Y Combinator Startup Podcast - #120 - Austen Allred

Episode Date: April 3, 2019

Austen Allred is the CEO and cofounder of Lambda School.Lambda School provides a CS education that's free until you get a job. They were in the Summer 2017 batch of YC.You can learn more about Lambda School at lambdaschool.com.Austen is on Twitter at @austen.The YC podcast is hosted by Craig Cannon.***Topics00:00 - Intro1:01 - Encouraging people to do something that they're scared to do5:16 - Where did the insight for Lambda School come from?6:26 - College vs developer schools10:26 - Building a network12:16 - Does Austen see value in a traditional liberal arts education?14:56 - Steven Klaiber-Noble asks - As competitors begin to copy your model what front do you believe you'll be competing on?17:56 - Why did Austen choose to raise money?20:06 - Fundraising falling through on Austen's first startup21:36 - Moving back to Utah and writing a book about growth23:26 - Why Austen wrote a book26:26 - "Starting a company is by definition saying, I think what I can do is worth more than what other people will pay me for."27:26 - Mispriced human capital30:21 - Other opportunities for Lambda School32:46 - Modeling risk35:36 - David Kofoed Wind asks - When Lambda School is incentivized to take in people that will land high paying jobs, how do you think about the diversity of candidates? One would imagine that it quickly becomes a game of pattern matching the stereotypical SV people.37:51 - Will Lambda School ever not be remote?41:16 - Dave Dawson asks - You appear to be on the successful path now, was there a point early in Lambda School when you wanted to stop?43:46 - Helping everyone become an autodidact46:46 - Rethinking where to start on an online course48:11 - Dave Dawson asks - What keeps you up at night at this point? 49:46 - Dayo Koleowo asks - “I have made remarks I do not agree with” - from Austen's Twitter bio. What is that one remark you wish you didn’t have to disagree with?53:26 - Choosing remote work as a core problem to solve in your company55:56 - Analysts aren't good at measuring product quality57:36 - Teaching taste

Hey, how's going? This is Craig Cannon, and you're listening to Y Combinators podcast. Today's episode is with Austin Allred. Austin is the CEO and co-founder of Lambda School. Lambda School is a CS education that's free until you get a job. They were in the summer 2017 batch of YC. You can learn more about Lambda School at Lambda School.com. And Austin is on Twitter at Austin. All right, here we go. All right. So today we have Austin Allred. He is the CEO of Lambda School. which was in the summer 2017 batch, and Lambda School is a CS education that is free until you get a job.

So, Austin, what I wanted to ask you about, you mentioned this on a few podcasts that I've listened to you on. And basically, there's this core idea in Lambda School that you have to be kind of confident enough to even apply. And this is a great opportunity for many people. But what I'm curious about is,

how do you encourage people to do something that's probably good for them, that they might just be scared to do or they make excuses about. Yeah, I mean, I think that's actually the problem we grapple with the most. And, you know, I think Patrick Paulson said something along the lines of, you know,

if you think about it, the highest leverage activity any human can have is inspiring other humans to do what they're capable of. And in many ways, I see Lambda School as like the realization of that. So we've had a lot of students, you know, in the past, you would graduate and then whenever you felt ready,

would start applying for jobs. And we'd have students that would just wait and wait and wait. And we'd be like, why are they not working hard? What's going on? And you talk to him and you realize it's massive imposter syndrome. They're just not confident or comfortable with the idea that they're now a software engineer. And so they're just kind of procrastinating that. So now we have some mechanisms that get you to start applying earlier.

But yeah, like the minute they start applying, they get interviews, they get hired. they get a six-figure job. And it's like, what, what were we waiting for, right? You're totally capable. And what about what about the people before Lambda School? A few of the questions that came on from Twitter were basically like, isn't this just an opportunity for rich people, you know, like being able to leave your job and commit full-time to a seven-month program? Yeah. My first answer to that would be we have part-time programs as well. So you can do it evenings and weekends. We have experiments running where we pay people living stipends. That will be expanding greatly. We'll be announcing something in the near future along those lines in concert

with a few other tech leaders here in the valley. But yeah, I mean, the number one problem we have to solve on the admissions side is getting the people who are qualified to actually apply. Yeah. It's kind of a, you wouldn't think of it as being a problem. It's a YC problem too. Yeah. No, it totally is. Yeah. Some of the best companies are just like, yeah, I just don't know if I can get into YC. And that's the difficulty of having a good reputation where a lot of people want to go there. You just, there are people who assume that they won't get in, which is not the case. Right.

I mean, so your acceptance rate, maybe it's changed, but I heard you say it's 25% of the people who make it through that first initial test. Of the people that make it through the precourse work, it might even be higher now. I mean, the precourse work is more difficult. but the vast majority of our selection mechanism is the pre-course work of how well you do on it if you put in the time um sometimes i wonder if we could just make the pre-course work really long and have that be it no no interview no nothing just just the work yeah i mean because that's obviously like your business hinges on you assessing that risk right correct and so if you could make it sufficiently difficult yeah in theory um

I mean, you run the risk of false negatives. Yeah. Or false positives, I guess. But, but yeah, all that we need to find out is, are you of average, you know, mental intelligence and will you work really hard? Yeah. And I think YC is similar, right? Like, when I got into YC, I felt super intimidated.

There were, and there are brilliant people all over in the room. Yeah. But just because you went, you have a PhD in computer science from MIT. and you got a 1600 on the SATs as a freshman doesn't necessarily mean you'll have a successful company. It's not directly correlated. I think in the past it's possible that YC was fooled more often by fancy degrees and PhDs and stuff like that. Possibly. Yeah. Not the case anymore. I mean, in my YC group, there were a couple, they're like a 15 and a 16 year old kid. Oh, you were in that group? Yeah. Yeah, that was a fringe case. Yeah. So I'm curious about like,

there's this core insight with Lambda school, which centers around what if we didn't have to charge $10,000 for this, you know, dev school. How did you reach that point? So I was living in rural Utah before I moved to San Francisco. And when you move to San Francisco from a small town and you see just the discrepancy in opportunity, I guess. So it was easy to look around rural Utah and be like, look, that guy is just as capable and intelligent as that guy in San Francisco. But in Utah, that guy's making 30K. In San Francisco, that guy's making 150 and he's leading a team. So, you know, how does that work out?

Is it just what jobs are available? And, I mean, if you talk to people, you realize it's more about opportunity than anything. So to tell a guy that's making 30K, hey, just drop, you know, 10K on an education and there's a 7% interest rate on the other side. hopefully it works out, that's actually a really big ask. So I have to put it in terms for VCs sometimes and say like, imagine spending half of your annual income on an education, on a bet, right? You have, most VCs are very well off and you have that kind of risk that you can take. So you have to kind of put it into that similar psychological context that people just can't

afford that risk. So why are people in these situations signing up for University of Phoenix? type programs, but not the dev schools, because it's a similar choice, right? So I think the first reason is honestly because the University of Phoenix is more aggressive in their marketing tactics. They, I mean, they have the, they don't really care whether you succeed to some degree. If they can, you know, they're backed by, the loans are backed by Uncle Sam and whether or not you're successful, they get paid.

Yeah. So the incentives are fundamentally misaligned. And if the University of Phoenix can get you to sign a piece of paper, they get 80 grand. Okay. And that's it. But the reason people are, the reason people opt for universities, generally speaking, versus, you know, code schools is they've, you know, my entire life growing up, nobody ever said there's a path to success that's not college. Yeah. And I'm not a college graduate.

My older brother isn't a college graduate. A lot of very successful people I know are not graduates. But yeah, everybody growing up just said, go to college. Doesn't matter what it costs. Just get a degree. It doesn't matter what you study and you'll be successful. And I think my generation is now realizing that's fundamentally untrue. It isn't only not good advice.

It's probably bad advice net net. And the newer generation has the benefit of seeing people with hundreds of thousands of dollars in student loans and working at Starbucks. Yeah. And clearly something was off in the advice that we were given. Well, yeah. Yeah. I mean, I went to NYU.

So I know the feeling. I graduated with like 50. That's pretty good going to NYU. Which is okay. Yeah, I got a bunch of scholarship and it worked out all right. I mean, it's still a lot of debt, to be clear. Yeah, dude. I was an English major.

So all the jobs I've gotten have been through skills I've learned outside of NYU. Obviously, I can write fairly well. For sure. But the real upside was being in a huge city where I could start working early. And I think that was a real competitive advantage. And I'm curious about Lambda School in this way. Because at NYU, you know, once I started, I never went home again. You know, every summer I was working.

And then I was working during the year. And then I was like realizing that I could cram all my classes on one or two days and work full time. And so I had easily a four-year advantage on all my friends who went to, you know, like Colgate or something. in the middle of nowhere, right? So how do you take advantage for that at Lambda school, like getting people in early, getting them a network? Yeah, so there are a couple things. One is, you know, Lambda school is nine months full time

versus a four-year degree, which is obviously four years. So the average Lambda school grad, if you had two students, one started a university at the same time as another student started Lambda school. By the time the student's graduating from university, the Lambda school student has three years of experience, and has paid Lambda school off and is a quarter million dollars ahead, at least,

of the university grad. So, you know, net net, it's pretty obvious. But the network is pretty key. So most of our students are coming in with no network, a lot of students from either inner cities or rural areas. And we basically have to help them build that and then build a network around them. So we have a full-time team that is just bringing in companies

to hire students. Part of the school itself is actually, okay, here's how you network. Here's how you find other people with similar backgrounds, hired in engineering roles on LinkedIn. Now we're going to go contact them. That's actually built in the curriculum.

Oh, I didn't realize that. Yeah. Can you actually break those down? I'm very curious about how you, you know, tactically explain networking skills. Because I know you wrote a growth book before Lambda school, right? So you're kind of like into breaking these things down.

Yeah. So, yeah. Say I'm a graduate or I'm in Lambda school. At what point do you start teaching me, I guess you could call it soft skills? So now you meet your career coach at week three. Okay. So it's very integrated into like it's it is Lambda school, right? It's not a separate external thing.

And we have careers lessons every week for the entire school. So for example, you know, we train students to do informational interviews, which is find someone with a similar educational background to you. So use LinkedIn's advanced search and search for schools that are XYZ in locations that are this and with careers that are this. Now you have a huge list of people who are just like you. Reach out to them and ask if you can grab coffee. Or jump on a phone call and say, hey, I want to break into this field.

What do I do to break into this field? And probably our best job offers actually come through that. Your best job offers always come through networking and meeting people. We're really close to the point at which we just say, you know, if you have to use an application to like click an apply button somewhere, just throw it in the garbage. Don't do that anymore. Or at a minimum, we'll have somebody else do that for you. So now to help with that, we are hiring right now 37 interview sources. So those are folks that are just going out. They'll take your specific information, and they'll go out and help find companies as well and bring the companies to you.

So we have an entire team that's dedicated to that. Wow. The future we're going to look a lot like a talent agency, basically, for software engineers and designers and whatever else. Right, right, right. So in terms of the other, there are a couple questions around. Well, so John Palmer asked, can or what other pieces of the university experience can be unbundled? And the thing that I'm in particular curious about is the way you treat education in the sense of Lambda school is like, hey, this is job training, right? Like, this is the goal of making money.

It's not about, you know, being altruistic and necessarily making artists or whatever you want to call it. Right. Right. Do you see a traditional, a value in a traditional liberal arts education and like those elements of school? For sure. So I, I see value. absolutely in the liberal arts, right? I do disagree that, A, the only way you can learn the liberal arts is within the walls of a university. So, you know, in my mind, a lot of the people

that we're talking to, you know, if you're 35 and you've never had a very high-paying career, the prospect of let's take out $50,000 of loans to study Shakespeare is not a bad thing per se, but probably not the right thing at the right time. So we are entirely vocational. We're a trade school, basically. And we want to help you make as much money as you can. And then when you're making a lot of money, it's a whole lot easier to make decisions

around what you'll learn in the liberal arts. In fact, that may be an add-on. We add to the school later, but it's just not the focus right now. There are a lot of people that do a really good job at that. And we're okay to leave that to them for now. Yeah, because I think that's, it's one of those things similarly to signing a student loan when you're 18. Like, you don't really know the terms of the, I mean, you can read it on paper, but you don't really understand the dynamic you're about to enter.

Whereas when you're, say, yeah, you're 35 thinking about switching careers. You're much more practically minded. Yeah. Or you might just be interested in indulging. I think we've romanticized it a little bit, right? Yeah. Yeah. I went to the liberal arts portion of the liberal arts degree before I got into the specialization.

And like, it was valuable. But I've learned way more by reading books and meeting people and other stuff than I did in the university. So I get the value, but I don't buy the argument that like that's the only time and only place that you can become well rounded. Yeah. That doesn't make sense to me. Yeah. I mean, do you see there are value, there are elements of value in. unbundling other aspects and like really building that into lambda school for sure yeah yeah okay um

so there's another question here from uh steve claibor claibor noble who asks as competitors begin to copy your model which is we should talk about it's a income sharing agreement what um what front do you believe you'll be competing on um all of them so so the way i describe lambda school is it's you know people know Lambda School because of the business model, but the business model is something that's up front. That's not what makes Lambda School works, right? You can charge whatever you want or however you want. The key is making that successful.

So our product, our educational experience is, I think, among the best in the world. And it has to be the way we've built it in order to make a free upfront and online education work. I mean, when we started, our dropout rate is what. was killing us. Now we're graduating, you know, more than 85% of students that start day one. And a lot of the dropout is because of reasons outside of our control. It's financial or life circumstance or whatever else. So we have, we have a product that people love, they come out

on the other side as great software engineers, and we have a hiring network ready to hire them. That's all really difficult. then the admission side of knowing who and how and what to accept, like, that's not, it's not something you can buy, right? You just have to, like, figure that out over time and eventually it will be very data-driven, very, you know, we'll be able to tell on before a student begins Lambda school what they're likely to be hired at and what their likely outcome will be. Yeah. Similar to, you know, a lending company. Yeah. But there's no credit score for people, right?

You can't say, like, what is this person's potential? There's no inputs that you can take right now that can determine that. So nobody knows how to underwrite student risk. Nobody knows how to train students online. Nobody knows how to place students nationally at scale. And figuring all that stuff out is the hard part. Right. Plugging, throwing an ISA on the front end is the easy part.

Yeah. Okay. So you're just hoping that like you're much further ahead than people realize. Way further. Yeah. Yeah. And I'm sure there will be competitors. Sure.

But the thing that scares me isn't somebody adopting our business model that probably has happened that I haven't heard about and will happen a million more times. What will make us win is the student experience and how fast we can move in making that better over time. And that includes the outcomes that students have. So all of my time and effort and energy is focused on that. And that's really freaking hard. Okay. It's way hard. Yeah.

So, yeah. So you were profitable before you did YC, right? Correct. Okay. Or, yeah. Not usually profitable, but profitable. We were profitable by any definition. Yeah, there you go.

Okay, cool. So was there an element of fear around being copied that led you in the path of raising money? No. Okay. So we actually sat down with, a YC partner. And we said, okay, we don't need to raise money right now.

But if we do, we'll suffer X percent. So we modeled it out. We actually created a financial model and said, here's the dilution that we'll suffer. And with that money that we'll raise, we'll be able to grow like this. And therefore, you know, and it came out to something like

Lambda School will be 10 times bigger than it otherwise would be. And it will suffer, call it 15%. dilution. So that's an easy trade-off if you actually model it out. And that's the reason we have continued to raise. I mean, before we started Lambda school, I was like, I'm never raising VC again. Right. Well, we should tell that story. That was a cool story. Yeah. So, and now we've raised, it's a year and a half later and we've raised 48 million and it's not going to be the last we've raised. Right. But if you look at the growth rate of the school and,

the revenue, if you look at any number, all of those raises were a wise decision in retrospect. And there's a reason VC exists, right? When you have a company that can grow at extreme scale and capture a market and create way more value, that's why you raise VC. And the realization for us was realizing that Landis School could be a successful bootstrapped company, but if we raised and used a little bit of fuel, we could just be much bigger and much more impactful. I actually don't think it's dissimilar from student loans.

Like, there's a dynamic where it works really well for you. And there are other dynamics where if you don't know the terms of the deal beforehand, there are different incentives and it doesn't work out well for you. Right. Right. So this is kind of you got burned before with your first company. Yes. Yeah.

Yeah. So this, I mean, if I remember correctly, right, you were about to raise an A. and then it just fell through. We had docs done for an A, which is not normally when things fall through. It was a very abnormal story. So it was, I mean, it was December 23rd. And we were waiting for a wire any day. And then the gentleman who was leading our Series A called me and said, actually, we're not, we actually had his secretary call me and say, actually we're not doing the deal.

And I said, can you tell us why? And like, well, we're just not confident in the company. after a month of due diligence and going through all the paperwork. Man. I mean, our law firm was like, we've done thousands of these deals. We've never seen this happen. And we were like out of money. So that was, I didn't want people to go through the holidays planning on coming to work in January.

And then the company not being there. So I called the whole team on December 23rd and said, I think it's over, guys. I don't know what other options we have. and we had other people who would have funded us, but it's really difficult to like, hey, you know how we went down a month and a half with that VC? Well, they pulled out, so you should fund us. It's not, it's very momentum driven. So that's why I was very anti-VC. Now I think there are companies that should raise VC.

There are companies that shouldn't VC. It's just dependent on the circumstances and the details and what you're looking for. Yeah. Yeah, but then you left and you went to go work. for another startup, right? After writing the book? So I was broke. I was working remotely in the middle of nowhere in Utah during this time. So we go back home. It's not like their tech jobs, I mean, the closest tech job was probably two hours away, an hour and a half away. Out of money, well, I used all my savings to make employees and contractors whole because we were

burning it down to the wire with the company funds. And then my daughter, who was born, ended up in the hospital for a month. So we were just like, actually, she's only in there for a week, but it felt like a month. And the bills may as well have been for a month. So we're out of money trying to figure out how to recover. And I had written a couple of blog posts about growth as we were working on the company that had taken off. So I said, okay, we're going to turn those blog. blog posts into a book and I emailed everybody who had subscribed to my blog and said,

all right, we're launching this Kickstarter and I'm going to finish up this book. And the Kickstarter did something like $120,000 in sales. I mean, that's what I'm good at, right? How many people are on the list? A couple thousand. That's really good. Yeah, if there's one thing I'm good at in life, it's growing something quickly, building hype for something quickly.

Yeah. That's kind of my superpower to some degree. So use that in its fullest for the first time. And then a few companies saw the book and said, hey, come work for us. One of which was Lundup, which is a YC company. Yep. So it's still interesting because it's fairly risky, you know. Oh, yeah.

Like, you lived in the bay before. You know, like you lived in your car. Yeah. Right. And then you move back to Utah. you could conceive of getting a tech job, right, rather than writing your book at that time. For sure. Why didn't you do that?

So I kind of did both, right? It was just, it was whatever I can do to get money right now. And a book was honestly faster than a job hunt. Well, maybe that's not true because I could have, yeah, it's actually not true. I don't know. There's not a good reason. I had offers like within days. Yeah.

So I imagine the scenario is like, hey, here's something. I've been really interested in this idea and question lately of like, at what point did you kind of find your voice? And people talk about that in the context of art, but I think it's the same for entrepreneurs in that kind of confidence like, oh, I'm just going to do my thing. And I could, yeah. So it's funny. I had, as everything was winding down, I went one to one of our past investors.

and I was like, what, you know, what am I going to do? And I was paying myself, I'd started out paying myself 40,000, and I'd recently given myself a raise to 60,000. And I went to that investor, and I was like, how can I pull this out? I don't know what I'm going to do next. And he said, well, you know, you don't have any marketable skills. You're never going to make more than $60,000 a year.

So maybe you should go find an internship somewhere. I was like, okay. And it's like that's where your like mindset is, right? Maybe I can make $60,000 a year. Yeah. So I actually made sure that the first job offer I got was double that just out of spite. But it took me a while to build up the confidence to like, you know, people were telling me that, well, when you're the CEO of a company, your only job is to make that company successful. Right.

And if that company fails, by definition, you're not a good CEO. Right. You could debate whether or not that's true, but that's realistically one or zero. Your job is to be successful. Right. And so that calls into question, well, what do you actually do? What are you good at? Do you have a skill set? Yeah. And I'd never worked. I'd worked in like marketing before, but never in growth, growth. And so I was like, I don't know if there's anything I can do. Yeah. And I didn't believe that people would try. that I had like a skill set that was valuable because I had investors telling me you don't. And clearly they know more than I do, right? So it was a psychological, psychologically difficult time. And I thought, you know, the only way I can show people what I can do is by publishing this book, right? It's funny to think about that. I've never thought about that.

But in retrospect, starting a company, is by definition saying, I think what I can do is worth more than people will pay me for. Yeah. Right? I think that I can do something, whether it's because you can't measure. I think Paul Graham has an essay about this, something about measurement and leverage and how companies can't do any of those things very well. So if you want to get to a place where you can make a lot of money, get to a place where

you can measure it, get to a place where you have leverage. And so you look at pro athletes. like anybody can measure the number of dollars that Michael Jordan brings in, so it makes sense to pay him $100 million a year. Whereas even if you're the best software engineer in the world at a small company, they're not going to pay you $100 million a year. No. Google might.

Google has in the past. It spent $100 million to retain Sundar and stuff like that. But yeah, it's mispriced human capital. capital is kind of fundamental to it. Yeah, but it's also a quarter of your business. But that's, yeah, I think that's the key. That is the insight. It's saying, you know, there, if you look at any asset class in the United States, it's being traded on Bloomberg terminals instantly all over the world. Right. So you can trade, you know, 100,000 pounds of pork bellies without anything moving. And it's priced instantly. And there are a million people

trying to figure out what the accurate price is for those pork bellies. But for some reason humans don't have that, right? It's you get a job or you don't. And I'm, there, specifically, there have been women who applied to Lambda school. We get to the negotiation stage and they say, you know, I have always been paid X and we have to say, you're worth more than two X. So we're going to pay you what we actually think market is. And turns out they just always been underpaid and they didn't know to ask for more. And I think that happens all the time. all the time. Well, you don't, because the thing is when you start out, you're just applying for jobs, right?

And you take what you can get. And then like you mentioned before, many of these, you know, quote, great jobs are never advertised. Right. And so you anchor in this weird way that until you know people who make 400 grand a year, you're just like, well, the job says 75 grand a year. Right. And that's awesome too. Like, you know, if you're making 35, 75 is fucking killing it.

Right. Right. But then you're just like, oh, there's probably. like some ceiling at like 100 something. And you're like, the answer is actually no. Right. It just keeps going. But companies are incentivized to not publish that as well. Right. Right. No, it's a, yeah, it's a, and that's a funny thing when you get to Silicon Valley and you see, like, there is a desperation around top talent. And there are people commanding, you know, million dollar salaries and the companies will happily pay it. obviously that's not an entry level salary

but and there are people in the Midwest who are capable of being paid six figures in the Midwest that are making 20 in the Midwest and that's crazy to me like that's the problem we're really out to solve is why why is there no mechanism to help people realize their full potential both in economic standpoint and a non-economic standpoint and why is there like there's nowhere

near an efficient marketplace for capital. No. Now. Nowhere close. And that's crazy because if you look at GDP and spending and like where we can make the most improvement as far as efficiency goes, human capital is the most unoptimized asset class we've ever had. Yeah.

And that's insane. Well, especially in the States too, where people aren't working in factories for the most part. Right. Right. So aside from the tech jobs that you offer right now, what other opportunities do you see as like really great for arbitrage in that way. So right now we're hiring an economist to help us make sense of all that.

But some of it you don't have to be an economist to see. You know, you can talk or download data from the U.S. Department of Labor and see like how many people are applying for the jobs and how many jobs are out there. And there are some that have drastic like three to one shortages that pay really well and there just aren't enough people. So nursing is one of them. Every nursing school is at capacity because they have some. So there's something called the 90-10 rule,

which says that only 90% of your money as a school can come from federal funds. The other 10% has to come through people paying tuition or private sources somehow. And that is actually the thing that drives the education system. in the United States, that 10%, finding that 10%. So every school is just desperately trying to find that 10%. And however big that 10% is, they can blow the rest out with federal funds all day.

So nursing schools, for example, there's a huge shortage of nurses. Boomers are getting old. Millennials aren't going into medicine. But nursing schools are capped because they can't find that 10%. And so it's like, that drives massive labor shortages across the entire economy. And that's crazy, right? That's just a, that's just a market inefficiency. So, you know, we're not working on it right right now, but don't be surprised if you hear by the end of this year an announcement that Lambda

Nursing is going live and we're launching a nursing school. Or, you know, so we look at it backwards from a labor market perspective. Yeah. And we're starting out with where are the shortages in labor markets and let's fill those gaps. And it turns out some of those gaps are five million people at a time. And that's a huge inefficiency. And if we can be a toll road that takes a very small toll

to get you there, it's an enormous company. So, yeah. I think so, too. So, yeah. So, okay, I'm curious about then how you end up modeling that risk if the program, I imagine the nursing program might be a little bit longer

than nine months. Uh-huh. you're going to have to give people, I imagine, like you're talking about testing out these living stipends, stuff like that. How do you start modeling that risk? In the beginning, you make good guesses and you put it on a spreadsheet. And you give yourself a margin of error. You lose some, yeah. Yeah.

I mean, it looks like any other fintech industry where you start out saying, all right, we're going to make some loans. We don't really know how it's going to work out. We're going to learn from that. And over time, we'll have a really predictive model. we're getting better on the just income share agreement for education side for software engineering, right? We're not all the way there, but we to some degree know what can predict what the returns will be given the macroeconomic environment staying the same. So you kind of just have to like create terms that make sense and figure it out as you go. And then, you know, when we talk about a moat, over time, you can better.

predict what repayment will be. You can better predict how much money you're going to make. You can write a tighter model. If you can write a tighter model, you can bring down the cost of capital, you can bring down your cost, or you can increase the services that students get. There's just a fundamental advantage to having done that before. And now we've got a couple years head start on everybody else. And we can pretty act, I mean, not with 100% accuracy, but we have a pretty good sense of how successful a student will be by the time they're starting or a couple months in. And, you know, we have, we're hiring teams that are going to focus on just that. How can we shorten that feedback loop so that we can determine very quickly how successful people will be?

Can you kind of quantify someone's work ethic or grit? No, but they all along the way will spit off data that you can use to try to approach that. So the numbers are an output, not an input. But, I mean, similarly to a startup, right? Like, you can't quantify the grit of founders, but you can look at what they're doing. And the results of that, you could retroactively say, yeah, that looks gritty. And if you get enough data points, machine learning is actually, like, that's one of the places where AI makes the most sense is saying, you know, let's take all of this data and let's figure out a model that maybe humans couldn't put together. but computers can figure it out.

And pretty soon, you can underwrite the likelihood that a person will be a successful software engineer before they've paid a dollar. Yeah. And then that changes everything. So someone asks us questions, I want to credit them somewhere. Oh, no, I know who it was.

Yeah, David Kofidwind basically asked, imagine a market dynamic where it's mostly white dudes getting hired for software engineering jobs. Is it possible that you're, model could learn in the wrong way and say, only select white dudes for Lambda school. So it could if that's what we're actually happening. That's not what's actually happening. The reality is if we can make someone to be, make someone a strong software engineer,

they're getting hired anywhere. But I mean, there are ethical concerns that we have to be aware of, right? I mean, I used to work in lending. You have to be very cognizant of that in lending because, for example, if you use zip code and you say, look, the people from this zip code tend not to repay, zip code is very directly correlated with demographics and there are ethical concerns that you have to be wise about. What we're seeing right now is actually the reverse to some degree. So obviously not, you know, it's not causation by any stretch of the imagination. but we can tap into markets of completely untapped talent because we're not charging anything. Folks who are brilliant just haven't had opportunity before.

And so we actually over-indexed to those types of communities. So we're, I think, as a school, we're less than half white, which is not the traditional makeup of a code school by any stretch of the imagination. But that's not because we're like intentionally, you know, skewing it. admissions that way. It's just because that's where a lot of untapped talent is. We try to find and train that untapped talent. And companies are happy to have it. In fact, it's a huge need for companies. Oh, for sure. We don't sell ourselves as a diversity solution, but it just so happens that our students who are great engineers are generally speaking more diverse than Stanford would be.

Yeah, that makes sense. But great question. Yeah, no, it's really interesting. Interesting. I was, yeah. Yeah. So you guys now are remote, right? So like all the coursework happens, live stream. Do you see a version where you become centralized? You buy, I mean, like, my buddy, he worked at a college in Vermont that just went under, right?

I imagine you can buy colleges at this point. Yeah. Yeah. Do you see a world where you're like, I mean, maybe probably with a nursing program, you'll have to. You would have to buy a. Yeah. I mean, it changes the cost structure. So the less we can be in person, the better.

We have some experiments that we're running where we're actually housing people and group housing together. So they live and work in the same environment. They're still taught online because we don't have to have the density of instructors in one place at one time. We can just get students together. I mean, I've looked at, hey, can we just buy a summer camp and run camp land? and have a bunch, like, that'll be awesome. Yeah, great. We just have to, like,

decentralized housing is much cheaper than centralized. So students would have to be willing to build that into the cost. So what I like to say is, you know, you look at Amazon. Amazon in the beginning was saying, no, we're entirely online. We're going to be focused there. But once that's nailed, then you start to play with other stuff will probably be the same way. But the core of Lambda School for the foreseeable future is online, whether students are in the same place or not. We actually have a monthly meetup in every major city in the U.S.

where students all get together in person, and that's working pretty well. So there may be more of that, especially as we have more density. But the educational experience will probably always be online. Yeah. I mean, this is what I've heard from, you know, like the guys at Zapier who are just saying, You basically have to be intentional and build that remote culture there. Very intentional. Because if you don't, you could easily see a version where, oh, you weren't in class today,

then you don't hear the thing. You didn't hear the tip. Right. Yeah. And I think you have to do that as a company, as a school. Like, it's not something that happens on accident. Yeah. And in the beginning, you know, we started out by figuring out, okay, here are all these

people who could be watching Netflix right now. So it actually goes back to our instructional design where, I mean, if I think back to my college classes, maybe 50% of people were paying attention if I'm being optimistic. At least, I mean, this was, you know, call it 2010, at least 50% of the class was on Facebook any given time. Have you seen those photos from back in the day when Facebook just started? So, yeah. I'm sure. I don't think it's Photoshopped, but I imagine there's a real one out there somewhere where it's like from the back of the class and the professor's talking and like it's 70% of the screens are Facebook. Oh yeah. Oh yeah. Yeah. So,

For better or worse, I actually think it's a secret advantage is that we can't rely on the crutch of just like looking at somebody and seeing what they're doing. So we have to use data and software and instructional design to make sure everybody's working on the right thing at the right time. So, I mean, yeah, it's a different world that you have to build for and you have to build it for it from first principles. It's like you can't just tack that on at the end. Oh, by the way, we're online. That does not work. Well, most MOOCs are, yeah, disaster. Correct.

10% or something. Yeah. Of the good ones. Yeah, the good ones. Yeah, yeah, yeah. It's crazy. So Dave Dawson asked several good questions. He says, you appear to be on the successful path now.

We'll just take that for granted. Sure. Was there a point early on in Lambda School when you wanted to stop? There was never a point I wanted to stop. I mean, I would, if you paid me minutes, minimum wage to do this forever, I would do this forever for minimum wage. Maybe I'm just to say this for a master'sist or something. You might have to move back to Utah.

Yeah. But there are definitely times when it was just like, this is not going to work and we're screwed. And I mean, in the beginning, it was like all those other schools were right. Like when we started, everybody said, A, you can't teach people effectively online. B, you can't teach people effectively without skin in the game. They have to put something up. Yeah.

You know, C, people aren't going to get jobs if they don't have a network. Like, you can't accept the categories of people that you're accepting and have them be successful software engineers. Which, like, looking back, like, a ridiculous thing to say. Yeah. But everybody believed that. Like, the entire Code Boot Camp industry believed that online, was not very effective.

Because they're all like, we have an in-person class. I'm like, yeah, let's like throw it online. And, oh, it didn't work. Well, clearly that's fundamentally broken. Yeah. Everybody who had ever tried a free upfront thing didn't use any sort of filtering other than a paper resume. And so, and people would show up on day one and they wouldn't show up on day two.

And they would say, oh, that's clearly isn't working. And so, yeah, there were a whole lot of times when we. said this, like, maybe they were right. That was the real reaction. Like, maybe we were wrong this whole time. And, you know, we're out here saying, hey, you guys are all old school. You're all doing it the wrong way. We're going to do it over here. Well, maybe, maybe there's a reason that hundreds of years of education have been, have worked this way. Yeah. But really, I think what, what happens is, like, we don't have another option, right? We have to figure it out or we die. Yeah. And that's a very powerful motivator. Yeah.

not getting a real job. Yeah. Have you ever completed an online course before? I have not. Right. Okay. And in fact, we were talking about the book. The book was available as an online download.

Yeah. And one of the things that made me want to build in this model, and I sold the book for a hundred bucks. Right. It was not cheap. No. 50% of the people that bought the book ever downloaded it even. So there's, you know, between looking at that and looking at MOOCs, it was like, has anybody ever figured out how to make education actually successful?

Yeah. Or are we all just opening the top of the funnel so wide that some people are going to fall out the bottom? And like, that's become my thesis is that there is some percentage of society who are autodidacts and they just have a ridiculous advantage over everybody else. And so part of land of school is how can we help? the other 98% learn how to be autodidactic, how to see a problem, approach it, figure out, figure out a solution. And I don't, so we approached instructional design with no assumptions. And I think every school ever has looked at everything and said, okay, well, here are the successful students. So our job is just to weed everybody else out. Yeah. When really, like, why are those,

Why are the other students unsuccessful? Is that because they suck or is that because you suck? And we've found that it's really just because you suck most of the time. And it's really easy for schools to just look the other way. I have been wondering, I'm doing a duolingo right now. And I've been curious about, I mean, it's cool, but it's very open. Like you can just choose where you want to go. They like motivate you a little bit by keeping a streak up.

but I'm actually a little surprised that people, if people finish it, because I'm doing it every day, but I think if you guessed what their completion numbers were, you'd be right. Yeah. And I think about, you know, when I went to college and I had a class and I showed up and it was a Shakespeare class, I think about the work that I put in in that class and then the work that I put in outside of that class, there's no way in hell I put in as much work studying Shakespeare on my own as I would in the four walls of a university. But I don't think that's because there was a physical campus with a professor wearing a

tweed jacket necessarily. That's just because there, there was social pressure, there was instructional design, there were external mechanisms that forced you to put in the work. So we had to, like, that's what we built into Lambda school. But you also have to make it fun. Totally. You have to motivate in that way. Totally.

It's why I learned to program. It's why I learned to video edit. It's why I learned everything on the side because you had a clear goal like, hey, I want to build this thing. And it's enjoyable to build the thing you want to build. So you look at, as an example, computer science programs, right? They have ridiculous dropout. And they're proud of that.

But in my opinion, it's because they start like writing Java or they start writing C. And you have to go semesters before you get to a point where you can write any code that you can see or touch or actually. play with. And so, like, yes, you're getting the fundamentals, but Lamb's School works the other way. So you have a site that you can play with the first day. And it's not, you know, you don't understand the fundamentals of programming. It's crappy HTML and crappy CSS.

Yeah. But you can see it. You can touch it. You can play with it. And I think there are a lot of people, if not the majority of people, that learn that way. Yeah. And they're the people who aren't going to become researchers, and that's okay.

And just because you start. at that point doesn't mean you can't drill down until you're doing the fundamentals. Like, you do need to know how to write C to be a good engineer. You do need to know how memory management works. But maybe let's not start with memory management as like an entry level point to software engineering. Yeah. Now, I did a year of CS in even high school. And it was just like, what are we doing this for? Right. What is the point of this? Right. And there are a few people that are interested by that enough that they can carry on. But that's not enough people to build the world of software that we need.

Yeah. So, yeah. Yeah. So Dave asked another question that I want to cover, and that is what keeps you up at night now? So we agreed as a team to no longer share the number of students that we have enrolled. But it is not a small number, and it is growing at an insane pace. Yeah.

We'll soon be measuring land-to-school scale by percentage of the overall number of students learning to program every year to give you some context. And being able to support that kind of scale effectively is what keeps me up at night. Mostly specifically hiring, mostly hiring executives right now who can, build out 100, 150 person teams beneath them. Those people are difficult to find, and it's a very important decision. And we need like five of them yesterday. And then, you know, on the individual contributor side, we're probably, we'd need to hire like 100 people very quickly.

And that is hard. But that would be remote, right? those jobs would be remote correct yeah so if you're looking for a job yeah oh please I think we're hiring for like 50 positions right now lambda school dot com slash careers yeah please please please uh all right so I want to talk about

like two other topics so one uh actually really like this one deo colliovo asks I've made remarks I do not agree with that's a quote from your Twitter bio yeah you're prolific on Twitter if people don't follow you What is that one remark you wish you didn't have to disagree with? One remark that I...

So I think what he's trying to get you to say is what is something that you may have had to, like, say or go back on in a perhaps like politically correct or like environmentally correct way. Hmm. There are a lot of layers to that question. That's a tricky one. Or maybe even a core belief where you're just like, oh, maybe I'm just wrong here. So the one that I go back and forth on the most is as a company being remote versus in person and the tradeoffs of that. So we bring people together a lot. And I see the advantages of that.

And a lot of our executive team will probably end up being in person. And so it's, I would say that. Wish that remote work were at this incredible place where there's no tradeoff. And I think that's something that everybody wants to believe. And some people do believe. But until you're kind of in the CEO or executive role trying to bring a company together, you don't see some of the tradeoffs. Yeah.

So I mean, I would love to be able to move anywhere and not pay. what I pay for rent and by extension not pay everybody else but I have to pay them so that they can pay rent. But I still think and a lot of our students come in wanting to be remote. A, I don't think remote work is built into enough companies yet where I would be comfortable telling somebody that I love that they should start their career as a remote junior. software engineer. B, I think we're still figuring out what the right dynamic is of in-person versus

remote, like as a tech industry, what the trade-offs are and what the ideal way to do that is. My first company was entirely remote. And that's really hard. When you're trying to come together and create something, but nobody's in the same spot. They're just trade-offs. That said, all of our instructors are remote, all of our career coaches are remote, and all of our students are remote. And because we've built around that, or we've built into that, it doesn't matter. But I think the two things that are most, like my

most controversial beliefs, maybe, or most seemingly, like, don't seem to jive with each other is that I think the best high growth companies are still going to be built in Silicon Valley for right now, or at least they'll have an executive team in Silicon Valley. But also, I believe the best schools are remote. And I don't think that's a contradiction, though it certainly feels like one. Yeah. Yeah, that's a good one. Yeah, just think about Yeah, no, I was listening to Michael Seibel talk yesterday, and he said he's had his mind changed about remote companies given the success of, you know, GitLab, Zapier type companies, right? But the way he puts it now is that it has to be one of your like core things, one of your like core innovations. And if you're thinking like maybe we have the energy or the insight to innovate on a couple, maybe three categories, like are you willing for remote work to be one of them?

Yeah, I think that's exactly right. You can only solve so many problems as a company. And I mean, I've talked to the CEOs of both Zapier and GitLab in the past couple weeks. And they think about that all the time. Yeah. And the nice thing is the talent advantages that you have when you do that are enormous. You know, when Zapier is like, yeah, we've got like this guy in Ohio and this guy in Nebraska. It's like, man, you know, I'm hiring.

but at the same time, the trade-offs are that if you're, you know, you have an office in the financial district and you're hiring five executives, there are 100 companies that have been high growth that, you know, the funny thing is a lot of the people who they join a high-growth company, they know how to grow it, they've figured it out, now they're successful and they have less incentive to move than other people do. Yeah. So, like, I think the pool of high growth executive talent with 15 years of experience growing high growth companies is still largely concentrated in San Francisco. Like if you need, or call it Silicon Valley, whatever.

If you need 50 people to do that, it's really difficult to find 50 people in Ohio to do that. It's still difficult to find 50 people anywhere. But yeah, if you've built that in, like GitLab and Zapier have you know in other companies like InVision or whatever else they've chosen that as their path and they have to spend a whole lot of time thinking about and focusing on and optimizing for that maybe that's a tradeoff where they have to spend less time hiring

or less there's a less competitive hiring market I mean the instructors that we have now there's no way on earth we could could have had a similar quality of instructor base in San Francisco. They're just, there's fundamentally is not. So it's, yeah, it's a tradeoff. Yeah, it's difficult. That's a tricky one.

Okay, so the last thing I want to cover is I've heard you mentioned in a couple interviews that the market is not very good at measuring product quality. Correct. Or something to that effect, right? Yeah. So I think what I usually say is specifically analysts. So people who are and, you know, if you look at public companies or or VCs or whoever else.

And another way to say is, I think PG has said that product is, or revenue is a very, very trailing indicator of product. So I think, and so back when I had spare time, I would play the stock market a lot. And I think people just don't have a very good, there's no way you can quantify product quality very well. So people who are looking at things from a quantitative standpoint, underestimate it every single time.

I mean, I look at some of the classic companies like, you know, look at the YC companies, the Airbnbs, the Stripe. They all had competitors. Some of their competitors had a head start. Some of their competitors had more money and more market share at different times. But there's a reason those companies win and become durable companies. I know Dropbox as an example.

Well, it's one of my favorite Steve Jobs videos. I don't know if you've seen this one before, but it's like a very hot burn on Microsoft where he's just like, listen, they're good people. The problem is they just have no taste. Yeah. And so what I was curious about with you is like, do you think you can teach taste in a school? Because it's very much, it's related to products. It's related to listening to users.

It's all of that. But there's something like more ethereal about it, you know? I think that the main thing is having thought about it a lot and then having seen it and having noticed it when you see it. So for example, we use Slack as a school. So we've got, I could tell you how much we spend. That would tell you how many students we have. It's a non-trivial amount of money for Slack. and people say, you know, why don't you use, you know, competitors or, you know, just use IRC.

But like, it's very, very subtle the work that has been put into Slack. And Slack has, it's not perfect, right? But as a product, you can just tell. And so it's a whole lot of, the way I like to think about product is a whole lot of subtlety built up over time to the point where it becomes an advantage. And if you build up a lot of those advantages over time, it compounds to some degree. And I think because it's difficult to measure and it's so subtle, I mean, if you, for example, if you drive a Model S and then you go drive a similar cost Jaguar, for example, the Model S, like the materials are worse. The build is probably not as good. they're not as good at like assembling the pieces but just the experience of that car versus

the other one it's not even close so Tesla is probably the canonical example of like product matters way more than analysts can measure cool so you would just think expose students to this over a long enough time frame I think you show people like the when I started to realize it is when I had a few product-minded people, like, point out some of the subtle details and be like, you find yourself looking for one app or one piece of software or using something more often. Yeah. And it takes somebody to sit down and point out, like, you know why you're doing that, right? It's because this is happening at this specific time in this specific way.

And you're like, oh, that was very pleasant, actually, in retrospect. And pointing that out and then beginning to look for it is when I think you start to notice. the key differences. Fair enough. Yeah, I like being critical sometimes, especially products. All right, man. So if people want to sign up or learn more about Lambda school, where should they go? Yeah, LambdaSchool.com. Sweet. And you're on Twitter at... At Austin. Cool. With an E. Like the feminist author, not like the city. All right, thanks for coming in. Perfect. Thank you. All right. Thanks for listening. So as always, you can find the transcript and the video at blog.combinator.com. And if you have a second, it would be awesome to give us a rating and review wherever you find your podcast.

See you next time.