Does a lack of diversity help a new company?

(written by lawrence krubner, however indented passages are often quotes). You can contact lawrence at: lawrence@krubner.com

What’s needed in a new, small company is different than what is needed in a big company. And I’ve read that managers often have success, early in their careers, by acting like dictators and giving a lot of orders, but that tactic only works while the manager can see the people they are managing — if they want to rise to a higher level, where they manage many thousands of people whom they will never meet, they need to change gears and invite criticism and dissent, to be sure they get all the information they can from the ranks down below.

Diversity seems to help large companies, over the long term, adapt to changing circumstances. But does it help small companies. I found this interesting:

Striving for optimality early on—debating pros and cons of various design decisions in intricate detail—would have doomed PayPal. When systems problems finally caught up to them, their communication was so good that they were able to fix them reasonably quickly. They kept hiring people from Illinois and Stanford. They focused on their network. And things worked out. But only because of a lack of diversity.

PayPal once rejected a candidate who aced all the engineering tests because for fun, the guy said that he liked to play hoops. That single sentence lost him the job. No PayPal people would ever have used the world “hoops.” Probably no one even knew how to play “hoops.” Basketball would be bad enough. But “hoops?” That guy clearly wouldn’t have fit in. He’d have had to explain to the team why he was going to go play hoops on a Thursday night. And no one would have understood him.

PayPal also had a hard time hiring women. An outsider might think that the PayPal guys bought into the stereotype that women don’t do CS. But that’s not true at all. The truth is that PayPal had trouble hiring women because PayPal was just a bunch of nerds! They never talked to women. So how were they supposed to interact with and hire them?

One good hiring maxim is: whenever there’s any doubt, there’s no doubt. It’s a good heuristic. More often than not, any doubt precluded a hire. But once this very impressive woman came to interview. There were some doubts, since she seemed reluctant to solve a coding problem. But her talk and demeanor—she insisted on being interviewed over a ping-pong game, for instance—indicated that she’d fit into the ubernerd, ubercoder culture. She turned out to be reasonably good at ping-pong. Doubts were suppressed. That was a mistake. She turned out to not know how to code. She was a competent manager but a cultural outsider. PayPal was a place where the younger engineers could and would sometimes wrestle with each other on the floor to solve disputes! If you didn’t get the odd mix of nerdiness + alpha maleness, you just stuck out.

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