Tyler and Daniel Gross Talk Talent

Conversations with Tyler is produced by the Mercatus Center at George Mason University, bridging the gap between academic ideas and real-world problems. Learn more at mercatus.org. And for more conversations, including videos, transcripts, and upcoming dates, visit conversationswithtyler.com. Hello everyone, and welcome back to Conversations with Tyler. What we have for you today is an actual conversation. I'm here with Daniel Gross, who is an angel investor, venture capitalist. He entered the startup world at a very young age. He ended up working for Apple. He founded a search engine called Q. He was, I think, the youngest ever partner at Y Combinator. He now is the founder and CEO of Pioneer, a venture capital firm. But most importantly for me, he is my very good friend and also co-author of our new forthcoming book called Talent: How to Identify Energizers, Creatives, and Winners Around the World. Daniel, welcome.

Thank you so much for having me, Tyler Cowen.

Let's start with a simple question. Talk us through what is a good interview question. Pick one and tell us why it's good.

You know, we're going to get to that in a minute. But I actually had a question on my mind for you.

Sure.

As I sit here and I'm holding a can of Diet Coke in my hand that I'm gonna crack open, I was wondering, you know, Bill Gates, Elon Musk, Lawrence Summers, Warren Buffett, John Carmack, all of these people drink Diet Coke. What do you think is going on with that?

I think they have habits of nervous energy and more energy than they know what to do with. And there's no series of challenges you can present to them that exhausts all of their kind of nervous intellectual mental energy. So it has to go somewhere. Some of them might twitch. Some of them just keep on working basically forever. But also drinking Diet Coke is a something you can do. You feel it's not that bad for you. It probably is really bad for you. The quantities just get racked up. I've seen this in many high achievers. What's your hypothesis?

Yeah, I don't know. It's a good question. Of course, you know, I mean, many people in America drink Diet Coke. You know, I don't exactly know what we're selecting for, but that would be boring to just leave it there. I do wonder if this amazing molecule we discovered called caffeine is really good. And maybe these very high achievers are just slightly caffeinated all day long. There's also something very neurotic about getting too worried about, you know, is aspartame good for you, bad for you, regular Coke, Cherry Coke, just drink it and move on. So there's a kind of sturdiness there. Maybe in fact it is really bad for you and the people who manage to be very productive while consuming it, you know, are spectacularly good. It's like deadlifting on Jupiter. You know, there's extra gravity. Yeah, I think it's an interesting question. I kind of do wonder how much of what we assume when we think about talent, you know, how much of it is innate versus just, you know, environmental.

I wonder if there isn't something super short time horizon about a lot of very successful people, that the task right before them has to seem so important that they'll shove aside everything else in the world to maintain their level of energy. And as a kind of collateral damage, maybe some long-term planning gets shoved aside as well. It just seems so imperative to win this victory now.

There is something definitely I'm struck by when I meet a lot of the very productive people I've met in my life. They seem to have extreme focus, but also extreme ease of focus, meaning it's not even difficult for them to zone everything out and just focus on the thing that's happening now. And you might ask them even like, how do you do that? And is that a special skill that you have? What type of drug are you taking? And they look at you with a dazed and confused face. So anyway, you asked me what is a good interview question.

But maybe you gave us one, right? So say you gave the Diet Coke question to someone who came to you with the startup. What would count as a bad answer and why? Why would it be bad?

I think in interviews in general, a very simple thing to look for— I'm still, by the way, I should mention a preemptive huge asterisk that I'll only say once on this podcast, which is I may say different hypotheses that I have, but they are opinions of a student, not of a master. So I'm still learning. But all of that said, I think sometimes in interviews and when you meet people in general, there's kind of just a sense of being asleep or awake. And, you know, asleep is someone who doesn't really even, you know, have the idea to think about the world as just like, you know, maybe Diet Coke is something really good. You know, what actually drives that? And someone who's awake has actually had that thought already. So For me, it's the rejection of the question would really only be the bad answer. And I think that's true in a lot of interviews in general. You know, this very conversation we're having, you can kind of tell, like, if people are having fun with each other's questions and whatnot, or whether it's monotonous. And, you know, someone who kind of locks up and freezes when you ask them if, you know, maybe Diet Coke is correlated to productivity, which is a bit of a silly question at the end of the day, just the fact that they're not having fun with it, I think, is something to look for.

So what's another good question? The Diet Coke question I like. What else is good?

You know, one thing I think we have both probably learned in interviews is the best interview questions break the fourth wall of the interview, so to speak, and the characters come out a little bit. And it's kind of the same joy you have when a character breaks on, on set or on stage, watching some behind-the-scenes footage or something, a blooper reel. And, and good interview questions, I think, ultimately will have that property of breaking people out. And so, you know, You know, a really good one that we can't do now because we just got started in this conversation, but, you know, about 3/4 of the way in, just asking the question, you know, "How do you think this conversation is going?" is a bit off-putting. It's a bit funny. It breaks the stress or the kind of fixed nature of the conversation, which isn't fun. So I always like having fun with that one. I think another, another interesting one that I learned from a friend of mine is, "Do you have any good conspiracy theories, you know, that you're liking lately?" Which is interesting because it's unusual. And, you know, I find like at the end of the day, a lot of really good, really productive people are constantly exploring kind of on the fringe and frontiers of all ideas. And so you end up with people that have odd theories.

I find creativity and interest in conspiracy theories to be correlated.

Yeah.

That there's some innate desire to connect a bunch of different points. A bunch of data is thrown at you like the JFK assassination or, you know, how COVID-19 came to be. And whatever you think the truth is, if your mind is sufficiently restless in the right way, you won't be content with the regular stories, right? They seem not very satisfying, like, oh, Jack Ruby, he simply came along and killed Lee Harvey Oswald. Now, maybe that's true, right? I'm no expert on this, but if you're not irritated or pissed off by that event, I think there's something wrong with you. It's a sign you're taking too many things for granted.

Do you think that maybe the simple theory there that's a bit of a conspiracy theory is just true, that Lee Harvey Oswald is just operated by Russian agents he met while he was living in Russia.

I think there's some chance of that, and I think there's room for a hybrid theory where actually they trained him, they told him to go back and do terrible things. One of the things mentioned might have been assassinating a president. Maybe they didn't even think he was up to it. Like, he didn't pass their Diet Coke interview questions, and the KGB is pretty rough and tough, right? Lee Harvey Oswald was in some ways Apparently not a very impressive man, but they let him go back and they're like, oh, you know, it's like you let people try their startup and maybe you'll never hear from them. And all of a sudden they wake up one day and it's like, oh my goodness, you know, that's a unicorn from the KGB point of view.

And it's very true with startup companies where having invested in a lot of early stage businesses that got big, but also worked at YC, it's really humbling. In fact, where you'll meet a cohort of companies at Y Combinator and you and all of, you know, these other partners who are very, very smart people, many of them much smarter than me, will kind of informally kind of vote on who you think is best. And you're almost always wrong. Almost always the dark horse. And it's almost always not who the crowd favorite is. There's a humbling lesson there that you can learn in the opposite direction about the JFK assassination. Do you think Jack Ruby just strolled in one day and shot him? Or do you think there's something deeper there?

My suspicion is there's something deeper there, but it may not be a full-blown conspiracy. Of the sort that would satisfy actual conspiracy theories. The ability of chaos to resemble conspiracy cannot be underrated, I would say.

Definitely, definitely.

So take these committee procedures where the dark horse is actually the excellent candidate and ends up being overlooked or not the most popular. How do you think we can improve those processes to spot the effective dark horse more frequently?

Well, right, so let us take a step back. Why are we even here, and why would I even have a shred of, you know, an interesting opinion on talent. And to the extent that I do, I think it's because in the venture business, much more so than I think almost any other business, you live in constant paranoia of missing out on great talent. Okay, you might say, well, like, that's true in every company, and, you know, it's true at the Met, you know, when you're looking for someone to play the orchestra too. But in the venture business, unlike others, great talent always looks very weird to whatever convention is. And so Before Mark Zuckerberg came along, that phenotype of the hoodie, sweatshirt, kind of slightly aspie kid was not the common phenotype. Now, of course, there was a phase, 2013, 2014, 2015, where everyone started looking for that. But then it kind of hit you again with a very kind of weird-looking person where Vitalik is of a completely different ilk than Zuck. One very much is Julius Caesar, and I think another one— I don't exactly know how you'd bucket Vitalik— maybe like an early pope.

—like a Russian holy saint. Exactly.

And by the way, not to mention, not just the person is weird than whatever the conventional norm is, but the idea is weird too. Everyone listening to this podcast probably understands Ethereum at this point. That's kind of priced in. And the paranoia that all venture capitalists live in is, of course, the new thing is not going to be Ethereum. The thing that overtakes Ethereum, that will be bigger and more exciting, will probably be— I don't know, it'd be some weird biotech thing, some weird thing that could be artificial intelligence, you wouldn't even label it that way. And so you live in constant paranoia of some type of different market or some type of different person becoming really big and really important. And in venture, of course, your error is of omission, not commission. It's a good old Warren Buffett phrase. And so you can't miss. And so you're deeply thinking about dark horses. And the entire reason I even have this idea to share with you about YC and whatnot and the selection and group consensus mechanic there is because there's deep paranoia. And so you have this kind of reflexive effect where now everyone's looking for the dark horse. So does the dark horse actually change? Or the system gets a bit dynamic in that way. But that's, I think, the big innovation with venture is that you're constantly hunting for people that look different and you're rewarded to do so much more, I think, than any other industry. So you end up learning to appreciate the humility in all of it. Although we'd recently, very recently, or about to publish a book on this topic and we think we have something to share with the world. I'm still, you know, deep in the Dunning-Kruger collapse in this topic. And I think like the main idea in my mind about the book at a deep level of, I think, the impact it could hopefully have is actually to reduce and to bring everyone down into the Dunning-Kruger abyss where we are now and kind of realize this is actually a much deeper topic than most people pay attention to.

I view our central message in the book as right now the world is failing at talent spotting. And this needs to be a much more major topic of conversation. And we have our ideas on how to do it better. But if we can simply convince people of that, I will be relatively happy.

Yeah, and I think kind of to me proof of this is SpaceX. Look, at the end of the day, SpaceX until fairly recently wasn't really doing anything new from like a physics standpoint. There weren't any new physics discoveries, you know, that Elon in a lab in LA kind of figured out that like that von Neumann couldn't figure out. It's yesterday's technology. It's just that he is a better router and allocator of capital to the right talent. And you see this time and time again. I mean, many Elon companies are this. He just manages to put the right people doing the right thing. So I think if you were to try to really explain to a 5-year-old at a very basic level, why aren't there more SpaceXes? I think it kind of comes down to the right people don't have the right jobs for human progress. And once you start viewing the world through this lens, it's really hard to unsee it.

The new book on SpaceX, it indicates that Elon personally interviewed the first few thousand people hired at SpaceX to make sure they would get the right people. That is a radical, drastic move. You know how much time that involves and energy and attention.

You know, Jeff Dean, who's probably the best engineer at Google, used to work at Digital Equipment Company, I think was the 10th or 11th engineer Google hired, and, you know, is basically responsible for the fact that Google Search works. Did crazy optimizations back in the day when this mattered, like Writing data that you're going to access a lot on the exterior side of the disk so it was a bit easier to access it. Anyway, brilliant guy, still works at Google, is an amazing software engineer. And he told me once, while he was just waiting for code to compile, he would just go through a stack of resumes that Google was hiring. This is back when Google had maybe 10,000 people and he still had a pulse on the type of people they were bringing in. And you hear stories like this a lot, but very few organizations do it. The best organizations tend to do it. And so it really matters. And it might matter more, especially in the current market that we're in, it might matter more than capital. You know, it's just allocating the right people to the right jobs.

One of the interview questions I've used quite successfully as of late, it's a very simple one. It comes from Peter Thiel, I believe. And it's simply to ask the person, how ambitious are you? And a yes or no answer actually is fine. If they say no, because they think you mean something bland and a little mainstream, And they say, no, I'm not ambitious, but I want to do this. And they say it with great passion and charisma. That's excellent. If they're just stumped by the question, they have no idea what they actually want to do, that to me is a negative. They might do fine in some jobs where they don't have much responsibility, but they're not going to build something for you. But if they can articulate some ambition and simply know what you mean when you ask them, I find it's a very hard question for people to fake. That if they don't actually have the ambition, their ability to articulate it with the requisite energy and detail and focus just isn't there. Because of course, the great problem one faces in an interview is that people can fake their answers to questions, right? So if you ask them, are you conscientious? Well, you probably care about that, but they're just going to say yes, right? Who would say no? Does it mean they're conscientious?

Of course not. Another idea I think that we discuss in the book that works pretty well is repeating questions, which is a bit uncomfortable to do but can kind of work, especially if you're asking something that the person may not have an answer for because they're kind of thinking about it for the first time. And that can be a way to get something out of that, like, are you conscientious question, which I agree is tough.

Here's a very tough question for you. Let's say you're trying to hire not just a talent, but a talent identifier. Right. What do you look for in a person to judge if they're a good talent identifier?

You know, there's something about being able to do counterparty modeling. Which I actually find women in many cases are better than men at this, the ability to understand that person's motives and how they will act and react to an environment, you know, given a particular set of incentives. And, you know, I think that's like an important thing to tease out in someone who will themselves be good at identifying talent because it lets you predict ultimately if someone has a good simulator, you can kind of predict how that person will react in different places. You can say, well, okay, how do I know if a person has that? And I think one thing that is predictive of it is just having a bank of similar experiences of people that you've worked with to fall back on, I think is pretty important. So, you know, working with a large number of people that are very different is really helpful because ultimately in the interview, a lot of what you're doing, I think what anyone's doing, you know, subconsciously and consciously is, what does this remind me of? In good and bad ways. It's a very potent system in the brain that you just can't and won't turn off. And so a rich bank of experience is important. I mean, I think there's like a base sense of sensitivity people have to just perceiving the small micro expressions someone might have or, you know, the way they hold themselves. And I don't know that everyone takes in reality at that level of resolution, but I think good talent spotters do consciously or subconsciously. They really see that. And that affords them a much wider canvas to kind of pattern match on when trying to figure out, you know, who that person will be in a particular environment of place.

What about you? Consistent with that view, I like to talk to people about drama. So if they've read Shakespeare, you know, you can say, well, my hypothesis is that in Romeo and Juliet, Romeo and Juliet don't actually love each other at all. Does the play still make sense? To see what they have to say. It's a way of testing their second-order understanding of situations, diversity of characters, or talk to them about Moby Dick or, you know, whatever movie they might have seen. You need to find something that you share with the person and just ask them about it. Give them a hypothesis, see what they come up with. So for me, I use culture very often.

When you talk about it, what I'm hearing from you is you kind of almost use it as a way to test. It's kind of like a play is chess for you in a way where there's different actors, different motivations, and you're really asking, you know, could the person extend the play basically? Could they write another final chapter with their understanding of the intentions of the actors?

And Shakespeare himself does this in Hamlet when Hamlet puts on the play before the king to see how the king will react, right? So it's doubly Shakespearean in that sense. But just get people talking about drama. I feel you'll learn a lot. It's not something they can prepare for. They can't really fake it, right? If they don't understand the topic, well, you can switch to something else. But if you can't find anything they can understand, you figure, well, maybe they don't have that much depth or understanding of other people's characters.

One good thing you highlight in the book is just this idea in general of talking to people about, you know, media, drama, movies, music. And I think that works both because, you know, you can kind of learn a lot from what someone says. They're not likely to make up a story. But it's also fun. And it is, you know, a common thing many people share. You know, even in this era of HBO and Netflix and all— I mean, there's any given week in America and globally, I actually find at this point, you know, there's like 10 shows that people are watching. And so it does provide a fun common ground that I think is underused. I mean, people come into the interview, you know, with all these scripted questions and like, you know, what are your greatest weaknesses? But, you know, the idea that like might be better to ask someone about Squid Game, I think is really underrated.

What are resumes still good for these days? A very LinkedIn question, right?

Resumes are good for understanding how the person wants to be perceived by the broader world. And so this is helpful for Both kind of the obvious things, you know, checking for typos and whatnot, but also what they take pride in their identity. You know, I love asking people sometimes, you know, out of what I see on kind of your LinkedIn or your resume, what are things you were kind of trying to hide and what do you wish you could feature more? And, you know, sometimes you have to really unpack that because people might not want to share on first blush, you know, what they want to hide, but confident people will. And you kind of can learn a lot that way. Another question you can ask is, you know, Instead of trying to actually dig into the weak points of the resume, just ask what the weak points in the resume, in their opinion, are. Because it really gives you a sense, you know, it's the mirror that that person wants to have. I think the actual content on the resume may not be as interesting. I mean, there's all sorts of things you can read, you know, between the lines. For example, I mean, very common thing to look for is a person that has multiple jobs that don't last long. Obviously there's something going on there, so you won't hear a good story. But broadly, it's that person's you know, perception of themselves. There's a theory that I think there's a book about that a friend enlightened me to, that just the selection of the profile photo on online social media is predictive of some psychometric profiling method. And I don't know if that's true or not, but the idea itself I think makes sense. There's something pretty deep just about that alone. So, you know, to me, that's why the resume is interesting, is it's a self-portrait.

And the quest for talent, do you think we are overvaluing smarts?

It kind of depends for what role. I definitely think for the role of founders, the kind of one I specialize in, so looking for someone to start a business that has the chance of becoming, you know, the next Thermo Fisher or the next Facebook or the next Apple, yes, I think intellect is very much overpriced or overvalued. I think it's extremely important, and definitely in the mega-success scenarios, you know, if this was kind of a Gartner 2x2, you would have like high intellect and high power or energy or ambition, pick your word. But if you had to pick, you actually probably need energy because what you want is multiple shots on goal from the individual because it is really difficult. It's basically impossible. I have not heard a story of someone never having to course correct and just like all their ideas were right from day one, they just launched and got there. You know, for the most part, you try a lot of things, you spend most of your day getting negative reinforcement from the system until something starts working. And the reason most companies fail is with enough negative reinforcement, the actor stops participating. And so what you actually want is someone who has a lot of energy, who's just going to keep on going. And people, I think, tend to discount that in favor of intellect. But in your world, Tyler, is it any different? I mean, I could make the case actually that in academia, maybe intellect matters much more. I mean, you guys are solving real problems versus us just, you know, pounding away at keyboards and, you know, you're trying to make numbers get bigger. So doesn't intellect matter a lot?

Are we always solving real problems? I look for energy and durability and that combination. And then here's another thing I look for. I think it's very important, especially in academia, but in many spheres. Does that person understand which are the correct hierarchies to be climbing? And this may be influenced by my own background as a chess player when I was quite young. I knew a lot of super talented young chess players, just brilliant people, young kids, full of energy to play chess, but they always were just stuck on the notion that winning at chess was the game they should be playing. And for Magnus Carlsen, that's true. That's the game he should have been playing, and he is still. But for most of those people, if they stayed in the chess game, their lives are miserable. You know, they're now old, they don't have health insurance, they're not top players anymore, their lives are wrecked. So you can have durability and energy at the wrong thing., and the people who can understand this is the right path to get to some higher point where that higher point actually makes sense. I like to see if a person has that. And I think also getting them talking about drama, you get a sense of how they organize hierarchies, you know, of status or achievement in their minds. So those would be my top things along with SMARTs, energy, durability. Do they understand the hierarchies they should be climbing?

Say you're looking at a young chess player and we're trying to figure out, you know, do you understand that like This isn't everything in life. There are other hierarchies to climb. How much of that do you think is formed based on the environment that they're in versus kind of being innate?

I suspect it gets locked in fairly early, say by age 13 or 14. I'm not convinced it's innate, but by the time I would meet such people, I think it may be a done deal. And one good way to figure out their sense of hierarchy is, you know, get them talking about science fiction. Are they interested in science fiction? Well, it doesn't have to be science fiction, right? But it ought to be something. And then see how they've approached the study of those other things. And if they're not coherent about other hierarchies, that would be one cause for worry, I would say.

That's interesting.

So you did games early, right? To an intense degree. And you're probably still really good at games, but how is it you switched out of doing only games?

Do you mean video games or—

All the different games you played, you tell me.

Look, I committed the sins of anyone growing up in the 21st century, I guess, which is, yeah, I played a lot of video games and I have a lot of respect for them. You know, I think they're an incredible accomplishment actually of the human species where, I mean, we think about it in the abstract to the extreme. You know, there's people in South Korea that are playing video games to exhaustion. To death in some cases. So we've managed to create a collection of photons that, you know, that we're projecting from screens into people's foveas that like manage to get them to ignore their most basic evolutionary instincts and just like be in flow until they pass out. So obviously that is bad, but they deserve a lot of respect. I think a lot about just this whole idea of gamification. I mean, it sounds kind of childish and silly, but if we kind of take that as a given that there are these pieces of software that like people really yearn to use, If I told you an abstract of this alien technology and it makes like no drugs are required, but it's just like a thing on your computer and people really want to use it. And when they're not using it, they're just thinking about using it. You say, well, that's impossible. You need like a drug for that. And I say, no, it's called video games. Can you know, and how would you use that same type of thing in order to make yourself more productive, in order to make productivity software more fun? It's a thought everyone might have, but no one really acts on. And it all comes back to talent at the end of the day. If you ask like, why isn't Gmail more fun? Why doesn't Gmail help you accomplish your goals? Not the simple stupid goals you have for the afternoon of just clear out the inbox, but your actual goals in life, like the things you actually want to do. You know, write a book with Tyler Cowen, you know, try to have a little bit more fun in every day. Why isn't Gmail helping you do that? And I think a lot of it at the end of the day, you might think it comes down, well, this, that profit incentive. A lot of it comes down to talent. And I think game designers are very underrated people in that sense. And by the way, small sidebar here, software engineers, from the gaming industry are extremely underrated. And there's a nice thread on the internet the other day about how effectively the entire Starlink team, who's building SpaceX's internet, you know, network, are gaming engineers. So I think that whole corner of the world is really overlooked by, you know, adults who view gaming as somewhat of a pejorative. But it's a very powerful sphere of human creativity, and I think more of it needs to be brought into day-to-day life. I think, by the way, just in general, when you think about gaming and fun, More of that needs to be brought into day-to-day life. There should be a Michelin guide for having fun. What are the best ways to have fun?

Can I have fun by asking you a bunch of questions about tech? And this is just I ask, you answer. Okay. Because I want to know the answers. Why do ad companies keep on making their products worse over time? Right.

It's a good question to try and answer deeply. I think companies, when they're not founder-led, actually become brain dead. And as a result, they only maximize numbers that were set in place by the founder before that founder decided to go to Hawaii and retire or, I don't know, kite surf and whatnot. Why that is the case, we'll get to that in a minute. And so ad companies obviously end up focusing on revenue, which comes from engagement, which comes from eyeballs. They optimize for eyeballs. And you could still ask, I think you're asking the question, okay, why don't they optimize for enjoyment and eyeballs in the long term over the short term? And companies just don't know how to do that unless their founder Why not? Kind of ask why again, unpack that. I think it's something about actually the founder might be the only person that has permission to focus on the long term, even while in the short term it might hurt metrics or revenue or whatnot. And they end up hiring executives that just don't feel like they have permission to question the basics. And so you end up with this result where it's actually very good for startups that large companies end up becoming these autonomous planes that fly until they run out of fuel and slowly glide down and crash into the ocean, which is totally What is happening today with Google Search or Amazon Search? These products are impossible to use. Everyone's having the same thought that they're impossible to use. I mean, try to buy an iPhone charger on Amazon. It's like walking through a Shenzhen flea market. And everyone has the same thought that that's crazy. Jeff Bezos stopped answering his emails because he's focused on his Blue Origin mailbox. And so it's just going to continue to get worse until some young startup will get started and say, we're doing better product search. And they'll get created and the cycle will restart and the founder of that company will become super successful and then 50 years from now, they'll work on their space company and that company will fail. Anyway, we do these cycles over and over again. I don't know if there's any historical examples of this with like the East India Trading Company, but yeah, companies without founders, it's like a toy for kids or something and the battery pack is removed and it's like slowly becoming more and more decrepit over time. So it's a great question to ask. And I'm trying to think now, are there any examples of businesses in corporation history that have really been reborn without the founder?— and have done something to really threaten their profits in the hope of long-term success? Because everyone talks about IBM, but I don't know, maybe in its restructuring days, if there was a risky move ever endeavored by a non-founder CEO.

That'd be a good question. How is crypto talent different?

Crypto talent seems to be, as far as I can tell— I sit in all these chat servers, Discord servers, some of your listeners will know, and I just observe what's going on. I'm still learning, but You know, the internet I grew up on, referred to by some people as Web 0, 1, 2, 3, -5, whatever, that internet was significantly more innocent. And so the people that found themselves on these chat servers in, say, 2002, 2003, 2004, 2005 were really just interested in building things. There was no immediate commercial intent, and it was just about kind of coolness and neat factor. And the issue you have with crypto is that you still have those people, but they're clouded by maybe 2 orders of magnitude more people that are just in it for a quick buck. And I don't exactly understand why, but the human psyche, as far as I can tell, really gets confused and degraded when it comes to making money fast. And to some extent, I think this is why we regulate lotteries and gambling. It's because the human brain of the average person gets really confused by this thing. Or maybe a better way of saying it is the average scammer is much more intelligent than the average customer in these dynamics. And so, you know, you end up with these odd effects where you get a lot of people that are just in it for a quick buck. And that person, by the way, a lot of people have this pejorative view of crypto of just like it's a bunch of people in it for a quick buck, backed by maybe like 100 Vitaliks, really brilliant engineers that are just trying to make something work. I take a different view, which is I respect that energy. It's a mercantile energy someone can have of just effectively wanting to participate in a Ponzi scheme. It's not a very productive use of their talent, but they have something deep there. So I'd say you still have the bedrock of curious people that you had, say, in the early internet days, but you have this giant icing layer this molasses of kind of hustler, you know, the people that were previously trying to flip homes, you know, during the 2008, you know, housing boom. In that sense, it is actually very different. And, you know, you can take your spoon and kind of go all the way through the icing and just hit the, you know, core part of the cake and you'd still be fine. But I think the icing part is full of air, as icing usually is, or whipped cream usually is.

In which part of the world do you think tech talent is still the most underpriced?

We're obviously having this discussion today as there's some action unfolding in Eastern Europe and in Ukraine. And so that is definitely a part of the world that is still underpriced. And I think that's somewhat of a novel statement because a lot of people are excited about it now. But there are extremely, extremely capable engineers there. There's a variant of that question I think is also interesting, which is how is that top tech talent different from country to country to country? And I will say this, one thing going on for America, and I don't know how much of it is formed once you kind of are in California drinking— whatever lithium we have in our water. I don't know how much of this is formed by the environment, but there is something special about the top American talent in particular that's extremely rare to find anywhere else in the world, which is a sense of aesthetic and taste. You could really meet the best software engineers in Moldova, in Ukraine, in Israel, in China, and they're not going to have the same degree of taste and finesse that software engineers out here in California will have, or New York, or whatnot. And I would like to believe that's a uniquely kind of American thing that you get either by being born here or coming here. And I think it exists in some other areas of science and might explain a little bit why all the breakthroughs, discoveries seem to happen predominantly in the United States. And a lot of the fast follows seem to happen in China. There's something about aesthetic. And I think when looking at founders, actually, that matters quite a bit. I learn a lot by the quality of the homepage of a very early stage startup. Because that is signaling to me that that person understands that looking good is important and knows how to make something look good. That's a huge, huge difference. The actual IQ on, like, if you had to give me an algorithm and you had to optimize it and whatnot, you had people participate from every single country in the world. Sure, you'd see some differences. Maybe some countries would be higher up, some lower, but I don't think the bands would be that large. The difference on taste and design would be, you know, the US would have a giant leapfrog.

So we wrote this book together. Again, it's called Talent. Yeah. What is the user guide for Tyler Cowen?

I would say reply to emails very quickly and always be interesting.

And how do you mobilize Tyler Cowen, or is that also how you mobilize him?

You sit at an information superhighway. There could not have been a better time, I think, for you to be living, given your goals. Like, the internet is an amazing product. And I envision that you basically are sitting at your keyboard. In, in my mind, I visualize it that you have a lot of monitors. I realize you actually don't, and it's just a straightforward laptop, but I think it would be befitting to visualize 9 to 10 monitors, kind of like Steve Cohen's trading setup. And you're just getting information and synthesizing it. And that was a lot of the process of writing this book with you. It's very easy to get access to you, and I think, yeah, I think it's a great blessing for you that the internet exists. Like, you are probably in the top decile of people taking advantage of the internet.

What is it you want to ask me?

I've asked you a bunch of things. Yeah, I appreciate that question in itself. How have your views on nature versus nurture changed over time?

I have moved in the direction of thinking parents are especially important, and I don't just mean as giving you their genes. But just giving you an environment in which you feel you can succeed in some way. And that if you don't have that, I find that very hard to overcome. And my estimation of the importance of that phenomenon has increased having written this book. I value IQ less than I used to. So there was one study we talk about in the book. They looked at the CEOs of top Swedish companies. Now, to be clear, these are not necessarily founders, but they're CEOs, right? And their IQs are at the 83rd percentile, which means ahead of 83% of the rest of the Swedish population on average. Now, that's pretty good. That's smarter than average, right? 50% would be average, but it's not 99%. If you had asked me before the research, I would've said, well, I think that number is gonna come in like somewhere around 95%, like they're just gonna be much smarter than other Swedes. And it's 83%. And if you take smaller companies, the number gets lower yet. So that's caused me to decrease the weight I put on IQ or smarts. Conscientiousness I view as a bit more of a mixed blessing. Clearly for many jobs, I suppose most jobs, you just outright want conscientiousness. It's positively correlated with wages. But for people who are more creative achievers, like the Diet Coke habit, it's not entirely conscientious, Maybe you want that they still throw their cans away where they ought to go. But people can be conscientious about the wrong things, like, oh, I can't work late tonight. I have to get home and feed the cat. Well, if you need to feed the cat, I get that. But it means you haven't arranged things in a way where you're understanding what are the correct hierarchies for applying your conscientiousness. And that kind of insight I hadn't really thought through well enough. Those would be a few examples.

What do you think of neuroticism? Is neuroticism good, bad?

I think for the very highest level of top creative achievers, you want to look for some neuroticism. And you see this most clearly in musicians and artists, the very greatest ones. You read their biographies and you're like, what? You know, he or she did that. And they're weird. They can in bad ways be abusive, but there's some way in which seeing the world so differently just makes them be off. But that said, For most jobs, you want it in some kind of check, but there's a whole host of jobs where neuroticism is just a positive. Say you want someone who works in a nonprofit, and in essence, their job is to go out and complain about social injustice, and they're going to be underpaid. That person's probably going to be pretty neurotic. They probably need to be. They're underpaid. They're satisfying their neuroticism. You know, let's run with that. So thinking about how the context matters, but don't consider it an unalloyed negative. Would be my key point there.

Yeah, that seems to make a lot of sense. It does seem like at least now, you know, from where we sit, the winds of COVID have slowed a little bit. But let's assume remote work is kind of here to stay. Let's buy that narrative for a moment. Does that change kind of how you think of what to look for in interviews at all?

I think there's a whole class of people who feel more confident when they're over Zoom. There's no actual physical confrontation. It's much easier to turn away your eyes. It's in general not clear where you're looking, right? Obviously, there's a kind of excuse built in for certain types of poor performance. Well, you weren't fully charismatic. Well, it was over Zoom. And those people can become more charismatic. They might confide more, share more of themselves, be more open, be more creative. And just to think through when you've discovered one of those people, maybe it's a bit like being in confession with the priest where you don't see the priest, priest doesn't see you. Therapist's couch. You don't look the therapist straight in the eye in a lot of cases. That sometimes fosters more openness. And to realize that the distance of the medium can be your friend. And you also learn just how much there are some people, and a lot of them are truly talented, but they rely so much on the physical presence of their body to generate charisma. And that is itself a valuable skill. But I've learned how much I used to confuse that skill with skill in general. And and it's quite different. And these people can't do that over Zoom, and they just have to say something that's pretty good, and they're not all that great at it. So that's a big thing I've learned, is how to think better about charisma.

Very interesting. Yeah, you could kind of imagine the perfect person for Zoom sales, the salesman with the highest conversion rate, and the salesman for real-world highest conversion rate. There's kind of a Venn diagram there of attributes that definitely are overlapped, but there's things that are distinct that are kind of interesting. Obviously height being a simple example.

Yeah, but handshakes also. So say we're both men, you go to shake hands with the women. It's not clear what the convention is, what the handshake should be like. There's sort of a clear standard with other men, and if the man matches that standard, at least you know they're good at prep, good at a certain kind of conformity, good at learning particular things. But the handshake from a woman, it's just a confusion. And obviously it doesn't exist over Zoom. And that's better, I think.

If you had to give advice— earlier you were just talking about charisma— how does one become more charismatic, hypothetically speaking? You have an essay on this, right?

So first, let me say what I understand to be your theory is you need to take role models of other people and kind of run them through your mind on a very regular basis and not copy them. That makes you too mechanistic. But have those be live vivid examples for your emotional imaginings of the entire world. And they don't have to be people in your field, but just live in their worlds. It could be Winston Churchill. It could be George Orwell. It could be Paul McCartney, Magnus Carlsen. And that over time will make you more charismatic. The approaches I think you don't like, and I agree with you on this, is when you read a book and it says like, to be charismatic, smile, make eye contact. The actual charismatic people I know often don't do those things. They have their own weird setup, which defies description and indeed is weird, and the weirdness makes them charismatic. And someone who tried to follow all those, I suspect, would only clock in at like a 6.5 on charisma. Like, they'd be fine, but you wouldn't actually really be drawn to them if you had like pretty fussy standards for charisma.

What do you think? I very much think you're right. I think, you know, asking someone charismatic how to be charismatic someone truly charismatic, like if you ask Bill Clinton, who regardless of what you think about politics, does have natural charisma, I think it'd be kind of like asking von Neumann, you know, so how do you multiply 5-digit numbers in your head? And it obviously comes easily to them. And I think, you know, someone like me who's just trying to learn and certainly doesn't have that natural gift. Yeah, the idea of not trying to necessarily copy, but to kind of load kind of that person's cartridge into your mind. Is helpful. And, you know, I think a lot of people, certainly my parents, viewed TV as a pejorative. But to the extent that, you know, you can really grow up today on YouTube watching the most charismatic people at all times, that's got to have somewhat of a positive effect if you can, you know, intelligently kind of osmote, not exactly copy, but emulate what they're doing.

I think just learning to channel your own enjoyment and be willing to let it show. You know, I've been a teacher Professor most of my life, and the way you teach people well, well, of course you have to explain it properly, but it's for them to see that you care. And even bad students are such a wonderful audience for understanding if you don't care, they sniff it out so quickly and so smartly that you are sunk right away.

Yeah, I think there seems to be a lot, almost everyone seems to have a kind of system 1 talent detection thing or mood detection thing. You always sense it like in a meeting, someone comes in who's like, always effervescent and bubbling and happy and laughing and you really feel the mood change. Yeah, it's important to try and be that type of person because I think all humans really pick up on that extremely quickly.

Now you're an avid runner, you run marathons, you did like in a week you ran a marathon, what, on every continent or close to it?

I paced a friend, I didn't do all of that. He did all 7 continents, I just did 3 marathons back to back. But yeah, I like running.

And why do you think so many highly successful people are drawn to mastering feats of endurance?

Well, running in particular, and cycling I guess, and swimming, or maybe the triathlon sports— first of all, they're very numerical, so there's a sense every day of numbers that you can work on. That's nice. A lot of these people are competitive, not necessarily globally, but just with themselves. They want to improve. And so there's a digit you can work on every single day, and that's very helpful and gives a sense purpose. And so to a high-achieving person, that's kind of crack. The second is, well, you could say, well, like, there are other numbers you could optimize for. Like, you could try to optimize for the numbers of hours you sleep. The challenge with that is the effort involved in that. Like, if you really want to sleep perfectly every night, it's not about difficulty and kind of pushing through, which is what high achievers always want to do. It's a bit more about relaxing and taking it easy. So, you know, with running and cycling and swimming, you know, you end up in these dynamics where you have these high achievers at the highest level, much higher than me, and The main thing coaches do to these people is slow them down, not accelerate them, because they really get pleasure out of just, you know, persevering and pushing through. And I like that myself. And, you know, for me and for a lot of other folks, there's this idea that, kind of like your idea earlier, that you can learn a lot about how to find good personalities by reading plays. You can learn a lot about mental fortitude by just putting yourself through a physically demanding experience and pushing through. I think it's a very helpful thing to do, you know, the correct amount. A lot of athletes overtrain, but, you know, once a week, really putting yourself in a physically demanding situation seems to be physically obviously very healthy, but psychologically it's just, it's good to know, you know, that you can push through.

Let me ask you a question that we both should answer, and you tell me if you want to go first or second. What do you think is our main disagreement, if only of emphasis, when it comes to identifying talent? We've written this book, worked together on this problem for years. We agree on a lot of things, but what's the residual disagreement and how do we boil it down to a relatively small number of dimensions? And I can go first if you want.

You should.

This is what I think it is for me. I'm not sure of this, but I think you are both more concerned with and much better at identifying competitiveness in people. And I think I am more concerned with identifying obsessiveness in people. So I have a comparative advantage in identifying people who are obsessive but not necessarily extremely competitive. And it's perhaps because I'm a bit that way myself. And you have this different emphasis, and it also relates to your interest in contests of endurance, which have a kind of competitive element to them. So I have obsessive desires to collect all this information, but there's not really a benchmark for it. Like, I have no idea how many books I've read. It's not really compared to how much some other person has read. It's just this obsession. So this kind of competitiveness versus obsessiveness distinction is one thing that strikes me. Not quite a disagreement, but a difference in emphasis. And I think given what you do, venture capital, you should have the emphasis you have, to be clear.

Yeah, that is very interesting. Here's a question for you, maybe to find another way we disagree. If you kind of have to fill the pie chart, if you have to award points in terms of, in talent, what matters most? You have 3 categories. You have nature, you have nurture of, say, the first 6 years, 7 years or so. Then you have, like, just environment, meaning not the way your parents treat you, but just like the food you eat and the air that you breathe. Tell me how the pie chart looks between those 3 buckets.

I don't think sort of the food or the air matters that much as long as you're in a livable situation. What I put really a lot of weight on are who are the really smart, energetic people or role models you were exposed to in something like ages 12 through 16. And that I put great deal of weight on, and I put a great deal of weight on how old were you when you first started to try to do something in some area. You don't even have to have succeeded, but you tried at something. And if you tried at something at 14, to me that's a big plus. If you first tried at something later on, again, it would depend on the context, but at least I want to start thinking about why it took the person so long. What you've inherited, quality of parenting. But I don't think it ends at 6. I think those years 12 to 16, give or take, I really put a great deal of stress on. I don't know that we disagree on that, but that would be my answer.

I think if we were to maybe then define the buckets a bit more simply, nature, you know, nurture broadly, who you're around or whatever, and then just physical environment. What I'm hearing from you is between those last two categories, you'd stack rank effectively the nurture effect I'd probably put the environment effect ahead of that. I really think, and this theory is definitely not mine, there's all sorts of researchers on Twitter that are expert at this, but I think a lot of what is driving American mood today or conversation today is a byproduct of, you know, lithium we put in the water or plastics we consumed when we were children. So I think that might be one aspect of it that where we might swap, not that it really matters that much, but it is a difference.

Here's a way I would put it. I would say, I look for signs that the person at an early age tried to get nature and nurture working together in some kind of multiplicative fashion. And that brings the question a bit away from nature versus nurture. If they made a decision at age 13 to get nature and nurture compounding each other, then I'm very impressed. Does that make sense to you? I think that makes sense.

And I would probably say that I agree with that, but I kind of think ultimately the, you know, mitochondrial efficiency that that person has is a by product of the nutrition they got early on in life might actually be the one driving that. But we can agree to disagree there.

We're about out of time. Just for our listeners and readers, here is my book with Daniel Cowen, Talent: How to Identify Energizers, Creatives, and Winners Around the World. Daniel, it's been an enormous pleasure and honor to have written this book with you. Really just a wonderful experience in my life and an honor to have you on Conversations with Tyler Cowen. Same here.

Every conversation is a joy, and I hope to have many more.

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