Talent by Tyler Cowen and Daniel Gross

The premise of the book is that one can learn to detect talent in others, ie. that we can subject people to questions like "What's your most absurd belief?" and thereby figure out which people will succeed.

From a finance perspective, an Efficient Markets Hypothesis-friendly version of hiring would be to give all the applicants a standardized test of the material required for a job, then hire the top N scorers and let time determine the winners. This is basically an SP500-type index.

Since Cowen has previously espoused an EMH view on investing, it is frustrating to see an apparent about-face without any tests or comparisons to show that this Human Resource gambit outperforms a basic market index.

Each meeting led to another, and it was while having lunch at a San Francisco Chinese restaurant in 2019 that we decided to write this book. The plan flowed quickly, and we both agreed that the key was to get started and to allow the gains from intellectual trade to flow. Tyler recalls feeling very guilty during this conversation, as he had to report to Daniel that he could not start work on the project for several months because he first had marketing obligations for his previous book (Tyler hates it when people cannot start on their work right away). Still, Daniel noticed that Tyler hated this fact, and that pleased him just enough to keep the momentum going.

Virtually all of you are familiar with the standard bureaucratic interview setup. A bunch of people show up in a room, armed with scripted questions (and answers), often bored by the process and hoping for the best; they are trying to find someone who seems “good enough” and capable of commanding consensus by being decent but most of all sufficiently unobjectionable.

The idea that “talent search is one of the main things we are bad at” is a radical reconceptualization of the way so many parts of our world have gone astray. The traditional bureaucratic approach to finding talent doesn’t typically intend to be discriminatory, but the focus on credentials, hierarchies, and consensus is far from ideal for giving better chances to outsiders. Therefore, we will focus on how you, within current structures, can make the world better at giving other people—the otherwise overlooked ones—their justly deserved opportunities. -- arbitrage needs more cred?

Furthermore, to the extent you are a good assessor of talent, you’re essentially saying to people, “No, we are not rejecting you because of your bad shoes or the school you went to. The real problem is you.” It is hard to feel entirely comfortable with issuing that kind of judgment, even if it is your responsibility and even if it is better in the long run for those who are rejected.

Most importantly, many of the research studies pessimistic about interviewing focus on unstructured interviews performed by relatively unskilled interviewers for relatively uninteresting, entry-level jobs. You can do better. Even if it were true that interviews do not on average improve candidate selection, that is a statement about averages, not about what is possible. You still would have the power, if properly talented and intellectually equipped, to beat the market averages. In fact, the worse a job the world as a whole is at doing interviews, the more reason to believe there are highly talented candidates just waiting to be found by you.

Consider an analogy from finance. What if someone told you to “buy up the stock of companies full of really smart people”? That is not good advice. You can believe in the importance of smarts all you want, but quality companies also tend to have expensive share prices, and that will be true of these companies full of smart people too, at least insofar as those smarts really matter. Economists have known for a long time there are no extra gains to be had from investing by running after positive qualities but neglecting price. The key instead is to find undervalued companies, and that means companies with hidden virtues. The importance of hidden virtues holds for quality hires as well, whether the dimension in question is smarts or something else.

When it comes to the start-up world, Daniel sees too many young people who are content to go to one conference after another, receiving positive feedback because they are bright and articulate and seem to have promise. They also may play around on Twitter, building a profile and garnishing likes and retweets. But which useful hierarchy are they actually climbing? The best prospects are more focused on their actual projects and the building of their companies.