Some posts are written to give a specific knowledge. For example, how to optimize your website for SEO.
Other posts change your way of thinking, force you to question everything you know. Such posts and ideas inspire to find new, better ways of doing something and in the end, they help you to grow.
For me, one of the most eye-opening articles was “Employee #1: Coinbase” written by Craig Cannon. It was an interview with Olaf Carlson-Wee, Coinbase’s first employee, who described the company’s one-of-a-kind recruitment process.
Coinbase's approach to hiring new people can be an inspiration not only for those who are responsible for recruitment but also for those who care about corporate team building.
The most important questions you should ask yourself
Before you start your recruitment, before you even write your job offer, you need to know who’s the person you are looking for.
Let’s say that you can choose:
A. An experienced person that will handle their tasks without complaining,
A less experienced person that will be enthusiastic about the product and the company.
Which one would it be?
To be honest, I’m quite sure that most of you would say “I’d choose B.”
Having an enthusiastic and motivated person as an employee sounds like a great idea, right? In theory, of course. When it comes to recruitment, most HR specialists and managers choose experienced employees, because they want a quick money return.
The cost of hiring a new employee can be as high as 50%-60% of an employee’s annual salary with total costs associated with turnover ranging from 90% to 200% of annual salary. For example, if you want to hire an HR manager, you have to reckon with an estimated turnover cost of $133,000!
Now, would you be so keen to hire ‘B,’ or maybe you’d think now that ‘A’ is a better choice?
Don’t get me wrong; there are no good or bad answers here. An expert ‘A’ will do their job right from the beginning, an experienced, passionate person ‘B’ will have to be trained and skilled before they reach ‘A’s’ level.
However, a passionate and motivated person ‘B’ will, in the end, outperform ‘A,’ because this is how things work. It’s up to you to consider all pros and cons.
Before you decide, read about Coinbase’s recruitment, as it might affect your choice.
Coinbase recruitment process
I wrote my undergraduate thesis about Bitcoin and the larger implications of open source finance in 2011. I was Coinbase’s 30th user.
When Olaf Carlson-Wee sent his email (“I love bitcoin. Here’s my thesis. I’ll do any job.”), Coinbase didn’t even start to think about hiring people. However, just a couple of minutes after Olaf sent his email, Fred (one of the co-founders) replied: “hey, can you hop on Skype?”
Olaf’s recruitment process has started.
Their first conversation took 20 minutes. After the chat, Olaf got an email with information that Fred would like to talk with him in-person on the next day. He was also asked to prepare and finish two presentations, 15 minutes each.
The first had to explain something complicated Olaf knew very well and the second should outline his vision for Coinbase.
They met on the next day, and Olaf presented his ideas. The first one was on the “pharmacological induction of lucid dreams.”
It is complicated, but it’s a mechanism to induce lucidity in your dreams. You can control your dream by waking up in the middle of the night and taking an over-the-counter supplement called galantamine, which increases levels of the neurotransmitter acetylcholine in the synapse.
The second presentation was on Coinbase and Olaf’s high-level strategy for the company.
It should be enough to hire someone or not, right? Not for Coinbase!
After presentations, Olaf talked with Fred about 45 minutes and then, Fred gave him a hard-core mathematical problem to solve and said: “Okay, why don’t you figure that out while I go talk to Brian?”
Here's the problem:
There are 100 closed lockers. A kid goes by and opens every single locker. A second kid goes by and closes every second locker. Third kid comes by, closes every third locker. If it’s open, he closes it. If it closed, he opens it. And now 100 kids go by. What is the state of the lockers after 100 kids go by?
As Olaf describes it, at first, he found this problem unsolvable. But suddenly, he had a flash: the perfect squares are open! It took him three minutes to solve this puzzle.
OK, now Olaf should be hired, right?
For the next hour, he was “examined” by Brian, the second of the co-founders, who asked him a lot of intense questions about his life, mindset, and values.
Four days later, he got a call from Coinbase.
He had to be hired, right? Wrong again! He was asked to start a two-week paid trial. Luckily, it was his final test.
After this period, finally, he got a job offer.
He became Coinbase’s first customer support agent. A couple of years later he hired a Director of Support and became the Head of Risk.
Corporate team building
When Coinbase started to grow, they started to have problems with providing customer support. At the peak, the average time to reply was five days! They were definitely in need to hire new people, so they started a recruitment process.
However, even though they (or, let’s say, their customers) needed new support agents desperately, they didn’t want to hire someone who would not fit their company’s culture. In the end, they rejected all the candidates.
At Coinbase one thing that gets said a lot is, “On a candidate, if you’re not a ‘hell yes’, you’re a ‘no’.” If you’re like, “I like them. I think they’re smart. I think they’re great.” That’s a “no.”
To find people who would eventually fit, Olaf posted on Reddit an application form with Bitcoin-style “brainteasery” questions and wrote: “If you get a perfect score, you get an interview for remote customer support.”
They received 250 applications! Four months later their customer support team consisted of 43 people. They didn’t have to go through such a brutal recruitment process like Olaf, but they also had to show how much they know about Bitcoin and they had to share the company’s way of thinking.
So much of it is about the personality and drive. Even if you’re technically brilliant, there are these dark times. And dark like bad things are happening. There’s always gonna be bad events.\nYou have to ask, are they gonna focus in and just move forward, or are they gonna give up? And it doesn’t matter if they’re technically competent if they’re in the latter category. They could be the best person in the world at this but if at the end of the day they don’t have the drive and spirit to make this happen, it doesn’t matter.
Here are the most important traits that were the most important for Coinbase when hiring new people.
We’d sort of filter for smart people that were passionate about Bitcoin. It’s my opinion that if you’re smart you can learn a new skill and all the details.
One could ask how is it possible that Olaf spoke a lot about the superiority of right mindset over experience and still their recruitment process was so complicated.
But in this particular case, knowledge is not correlated with experience; it’s connected with passion. They wanted to hire people who loved Bitcoin - and when you love something, you want to know more and more about it.
For them, knowledge on the subject was a sign that this particular person is really interested in cryptocurrencies, but also a sign that they will be able to handle the job: integrations, API support or anti-fraud investigations.
We tended to hire people who said, “I love this company. I don’t quite have the experience.” Versus people that said, “I have the experience, but I’m looking at four other places and maybe I’ll pick Coinbase.” My belief is that the inexperienced, interested person will outperform the experienced, uninterested person over time.
People who bring passion to their jobs are well motivated and used to achieve higher levels of performance. They want to learn, they want to improve, they bring great ideas, and build the team spirit.
I’d say meet them and make sure 100% that you like them, that you could work for them, and that you will run the whole marathon with them. Running a company and scaling a startup is so much stress, so much work. And they’re gonna be sitting next to you the whole time.
People who love the same things, value the same things and are driven by the same things, tend to get along better. At work, they have fewer communication problems, they motivate each other and together achieve more.
It all sounds great in terms of business, but here’s another thing. It is said that we spend at work 35% of our waking hours. Would you rather spend this time with someone like-minded, someone who you like to work with, or with an expert in their field who you just can’t stand?
The answer is simple.
Rethink your hiring strategy
In this post, I’m not trying to convince you to hire people based on their personalities only. I’m just trying to stress out that sometimes it’s much more beneficial for the company to hire an inexperienced person with right mindset than a superstar who will leave as soon as they find a completely new company.
So, if you’re interested in a quick recruitment cost return or you can’t afford training another, you should definitely hire an experienced person that will bring value to your company.
But if you think about corporate team building, think again about hiring people that you’d like to meet after work and talk about work. In the long term, it will pay off.