Most new grad students drift for a while until they find their internal ass-kicker. The job of the "manager" is to help them find the thing that lets them excel, then get out of the way.
Most smart people carries an awful lot of weight in that sentence. And respect can be traded off against liking. Valve is an existence proof that this is a feasible mode of organisation but I would be surprised if it worked with a workforce that was not above average in intelligence, conscientiousness or both.