March 5, 2019

Lambda School’s Austen Allred on Solving Problems in Education – Problems Sighted

Check out the Problems Sighted Episode Page & Show Notes

Aligning incentives is critical
- Schools and their students are usually not aiming for the same thing
  - Schools may want to “expand the minds” of their students, while students simply “need a freakin’ job”
Lambda School aligns incentives with students by enabling them to defer tuition until after they’ve landed a job
- After students graduate and get a job, what happens?
  - They give 17% of their salary back to Lambda School for 2 years, capped at a max of $30k, but only after they’re earning an income over $50,000/year
One huge problem with massive open online courses (MOOCs) – the completion rates are incredibly low
Student debt is growing by 0.1 – 0.2 trillion dollars a year

Schools and their students are usually not aiming for the same thing
- Schools may want to “expand the minds” of their students, while students simply “need a freakin’ job”
  - This causes plenty of negative externalities
    - An externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit
Austen considers it likely that there will be an unbundling of university offerings to better serve specific student goals
Lambda School, for example, is specifically designed to help students find technology jobs

People originally saw an opportunity for optimization
- The idea was to find the best professors for different subjects, build amazing courses around their lectures, and put them online for anyone to take
  - Surely it’d be better than having plenty of different mediocre professors teach at different institutions
- However, the completion rates of these courses are incredibly low
It turns out that the lecture isn’t as important as what happens around it
- Working with others and having adequate social pressure are critical in helping you finish a course
  - MOOCs left that key component out of their instructional design

Fundamentally, the school tackles a human psychology problem:
- “Humans have a really hard time pushing themselves to do difficult things and to keep continually pushing themselves beyond what they’ve done in the past“
Lambda School aligns incentives with students by enabling them to defer tuition until after they’ve landed a job
- After students graduate and get a job, what happens?
  - They give 17% of their salary back to Lambda School for 2 years, capped at a max of $30k, but only after they’re earning an income over $50,000/year
- This structure is made possible through Income Share Agreements
Lambda’s success is completely dependent on their students succeeding
Because of this alignment, they’ve forced themselves to innovate and create a “full-stack” solution
- Re-imagined admissions, the school itself, outcomes, financing, etc

An Income Share Agreement (ISA) is a financial instrument that allows parties to pledge a portion of their future income
- This is how most students pay for Lambda School
While it’s a powerful tool for aligning incentives, it doesn’t solve all problems
- Implementing an ISA in colleges (like Purdue has done) is a step in the right direction, but it also creates several challenges
  - Most revenue immediately goes to $0
  - Schools have to figure out a selection process to find the right students
  - The instructional design has to account for the trade-offs of online learning
Austen believes you need a full-stack, vertically integrated re-thinking of how things should be in order to make it work at scale
- “Chevy can definitely produce electric cars, and that’s a great thing. But it’s still not a Tesla.”
- That implies that every career path potentially represents an opportunity for Lambda School’s integrated approach

“Student debt is growing by 0.1 to 0.2 trillion dollars a year. That’s not okay.”
- “We’ll see the impact of student loans on the economy for another 30-40 years”

International credit infrastructure
- More income verification
  - It’s really hard to use ISAs in other countries, or even extend consumer credit, because the infrastructure just isn’t there yet
- “If you can figure out Income Share Agreements in India, please give me a call”
International arbitrage for code reviews
- Find really talented engineers earning low U.S. dollar-denominated salaries, and pay them to review code
Immigration as a service
- Making immigration to and from various countries clear and easy is probably a billion dollar opportunity

These notes were edited by RoRoPa Editing Services