This Week in Startups - E1033: News Roundtable! Lambda School CEO Austen Allred & General Catalyst Partner Katherine Boyle on Lambda School controversy, Techlash & late-stage journalism, Robinhood down as Dow jumps & more!

Episode Date: March 3, 2020

0:54 Want to see what it's like to be an Angel Investor in Jason's Syndicate? DM @thesyndicate415 to read Jason's last 3 deal memos 1:37 Jason intros Austen Allred & gets his side of the recent Lambda School controversy 6:22 Jason intros Katherine Boyle & gets her take on how she would have advised Austen on PR 7:58 Explaining Lambda School in simple terms 13:10 Setting up Lambda School as a counter to predatory loans 14:31 Jason explains late-stage journalism, Austen describes his board's response 16:20 Techlash, issues with journalism today, how Balaji-coronavirus story sparked response 24:52 Fixing journalism 28:00 New Twitter investors Elliot Management want Jack out as CEO, is Twitter broken? 30:00 Misconceptions of Lambda School rolling up ISAs, how privatizing education in SV causes techlash 40:33 Katherine explains her investments in the defense space 46:00 DoorDash files for IPO, did they miss their window? 47:30 Analyzing coronavirus, wet markets, the "Wuhan shake" 58:51 Robinhood outage as Dow jumps 1000 points 1:01:03 What does Katherine invest in? 1:04:41 Jason introduces his new soundboard

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Transform your corporate email into a multiplayer game so your team can increase customer experience and take action faster. Take 20% off your first year today by using the code Twist at sign up and visit frontapp.com slash twist for more information. That's F-R-O-N-T app.com slash twist. Hey, everybody, welcome to this weekend startups. I'm your host, Jason Calacanis. And this is our news roundtable. A lot of news going on. We're trying to get you at least one weekly news roundtable.

Thanks for all the great feedback. As you guys know, I'm an angel investor here in Silicon Valley. And if you want to read the deal memos that I write when I'm investing in a company, go to the syndicate.com, the syndicate.com, or follow the syndicate 415. That's the area code here and just DM us. And we'll add you to the syndicate list that you can read my deal memo. So when I invest in a company likecom.com, I write a deal memo. I send it out.

A bunch of investors put money in. And then we hope for the best. So if you want to read those deal memos in your credit and you want to see what it's like to be an angel investor, go ahead and go to the syndicate.com and sign up. Today on the program, I've got Austin Allred back on the pod. You know him as the outspoken CEO and co-founder of Lambda School. He was on the pod. I don't know, what, six months ago?

Oh, it would have been like 18 months ago. 18 months ago, a long time ago. Yeah. And I know things have been going great, but there's also been a little bit of a brouhaha. So thanks for coming on the pod to talk. about that. We'll get into that in the first segment. Catherine Boyle is here. She's a partner at General Catalyst and formerly a journalist like myself. She was at the Washington Post from 2010 to 2014. So you'll have some feelings. Yes. All the feels. It's a good way to put it.

Some feelings. All the feels. All the feels. All right. Well, let's just get right into it. Everybody knows Lambda School is trying to teach people how to code. And I saw a New York magazine article. What was it two weeks ago now that you've been dealing with? Yeah, something like that. And they allege you misrepresented some stats on graduation, 50% versus 86%. They seem to be confused a little bit about the ISAs income sharing agreements, maybe some complaints about the enrollment, and maybe the team leaders are overtaxed or underprepared is what they claimed.

You came out and were super transparent. You explained exactly what the confusion is. you've had times when you've had 85% of graduates get hired, which is unbelievable. You've had the article reference to 50% hiring rate, but that was in the risks part of your deal memo in a mock exercise, correct? Let me speak to this just a little bit. Yeah, explain this to everybody who saw this brouhaha. At a high level, when we talk to investors, we talk in terms of enrolled students because

our costs all come from enrolled students, right? So we'll say, of those students who were enrolled, X percent were hired. Whereas when schools report publicly, they speak in terms of graduated students. So obviously those two numbers are always going to be different because some people will drop out and then you'll have a different denominator. So the reporter just took a number that was different and compared it against a different metric. That said, that 86% was somewhat out of date. Like it had been a while since we updated our numbers, but it was the most up-to-date number we had. So we quickly put together what the real numbers would have been, which was 78% instead of 86%.

Which is basically the same number. But not drastic. Well, I mean, it's going to change between classes as well, correct? Of course. Of course. So it was, yeah, it was somebody who didn't understand what numbers they were looking at comparing two different things. And also, you know, refer to this person as a reporter. In fact, I'm in touch with the person because, you know, I was defending you publicly.

I'm not an investor, to be clear. But I just thought this was like a slam piece that was ridiculous. I defended you publicly. He got in touch with me. And I was like, there's something weird here. How long have you been writing? I don't see any other bylines for you. And this person is a founder, not a journalist.

So when they approached you, did you know they were not a journalist and they were another founder writing? what is for New York Magazine, what, an opinion piece? Well, so when he approached, he said, hey, you know, I'm writing an article about the code boot camp space in general. And could I get, you know, a couple lines from you. Which, you know, we do that stuff all the time. Right. They're writing, you know, ISAs are a new thing. They're trying to understand.

But, yeah, it was, and then it came in very aggressive. On the phone when you talk to him. He actually came into the office. Came to the office and then got aggressive in person. person. I mean, I would call it aggressive. I don't, you know, I don't. Aggressive questioning. Yeah, it was, it was intense, right? Like, more intense than any other, and, you know, we've had other bad articles written about us, but nothing quite like that. I don't know. It's just weird. What was the axe to grind, do you think? Because he seemed to have some code product that he was

working on previously. I asked him what his axe to grind was. And he, yeah, he was just straight up like, Austin's a liar. And I was like, well, it doesn't seem like that. And it seems like the overwhelming number of people coming to Lambda school of getting jobs. Yeah, I don't know. It's something that I've been trying to figure out is why, I mean, there is a very small pocket of people who very much do not like me. Well, join the club. You've got your own.

Yeah. Welcome to the club. Catherine's laugh. She's like, what did I get me? Oh, well, you're outspoken. Yeah, I'm definitely outspoken. And I think he felt like I'm above and beyond in our marketing, which is fair at times. It's certainly never been fraudulent or intentionally misleading or anything like that.

Catherine, if you were advising Austin as a former journalist and an investor now, should he have even taken the meeting with New York Magazine or would you do what I do? What you say? Send me your questions. I'll answer them by email. Yeah, you know, it's an interesting question because I think even if you're advising someone to be very judicious about who they take meetings with, it's impossible to know now. Right. I mean, there are so many different media platforms. journalists have very different views of what's appropriate and what's not across from, you know, Wall Street Journal investigative unit has very different values and ethics requirements than, say, a blogger who is just starting out. So my advice, I actually think that your response was the right response, and we're seeing this

from a lot of CEOs. Fred Smith did this with the New York Times or when he didn't agree with some of the things that were published. So I think being very upfront when something's published and exactly what you did, like here are our numbers. We're going to be very forthcoming and very true. transparent. That's just the new norm for CEOs. Go direct. And that is the new norm for anyone who is an influencer of any kind, but specifically CEOs and companies, you have to be open. Yeah, which is, I mean, one of the reasons I invited John the Puck, because I've always known

you to be very direct. The thing that I also find very puzzling about this is, and this is where the story broke down to me. And of course, this gets published on Twitter. Everybody who hates tech right now, which is a lot of people, largely because of, let's say, the election and Facebook's role in it, I think, my personal belief. But then everybody starts dunking on you, and it spreads like wildfire. And if you read the story and if you just have a cursory knowledge of what you're doing, if a person comes to Lambda school and they do not get a job, and they, when they come in, my understanding is because I have a close friend whose husband is in the program right now and say who, You can either pay $20,000 or have $30,000 in deferred ISA.

Am I ballpark correct? That's roughly correct. Yep. The person I know paid the $20,000, they had a little bit of money. They said, yeah, we don't need to pay it overtime. We'll pay the $20,000 and we'll get a job after whatever, nine months of the program. It's a nine-month program. Yep.

The people who paid the $30,000 deferred with an income-sharing agreement wind up paying $40,000 or $50,000 of their back over time. No, $30,000 is the max. So the way it works is, you. you pay a percentage of your income for two years, 17% for two years, if and only if you're making more than 50K in a role that you trained for. If not, you pay zero. And $30,000 is the maximum. So there will be students that pay $17,000 because they only get a $50,000 your job. Right. So you have to be making north of 86, 87K to pay $30,000. So what's interesting about this is, and I don't mean to just become like your PR person.

and your media counsel, Austin. But if it was me, I would just come out dunking. Like, you people are idiots. There is no downside. You don't understand what an ISA is. You dipshit idiot reporters have no idea that there is zero downside to going to Lambda School. Because if you don't get a job,

you are not responsible. And the debt wipes out after how many years? Five years. Okay. So, Catherine, do you just pause here for a second and consider the insanity of this? this, the person takes no risk. Lambda takes 100% of the risk.

If the person doesn't get a well-paying job over 50K, they pay zero. If they get a job outside of tech and being a developer, they pay zero. Well, being a developer is, I mean, you'd pay if you're a developer outside of tech, right? If you end up being a bartender, for example, then you don't pay. In the U.S., that's not true in the EU, but in the U.S., yes. So you're not on the hook, and it wipes away after five years. Catherine, for college, you cannot even go bankrupt and wipe out college debt, correct? Yep.

So, Austin, you have created the giant mitzvah of all mitzvahs for all of young people who might want to transition. And the payback he gets is people don't even understand that nobody's on the hook. How insane is this? Yeah, no, it's interesting. I mean, Austin and I have had this. conversation offline before. But I was once in that boat when I wanted to leave journalism. I was not paid very well and was looking to improve my life and ended up going to business school.

But that sort of solution of you don't have to pay anything up front actually speaks to a huge sector of the American public that is terrified of taking on more debt, especially the people who've already taken on debt, who went to a university, they believed the American dream and said you can better yourself with college and then got out of college and were paid $25,000 to do an entry-level job and really can't afford to live in a city. Do you want to turn your idea into a website? Do you want to blog and publish content, maybe sell products or your service,

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Go to Squarespace.com, get that free trial. The website will look beautiful. Your website's going to look gorgeous. They have so many beautiful templates. And the best part is everybody on your team is going to know how to edit and clean and crisp up that website with new content whenever you need it. They just keep making the product better and better over the years.

They are the gold standard for building beautiful websites. Go ahead and go to Squarespace.com and get that free trial. Use the promo code. Twist to save 10% off. Let alone the University of Reports, allegedly, University of Phoenix and other places, people taking massive loans that are due immediately no matter what the outcome is. And doing that to GIs, who are getting out on these GI bills where they can take loans. I mean, when you came into the industry, there were a lot of these Fugazi players, correct?

Yeah, I mean, so we. So we set up Lambda School to be a counter to all of that, right? So what if there are a world where you only paid if you're successful? And then it eliminates all of the incentive to do all of the shady stuff that the rest of for-profit education is doing. Now, there's still things that it doesn't eliminate, which you correctly pointed out. Like, you still have to put time and effort in. There's nothing we can do to absolve that.

Oh, you can't go back in time and let people change their decision and give them back nine months of learning? This was the stupidest response from this idiotic journalist's, person with an axe to grind, who I will have on the program, and I will take him to task. I didn't want to do it with you here. I'll get your side. I'll get him on here next if he's brave enough to come on here and explain what his axe to grind is. But shame on you New York Magazine for letting this person do this ridiculous article in the face of you trying to solve education.

And the reason everybody knows about ISA is that I want to make a cry here, Austin. I see you get a little emotional. No, I'm not going to get emotional. But I just want to say, I did not understand what I am. ISA was. I was not attuned to what you're doing in the mission. And the world, especially in Silicon Valley and out of it now, now understand what an ISA is and the value of it. And I understand universities are now watching Lambda. And because you're the tip of the spear, they're following you and now they're going to do ISAs. This is correct, right? Correct.

What are they thinking at New York Magazine? And this is why I had this argument with Kara Swisher on her podcast recently about late stage journalism. We're now in this like end game of journalism before it collapses and has to be rebooted, I believe, where they're so obsessed with clicks. They're so obsessed with having like a woke, get a tribal response from the left or the right, because the right obviously was guilty of it with Fox News. And now the left is like, you know what, we lost to Fox News? Let's be like them. Let's take a story. And instead of telling the truth, let's dunk on tech because that will get us more clicks. And really the narrative is going to be, oh, you become a billionaire because of Lambda. I hope you become a billionaire,

It becomes a Lambda. Because if you do, that means tens of thousands of people will have become developers. There's no way for you to become rich off the startup or your investors unless you produce, what, hundreds of thousands of developers. Correct. What was the response from your board and your team when you have a PR crisis like this? How do you handle it? Because this is the first time you've had to handle it in your life, right?

Yeah. I mean, so we've had people who write bad or confused articles in the past. But this was the, I guess, and there was kind of a stream of them because there were like three or four all that landed at the same time. But our board was just, you know, hey, so our response internally is always, you know, try to block it out and like focus on the students. Yeah. Because at the end of the day, you know, as long as our students are successful, like it doesn't really matter what New York Magazine writes. And that's the thing that I've been surprised by is how little effect that actually has at the end of the day. Yes.

And if journalists are going to continue to take a. They will continue to fall victim to exactly what Trump wants, which is to say fake news. Like this literally is an example of New York Magazine being fake news. It's literally, and I don't want to say that. I'm as anti-Trump as any person could possibly be. I will vote for anybody to get him out of office. This is actually my biggest fear about what's happening with media is you have great journalists at these great institutions that are still doing investigative reporting.

They're still playing by a rulebook that has been around for decades of how you identify yourself, how you ask questions. And unfortunately, I think the influencer-led institutions that have taken this kind of, we have a point of view and we're going to go after a certain thing and we're going to say what we believe and it's going to be more opinion journalism than it's going to be actually investigative journalism. They've actually hurt the real institutions that are doing important work. And so I think it's important for the media to say there is a difference between the Washington Post and Recode. There's a huge difference between New York Mag now owned by Vox and the Wall Street Journal investigative unit.

Which, by the way, both of these are owned by Vox, so I don't mean to beat up on them. But I told Kara Swisher, this whole story on coronavirus with, what's his name, the VC? Malogy. Malogy. Polygy. Just making them look incredibly stupid immediately after publishing it. And now as time goes on and events are actually being canceled and people were always saying stop giving handshakes. They literally made the lead to that story.

I don't know if you saw it. Silicon Valley terrorized of handshakes. It's so dumb. Yeah. And it's a public health story. Bollagogy was so clearly right. And in retrospect, there's nothing that you can do. Like, I think, I honestly think that is the first tipping point where people realize, like, I mean, Bollogy was approached by a reporter.

He called it out correctly. He said, hey, you're going to write an article about handshakes on Sand Hill Road. And that's not what you should be writing about. You should be writing about the pending epidemic health crisis. He tried to help the reporter. Like, literally tried to help them. And they, yeah, they wrote the article he said he was going to write, and it was wrong in all of the ways that Bology thought it was going to be wrong. Like, that shouldn't have been the story in the first place. It was only, they approached him with the narrative already created. And that's the thing that drives me crazy is when you have a reporter who's already made up their mind and they're not looking for a comment. We had an article written about us where I had, you know, an hour and a half long interview with a reporter. And the only quote they used was so out of content. that because it fit the narrative that they came in wanting to write about.

This is the worst part of it is and that is why I'm advising founders. I'm advising founders for the rest of 2020 and I'll make a decision on 2021 going forward. But as the chairman of startups, which I just anointed myself, as the chairman of all startups, I'm going to pass an edict right now. No founders of any venture backed or angel back startups are to talk to any journalist on the phone or at events, you can answer questions only by email and or DM, and you will publish all complete interviews on your personal corporate blog or your medium. And we will teach journalists how to do what they should be doing, which is go right down the middle. The truth. How about that? So I do actually think there are some journalists, though, and I know it's, it's, being a former

journalist, I think I'm still, you know, very much longing for kind of the old school way of practicing journalism. I do think it's important. that we have journalists that are empowered to speak truth to power, particularly in politics and tech, like where there is a lot of power. So I'm not, I think email is a great way to do it, but I do think that there are journalists that practice very well and that can do things in person. I'm actually very optimistic about journalism. This might sound a little contrarian, but I think that we're entering a golden age of journalism. And podcasting has actually helped this where you have to have nuance and you have to have real thoughtful conversations if you're

going to talk to someone for an hour. So I actually am very excited about the way journalism is headed. I think these sorts of kind of last cries of sort of, you know, flailing. Yeah, I think there's, there's some issues there, but I think we're going to have a multitude of voices coming to speak in different platforms, and podcasting's a really

great way to speak to someone and get the truth. It doesn't just have to be email. It doesn't just have to be a PR person answering on behalf of a person of power. Well, and look at it, Austin, I just said to you on Twitter publicly, like, hey, come on the pod if you want to talk about it. I'll give you the platform, and you're like, yeah, of course. because you know I'm going to ask you a hard question, like, what's the real number?

And you know you can answer it in your own words. And if it takes 10 minutes or 30 minutes, so be it. I think that's the hard thing in this day and age is there's no nuance. If, I mean, if the reporter doesn't want there to be nuanced, there will not be nuance, right? And at times that may be appropriate. But I don't know, I find it rare that there's a time when I'm saying, oh, I wish there were less nuance in the way that was discussed or the way that was written. Yeah. I think all of us would hope for some nuance when we turn on the nightly news tonight. Like literally does not exist because nuance does not get you

clicks. If they said, um, Lambda school reporting variable results by class of between 50 and 86 percent or 75 and be like, okay, great, thanks for the data point. I'm not clicking. But if they're like, oh, Lambda School is reporting one number to investors and one to the public. It's like, oh, my God. Ridiculous. All right. When we get back, as if the world wasn't bad enough with late-stage journalism collapsing, I think a right-wing Republican maniac wants to buy Twitter and now's Jack. So Facebook already owned by the far right via Peter Thiel and Zuckerberg, who secretly invested, voted for Trump, from what I understand. I think he's a Trump voter. That's what I've been here. that he's secretly voting for Trump.

Who are you hearing this from? Me, I just made it up. Okay. Just my intuition. Thank you, though. Fake news, 2020. When we get back, will Twitter also become a tool of the right like Facebook?

And we come back on the swing startups. Hiring great people is the way to grow your business. You know this.