OK that's fine, but doesn't everyone have this choice? Apparently google attracts thousands of top engineers with this clause. Lots of people agree to it, just because you won't doesn't mean it's absurd. Maybe you are absurd for calling google and their ideas absurd.
If you're a startup or a small company, you do not have enough money to do what Google is doing. You'll attract talent, but you won't attract industry veterans or people who have very wide skill sets, because what your company is doing is not interesting or broad enough to hold their entire attention -- and you're demanding their entire attention, both in and out of work. You're also not in a position to offer anyone like tytso their dream job, because you have a minimum viable product to build with specific requirements. So the industry talent you do have will leave quickly, because in order to do interesting things they'll have to.
I regularly see articles about how to hire good people and keep them, and a lot of them waste time talking about stuff like snacks in the office, or the company culture, or whatever. Very few of them acknowledge that good programmers are good because they like programming, and if you put them in an environment where they can't program without your permission, they'll leave because regardless of how many free sodas you're giving them, they'll still feel smothered. Similarly, the employees that stay will progressively have a harder and harder time keeping up with the industry, because there's no reason at all to explore new technologies when you can't do anything with them.
Take whatever position on the ethics you want, it's absurd to assume that you're going to hire someone who's genuinely passionate, and keep that person around for 10 (or even just 5) years if your company has policies like this. You have to give those people the ability to breathe, or they'll go somewhere else where they feel less strangled.
People look at Google and say, "it's fine, because it works for them." 99% of companies in the world aren't Google, and will not be able to pull this off without suppressing their hire quality and retention.
Do they really? Who cares? If some startup adopts the policies of one of the largest most successful companies in the world, then that is stupid and on them, they deserve to fail. At this point it doesn't even have anything to do with Google.
You said you won't apply to Google because of their policy, I said fine they don't need you they have plenty of qualified applicants. Now you're saying the problem is all these copycats. OK, whatever. Let them do what they want, and let people sign agreements they want. You just keep saying that it's absurd, but that doesn't make it so. That is entirely your opinion and the fact that thousands of engineers CHOOSE to work there is supporting that it's not absurd. If this is all about Google and you don't care and would never work there then why do you care so much about the people that do? Are you concerned they're being oppressed in some way? Have they been mislead? Isn't it possible they just disagree with you?
I never said anything about trying this policy out at your local startup or anything about what's best for you as a programmer in general. No kidding people like freedom? People lash out at Google and then turn it into something completely different halfway through the conversation.