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.