Gotta Catch ’Em All? Antitrust and the AI Talent Wars
The AI talent wars have produced a steady stream of stories that seem tailor-made to confirm everyone’s worst suspicions about Big Tech: nine-figure pay packages for star researchers, entire startup teams absorbed without a formal acquisition, and—most strikingly—reports of elite AI scientists paid handsomely to do nothing for a year under “garden leave” arrangements rather than join a rival—“hoard[ed] like Pokémon cards.”
To many observers, this looks wasteful at best and sinister at worst. Why would a profit-maximizing firm pay enormous sums for talent it seemingly has no intention of using?
Ronald Coase had a wry answer for moments like this. “[I]f an economist finds something—a business practice of one sort or other—that he does not understand,” he observed in 1972, “he looks for a monopoly explanation. And as in this field we are very ignorant, the number of ununderstandable practices tends to be rather large, and the reliance on a monopoly explanation, frequent.”
A new working paper by Shaolong Wu of Harvard Business School and Zefan Qian of Georgetown, “Talent Hoarding and Upstream Innovation: Labor Market Distortions by Large Incumbents,” supplies precisely that monopoly explanation, complete with a formal model and an empirical test. Large incumbents, the authors argue, sometimes hire and retain frontier researchers not to put them to work, but to keep rivals from doing so. Because top AI-research talent is scarce, every researcher a dominant firm keeps “on the bench” is one a challenger can’t hire. The incumbent protects its existing profits, and society loses the discoveries that researchers would have produced elsewhere.
The paper closes with policy recommendations to match: limits on garden leave, narrower noncompete agreements for publicly funded researchers, and institutional pressure to keep frontier talent “actively deployed.”
The policy audience is already primed for this argument. The Federal Trade Commission (FTC) has announced its intention to scrutinize acquihires—transactions structured around hiring a startup’s employees rather than acquiring the company outright—to ensure they aren’t used to evade merger review. Talent-centered theories of competitive harm are rapidly becoming the next front in the broader campaign against large technology firms. All the more reason to get the economics right.
It’s a clever paper, and perhaps a more careful one than many in this genre. Its headline claim, however, substantially outpaces its evidence. What the data actually show is that one group of software firms retained more skilled employees after the Supreme Court weakened their patent protections. Everything beyond that—the “idle benches,” the foreclosed rivals, the lost innovation, and the social harm—comes not from the data but from assumptions built into the model.
More importantly, nearly every one of those assumptions rules out, by construction, a far more ordinary explanation: that the same behavior reflects good management rather than anticompetitive conduct.