she would soon have a lawyer draw up a Non-Disclosure Agreement regarding the project, at which point I had to interject.

“Ah, let me stop you right there for a sec and let you know this up front: I will almost never sign an NDA.”

She was curious as to why. This is the explanation I gave her, spread over a couple of distinct but interrelated concepts.

There’s Nothing New Under the Sun

Between a first-time web entrepreneur and one who’s been for years working on many ventures, there is a huge gap in perspective regarding the importance, rarity, and uniqueness of ideas. Namely if you have this one great idea and that’s your ticket into entrepreneurship, you’re apt to overlook (or simply be unaware of) how interconnected and overlapping innovations are, and correspondingly unable (or unwilling) to see traces of your idea in and around stuff that’s already out there.

This perspective gap is most easy to recognize when someone alludes to their confidential idea as being like [existing web thing] for [some other niche].

“It’s like twitter, but for construction field workers”, “It’s like Yelp, but you only see reviews of people you know, like your Facebook friends”1, “It’s like AirBNB, but for wife-swapping.”

Even a revolutionary take on the deal-of-the-day industry as alluded to by my new friend has, by virtue of being rooted in an established business model, an upper bound on its originality (to say nothing of the likelihood that the million-dollar marketing or biz-dev teams of Groupon, Living Social, etc. have already had and/or explored similar ones).

Ideas are Plentiful, Good Execution is Scarce

It’s a well documented phenomenon how idea-havin’ first timers just need a programmer to bring their vision to life, as though the idea is somehow half the battle (or 90%, as folks like me often get offered sweat equity deals–10% seems to be a popular number). But if you’ve ever tried to bring even one venture to market, you know perhaps all too well that ideas are just the starting point, and take by far the least work, time, and capital.

Gary Vaynerchuk said it perhaps best in his talk at the 2011 Big Omaha : “ideas are shit, execution’s the game”. Watch it2.

It’s Not a Good Sign

Say I’m just first meeting you to discuss your idea. If you prize your idea so much (in relation to everything else it will take in order to make it succeed) that you feel the need to put in legal protections from me, it’s a tell that you don’t have much going for you in this endeavor.

How do I know this? Because if confidentiality matters to you when talking high-level particulars (meaning anything shy of at least a 10 page business plan), either one of two scenarios apply.

Either (A) you’ll be blown out of the water in the open market soon after you release (this is the case in which the idea really is all it takes, which implies stronger incumbents will easily be able to catch up), or (B) you are vastly underestimating what it takes to execute successfully.

Scenario A rarely ever happens (if ever), but is understandably often feared by those with the newcomer’s perspective described above. Scenario B is much more common, and should make the thought of tethering oneself to broad and vague legal obligations even less desirable.

Your NDA Treads Heavily Upon My Right to Work

Overlap in innovations and concepts found among disparate parts of the web is ubiquitous. Any agreement that I sign to not disclose or use information shared with me in a casual engagement opens up a whole world of potentially contentious confusion about what is or isn’t okay for me to do in the future.

In an ecosystem where ideas are borrowed and remixed constantly, an NDA is a poor man’s patent that can be levied only against the signer. Never mind the existence of clear competitors: the confusion of whether or not any “secret sauce” information was shared is enough to entertain lengthy and costly litigation.

I had a fellow make a bid to buy my CoachAccountable business not long ago. Great guy, but when I ultimately decided to decline his offer he resorted to legal threats that I better not use any of the ideas we talked about, and expressed regret that he hadn’t had me sign an NDA.

In reality, if had he offered one up I simply would’ve declined.3 Signing one could have compromised my ability to build upon my business or sell it to the next suitor, and by corollary, compromised my negotiating position in the sale. It would have been the poor man’s patent in action.

NDAs Have Their Place

Are there some situations where NDAs are appropriate? You betcha. They are appropriate when there exists something both significant and tangible to disclose, representing more than just whatever popped into your head in the shower. The 10 page business plan alluded to above makes a reasonable cutoff, necessary but probably not sufficient.

The importance of having something significant and tangible is that it’s something you can point to and say “there, THAT’S what is confidential”. Without it, the reach of an NDA is too vague and undefinable. An NDA that is not highly specific nor describes boundaries to what it applies is not worth signing: sloppy legalese at best, a malicious trap at worst.

An NDA should also be dependent upon the signer being compensated in some non-trivial way, as in a condition of being hired or part of terms of a sale. Requiring one prior to that is highly suspect, and signing one, I say, is highly inappropriate.


So that’s why I won’t sign your NDA. It’s not because I don’t like you, it’s not because I want to steal your ideas, it’s not because what you’re up to isn’t important.

It’s because the ideas you are likely to share with me over coffee or in a phone conversation are otherwise plentiful, worthless in isolation, and, to some degree, completely unoriginal and already known to the world. View the discussion on Hacker News

Notes:

    1. Actually had this one come up. Even though their idea had roots in TWO existing websites, they were surprised I wasn’t willing sign an NDA.
    1. His riff about ideas starts at 25:24 in. Vimeo has problems jumping to the middle of a video until it’s loaded, but it’s worth the wait for the download, or just watch from the beginning–the whole talk is great.
    1. After all, it would be weird to presume that in his several months of thinking about ithe would have more ideas that my partners and I had come up with during the 18 months we were actually building it.

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