How can one identify and predict talent? On a search to answer this question and others like it, Tyler Cowen joined venture capitalist and entrepreneur Daniel Gross to explore the art and science of finding talent in their new book Talent: How to Identify Energizers, Creatives, and Winners Around the World. In a panel discussion hosted by Shruti Rajagopalan, Cowen and Gross discuss the applications of their new book, particularly how lifestyle characteristics can indicate an individual is capable of great creativity and talent.
Daniel and Tyler also discuss undervalued talents and skills, what talents they look for in the start-up and investment world, why there is no good chocolate ice cream to be found in San Francisco, what their exercise preferences indicate about their personalities, how they approach identifying talent in different countries and industries, how immigration impacts entrepreneurialism, the short-comings to Zoom interviews, what a messy desk reveals about a person, and more.
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RAJAGOPALAN: I’ll start right away. What is a talent that you think you possess that is underrated by everyone else?
TYLER COWEN: Daniel, I think that’s for you first. [laughs]
DANIEL GROSS: Well, pausing before answering a question is definitely a rare skill these days.
There’s something that’s been helpful for me that I’ve realized I have, that I think many people have — I don’t know if it’s totally ubiquitous — is, in the process of an interview — which you do in venture a lot, hundreds and thousands of times a year — being able to build a grid of the person that’s talking to you, who they most remind you of and the outcomes that those people have had, is I think a pretty important skill.
It’s a pretty important skill for anyone searching for talent, but certainly, in the venture world, it’s what you’re doing. When you meet these early-stage businesses, you’re trying to build some type of search map in your head that’s more intuitive than it is rational. It’s sometimes a bit hard to explain why X might remind you of Y. That’s a skill. That’s a skill I think a lot of people have. The benefit I’ve had is I got inculcated in this world at a very young age, so I’ve had many, many hours of reps, just getting it in and mostly making mistakes, but occasionally getting it right.
COWEN: I don’t think I have the talent of hesitating before answering a question.
I think one thing I’m good at is turning problems into combinatorials, then within my head very rapidly searching for all possible combinations of factors that might somehow fit together, and spitting that out in well under a second. I’m not even sure that’s an underrated talent, but I think it’s a way to think about some of the talents I have.
If it’s an area where I can turn it into that, I will typically do quite well. But if it’s like trying to work the microwave at home, which I cannot turn into some kind of combinatorial factorial analysis, then I’m way below average at trying to work the microwave at home.
RAJAGOPALAN: That’s true. [laughs]
Daniel, if you’re looking for talent in investing or finance, how does that look different from the talent in the start-up world?
GROSS: In the start-up world? What makes a good investor is very different from what makes a good founder. If you were to make a scatterplot of it, some of the attributes are completely diametrically opposed. For example, I think very good investors are the right degree of optimistic but also realistic, whereas founders are too optimistic, which they should be.
At the end of the day, start-ups are a very funny activity when you think about it from a probability standpoint. Most companies fail. Almost all companies fail, and yet, people seem to be seemingly doing this activity over and over. They’re jumping off the cliff over and over again. You look over the cliff, and everyone who jumped off of the cliff is just on the ground dead, but people keep on jumping off the cliff. Founders are almost too optimistic.
When you’re evaluating a business, especially at later and later stages, I think optimism can be your enemy. Often, you see when a lot of founders later on in life — and I’m such a person — who started a business, sold it, and became an investor, you actually have to be able to wear very different kinds of psychometric hats. One of them is this continuum of realism and optimism. I’d probably say that’s the starkest difference between what makes a good start-up investor and a good founder. There are probably many others, but that’s the main thing that you look for.
RAJAGOPALAN: Who’s more likely to drink Diet Coke of the two groups?
GROSS: That’s a good question. I’d say both are pretty likely to be of the whatever Diet Coke signals. I don’t know. Obviously, here in San Francisco, it’s quadruple espresso, $25 coffee. Maybe the rest of America, it’s Diet Coke, but both are people that want more stimulants as opposed to depressants.
RAJAGOPALAN: And that just depends on the stage at which they’re at?
GROSS: Yes, I think so. I think stage, location, whatnot. The bit about it that’s very funny that you end up writing — I have the great gift of writing a book with someone like Tyler Cowen on a topic as expansive as talent, and of course, what comes out of it is, everyone wants to talk to us about soft drinks. Sometimes I feel we’re like Michael Pollan, who wrote a book about dieting or something, and everyone else wants to talk about Diet Coke. I think it’s probably a very common trait across all active people.
COWEN: Investors need more red wine, don’t they, to regulate the mood?
GROSS: Oh, maybe. Maybe they’re more totally trying to operate their amygdala with opposing drugs — uppers and downers.
COWEN: But there are some skills to evaluating the wine that reflects skill in evaluating investments more than, perhaps, start-ups.
GROSS: That is probably true, that the start-up founder would probably be the type that does not care what they’re drinking as long as it gets them hydrated and in the right mood. The investor definitely has all sorts of theories about the colors and the vintages and the countries and all that.
RAJAGOPALAN: It may also have to deal with disposable income at that stage, right?
GROSS: Yes, it may also have to do with the fact that one is not free.
RAJAGOPALAN: Tyler, both of us are at George Mason; you’ve been a professor there for more than 30 years. You’ve been involved in a lot of hiring decisions. It’s a strange place for more reasons than just that both of us are there. It’s a large state school, it’s newish. It’s not an Ivy League school, but it’s had an exceptional economics department. We’ve had a couple of Nobel laureates. We’ve had people like you.
What is the secret sauce at George Mason that it manages to attract that kind of talent that other schools of comparable level are not able to?
COWEN: I like to look for people who believe something very strongly. That can’t be the only qualification, but other economics departments tend not to do that. They look for people who can execute flawless 90-page papers with every possible robustness check. Now, that too is important and useful, but it’s not what we do.
If you decide you will specialize in people who believe in something and pursue it passionately and want to sit around and argue and talk ideas and read books, you will end up with one of the most interesting economics departments. We’ve built a sufficiently strong consensus that we just keep on hiring people who believe things. They turn out being a little wacky, but you’re selecting for that. That, in turn, keeps you different.
RAJAGOPALAN: How do you know how to screen for that? What’s the question you’re likely to ask at the AEA [American Economic Association] meetings that you know that someone is technically not unsound, but they’re also very interesting, and they can’t game it?
COWEN: Oh, I don’t think you have to ask questions. If they believe in stuff, they will ask you questions.
You just have to show up in the room. It’s one case where you don’t have to agonize over optimal interview questions. In fact, the way we’re supposed to interview now — not just supposed to, but do — is we’re to ask everyone the same questions, and we do. But that doesn’t matter. It’s not actually a handicap. It would be a handicap in almost any other situation. You can ask everyone the same questions, and it will just come out who believes in something.
RAJAGOPALAN: Daniel, at Pioneer, one of the things you have tried to do is gamify the experience. When it comes to gamification, do competitive games work better or do cooperative games work better to test for ambition and aspiration?
GROSS: Pioneer is principally a website, but it is an online start-up accelerator, a pre-YC [Y Combinator], which I would have to explain in most cities but not in this one. There are many ways where it’s different and unique. One of them is that everyone on the platform gets a score every week for the work that they do, so you’re incentivized to make your score go up.
The broad idea there is trying to really address a question somewhat related to talent, which is, why aren’t there more start-ups? And there are many answers to this question, but one of the reasons why there aren’t more start-ups is — as we were saying earlier — the act of starting a company is completely irrational, and you tend to get a lot of negative stimulus before you get positive stimulus.
You start working at a new job. You have a boss, and that boss wants to, hopefully, make it a good experience for you. They tend to build a map and a game for you — “basic game” in quotes here. Start-up doesn’t have that. You tend to just hear, “No, no, no, fail.” Then finally, you might get somewhere, but a lot of people don’t crest beyond the J curve, really, and they just drop at the nadir.
Gamification is a way or some way to make something compelling. Ultimately, the goal of basically creating more start-ups is the theory behind Pioneer, somewhat how Peloton gets more people to cycle. Heck, people in South Korea are literally dying of exhaustion because they’re playing video games to death. There is something very powerful about that effect, whether it’s used positively or negatively.
Now, you ask the question of what creates more goodness, basically — competition or cooperation. We think competition, broadly, is what creates greatness. The answer is both, obviously, because competition creates cooperation within small groups that compete against each other. Now, it is true that not everyone who signs up for Pioneer wants to compete on a global leaderboard against everyone else in the world.
Very good competitors, I think, even the best, most competitive people tend to have a predictive model of like, “I’m only going to enter games I can win, or at least, games where I have maybe a 40 percent chance of winning.” But I strongly believe, whether you want to compete globally or not, everyone wants to improve every single day.
It’s very similar to Peloton in the sense that you can have a score, and you could be playing against yourself. You could just be trying to grow your revenue week over week, or the amount of active users you have, or any one of different metrics and KPIs [key performance indicators], or you could be competing globally. I think that affords us all modalities because I really think there are very few people that don’t want to improve at least themselves, if not want to compete against others.
Of course, every form of competition usually will entail some form of local cooperation, and I think it’s a very good thing. Ultimately, a lot of what a free market enables is for people to get excited about the idea of competing, building a better product, trying a new experience. Many of those fail, but occasionally, those work, and it creates the microphones that we’re using, the building that we’re in, and the city and world that we live in. So, I think both are necessary
RAJAGOPALAN: On a day-to-day basis, though, you’re trying to create a community, right? Does the leaderboard sort trade that off a little bit because people are just trying to go further up? Does it turn it into a zero-sum game instead of forming a community?
GROSS: Yes, it’s a good question. What we try to do is make the game not necessarily appear zero-sum. It is true that for every ending week, at the end of the day, if you have a sorted list, someone will be at the top and someone won’t. But there’s no direct reward function for being number one versus number two. There is the glory of it, and a lot of our founders send us and tweet screenshots of their position on the leaderboard — whatever, it’s great for them.
There’s no direct reward. The guarantee Pioneer gives you is that if you’re in the top decile, we will review your application, but you could be 25th or 32nd — it doesn’t matter, we still review your application. It just helps us in that case to get a broad sort, and because the game is not that zero-sum, I think people still tend to at least cooperate on non-business-related things.
I think on business-related matters, founders should either merge their companies or compete and not cooperate. That’s totally fine. I think we manage to have the best of both worlds. But I do think, when constructing these universes and whatnot, it’s quite important for it to not feel necessarily zero-sum. You could go compete with someone on a running track, and ultimately, their running faster than you doesn’t eat away at any of your pie, so to speak. And I think that’s important because, like everything, it’s a spectrum.
A lot of these start-up communities — and ultimately, San Francisco is one for better or worse. It’s basically a giant start-up campus. They work because people do, at the end of the day, feel some form — even if it’s not directly related to their business — but some form of kinship with each other. Silicon Valley lore’s obviously littered with stories of the person who let me sleep on their couch, and one thing led to the next, so we have both, I hope.
RAJAGOPALAN: How much of your time growing up in Israel and watching different experimentation with community building, different kinds of communes, inform how you decided to build Pioneer?
GROSS: I’d love to be able to answer yes to your question that that was somehow extremely informative to me. I grew up in a dark, secluded corner of Jerusalem, right outside the old city, and so I can’t really say I had the most expansive view. But in reality, the real place I experienced growing up is the internet.
Many people now like to talk about how bad social media is and how bad these online communities are. That’s a very nice thing to say when you’re looking out into the rolling hills of Sonoma and this beautiful world that we live in here today. Look, obviously, the place where I grew up is certainly not a third world country, but it’s very different and isolating, to be honest. I think there are many people who immigrate to San Francisco and California who feel similarly.
The idea of growing up on the internet does let you see all sorts of experiments. I grew up in the open-source community, writing code. And so that, to me, was an interesting example of a very different organizational model than many different companies, where the leadership in some of these open-source projects is actually quite undefined, and you really tend to see those struggle versus ones that have a defined leader.
There’s an infinite variety of forms of cooperation, but I can’t really credit Israel with that. I’d probably really credit at the time, the 56-kilobyte dial-up internet connection I had.
RAJAGOPALAN: Speaking of internet connection, Tyler, you’re an early adopter. One of the things that you’ve done, which is a little bit niche but very fun, is the Ethnic Dining Guide. That’s your way of looking at the world through food. You are not so good at desserts. You go straight for chocolate ice cream. That’s your go-to move. Is there something fundamentally different about people who write about food, or who are food critics, versus people who write about dessert? And is there such a category? There should be, right? Dessert critics?
COWEN: I don’t quite consider desserts to be food.
COWEN: I think in a town like San Francisco there will be many dozens, hundreds of places that are quite good. There will be very few good desserts. In my perhaps backward view, there are excellent desserts at Michelin-starred restaurants, most of all in Europe. There are superb desserts in India, and then there’s very good chocolate ice cream. All other desserts, basically, are bad, and most chocolate ice cream is not good, including in the city of San Francisco.
The fact that desserts tend to be sweet — that was a decision made in Western cuisine. The French decided to segregate out the sweet stuff and make it separate from the meal. Say, Arabic food, or even food still in Sicily today — the sweets are integrated into the main courses much more readily — parts of the Middle East, as well. When you put all the sweet stuff in one place, it’s not going to be good unless it has a very high level of ingredient quality and composition.
RAJAGOPALAN: It is a different taste palate for someone to be able to appreciate desserts, which you don’t possess.
COWEN: I don’t cover desserts because I don’t live in Kolkata. I’m not covering Michelin-starred restaurants. And chocolate ice cream, there’s not really that much to say about. We all know where it’s good and it’s bad. It’s good in Italy, Argentina, Brazil, some parts of the US, most of all the Northeast. It’s very good in France, actually, especially Paris, but mostly it’s bad.
RAJAGOPALAN: We disagree on many things.
COWEN: We went to Joe’s Ice Cream last night. It was just awful.
COWEN: I Googled “best chocolate ice cream San Francisco.” One of the top lists, once you get past the Google ads — Ghirardelli is listed three times in the top ten. What kind of insanity is that? Then Swensen’s is in the top ten, and then there’s some place called Mocha, which is not even ice cream. Then there was Joe’s, which was horrible, and that was five of the top ten.
The internet has failed us. San Francisco has failed us. Chocolate ice cream has failed us — some combination of all those things. I’d rather eat in Israel, in Tel Aviv. There’s excellent chocolate ice cream, better than in Jerusalem, I think.
RAJAGOPALAN: My explanation for the bad chocolate ice cream last night was that San Francisco doesn’t have enough kids. Not enough people are having enough kids, and that’s the reason for it, aside from the benefit of torturing Tyler and not getting him good chocolate ice cream. [laughs]
RAJAGOPALAN: One of the things I want to learn about is how you’ve influenced each other. One is exercise. You both have different ideas of exercise, both very regular. Daniel, you run marathons, I believe, on every continent, and you’ve run one in Antarctica. Is that right?
GROSS: In a city like San Francisco, where it’s hard to go out and not see someone running, I don’t think it’s particularly remarkable to be a runner. But yes, I think we have very different philosophies when it comes to exercise. That is a fair statement.
RAJAGOPALAN: The last time I went on a hike with Tyler, he brought his book bag along with a lot of books.
RAJAGOPALAN: Have you influenced each other on exercise at all? Do you talk about it?
GROSS: Have you changed your philosophy? What is your stated philosophy on exercise?
COWEN: I very much enjoy games of skill, such as tennis and basketball, and those are exercise. If it’s sheer exercise, I’m bored, but YouTube plus Peloton to the rescue — that works for me. I very much like Peloton, and that’s your influence. Peloton with YouTube is great. You can watch Magnus Carlsen and pedal away, and Magnus is highly entertaining.
GROSS: That’s definitely not what I do, but I appreciate the sentiment.
RAJAGOPALAN: How much do you think the gamification in exercise and the personalized, customized version of exercises help you or form the way you think about running?
GROSS: Definitely, it’s formed the way our product is built. I think everyone who works on our team is either a want-to-be competitive athlete or a want-to-be competitive chess player. Everyone is, in a way, getting scores in their hobbies all the time and want to improve. That obviously drives product ideation forward.
I think Peloton was an interesting case study. It’s an ongoing case study that’s being evaluated every day in the market, not positively, but it’s an interesting case study in how much gamification matters at all. It does seem people are actually quite motivated by whatever leaderboard and power mechanics they have out there.
On the contrary side, they’ve released this thing that totally flopped. I thought it was fascinating that it didn’t work. A priori, if I were to describe to you here some type of thing you can use on an exercise bike, what it does is, it responds to the music that you are listening to. As the tempo of the music increases, you pedal faster, and as the tempo of the music decreases — whatever, it’s all synchronized, and it’s fun. If I was pitching that at a venture firm, I think people would say, “Wow, sounds great.” Peloton built this, and they launched it. This particular thing totally flopped.
I think people tend to really overcomplicate it. I think there are psychometric personalities — I imagine mine — that are relentlessly interested in improving, and for that, getting a tight feedback loop with any type of numerical score is very good and very simple. I think there are people that don’t really care about that, and want to watch YouTube and get the work in and move on. Ultimately, yes, I think it probably helps a certain type of personality.
RAJAGOPALAN: Tyler, do you think this kind of gamification would have made you a different chess player when you were young?
COWEN: I think one significant difference between Daniel and myself — Daniel I see as much more competitive than I am. I think I’m somewhat more obsessive than he is, though he’s quite obsessive. The areas I operate in — for better or worse, I’m never asking myself where I am on the leaderboard. For instance, there’s no other person where I could tell you how many Twitter followers they have. I just have no idea.
But I can wake up every morning, do my thing, practice at it, try to progress, and just relentlessly, endlessly do that forever, as I’ve actually done now for the last, basically, 46 years. That’s a kind of obsessiveness, but I’m not competing very much at all. I don’t know what my leaderboards are, and I’m fine with that.
You could describe yourself better than I could you, but I think your experience is one of the world of gaming more fundamentally. I quit chess when I was 15 because, in a way, I found competing a little boring, actually. It wasn’t obsessive enough, in a funny way. The thing always comes to an end, whereas what I do now — it never comes to an end. It’s a true extreme of relentlessness. Does that make sense to you?
GROSS: Yes, definitely. Do you think, if you were starting out in the era of the internet, where things are much more interconnected and reflexive — the whole chess thing is just much more in your face — do you think you’d play chess longer?
COWEN: No, I think I would have quit sooner.
COWEN: I would have accelerated to the point of frustration and boredom more rapidly and quit at 13 rather than 15.
RAJAGOPALAN: Is it because when you were growing up, there was still a chance that humans had against computers while playing chess, and now that’s just over?
COWEN: No, I never thought about the computers, didn’t worry about them. There was a chess-playing computer back then called Tinkerbell. People lugged it around to tournaments. It was quite large. You had to pull on it. It was on a cart. You needed more than one person to pull on the cart. It was a standing joke. You had the option of not playing it, but you knew that if you played it, you would beat it. A very different mentality.
At the time, I thought chess-playing computers — it was a very far-off thing that they would ever be good. Obviously, I was totally wrong. I didn’t understand how they would manage to copy intuition in different ways.
I think that Borges’ notion of the infinite, unending system, the infinite library, is what really appeals to me. With the internet, I would have found that more quickly — indeed, in the internet itself, as I have, in a sense, now.
Ben Casnocha once made to me the interesting point, I’m the last generation to have lived in both worlds in a significant way: with internet and without internet. I’ve lived 22, 23 years with a lot of internet, and then I lived well over 30 years without any internet at all. That’s just not going to be a thing anymore. I feel very privileged, actually, to have grown up in libraries and not the internet, but then to have had the internet.
RAJAGOPALAN: One of the things I want to ask you is, since we’re in San Francisco, and everything is Elon Musk, and we’re always talking about what we’re going to do when we end up on Mars. How do we screen or select for the first group of settlers? What are the interview questions we should ask them?
GROSS: That’s a great question, by the way. I’ll throw out a few ideas. I think the interesting question for Martian settlers, any form of settler — anyone who wants to do that is saying a lot by self-selecting into it. And I think it has been the case for people that have gone to new continents, and to settle new nations and existing continents, and whatnot. You’re going to get a lot of free selection effect by virtue of the person wanting to be an astronaut, let alone an interplanetary settler — that’s quite the LinkedIn.
I think an interesting broader question for that colony will be, what’s going to keep people together during the hard times? If you look at successful countries that were settled, there were very strong religious ties that built out lore, that helped create fabric. Look, maybe the conditions will be so harsh that that alone will create ties.
I’d be looking and asking for groups of people — I would make no case on what form of religion is the best — but groups of people that are very connected on some very deep level because otherwise, I think you can end up with something that blows up. Tyler, what do you think? Diet Coke drinking? There’s no Diet Coke . . .
COWEN: Obviously, I’m an American, and I’m personally very influenced by Puritan culture and my country’s own background. I would look, first and foremost, for religion, but it’s a bit like the GMU hires. If you have to ask someone, “Do you believe in some idea?” it’s already a bit hopeless. You need to know that they already do before you have to ask them. In that sense, it’s not an interview question.
I think simply whether the person is American is, to me, of critical import for settling Mars. I think Americans are fairly well-situated to settle Mars — pretty high level of trust, frontier mentality. A lot of us are crazy. We’re relatively religious. The notion of settling a hostile territory obviously is in our cultural DNA.
Israelis, possibly. It’s a little more complicated because for Israel, it’s a bit more about settling a specific place, which Mars is not. Nonetheless, there’s the sense of braving the hostile elements. So, religious Americans and Israelis would be my first cut at it.
I would even consider LDS Mormons, who tend to have beliefs about other worlds and that human beings should have some role in colonizing other worlds. That might help. I don’t know if that’s the strongest LDS belief, but it’s not going to hurt any.
I want to double down on the Americans and not, say, the Belgians. Nothing against the Belgians. They have amazing chocolate ice cream —
COWEN: — and French fries and some other things, but I’m not really going to send them to Mars. I’m sorry.
RAJAGOPALAN: Is there a screening question? One screening question for me would be, do they want to have kids? How do they think about how many children they want to have and raise them? I think that would be a key question. Anything else we should screen for before we pack them off?
GROSS: I think there’s probably a lot of physical stamina that would be necessary. Just good old, can you do 10 pushups or whatnot? It’s probably nontrivial physically to get to Mars, let alone settle it, so that probably would be an important one.
COWEN: People who are careful with airlocks would be high on my list, but just not making very stupid mistakes with physical items. People who are bad at operating their vacuum cleaner, I wouldn’t take to Mars. Certain type of, almost a carpentry skill — that would be very useful, even though you don’t need them to build things. Maybe the robots do that, but you don’t want them really pressing the wrong button very much.
GROSS: You need a MacGyver skill.
RAJAGOPALAN: It’s also a little bit like selecting for your condo association board. You don’t want really annoying people, for instance, or people who just want to be contrarian for the sake of being contrary. It’s sort of the same way you hire for tenure in an econ department. You’ve got to have lunch with these people the rest of your life.
COWEN: Weren’t the Puritans somewhat annoying? My intuition is you actually would want a lot of annoying people because —
GROSS: Ned Flanders from The Simpsons, basically.
COWEN: — that friction would somehow keep them going. It’s the people who don’t argue with each other who could end up very badly off track on Mars. You need people who are arguing every day.
GROSS: You didn’t ask — are we going or just they’re going? We want them to set something up.
RAJAGOPALAN: Well, I’m not going anymore, after the answers you guys have given me.
RAJAGOPALAN: All these annoying carpenters who know how to run a vacuum. I’m fine on Earth, chocolate ice cream aside.
COWEN: I don’t find space that interesting. Aliens I find interesting, but just to put me somewhere empty where most prices are infinity, I’ll say no to that.
RAJAGOPALAN: Coming back to the talent market. Do you think, Tyler, it is in disequilibrium? Or there’s some market failure? Or there are different kinds of talent markets and some are in disequilibrium, some have a failure. This book sounds like there is disequilibrium in the talent market, and a lot of the suggestions that you have given can push it towards the equilibrium.
COWEN: I think there’s a massive market failure in most parts of the talent market, but it’s worth asking which parts work very well. I think, actually, many parts of gaming don’t cost that much to access. Not that everyone in the world can play games, but really, a considerable number of people can. Performance can be measured. There are leaderboards. It’s obvious how well you’re doing. If you want to learn, there are a lot of ways you can learn and get better.
I think chess is a pretty efficient market, especially now that many more people in India and China are playing. Well, you play with computers, you can become as good as quickly as you’re able to.
But when it’s intangibles, I think there’s a common situation where, when the time comes to make a hire, you feel rather stuck. Ex ante, hardly anyone is doing all the right things in terms of investing in preexisting networks, honing their own abilities, making themselves sufficiently inspiring, figuring out how to attract the talented people to come to them. Those are the more difficult tasks.
It’s not like you sit on your throne, and three candidates show up, and you point to the one, and you’re only going to get so much better at that. You can get better at that, but I don’t view that as the way to think about the market failure. In most general terms, if you find a great person, you make them a lot better. They capture a lot of that value, so you underinvest in doing that. That’s the fundamental problem.
Whoever first spotted Elon Musk has basically no share in Elon’s riches. You could say, well, Peter Thiel at some modestly later stage spotted Elon and earned some money from spotting Elon. But that’s the actual problem. You can help people a lot and get nothing for it.
RAJAGOPALAN: How much of the insights in the book have either of you managed to implement in your own organizations?
GROSS: When you write a book with a title of Talent, you certainly walk into every interview you do in your life realizing that guy’s thinking he’s chatting with a guy who wrote a book called Talent, so you pretty much want to be on point in the interview.
Look, we obviously already experienced some heightened awareness around an act which most people are not sufficiently focused on, which is the interview itself. That only increases, I think, after something like the book comes out. We have always been trying different interview questions. The book is really just like a cut from a very long list that keeps on growing. I think we’ll continue to iterate on that, over time.
I’d say that the biggest shift in my thinking on talent, as a by-product of working with Tyler, has been on the value of things like energy and sturdiness and industriousness over raw intellect and IQ, which I don’t think is properly . . . It certainly wasn’t in my mindset a couple of years ago, and I still don’t think it’s in the global mindset.
We’re certainly not saying that horsepower and IQ don’t matter. They certainly do, but there is a clearing bar at which point, for most roles, I think people tend to overvalue it and don’t realize the logarithmic nature of the curve and assume it’s linear. But I actually think, earlier than many people realize, you want to switch to caring about just how vigorous and how energetic that person is.
I think that might be because — I’d be curious if you’d agree that it’s because, for most tasks, doing gleans far more information than thinking.
GROSS: Yeah. You’d rather have someone that will just do much more. Their learning rate should be much higher.
COWEN: [to Rajagopalan] Speaking for myself, I hired you, right? You are in academia. I think in academia, there are quite a few people who are significantly undervalued. You can’t wait too long, or they’re just totally ruined. But if they’re given freedom to operate and actually do things, there’s already a reasonable positive selection for smarts.
There are some people who really are thirsty to do things and run things and create and make a difference, and those people are trapped in academia because a lot of them can’t see a way of supporting themselves doing a different thing. If you can set up structures where they have that support, you can find a lot of people who can become 50, 100X more productive by simply not just being academics all the time.
You’re exhibit whatever — I don’t know what letter — but that’s you. You run Emergent Ventures India, and you identify people in India and give them support and get them going with their own start-ups and projects and intellectual endeavors. That’s phenomenally way more productive. Are you smarter now than then? Well, probably somewhat, but that’s not the difference.
The difference is this ability to see there’s a difference you can make and really want to do it and be in a structure that allows that to happen. That’s just an example of how the market for talent can be way more efficient, not by 2X but by 100X or more in many, many cases.
RAJAGOPALAN: I actually use the insights in the book for what I do. I’m asking you the same question.
COWEN: You did it before you read the book too.
RAJAGOPALAN: I’m asking you if you do the same. Like outside of EV, is it easy to bring insights like this to a university system the way we hire — not just in econ at George Mason or at Mercatus — because these are institutionally set in their ways.
COWEN: Talent issues, I think about all the time. I said before, I’m an obsessive person. If I’m waiting in line for my chocolate ice cream, whatever, I’m thinking about how’s the staff organized? Who’s doing a good job? Why, why not?
It’s pointless in a way, but you can’t help but do it, and it’s some form of practicing just to always be on and processing and thinking through “how is this working and why?” I find that useful, but I know it’s weird. Does it make a person happy? I’m not unhappy doing it. It’s part of being obsessive.
RAJAGOPALAN: Fair. Daniel, how do you think this interview or conversation is going?
GROSS: Oh, thank you for asking.
I’d say it’s going well. I appreciate the questions are very colorful, better than some of the questions we’ve gotten. I think no one has, to date, asked us how to screen for human Martian settlers. I’ve been enjoying it. What about you?
RAJAGOPALAN: Better than I thought.
GROSS: Oh, that’s good.
RAJAGOPALAN: I had this whole secret plan when they were plugging in the mic. There were some loose wires, and it’ll come in handy if things are going badly, so we’re all still here.
RAJAGOPALAN: How do you think about immigrants and talent? The more specific question is, how are immigrants different from children of immigrants? Is there anything that differentiates them? I see a lot of differences in the Indian community, but I’d like to know more from how you think about that.
COWEN: I’m a big fan of immigration for countries that can manage it. For me, that definitely includes the United States. I think immigrants bring more energy. There’s plenty of data. They do start-ups at higher rates.
But immigrant parents often are in difficult positions. They come without networks. They’re starting all over. Immigration can be much harder for men than women. There’s literature on this. If the woman is raising children, her position in the family more or less remains intact, but the man is starting all over again and very likely is under-placed in some significant way and spends quite a few years just working to achieve a decent middle-class income.
But if you see persistence within families, whether you think it’s genetic or upbringing or social, cultural, whatever, but I strongly believe in persistence in families. The children of the immigrants will start off usually in decent enough schools, often in the suburbs — could be Northern Virginia, could be Ontario. They’ll develop, normally, North American networks.
They’ll be completely fluent in English in a very useful way, and it can just be full speed ahead. They’re still not taking prosperity for granted. Their parents often are kicking their butt, like “You’ve got to succeed,” which is useful, though not always happiness-inducing.
It’s just a general group of people I’m extremely bullish upon. I think there are a lot of good reasons — both intuitively, but that also show up in plenty of actual data and research studies — why we should be bullish on immigrants and try as a nation to take in more immigrants than what we’re doing right now.
GROSS: To what extent is the positive effect of immigrants true of people that immigrate within the United States?
COWEN: I don’t think it’s very true anymore. I think it was a long time ago, say, people who went to California, people who settled Utah. But now, to move across the United States — there’s always internet, supermarkets are the same. There are definitely different things politically, but if you’re a dentist who lives in Denver rather than Columbus, Ohio — it doesn’t feel that brave to me. Fine, maybe there’s some very modest positive selection.
GROSS: It’s weakened considerably.
COWEN: It’s quite weak, I think. Maybe people who never move, but if a person only moves once and not that far, I don’t feel that’s negative selection. I grew up in New Jersey, moved to Northern Virginia, which is like, what, a four-hour car trip away? It’s not really such a brave thing to do. I moved to more trees, but still, that seems fine as a marker.
RAJAGOPALAN: An interesting thing that I see in the Indian diaspora is, the first-generation immigrants especially, probably the ones you’re familiar with in the Bay Area — they are not very risk-taking and entrepreneurial in the sense that they’re not doing start-ups and stuff like that. But they’re very good at doing very well in big tech firms and very good at navigating a particular system.
It’s the next generation — American born from Indian families — who end up being very, very entrepreneurial. Is that a good way of thinking about all children of immigrants? Or there’s something funky going on with the Indian immigrants? Mostly children of immigrants just aren’t that risk-taking?
GROSS: I think there’s something interesting going on with Indian immigrants. In particular, if you look at the executive leadership bench in tech, there’s massive overrepresentation of Indian immigrants or children of Indian immigrants. I don’t know if you have a view, but there’s something interesting going on there. I think that’s an interesting effect someone ought to study. Certainly, with start-up founders, which is maybe the area I most studied in, you tend to see first-generation immigrants.
But these are people that come to the United States usually not out of sheer desperation to have some basic form of economic success, because they were somewhat suppressed in their origin country, but more people in search of some spiritual belonging that they believe they found in whatever technology they’re working on. They look much more like religious migrants, I think, than your typical immigrant: “I’m trying to make it.”
Founders, at least, that I meet that come out to San Francisco — some of them actually are American, just immigrating from Iowa to SF. Obviously, many of them international, too. The best ones are not necessarily that worried about making a buck tomorrow. They’re technical, they found an interesting scene, and they want to belong.
I think it’s actually quite different from the immigrant persona of, “We took our whole family to the US. We have two screaming, crying babies, and we’re just trying to survive.” I think those people, for very obvious reasons, are very risk-averse.
COWEN: I’m strongly of the view that right now is a golden age for the Indian diaspora and also India. If you look at Florence during the Renaissance, or you look at Central Europe in the early decades of the 20th century, you see remarkable, truly remarkable levels of achievement that don’t happen before, don’t happen after. It’s not some genetic thing, but somehow everything is coming together just right.
I think part of talent is to realize when you hit these mother lodes, and then to figure out, “Well, we’re just going to try to do a lot here, as much as we possibly can.” Investing in potential mathematicians in Hungarian high schools in 1916 was a really good thing to do. You don’t even have to be that good at picking talent.
Today, for whatever reason, I do think it’s India, possibly South Asia more broadly. I see the potential for parts of Nigeria joining that club. It’s further away, maybe still contingent. But for whatever reason, right now, something remarkable is happening. Combination of level of aspiration, internet is good enough, enough people with enough English fluency, some underlying flexibility of worldview that I think has made Indians relatively well suited, say, to be CEOs in American companies in a way we might not have expected, say, 30 years ago.
I think something extraordinary is going on, and it won’t last forever, and it was not the same, say, 40 years ago. Maybe it started 20, 30 years ago, but now we’re seeing it all blossom. To me, it’s very exciting.
RAJAGOPALAN: I would agree. EV India is a lot of fun. For those of you who are investing or thinking of investing in India, there are a lot of low-hanging fruit. A lot of the people that we pick for EV India — if they were in the United States or Canada, they would have been in incubator programs and accelerator programs and magnet schools and Thiel Fellowship or something like that, but none of that exists in India. The scouting or the incubation infrastructure doesn’t exist.
Actually, Tyler and I are in competition usually, and I get far better quality of applications, a higher average and lower variance than the ones that Tyler gets from the rest of the world. That’s my simple explanation for what’s happening in India.
RAJAGOPALAN: One of the things that both start-ups and economics departments have in common is failure. This is both at the level of . . . Start-ups, it’s fairly obvious. But in economics, most people who start their PhDs don’t finish, or even the people — the sorts that Tyler is hiring as professors in the econ department — they may stop publishing, or they may give up at some point. What is a good way to screen for who will handle failure well, or at least better than the others in the running?
COWEN: I think in science, we’ve allowed institutions to evolve to the point where people have options of not failing at all. Science ought to be more like start-ups. Most ideas do fail, even published research papers in top journals.
If you ask researchers who really know, and they’re willing to speak honestly with you, like, “What’s the chance that paper is actually true?” you’ll get answers like 20 percent, 30 percent. You don’t get answers of 50 percent, but we’ve created this veneer or cloak of, “If you do all the right things in terms of process, we’ll all pretend to take this paper seriously.”
You’ll get tenure somewhere — maybe not at Harvard or MIT, but at some tier-one research university, and you’ll be given all these bureaucratic duties, and you have to referee a lot of papers and hire other people. It’s this self-replicating thing that insulates people from truly failing, but it also means that fewer people than ever before pursue true success.
I think it’s an example of gross talent misallocation. It is a better lifestyle. If you become an academic and if you work hard enough and you’re smart enough, you can’t fail. But we’re doing ourselves a gross disservice. I think a lot of our sciences are badly out of whack for this reason, and they should become more like start-ups again. But structures tend to ossify, and academia certainly is no exception to that.
GROSS: Yes. Look, there are classical answers to your question of, how do you look for stories early on in someone’s life — failure and whatnot. All that stuff is true. I think a great emotion to be on the lookout for in an interview, in particular when assessing founders, is fear. Sometimes you meet people and their naked ambition is so large and vast that I don’t feel fear for my life, but I definitely feel a little bit of fear being in the room with them. I think that’s a very promising sign when one feels that emotion, and that, I think, is a good proxy toward, will the person handle failure?
I think a lot of the best founders I’ve had the pleasure of working with don’t even really experience setbacks and failure the same way most people do. Or the degree of badness of the news — for something to register in their minds as true failure is much higher than it is for most people. A lot of bad news is immediately misinterpreted as great news. “Oh, the market’s down? Great. A lot of talent will be fired, and we’ll be able to hire them.” Correction, creative destruction and whatnot.
I think a lot of that comes out of just a general sense of vigorousness and vitality that I think is somewhat correlated with this sense of ambition, too. I think about that a lot. Reflexively, I try to think about how I feel when I interview someone. I imagine, actually, everyone’s doing that. Some awareness to the process is quite helpful, though.
RAJAGOPALAN: Yes, resilience is somehow hard to test for, right? It just needs to be observed. It’s one of those things you can figure out fairly quickly. I just don’t know if there’s an interview question to figure it out.
GROSS: Yes. One of the reasons why founders are not strictly economically motivated and are motivated by some deeper belief, or better, is the underlying barometer of what they’re going to be resilient about is much greater than the local game of, “Oh, this fundraising round fell through.” There’s a much deeper game going on. It’s basically, “Oh, I told everyone I know. I never felt like I ever fit in anywhere in life. I’ve now gone around and told all my friends and family that I’m doing this company thing. I’m doing the company thing. The company thing cannot fail.”
I think that type of perseverance . . . Look, every single great start-up has had these dark moments of death or near death. Obviously, everyone’s talking about SpaceX famously failed three launches and couldn’t fail the fourth. Every start-up has that narrative. You often need someone that’s powered by a deeper reserve currency than dollars in order to see through that.
RAJAGOPALAN: Is your office messy or neat? When you walk into someone’s office or workspace, do you judge them one way or another on how talented they are, depending on how messy it is?
GROSS: Steve Jobs, famously, said someone asked him that question, and he said, “Everyone says an organized desk is an organized mind, but most desks that I’ve seen that are organized are empty.” Would you say an empty desk is a what mind? He famously had a very messy desk.
I do think Zoom has created this, although it has reduced the amount of entropy or information you’re getting from someone in an interview. I think everyone here can probably attest to the Zoom interview as not as enticing, exciting, revealing or interesting as a real-world interview, but it does reveal other information.
Net, you’re still getting less, but you’re suddenly getting this new, interesting information in the background. Where they are, the cats wandering around — okay, that’s interesting. I don’t know that all of our mental models, built around decades of calibrating on real-world interviews where you don’t get that information, now suddenly have to be readjusted to that. I think it’s a good question.
The desk is a reflection of the conscientiousness, I think, of an individual. For some roles, conscientiousness, to the extent it moves at a continuum that pulls down openness, which the big psychometric theories would disagree with you, meaning they would say the Big 5 aspects scale are totally independent of each other.
But you do really wonder. The person who’s hyper conscientious, who really dots every i and crosses every t — it’s exceedingly rare, I think, to find someone that is really, really conscientious and also really open. So, I do tend to believe that they affect each other a bit more than we realize. I think that can be a revealing thing in either direction.
I don’t know that you would necessarily want, say, your product designer to have the most organized desk that, to Steve Jobs’ parlance, is also quite empty. I don’t know that I would want to see my accountant have an incredibly disorganized desk with all sorts of returns and Post-its and papers flying around. Much depends on the role.
RAJAGOPALAN: What about your co-author? Tyler, you know why I’m asking you this question.
COWEN: I like the messy desk now. I’m biased here, to be clear, but when I see the desk isn’t messy, it just looks to me like there’s an input that’s not being used. There’s a lot of slack in the system, and the person tolerates slack without thinking, “Well, how can I put this desk to better work?” Then I get suspicious. “Well, what other inputs are there a lot of slack on?” Their own labor, their own effort, their own intelligence — I don’t know.
I do know some very successful people with very neat desks, but it rubs me the wrong way. I think of the messy desk as quite organized, of course. There’s like, what’s the average quality of organization versus what’s the total amount of organization that went into this event of the desk? The messy desk is going to have more total organization, almost always, even if the average quality has higher variance.
GROSS: There’d be an inefficiency in the symmetry required of a perfectly organized desk, meaning everything can now only fit into squares, which means you have less total space, like a bin packing problem.
COWEN: That’s right. To me, it’s also a sign.
RAJAGOPALAN: Yes. Then there’s the floor, which Tyler uses very well for the packing problem.
COWEN: But there’s a sign they’re not using the physical dimension, somehow, in their thinking. I’m a big fan of the physical dimension. Thinking with your body, thinking with what you put on the floor, filling out every computing device available to you. Space is a computing device. If you’re not using space, your computer is lying there passive, fallow. Who wants that?
RAJAGOPALAN: Now I know what you think when you walk into my office because there’s nothing on any surface. It’s pretty neat.
COWEN: I assume at home, it’s some huge sprawling mess, right?
RAJAGOPALAN: [shakes her head vehemently] Yes. I don’t walk into Tyler’s office because there’s no room to walk into, and the door doesn’t really open, and other such things. The one thing that Tyler’s office does reveal is the obsessiveness. It’s like everything that is being read or worked on in that moment is right there. It is very much a picture of what you’re doing at that time.
COWEN: It’s like a test for people. How will you react to this unbelievable mess? You’ll see things that don’t even seem like they should belong in an office, like a voodoo flag. You see a voodoo flag in an office, and what does the person say? What do they think? That’s useful, too. Do they even notice it? I’m always interested in people who don’t seem to notice the mess at all. The repeat visitors may not notice it anymore, but people who go there for the first time and talk to me like I’m a normal human being — that’s fascinating. It’s like, what’s with them?
RAJAGOPALAN: I don’t think anyone talks to you like you’re a normal human being, but it has nothing to do with the mess in your office.
RAJAGOPALAN: One of the things that I’m curious about is, a lot of us are looking for good mentors. What is a good way to figure out if someone will be a good mentor, especially long term? Is there a way to interview for a good mentor?
GROSS: I grew up outside of Silicon Valley, and I was very interested in tech. My father taught computer science for a living. He didn’t really teach me how to code, but he set up a home with a lot of coding books, and that was the only thing to read, so that was what I did. That aside, I remember a time before YouTube. I’m old enough to say that, but I’m also young enough to say that I remember, once YouTube came online, I just never stopped watching content and lectures on it.
I find it’s interesting. A lot of people here want the best real-world mentors, but we do have this amazing product that 50 years ago, people could barely dream of, where we have, effectively, an infinite amount of content from the world’s best teachers, investors, mathematicians. For me, when I was running my business, it was actually very helpful in specific ways, like you learned specific tricks. But also, watching very charismatic leaders talk is definitely a great thing to do the night before you have your all hands.
I think that the amazing thing about the reality we live in today is yes, you can interview literally millions of mentors on YouTube for free, basically anywhere in the world. I found, for me, that was a huge thing.
Silicon Valley in particular — obviously, it’s a very porous place, and people are generally very helpful to each other. You tend to have — I wouldn’t call them mentors, but people who take a step of goodwill. Based on limited information they have on you, they go out of their way to help you, and someone did the same thing to them. In many ways, I wouldn’t be here without someone taking a bet and funding me, and now I’m trying to pay it forward to others. Those things come into your lap.
I do worry a little bit when I meet people who are overtly searching for mentors for the sake of finding mentors. I’m wondering, whatever you’re looking for, I don’t think that’s quite going to satisfy it. To the extent one wants just good mental models of like, what does a really good salesperson look like, or what does a really good math professor look like? That’s available online in unlimited fashion.
Tyler, I don’t know if you have a different view, but that’s fine.
COWEN: If you want to find good mentors, I would say focus on yourself. Don’t focus too much on finding the mentor. If I’m thinking of someone I might usefully mentor, and they would, in turn, teach me things, I would wonder, “Well, is this person as curious as I am?” Something like that would be a starting point. I do figure they can’t fake that. They can’t even set out to become more curious. There’s something a little forced about that. But if they actually are very curious and just allow that to grow, they will end up in a position where maybe I will end up having a connection with them.
For it to happen organically, figure out what your strengths are, and let those blossom, and then just be out there. But again, don’t try to force the mentoring thing too much because potential mentors can sniff that out, and that, to them, is very boring. Someone who wants to be mentored is the most boring thing you can imagine. Someone who wants to learn something can be very interesting, however.
RAJAGOPALAN: Tyler, you are a very good mentor, and I think that has something to do with how generous you are. How do you rate generosity on the scale for a good mentor?
COWEN: I don’t know that I’m generous. I think of myself as pretty selfish. And people I mentor in some ways mentor me, and I learn from them, and I’m always trying to think obsessively, how can I learn from them? I’m open to the notion of selfishly a bit exploiting them. For me to stay in touch or stay vital —
GROSS: Tyler, you run an organization that gives out money to people around the world.
GROSS: How would you square that with the idea of you purporting to be selfish?
COWEN: First, it’s fun.
COWEN: Second, it is a source of social capital, which is very valuable. I’m not paid, at the margin, to do it, but I learn, really, an incredible amount. And I get some sense of where the world is going, and that, to me, is exciting. I feel I have a higher living standard than just about anyone I know, and I know a lot of people with very high net wealth. I don’t really think of them as richer than I am in terms of time usage, memories. I have art, music, consumption of desserts, whatever. I think of myself as wealthier than them in human capital terms for the most part, so I’m pretty selfish.
GROSS: All right. That’s good.
COWEN: And I think I’m good at it — at being selfish.
RAJAGOPALAN: Well, for me, it wasn’t the fact that you give money away. It’s the time. It’s an extraordinary time investment, both in EV and everyone. As the EV family grows, more and more time is spent solving their problems and helping them figure their life out.
COWEN: But people are fun. I certainly have enough time on my own, locked in closets reading books and the like, so I’m not giving that up. If anything, I still have too much of that and should spend more time with people.
RAJAGOPALAN: Well, here’s your chance.
COWEN: Here we are. Right?
RAJAGOPALAN: I think this is a good time to hear some questions from you. If you have any, you can just come up to the mic. There’s one on either side. Just state your name and ask your question. We also have questions on the iPad, I believe.
AUDIENCE MEMBER: I’m Owen Evans from Oxford. I’m going to give a science fiction–type scenario that maybe has some relevance to talent. Imagine that, say, half of all people had an identical twin, and some people have 10 identical twins. We’re in this very different world, and talent identification, in some sense, is much easier. What kind of impact would that have on, say, start-ups or maybe other spheres where talent is important?
COWEN: I think there’s somewhat less information contained in identical twins than many people in the Bay Area would suppose. I think maybe America, as a whole, might underrate the role of genetic factors in talent. But the people who think about it at all, I think, tend to overrate significantly how much it matters.
There are plenty of identical twins with very different outcomes. There are quite a few of them while they’re both law partners in Cincinnati, but at the highest levels, those very small differences — it’s like a multiplicative model. You need to have eight or nine very definite things go to an A or A+ level for you, and it might happen for you and not for your identical twin.
So, I think, at the highest levels of achievement, identical twins do not contain a lot of information, and they would not be that useful in talent search. I wouldn’t go around like, “Oh, did someone clone Bill Gates?” That’s sort of like an identical twin. Or “It’s the eight-year-old who was the clone Bill Gates. I want to support that person with some VC money.” It’s still a better than average bet, obviously, but that would not be my obsession. Absolutely not.
There’s some weird confluence of environment and genes and circumstance that maybe you know it when you see it. But ex ante, trying to predict that by looking at any one of the factors, I don’t think you’ll get very far.
RAJAGOPALAN: Hi, Andy.
AUDIENCE MEMBER: Good to see you again. I’m Andy.
RAJAGOPALAN: From Emergent Ventures, one of the many.
AUDIENCE MEMBER: You all talk a lot about energy and vigor. I’m really struck by that. It makes me wonder, where do you think that comes from? Why is it so variable? Why is it so different between people? How plastic is it?
GROSS: That’s an awesome question, isn’t it? There are all those studies about gait — walking gait — and all other health telemetry with people generally correlates with longevity. I don’t know that anyone’s run the regression on that and income, but I think it would be interesting.
I don’t know. Is energy plastic, Tyler? I don’t know if you’d have a different view. I think it’s an awesome question, a bit of a nature-nurture biology-esque question. There is some basic mitochondrial factory thing going on that seems more efficient in some people than others. I think that just leads to more hours in the day of work, more chances taken. If you assume the batting average is roughly even, just a higher chance of home run.
But when you read the interviews of Paul McCartney, or the documentary, he’s just at it. George Harrison is like, “Again? We have to go again? It’s 10:00 p.m. Again?” There are thousands of those stories — Steve Jobs, whatnot — of people that are more shots on goal. I think that must compound. Tyler, do you think energy’s plastic?
COWEN: I’ve never read a serious research paper on this question, but my intuition is that energy and that kind of vitality is one of the most heritable of characteristics. I’m not saying you will be a copy of your parents, but whatever was plugged into you at birth is what you have. If I think of myself or the other people I’ve known their entire lives, which is not that many people, I just don’t see that much change.
The way I am — my sense is I was that way at three or four, at age two. I don’t remember. My mother always told me that — always antsy, wanting the next book, something. I just don’t think it’s something I taught myself. You can, once you’re that way, learn how to use your environment to make yourself better at that and get the gene’s environment interaction going. That is very much something you learn, rather than something you were born with — how to multiply your interaction effects.
But that core something or other — Paul McCartney was composing songs at age 14. He’s finishing up a tour now. He’s 80. He doesn’t need the money. Puts out an album every two years. Takes on massive projects: art, books, everything. Incredible. You just read biographies of Paul — it just clearly seems he was born with it.
GROSS: Why do you think human core body temperature is dropping? In 2018, there was a famous study put out by the United States, I think military Army, that captures your human core body temperature longitudinally over time, and the US core body temperature, at least, is dropping. Now, you could say it’s some type of odd measurement effect, thermometers have changed since the 1930s or whatnot, but to the extent that’s an odd proxy towards energy, is it?
COWEN: I think we are declining in energy as a country. Putting immigrants aside, which is going to be a complex story of its own and may not be the same from all other places, but the country, to me, seems to have much less energy than it did even earlier in my lifetime, just anecdotally, so I worry about that.
AUDIENCE MEMBER: Hi, I’m Spencer. What, if anything, do you think we’re doing wrong at a national level with our talent evaluation of politicians? Where are we going —
GROSS: You’re closer to DC than me.
COWEN: I don’t know where to start with that.
COWEN: I would just say, in my basic view of politics, the main problem usually is the voters. Not always, but typically, it’s the voters. We started talking about this before in the green room. I think senators, as a whole, are actually fairly impressive. It doesn’t mean I agree with what they do or say or changes they push for, but just as raw studies in talent, they seem to me pretty good.
I live right outside of Washington, DC. I know, or have met, really very large numbers of people in politics: chiefs of staff, military agencies, people on the board of the Fed. I think our talent in those slots is pretty good. Not perfect, but that is not our national problem, in my opinion, at all. I can name plenty of individual politicians who I think are just absolute train wrecks, but again, I would think in terms of the main problem being the voter.
I think our political system does better at bringing in some talent than you would think. It’s striking to me, if you live in the DC area, how many families, almost every family — there’s some notion of doing national service that I actually find strikingly absent in the Bay Area. Maybe in the whole US, it’s weakest here and strongest where I live, but that sense of obligation to national service — it actually works, I think. US government still has done a whole bunch of things properly.
We did Operation Warp Speed. That would be one example. We had a lot of talent there. The economist heading it, Michael Kremer, Nobel laureate, one of the very best economists alive on planet Earth, and he was running that side of Operation Warp Speed. Well, how’d that happen? We’re doing something right. But at the end of the day, the voting inputs — I don’t know. I really do worry. But Daniel?
GROSS: That’s going to be a much better answer than the one I can give you.
RAJAGOPALAN: Go for it.
AUDIENCE MEMBER: I’d love to hear two or three anecdotes from the two of you on specific moments in which you’ve really made a difference in somebody’s ambition or aspiration. You talk about that at the back end of the book, and I’d love to get a couple of case studies of how you did it, how you zipped in there.
COWEN: I think it’s important not to self-deceive. I’ve had really quite a large number of people I know — some of whom are in this room — tell me I made a big difference. I’m quite convinced they’re sincere, but I’m not sure they know. I think there’s something quite useful to just being obsessive and continuing, and almost not trying to figure out too much. There are some odd ways in which I think our society is too data-driven. Just keep on trying to do it and repeat, and try to be a good example.
If you’re trying too hard to measure your marginal product, you’ll maybe end up conforming too much or doing too many things that are measurable. At the margin, maybe the way to have an impact is to not worry too much about measuring your success. I don’t think that answer can work for everyone, but it’s how I’ve approached the problem. I feel without measuring it that it’s worked pretty well for me.
GROSS: I think that is a very good philosophy. Oddly, I think the simplest thing — I don’t know about EV — but certainly, I find what I’ve done over the course of my career that people seem to say has been useful for them is either just funding, or at least encouraging people to move — to Silicon Valley, ideally, if they’re in tech, but even just to a new city. They tend to mispropagate that at me. First of all, anyone, hopefully, would’ve nudged them at some point, but it’s really just that movement and that immigration pattern is I think really important.
COWEN: Shruti, what’s your answer?
RAJAGOPALAN: I don’t have a very good one. One of the answers that people give me when I talk to them and tell them, “Oh, you received the EV grant in India,” is, they say, “Oh, you believe me?” Not believe in me, but they can’t even believe that someone actually trusts them with the money and really trusts the story that they’re selling to me, and so on. The first thing they say is, “I won’t let you down.”
That’s the only thing I can pinpoint, a moment when I feel like something is changing here. I don’t think I’m responsible for it. I think it would’ve happened anyway. Someone else would’ve given them funding or believed in them, but pretty much almost all of them say that. That tells you more about how broken things are in India than about me. I can think of that as a tangible thing where my faith in someone is somehow such a big signal to them that they have a — even if it’s marginally higher — self-belief. It’s worth it.
AUDIENCE MEMBER: Hello, my name is Riley. Tyler, you had a conversation with Marc Andreessen, and you asked why Peter Thiel could spot talent so well. He countered that this is the concept of a Bat-Signal. He throws up a Bat-Signal, and people come. You have your own Bat-Signal. Daniel, you have your own Bat-Signal. There’s a portfolio of ideas through your blog, all your books, with Pioneer. It might be this Turing aspect of gaming, whatnot.
I’m curious, what components of that Bat-Signal do you think are the most effective? People come to you and they say, “Oh man, I really love this about your portfolio. I really love this about Pioneer.”
COWEN: I think the bigger and more globalized network the world gets, the higher the returns to the Bat-Signal, and Bat-Signals are still one of the most underrated ways to be effective. Now, we have some kind of weighted average of how effective they were in the past. We apply the weighted average, but their importance is just rising very, very sharply, I think, even over the last five years. I think the world likes some kind of authenticity in Bat-Signals.
Don’t think too hard about your Bat-Signals, maybe. Now, if they’re bad to begin with, and you don’t think too hard, I guess they’ll stay bad. But that’s great because then, more people like my Bat-Signal, and maybe they should be coming to me. I don’t know.
I try not to overthink the Bat-Signal, and if I write a blog post like I was working on earlier today, what’s the difference in the 18th-century Scottish Enlightenment and Irish Enlightenment? That makes no sense as a topic. Maybe someone in Ireland will read it, like, “Okay.” But there’s no way you could come up with an argument that that’s what I should be sending out as my Bat-Signal. But that will be the Bat-Signal, and I actually think it’s fine.
GROSS: I think the one thing I’d add to that is that the best people are ones that view you as a way to gain advantage for themselves. They’re not attracted to you as the Bat-Signal because they want to be near you. They’re going to step on you to get somewhere else, and that’s great. I think it’s an important nuance that some people miss when they send out their Bat-Signals.
RAJAGOPALAN: I would say Tyler’s Bat-Signal is not the difference between Irish and Scottish Enlightenment, though that’s interesting. I think it’s consistency. I just recently found out that he’s blogged every single day on Marginal Revolution for 19-plus years. I think that’s the Bat-Signal.
COWEN: That’s part of it, yes, and no day has that been hard. I think it gets to the authenticity point. There’s no day where I’ve said, “I have to blog today, or I’ll break the streak.”
AUDIENCE MEMBER: Hey, I’m Josh. Thank you for speaking. This is an awesome conversation. One big topic, in SF especially, is on automation. Are there any parts of your talent process that you think could be automated? Obviously, ATS is a thing, and with the rise of automation, maybe it’s pretty industry-specific. But are there any changes in how people seek talent that will come as things get more and more automated?
GROSS: I run a company that principally has — for our little corner of talent, meaning venture — tried everything under the sun in order to automate it. Like many processes, you basically split things into two. There’s the spam filtering process of basically weeding out people that don’t make any sense for us, for whatever reason — what they’re working on is noneconomic, or they don’t have the qualifications. That you can probably do with software.
There’s a second step of it. Basically, okay, imagine this is Gmail. You’ve got rid of the spam, but now you’ve got to pick what in the inbox is important. That’s a much harder task. I’m sure it can be done in software, but I think it’s a bit more nuanced. The really tricky thing — in venture, in particular — is regressing on success is pretty hard, not just because the data points are pretty sparse, like, what great founders look like — maybe you have 10,000, which is not that helpful. Machine learning skill. But also, because everything changes all the time.
The psychometric makeup of a great founder in, say, 2015, SaaS era, is someone like Fred Luddy, who started ServiceNow, who’s basically a sales machine, started a sales empire. It’s very different from who’s going to be a very good founder, say, working on transformer models, who’s going to be much more like Woz [Steve Wozniak] than Steve [Jobs].
Everything is shifting constantly, so it’s tricky. I assume a lot of automation can be done for that first step. I think, for the second step, you could. But the final thing I’d say is, in venture, in particular, you are rewarded so aggressively for making the right calls that you will be able to always afford the salary for people to review it.
You’re penalized, of course, very aggressively by errors of omission, not commission. I think you’re going to always end up with an economic model where you can have people. This is obviously very different if you’re like McDonald’s and whatnot, and you’re trying to figure out, “Okay, who’s going to be able to flip burgers a year in?” But I don’t know enough about that field to apply it there.
RAJAGOPALAN: Thank you for attending. Thank you, Tyler. Thank you, Daniel. This was fun.
COWEN: Thank you, Shruti.
GROSS: Thank you, Shruti.
Photo credit: Drew Bird Photo