Why Anointment Decides Who Really Rises, with Toby Stuart

0:00AI systems, I would make the argument that they will make more fair choices. So on the one hand, there's a theoretical possibility that AI could lead to a lot more equality and outcomes that made choices without factoring in things like age and race and gender. On the other hand, AI creates a second problem, which I think is at the moment just a giant problem that we're just starting to talk about, which is that it suppresses the amount of information that's available to us when we're trying to evaluate human beings.

0:36Good morning, everybody. It's Guy Kawasaki. This is the Remarkable People podcast, and we have found another remarkable person to inform you and inspire you. His name is Toby Stewart. He's a professor at UC Berkeley's Haas School of Business. And quite frankly, he's one of the world's leading experts on innovation, entrepreneurship and social networks. His latest book is called Anointed, and I read it. I loved it. He's quite critical about, shall I say, some of the decision-making process of Silicon Valley. So his work challenges the myth of self-made founders and reveals what it really takes to rise in today's innovation and digital economy.

1:26Welcome to the show, Toby. Thanks, Guy. Thrilled to be here with you. Yeah. Toby, here we go. First of all, just out of curiosity, what school did your daughter end up going? Because you mentioned her in the book. Yeah. She went to Barnard College, affiliated with Columbia in New York City. Wow. Wow. So, you know, what's three, 400 ,000? Yeah. Give or take, give or take. But that's about right. I know Haas professors make a shitload of money. So we can say shed. I'm glad we got that. I'm glad we got that out of the way. Just to give people more of a context here, the book is called Anointed, and most of it is talking about the positive effects or at least the advantages of being anointed.

2:17But you mentioned a very interesting case with your daughter, which was kind of reverse anointment, right? Like the college admissions advisor says she's got five strikes against her. She's like, she's white. She's from a prominent academic family. She went to a private school, like five things working against her. And so it wouldn't be easy to get her into school. So can you just tell us that story? Because we're going to start with the reverse of anointment. Yeah, it was a funny story in my life. I'm a career academic and I'm the kid of academics. I've been around universities all my life. And so let's just say it's a family that really values education.

2:56And my daughter, she's an only child. And she had sort of spent her life in the private, the independent schools throughout her whole childhood. I bounced around between a number of different universities. So we moved between places. Anyway, she ended up graduating from high school at a private school in Oakland. And there's this moment when, like most parents of kids this age, many of them have been through it, where you go meet the guidance counselor. and you're given sort of the state of the state with respect to what's going to happen with college. And the school my daughter went to is actually called College Brat, so a very original name.

3:30And so that meeting is kind of like if you go in and you feel like you're about to hear your kid's future. And I mean, we'll come back to why that is because the book is about why that is so, so important for one's future. But I went into this meeting and I had sort of had a sense of how well she was doing in high school, but I wasn't anticipating what he said, which is he described her as a five striker. And those were the five strikes. The five strikes were she's female. She attends high school or lives in the Bay Area, New York, Boston, Chicago, LA. I think those five areas were the five listed.

4:05She's from well-educated upper middle class family, and she went to a private school. And kind of what he said is at this moment, and so this would have been, it'd be different probably this year, but this was six, seven, eight. This would have been, I'm trying to do the math in my head, but eight, nine years ago. And at that point, college admissions were looking to create a little bit more equality. So there was something of a hesitation about what looked like overprivileged kids from affluent families, but maybe not affluent enough to name the buildings. Let's be clear. There's a range of affluence, which is still good, still works for you.

4:45And so that was going to make admissions difficult. Now, the two surprises to me at the time were one, that she was a girl. And the reason for that is because girls consistently have better grades and better test scores than boys do at this age. So if you were to use those two dimensions to make admissions, you'd end up with heavily gender skewed classes. And most every place is trying for roughly 50-50 mix. So it actually makes it harder for girls to get in. They need higher scores. And then private schools, because there was a little bit of a backlash against these elite private schools in admissions decisions.

5:21First of all, I would debate like, what's so wrong if girls were overrepresented in college? Why don't we flip it for a while and give them the advantage, but let's not go down that hole. So let's back up here. Will you just define anointment beyond the biblical sense of putting oil on somebody's head. What do you mean by anointment? Yeah. So the book is a quite broad treatment of social status and status dynamics across economic markets, workplaces, social contacts, Silicon Valley, art. So it's a quite broad book. And anointment refers to the act of transferring status. And, you know, it is biblical.

6:02And I couldn't tell you exactly why the title popped into my head one day, but it did on a COVID walk on a beach. In Southern California, I thought of the title, and actually that's what cinched it. That's when I decided I'm going to do the book is when I thought of the title. And probably harkens back to my Catholic school upbringing. But anointment is the act of transferring status from one party to another party. And it happens in small ways and large ways all of the time. So in our world, I want to take you to Silicon Valley, the ex-Apple guy, the ex-VC, the ex, you know, the longtime Silicon Valley marketer and veteran of nearly everything.

6:41Anointment is when Sequoia Capital decides to invest in a company or when Y Combinator decides to admit founders, right? These are acts of anointment or when UC Berkeley or Stanford graduates a new class and prints a whole bunch status through a transfer from party A to B. So the party might be YC and the recipient might be a budding founder. And there you go. And it happens every day, everywhere, every place. I have to admit, Toby, that as I was reading your book, I was simultaneously disgusted with how anointment works, but I was also convicted because I work for Apple. I went to Stanford. I started a company that was funded by Sequoia.

7:35I know Jane Goodall. I mean, I had a lot of anointment going on in my life. And so I was conflicted. And the first thing I thought of, to pardon my French, do you think anybody would give a shit about RFK Jr. if his last name wasn't Kennedy. Yeah. I mean, that's so right. There's been politics I've been trying to stay away from, but the answer is probably not a lot of shits. And we've been living in dynastic worlds. Look at the Trump family and what the kids are up to and look at the Bushes and look at the Clintons. We live in a family in a dynastic world. Now, there's a quote in the book about this, which I just love.

8:19I found it in the course of writing the book, and it's by Thomas Paine, or at least that's the attribution. And the quote goes, if Homer's kid wrote a novel, I'm not really sure I'd want to read it. I thought that's so good. On the other hand, there must be a reason why anointment and the transfer of social status works. What's the upside of it? That's a super nuanced question. Eventually, will come to the fact that a world without social status is a much more complicated world. That is, we rely on status cues all of the time to curate the world for us and to get us from options to decisions. Always, all day long, always, we rely on social status.

9:04We don't even think about it. And that's why I think folks should read the book and why it's important is because there is this kind of force that operates in the background. And most of us, we're not cognizant of it, but it operates on us. It does in myriad ways all the time. But then behind that is sort of set of social mechanisms. So let's take you're a Stanford graduate and you're an alumni of Apple and you're a veteran Sequoia founder. And the sort of core economic logic of it is that Stanford doesn't admit just anybody and Sequoia doesn't just choose anybody to finance and Apple doesn't just hire anyone.

9:43So these are in our world, yours and mine, and in the world, these are three very prestigious institutions. And when they make a choice to hire, to admit, to finance, we interpret that as evidence of quality, right? They're super smart. They're super successful. They chose you because you're amazing. And the thing that misses is there's a set of reasons why they chose you and not somebody else that maybe aren't 100 % merit-based. And the second is, in academia, we call this selection versus treatment. So these very distinguished institutions not only choose you, but they treat you. And by treatment, we mean they give you a huge boost in status, and then that helps you with everything that you do subsequently, right?

10:34So then it looks like they made wise choices, right? Apple may be ashamed of a few things over its career, but hiring you isn't one of them. I don't know about that. I guess I'm living proof of the Matthew principle. And like, I should have been more successful now that you mentioned it that way. Just to set the record straight, Toby, the way I got into Apple is nepotism. My college roommate hired me. The way I got Sequoia investment is that back then in the dot-com days, Sequoia funded anybody if you had a room temperature IQ and a PowerPoint pitch. And then Stanford, I am so old, Toby, that as a Japanese American, when I applied to Stanford, I was considered an oppressed minority.

11:24So there's nothing about anointment. There's mostly dumb shit luck in my anointments just to set the record straight. I mean, I love the modesty, but I think also Stanford, when you went, was mostly Stanford. Sequoia, when they financed your company, wasn't Sequoia. And Apple maybe wasn't quite Apple yet, right? I mean, so these institutions themselves have gained a great deal of prestige over the years. But what you said as an intro into that, actually, and it was funny, so thank you, but I also know it's quite serious, which is nepotism, social networks that are elite, contacts and contacts that get you into places that other people don't have.

12:11These are all the ways in which opportunities are distributed. Yeah. Let me just say that if Apple did not recover and become the$2 trillion most successful company in the world, I would not exactly hold myself out as the former chief evangelist of Apple, right? And you clearly didn't hold your stock because we're up to$3 trillion now. I don't want to get into it, but I don't have any Apple stock. I think I have four shares. but anyway so as i was reading your book about this anointment and and and i kept coming back to like i find it very difficult to find an example where an offspring is anointed and really lives up to the name and the potential you wouldn't say that paris hilton has outdone conrad hilton you I wouldn't say that Eric Trump is somebody you say that really took advantage and did something.

13:09Hunter Biden. I don't know if I'm pushing back on your concept, but I find it difficult to convince myself that anointment has really guaranteed success for people. If you take those three people, Hunter is a complicated one because for all the sort of legal accusations, the criminal accusations in that case. But so take Paris Hilton. She may not have outdone Conrad Hilton. She had a career in which she probably earned hundreds of millions of dollars and became a global celebrity. And so whether you outdo your parent who's like dynastic is one thing. The anointment dynamic is like the way that I think about it.

13:52And I'm always thinking about these things with my academics hat on it. But the way that I think about it is, suppose you could take Paris Hilton and assign her at birth to some random family. And then you had two Paris Hiltons. One was Conrad's daughter and the other was the same human being, identical, everything the same, but just assigned to like an average lower income family in America. Like, is the second Paris Hilton going to make hundreds of millions of dollars and become a global celebrity? Right. And so that's the thought experiment. The thought experiment isn't, do you outdo your parents?

14:28It's that, did you succeed far beyond you would have had you not have been anointed with the Hilton name? Wow. When you put it that way, you're absolutely right. Let me take you back to our world. Let's take Y Combinator, because that's always a fun one to think about. Each time Y Combinator admits a class, these days it's only AI. But in the past, It was blockchain companies, and it was SaaS companies, and it was consumer companies, and it was health tech companies, and it was whatever companies. They were looking across the spectrum. Okay, so they're going to admit a class, and let's say there are 100 startups in a class.

15:07It doesn't matter what the number is, but there's 100 seats, right? And so if you think about the selection process, what you're doing is you're comparing apples to oranges to begin with because you're comparing some fintech founder to some PhD in biochemistry who's got a molecular target that they're working on. So already you're in a very apples to oranges comparison when you're looking at startups. And so imagine you could run this experiment where you have the 100 company, you take the 100 companies that Y Combinator admitted, and you find the one that was the last one. Okay, so it was the last slot they allocated.

15:44And then you find the founder who started the company that will call it the 101st company, like it was the closest to make the cut that didn't actually make it. Now, what I would argue is that there's no quality difference between those two companies. Like on a different day, the 101st company would have been admitted or there was some meeting dynamic, but it's random. It's effectively random. Like these are very hard decisions to make. Like I don't admire the YC admissions committee. But if you then compare the fate, the future of the 101st founder to the 100th founder that was admitted, I think you're going to see super different outcomes.

16:24But you had the same quality to begin with. And that's a status dynamic that then unfolds because the 100th company was anointed and the 101st company was not. And so are you saying that this is inherently an unfair or at least random process and we should fix it? Or are you just describing the phenomena and say, this is how it is, boys and girls, you should work at being anointed, even if it doesn't necessarily reflect your merit? This is how it is, boys and girls. The book's a lot about how the world works and not strongly a moral judgment. I'm much more concerned that people kind of understand how things happen.

17:11And if you want to then reverse engineer about how to acquire more status, you can certainly do that based on the information that's in the book. But it's really about this is how the world functions, and we should all understand that. And I think it's part of the cultural heritage of the United States. And look, if you take 2025 America and you compare it to almost any place at any time besides 2023 America, I think that you find that this is like a more merit-based society than we've seen nearly all places, all times, all of history. But that doesn't make it merit-based. So we're doing better than I think we've seen historically, but there's lots of things that distort the connection between merit and achievement or outcomes.

18:01And social status is one of the biggest things that does that. Wait, let me make sure I understood that. You're saying that even today, where someone ran a wrestling entertainment company is now Secretary of Education. You're saying even today, 2025, because your last name is Kennedy, you're running health. You're saying even today, we are more merit-based than most societies ever. Yes, than most societies in the history of the world. Remember, I mean, the history of the world is casted systems and monarchies and feudalist societies. And by history of the world, I mean the broad spectrum of the history of the world.

18:46And there's still a large part of the sort of inhabitants of the world today live in somewhat oppressive societies. In the broad sweep of history, 2025 America is certainly there's more opportunity to get ahead through merit and hard work than there is historically. But that isn't all or, in my view, really most of the story. Why do I not feel any better? I don't want to bring you down.

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20:02Today, Raz's success is proof that with passion and the right support, it's possible to make your dreams a reality. Learn more at CapitalOne.com slash Business Cards. You're listening to Remarkable People with Guy Kawasaki. You know, theoretically, do you have ways that one can recognize and discern genuine expertise from the assumption of expertise? Yeah, that's a really interesting and really challenging question. So generally, I don't know that we work that hard to do that, right? I mean, because we're ready to conflate achievement and merit, rather than going back and trying to explain how achievement happened.

20:49So I think we all could do better with that than we do. And we all could think more about status dynamics and how people get to where they are. And we could all also think about some reflexive responses that we have to status cues. And I think if collectively, if we did that, we would have a less status-based system. But the benefit of status that we should talk about is that it really does help you come to evaluations. It makes it much easier to make choices about things. And it, in fact, really quite dramatically even curates the choices in front of you in most contexts. And that's super helpful because we live in a world that's got just an overabundance of options for nearly everything.

21:37And we need to make a constant set of choices. But basically, Toby, are you not refuting the concept of the wisdom of the crowd? Are you saying it's the stupidity of the crowd? So the crowd has wisdom about certain things. So if you have what I think of as the classic wisdom of the crowd problem, which is if you have an urn and it's filled with red and blue balls and you want to know how many red and blue balls are in the urn, a good way to get there is to ask 10 ,000 people and take the mean or the expected value of those guesses. And the evidence shows you're probably going to get pretty close to how many actual earns.

22:20So people be too high, people be too low. Some people get it right on. But the crowd has wisdom that the individual does not. And prediction markets work the same way. So there are many examples in which crowds have wisdom. I'm just not sure that crowds are wise with respect to status processes. So are you saying that if you see a big line of people in front of a restaurant, that is a reasonable way to estimate the quality of the restaurant because of the wisdom of the palate of the crowd? That's so funny because this is one of the classic quality signals about restaurants. We're all told, like you're in a city and you've never been in that city and you're walking down the street and you want to know where to eat.

23:06And if there are four restaurants on the block and one of them is full and two of them are half filled and one of them's empty. And from that information, we are to deduce the full restaurant is probably right. And I actually am totally on board with that one. I think that's probably generally true, like particularly if you're in a place where there's lots of locals. But the line out the door is a different thing, right? The line out the door is typically manufactured. So I love lines out the doors. There's this ice cream shop. I forget what it's called, in South Berkeley. There's always 50 people waiting for ice cream.

23:43And of course, I wait in the line because I had a kid at the time and she saw the line and then wanted to wait in the line. So I wait in the line and I get there and I realize when I get into the store that the line's intentional. Either it's like the laziest staff ever or they've been told to take their time to make like the perfect round scoop or whatever because the line out the door makes it seem like it's the it place. And that gets to, I think, one of the central mechanisms about anointment, which is that it's reflective. Is the hot restaurant hot because it's amazing, or is the hot restaurant hot because the fashionable, the cool, the high status, the people you admire go to that restaurant, and then you want to go because they want to go, and then more people want to go because the restaurant's hot.

24:31So you end up just in a circle, right? This reflective circle where the restaurant's hot because the in crowd's there and the in crowd goes because the restaurant's hot, but the restaurant's hot because the in crowd goes, but the in crowd goes because the restaurant's hot. And that tends to be less a quality signal and more a status signal. And the reason people go to those places, all of us can imagine the place I just described, like wherever you live, whatever you do, we all can imagine that place. people don't tend to go to these because they think it's the most amazing culinary experience right they go precisely because it's the hot place i'm trying to wrap my mind around this like so marilyn monroe is sitting in the front row of my performance for two weeks and because marilyn monroe is there because she's so famous i must be a good singer or i don't know lebron James endorses a car or I don't think Matthew McConaughey really drives the Lincoln Navigator.

25:33I could understand if Matthew McConaughey was recommending something he really knew a lot about or LeBron James is recommending a basketball shoe or something. But why do people think that Marilyn Monroe is now my music expert? What transference does that occur? That's such a good question. And I'm like looking at you and I almost want to turn that one around because you're the marketer and I'm not. So you know way more about whatever decision the Ford Motor Company made to hire Matthew McConaughey to represent the Lincoln brand. Like that was the marketing department who made that decision. But let's take those apart.

26:12The Marilyn Monroe stories in the book, I have always loved that one. So I think a lot of cultural tastes are also status processes. Most of us don't know the difference. If we do blind tests and bottles of wine, we're not going to do well in terms of identifying which one's expensive, which one's high quality, according to the experts. We're poor at making judgments in cultural markets. And that's probably to a lesser degree true in music. We understand what we like and what our own preferences are. But the Ella Fitzgerald story, and I like it because she's arguably the greatest female vocalist ever in my mind, but I'm a jazz, I love jazz.

26:50I think she has one of the greatest voices I've ever heard. But to build her career, Marilyn Monroe turned out to be a huge fan of hers when she was young. And she got a sort of breakthrough gig at an LA nightclub because Marilyn Monroe agreed, who was already a mega star, Marilyn Monroe agreed to go every night Ella played and sit in the front row. And the club owner was like, that's a deal I'll take. And then Ella got a couple weeks of performances at this club. And that is one of many things in addition to an amazing voice that led to the stardom that she eventually had. But what you're getting at is it's just central in the marketing world, right?

27:32Which is think about the products that celebrities and athletes endorse. And the big spenders are Adidas and Nike and Babelot and Titleist, right? They're the brands that are sports relevant, but those athletes or celebrities then become spokespersons for Lincolns and for Mercedes and for Rolexes and for all the brands that you can think of. And ask yourself, why would you care? Do you want to wear a Rolex because Roger Federer wears a Rolex? Obviously, it was expensive for Rolex to hire Roger Federer, and they paid a lot of money for that. And they did it with a whole bunch of math on, and I'm looking at you.

28:12When When you go pitch like the Roger Federer endorsement at a Macintosh and you show up in jobs office, you damn well better have ROI math to show him that's the best stuff and investment that he's looked at in a long time. And this happens because the status actually successfully transfers, right? It's somebody we hold in high regard. And when we associate them with a product, not all of us, maybe not you, maybe not me, but many of us accept that as an endorsement of the product. And it elevates the brand and our willingness to pay in our minds. Now, I think it's important to say that there are breaks on this process, right?