
Ask HN: Why not invest in random companies and hire random employees? - baron816
Planet Money aired a story yesterday about how Nigeria essentially handed out free money to random businesses: http:&#x2F;&#x2F;www.npr.org&#x2F;sections&#x2F;money&#x2F;2016&#x2F;05&#x2F;20&#x2F;478883658&#x2F;episode-702-nigeria-you-win<p>It&#x27;s still too early to determine if the program will be successful in the long term, but early results are that it&#x27;s been a lot more effective a creating jobs than any other traditional jobs program.<p>This got me thinking: not only should someone (YC maybe?) try this with startups in the US, but companies should also do something similar with employees.<p>Using a random sample would allow companies to determine if their hiring practices are really effective at all or just a waste of time. It would also eliminate any biases from the hiring manager.<p>We know that stock picking isn&#x27;t any more effictive than random chance (that&#x27;s the theory behind index funds). Maybe the same is true for investing in startups and hiring employees.
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green_lunch
99% of the new companies I see on HN and elsewhere have either no business
plan or a company that will most likely fail. Randomly investing in these
companies without any actual effort to mitigate risk, will result in throwing
most of your money away.

For employees, it's the same thing. It's all about risk and determining if the
employee can do the job and be a good fit for the company.

"We know that stock picking isn't any more effictive than random chance
(that's the theory behind index funds)"

If this were the case, why aren't index funds comprised of startups and penny
stocks? Index funds are usually comprised of stable companies that have an
excellent track record. This means it's not random.

"Maybe the same is true for investing in startups and hiring employees."

It's not the same for stocks and it's not the same for startups or employees.
You need a way to filter.

Did you read the article?

This is at the bottom:

"They'd hold a massive nationwide contest. They'd give out piles of cash like
nobody else had before. And Lariat was in."

It appears they have a contest, which means it isn't random. It's a process to
mitigate risk.

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drogo
You say:

"We know that stock picking isn't any more effictive than random chance
(that's the theory behind index funds)" If this were the case, why aren't
index funds comprised of startups and penny stocks? Index funds are usually
comprised of stable companies that have an excellent track record. This means
it's not random.

I think you are getting the idea wrong. The point is that in a liquid and
efficient market like the stock market the price will reflect all available
information on the company and you should not expect anything more than random
returns. In the case of startup there is no price, and in most cases the price
is likely to be zero.

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Zelmor
Any government doing this are not wsdting their own money, but the money of
their taxpayers. Or in Nigeria's case, other countries' aid money. It is a
desperate attempt, but I guess they are out of ideas. Also, this way a lot of
government officials, their wives, friends, family and their dog can apply for
business aid. Dream of anyone out for themselves, really. Corruption at its
best I say.

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baron816
The program was designed to avoid corruption. If they had a committee choose,
they would have chosen their cronies. By setting up a lottery, they money goes
to people without special connections.

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Zelmor
Because noone has ever rigged a lottery, right?

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sharemywin
I'm working on a platform where people can contribute to projects part time
and build equity. Not quite the same thing but I think it's a way for more
people to get out from under the capital trap. And there won't be a lot of
random hiring requirements.

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kiloreux
well I was waiting for that discussion for too long, our country (Algeria),
started a similar program that gives til 100k in USD for young people under 30
to start new business, and they handed so much money without real evaluation
of business plans on the long term, while really few succeeded, some people
used the money to buy nice cars and have luxury life, it was such a waste of
public money, the economy still sucks most of it depends on oil industry and
nothing have changed now, except that people are in debt for the government
now, the thing is that government started this after the arab spring in other
countries, so it could calm down angry people.

