I don't understand why people don't reject their employment contracts when they include this sort of dumb shit. An employment contract is a negotiation.
Not everybody here at HN seems to realize that negotiation is not always appropriate when your first priority is to get a job.
Thankfully I've never been in that sort of situation, but I've certainly been desperate enough in the past where I would have happily signed if it didn't look like they would be willing to "bend the rules" for me.
The people I work with are brilliant (which I knew going in), I am paid very fairly, my bonuses are tied directly to my personal performance, I have flexible hours, and complete autonomy to do whatever I need to get my job done.
If I _need_ to purchase a $10,000 server to do my job, I just buy one and expense it at the end of the month. I _might_ have to explain the need when someone sees the expense, but that's par for the course. If I need to buy a USB drive to get my work done, or a relevant book, nobody will bat an eye at it.
Also, I haven't chanced it, but I'm guessing that my employer would only exercise control if I built something related or tangential to our core product. If I made an IOS game, I'm pretty sure I get to keep it... but if I build a widget that makes the support or administration of our core product more efficient to use, I'm guessing I'd have a hard time starting my own business around it without my current employer pulling out the lawyers.