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What is the best way to pick students for an educational institution? I've been thinking about it, and it seems that this is one of the single most important decisions a society makes, and nobody knows how to do it

>Asians use exams, which means their education system is nothing but studying for exams
>Americans use high school GPA and extra-curriculars, which makes them vulnerable to grade inflated private schools, bullshit resume boosters like team sports, and completely arbitrary things like affirmative action/legacies
>Europeans just separate the students into different high schools depending on ability, and put the kids from the best high schools in the best college, which means that your life is already decided by the time you're 14

How do you pick students in a way that measures real academic potential and not just bullshit stat padding?