What Elon recognized is you can't be incremental. You have to actually make real change.
You were the first person to work at A16Z and you decided to go into government and be constantly attacked. Why did you do that?
My wife asked me that question every day. Her actual line to me was, "Why are you effing up our life?" We have a fundamental systems problem in the federal government. The incentives are hire more people for every problem. Don't actually hold people accountable.
You presided over the biggest federal workforce reduction in modern history on a net basis, a little bit shy of 300,000. The federal government is the smallest it's ever been actually since 1960. Now when we hire technical people into the government, we actually give them a test. You guys are building the US tech force. If you want to work on the most complex, the most challenging, the most high scale problems, this is a place to do it, right?
My friend Scott Kupor is running the Office of Personnel Management for the Federal Government, OPM. That may sound boring to you, but I'm having him on for a second time here because I think this is one of the most important areas of our federal government. He's in charge of all two million personnel. How we hire them, how we measure them, how we can fire people. 50 years ago, we made it almost impossible to fire people in the government. We got rid of the test for hiring them. And the quality of work has gone way down. It's a mess. Scott is working with President Trump and the administration to put back in merit, to change the rules, to make it so you can fire people for being inept, to make it so you can reward people for being successful. He came to UATX, our new university, and the whole group is really excited to hear from him. I think you will be, too. It's wonderful to see everyone here. We're off to a very strong third year with our third class at UATX and a lot of our students are here in the community. So, thanks for joining us. Scott, it's an honor to have you here.
Thank you for having me. Great to be here.
Scott is working in one of my very favorite areas of government we're going to get into and talk about. This is a very important area of how you make sure that people are able to be let go if they're incompetent and competent if they're hired. It turns out it's good to be able to have not totally incompetent government. Even though I'm suspicious of it in general, but it's even worse when it's stupid. Scott, you're
going to get me in trouble today.
I know. I'm definitely going to try to get him in trouble this.
Oh yeah, this is definitely going to be an episode in my podcast. So, no, it's okay.
So Scott, you were I think the first person to work at A16Z. So you helped start what's one of the largest technology firms in the world. I presume you made a lot of money from that and don't have to keep working. And so you decided to go into government in a very contentious area and be constantly attacked. And so why did you do that?
That's great. So first of all, Joe, thank you really for setting us up tonight and I did get a chance to spend a couple hours with the folks here today and incredibly impressive set of students and faculty and everything. So thank you for that opportunity. It was great and thanks for those of you who are here. Yeah. So that's a really good question. My wife asks me that question every day. Why the hell would you do something? Actually, her actual line to me was, "Why are you effing up our life?" Basically, was what she said to me when I decided to do this. Look, in all seriousness, you know, look like you, I've been incredibly blessed in my professional life and just lucky to be around really smart people and making good decisions with stuff. And I had always had a bug to do public policy stuff. In fact, actually, I was a public policy major at Stanford. And in fact, actually, the current chairman of the Federal Reserve, Kevin Warsh, and I were public policy mates back at Stanford way back when. And so it always kind of was on my bucket list of things to do and just kind of life got in the way. And when the opportunity came up, when as a firm we got more involved in technology obviously and regulatory technology whether that was crypto or AI or other stuff. Obviously we made a decision to get more involved politically and you know you can read all about it in the newspaper. It's all out there.
We're grateful you guys did. I was feeling lonely in DC for a while.
I know. I was going to say right. It took us a little bit longer, Joe, than you to get there. But of course, in fairness, we were living in Silicon Valley. You were in Texas, so we didn't have any air cover, right? So, it's pretty hard at Silicon Valley to do these things. And look, the opportunity just came up. I mentioned to Mark one day, I'm like, "Hey, if Trump wins and it works out and it's okay to take a leave from the firm, I'd love to do it." And I kind of forgot about that email. And then he came back to me in September of '24 and he's like, "Hey, you got to meet this guy Howard Lutnick, who, you know, is now obviously the commerce secretary here, however, is running the transition team." And you know, one thing led to another and I found myself sitting in Mar-a-Lago in December of 2024 talking to the president and it just seemed like the right thing to do. You know, look from a personal perspective, you know, I believe in what you and I have talked about which is look I believe in a government that actually can work and on behalf of the American people I believe that we should not bankrupt our grandchildren and children with the work we're doing. I think we can have an accountable government that actually does deliver if we fix some of the things we've talked about. So that's really what I'm trying to do.
So tell us what's been your most surprising experience so far in DC.
You know look, I would say a couple things. One is look a surprising on the positive side is look we're responsible for 2 million civilian employees. So look like any large organization there are yes there are definitely people who are not doing what they're supposed to be doing and we should fix that. But that's not surprising when you've got 2 million people. On the other side, I would say like there's a lot of people who actually are really dedicated to what they're doing and actually really believe, you know, in the public service work they're doing. So that's been a positive surprise. The biggest, it's not a surprise, but I would say the biggest observation is we have a fundamental systems problem in the federal government. And you know, you and I have talked about this, which is look, organizations to me are pretty simple. They're just collections of people that are aligned around a common objective, right? That's all an organization is. It doesn't matter if it's the government, if it's a private sector, if it's a nonprofit or an academic institution. And you know whether we like it or not, people respond to incentives. And we just have a systems problem in the federal government which is the incentives are all wrong. Right, the incentives are like hire more people for every problem, like don't actually hold people accountable. Don't differentiate performance in terms of you know kind of how what people contribute to it. Never take risk because god forbid you know you should get a GAO report or inspector general report or you should get hauled in front of Congress. And so a lot of what we're trying to do is like address the root of the problem, which I think is if you can solve the systems problem and solve the incentives problem, then you have a chance to actually get people to do the things you want to do. And so, you know, we can talk more about it. That's a lot of kind of what we're trying to do.
And so, you know, you presided over the biggest federal workforce reduction in modern history, right? I think it's 378,000 out, 127,000 in approximately since I checked.
So how did you successfully reduce the size of government? Did anything break? Like what have you learned from that experience?
Yeah. Okay. Yeah. So it's a great question. So roughly just if you have a sense there were about 2.3 million people when the Biden administration left and Trump came in. We're today roughly around 2 million. So yeah on a net basis a little bit shy of 300,000. To give you a perspective that is the largest reduction literally in peace time since 1930. And it also means that the federal government is the smallest it's ever been actually since 1960. So it's significant. What do we do? Look, an enormous amount of credit goes to, you know, obviously your friend and longtime partner, Elon, and the DOGE guys, which is, you know, for all of the, you know, kind of, I would say, feedback that Elon took, for lack of a better word. Look, what Elon recognized is, I just, I mean, I say it bluntly, which is, look, you can't be incremental when you're trying to turn like a, you know, a 7 trillion, you know, oil tanker basically, right? You have to actually make real change and you know like what Elon did was like look like we need to actually like go in there and make change and so he did a great job. We had to invent something that they invented called the deferred resignation program called DRP, you and I have talked about this, which is it's extremely difficult to actually get rid of people in the government so we literally had to invent a program which every other of course company in the world does which is called severance basically just like get people to leave for severance. And I still to this day get you know kind of backhanded compliments from the media about how we wasted money by paying severance to people. And I was like, okay, like if you can't figure out the math that we actually reduced by close to 300,000 people like permanently that expense and we had to pay some severance, I don't know how to help you in that process. But you know, look, these guys did a great job. And then look, what we're trying to do, Joe, is as you know, is look, now we got to institutionalize it, right? So like we made a bunch of changes. Now we actually have to figure out like how do you make efficiency a first-class citizen? How do you make stewardship of taxpayer dollars important? And again, to me, that is now like an incentives problem, and we just have to actually orient people around those incentives.
Yeah, there's so many things I want to ask you about this. I know a lot of it's too sensitive, so just push back on me.
You know, so one thing, we've had this conversation. I'm obsessed with the fact that we used to actually have merit-based tests for the federal government, right? So at the very high level, after the Civil War the government grew a lot and all of a sudden everyone realized that every time a new president wins they bring in like all of their friends and maybe their like stupid cousin Vinnie is like actually a stupid lazy guy and they put him in charge of something because it's their cousin Vinnie and it's a disaster, right? And our nation shouldn't run based on that. And so what we decided to do is we decided to have like pretty hard tests where you actually have to score reasonably high to be able to work in important places and even higher if you want to be the boss. And you know this actually I think worked pretty well overall. We went to the moon with people who came into the government and passed these tests and ran these departments and hired people. We won the World Wars. So, it was like a functional thing. And then in the 1970s, we decided that this stuff was like too functional and that it's not fair that there's people from different backgrounds and different racial backgrounds that score differently on these tests. And they actually confirmed in the court decisions in the 70s that the tests were predictive of how well you do the job. Yeah, but despite being predictive, they decided they were racist and they got rid of them. And so mostly we don't score people anymore. And then at the same time, they actually made it like nearly impossible to fire people. And so you do this thing with severance, but there's all sorts of other things where, and I won't mention the department, but my friend's the CIO of one of these places that works with our friend right now, and he had 40 people come on the other day as his DevOps leaders. And I was told not to put this in public because of his name, so I won't say his name. But then only five of them would come off Zoom even though he's the boss to say what they were doing. And the rest of them realized they couldn't get fired if they just didn't speak up. And then it took them a year to replace the general counsel who was protecting these 35 people and they still haven't fired most of them. And so it's a total disaster. And my impression, and just so I want to pass this over to you, my impression is that every time we try to create new rules with the executive power to do this that we think are constitutional, there'll be some activist judge who will say no it's not constitutional and then we have to go to the Supreme Court and it's just this thing where they could just like stay everything. And so how are you dealing with that? Can we just do enough that they can't stop us? Like what can you do here?
Yeah. Okay. So that's awesome. Let me just fill in a couple of the pieces. So yes, thank you Joe. If you guys haven't heard, can't tell, Joe is actually passionate about this stuff and what's great by the way, you know, and this is not surprising because Joe's brilliant in many areas, but like he's just very learned in lots of these topics. So, yeah, let me fill in a couple things, right? So, you're exactly right, which is every single job at one point in time was a patronage job in the federal government, right? So, it turned out, yes, exactly as Joe said, like, you know, a president would get elected and he would put all his cronies in. And then, you know, along came this thing called the Pendleton Act basically, and we basically said, "Okay, let's not do that. We should probably actually have, you know, merit be the decision." And as Joe said, that's basically the way it worked until literally like 1979, 1980. We had a test was called PACE. I actually have a hard paper copy of it in my desk if anyone's interested in seeing it. It's actually a really hard test.
We should give it to the students here.
You know, I was going to say, yeah, I want to, I actually, I'm going to do that when I get back. I'm going to send you a copy and I'd like to see what the pass rate is from your students here. Exactly. But and so anyways what Joe said was it turned out you know under the theory of disparate impact which of course we now know is no longer kind of a valid theory for you know kind of core discrimination cases. The Carter administration entered into a consent decree which basically said you know thou shalt no longer test people. And I kid you not in lieu of testing what we did was we went to a process of we did two things. One is actually which is interesting which I didn't know this until I researched this. Joe, you may know we actually went to like a kind of top 10% like thing like the University of Texas and A&M and others do which is kind of we basically took like GPA and other stuff and did effectively auto admit to federal government. It turned out actually interestingly enough by the way that had almost zero predictive value for people's success in work which is probably not surprising for you know academics and educators understand that. The other thing we did which is literally until about 12 months ago we did was we used self-attestation. Okay. So you know Joe knows this right? So I am not a software engineer but if I wanted to apply for a software engineering job I would get literally I would fill out a form which would say okay rate your skills from 1 to 5 on how good of a C++ coder are you, how good of a Perl coder are you, like what do you know about like what do you know what do you
It's literally they just can pretend, right? Completely.
No, so this same guy, surprisingly believe it or not people don't actually give you honest answers on a self-attestation.
This same guy, the same guy had over 3,000 engineers still working for him.
Sorry, now I know what you're talking about. Yeah, I don't want to get in too much trouble.
And they, and they, you can't test them still for hiring. It's still not allowed, right?
Okay. So, but back then he couldn't do it a year ago. So, he gave them a test to use for organizing the department. And out of 3,000, it was something like 60 or so passed his like basic basic competence as programmers. These are full-time programmers with their jobs. So, like they were all just lying and not working. It's like it's really bad.
So, I got to tell you, I think I told you this, but so this person got some at some point, you know, somebody's going to slip and say it, but I'm not going to say it. Anyway, so this person, he called me on a Saturday and he gave me that stat.
And my oldest daughter went to Stanford. She was a computer science major at Stanford and she now works at a startup. And so, you know, this guy, you know, the guy Joe's talking about obviously is a very skilled person. So, I said, "Hey, you know what? Like, let me just check cuz maybe the test was really hard or something, right?" So, I called my daughter and I said, "Hey, can you please like get this test, get a copy of this test?" And it was a Saturday. She's like, "Look, I'm not going to sit down and do a 4-hour test." I said, "Just like look at it, you know, quickly." She called me back in about 10 minutes. She's like, "If you've taken a single computer science class in your life, you would get like a 90% on this test basically." So I at least did a sample of one validation that it wasn't crazy.
So we have changed it. So the good news. Yeah. So, let me tell you the good news. The good news is about 12 months ago, we actually got rid of this consent decree that has been on the books since 1981. And so it's called Luevano, which was the name of the plaintiff. And in fact, even the original plaintiff was still alive and he actually agreed with us and the DOJ that this was no longer relevant. So we got rid of the consent decree. We now have tests and for the first time actually now when we hire technical people into the government we actually give them a test where we happen to be using CodeSignal which some of you may know if you've been in the startup community. And for the first time you actually have to take a software development test to do this. So we're working on that. Now we needed to go build out all the tests in other areas but this is the kind of stuff that's just crazy and the people who complain about it you know are well you know like what kind of biases are there and everything I was like look you know and you all know this if you've hired people like the most biased process is literally sitting down and interviewing somebody like we all have incredibly terrible biases on this stuff the most unbiased thing is do you actually have a demonstrated skill that we can actually measure through some of these tests so I think it's going to be great. If you want to talk about the other stuff let me but I know I'm over my time here.
No, it's good. Well I want to ask one more DOGE question because obviously like Elon got attacked a lot.
We've seen not what you're in charge of, but we've seen like all the Latin American countries like vote the other way when we don't spend lots of money like helping the left down there of course which was coming from USAID and otherwise. So there's a lot of things we turned off that I'm glad we turned off. Like should we have been even more aggressive in certain areas? Were there things that you did politically that made it so we had to stop that we didn't have to necessarily do? Like give us your take on what could have been better there.
Yeah, I mean and look obviously I have enormous amount of respect for Elon and I can't pretend to like sit in the same room as somebody with his skill set. I think as an observer of it, I think where maybe we could have done differently is there's probably you know maybe it's just a process thing which is in some case like some kind of concept of empathy or just an understanding that okay like we are changing the rules of the road right and again I'm
Fewer chainsaws, yes. If I had to do it all over again, yes, I might have actually nixed the chainsaw. Yeah, in all seriousness, look, it's really easy for me to Monday morning quarterback someone like Elon and look, he's, I'm grateful for what he did. But I think that's it. And I think that's what at least that's what I've learned certainly in my time in DC is you know, look, everything you want to think, okay, like efficiency, how can that be political? But everything's political, right? There's just nothing that's not political. And so some of this also is just like you know having showing some kind of you know human side of things and making sure that we at least acknowledge it and don't actually have an outcome that's different but at least just demonstrate that okay we understand the gravity of the situation.
So showing empathy and then one thing that I've heard that I'm not sure, so a lot of stuff we were turning off was grift and I know it's very asymmetric this country I think it's quantitative. If you look at it, the majority of that grift is tied to interests on the left, but I think some of it's tied to some interests on the right that apparently are not good either. Have you seen this at all? Is this something that you've been exposed to or is that because that's something people are saying?
