I'm a fan of YC and I don't need convincing that YC provides great value to a young startup -- more than the 6% equity it takes. However, I just don't believe that PG & co are capable of separating the potential winners from the losers based on a short application and a 10 minute interview. So many factors affect the success of a startup and I don't think that anyone can have such predictive abilities based on so little input. Maybe YC knows is good at filtering out the lowest 40% or so, but between the teams that have some viability I believe it's simply impossible to call which will succeed and which won't using YC's selection method.
The only way to measure YC's ability in picking winners is to to have PG & co rate a bunch of non-YC founding teams at the early stage of their startups, wait a few years, and see how well their predictions held up against more or less random predictions. The experiment must involve non YC startups is that YC enhances their startups' chances of success, which can create the likely false impression that YC excels at picking successful teams rather than at guiding the teams it happens to pick to success.
"I just don't believe that PG & co are capable of separating the potential winners from the losers based on a short application and a 10 minute interview"
In poker, if a pot is very large, calling a bet (ie investing some money) can have positive expectation even if the probability of winning the pot is quite low.
Similarly, YC's filtering ability only needs to be "good enough" to generate positive expectation, which can happen even if their predictive ability for selecting winners is quite low. Picking winners at a slightly better rate than the competition gives them an edge, even if they're not actually good at it. ie being "barely competent" at something extraordinarily difficult can often be enough to achieve considerable success.
Of course, I don't see any reason to believe that they aren't actually quite good at choosing winning startup teams -- it would certainly be interesting to be able to measure that. It will also be interesting to see if their hit-rate goes up over time.
The only way to measure YC's ability in picking winners is to to have PG & co rate a bunch of non-YC founding teams at the early stage of their startups, wait a few years, and see how well their predictions held up against more or less random predictions. The experiment must involve non YC startups is that YC enhances their startups' chances of success, which can create the likely false impression that YC excels at picking successful teams rather than at guiding the teams it happens to pick to success.