I feel like I can rule the world. I know I can be what I want to. I'm from all in it like a day's all. So let's travel never looking back.
I can feel like I know. Okay, so Austin in the hole. Is it? Oh, yeah, there's a blue so less than.
Yeah, so also over here. He's a founder of Lambda School, which I've just been shamelessly pimping on the podcast for like a year. So you probably already know that. He's a interesting dude.
And I don't know which also we're going to get. There was controversial Twitter, Austin. That was around for, I don't know, like a year and then like cleaned it up a little bit, tightened it up as the company was growing. So I don't know.
Are we going to get tightened up, Austin? Are we going to get Lucy Guzy? You can request. Lucy Guzy Guzy Guzy.
Look, I'm seeing him as a listening right now. So we're good. Right. I'm in it for the clicks of a listen.
So, you know, the more controversial and interesting things you say, the better. So can you give Sean and Austin, can you get background? What is his business? It's called Lambda School.
What is that? Yeah. So we train people to be software engineers and data scientists in live online classes, but we don't charge anything until you're making more than $50,000 a year after the program. So the idea is we can be risk education for people.
Then you can kind of go for the education that you ought to. I mean, incentives are aligned between the school and the students. So you don't get paid unless we don't make money unless you're successful. And that's kind of how we think it should be.
So like a free school and you get a percentage of the revenue that the student percentage of the salary that student makes to a certain point and that's how you get paid back. Yeah, that's right. So basically we get 17% of salary if and only if you're making more than 50k a year. And then once you hit $30,000 or 24 payments, monthly payments, whatever comes first, it's done.
So it's either two years or 30 grand, whatever comes first. And if you don't get hired making more than that amount, then we never make anything. And give people a sense of the sort of scale of, because it's been pretty wildly far more and kind of just getting started. But give people a sense of how Lambda school has grown over the last few years.
Yeah, I mean, we started, what was it, three years ago with our first 20 students. And now we enroll 300 to 400 students a month. So we're talking in the realm of, that's a lot of software engineers, actually. It's not the biggest university by any stretch, but we're placing more software engineers and we're thinking about the UC system, right?
All the UC schools. We're a little bit bigger than that as far as software engineering goes. Then all the UC schools combined. Correct.
Wow. That's kind of awesome. Wow. So the math is, if you're adding 300 a month, that's 3600 a year.
If it just stays the same, you can earn 36, I think it's a $36,000 off of that. So that means you're adding $130 million of revenue or a potential revenue lifetime revenue. Sam, did you just flexing that mental math right now? Yeah, I wish it were that simple.
Okay. I mean, so let's say our average student gets hired making 70k, right? So that student will pay back just less than 25k, but will round it to 25 for sake of simplicity. So if we're getting 4,000 students a year higher, then that's 100 million a year kind of overtime run rate.
But you have to finance those ISAs. So we basically borrow against them and we pay a lot for that. And then every student that either drops out or doesn't get hired, we don't get paid for. So those cuts are, you know, that's a difficult thing, right?
And so you think about like a university that had like a 75% graduation rate and a 75% hiring rate. Those are pretty good numbers. Early quickly, you're at 50% of the students who enrolled were successful. So those multipliers eat in really quickly.
And that's the name of the game is making it so that as many of the students who you can possibly make successful are successful. That's why the incentive line matters, right? Because traditional school, you enroll and whether you get a high paying job or not. You know, of course, they'd like you to get a high paying job, but they don't need you to get a high paying job.
They got their money either way. And so for you guys, it's not that you're nicer people than everybody. It's that the business model actually depends on you successfully getting people high paying jobs, which is what they want to. And so like when everybody gets excited about Lambschool, they always talk about ISAs, which is like, you know, this mechanism, it's income share agreement.
But that's kind of missing the point. It's more about the fact that your success is tied to the success of the student in a way that a normal university is not. And that's why your product is going to be better. That's why you're going to train them better.
That's why you're going to hustle harder to get them jobs. That's why you're going to filter candidates better because you needed that to work for your business to work. And that's not the case for a traditional school. Totally.
Yeah, there are a few points where we've kind of looked around the room at my executive team. And our executives are like, they're the best in the world at what they do. And you look around and say, you know, we are at a point right now where we're doing a pretty damn good job. And if our only incentive was to produce a report at the end of all this or something, we would be patting ourselves on the back.
But we're looking at our business model and saying, oh my gosh, no, we need to drive so much harder. We need to do so much better to get to where we want to be. So yeah, I think you're right. The idea is cool.
But the ISA itself isn't that interesting. I mean, it's nice to, you know, it's a more flexible financial instrument for students. But the incentive alignment really is the key. And we'll dump millions and millions of dollars into getting our hiring rate up a couple of points if the math works like that.
How old are you, Austin? I'm 30. You're only 30. Wow.
Okay. How much money has the company raised? Just over 120 million. And so you guys have only been around for three years.
How the hell does that happen so fast? When I first talked to Austin, I remember you had great. You know, we were talking. I was like, I want to invest in this company.
And at the time, I remember you had in total graduated 80 students. I think there was like 80 students total in the pipeline and clearly graduated and not graduated yet. And I remember that same math you just did where you got to like four thousand students to get to about 100 million in revenue. That was the math I did.
I think I got all of the variables wrong. Like the wrong, like the assumption of how much you keep. I had the wrong assumption of whatever. But I also got to 4000.
I was like, oh, he's going to get to 4000 for sure. And you know, you're underway now. But anyway, sorry, that's how great that wasn't that long ago when it was like 80 was the total number of students who had even experienced the goddamn thing. Austin being 20 wasn't that long ago.
Austin losing his virginity wasn't that long ago. That's really what he needs to know. They're talking like the $100 million range business. Well, I mean, to be clear, that's like $100 million of like, you know, I almost think about it like GMV, right?
Like we don't. It's cute to say, look, if we get 4000 students tired, then we'll eventually get that. Hey, we're not getting 4000 students here hired. We're a fraction of that.
B, the financing mechanism is probably the most important and most misunderstood aspect of Lambda School. Because the cost is, you know, if we could raise half a billion dollars and then just sit there and wait for that $100 million to come in, we could do that. But that's not how it works. Right?
Like, so our equity investors do not want to put in, you know, a bunch of money to buy ISAs. They want to build a technology company. And so we have different different pools of capital that are for basically borrowing against the ISAs. And you have to, you know, so you kind of take what is the expected revenue per student at, you know, early on in the program and then you discount that a little and we can borrow against that.
And then after that, it starts to trickle in over time. But how big will this get, you think? I mean, multi-billion dollar your business? Yeah, for sure.
I mean, so I think in terms of students, right? So essentially, I mean, it's not going to be easy to get there by any stretch, right? Like, there's a reason no one's done this before. And that's because it's just really freaking hard.
But from a kind of macroeconomic standpoint, right? Think about how many people there are in the United States who are making $30,000 or less, who could be making $50,000 or more. And you can move those numbers to 40 and 70 or 30 and 50 or whatever, right? Like, the number is outrageous.
And think about how many companies would hire those people if they had the right skills that number is outrageous too. So the difficult thing is you have to close that full loop. So you have to take someone from having never heard of you to hire and repaying, which is like three different businesses baked in there. And then you have to have that right match, right?
So it's not too dissimilar from a two-sided marketplace in some instances where you have to find the right person, you have to find the right company, you have to train the person, then you have to get the person there. And there are different mechanisms of doing that. But it's really difficult to do, but if it works, it's really, really powerful. And last question for me on this, how many people work there?
Right now, 170 in change. Yeah, that's just a lot of stuff to do in three years. Well, that's when we're getting to the corner. We have full-time part-time TA.
We've got about 300 or 400 of those. So it's a big organization, for sure. When we were going through the acquisition process, I was like, oh, it's either going to be this big company, this big tech company, that big tech company, this big tech company. And I was like, where would I actually want to work?
And I was like, the only company I'd want to go work at to earn out of any deal would be land school. That was the most exciting, it was like, top of my list. So I emailed Austin. I was like, hey, you want to buy my company?
It has nothing to do with what you guys do. But we've done some live video stuff and we're pretty smart. And he's like, all right, well, you know, we did that. Yeah, you like that.
And then I was like, you know, we'll take, you know, 7% of land of school. And he was like, yeah, no reply. But I was like, that would have been, you know, I think every kind of five years is like a handful of companies that are really interesting to work for. When I moved to Silicon Valley, those were like, Stripe and Angelus, I thought were the two most interesting companies to work at.
They were small at the time, but I thought they might get big. And right now I would put Lambda School in that bucket with, I don't know what else I put. What do you think, Austin? What are the other like, I'm curious who else you're going to name?
Let me think. Like I think about who like the hot flex bar. I think flex works kind of interesting. Dude, I don't want to hear that anymore.
That's been there. Done that. We all know, we all know that's bad. Yeah, four years ago, it would have been the one like every day in Uber at, you know, in the 2009 rain, 2010, 11, whatever, that was like the time when those were really exciting.
Yeah, I think, I mean, when I was starting land of school, so, you know, a couple years ago, the ones that I was like, Oh my gosh, these are going to be incredible companies. Air table. I was just like, Oh, that's, that's going to be a winner. You could already tell.
I'm sitting with Notion for different purposes. Super human. I was just like, Oh, finally, someone's making a great product in this super, super obvious space. I'm in love with Rome research.
I don't know how big the business gets. But I think it's super interesting. It's still super early. I don't want to hear about Rome research.
I can't stand this shit, man. I like because like, it's like, I'm sure the creators and cool products seem cool. It doesn't make sense to me how a note taking app can. So I'm a small time.
I'm a part owner in a small note taking app and it does 80K a month in revenue, which is probably what Rome does. And I'm like, wait, what? How does this company raise at a multi $100 million valuation? I don't get it.
I don't get how you could do that with the $5 monthly. Well, companies that VC companies that VCs understand in general get like a 30% premium on everything, you know, because they can explain it better to each other. And so they all get it. But yeah, Sam, this is good.
The more you it's like when you insulted Gen Z and they all came for you and they all discovered our podcast. It's the same. It's all the Rome research cult and they'll all be here to defend themselves up in arms. It's crazy, man.
I don't get it. Like, here's what your computer gets. My pen of paper. I don't get it.
But whatever. Also, you should tell people about, I know you probably told a story a bunch, but frankly, it's kind of a great story, which is you're like, I was sleeping in a car before I started Lambda School type of thing. So explain that story. So you come to San Francisco, you want to live the dream and you, why were you sleeping in a car?
Yeah, so I mean, going back a little bit further, I was going to college as a BYU in Provo, Utah. And I was just kind of like, I always knew I wanted to do something entrepreneurial and I'd always love technology. And for some reason, it didn't quick until I was like 20, that that was like a thing that you could just like go run tech companies. I was like, Oh my gosh, that's awesome.
And there's this place called Silicon Valley. And so I know, and the Provo scene, like the Utah startup scene is getting there now, but at the time, there'd been kind of on the chair and there was word perfect, but it was a very sales driven culture for a variety of more many reasons. But I found that like everybody was just like, Hey, let's build a marginally better crappy product and let's just go sell it like crazy. And I mean, that works, right?
Like that totally works. But I wanted like, I had a real love for product and design and like the way things worked and like, you know, changing the world in a way that you can't just like, you know, let's make a new SaaS app for dentist and like, let's sell it like crazy. So I was pretty frustrated that I couldn't find that there and I wanted to be a part of that. So it's even more than just Silicon Valley is like, I want to be in somewhere where they make great products and they make great stuff.
And you know, the culture in Utah was like, yeah, we'll find a developer off the shelf and they can like build the thing so we can go sell it. And like, that was where the excitement was. But I didn't have any money. I didn't really have a job.
I didn't really have any, you know, super tangible skills. And I saw him like Hacker News. There's some guy who like re like re like re works his Honda Civic to live in it. And I was like, Oh my gosh, I have that same two-seater Honda Civic.
It's crazy as it sounds like I started looking at like rent in the Bay Area and it was like 800 bucks a month. And I was like, you can afford 800 bucks a month. That's ridiculous. For what?
Yeah. So I just put an air mattress in my car and drove out there and said, I'll figure it out and eventually did. It worked out. What was your job before Lambda?
I did like some marketing agency stuff, like some SEO stuff when that was a thing that people, like that was a career path for a while. It was like you do SEO. In San Francisco? No, just freelance.
Like there's actually a company that I got connected into randomly that they needed like SEO copywriting. Right. So it wasn't like real SEO. It was just like, Hey, we need content about this thing and we don't even care what it says.
So we just need like, we just need a monkey to pound out some words and I'll pay you like $5 for every 500 words that you pump out. We need two words and 25% of them need to say the word email. Totally. And I was working with a buddy on it and he probably had the better methodology.
He would get super high and just like crank stuff out like crazy while I was tripping and nobody cared because it said the right amount of words and the right, you know, phrasing. But then you like you like thought of this idea and then you went through Y Combinator and that's kind of how you go. So you go to San Francisco, you're in your car. What happens between there and Lambda School?
Yes, actually I started another company between there and Lambda School. So that was a, we're saying, Hey, social media is all over the place, but it's not fact checked and we're still relying on these reporters who are at the end of the day, just like random people on social media trying to like figure out what's going on. So we built like a crowdsourced newsroom, kind of a Wikipedia for journalism, basically, where you can go in and the product would let you like pull in sources and fact check them and kind of try to do that in real time. It was semi working, but I mean, it was so far from actually working.
I had a bunch of users, but far from a revenue model, which turns out is you want to be close to a revenue model. So it raised a little like half a million dollars burned through that and there's a long story and it ended up going to zero and then went to work at a company called Lend Up, which was a kind of YC company in San Francisco. So that was basically me moving from, Hey, I'm like 10 steps away from money changing hands. I want to get as close to the money as I can.
And so I kind of went down the FinTech E route, which is a lot of why Lend Up School worked because I was always thinking about risk and capital markets and how you can move money from one place to another and what the IRR needs to be to make that happen and how securizations happen and stuff like that. And then when Lend Up School was just getting started, I was like, wait, there's got to be a different way that you could think about this risk and shift it around and cool it and that kind of thing. And you, you're Mormon, right? From, I just went and lived in Utah for, I mean, I lived in San Francisco.
I gave up my place. Now I just live on Airbnb and I picked Utah because the Mormons fascinate the show out of me. Sean and I, our friend, sometimes when I'm out or Sean's out, he's our friend named Stu sub's in for one of us and he converted to Mormonism, which is weird. No one in his family's Mormon.
Like I've never heard of that. And so he kind of like taught me about it. And then I also had a friend of a friend with Josh James, the guy who started out here and he like, I'm like crazy fascinated with Mormons. And the culture there was so unique and interesting.
What is it that makes this high penetration of interesting startup entrepreneurs? Yeah, I mean, it's a few things. Like the, for me, the most formative period of my life and by a lot was serving a mission. So those of you that don't know Mormons when they're, it used to be when they're 19, when they're 18 now, you basically put in your papers and you say, Hey, send me somewhere and I'll go teach people about Jesus and do service all day, basically.
So I put in my papers when I was 18. And then what they call admission calls. So basically the letter comes and you gather around with all your family that says you've been called to serve in this area. So for me, it was done yet, you crane.
So Eastern Ukraine kind of up against the border of Russia. So you spend a little while trying to learn the language and kind of getting your feet wet. And then you're basically just shipped out and you have to figure it out. So I had to learn to speak Russian.
You know, I went on my mission and like crazy ask to be like, yo, just learn to speak Russian. You only have two years on the mission anyways, right? So it's like, what do you, it's that crazy? What happens when you're when your family immigrated here?
Like, that's what you do, right? I mean, so many people have to do that. Well, don't think to do it like out of on your own choice that your own accord like I want to go to America. That's why, you know, and I speak a little bit English.
I'll improve it versus like you're told, Hey, an organization. You train it is for you. Start brushing up. You know, you want to even if you wanted to spread the gospel, you literally have to first learn a language which takes months.
So what did you even do the first few months when you don't speak Russian? Yes. So you go to the missionary training center and that's like, like, Lam School is kind of modeled after that actually. So it's like you show up on day one.
And by the end of the day, you're like, you shouldn't know the alphabet and you should be praying in the first few months. You should be praying in Russian, right? And obviously it's terrible. And you don't understand cases.
You don't understand the grammar. But like, you just look with one of day one. They want to know they want to lambda. I mean, they want you should be submitting your first pull request, right?
Like, and I don't think that's actually day one anymore. That's, but like, yeah, you're going to build your first website using HTML and CSS. Like, you're going to go. And the pace is intense and it's very much like, you're going to get thrown into the deep end and figure it out because that's the only way anybody learns anyway.
I mean, like, I came back, you know, spoke Russian fluently and went into a couple of college classes and they had a way that you can like test out based on what your level of Russian was. I think I got like three years of full, like I got like 100 credits of Russian. And you know, you still go into the Russian classes of the people who weren't living in the country and they're like, you know, trying to figure it out. Like, oh my gosh, there's no way.
There's no way. So there's definitely something to emerge in and just like getting thrown in. Do you keep track of how many people you convert? Like, do you know how many people, you know, sort of heard the message and actually like sort of went down the path?
Yeah, what's your quota? Yeah, it depends a lot, right? If you're in South America or Africa, it's very different than Eastern Ukraine. So in my mission, if you converted anybody, like over the course of two years, that was a win.
Like one is a win. Yeah. And like my friends in South America, like, you know, two or three on a weekend is normal. So just totally depends.
I mean, take 25 years of government force atheism and then later on, Hey, where this American church, you should join. Like, there's not product market fit there. Right. Also, you're going to sales.
Yeah, stop drinking and smoking and only have sex with your partner, who you're married to. Like, this is not interesting for the average Ukrainian. How did you go about it? What's the sales funnel?
Yeah, that's a really good question. There are a couple ways. First is English classes. So I taught and stay in the mountain of English.
And for a couple of reasons, first that tends to bring out people who are a little bit more open minded about like your like hardcore Russian Orthodox, which you go back to the Soviet Union, like you're not going to come to an English class. And a lot of people, I mean, it's just different culture, right? Like people thought we were spies. People did not like Americans.
They did not trust Americans. They were kind of bummed that capitalism was a thing because their version of capitalism is basically run by the mafia. So just super, super different. Right.
Many other one is just your brute force numbers. So, you know, there were probably six months at a time where I would spend 12 hours a day knocking on doors or approaching people in the street. And your top of the funnel is huge. And it does it.
You know, your funnel is not very efficient. And if you have a sales funnel like that, most companies would get fired. But that's just what you did. So were you like, yeah, extremely motivated every morning when you woke up like I'm going to do this or was it like, well, I'm going to enjoy the Ukraine and I'm going to do a little bit of this.
And I'm super shocked. And there are times like months in time when I was kind of depressed, honestly. And that's not unique to me. I think that's just like when you so you keep a really intense calendar and you follow the calendar to the letter.
We call them planners. You set goals every week and you report on those goals. So, you know, everybody in the mission reports their numbers up to the mission president. And so you're keeping really, I mean, Stephen Covey was this is this is business school.
Yeah, I mean, Stephen Covey like it basically took the Mormon missionary planner system and turned it into seven habits. Like that. This is like, you know, when I hear somebody's time in the military, I'm like, wow, that's an incredible amount of adversity, resilience, and sort of like you really developed yourself during that time. But this is that with, you know, less of some things, but more of other things, which is like sales, human psychology, marketing, you know, you have to develop those skills in order to be successful here.
So I may only work with Mormons going forward. Well, yeah. Well, well, there, I think McKinsey or Bain, they used to have a joke where it was like military. Oh, no, military McKinsey or Mormons.
Yeah. I think that's Harvard, actually. Harvard is a school is military McKinsey and Mormons. Yeah.
Yeah. That's how my school also. That's how I now believe. So is that okay if we just jump right into some ideas because you tweeted something, there's two ideas that I want to bring up to you.
The first is levels because I see you're wearing it and Sean and I were beta testers for it was cool. The second is college applications. You tweeted out something today that was crazy fascinating. You said that colleges earned close to five hundred million dollars a year, I think, from college applications.
What's that? What's that? I mean, it's such a strong build up. Just like you gave up at the same thing.
Yeah. Like what's that? What's that about? So here's like the forty dollar application I fill out.
There's five hundred million dollars worth of it. Yeah. I mean, do the math on that, right? And you can actually look at it broken down by like school and it's like UCLA will have a hundred thousand people apply and they'll all pay 80 bucks, right?
Like that starts to get crazy money. So isn't there like a common application? Yeah. So there is something called the common application, which I mean, the interesting thing is if you're UCLA, like you don't want to use it.
You see, like you don't want to use a common application because then where's that eight million dollars? Yeah. You do and you don't. So the common application, you can basically like set a trigger and be like, yeah, I will accept applications from the common application.
The problem with it is everybody's using the common application is just spreading and praying to everywhere. It's like indeed calm. Right. Yeah.
Exactly. It's or like the LinkedIn, like one click apply unless LinkedIn is a sponsor and then it's a different. No, no, no. I'm either a sponsor or an enemy as far as I'm concerned.
Yeah. Let's say one of a $5,000. That case, yeah, we'll talk about it. Yeah.
We'll talk about it. Yeah. So the way you use the common application is to get your acceptance right down because you're going to get a hundred thousand applications of people that aren't really interested in going to your school. They're just going to check everybody and hit submit.
And now you have a two percent acceptance rate because a hundred thousand people who are never going to go to your school. Applied. And for some mess, that reason, that's like the main metric that the school rankings use, like the US weekly school ranking, like the first thing it looks at is the acceptance rate, which is a weird set of incentives to be like the school that turns down the most people must be the best school. But that's, yeah, that's the other game that people play.
So there is no business down this path is what you're saying. I don't know. Like the incentives are just messed up, right? So you have to like, if to work backwards from the incentives of like, what does the school wants?
The school wants a ton of applications. It wants those applications to be as expensive as possible. And it wants to be able to broadcast as low of an application percentage acceptance as possible. So maybe they're like, that's what you really need to serve at the end of the day.
Like you can serve this, the would be applicant in that world. But like the schools have the quasi monopoly. So if you don't please the school somehow, there's enough scenario. So the business that I saw that was in the space, I've talked about this before.
This was the company I was, I could have invested in at the seed. It's now billion dollars company. And it's called Apply Board. And what they do is they went to the colleges and they basically realized this one insight, which is colleges make three times more from international students than domestic students.
So that's a killer business. And so they went to the schools and they said, Hey, you know, if I'm sitting in Malaysia right now or in the Philippines and I want to apply, you know, what do I even, I don't even know that brown is a university, I think it's a color. So, Hey, why don't you pay me $3,000 for every student that you admit that's international and I'll just up your international volume for you. And the school's like, well, sure, it's a success fee based right I'm making 30k off this person.
I'll give you three. And so then they went and signed all these deals with all the universities and then they went to the students in Malaysia, the Philippines who wanted to come to the US and they're like, Hey, we will, we'll make it super easy to apply right you do a common app here. I will send that common app everywhere. And it's like this international student like, you know, one of those like human trafficking things it's like that with a, you know, with less evil and that business is amazing.
Like Ivy Leagueers. Yeah. Super smart. Yeah.
I mean, the thing that makes money more than anything else in higher education is international students. And that's one of the reasons that so many universities are struggling right now is, I mean, A, the desire to come to America to go to college is lower than it has been in a while. But they're, I mean, not even because of COVID the Trump administration is basically, I think at times intentionally being like, Hey, if we, you know, stop this revenue flow then all the universities hurt and help those guys basically. So why do schools charge three times more for international?
Like, what is their shitty justification for that? I mean, that's crazy. It's like, yeah, you guys want to come here so much more than we want you here. So you're paying full freight.
Like an in-state student, we're going to cut our tuition in third or whatever. Like, basically it's, it's international students subsidizing local students. So I think there's probably an opportunity there to cater to international students who would like to not pay the three X rate and so maybe there's an opportunity to either as a university to differentiate by not doing that or like come up with some shitty system that like, they don't apply as a domestic, you create like a body double that sort of, you know, like gets them in at domestic rates. I've been kind of fascinated by this, but like, I mean, you hear about old old days, people would get into all sorts of colleges and like, I've heard a number of stories of people applying under a fake name or like, I mean, now I'm sure they've locked it down.
But for a while, you could just tell a school you had like a perfect SIT and be like, Oh, awesome. Like, please come here. They never check. Like, that's crazy.
Anyway, I actually think there's, there's something to schools moving away from the SIT and ACT. It's going to be really interesting. So a new, a new SAT and ACT? Yeah, I don't totally know what the right angle is.
But basically, if you look at the UC is one of the, they're kind of like the same way California from a regulatory standpoint, whatever California does, a lot of other states tend to follow. The UC is kind of that for colleges. So you see kind of sets expectations and they're moving away from that SAT and ACT entirely. And basically what they're saying is, Hey, these tests are racist because different populations perform differently.
So we need to find a different measure that matches that. And they went back and they did a study and the study came back and said, Okay, yes, that's true. But it's also a leveling feature because if you're a poor student who's really smart, there's no way in hell you're going to have the same extracurriculars as someone who. Who came from money.
So your only shot is the standardized test. So net net, you know, it's going to hurt diversity, but the push back against the SIT was so strongly they killed it anyway. And so now there's like this, there's this black hole of like, what is the right way to evaluate, you know, who should become a student and you know what one of the main reasons, in my opinion, the employers are like, it's really easy to hire a Stanford grad because you know they're going to have a high ACT score. They're going to have a high IQ.
They're going to come from wealth. They're like, all the risks are gone, generally speaking. Wow. So check this out.
Okay, so I'm just googling this while we're talking. You know all about this. I mentioned the, so is this how it works? The college board owns the SAT.
Is that correct? Yes. That the company's called the college board and then educational testing service. That's the one who administers the test.
Is that right? I don't know what that means? Admitters. What's the difference between administered and like a brick and mortar like pro.
Like creates the test and then you show up at like a for me. It was like you go to a high school and there's people there making sure you don't cheat and like handing out your scandrons and stuff. Okay. So the so educational testing service.
That's the name of the company ETS right? Wow, they did $2.1 billion in revenue last year. And then the company, the college board, it's a nonprofit. So this is all public in 2018.
They did north of a billion in sales and something like $200 million in profit. Yeah. And crazy. And all they all they do is make the test.
That's nuts. I mean, that's a lot, but that's pretty crazy. I what they really did is got all of the universities to agree that that was the thing, right? Like you have that, then you know, you do whatever you want on the other side.
Revenue has almost doubled in 10 years. Yeah. I mean, it's now like that. And they kind of started this meme that like the reason some kids aren't getting into good schools is because they never take it.
So they kind of they they're trying for like a bill that like government would fund taking the SIT or the ACTs like any high school student just signs up and they get a check from the government. Now they're kind of forcing him to like a school district. You should really find a way to pull money and like guarantee you every student takes it. So it's that's good business.
Is there a world where so is there a world where somebody and by the way, I didn't even look up the ACT. I have no idea how that big is it looks like it's a little bit small, but in the same ballpark, maybe. What about is there a world where this new standardized test could exist? Well, I think the pushback against standardized test is going to be big enough and broad enough that I don't know if that's the angle you can take.
I mean, their companies like criteria Corp has a test called the CCAT, the criteria cognitive aptitude test. It's basically think SIT for adults, right? For adults entering the workforce. And there are enormous companies with hundreds of thousands of employees that will use that as one of their criteria for deciding whether or not to employ you.
Now, there are some legal footwork that you need to do because in the US, for basically everybody other than the military, it's illegal to hire based on IQ alone for obvious reasons. For some reason the military just does what it wants. So you can't really get into the military with an IQ of below 85 and military tests that rigorously and it's fine. And everywhere else, the argument is made that IQ is a sub-optimal measure, which I agree with.
But it's also a really easy way for employers to rule people out or to find the diamond in the rough or whatever. So there's still something around how you test and how you find the right type of talent that is interesting. I don't know what it is. So I have a half-baked idea here.
When I was in the seventh grade, I took this test. I don't know if you guys took it, but it was called the TIP, the Talent Identification Program. Did you guys ever do this? We had something similar.
Art was called the Iowa. So the one I took was actually it was called the Duke Tip Program. Duke University's Endowment had created this thing called the Talent Identification Program. They did it for seventh graders, which was kind of like earlier in the funnel before you even take your PSATs, that sort of thing.
And they created this and it was their own little test. And if you took it, you basically got this certificate. That was like congratulations. You're like in the program just for taking it and your parents were all happy because like, oh, this university says you're talented potentially.
And then if you did good, if you're like in the top 20% or 10% or whatever, you would get this special thing, which is like, we have identified you as a talented person that would love to have you someday come to this school. And it was there like way of just getting a whole bunch of people to know about Duke and apply to it. And it worked on me. Like I literally went to Duke and I remember getting like recognized in this thing back in seventh grade and planted a seed.
And so I wonder if you could create a new tip program and maybe you do it like for, you know, minority students or in lower socioeconomic classes where you go to certain neighborhoods and you basically host these free things you come take. And then that's your leads for colleges will actually potentially pay to have access to these leads and to market to these students because they want to hit their quotas, have diversity, be able to surface out who are the most talented students in these groups. It's like your part system. Yeah, that's totally worth.
You're all of the minority kids who tested really well on this thing that you probably want to come to your school. You're going to pay me 500 bucks a lead to start marketing to them now. Exactly. I know the pricing.
You can be 25,000. I'll do the marketing for you even better. Right. You basically just like this engine that just functions for the university.
Now, I don't know if some people are going to probably think that's a little product or whatnot. But I think I know, I'm just not ideas here. Yeah, I hear something crazy that I knew guys who ran GMAT Quiz companies like GMAT study, you know what I mean, teach you how to do on the GMAT. Yeah.
And they would tell me that a qualified lead, like someone who is ex-smart or whatever. I don't know how to qualify the lead, but like they would charge or they would pay Harvard and many other schools, something like two or $3,000 per lead. Is that accurate, Austin? For what?
Like what was the? Like an MBA school lead. Like someone to get on the phone with you about why you should apply to Harvard. For a while, there was like the education, like, hot swap market.
So like, if you could get someone who is on the phone who's willing to sign up for a student loan to go to University of Phoenix, like, yeah, easily a couple grand. Right. And like, there's some schools if your tuition is $45,000 a year and you're like an online school, you have a $15,000 CAC per student and not care, which is like messed up, right? But the reality is, I mean, it's just math.
Yeah, the value that's a different person. Yeah, the willingness of people to sign up for $45,000 of student loans after a phone call is what's messed up, right? Like, that's shouldn't be true. The reason it works is because these guys like University of Phoenix, they were able to tap into the government financial aid.
So if I had to give you $45,000, I wouldn't do it. But if I just get to go to school and I'm going to take out this loan and it kind of feels like this later problem that I don't have to worry about and that you don't deliver on giving me a diploma that helps me get a good job, then that's fucked up. Yeah, I mean, there are so this kind of caused this environment where for a long time, there are a bunch of schools that had like higher student loan default rates than graduation rates. Right.
So like 40% of the people who were taking out loans to go to your school are defaulting and 20% of them are graduating. And that's just like, oh my gosh, that's that's a travesty. Yeah, I mean, the reality is if you can, we've created this weird world where it doesn't face people, the thought of paying $40,000 a year in tuition. And the fact that that like people definitely don't understand the interest on that, right?
Like if you're, you know, if you go to NYU and you have $100,000 in student debt and you're paying off $1,000 a month, you can pay that for the rest of your life and you won't even touch the principal. And that just like doesn't, that doesn't sink in with people. So that's, that's a tough part. Austin, this whole idea of these tests I find to be just like crazy fascinating.
Another test that I was obsessed with for a little while, and I just considered, you probably know a lot about this is strengths finders, strength finders, is it strengths? You know, I'm talking about strength finders. It's owned by Gallup, which is most famous for their polling, but they own this thing. You know anything about that?
Yeah, there are a few different versions of it. Basically to the listener, it's like a $50 test, right? It's a personality test. It's a $50 personality test and it's famous for the book, Shranks Finders.
But sorry, go ahead. Yeah, and there are a few different versions of this and there are some, you know, like every, every ATS has their own little version, right? So hired has their own version and LinkedIn has their own version. And it's just like, if you as an employer think that you can get a person to take the test and that it will make you n% better at hiring, then yeah, what's a $50 test?
Who cares? But then you do the math on the other side of that. Like, oh my gosh, for doing nothing, you have to develop the test and that might cost you $100,000. But then anything on top of like 2,000 people taking it is just gravy.
That's a great business to be in. How big do you think that Shranks Finders thing is? I've been trying to figure that out. They're privately owned.
If you told me that that $150 test makes $200 million a year, I wouldn't be surprised. I guess it's in that. Let's see. Shranks Finders.
What's the name? I guess it's Gallup. So usually I can call my Gallup. It's highly complicated.
Yeah, usually you can like try to back into it by number of employees or something. I've been trying to figure this out. I've used Web Archive. I've used everything on their website.
They'll say like this many people took it and I'm like, okay, I guess that's the only guess summation that I have. What's that number? How many people? Over 100 million people have tried it.
It says, oh, it's got to be, I guess, 200 to 500 million a year business. I have no idea. I'm totally guessing. That would be nuts because I do it one time.
So Austin, I'm curious. Before you came on the podcast, I don't know if you had any time to think about one or two ideas that are interesting to you that you think that the audience might be interested in or just half-baked startup ideas that you can't pursue because you're running Lambda School. Give us some ideas that are cool to you. Yeah.
There's one that I've been thinking around the edges of it and I can't quite like. So it's a came partially from my experience running Lambda School, partially from Phu Meade, the blog post of Frank Slootman, who is the CEO of Snowflake, just went public. He talks a lot about how much activity that companies have wasted. And then there's a whole kind of lean thinking and lean methodology and lean manufacturing and all this stuff.
And I've been reading a bunch of books about that because I want to run a very efficient organization at Lambda School. So I'm trying to figure out, is there a way that you could parse out how much? And again, everybody that works at Lambda School, I'm sure, is working on really hard stuff. They're working really hard.
But I'm not sure that if I knew what everybody was working on at any given time and I were playing God, that I would be focusing that amount of time and effort on that thing. So I'm trying to figure out, I know some companies will use Asana in a way that will figure out what everybody's working on and make sure the prioritization makes sense. But I feel like there's a missing product there, especially in a remote world where everyone's just kind of doing their own thing and everyone's working long hours. But I guess something like 90% of the effort is just unnecessary.
It's like finding a way to channel that. Right. How do you find all the slack in the system? So laziness, it's some combination of laziness plus just not being focused on the high priority things or chasing down the wrong rabbit holes.
This idea that I'm going to say is definitely extreme. And I might get roasted for bringing it up, but let's just like play it out and listen to what it is. Which is there's this guy named Joe Lamont, who Joe Lamont is. Yeah, really?
You heard of him? Yeah. I don't know. Okay, so then it sounds like you have some type of experience with him, but you can talk about it.
But basically Joe Lamont is a billionaire guy who has his company, his software company, he buys software companies and outsources of jobs to India. And then he got in trouble because he would install this keystroke software into the Indian employees' computers so you can see their screen and where they type at all times. And that sounds evil, sounds crazy. I mean, obviously it would work.
I've seen there's a company, I think it's in YC called Squiggle or something, where it would basically, the idea was, hey, you want to even, it's trying to find a non-invasive way of doing that. And I think they would take pictures of your screen and a picture of you and share it with everybody else at random periods. But I think they were legitimately trying to do, you're working remotely with a group of people. Video conferencing is really high bandwidth.
What's a lower bandwidth solution to that thing? I don't think that's the right solution necessarily, but there's something there. The coordination problem, the cross-ever thing, you can debate whether or not you'd want to work with a company that puts a keylogger on your computer. Well, the answer is no, you would not want to, but I would want to objectively see the results to the experiment.
I would not be surprised if they are phenomenal. I would not be surprised one bit. I know a tiny bit about crossover and Joe. So then you have to ask yourself why, and is there a way where you feel more comfortable doing this that is something similar?
Right, so there's two questions. First is, is Joe or is crossover just willing to pay people that wouldn't have that job any other way? I mean, they're being open to everybody who will take a programming test to decide if you'll be a programmer and then paying them 30 bucks an hour. Like, yeah, you're going to find people that do not love the idea of that software being installed on their computer, but for 30 bucks an hour, I'll do whatever you want because I'm in Bangladesh and I will live like a king if you pay me that.
And just because I know someone's going to take that out of context, I'm not talking about being like, I'm like, the fact of the matter is there are places with lower cost of living and lower salary expectations, and you can pay those people more. So now that I've dodged that bullet, the other angle is- Our trick is we just step in so many muddly puddles that people can't pick which one. We paralyze people who want to cancel us by saying so many things that, you know, off the cuff, it just becomes a safe space, actually. Austin, do you know what WAP is?
Yes. Last episode, we put the lyrics of WAP into the GPT-3 thing, the AI thing, it had it right where SOGS. I did it today, it came up with a great new song called Walk the Plank. I'll tell you what it's about.
I don't know what that's a euphemism for, but okay. So anyway, the other way is you can find a way to get the same effect for the employer or the organizer without being quite so, like, you know, like, keylogger in the US would not work, but is there something that's a little lighter weight? I think Stan Lesson was working on a company that was doing something like that for operations heavy companies, where the idea was you have people who are doing very road regimented operations heavy stuff all the time, but they don't think like a programmer, so they can't be like, okay, here's exactly how you should automate it. The idea was, you know, the software will watch you do the thing and then we'll kind of spit out the instructions or the playbook or what that is, and then you can have a programmer running it behind them and automating it, which is a lot.
But I mean, companies like Flexport, there's a whole lot of that happening, right? There's this company called CS Grocers. It's based in summer up here where I'm in New York. It's the maybe the third or fourth or fifth largest privately held company in America, and it's a grocery, they wholesale groceries to stores and they made a change in the 80s where they started paying their workers by their warehouse workers.
They'd give them a small hourly rate, but then they had to hit a quota for boxes packed. I know like that. It's fascinating. I wrote all about it on my Twitter thing.
I'll share it to you. I'm sure warehouse workers incentives or something. It's a pretty famous case study, I believe, but they like build all this great technology to try to automate a lot of stuff and then for the workers, they just change how they paid them and like revenue like went through the roof. They're like, all right, we're not like, this is just fair guys.
We're not just gonna like people just start packing like so many more boxes. I mean, that's like Charlie Munger, like an allergy of when he's there's a guy who's working for FedEx and they're trying to like get these airplanes packed on time and every night they're failing and they're trying all these different things. And finally said, you know what, we're going to show up on Friday or whatever. And as soon as this plane is packed, everybody can go home and it was like, okay, two hours.
They're out of there. And so I mean, that's supposed to be an allergy. Yeah, about the importance of incentives. But I'm trying to figure out if there's a way to do that within land of school that's not draconian.
I haven't found it yet, but I'm super interested in that. I've told this story before, but I worked at this place with this kind of crazy billionaire guy. I worked under him in Indonesia and he bought this software from Boeing, the Boeing used either Boeing software or the same software Boeing used and they used it to like manage their factory. So the same sort of thing.
Whatever you have this like kind of assembly line process, you can kind of just measure inputs and outputs quite, you know, it just doesn't feel like it's like a human question. It's like, no, how much are you inputting and how much are you outputting? And he used it in our office with people on their computers and basically like everybody on the giant wall. Next, everybody was a huge projection and everybody got once every square represented one person in the company and it would just have this like color and like this like meter basically.
Based on how productive being. And nobody really even understood what is measuring and how it all works. You just knew something's all on your laptop and you were just like furiously trying to do shit because you just didn't want your shit to go red and so like it's like placebo productivity in a way. You know, he could do it because he was, you know, pretty crazy.
He had all kinds of crazy. And he was like, the woman needs to be at home. So you no longer have a job here. Like he was like pretty wild and is now actually in jail for, you know, different for once he committed, but it was a very interesting work experience, nonetheless.
I have two more quick ones and obviously you guys want to be in Lambda School for many things, all the valuable ones and let everybody chase all that not valuable ones. So, what do you think when you just see a new Lambda School for X come out and what do you think are the ones that you guys are going to pursue and what do you think something you're not going to do that other people should. I mean, my first answer is always like, Oh, good luck. Like, for a while, it was just like, Oh, I ran the math on that.
That's easy. I'm going to do that. And then a year later, they're like, Oh my gosh, like I have to get five things working and none of them are going to work. So this sucks.
Yeah. Can I tell you that? Has anyone successfully done it? I haven't seen anybody make the model work yet, which is saying something because there've been, I don't know how many, I mean, the one model that does work is like, you're going to owe us 10% of your income for five years and here a bunch of videos, like it's hard not not to make that work, but it's not like it's not going to save either.
What does it cost you all to educate somebody? That's like north of 15, 15, right? So you have to basically make sure that you're able to recoup that, whereas you put the videos up on a website. Okay, your calls to educate it.
Yeah. And then you might, you know, your average successful student might pay you $30,000. You might make $2,000 a student, but if it costs for 500 bucks, a student who cares, that's just a very different business than the one that we're running. And I don't think it would grow very well because people, you know, eventually you're going to find a different way to do that.
The intensive, expensive, high quality one is pretty difficult to make work. I had a guy pitch me one this morning, give me your instant reaction to it. So he said, it's lambda school for mortgage loan officers or something like that. It's basically like the loan officer who issues mortgages.
And what he was saying was that, you know, there's this large, you know, same thing as software engineers. Like there's more capacity for hiring folks who can do this than we have folks who are trained to do it. The current model for how it's done is like kind of broken. It's like run through a bank.
You have to like get certified in this like slow process by the bank or something like that. And basically it was like, you know, in two months, you can get trained and certified to be issuing these. The people who are high volume at this are making like 300k a year at the bottom end. They're making like 70 to 100k a year.
And with interest rates being so low, there's just high demand for people to be more exciting professionals. So what's the Austin All-Rid official quick take on that? I mean, my first response is just a lot of nervousness around macroeconomic environment. Like, I mean, that's that feels like a short term arbitrage that might work for a little bit and then go away.
And part of that is because I don't believe, I mean, I don't believe that mortgage officers add like an insane amount of value versus like an acquisile automated process. So I'm nervous about the long term. And the short term, you could probably, I don't know enough about the industry, you could probably spin it up and get some cash spinning off. Like the interesting thing about that is like, you can't like fail at becoming a mortgage officer very easily, right?
Like the reason Lamestool is so difficult and so powerful is because it's really hard to become a software engineer, but when you are, you get paid really well. And so that's just a different end of the market. What's the likelihood that you guys are going to just fail miserably? I mean, is this a company that like, if this works, it's going to be the biggest thing ever and it's going to be massive?