Episode Summary
Executive Summary: In this episode of This Week in Startups, host Jason Calacanis discusses the Lambda School controversy with CEO Austin Allred and investor Catherine Boyle. Allred defends his school's metrics against a New York Magazine article, explaining the difference between enrollment and graduation rates. The conversation expands to media ethics, the privatization of education, defense technology investments, and the economic impact of coronavirus. Allred's ISA model is highlighted as a risk-free alternative to traditional student loans.
Main Topics: Lambda School Controversy and Media Ethics (Priority: 5/5): Austin Allred addresses a New York Magazine article that misrepresented Lambda School's graduation and hiring rates. The article confused enrollment-based metrics with graduation-based metrics, leading to a 50% vs 86% discrepancy. Allred and Calacanis criticize the reporter's lack of journalistic standards and the media's tendency to prioritize clicks over accuracy. Income Share Agreements (ISAs) as an Education Model (Priority: 5/5): Allred explains Lambda School's ISA model: students pay 17% of income for two years only if they earn over $50k, with a $30k cap. If they don't get a job, they pay nothing. This aligns incentives and eliminates student debt risk, contrasting with traditional for-profit education. Privatization of Government Functions (Priority: 4/5): Catherine Boyle discusses how Silicon Valley is taking over roles traditionally held by government, such as education and defense. This creates tension with those who advocate for public funding, but Boyle argues that aligned incentives can lead to better outcomes. Defense Technology Investment (Priority: 4/5): Boyle reveals General Catalyst's investments in defense tech, including Anduril Industries and Vannevar Labs. She emphasizes just war theory and the need for modern software in the Department of Defense, contrasting with Google's reluctance to work on such projects. Coronavirus Impact on Markets and Society (Priority: 4/5): The panel discusses the coronavirus's R0 of 2-3, supply chain disruptions, and market volatility. Allred is short on the S&P 500, while Boyle sees potential benefits in remote work and reduced handshakes. Calacanis criticizes the lack of testing in the U.S. DoorDash IPO and Food Delivery Competition (Priority: 3/5): DoorDash files for IPO amid intense competition from Uber Eats and Grubhub. The panel debates whether the company missed its window, but notes that coronavirus could boost delivery demand. Robinhood Outage and PR Crisis Management (Priority: 2/5): Robinhood experiences a system-wide outage during market volatility. Allred advises transparency as the best response, while Calacanis suggests creating backup systems like phone trading.
Key Arguments: Lambda School's 86% hiring rate was based on graduated students, while the 50% figure cited by New York Magazine was from a risk section in a deal memo referring to enrolled students. ISAs eliminate student risk: students pay nothing if they don't get a job over $50k, and the obligation wipes out after five years. Traditional universities have no incentive to ensure student success, unlike Lambda School which loses money if students fail. Media outlets prioritize clicks over accuracy, leading to 'fake news' that undermines trust in journalism. Defense technology startups can provide modern software solutions that the Department of Defense lacks, with ethical frameworks like just war theory. Coronavirus could accelerate remote work trends and reduce handshakes, but supply chain disruptions from China pose risks. DoorDash's IPO timing is risky due to competition, but the pandemic might increase demand for delivery services.
Data Points: Lambda School graduation hiring rate: 78% - Updated number after the New York Magazine article, down from 86%. Lambda School enrollment hiring rate: 50% - Cited in the risk section of a deal memo, referring to enrolled students. ISA payment cap: $30,000 - Maximum amount a student pays over two years if earning over $50k. ISA income threshold: $50,000 - Minimum income to trigger payments. ISA payment percentage: 17% - Percentage of income paid for two years. ISA wipeout period: 5 years - After five years, the obligation is wiped out if no job. Coronavirus R0: 2-3 - Estimated viral coefficient, meaning each infected person infects 2-3 others. Coronavirus death rate: 2% - Current estimated death rate, but denominator is uncertain due to lack of testing. U.S. coronavirus tests conducted: 500 - As of the recording, compared to South Korea's 100,000+ tests. Lambda School program length: 9 months - Duration of the coding bootcamp. Lambda School tuition upfront: $20,000 - Option for students who pay upfront instead of ISA. Lambda School ISA deferred tuition: $30,000 - Maximum amount under ISA, but actual payment varies based on income. University six-year graduation rate: 50% - Average for public universities, used as comparison to Lambda School.
Pivotal Quotes: "My North Star is that in 10 years, nobody has to take on student debt that they won't be able to pay off ever again." — Austin Allred: Allred's vision for Lambda School's impact on education. "Don't let the bastards bring you down." — Jason Calacanis (quoting Kris Kristofferson): Calacanis encourages Allred to ignore critics, referencing Sinead O'Connor's experience. "If we can figure out ways that students benefit, that investors like myself can invest and make a return that funds pension funds and endowments... that's a good thing if everyone is aligned." — Catherine Boyle: Boyle defends the privatization of education through aligned incentives.
Implications: The episode highlights the tension between innovative education models and traditional media scrutiny. ISAs could disrupt student debt, but face political and media backlash. Defense tech investments signal a shift in Silicon Valley's priorities. Coronavirus may accelerate remote work and reduce physical contact norms, but supply chain vulnerabilities need addressing.
About This Week in Startups
Jason Calacanis covers startups, tech, markets, media, and all the hottest topics in business and technology. He also interviews the world’s greatest founders, operators, investors, and innovators.