"Google's Broken Hiring Process"

Ryan Tate of Silicon Valley Insider quotes Google's director of research Peter Norvig:

One of the interesting things we've found, when trying to predict how well somebody we've hired is going to perform when we evaluate them a year or two later, is one of the best indicators of success within the company was getting the worst possible score on one of your interviews. We rank people from one to four [one being the worst], and if you got a one on one of your interviews, that was a really good indicator of success.

Tate notes elsewhere in his piece that the Google interview process involves crazy questions. Tate doesn't connect the dots, but asking those sorts of questions in a job interview is essentially a way of giving a prospective employee a de facto IQ test (giving actual IQ tests to prospective employees has been legally problematic since Griggs v. Duke Power). Back to Googler Peter Norvig:

Ninety-nine percent of the people who got a one in one of their interviews we didn't hire. But the rest of them, in order for us to hire them somebody else had to be so passionate that they pounded on the table and said, "I have to hire this person because I see something in him..."

My guess at what's going on here: creativity probably increases directly with IQ up to a certain point, at which it peaks and then declines. So if you are looking for an employee who's going to come up with the next killer app or new line of business for your company, and you hire only the candidates with the highest IQs, you are probably overshooting the IQ sweet spot where you'd find the smart, creative types.

Blogging like it's 1999

One of the reasons I like reading venture capitalist Fred Wilson's blog is that it reminds me of 1999. Remember when the economy was booming, unemployment was at ~4%, the stock market was hitting new highs, and Internet businesses were focused more on gaining users than generating revenues? That last part, at least, is still the case with some of the ventures Fred writes about, and it makes me a little nostalgic for the good old days. Here was Fred blogging about one of his portfolio companies, Foursquare yesterday:

I was having breakfast at Pastis with a friend today. The "mayor" of that restaurant, Mark Ghuneim, walks in and goes to the bar to order his morning coffee to go. I said to my friend, "watch this, he's going to pull out his phone and then look up and and try to locate me in this restaurant". My friend, who is not on foursquare, says to me "how do you know?" I said "trust me". Sure enough, Mark starts looking around the restaurant and spots us and comes over and has a ten minute conversation about web music stuff (and foursquare).

When I checked in this morning at Pastis, I added a shout that said "getting a demo of a hot new web music service". The CEO of Targetspot, Eyal Goldwerger, saw that on his phone and jumped in a subway to come down and see the demo too. Sadly, we had left by the time he got there.

But both anecdotes are examples of why foursquare has such potential. It seems like such a simple and whimsical service. You just checkin to places via your phone. But the data that it creates and the way it is published out to your social graph is powerful. I expect we'll see a lot more of this sort of thing as the user base on foursquare hits six figures and hopefully seven figures in the coming months.

A commenter of his named Greg responded:

I don't think Foursquare is going to grow. Fred, your position is unique -- you're a micro-celebrity, people want to see you because they want to grovel for your money. The average person, though, has only 10-20 friends, and random people aren't checking to see them at all hours of the day. Checking in, then, quickly becomes a lonely and pointless experience; the virtual badges get old fast, there are no great anecdotes of people visiting you, and the deals businesses offer for mayors are sparse and easily gamed.

Foursquare is a case-study in the tech industry hype-machine. Because it's useful for micro-celebrities, you have exactly those people hyping it up: MG Siegler, yourself, etc.

Greg makes a similar point to the one I speculated about in this post, Social Media: the new Public Access TV?.

"S&P 500 Overvalued by 40%, Set to Fall, Smithers Says"

Bloomberg interviews economist Andrew Smithers, who called the correction in 2000. Smithers says U.S. stocks are 40% overvalued according to Shiller's cyclically-adjusted P/E ratio and the Q Ratio. Smithers says quantitative easing by central banks has fueled this asset bubble which won't be sustainable when that QE is reversed (HT: The Atlantic's Daniel Indiviglio).

Sounds reasonable to me.

Matthew Yglesias on John Meriwether's new Hedge Fund

Yglesias notes the Financial Times article about John Meriwether, of Long-Term Capital Management infamy, setting up his third hedge fund and writes,

I’m not a huge believer in human rationality, so I totally understand how this scam worked once. That he was able to get a second fund off the ground is pretty amazing. If he finds investors for a third spin around the wheel I’m going to propose confiscating all the rich peoples’ money and giving it to capuchin monkeys.

Richard Posner on the Goldman Sachs Bonuses

Judge Posner, who in addition to being the co-author, with his Nobel Laureate friend, of the Becker-Posner blog is an Atlantic correspondent, has this piece today on the Atlantic's website about the Goldman bonuses. Worth reading the whole thing, but here's an excerpt:

Goldman Sachs, we learned earlier this month, may end up paying more than $20 billion in bonuses to its employees in 2009. The controversial bonuses that American Insurance Group (AIG) had wanted to pay had been intended to reward performance before the company collapsed, and most of the recipients appear to have had no involvement in the decisions that precipitated the collapse.

The Goldman bonuses, in contrast, were intended to reward Goldman's employees for their outstanding performance during the economic crisis. The performance was made possible by the government's having bailed out Goldman in September 2008, when it is believed that, upon Lehman's declaring bankruptcy, Morgan Stanley was 24 hours away from following suit--and Goldman Sachs 72 hours. It was saved by receipt of bailout money and, more important, by being permitted to convert from a broker-dealer to a bank holding company. That entitled it to borrow from the Federal Reserve -- unlike Lehman Brothers, which was denied a Fed loan because it was a non-bank. That was not a sound basis for denying it a loan, but Goldman would have been in the same boat, had it not converted.

So the argument goes: Without government aid then, no $20 billion-plus in bonuses for Goldman Sachs's employees in 2009? Maybe zero in bonuses, maybe indeed, no Goldman Sachs at all. Against that background, the bonuses seem egregious. It seems that the government drove a bad bargain when it bailed out Goldman, that it should have demanded a big chunk of Goldman's future profits.

Posner goes on to note that the majority of the firm's profits in the last year came from proprietary trading, an activity, he argues, that is of limited societal value. Posner posits some negative political and economic consequences of this.

The image above accompanied Posner's Atlantic essay and was credited to Chris Hondros/Getty Images.

Coates and Co. on The White City

There's a spirited discussion on Ta-Nehisi Coates's Atlantic blog about Aaron Renn's essay The White City, and Renn himself stops by to join in the conversation. In his essay, Renn noted that many cities such as Portland and Seattle that are praised for their progressiveness have something in common: few African Americans. One objection Coates raised to Renn's argument was that Renn excluded large cities such as New York that do have significant African American populations and of course also attract young progressives. In response, I noted that many of the soi dissant young progressives in New York end up congregating in trendy neighborhoods that are far less diverse than the city as a whole.

I made a similar comment in the comment thread following Renn's essay and linked to a post of mine from earlier this year that included the photo above, from a New York Times article on the burgeoning culinary entrepreneurship movement in Brooklyn. I noted that the photo gave a sense of the sort of diversity one might find in some of the trendier neighborhoods in New York City.

President Obama Comes to Hackensack

President Obama made an appearance at the cis-Hackensack outpost of Fairleigh Dickinson University¹ to raise campaign funds for our governor, Jon Corzine, the former Goldman Sachs chief. I was going to post about this yesterday, noting that, if memory served, this was the first presidential visit to Hackensack since President Uribe of Colombia made a state visit here a couple of years ago. Then I wasted a half hour trying to find a good photo or article to link to about the Uribe visit, got frustrated, and gave up. Part of the problem with that search is that we've had a Colombian-American mayor here, so articles about him popped up. And we also have an annual Colombian Day celebration here, so that comes up too.

Fortunately, I missed the inevitable traffic snarls yesterday, but Cheryl wasn't as lucky; she got stock in gridlock on Hackensack Ave. on her way back from the Hackensack Financial District. She had to make an Italian illegal U-Turn (all the police were occupied with motorcade security, so she didn't get a ticket for this) and loop around Hackensack via the highways. In any event, thanks to the magic of YouTube, here is some Hackesack residents' brush with the motorcade of the Imperial Presidency²:




¹This school was derided as "Fairly Ridiculous" when I was growing up. Most of its "Metropolitan" campus is on the trans-side of the Hackensack River, which divides the City of Hackensack from the Township of Teaneck.

²By way of contrast, I recall a photo of French President Sarkozy jogging in Central Park last month when he was in New York for the annual UN festivities. Exactly one security guard was visible in the photo.