Regarding #1. The author of the essay left out that he and the other VCs have learned to identify behavior in the interview that equates to ability, or lack of ability, to make money. For example, the fidgeting he observes in response to a certain question indicates that the founder is less likely to make money because of an unaddressed problem, possibly unaddressable due to the founder's character or way of doing business.
The essay jumps straight from interview behavior to a decision to not fund, leaving the reader to work out what is the assumption. There is simply no other reason the VC would consider such behavior important.
The reality, as indicated in a recent Kauffman report is that the majority (actually, a super-majority) of venture capital forms perform poorly to the extent that they are not worth the management fees or continued investment. [1]
This would indicate that VCs, on average, make poor judgement on the quality of their investments. The use of arbitrary indicators and qualitative characteristics as a primary decision factor for who they invest in or not would seem to be contributory to their overall poor performance. Perhaps VCs should learn to resist their early (and probably incorrect) assumptions about entrepreneurs based on age, nervousness, or other factors and instead look to the underlying premise of the business and existing capabilities of the management team. Or at least they should realize that they are not particularly good evaluators of those characteristics, based on their past performance, and factor that in accordingly.
We don't know the VCs have better indicators available. The mutual fund industry also interviews CEOs but largely invests based on data, and it has the same performance problems even among niche micro-cap funds.
Someone comes up to you and say, "I have a GREAT idea, it's going to be the next Google / Facebook / Twitter / etc. I just need a CTO / web developer to build it. Quit your job, joined me full time now."
Would you? If you've heard that a lot, you probably won't. There's nothing wrong per se - the person could be right, but it's more likely that he is wrong[1]. But something could be said about this person's approach to finding a co-founder, i.e. if he's going about his co-founder search this way, he's probably doing other more serious mistakes other battle-hardened entrepreneurs have learned the hard way.
It's a mental decision-making shortcut. Don't get hung up over little things such as the OP's actual words, like the way the interviewee answers a questions, fidgets, etc. It's just a mental shortcut signal. Sure the OP could be wrong. But he could also be right. How do you know you're not wrong? VCs take a million meetings, make a million decisions, they have LOTS of data to test how well they're doing. They are not random schmucks. Clearly they think about this day and night. Is it possible that they're all wrong and you're right?
Also - I'm not in VC so I can't comment from a position of being an insider, but consider this: if you were a stock trader with an uber stock trading algorithm, would you share it? No. I don't see why VCs would share their "algorithm" either. They're competing with the other VCs for deals in startups, and they each have their secret sauce. They also compete with each other for more investor money (from their LPs).
Lastly, consider this: would any anti-spam vendor fully disclose all their algorithms to detect spam? No, that would be dumb, because then spammers would know exactly how to circumvent them.
I think you have gone off-topic somewhere. Originally this was about whether this VC's shortcuts were tied to likelihood of a good return; now you are either saying not much works or they know what they are doing, i.e. looking for fidgeting works. Or maybe both or neither?
I've been pitched on stupid "next Facebook" ideas, tried to make one (didn't go anywhere), am now developing one as a consultant that is going somewhere and also analyzed securities professionally so I understand some of these difficulties, but my concern is that the essay author's assumption (some in-interview behaviors tend to represent bigger problems that sink startups) is recognized as the missing link between the interview behavior and declining to fund.
The mutual fund industry almost certainly has the same problem that the VC community does - there's a form of cognitive bias that leads to people like VCs overestimating the effectiveness of their decision-making skills and seeing patterns that are not in fact there, causing them to make worse investment decisions than some hypothetical that was able to make a rational assessment.
It's not a ludicrous statement. We must assume the VC wants to make money and thinks it is an indicator, just like we assume a plumber wants to fix pipes even if he uses a divination rod to find leaks.
There is a difference between intent to be rational and actually making good decisions, and they don't have to go together.
The essay jumps straight from interview behavior to a decision to not fund, leaving the reader to work out what is the assumption. There is simply no other reason the VC would consider such behavior important.