Organizations struggle to hire talent, mostly from self-inflicted mistakes. Talent sourcing is relegated as an afterthought, a second-tier priority at best. It’s an unwelcome distraction when there’s so much other work to do. At no point do companies treat talent recruitment as a strategic skill.

It’s done by gut, intuition, and feel. In other words, it’s mostly made up.

How well does your company hire talent? Struggling to attract great people?

Fortunately, Tyler Cowen has several insights on how to change the hiring process. Tyler is an economics professor at George Washington University. He’s as close to a renaissance thinker as I’ve come across. He’s the founder of the popular blog Marginal Revolution. He hosts an exceptional podcast, Conversations with Tyler. He’s the author of several books (I count 13).

One of those books is Talent: How to Identify Energizers, Creatives, and Winners Around the World.

Below are 12 ideas from Tyler to change how you hire talent.

Here’s the quick list:

• Minimize the Bureaucracy

• Creativity, Independence, Internal Drive

• Less Credentialism, More Evidence

• Start at the Bottom of the Resume

• Are They Self-Directed?

• Directly Evaluate Job Skills During the Interview

• Savor the Silence

• Critical, Non-Threatening Questions

• On Ethics, Honesty, and Integrity

• Constant Learning Mode?

• More Exceptional Traits: Sturdiness and Generativeness

• Tyler’s Favorite Interview Questions

Let’s explore in more detail:

Minimize the Bureaucracy

I bet your company is still following the same static hiring playbook it has used for decades. Sure, the tactics evolve, but the philosophy and priorities remain stuck in the past. Good grades, good schools, and good extracurriculars. Prioritize conformity, consistency, and predictability. And above all, make safe choices when hiring talent. You don’t get fired if you fail conventionally.

Tyler Cowen explains:

Most of all, we oppose and seek to revise the bureaucratic approach to talent search, which is poorly serving the American economy—and many American and global citizens. The bureaucratic approach, as we define it, seeks to minimize error and loss, and it prizes consensus above all else. It demands that everyone play by a set of overly rigid rules, that individualism be hidden or maybe even stamped out, and that there is never any hurry, so another set of procedures can be applied, virtually without end.

Creativity, Independence, Internal Drive

Corporate managers like predictable, discrete metrics. Take GPA for instance. Most companies will take a 3.9 GPA finance major over a 3.2 GPA engineering major, even though the rigor of the engineering program dwarfs that of the finance major. In addition, perhaps the engineer was inventing real technology, while the finance major was regurgitating CAPM.

Less GPA. More focus on the creative and entrepreneurial drive.

Here’s Tyler:

We focus on a very specific kind of talent in this book—namely, talent with a creative spark—and that is where the bureaucratic approach is most deadly. In referring to the creative spark, we mean people who generate new ideas, start new institutions, develop new methods for executing on known products, lead intellectual or charitable movements, or inspire others by their very presence, leadership, and charisma, regardless of the context.

Creativity is deprioritized because it doesn’t fit in a nice box. We struggle to evaluate it because it’s not conventional. Understanding a candidate’s real background takes deliberate effort, so it’s no wonder the easy way is preferred.

Less Credentialism, More Evidence

Do credentials matter? To a degree, yes. They’re great for young analysts or those entering a new field.

But are they a great predictor for who will be a successful investor? No.

Should someone with 10+ years of experience be evaluated based on credentials? No.

Should someone be evaluated on what tangible value they can produce and prove? Yes.

It’s not about credentials, it’s about what you can do, where you can add value, and what you can deliver. Hiring managers desperately want to believe credentials, like GPA, indicate that ability.

It’s laziness.

Cowen explains:

Excess credentialism, one of the worst instantiations of the bureaucratic approach to hiring, is also a problem of talent search. Many jobs that decades ago required only a high school education now require a bachelor’s or even an advanced degree. The New York Times has reported that the master’s degree has become the new bachelor’s. Does a worker in law enforcement or construction management really need to have a master’s degree, as is currently a trend?

CFA, CAIA, FRM, CFE, blah blah blah. Yes, they serve a purpose. But don’t oversell it. Like college degrees, the signal is limited.

Is a credential a sign that you are obedient at jumping through hoops other people tell you to jump through?

Or is a credential a sign that you are someone that has the innovative drive and creative spark that will bring new ideas to an investment firm?

I argue it’s the former.

A credential is a start, it’s not a conclusion.

Start at the Bottom of the Resume

I’ve heard this idea from many sources. Cowen agrees as well. If you really want to get to know someone, start at the bottom of their resume. Ask about their hobbies, their passions, their weirdness. See what they are really like. Going through their college classes or work experience? There’s some benefit for sure, but it’s mostly predictable, regurgitated responses that have been honed to tell the hiring team what they want to hear.

Cowen explains:

We both find during interviews that “downtime-revealed preferences” are more interesting than “stories about your prior jobs.” So for instance, “What subreddits or blogs do you read?” usually is better than “What did you do at your previous job?”

You get what you ask for. Stale questions get stale responses. Interesting questions get interesting responses.

Are They Self-Directed?

If there’s a couple of traits I would want to know with absolute certainty, one would be their level of self-directedness and self-motivation. That is, do they have the ambition and initiative to do world class work because of the intrinsic joy it brings?

Or do they need someone to tell them what to do?

Do they enjoy the feeling of meeting someone else’s expectations?

Do they enjoy pleasing authority figures?

Here’s Tyler’s thoughts:

There is a striking study of violinists and how they excel—namely, through practice. But do you know what kind of practice is most predictive of success? No, it is not teacher-designed practice; rather, it is practice alone, driven and directed by oneself. Think of practice habits as one path toward continuously compounding learning and performance. Try to learn the practice habits of the person you are interviewing, as it will reveal one aspect of their approach to work. You also should try to learn just how self-conscious a person is about what he or she is doing for self-improvement. And if they give you a fumbling or bumbling account of their practice habits, as we have heard numerous times, you can help them out very easily by suggesting they think about practice a little more systematically.

Directly Evaluate Job Skills During the Interview

This idea seems obvious, but it happens less than you think:

If you are hiring a programmer, test if they can program live during the interview.

If you are hiring a private equity analyst, make them evaluate a fund/manager during the interview.

If you are hiring an equity analyst, make them evaluate a company in person.

Test and verify. Make them show their work.

It’s not, “let’s take their word for it.” It’s not, “let’s just rely on the resume.”

Rely on evidence, not proxies.

Here’s Tyler:

So if you wish to hire an economist, Tyler believes that asking a person substantive economics questions during an interview is a good way to start assessing their competence, though to our knowledge this never has been proven or disproven in study form. Daniel believes that if you wish to fund an applicant for venture capital, it is worth asking about the business plan to see how well the basic idea is presented and defended. If they can’t make a case for it to you, they’ll probably have trouble attracting talent to help them. The anti-interview crowd, many of whom are centered in academia, overlooks these obvious truths.

Savor the Silence

Silence is awkward but illuminating. During an interview, many of the questions will catch the candidate off guard. That’s the entire point! Don’t let the candidate off the hook by breaking the silence. Let them think but make them answer. We’re not looking for perfection. We’re assessing the ability to operate under stress.

Tyler explains:

In order to obtain the best sense of a candidate, it is important not only what you ask but also how you ask it. End at least some of your questions on a note of surprise. Do not be afraid to let a question hang in the air after you ask it; hold the tension as a way of making it clear that you expect an answer, and a direct answer at that. Do not reduce that tension with a nervous laugh, with too noticeable a blink, or by turning away—anything that would reduce the focus on the matter at hand. Don’t be afraid to keep on looking at the candidate, though don’t do this in an unfriendly or overly challenging way. Be relaxed but attentive. If the candidate avoids the question, ask it again. This insistence on an answer is one strategy that makes many interviewers feel uncomfortable or even a little mean. When it’s obvious that a candidate is avoiding giving an answer, many people feel a great temptation to ease the tension by allowing the topic to be changed. By maintaining or even heightening the focus on the substance of the responses, you will see how the candidate responds to pressure, but most of all, you will ensure that every question generates a maximally informative answer.

Critical, Non-Threatening Questions

If you want to really know a person, confrontation isn’t the way. It’s about conversations, not interrogations. As Tyler suggests, add some personal admission to the question to diminish the intensity and make it feel less like an attack and more like a friendly chat.

Here’s Tyler:

With all that in mind, one possible strategy for online interviewing is to try asking a question or two that evokes a sense of confession. Don’t make this a challenging or sharp question; rather, present it passively and openly, as if you are there to listen, not to judge. How about this? “We have all committed mistakes in the workplace, as have I. What is an example of a mistake you have committed but did not come to regret for a long time?” Or try this one: “In the context of the workplace, what does the concept of deliberate sin really mean? And how does it differ from a mere mistake? Can you illustrate this from the experience of one of your co-workers?” Note that the invocation of the co-worker makes the inquiry less threatening and is more likely to induce an honest response. If you wish to go direct, you might try: “When have you experienced great regret in the workplace and why? How much were you at fault in that interaction?”

On Ethics, Honesty, and Integrity

Nobody denies these are required qualities. However, they are obviously hard to test. And asking about it is just going to get you a pleasing sounding confirmation, without evidence. But here’s the one tip: if you even come across one instance of bad behavior or compromised choices, take a pass. One instance is all you need to know that it’s not worth the chance.

Cowen cites Marc Andreesen’s advice:

We can go back to Marc Andreessen, who offers one of the best and least contingent good pieces of hiring advice you can find: Ethics are hard to test for. But watch for any whiff of less than stellar ethics in any candidate’s background or references. And avoid, avoid, avoid. Unethical people are unethical by nature, and the odds of a metaphorical jailhouse conversion are quite low.

It's tempting to bet on reform and a second chance. But be aware of the chaos you will face if you get it wrong.

Constant Learning Mode?

There’s an attitude that once you get your degree, or credential, or position, the learning is over. Which is comical to even consider, especially in investing. So if you want people who will continue to get better and not settle, make sure they have the internal desire to grow and learn.

Cowen explains:

One of your most significant skills as a talent evaluator is to develop a sense of when people are moving along a compound returns curve or not. So much of personality theory focuses on observing levels or absolute degrees of personality traits. You should instead focus on whether the person is experiencing positive rates of change for dynamism, intellect, maturity, ambition, stamina, and other relevant features.

More Exceptional Traits: Sturdiness and Generativeness

Sturdiness

Sturdiness is the ability to deal with the unexpected, the unwanted, and the unfortunate. Up markets, down markets, crises, bubbles, internal strife, etc. Everyone can handle the good days. We need people that can handle the bad days. You don’t get to show up just when the markets are positive.

Here’s Tyler:

Sturdiness is the quality of getting work done every day, with extreme regularity and without long streaks of non-achievement. Sturdiness seems to be especially valuable in people working on longer-term projects. There is also evidence that sturdiness helps people make it through military training and also helps with jobs that involve high-stress management.

Generativeness

Successful investing isn’t plugging numbers into a spreadsheet. It’s not mindlessly sitting through earnings calls or manager meetings just to check a box.

You can’t teach or incentivize people to go above and beyond. It’s a quality that must be uncovered, not taught.

Here’s Tyler:

Some people will call it ambition, some will call it extraversion, but there’s a certain vitality to individuals that can be striking. They talk quickly, move quickly, and in general seem to be enthralled with life. They run all possible combinations of ideas through their heads, if only to better understand the possibilities. Along these lines, they tend to be high in openness as a personality trait. We call this quality “generativeness.” If you hang around people like this, you are likely to come up with new ideas from your interactions.

Tyler’s Favorite Interview Questions

If you struggle to come up with interesting interview questions, here’s a list of questions I compiled from Talent. Use the ones you find insightful to improve your interviews.

• What are the open tabs on your browser right now?

  • In essence, you are asking about intellectual habits, curiosity, and what a person does in his or her spare time, all at once. You are getting past the talk and probing for that person’s demonstrated preferences. – Tyler Cowen

• How did you spend your morning today?

• What’s the farthest you’ve ever been from another human?

• What’s something weird or unusual you did early on in life?

• What’s a story one of your references might tell me when I call them?

• If I was the perfect Netflix, what type of movies would I recommend for you and why?

• How do you feel you are different from the people at your current company?

• What views do you hold religiously, almost irrationally?

• How did you prepare for this interview?

• What subreddits, blogs, or online communities do you enjoy?

• What is something esoteric you do?

• What are ten words your spouse or partner or friend would use to describe you?”

• What’s the most courageous thing you’ve done?

• If you joined us and then in three to six months you were no longer here, why would that be?

• Or ask the same question about five years down the line as well and see how the two answers differ.

• What did you like to do as a child?

• Did you feel appreciated at your last job?

• What was the biggest way in which you did not feel appreciated?

• Which of your beliefs are you most likely wrong about?

• How do you think this interview is going?

  • The most brutal of all the meta questions – Tyler Cowen

• What would you be willing to trade to achieve your career goals?

• How do you think about the trade-offs that might be required to achieve your career goals?

• How successful do you want to be?

• How ambitious are you?

In closing, I’ll highlight three questions that Tyler Cowen referenced from an interview between Patrick Collison, CEO of Stripe, and Reid Hoffman. Collison and Hoffman were discussing the interview process and Patrick offered these three questions to consider:

• Is this person so good that you would happily work for them?

• Can this person get you where you need to be way faster than any reasonable person could?

• When this person disagrees with you, do you think it will be as likely you are wrong as they are wrong?

After every interview, assess the candidate based on these questions. It’s a way to circle back to what really matters and avoid getting lost in the interview minutia.