After Credentials

http://www.paulgraham.com/credentials.html

by mqt • 18 years ago

186 201 18 years ago

paulgraham.com

Shamiq• 18 years ago

For those who care, there is a whole branch of labor economics surrounding this topic:

http://is.gd/c0a2

(The wikipedia link had a set of paren that killed the URL)

lionheart• 18 years ago

"In our country, college entrance exams determine 70 to 80 percent of a person's future."

I'm sure that I can speak for many of us here when I say, thank God that's not the case here anymore.

aristus• 18 years ago

I think Paul is treading ideas with some interesting implications for him, personally. He is the head of an organization that funds companies on the basis of a written & oral exam, whose principal selling point is the transmission of "credentials" upon the kids they pick. Part of it is the kids' merit, but part of it is YC's past success.

People go to YC for many of the same reasons people went to Stanford -- past seed stage, it's still largely a credentials game. So you have to ask whether the same potential for "corruption" is present. Are they failing to transmit credentials over generations because it's a revolutionary model, or because it's only been around less than one generation?

What if someone did a sweetheart deal for a YC startup as a personal favor/quid-pro-quo/etc? What does it mean when founders who got rich from a YC company start funding new YC companies because they are YC companies? Is that "corruption" in the same sense?

pg12• 18 years ago

Some of what you say is true, but it's not true that the principal value of YC is the brand name. The YC brand has little weight to the customers of a startup, and without those it quickly dies. YC's principal value is the advice we (and the other YC startups) offer.

The part you're right about is that "admission" to YC is structurally a lot like college or grad school admissions. The difference, though, is that our choices are immediately tested. College admissions officers do not, as far as I know, follow up on the careers of the people they accept and see how they did. Whereas if we pick a bad group, that fact will immediately be thrust in our face. This causes us to work very hard to try to pick the best people.

It was being in a sense a colleague of college admissions officers that made me think about such topics. We're the next bottleneck downstream from them, and it quickly became clear to us what a bad job they were doing:

http://paulgraham.com/colleges.html

byrneseyeview• 18 years ago

The YC brand has little weight to the customers of a startup, and without those a startup quickly dies.

It would be interesting to see numbers on that. Informally, I noticed that back when reddit was good, anyone who was asked had either heard about it because it was YC-funded, or heard about it from someone who heard about it that way. I'm not certain, but I would probably bet that the submitters of, say "Man sentenced to NINETY THREE days in jail for taking 6 seconds to sit down! Outrageous!" or "Warrant Issued For Man Paying Fine With Pennies" didn't find out about it the same way.

gaius2• 18 years ago

College admissions officers do not, as far as I know, follow up on the careers of the people they accept and see how they did.

I'm not sure that's true - in the UK at least, universities often issue press releases when one of their alumni does something notable (like becoming the Prime Minster of Thailand for example, which Oxford is crowing about at the moment).

michael_nielsen2• 18 years ago

Nobel Prizes per undergraduate is an interesting measure. More than one in every 1000 Caltech undergrads wins a Nobel Prize, and that number rises substantially if one restricts just to science students, not engineering (which doesn't have a Nobel). This suggests that the admissions office there is doing something right.

cstejerean2• 18 years ago

Access to funding and marketing continue to matter a lot for most startups. Since web products are so easy to change and refine in response to feedback the initial quality of a product doesn't matter too much. As long as you can get users to provide feedback and funding to stay alive while you refine the idea you have a much higher chance of success. I'd argue that YC provides both: more attention and better access to funding, particularly because YC's track record at picking winners. The better you get at picking winners the more important the YC brand becomes.

cperciva5• 18 years ago

College admissions officers do not, as far as I know, follow up on the careers of the people they accept and see how they did.

In Canada, one of the strongest selling points of universities is what fraction of their students got a job in a related field within X years of graduation -- so at least here, institutions do track this sort of data.

In addition, there's a lot of work done to validate admissions processes based on the success of students during their undergraduate years; universities have extensive "black books" which tell them how a student graduating from high school X compares to a student graduating from high school Y given the same nominal high school marks (here in Canada, admissions are done primarily based on high school marks -- we don't have any equivalent to SATs).

michaelneale• 18 years ago

>but it's not true that the principal value of YC is the brand name

Yes, not to the customers of the app, but the interest the YC brand generates in "insider" circles, which helps bootstrap popularity I think you are underestimating.

> YC's principal value is the advice we (and the other YC startups) offer.

Yes but as before, the "brand impact" in the blogosphere (I feel dirty writing that) is still a huge thing. If that comes under the umbrella of advice, then that makes sense.

tokenadult2• 18 years ago

"College admissions officers do not, as far as I know, follow up on the careers of the people they accept and see how they did."

I checked for an article from the Harvard Crimson about the degree to which the admission office follows up on admitted students after they enroll, although I didn't find the link just now. You've received other replies mentioning various ways, with various degrees of formality, that admission offices can and do check their results. Now that many admission offices are making very fine distinctions among applicants as admission rates plummet below 10 percent, there will probably be growing interest in validating the criteria on which admission decisions are made.

MIT admission office McGreggor Crowley, in one of his admission travel sessions in the last year, said his office has done studies of which students perform best in upper division courses at MIT. Taking really hard classes in high school is a better predictor of upper-division success at MIT than having a spotless G.P.A., for example. He asked a large audience of high school students how many had done baby-sitting, and very few raised their hands. He said if that is one thing that kept you busy in high school, be sure to mention that on your MIT application.

fallentimes• 18 years ago

We're (TicketStumbler) a pretty good example of a startup that hasn't really been affected by being a YC company. [1]

I did YC because it seemed interesting and I needed a good excuse to quit my job. [2] Tom was bored and wanted to get out of Ohio.

When we launched on Techcrunch, we were met with widespread apathy. Techcrunch readers, by and large, weren't our target market and didn't give two shits about a ticket site. We expected this to happen, and it was still cool to be featured on Techcrunch anyways :). We weren't creating a new platform or becoming the next facebook - we were just solving a simple problem (finding tickets).

The investors we met with didn't care that we were with YC (many didn't even know), they cared that we were making money in an expanding market.

Also, our most targeted/best traffic has been from places that didn't know/didn't care who YC was (e.g. Ticketnews.com, Thrillist). Same situation for our users.

Finally, as Paul alluded to, the YC name can only do so much for you, if you don't have a good product none of it matters.

[1] - I'm only talking about the YC brand name/credentials, not the program itself, which certainly had a positive impact on TicketStumbler.

[2] - When much of your family lives in Detroit and has been recently or is, unemployed, it's difficult to say your ditching a cushie 60k per year job to do a startup. Having "backing" makes it much easier.

edw519• 18 years ago

One could easily amend this to include "After Perceptions".

As a young geek, I was often passed over because I didn't look like I could do the job. It started with little league and continued on through high school and into the work place. I even quit one of my better jobs because a slicker looking but far less talented peer was promoted into what should have been my job.

No more. As a mild mannered adult geek, I still get the same pseudo-negative first impression reaction until I open my mouth and show them how much they'd benefit from me and technology.

The Performance Economy was a long time coming (and probably taken for granted by anyone under 25), but now that we're there, there's no going back.

davidw5• 18 years ago

> until I open my mouth and show them

On a complete tangent, this is one of the perks of living in a foreign country if you speak the language well - instant recognition that you have mastered their language, and that you must therefore not be a complete moron.

The downside of this in Europe, for me, has been moving about 4 hours away (absolutely nothing in the US, in terms of distance) and completely losing this advantage.

gruseom• 18 years ago

You'll have to start over. That's not such a bad thing. So, Italian before, what now?

It's good to still have a bit of an accent. I knew an American who had mastered Russian to the extent that he was indistinguishable from a native speaker. There were, however, glitches that would show up in his speech - an occasional wrong phrase or something. Because he spoke perfectly otherwise, Russians sometimes thought he was a dumb Russian. This made me realize that you want people to know you're a foreigner, just a foreigner who speaks amazing X.

I never spoke Russian as well as this fellow did (and most of it is now sitting freeze-dried in my brain somewhere), but there was one funny thing in my case. Much of what I learned came from reading, so sometimes I would speak Russian like a 19th century novel. This made my friends laugh, but they also liked it - Russians are big on literacy.

Edit: your core point is quite right, and is easy to verify by the impression it makes when you meet a non-native speaker who speaks excellent English.

xiaoma• 18 years ago

>On a complete tangent, this is one of the perks of living in a foreign country if you speak the language well - instant recognition that you have mastered their language, and that you must therefore not be a complete moron.

Absolutely. I'm a partner in a small educational venture in Taiwan, and my sales conversion rate is actually significantly better than that of our local staff. I don't believe for a second that it's because I'm that good. Having people shocked at my Chinese skills definitely gives me an extra oomph.

I'm not sure if Chinese people in the US would get the same credit.

jpcx013• 18 years ago

Seems like there are more efficient ways of proving your intelligence than moving to country with a language that you don't speak natively. But if you do it for other reasons, I guess its worth using to your advantage.

meterplech• 18 years ago

I think that in the United States a lot of the pressure on students to succeed on entrance exams are in terms of getting into more prestigious schools has more to do with desired prestige and college experience than future success. Few parents would unequivocally claim that going to Harvard over Big State University = more success for their kids. For parents and their kids I think its more of matter of wanting the prestige and college experience that's possible at Harvard.

justindz• 18 years ago

I think it's effectively like buying an advertising and PR firm to work for you in the job market. Word of mouth and demonstrable talent substitute for the expense to the degree to which you stay in the (sadly) smaller circles who aren't significantly influenced by PR and advertising.

cperciva5• 18 years ago

PG claims that a shift towards smaller companies results in people being judged on their performance rather than based on factors which do rather poor jobs of predicting said performance; my experience with tarsnap indicates otherwise.

I have a small number of customers -- somewhere between 10% and 20% -- who are using tarsnap based on a recommendation from another tarsnap user; but the vast majority of tarsnap users signed up based on some other factor which is at best predictive of the quality of tarsnap. Reasons I've heard include:

  * I am the FreeBSD Security Officer,
  * They find my blog to be interesting and well-written,
  * I have a doctorate from Oxford,
  * They like the fact that I made the tarsnap client source code available, and
  * I beat them on a mathematics competition 10 years ago.

There are a great many instances of companies succeeding with inferior products as a result of having superior marketing; while I am fortunate that people are interested in using tarsnap for reasons which are quite unrelated to the quality of the tarsnap code or service, the fact remains that the market isn't (in PG's words) "[taking] every organization and [keeping] just the good ones" -- rather, the market takes every organization and keeps just the ones which rank best on a nebulous combination of quality, marketing, and luck.

Yes, credentials are an imperfect way of predicting quality; but are they any worse than the marketing and luck which the market introduces?

pg12• 18 years ago

Initially the users of a new product will have random motivations. They can't all come from recommendations when you've only just launched. But a year from now the number of users you have will depend mainly on how good tarsnap is.

cstejerean2• 18 years ago

Certainly, once you get some momentum your startup will survive or die based on how good it is. But if I hear cperciva correctly, had it not been for his credentials lots of users might not have even tried tarsnap to begin with, and I assume that would also translate into far less users a year from now, even though the product would be the same.

maurycy• 18 years ago

I think that in case of tarsnap it is relatively hard to make the decision if you don't have basic knowledge in cryptography, at least. That's why the information assymetry occurs and thus signalling has much more impact on it.

jbert2• 18 years ago

If large organisations are less efficient:

- why do they survive?

- if they survive despite all, why do we permit them?

If the market was regulated to set a cap on the size of a single company's workforce (or some other metric, perhaps market capitalisation), we'd also avoid the 'too big to fail' problem we have at the moment.

Not to mention quasi-monopolistic practices like large chains killing off small local competitor with an externally-funded price war (then raising prices once the competition disappears).

Is it that we need the largest companies for some large-scale activities (chip fabs, aircraft manafacture), or that they can be efficient at scale (fast food, wal-mart)?

Would the world/market be a better place if companies were forced to fission at a certain size?

davidw5• 18 years ago

> why do they survive?

http://en.wikipedia.org/wiki/The_Nature_of_the_Firm

I would really like to see more analysis of what structural differences point towards the lots of smaller firms that pg sees, and whether this is a short blip in time, or a long term trend.

Also, I hate to dredge up that ugly topic "politics", but currently, in the US, if you or your firm fail, that's great in terms of opening up space for others to try, but a little scarier in personal terms, with regards to things like health care. Long term, who knows how things like that will play out.

jbert2• 18 years ago

Nice link and info, thanks for that.

llimllib• 18 years ago

> If the market was regulated to set a cap on the size of a single company's workforce (or some other metric, perhaps market capitalisation), we'd also avoid the 'too big to fail' problem we have at the moment.

I don't think either of the metrics you mention would solve the "too big to fail" phenomenon. The fact is that "too big to fail" is a misnomer, which has actually been used to represent the concept "too connected to fail".

I.e. it is not Bear's/AIG's pure size that prevents us from allowing them to fail, it's the connectedness that they have in our financial system, which depends on a web of millions of transactions per day between every large bank. Then, if a big bank were allowed to fail (not that I'm endorsing this theory), that would cause a cascade effect where banks started charging higher rates for those millions of transactions, which would cause less of them to happen, which would cause even higher rates, etc. etc., ending in a completely broken financial system where each bank wanted too much money for each of the many transactions they depend on to exist in their current form.

So, I don't think that limiting the size of companies in the financial sector would prevent the "too big to fail" phenomenon by itself. Which doesn't mean it's not a good idea; just that I think that particular example doesn't suport the idea that well.

(edit: and read Coase, like davidw's comment suggests :)

retyred2• 18 years ago

this entire "lots of small firms are the future" meme is probably just wrong. paul graham knows a lot about websites but very little about the rest of the economy. show me the ten person company that can produce the equipment to generate and transmit electricity. or food production. where are all the ma and pa grocery stores? and banking...we have fewer banks now than ever and the number is still dropping. and PCs...making a PC is easy....so what happened to the 10,000 strip-mall PC makers?

show me real examples outside of the web industry that this theory is even remotely correct

nazgulnarsil2• 18 years ago

I have to disagree. it is true that the only reason we see small companies in the tech sector is that it is a young market that is still changing. but this change will continue, all indications are that tech will only change faster in the future. this means that the tech sector will perpetually act as if it were a new market.

evgen2• 18 years ago

Music production. Video production.

Any industry where the capital costs are low, or where a small group of niche specialists can add a significant multiplier to the value chain are candidates for this sort of effect. As more industrial tasks are farmed out to large companies that specialize in flexible production it is possible that you will see this show up in industries that are currently have strong vertical integration.

For example, ten people can't mass-produce a car. Ten people can provide spcialized bodywork and personalization of a mass-produced car. Ten people could probably design and oversee the outsourced manufacturing of discrete components in the car. Ten people could probably manage a company that deals with other small firms to create bespoke vehicles based upon mass-produced frames and engines. As you increase the specialization and make more parts interchangeable it is possible to decentralize and distribute a production chain to the point where a large collective of ten person companies can provide a higher-value good at a lower per-unit cost than a single large company.

Certain activities will always need large, high-capitalization organizations, but it seems that more and more of these companies and factories are being forced to become more flexible and nimble which is leading to a point where a larger and larger part of your world can be serviced by smaller teams than by large enterprises.

huherto2• 18 years ago

Supporting your idea check the "22 immutable laws of marketing" item #4 "In the long run, every market becomes a two-horse race"

dsimard• 18 years ago

Retyred is on to something here. Outside of web startups I think the trend may have actually gone the opposite way over the past 20 years or so. Companies are getting bigger, not smaller. Here are a few:

Retail: just went through a mass-consolidation. The more dynamic firms, the "places to be" if you wanted to do something interesting in retail, were the ones doing the consolidating. Think Wal-Mart, Home-Depot, Walgreens, Best-Buy etc... While it may not be interesting to the crowd here, innovation in things like supply-chain has been stunning.

Consumer Goods: P&G has been unstoppable, and that's where most people in that business want to go because that's where the interesting things were happening.

Consumer Electronics: Dell, Apple, Sony etc... have crushed everyone.

Banking: Ditto. Where did all the ambitious young financial engineers want to go? Easy: Goldman-Sachs. Not that innovation here was a good thing... but that's another story.

Agriculture: ADM, Monsanto and the agri-business giants have almost completely taken over. Small farms are near-extinct.

This list could go on for a while, but I'll stop. I think you see a similar winner-take-all pattern playing out in most industries. It'd be interesting to see the demographics of all this: the percentages of people employed by institutions of different sizes.

Perhaps pg is right that it's starting to happen though. Maybe the web world is at the vanguard of what will be a broad counter-trend. I suspect that won't be as strong a force as he thinks though - the advantages of being big are still too great in too many fields.

Then again, maybe the mass-consolidation was artificial. Maybe all the M&As owe as much to artificially cheap money as to natural advantages of scale. I guess we'll see.

smanek• 18 years ago

I honestly don't think that 'cram schools' are particularly effective. I taught for the Princeton Review for a while ($20+/hr when I was 18 sounded pretty good). In my experience, the average student would only gain about an extra 50 points the SAT (relative to what they would have gained studying on their own). If memory serves, a standard deviation (on the old 1600 point test) was usually in the neighborhood of a 110 points.

Increasing your score by less than half a standard deviation was nice, but it rarely made or broke your college application.

rsheridan63• 18 years ago

Applications to top schools are extremely competitive; I could easily see 50 SAT points making or breaking an application. I was under the impression that these days your application has to be more or less perfect to even have a chance to get into an Ivy League school, unless you're a legacy or a URM.

nostrademons4• 18 years ago

Amherst isn't quite Ivy League, but I had a bunch of friends there with SATs in the 1400s, or even the high 1300s. I believe the median (from stats, not from friends) is about 1460.

It was fairly scary how many of my friends had 1590s or 1600s, though.

apu• 18 years ago

In India they seem to make a huge difference. Friends and relatives who went to "IIT Preparation Courses" (6-12 months, at a boarding school, for getting into one of the IITs, the top technical colleges in the country) usually did vastly superior to others (of similar ability) who did not.

Dilpil• 18 years ago

But then again, how many of those students would have studied alone if not for the class?

tokenadult2• 18 years ago

On the one hand, high SAT scores are still rather scarce,

http://talk.collegeconfidential.com/college-admissions/41382...

but on the other hand, any one applicant with perfect SAT scores can still be rejected by plenty of colleges.

http://talk.collegeconfidential.com/parents-forum/377882-how...

Agreed with the point that on a dollar-per-SAT-point basis, there is little rationale for choosing commercial SAT preparation over simply self-studying with the released previous exams. The most decisive thing to do to raise SAT scores is to read widely and avidly in English.

rw• 18 years ago

Paul said: History suggests that, all other things being equal, a society prospers in proportion to its ability to prevent parents from influencing their children's success directly.

I am studying development policies and growth economics this year. His statement really doesn't count for the countries who have very little wealth to begin with. In fact, he needs to clarify that it is better for wealth to be passed through families, than for that wealth to be destroyed.

alexandros2• 18 years ago

Paul seems to be hitting on the optimization by proxy issues seen in many areas, even in pagerank. Google looks not for quality of a page but for indicators of that quality, namely inbound links by quality websites. Similarly exams and credentials do the same. If you can write about these books, you know literature. If you got a degree there, you must be very capable. And in the first generation it works.

However, as people become aware of the ranking mechanism, they try to get ahead by overoptimizing for the narrow areas inspected. So pages do linkfarms and black-hat SEO, students goto cram schools, etc. etc. essentially producing the exact opposite of what was initially sought. I believe Joel spolsky had a good article on a simillar pattern in sales.

The question is if an algorithm that affects its input data can be made so that it adapts to the changes and gradually reaches some kind of equilibrium with the input data or stabilizes in some other way. As paul suggests, one way would be to make the system more transparent, or even 'social' such that the participants have a way to update it in an agreed way. This would keep the minority from cheating on the majority.

Doing away with such filters though might be a bit harder than we think, especially given the breadth of their applications. As aristus commented, even YCombinator has an examination system. In fact it wouldnt be too hard to imagine cram schools for YC given enough incentive. I fear this is a problem we have to either solve or live with.

ryanwaggoner• 18 years ago

I fear this is a problem we have to either solve or live with.

Aren't they all? :-)

netcan7• 18 years ago

How would you run a cram school for YC?

Say you were given 19 yr olds at the end of Year 1 of Uni. You have 2-3 years part time. How would you get them in? Activities? Interview coaching? Resume building? Portfolio building? Specialised learning?

alexandros2• 18 years ago

Intresting question, but the feasibility of it is not dependent on my ability to give a good answer. Regardless, I'll give it a shot for argument's sake. Of course everything you say is valid. you would need to do these things.

I would also mine all the successes, details of interview process and characteristics of successful applicants and their applications for commonalities and then see how many of these can be easily added to an application for 'bonus points'. Of course it depends on how black-hat you want to get about this.

The first thing that came to my mind though, having read pg's essays, would be 'teach them LISP' :)

derefr• 18 years ago

I'd probably build their social network: connect them to hundreds of influential sources of free marketing. If you're judging performance, the initial performance of a connected founder will greatly exceed an unconnected one. If you don't wait long enough to watch market effects take over before judging which startups to keep, you'll only end up with the networked ones.

motoko3• 18 years ago

If the leading criterion for admission was concrete evidence that the applicants collectively have the ability and motivation build things people want as measured in users and sales...

...then a cram school for YC would be a program much like YC in which younger teams built smaller, more easily guided technology start-ups.

pg12• 18 years ago

That's a very interesting question. Above all I'd have them build things. We like anyone who's created an open-source project we've heard of, for example.

I'd also try to get them jobs at existing YC startups. Then they'd both learn how startups work, and (if they were good) get recommendations from people we know.

retyred2• 18 years ago

sadly i think college credentials in the US have lost their luster because its always a let-down. without a doubt there is only one school that i have never met a single retard from: caltech. cmu is a close second. every other school has let me down by graduating some goof who i have interviewed or worked with. never again will i get uptight or impressed by stanford, mit or the ivies.

my attitude is that i do not care where you went to school. in an interview, if you ace the questions, why do i care if you went to ball state? so what, maybe that is all you could afford. on the other hand, if you can't answer my questions, why do i care if you went to stanford?

furthermore its likely that most people here do not know what the best colleges in korea, japan, china and india really are. so best to just skip the education section of the resume entirely

bootload2• 18 years ago

"... every other school has let me down by graduating some goof who i have interviewed or worked with. never again will i get uptight or impressed by stanford, mit or the ivies. ..."

Don't confuse 'intelligence' and 'education'. There are plenty of smart people who have never been to University. Likewise there are plenty of people who go to University who graduate but can't think beyond what they have been taught.

nazgulnarsil2• 18 years ago

any type of creative field runs into this problem a lot. a lot of people reach a certain level and realize that they don't actually have any talent for X, they were just good at following the directions.

mthg• 18 years ago

I agree with this sentiment entirely. I went to a public magnet high school with SAT scores averaging around 1480 and at least half our graduating class every year ends up in an ivy / mit / stanford. I'd say more than half of those who made it to the top tier got in from legacy / extracurriculars / obsessive dedication to good grades and making teachers happy as opposed to genuine intelligence and love of learning. Also curiously, like you said, everybody from my graduating class who went to caltech, although not necessarily teh uberg3nius math wiz, was at least minimally competent in some technical field.

Although one could make the case that a lot of those schools, especially the ivies, are picking people based on their ability to lead and 'make a difference' in some general sense rather than pure raw ability. Therefore they may intentionally focus on apparently manifested soft qualifications like achievement in extracurriculars, personal discipline as exhibited by a flawless GPA, or well-established personal connections.

This is all strictly re: undergrads of course. I've never seen a single retard get admitted to a top-tier PhD program in science or engineering.

quantumhobbit• 18 years ago

"This is all strictly re: undergrads of course. I've never seen a single retard get admitted to a top-tier PhD program in science or engineering."

That's not the case as I've witnessed it. I won't directly name names, but I am thinking about a school that is ranked number 4 for graduate engineering on U.S. News.

prakash• 18 years ago

On College-Entrance Exam Day, All of South Korea Is Put to the Test. Noisy Flights Can't Land; Offices Open Late To Avoid Traffic; Mothers Pray a Lot.

http://online.wsj.com/article/SB122644964013219173.html

rokhayakebe• 18 years ago

the transmission of power between generations is also happening within the startup environment. How? Successful entrepreneurs are funding their friends or friends' friends. Furthermore, VCs are known to fund people within their close network. Power Bloggers are known to cover their friends' startups or their friends friends'.

Luckily technology is fairly cheap, learning how to do stuff is free and only requires commitment and time so we can still turn our ideas into products and put it in front of millions of people without bloggers, angels, vcs.....

rsheridan63• 18 years ago

"History suggests that, all other things being equal, a society prospers in proportion to its ability to prevent parents from influencing their children's success directly."

Can we assume that pg is in favor of restoring the estate tax?

pg12• 18 years ago

Actually I don't think inherited money is that dangerous. Unless it's coming from more than a generation back, you don't even get it till you're old yourself. And when people inherit money young, if anything it seems to screw them up rather than giving them an advantage.

dhimes2• 18 years ago

if anything it seems to screw them up

That's why it's dangerous :)

Buffet has it right: leave them enough so that they can do anything, but not enough so that they can do nothing.

anamax2• 18 years ago

> Can we assume that pg is in favor of restoring the estate tax?

Can we see some evidence that the estate tax in the US ever had the characteristics cited by its proponents?

Consider, for example, the possibility that Caroline Kennedy will be appointed to the Senate by the NY Governor who just happens to come from a line of NY politicians. This isn't an isolated case - a huge fraction of current US senators are related to past senators and governors. (Biden's successor, one of his advisors, is seat-warming until his son is ready to run.) The House of Representatives isn't much different. The same thing happens at the state level - IL is mainstream in this.

The estate tax also doesn't hit the rich. The wealth of Gates et al will not be subject to the estate tax. It will, however, work to the benefit of their kids. (The Fords, Rockefellers, and GM heirs worked the same game.)

The only folks who pay estate tax are medium size family-owned biz. Many of them have to sell to pay the tax bill.

Interestingly enough, Buffet makes a lot of money buying such biz. He also makes a lot of money selling insurance to their founders to pay estate taxes.

BKmke2• 18 years ago

PG, I enjoy your essays a great deal. Often while reading the content I click on your numerically referenced notes. Clicking on the numbered reference takes you to the details of that note. Please link the number in the notes section back to the location in the essay. This way I can click the note in the text and read the note and then click the note reference to return to the essay content and continue reading. This will prevent me from having to scroll back up to place where I left off. I would appreciate this user interface improvement. Thank you again for your thought provoking work.

msg• 18 years ago

use the back button?

BKmke2• 18 years ago

Thanks, not an intuitive option, but it'll do.

CatDancer• 18 years ago

Aha, that explains why resumes are so useless: a resume is a listing of credentials.

jpcx013• 18 years ago

I've transitioned my resume to be more of a portfolio list and abilities description with a 2 liner for school graduated.

Any company that respects a traditional resume is a company I don't want to work for.

aaronsw• 18 years ago

The left likes credentials? The right doesn't like intergenerational transmission of income?

These aren't any left or right I recognize. Who is PG thinking of?

mindslight• 18 years ago

That second to last paragraph sticks out like a sore thumb and should be removed, imho.

'left' and 'right' are pretty meaningless terms, their origins being the antithesis of American ideals. That paragraph says more about pg's political self-identification than anything else.

rsheridan63• 18 years ago

I think the idea is that leftist policies retard the shift from credentialing and large organizations to small, nimble organizations by being anti-business. Therefore, by default leftist policies stick us with credentialing. This is not a conscious goal of the left, it's just what happens.

I'm sure the left would disagree with this, but that's the right-wing point of view.

jpcx013• 18 years ago

I can give an immediate example. The left wholeheartedly supports Teacher Unions who are fundamentally opposed to merit pay, prefering seniority and tenure.

miked2• 18 years ago

And in Missouri at least, teachers' unions have made it so that any teacher, no matter how bad, can get a raise just by getting a master's degree or a PhD.

pg12• 18 years ago

I didn't say either of these things.

I said that the left has to fall back on credentials (the wording of which implies they don't like them).

And while the right may not like estate taxes, I don't think anyone on the right (unless there are any ancien regime fans left) favors the use of that wealth to buy position. At most they'd probably concede the possibility is an unfortunate consequence of not taxing people twice.

illumen• 18 years ago

Using the left/right abstraction is really silly. It's a broken, continually redefined buzzword concept that is too simple... so don't bother with it.

jackchristopher2• 18 years ago

Paul, how much of the conclusion did you decide on before starting the essay?

It felt more like an attempt to convince us, rather than a revelation to yourself. Not that that's bad, but you didn't seem excited.

What were your diffs?

pg12• 18 years ago

Actually there were a lot of surprises. That credentials are seals between generations; the distinction between direct and indirect methods of helping your kids; that sealing off direct methods promotes indirect ones; the emptiness of the explanation schools give of legacy admissions (which now seems to me as damning evidence as the practice itself); the precise connection between credentials, measurement, and organization size; the fact that falsely impressing colleagues in a small organization wouldn't have a lasting effect, because the organization wouldn't last; the reason the word yuppie arose, and the connection between startup founders and yuppies; that the spread of measurement would bring credential granters into line as well; and that the left, because their attachment to equality (of result, not opportunity) makes them dislike markets, have to fall back on a broken method of preventing transmission of power between generations.

I think the reason I didn't sound excited was the way this got written. I started it this summer, didn't work on it for months, and then started again in November. I rewrote it so many times that all that's left of the first version is the beginning, up to "Chinese example," and one paragraph in the middle that used to be in the beginning.

jackchristopher2• 18 years ago

I agreed with the point of the piece beforehand. And there was plenty of newness in it. I wanted to gauge how it was written. And the analysis is helpful.

A lecturely, authoritative voice seems inevitable as you move away from the excitement phase. But excitement may be more convincing.

And that's one advantage that blogs have over essays, that I hadn't considered. Being published so much quicker, it's easier to retain excitement. But I'm a bigger fan of essays. The medium still has steam left, even if you include it's other anachronisms.

geebee2• 18 years ago

I agree with much in the essay, but it's interesting that PG used law as an example of an organization that broke from the deferred compensation principle.

Most "elite" law firms actually do pay by seniority. An associate is generally paid according to the number of years he or she has been with the firm. And while the salaries for young lawyers is very high, they are actually (often) working for the potential of becoming partner - a reward for work done earlier in life. This is the essence of deferred compensation.

Law firms also tend to be more impressed with credentials than almost any other segment of the economy. The pecking order of law schools would surprise many people from the engineering world. Of course, some schools do have stronger reputations (for good reason), but in law, Harvard > Columbia > Cornell. Students accepted to a school higher in the chain will prefer that school by a wide margin. Whereas engineering students, especially at the grad level don't tend to have an MIT > Stanford > Berkeley kind of mentality... they'd be more interested in how their research interests match up with faculty in that area.

I think Law, Medicine, and other professions will be the holdouts against the trend away from school-based credentials. It's probably no surprise - these are the few sectors of the economy that can actually ban someone (with the full weight of government behind them) from practicing based on degrees and exams.

The question is, when will the tide overtake them (if ever)? Will the opportunities in a free market eventually become so appealing that only second-rate people will seek out the credentialed industries?

I'm not joking here. Law school is three years, but we all know that people learn at different rates. I suspect that some people could learn the material in a few months, whereas others would need six years, and some would never be able to learn it at all. The requirement of a 3 year degree most definitely sends some of the brightest folks into other fields where they can leverage their exceptional ability to learn quickly (software seems to be a favorite field for these people).

evgen2• 18 years ago

> I think Law, Medicine, and other professions will be the holdouts against the trend away from school-based credentials. It's probably no surprise - these are the few sectors of the economy that can actually ban someone (with the full weight of government behind them) from practicing based on degrees and exams.

These are also fields where the actions of a single bad/incompetent actor can have very, very serious consequences for their customers. Death and long-term incarceration are pretty heavy negative externalities and most of us do not want to wait for "reputation" to sort out the bad apples. These are also fields with large bodies of knowledge that an applicant in the field needs to master, with relatively easy mechanisms for testing this knowledge.

There is a reason your doctor has copies of his diploma's on the wall, and a reason why your eye searches them out when you are discussing your problem. Sometimes knowing that the other party has passed through several well-regarded and reputable gatekeepers is a good thing. Will the "wisdom of the crowd" ever replace the bar exam, medical boards, and graduation from an elite university? No.

geebee2• 18 years ago

I definitely don't want to give the impression that I am opposed to credentials in all instances. Actually, Medicine isn't that great an example, because you don't become licensed as a physician or surgeon until you've completed a residency - ie., you've proved you can "do it". Whereas in Law, you only need to obtain a degree and pass an exam. So in a way, you really are relying on reputation in law - which may be why "big firms" like to broadcast their connections with Ivies and so forth.

Anyway, the licensing process for MDs is so different from JDs that I shouldn't have mentioned them in the same sentence.

Here's my worry, though. If a truly bright person can learn much more quickly than the average, that person may eventually be discouraged from pursuing law (or even medicine) because they are essentially throttled by the system. Also, credentials may not matter as much to this person, because they seek out areas where they can prove themselves without worrying about the particular degree.

If this happens (and I'll admit it is unlikely in the near term), you could have a situation where professions that make heavy use of credentials are most appealing to those who are good at getting credentials, but not much good at anything else. For those folks, the payoff of a credential is highest. Whereas for someone who could do well with or without a credential, it's just a path with many irritating roadblocks.

The interesting thing will be to see if the professions adapt. Perhaps there are some creative ways to retain some of the valuable aspects of credentialing without forcing everyone to learn at the same pace? Perhaps a heavier focus on exams, rather than than hours or years logged in a program? Another approach might be to limit the most restrictive licensing to more specialized cases - ie, require a 3 year degree and full membership in the bar (and, I'd hope, even more than that) to try a death penalty case, but require a shorter and easier exam for more transactional work where a minor amount of money is on the line. Even in medicine, I suspect that nurses can handle many of the things that only MDs are currently allowed to do (in some states, nurse practitioners can do this - a two year MS followed by a one year apprenticeship and exam is sufficient to independently treat some cases, rather than a 4 year degree followed by a three year residency).

Hard to say if it can happen, or if it is even desirable. But I'd guess there will be pressure, and that's not necessarily a bad thing, depending on how it all goes down...

DThrasher• 18 years ago

One important factor Paul left out was the ability to terminate bad employees. If an organization can't get rid of poor performers at reasonable cost, due to restrictive labor contracts or tenure for example, the organization will have to put much more effort into screening candidates.

pg12• 18 years ago

This is true. I didn't go into detail about the reasons large organizations can't cheaply measure the performance of recruits, but this is the sort of thing I meant.

miked2• 18 years ago

The usefulness of measuring depends on how actionable the measurements are. I think this is one of the big reasons that the startup culture in Europe has never really developed. In most European countries (and US government agencies) it's almost impossible to fire someone after a short probationary period. This distorts labor markets so badly that even left-leaning labor economists (e.g., Brad DeLong) have sharply criticized European labor laws.

This brings up an interesting sorting issue. If it's easy for people to be terminated and/or quit (because they know that there are other jobs, available in part because other employees have been fired or quit), there should, over time, be an improvement in the matching between employees and jobs. This should lead to higher productivity as well, not to mention greater job satisfaction.

greg• 18 years ago

Paul argues testing will be pushed aside by measurement of actual performance. He may be right but existing methods of testing are amazingly unsophisticated and open to improvement. For instance:

Most work in the real world is done in teams, but schools tend to grade on average team output, which is vulnerable to free riders. Why not rotate individuals through teams and measure independent contributions with some simple statistics? That's what coaches do for sports like rowing.

Knowledge in the real world is rarely all or nothing. It matters how confident you are in what you know. Will you risk your company's future on an algorithm? Why not adjust test results by student's own ratings of their confidence in their answers? Then we could see who can really be trusted with their knowledge.

slvrspoon• 18 years ago

i believe, without having done any research, that credentialism worldwide has GROWN massively as the middle classes try to protect their positions for the selfish reasons PG states. less biased, more thoughtful research would make for a more reasoned debate about an important topic, to Y combinator, and to wider society.

jwesley• 18 years ago

So without doing any research, you arbitrarily take the opposite position and demand that more research be done? Feels like a non sequitur...

bayam• 18 years ago

Ask someone who works at Google if there was ever a time when in the company's history when a Stanford or Berkeley degree wasn't a major advantage in the hiring process. Even at a small startup, you're probably going to have more faith in an unknown from Stanford than an unknown from Western Kentucky U.

Paul's essay is interesting, but I don't think any of recent academic / sociological studies would confirm his conclusions. In general, the best indicator of one's success is (a) your parent's income and (b) your education. Academic connections open so many more doors and opportunities, even to those who don't have the intelligence and skills to match. An idiot who graduates from an unknown college will probably go nowhere, but one from Stanford may end up as CEO. (Personally, I've seen the latter occur.)

mstoehr• 18 years ago

I've definitely seen evidence that the school one goes to correlates with success, but are you sure that the causality flows in the direction: academic credential --> success? It seems plausible at least that if the parent is wealthy, seeing to it that their kid is well-educated is a good way of signaling that their kid is decent material, it's a costly signal so only the wealthiest of parents will probably be able to afford it. And since the kids of wealthier parents tend to do better, the education signal, by some accident ends up being used a great deal to gauge future success.

I actually think that it used to just be a straightforward signal of wealth, but these days we don't want to admit that that's the case, we instead want to justify it as producing some useful economic product.

nostrademons4• 18 years ago

"Ask someone who works at Google if there was ever a time when in the company's history when a Stanford or Berkeley degree wasn't a major advantage in the hiring process."

All my info is based on what they said (and hence somewhat unreliable), but the factors cited in my case were my startup experience, the interview feedback, and the fact that my skillset happened to fit what they're looking for at this point in time. I also have an Amherst degree, so I can't rule it out as a factor, but nobody once mentioned it. And my GPA sucked, so it certainly couldn't have been all academic.

bootload2• 18 years ago

"... It was not so easy 25 years ago for an ambitious person to choose to be judged directly by the market. You had to go through bosses, and they were influenced by where you'd been to college ..."

What was the hack Apple, MS and other tech companies used? Aligning themselves to rapidly improving technology where greater performance was really noticeable?

I still see the barriers described here occurring particularly in market bottle-necks (interfaces where technology collides with its ancestry) where old-world business has influence. The biggest one I can think of is access to capital. It seems the closer you get to capital, the greater the effect credentials can come into play balancing out performance.

"... What cram schools are, in effect, is leaks in a seal. The use of credentials was an attempt to seal off the direct transmission of power between generations, and cram schools represent that power finding holes in the seal. Cram schools turn wealth in one generation into credentials in the next ..."

Is YC acting as an anti-cram school hack? Using YC credentials to gain leverage to gain capital to the next generation Startups to be measured by performance?

motoko3• 18 years ago

"Is YC acting as an anti-cram school hack?"

Isn't a startup itself an "economic cram?"

"Cramming" isn't necessarily "bad" when the most effective preparation is achieving thing itself.

netcan7• 18 years ago

Paul mentions small companies interacting directly with markets as the catalyst to shifting from credentials to performance.

Another potential catalyst is the growth of freelance/contract labour. Essentially, what is being created is a less secure labour environment where there is more incentive & ability to directly measure performance. The assumption is that you are fired at the end of the job. If you can get further work or a referral, it's a bonus.

There is something obscuring the effects of this though. The growth of freelance/contacting partly coincides with & partly is driven by the internationalisation of labour markets. That will obscure some aspects of it. A copywriter in a cushy job in a high wage country won't leave to pursue a $25/hr career as a elence copywriter. They stay away from competition with international labour markets.

I don't think that will go away any time soon. What would be interesting to study would be these kinds of markets in low wage countries where hiring freelancers on international labour markets is not a cost advantage to hiring local employees

In any case, if we are moving to a higher performance/credentials ratio, I think this is a big part of the equation, bigger then startups.

helveticaman• 18 years ago

A question:

I'm in Stanford but I want to be in a start up when I'm done. Should I give up on good grades and a degree in favor of learning more (i.e. not let my schooling get in the way of my education)?

adamc• 18 years ago

Best pg essay in a while, in my assessment. It all rings true for me, although I don't think big organizations (complete with flawed, credential-based assessments) are going away any time soon.

akd• 18 years ago

Paul - you assert that the economy is less controlled by the biggest companies than it was 50 years ago. Is this supported by data? I would be curious to see what % of total GDP is booked by the top 1% of companies in 1950 and in 2000.

mattchew• 18 years ago

We've always had entrepreneurs in the U.S., but clever little firms haven't taken over the economy yet.

Big clumsy companies still have the advantage in a lot of areas. I'd like to see those areas eroded, but I suspect some of them are growing.

For example, my impression is that fewer doctors are in private practice than there used to be, with more of them belonging to clinics. There are certainly fewer independent pharmacies than there used to be.

kingkongrevenge2• 18 years ago

Credentialism and Mandaranism are artifacts of state dominated societies. It's really that simple. Free market economies feature so much creative destruction that power has little chance of persisting across generations. Only in a system lacking Darwinian market selection mechanisms do credentials become so critical. Credentialism emerged in China because the Chinese state was always much more powerful than the European crowns.

Credentialism has declined in the US to the extent that certain segments of the economy have adapted and grown so fast as to escape the clutches of government control. The segments still under firm influence of regulation are heavily Mandarin and Credentialist. Think medicine or law.

Tangurena• 18 years ago

Inheritance taxes eliminate the persistance across generations of power and wealth. However, since the bush administration chose to repeal estate taxes, they intended to return the US to the sort of nation with a hereditary aristocracy.

In IT, we saw the problems with "credentialism" in the problems with "boot camps" and the "paper engineers" who came out with CNE/MCSE credentials who also were basically useless.

ehabkost• 18 years ago

The whole article is about a common way to persist power and wealth through generations, a method that can't be eliminated by inheritance taxes. And you believe inheritance taxes would eliminate the persistence? Did you read the article? 8)

anamax2• 18 years ago

> Inheritance taxes eliminate the persistance across generations of power and wealth.

No they don't. The persistence of the Kennedy s and Rockefellers demonstrate otherwise.

US inheritance taxes just hit family biz, and destroy them because the tax bill can only be satisfied by selling the biz.

The wealth of the truly rich (Gates et al) is not subject to inheritance tax. It is, however, passed on. (What - you thought that the Gates foundation was to do good?)

aswanson2• 18 years ago

Or finance-Wall Street. Maybe not, as the vast idiocy taking place there has been exposed recently. But memories are short.

kingkongrevenge2• 18 years ago

Wall Street institutions are wings of the government. They live and die by the Fed and regulation. Universities also live and die by government support.

kwamenum86• 18 years ago

"History suggests that, all other things being equal, a society prospers in proportion to its ability to prevent parents from influencing their children's success directly."

I would love to see some evidence for this claim.

rams• 18 years ago

"All it takes is a few beachheads in your economy that pay for performance. Measurement spreads like heat. If one part of a society is better at measurement than others, it tends to push the others to do better. "

There is little evidence of that - Car companies, investment banks, etc, etc

flashgordon2• 18 years ago

All credentials are just another way to reduce the "blameable" risk on a party. People fork out hundreds to do a whole bunch of certifications which are happily accepted by large organisations as they are somehow proven... This in turn is just a manifestation of an aspect of the Principal Agent Problem - Adverse Selection!!

(by the way I hate doing exams and I absolutely suck at them because when I study I am interested in learning more than I am in getting a great mark at an exam...)

flashgordon2• 18 years ago

oh and by the way, what should be the policy on inheritances?? those are a direct transfer of power/resources between generations which can just easily be seen as unfair advantages.

nostrademons4• 18 years ago

Could also be because of increasing specialization. When my parents' generation was going to work, the sort of things you'd actually do might include serving beverages on a plane, assembling cars, or shuffling papers around. There's not much room for differentiation in these jobs: you either do them well or you don't do them, without many gradations in between. So the only way to "prove" that you had qualified, top-notch employees was to use their degree as a substitute for their competency.

A similar effect occurs in the financial and management consulting industries today, two of the most degree-conscious industries. It's nearly impossible to measure performance in these industries, because the results of an individual's work don't become apparent until 5-10 years later, and there are a whole host of confounding factors. Did the money manager get rich because he was good, or did he get rich because he was lucky?

russell• 18 years ago

It's an interesting essay, but just to be argumentative, I think it takes the wrong path to the conclusion. I posit that South Korea has only one highly regarded university or some other suitably small number. Maybe it's the University of Seoul. If you get into U of S, you are a superior being, you get the choice government jobs, you get to be the department head, you get the industrial fast track. If you don't get in, you are dross, just second class. In Japan it's the University of Tokyo. Neither university is particularly good or even much better than some of the others but they have the reputations to make the careers of their students. Contrast that with the USA. Of the top 50 universities in the world, we probably have 40. If you get into Harvard, MIT, Stanford, or Cal Tech, it certainly helps you career. If you don't, you aren't automatically second class, because there are so many other good schools.

Then there is our culture a meme of the irrepressible underdog, the New England inventor, the riverboat gambler, the mountain prospector, the Silicon Valley programmer. Business failure is not career or reputation ending, it's character building. It probably enhances you chances the second time around. In contrast I remember reading that in Germany if you failed you were done; no one would give you another chance. Banks controlled everything and were so risk adverse you probably couldn't get the money in the first place. My brother in law's business in Brazil went bankrupt. He didn't get a fresh start. He just stayed out of jail until he could pay it back. He was a chemical engineer, but he had to work in a grocery store. It is amazing how low the barriers to entry are here. Anyone interested in how Silicon Valley became Silicon Valley should read Regional Advantage: Culture and Competition in Silicon Valley and Route 128 by AnnaLee Saxenian.

In most of the world it is difficult to start a business. According to the Economist it takes $20,000 in fees and deposits to start a business. In many countries it takes one or two years plus bribes to get permission to start. In San Luis Obispo County it took me $120 and an hour at the county offices. And YC may even give you the money.

I think I agree with Paul's conclusion if not with his antecedents. I think we are moving away from a credentials based culture to a reputation based one, not because parental manipulation can falsify credentials, but because an individual on the web can build a reputation through a web of contacts, through writing, through performance, through reputons (small quanta of reputation). I went to Harvard. That's a reputon. I got my degree in economics. That's probably an anti-reputon. At least in the software industry, you can build a reputation thats worth more than a bunch of certificates.

DaniFong3• 18 years ago

I like the notion of 'reputons' but might I suggest a different word, 'reps', or perhaps 'props'?

rms• 18 years ago

Karma? Guānxi?

gqwu• 18 years ago

PG, when you were looking at YC apps, how many +points did you give to candidates who worked at Google?

pg12• 18 years ago

It counts for something with us-- probably more than school, for example-- because it seems like Google is a pretty good filter. But what we care most about is what people have built.

paddy_m• 18 years ago

I can't help but read this passage " They also tell you when you're succeeding in fixing them: when cram schools become less popular." and think of campaign finance reform.

The way to solve corruption in government isn't to outlaw large contributions to campaigns (cram schools), but to make large contributions less valuable. The most expidient way to do that is to decrease the power of elected politicians.

utsmokingaces• 18 years ago

Respectfully, why are PG's articles so damn long? If your goal isn't to make beautiful writing, you should just get to the point. Who has time to read long articles in this day and age.

stuntgoat• 18 years ago

Ha! I just finished reading your essay and earlier today I was thinking about the the current and future opportunity for the youth. ( I am 32 ) Seeing some high school kids acting silly and waiting the bus, while I was driving by made me think about what opportunities there are for them when they graduate high school. 3 thoughts came to mind as I made my way to the hardware store:

a) Youth are generally cynical towards the older generation because we won't let them have as much fun as they would like to have.

b) Older generations generally hold on to their wealth and could potentially stifle innovation by keeping much of the up and coming generation in the ranks of those living paycheck to paycheck.

c) How can a society let the youth innovate more efficiently ( and safely ).

College may not be the panacea for innovation and personal happiness but: attending college helps to put an individual's impact on the world in perspective and can perhaps demonstrate that people do cool things that affect the world. College is also a good way to show people how to learn effectively.

In theory, great schools are difficult to do well in and have high standards; this is the reason that particular graduates are selected for the jobs or funding. It is more difficult to graduate from Reed than Sonoma State- it takes more time studying, writing and thinking. I would consider hiring or working with a person who, theoretically, spent more time thinking in college over another applicant who went to one of the greatest party/drinking schools. Credentials from a school with rigorous curricula is much different than a doing well at a standardized test. What I mean is that some credentials * are * a measurement of performance ( performance, as in study hard and think clearly ). I think the performace VCs and people who hire graduates to work in their factories and cubicles are trying to measure is called 'return on investment'.

Here is a question for you: what would be your standardized test for measuring return on investment.

I'll think of 3.

1) Applicant, write a short essay about how you might generate $200 in total income in a day given only the clothes you are wearing right now, a $50 bill to spend on anthing you might need, having eaten the breakfast of your choice and a wish for good luck. ( you have 30 minutes )

2) Applicant, how do you manage your time when you are trying new ways of solving a problem? Give one or many examples with your reasoning explained in context. ( you have 30 minutes )

3) Applicant, how willing would you be to share your innovative ideas with me if I helped you succeed at implementing them? ( all my best ideas; most of my greatest thoughts; some cool ideas; not many OK ideas; perhaps one daydream; you'll never know what I am thinking next )

fauigerzigerk• 18 years ago

The problem with taking everyone and keeping just the best is that it takes a lot of resources to do that. A lot more resources than an exam would take. Just imagine YC taking on everybody who applied and working with them even just for a month.

I generally agree with the trend that pg describes, but don't think it can ever be universal (unfortunately). To be rewarded by the market you need access to the market and that's not always as easy as with consumer web apps. I would say consumer web apps are pretty atypical, because you don't need much investment, you don't need any certifications to be allowed in, there is no risk for the customer if you go bust (unlike with enterprise software), etc.

jmtame• 18 years ago

I see a lot of discussion about YC, but I don't think this has much to do with YC as much as it does with the market in general. The two really important things I took away from this were:

1) Instead of trying to make credentials harder to hack, we can also make them matter less.

> Comment: I think this is a general statement being made, correct me if I'm wrong. I didn't think this was a "At YC, we can make credentials matter less." I see this happening at the successful startups. They no longer say "B.S. in C.S. required" they say it's "optional, or equivalent experience." I would say that is brilliant.

2) Now we seem to be entering a new era based on measurement.

> Comment: I would agree 100%, and I'm glad you used the example of East Asian culture. There was a lot of turmoil, but one of the biggest things was feudalistic societies. If you haven't read the Biography of Yukichi Fukuzawa, I would highly recommend it (especially if you're an entrepreneur). His father hated Japan because it was feudalistic, so where he exerted the most effort and was far more intelligent than his superiors, he never moved up. Your position in society was not driven by merit, it was essentially determined by your family and birth. That frustrated a lot of the people who were very smart, even though they lacked "credentials" of going to a nice school because they couldn't afford it (or taking the Civil Service Exams for the same reason).

JimCooper• 18 years ago

And how are you supposed to measure performance? Many jobs are just not susceptible to doing that. It is well known in the software industry that attempts to measure programming performance result in programmers skewing their efforts in order to make the metrics look better. Teachers in the UK are measured on students' grades, so for some <sarcasm> totally unrelated reason </sarcasm>, students grades have gotten better every year for the last 20 years.

Proven ability to do your job is one thing; measuring your individual performance whilst doing it is another thing altogether.

huherto2• 18 years ago

You bring up an interesting point. Anyone has any idea of how to do it(Or how not to do it)? I've been developing for a long time and I do not have any good ideas.

kailashbadu2• 18 years ago

A good school doesn’t just give you a degree. It’s the whole experience that makes it worth going to a great school. A reputed school does a very good job at bringing smart people together. You get to network with future CEOs, innovators, and innovators. And when you spend a few years with a bunch of other smart people around you, some of it rubs off on you and you become smarter.

kailashbadu2• 18 years ago

Moreover, a great school doesn’t produce great minds out of a dumb soul. Rather the people who attend these schools are already smart to begin with. Just as birds of a feather flock together they decided to go to the same few elite schools. The successful people who are alumnus of Ivy Leagues would still have been just as much smart had they attended a nondescript school. Likewise, a not-so-smart person wouldn’t go very far even if he made it through (somehow) to a great school.

galactus• 18 years ago

hmmm.. I remember a recent article in The Economist about how social mobility in the US is decreasing, which seems to contradict the idea there is a shift towards a more merit-based society.

(btw, the same article also showed with hard data that contrary to popular belief social mobility was higher in europe than in the US, despite the idea that european countries are more "credentials based" than the US.)

keithrbennett• 18 years ago

Paul -

Very interesting article. I agree with you -- I was pursuing a degree in accounting in the 80's, and started programming in 1981 when my department bought a microcomputer with 16K RAM. I got hooked on software development and made it my career. I finished the accounting degree not because it had any value to my work, but because of the value perceived by employers in having a (any, even in a nonrelated field) degree.

I'm curious what you think about precisely targeted certifications, though. Many are not sufficiently expensive to be available only to the rich, and few require years of unpaid study to achieve. They do demonstrate an objective level of expertise. There are certainly many other factors to consider while evaluating a team member, but, all other things equal, and assuming the content is well chosen, do you think certifications have any value? (My position is that they do have some value, but only when tempered with consideration of other factors, and the realization that the lack of a certification does not necessarily mean less competence.)

- Keith Bennett http://www.bbsinc.biz

asimjalis• 18 years ago

You know this is almost like spam filtering. Maybe use Bayesian filtering - look at credentials and other factors and then figure out if a candidate is spam or not.

arjungmenon• 18 years ago

A very similar situation exists in India. There are literally thousands of cram schools all over the country that prepare students to get into engineering colleges, med. schools, e.t.c.

deltapoint• 18 years ago

This article got featured on college confidential which is a forum site for high achieving students striving to get into tops schools and worried parents. It is interesting to see their thoughts: http://talk.collegeconfidential.com/parents-forum/617548-aft...

kops• 18 years ago

I tend to agree. But I also think that people who are cunning enough to beat the system are then usually good enough to perform at a job as well provided the right kind of carrot is being shown. A very similar stinking system exists in India where a future of a kid is sort of nailed right after high school. But invariably the guys who crack the engineering entrance were cracking the civil service exam at the end of their graduation. Funny thing is that now a management course is values better than civil services, so again best of our engineers (in terms of resume) are sweeping the top MBA seats. So probably though it is some cram exam or something similar but it seems to get you some intelligent people who are capable of chasing anything. But that's true only for the top layer. Average ivy league student is mobbed big time in the industry by smart kids from unknown colleges. At least half the programmers I admire come from useless colleges.

albertcardona• 18 years ago

Now we seem to be entering a new era based on measurement. The reason the new model has advanced so rapidly is that it works so much better. It shows no sign of slowing.

I wish the measurement system was more accurate for science. Counting publications is not just mislead, but the root of a great evil: pollutes information sources with redundant or highly speculative information, i.e. papers published just to tell the measurement-obsessed bureaucrats that a given researcher still exists.

I wish we could just work quietly, sharing information informally with our peers over internet and at meetings, and only publish when ready, even if this means publishing every 10 years.

mbac• 18 years ago

The problem with the French is that they don't have a word for entrepreneur:

MLstate - currently in stealth mode - is an IT company, whose functional programming approach to SaaS and cloud computing has been recently recognized by the French Ministry of Research Innovation Award and support from leading investors.

We are research-oriented, we value technical excellence and innovation and we believe our technology has a potential to dramatically change the way web applications are being built.

MLstate opens several new permanent positions to meet this challenge:

    * Senior Developers: Outstanding PhDs with at least 3 years of research experience in functional languages and/or formal verification and the ability to manage a small technical team.
    * Developers: PhDs with strong FP skills. Applications from PhD students defending their thesis soon are also welcome.

pl0nk• 18 years ago

> the French is that they don't have a word for entrepreneur

Hmm. You might want to check the etymology of the word.

stephant2• 18 years ago

< the etymology points where you suggest :) but the fact is that in France if you can align a "good" school name in your CV you can be a moron you get the job!

shuleatt• 18 years ago

I posted a few responses on my blog http://leveragingideas.com

mmphosis• 18 years ago

bonus point! cred. your wow score. dollars indicated by an abstract number in a computer. What's the diff? I notice that universities seem to have become profit centers to scam parents wealth and create student debt. I would rather go to a free university to learn and only to learn. That I might get a piece of paper some day means as much to me as the share price for a startup.

this has not been a test

rdixit• 18 years ago

Paul says, "There's an even better way to block the transmission of power between generations: to encourage the trend toward an economy made of more, smaller units"

this very aptly describes "small-world Networks" which are ubiquitous in societal/biological/information centric complex systems.

It's the tribe reflected in the organization of smallworld networks: many small, high clustered groups working together, yet connected to any random person in any given subgroup within 6 degrees of separation or less.

How? The distance between any two separate nodes ("people") is much lower on average than you'd think, mostly because of "shortcuts" or giant hubs in the network to which two distant regions can both connect. This is a huge advantage, because the increased information throughput becomes so much greater, bringing great opportunities. (For example, when you desperately need a date for the prom, you ask the girl with the most friends on Facebook to set you up.)

with the internet's advent, the most gigantic hub in history now offers the possibility of a "perfect ad-hoc group", be it a tribe of hackers building an experimental project, a band of economic analysts parsing through financial data, or any group of like-minded people engaged in any endeavour.

What i'm saying is, exponential growth of smaller groups isboth dynamically driving AND benefiting from the spread of the Internet. So... it is inevitable.

How do we deal with this?

firebolt• 18 years ago

principle true,the spread to society is questionable. The public sector and unions have enough power to hold the walls from change. Competition there does not exist. So seniority and organizational politics still dictate rewards.

CharlieInCO• 18 years ago

A quibble in an essay I mostly agree with; the Confucian exams were on "classical literature" -- but also skill with both composition and calligraphy, and the "classical literature" was "religious" in the sense that the teachings of K'ung Tzu are religious. However, they also are the basis for the whole legal system. In our terms, it would be more like a BA in Poly Sci followed by Law School -- a credential some people expect from our political leaders.

partdavid• 18 years ago

It seems like Graham here is talking about one specific kind of credential--a university degree--and making conclusions about all kinds of credentials.

It's impractical and inadvisable to "just measure performance" for all kinds of medical practitioners, for example. And credentials can be used to determine factors other than just "performance", like trustworthiness.

brett1211• 18 years ago

The hiring process in general is outdated, if not broken. It is exactly the same (Resume to Interview) regardless of the type of job in question (Banker vs Developer vs Babysitter). Where is the customization?

As more and more work becomes digitally distributable thought-work, why aren’t we judging people based on relevant examples of their work? Why is an entry level hedgefund analyst judged by a 30 minute "tell me about yourself" interview as opposed to the performance of her personal account (and the verbalization of the rationale behind it)?

I think it is interesting that we just assume that "talking to someone" is the ultimate tool for determining intelligence, competence, and fit. Ultimately, talking to someone measures how well they can talk, not how well they perform. Are there more pertinent tools for assessment or will hiring always come down to how we "feel" about someone after a 30 minute interview?

(Good related post on interviewing by Eric Ries: http://startuplessonslearned.blogspot.com/2008/11/abcdefs-of...)

Also, a provocative essay on "elite education" that is a good foil to Paul’s point about how elite education makes people feel about themselves. From this author’s perspective, it is a disadvantage. Get past the first four paragraphs and some ridiculous ivy-towerishness and I think he makes some good points): http://www.theamericanscholar.org/su08/elite-deresiewicz.htm...

Postscript: This is a tangential point related to measurement. I just spent a scholarship year interviewing entrepreneurs and venture capitalists to understand how they evaluate or measure the progress of early stage ventures before the standard financial metrics become available. Paul, would love to hear your thoughts given your unique position. Thanks.

fab13n• 18 years ago

Reactions on a couple of secondary points:

First, there's a huge drawback in the "reward accordingly to the value you produce" paradigm: you can't punish people accordingly to the value they destroy. So if you estimate that an operation has 50% chances of winning $100M, and 50% chances of loosing $200M, your rational interest is to make that operation, even if it's not in your employer's interest, because you can't lose more than your job (this only works if your salary is much lower than $100M, but you can pick other numbers).

This effect is much stronger when individuals work for extremely wealthy companies, but I'd guess the protection from bankruptcy must have some comparable effect. It depends on your national business laws obviously.

About the footnote "[3] Progressive tax rates will tend to damp [the] effect [of money as an incentive]": it's only true if you suppose that money has linear value for individual, i.e. if going from $50K to $550K is roughly as valuable as going from $5M to $5.5M. But if you suppose that money has less importance when you have more of it, states should rather get it from where it's the least efficient as an incentive, i.e. from wealthier taxpayers.

tmcmhughes• 18 years ago

"History suggests that, all other things being equal, a society prospers in proportion to its ability to prevent parents from influencing their children's success directly."

I'm not sure I agree. Surely a lesson from the fall of Communism is that private property matters to the efficient functioning of an economy; and the value of most private property to most people is in their ability to transmit it to their heirs.

Obviously there is a need for balance here. Too much inheritance and society loses all cohesion; too little, and society loses forward motion. (I'm deliberately ignoring any moral question about whether inheritance is unjust; this is purely about the pragmatic question of what creates the most wealth for the most people.)

At a macro level, of course, we want the best person for the job. The best line in The Communist Manifesto, actually, is (this quote may not be precise) "to each according to his needs; from each according to his abilities." The hard part is knowing how to get there!

Thank you for an interesting essay on a fundamental question.

NeatManatee• 18 years ago

I wish paul would go back to writing again about lisp and computer science, hate this essays all about business...

perpetapaul• 18 years ago

Paul sees a major trend - the value and meaning of "education" is changing. For too long, it meant getting into a school, going to classes and graduating. That means less today when you can be "educated" on how to learn a new software language, develop a market-driven solution and earn a living from it.

I am one of those who 10 years ago stopped caring about hiring people based on college degrees. I cared more (and still do) about their skills, abilities and what they had created.

I am also a firm disbeliever in having to get software "certifications" - they are meaningless, as Paul proves out, because they have no indication in regards to performance.

syntostic• 18 years ago

definitely true. meritocracy is the way a free market works; instead of the alarmist notion that the fit survive and thus it's unfair for the unfit, i see a new treatment:

the good will cause the bad to conform, either by peer pressure, economic competition, or simply by social imitation.

the human being is not designed to be wiped out like now-extinct animals, nor were those animals unfit for survival. instead, the human being is pre-programmed to survive. got a sprained ankle? it self-heals. so does the body--and the mind.

the measurement system then will work out just fine. it will be only a matter of time.

Jamal in Beijing

rakesh_d• 18 years ago

You seem to be overlooking the fact that most of the times the academic credentials of a candidate tend to be directly proportional to his/her performance. In places like South Korea or India (my place), it is damn hard to find qualified people for the posts of professors even in 'Institutes of Excellence' like the IITs. There's an astronomical amount of gap between the amount of funding a normal university receives and the grants that IITs receive. It should be then very easy for a prospective employer to decide between a candidate from IIT and one from a normal university. The candidate from IIT most probably (99.99%) outperforms the other guy.

That's why admission to the IITs becomes the all-important thing not only for the students, but also to the parents whose only hope to get rich is through their wards. The offshoring / outsourcing phenomenon further catalyzes the sexiness of 'Brand IIT' as the students from IIT end up with offers from MNCs, which are far more lucrative than what the Indian Space Research Organization offers to its most senior scientist.

IITs get to chose their students from a vast pool of 500,000 students who cram day and night for more than 3 years during their high school. This further adds to their glamor. Hence it is not uncommon to find companies preferring a chemical engineering graduate from an IIT over a computer science graduate from other universities for the job of a programmer.

Thus third world citizens still live in the age where "Credentials Do Matter".

IgorG• 18 years ago

I think this is an excellent, well-observed piece. Credentials mattered more at a time when the measurement of effective results took longer to read so that university degrees and performance badges were indicators of the probability of future success. However, the modern age is an accelerated age and turn over of results based on performance is almost immediate. Companies have to be able to make much quicker, adaptive decisions than ever before; it's like everything is in a state of constant crisis management. Obviously the younger and leaner the company, the less baggage its accumulated and the more nimble it can be, but not always. Larger enterprises that adapt with more localised, distributed structures are able to operate and respond as smaller units but still maintaining the strength of size. Anything that is more based on measured results is going to be better as long as the means of measurement are also measured.

drlindalynch• 18 years ago

Paul. You certainly don't have the "Credentials" you claim are no longer needed, and if you did...how much did you pay the person who took English and Grammar courses for you? Tell them that they didn't teach you much. Not to mention the person who was seated in your place, in the courses they took for you concering ethics and honesty.

Your broad unfounded statements,based on what "Paul" thinks, sound really stupid. Certainly, you must have learned in 6th grade or so, that facts should be backed by citations - the basics of research. Citations are the proof that what you say is true or proven to some degree. In other words..who conducted the research of any sort to prove what you are telling others. If there is no proof or citation, your statements become the world according to what the author, Paus tells others, unfactual or unproven, unless of course the facts are insurmountable - grass is green, the sky is blue. So Paul, you are nothing more than full of the stuff that comes out of the rear end of a cow (obvious fact).

Challenge yourself to either proving your blanket statements through research, or do your homework and cite those who have. Professor L.

eddieleskowski• 18 years ago

Dear Mr. Graham,

Could you please give Harvard Psychology Ph.D Abraham Zaleznik, the old 3 Stooges Curly "nyuk nyuk nyuk"? Zaleznik must not be very happy publishing or perishing in his ivory tower, because on CNN's web site a few days ago he has this to say about entrepreneurs who want to start a startup:

----------------------------------------------------------- http://www.cnn.com/2009/LIVING/worklife/01/12/entrepreneur.p...

Research by Harvard Business School psychology professor emeritus Abraham Zaleznik has unveiled a darker side to the entrepreneur's psyche.

"Entrepreneurs tend to have a singular weakness that allows them to do things without checking their conscience," Zaleznik said. "Juvenile delinquents act and then try to sort things out afterward. I think entrepreneurs have this tendency."

-----------------------------------------------------------

Juvenile delinquency psychological tendencies? Oh good heavens, there is such a thing as spectrum. Entrepreneurs come in all sorts of flavors. And its not true those starting startups are immature or don't take their responsibilities seriously. It is very sad to see this commentary coming from Harvard.

Eddie

bradma• 18 years ago

I think that there seem to be two schools of thought in the USA on what defines performance and competence. If you follow the money you’ll see exactly the same thing happening in China happening here.

You've got wall street on the east coast and investment banks then you have the west coast with VC funding smaller businesses. As the size of the businesses get bigger and they are no longer created to be sold in six years, the downside of failure becomes much much higher. It's easy to assess performance in a small company and it's easy to kill projects that don't work in a small company. When you're Ford and your Firestone tires kill some folks life is a bit different, funding projects is a bit different, cash flow necessary to stay in business when disaster strikes is different, the types of employees you need to stay in business are different. What does this have to do with education and credentials? In these large companies it's much harder to measure performance and you get back to the old world view of who knows and trusts who. You're looking for a minimum level of reliability and competence since the downside of a screw up is much larger and the consequences are very different. I think these small companies are funded by people in large companies eventually buying them and those people agreeing to make the purchase I suspect went to Harvard and Stanford as did many of the VC partners who organized the funding. At the beginning and end of the project, the money passed through the ibanking system.

Silicon valley creates tons of companies which are bought and produce nothing but cash for the VC and deliver no or very little incremental profit to the company which buys it. It can no doubt be produced faster with a small company driving the project, but if you step back and look at the quality of the investment, you have an entirely different way to measure performance.

That means that the VC founders got money from east coast investors and the executive authorizing the purchase came from the exact same social circle. Performance metrics at the project level Paul Graham refers to are clearly met by any qualified professional from any school, but that employee amounts to an assembly line worker. If you measure performance in profit

I would suspect that the people who funded the startup attended top universities as those who bought it. Access to this kind of sure thing bet is limited to a group of people who are trusted by the previous generation who were doing the exact same thing.

The USA is good at moving money around into investments that often have no value to the investor. The founders and VC are out of the investment and the executives that authorized it are out of it long before anyone knows if it delivers real value. To call this performance based rewards is a pretty narrow view of performance. I think Paul Graham is brilliant, but he lives in a west coast piece of the puzzle which exits the process long before the end result of the pieces he’s created is known.

BillSeitz• 18 years ago

not about this post, but about YCombo moving to SV because it's a better environment for raising kids.

Could you be more specific about what makes SV better for kids? Personally, the whole suburb-traffic thing there makes me nuts. Is it the basic dynamism thing?

pwharton• 17 years ago

Have you overlooked the impact that the education behind the credentials might have on performance? A good grasp of the law that a Harvard law degree implies is surely relevant to a career as a lawyer. Ditto for a computer scientist. I don't think I'd want to be operated on by a surgeon without a medical degree, no matter how talented.

passerby• 17 years ago

In 2008 there were essentially three real candidates for president of the US: one had degrees from Wellesley and then Yale Law, one was a third-generation Annapolis man, the winner had been editor of the Harvard Law Review. I guess one could argue that the US counts as a large organization.

In Trollope's autobiography you will find an interesting defense of patronage as against the then examination system for the British civil service.

profitess• 17 years ago

I was awaken on march/28/09 God said there is a code ,i desire you know,i said o.k Lord,i figured it out,then asked Jesus Christ,why?He said i have a special reason,ill show,confirm soon why,on march 31,i found out there was a world wide alert on a person causing trouble,on computer,hes a hacker,must be stopped,he has linked into 10,000 or more sights,in world,there is a 20,000.00 award,i can stop him.

vivekzone• 17 years ago

VCs are the most biased individuals when it comes to judging an individual's calibre based on his/ her academic credentials . Why is it that almost all of the founders of the hugely succesful and VC backed companies like Yahoo, Google, Youtube, Cisco, Facebook are graduates or drop outs from the elite colleges? Simply because an elite VC is clouded by the belief that smartness resides only within the corridors of the elite schools.

After Credentials

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