so on their website it states that these guys only interview about 20 people for doing a phd at caltech. do they only accept 2 out of the 20 or more and then wait to see who withdraws?
I think you misunderstood the question. The 10 matriculants to UCLA last year includes 2 that got into their joint program with Caltech. OP is asking how the acceptances to the joint program at Caltech is executed.
If I were to guess, they probably start with 2 acceptances and compile a waitlist and go from there. This is definitely a question that you could ask the program themselves or their current students.