The shortcomings of this noxious but common "prove you're a genius by your ROI" attitude is exactly why Y Combinator has been as successful as it has been.

There is no mystery here. PG, JL, TLB and RTM obviously thought highly of many people when entering YC, even more highly when they got to see them up close, and even more so as they worked closely with them. They see their value. And that's why Sam Altman is the CEO of YC.

Believe it or not, the YC partners and leadership are actually better judges of ability than the market. It could never work otherwise.