The American-Dream-as-a-Service

Austen Allred and the class escalator

Austen Allred is the CEO and founder of Lambda School, a unique coding school that pioneered the ‘income-sharing agreement’ (ISA) model, whereby students only pay if they’re hired in their field of study. Lambda came out of incubator Y Combinator, before which he lived in his two-door Honda Civic and scalped soccer tickets at Stanford Stadium to get by. Prior to Bay Area entrepreneurship, he did a two-year mission to the Ukraine where he learned Russian and knocked on lots of doors. The interview was conducted via Zoom with Austen in Southern Utah, from where he routinely tweets out enviable photography of Utah’s stunning landscape.

Your posts are some of the most uplifting things in my feed. They’re either screenshots from an internal Slack or a retweet, and it’s a Lambda student saying: I went from making $20,000 in some service job, and now I'm making $80,000/year doing something technical at (say) Cisco, and you've totally changed my life.

One thing you often post that I think isn’t obvious to people who don't run a socio-economic escalator is all the necessary polish and look-and-feel of being part of the bougie techie class. For example, how you have this email protocol to set up a meeting. Or that if you think you're underpaid, you go in and you say, screw you, pay me more or I leave. It's intriguing that you don’t only have to educate them to turn them into front end engineers, you also have to teach them the social skills around that to become that bougie techie person.

That's one of the really weird things: The hiring process is not just a filter for skills, it's also a filter for class. And people don't talk about or acknowledge that. It's very clear in all these protocols that we have in tech that you and I understand, you have to learn them the hard way. I'll give you a couple of examples. When I was in sixth grade, I was selling stuff on eBay. I was just this kid trying to hustle, and I had this mentor/entrepreneur who came into high school every now and then and just talked with us. And I was like, okay, real talk! What do I need to do to be taken seriously, because nobody takes me seriously because I'm a 15-year-old kid? And he sat me down and he said: We are going to start using this thing called Gmail. I'm going to send you an invite, and you're going to set up firstname.lastname@gmail.com, no numbers, no nonsense, nothing else, you're going to have no signature, and you're only ever going to send text emails for the rest of your life. That's step one. He just walked me through all this really, really basic stuff.

There was this other time I was in college…I was hustling and trying to get into startups and there was this guy at a conference I wanted to work with, so I went up and talked to him. And I said what can I do to be like you? He gave me his business card and said just ping me next week.

I spent hours and hours and hours looking up what ping me meant. I couldn't find anything. So eventually I called somebody and said hey, this guy said ping me. What does that mean? How do I ping? And that person was like, no, no, it’s a call or an email or anything really, just reach out to them. Doesn’t matter how. That's all that ping means. You know, like a cell tower. Ping! I was like, ohhhhhhhh! There's so much little stuff like that. Another classic example is intros, right? Or using Google Calendar. I didn't know how to use Google Calendar until I showed up in my first job. Someone tells me, I am gonna put some time on your calendar. And I think: Oh, I guess I have a calendar. That's not obvious if you don't come from, frankly, a certain class. But all of those things are important; if you don't intro somebody the right way to a VC, they know you're a dunce, automatically. There’s nobody that sits you down and says hey, you're gonna say thank you so-and-so, moving you to BCC. It's not hard, but nobody ever tells you that anywhere.


I've heard it described as ‘the bottom 1000 universities’: Assume there's some algorithm that spits out the combination of is expensive and is ineffective. There are at least 1000 universities in the US that should cease to exist. There are many universities that net do more harm than good.


There's no tech charm school that teaches you how to do all that stuff.

Totally. And I'm sure there's more stuff. When one of our first students got hired at Uber, he showed up with his laptop. They tell him: you're a mobile developer. And he's like, I can't be a mobile developer, I don't have a phone. He didn't have a smartphone. So he called me freaking out: What am I gonna do!? Uber wants to hire me. I don't have a smartphone. I told him: Uber does not care about that, Uber’s gonna have a thousand phones, that's the least of Uber’s worries. They're gonna give you a laptop too.

Then he shows up to work on day one and they tell him: Alright, you know, put in your bank account information here to get direct deposit. He's like, no just cut me a check and I’ll run to the check-cashing store.

The Uber people reached out to me and said: We don’t know if this is going to work. I was like, he's a smart guy, it’s just that he doesn't have a bank account. So now we set up bank accounts for every student that doesn't have a bank account. The best way I think to describe Lambda School is the American-Dream-as-a-service.

Wow. That’s the corporate anthem right there.

(Laughs.)

There so much cultural encoding in an interview which, as you said, is just filtering for class. But…as these are technical people, there’s actually an objective standard of merit.

There are a whole swath of white collar jobs that the interview process literally is like, Hey, I'm gonna play a little verbal tennis with you and see if you can stand your ground and if you can, you get the job. That's probably the average white collar job.


That's one of the really weird things: The hiring process is not just a filter for skills, it's also a filter for class. And people don't talk about or acknowledge that.


Speaking of other jobs, do you see Lambda expanding to other fields? Is that even possible?

The thing that obviously aligns incentives is to look at education as a hard-nosed business proposition. I'm sure you personally care, but the reason why you care as a business owner is because you want them to get the job because otherwise you're not gonna get paid, right? You’ve invested a year and a half in this person, and they can't blow it up because they don’t know about direct deposits, so you fix that. Which is good, and certainly a lot better than the business model universities have. But that model only works if there's some pretty predictable future stream of income along with pretty predictable employment demand. Can you imagine non-technical professions like trucking and nursing that have high demand and high wages?

The cool thing about the incentive alignment is that we're not going to train you to be a sociologist, because it just doesn't work. A common critique of the ISA model is: oh, now people aren't going to study poetry anymore. And my response to that is: yeah, we're not a university, we're a trade school. The university has 18 million things that it does for you, and we cut cut off a tiny sliver of that, which is: we're going to help you get a better job, we're going to help you improve your state in life. That's all we do.

There are actually more high-paying jobs available than there are people to fill those roles. And that's true all over the place. I think about it as an optimization problem. You've got all this latent human potential, and it's just kind of bouncing around. Sometimes it goes to school, and it picks stuff at random to study, and you know what you know because of who you’re surrounded by.

One aspect of Lambda School that I think is underappreciated is a whole lot of people come in having no idea of what software is, having no idea that there's such a thing as a software engineer. We have people who join and think it's like, I'm gonna fix printers. They know that tech is a high-paying field, but they're not surrounded it. If you're in the inner city, or in a rural area, you don't know a computer programmer.

One way to think about Lambda is like fintech: You have all these transactions that are moving all over the place, but what makes it all work is a clearinghouse that moves all the money to where it needs to go. I think of Lambda as kind of an economic clearinghouse: Here's all of the untapped human potential, here's all the would-be labor, and over here’s all the jobs that need to be done. There's nothing connecting the two right now other than sheer happenstance and going to university, or maybe you hear that there's a good job over here somewhere.

But right now the situation is not: I'm making $50k, here's my skill set and my interest, I want to make $90k. Somebody should be able to tell you how to do that, and right now, nobody can. That’s crazy. More than half of GDP is just people working, and that's completely unoptimized.

Right. Even I, who came from a middle-class background and went to the university track, it seemed like a recently poorly-managed process and I only ended up in science and technology by sheer happenstance…

You stumbled in, yeah? I feel the same way, and the interesting thing now is, depending on which way you happen to stumble, you can end up fabulously rich or destitute based on your stumblings.


The other broken piece is the notion that you go to school once for 10 years when you're 18, and you'll be able to ride that for the rest of your career. That’s probably false for a whole lot of people.


So this model you’re describing, where you basically connect people from one income level to another higher one via various different processes. I’m curious what other connections you can imagine existing.

The way to answer that is to see where all the shortages are, where are people trying to hire and those people don’t exist? Tech is an obvious one, but it’s all over the place in healthcare and the skilled trades. You can actually get a data dump from the Department of Labor that says here are all the roles that we’re unable to fill with the existing talent pools. To start with you just plug those up. Over time you get more fancy and optimize for what level of programmer and other specifics, but right now if you're a long-haul truck driver you’re hired instantly. You can be a felon coming out of prison and you can make $90k, with like three weeks of training, and most people don't even know that that's an option. That may not be a career in 20 years, who knows what happens with self-driving vehicles, and we should probably also have a solution for when that's true.

The other broken piece is the notion that you go to school once for 10 years when you're 18, and you'll be able to ride that for the rest of your career. That’s probably false for a whole lot of people.



I did a story for WIRED on autonomous vehicles and I talked to some of the self-driving truck companies. There's a reason why there's so much availability because it’s a tough job and the churn rates are high. But let’s follow that logic. Does that mean that Lambda is going to be running a skilled machinist’s school or a trucking school or a nursing school at some point?

Yeah, we’d run a welding school. That’s a phenomenal job. Would we run a plumbing school? Yes. Why not?

Let’s look at the Andrew Yang school of thought that makes the argument for universal basic income (UBI), which is that we’re headed to a future where less and less labor will be required, or fewer people will be able to upskill to the jobs there are. I don't know if you buy the argument or not. I used to buy it, but now I'm a little bit less a believer in it. If you do believe in it, where does that leave something like Lambda? Specifically, where does that leave people who can’t manage to upskill in that way?

What's the what's the term that people always use…fully automated luxury communism? I mean look, maybe there’s some artificial general intelligence (AGI) that we don't see coming which will fully replace all that humans can do, and all that's left is manual labor and service jobs or something. I don't know. Isn’t it interesting that that hasn't happened yet? Isn't it interesting that with 200 years of technological innovation, there's still plenty of stuff to be done?

My job didn't exist 20 years ago; most people that I know, that job didn't exist 20 years ago either. I agree more with the the Andreessen-ian view that the human demand will just continue expanding infinitely. If you can automate everything, then we'll find something else to create that we will then need. That feels broadly right to me.


The problem in the United States is that the people who are making the laws and deciding how the funding rolls out, are from that aristocratic class. There are no welders in Congress. If there were, we would have Title IV for trucking school. Why can’t you get a Pell grant to become a trucker? Why only university?


As Andreessen constantly jokes the robots are still on strike! and then quotes the employment rate. But if you look at the labor force participation rate (which doesn’t count in employment stats), or the disability rate in certain US counties (which approaches 25%) it’s not quite true that we’re in a mostly fully-employed economy. We’re just not counting those permanently out of the job market.

To respond to your argument directly though, your job didn’t exist, but there were roles for very driven, ambitious people like you to fill, either as an entrepreneur or something else. And I agree with you that this idea that you just have to go to university at 18 and drop $200,000 on a degree, and if you miss that boat, you’re done for the rest of your life….that’s an antiquated notion.

On the other hand, some 55-year-old guy in Nebraska with a high-school education who put in 20 years at a chicken plant, what’s he going to do in this world?

I think we’ll still continue to see a bifurcation of skilled and unskilled labor, and of technical and non-technical labor. That’s part of the redistribution point: If you're a programmer, there are jobs out there for you, and there's plenty of demand for you. As the number of programmers increases, the demand for programmers grows exponentially faster because we can create whatever widgets we want on our phone and sell them for whatever. It’s just infinite leverage at infinite scale for basically free. Part of the reason Lambda exists is that we're taking somebody who is working at the chicken farm that’s going under and we're shifting them to where the demand is.

Right. If that person is ambitious and aged 23, he’s ready to go. But what do you tell someone who maybe isn’t talented in that way, or isn’t inclined to go into tech, or is older or disabled? That to me is the challenge of this model.

If you look at economic history, the times when there have been massive swaths of people who've been unable to provide any kind of value has been shockingly low. You would have expected booms and busts—we have the Great Depression, we have 2008—but it's not like we have 95% unemployment right now because there's not much going on. It stays pretty static—measurements can be all screwed up—but generally speaking, we find stuff to do.

There are still shifting points that are difficult; on the margin, you'll have people who are toward the end of a career or who’ll be pinched in some weird, tectonic shift between industries, and that will probably continue to be true forever. Like the physicists trying to get to absolute zero from a temperature standpoint, absolutely no unemployment would be something similar: there's always going to be some movement somewhere.

Also, at some point, the welfare state kicks in. Americans have this self-conception that they’re not a welfare state, and yet a very large fraction of national GDP goes to social spending, almost European levels1.

Yeah, we’re definitely a welfare state in many aspects, it’s just hidden.

To quote apocryphal Churchill, “Americans always do the right thing….eventually.” We can’t have national healthcare, so we have the emergency room. We don’t have UBI, but there’s state disability insurance. We do things via the backdoor, and very sub-optimally.

Another area where Americans don’t just go and do the right thing is trade schools. Here they have a negative connotation, but that’s not true in Germany, say. There, they have excellent vocational schools, and one can train oneself into a stable profession, at an elevated level of craft, and everyone in society is better for it.

The problem in the United States, the people who are making the laws and deciding how the funding rolls out, are from that aristocratic class. There are no welders in Congress. If there were, we would have Title IV for trucking school. Why can’t you get a Pell grant to become a trucker? Why only university? That’s because the people who make the laws, and decide what ought to happen to the rest of America, all went to Georgetown or Yale. If you look at Congress, it's literally something like 90% of the people come from six schools. It's not an exaggeration to say it’s aristocratic; the Supreme Court even more so, they’re like from two schools. The people making the laws are not making laws for themselves, they’re making laws for everybody else thinking that they [the lawmakers] live the optimal path, and that everybody ought to do the same. And that's just not true.

For some reason, it seems heresy to say maybe not every American should go to university.

If you said that, the arguments for university just become more amorphous and abstract: How will people learn how to learn? How will they learn how to be good citizens of a democracy?

The university system didn't exist, basically nobody went to school, for the first 100 years of the United States and we still held it together, right? I get in trouble sometimes for saying stuff like: Look that university degree, there’s nothing magical about it actually. It can help you get your foot in the door, and in some careers it acts as a license, but it doesn't automatically make you a better person. It doesn't bestow you with any gifts. We definitely overbill what it is in the United States.

Let’s talk about that. What do you think happens to the university system post-COVID? If you believe in Turchin’s whole ‘overproduction of elites’ thesis, whereby we have an entire class of people with Instagram-worthy tastes graduating from universities that charge you a quarter-million dollars for what often amounts to postponed adolescence, and where you can come away without swinging the job that justifies that level of borrowing.

I've heard it described as ‘the bottom 1000 universities’: Assume there's some algorithm that spits out the combination of is expensive and is ineffective. There are at least 1000 universities in the US that should cease to exist. There are many universities that net do more harm than good.

Look, I've never met someone that regrets going to Stanford. Unless they could have dropped out and started Facebook or something like that, you're gonna be okay if you're in the top 50 universities. You're not going to end up with debt that you can't ever crawl out of ever again. Although schools like NYU and USC, those kind of schools are starting to push it with $75,000 to $100,000 a year to attend.

Crikey, my numbers are old. I didn’t realize that’s where we are…

Yeah, USC is $78,000 all in for a single year.

There are a lot of schools that shouldn't exist and there are a whole bunch of schools that should exist. The problem is the average 18-year-old has no idea which is which, and there's nothing there to help them. Until you start to align incentives financially in some way, we'll continue to have crazy surplus and crazy shortages.

Ok, but the European cultural elitist in me thinks: At this stage in the game, the cultural repositories are obviously not the monasteries or the church. Well, maybe in Utah the Mormon church does, in some sense, play that role. But elsewhere in secular society, the universities are really the repository for a lot of culture. So what happens to all that?

And what happened to the church? It's still around, but it loses influence over time as people opt for something else. And I say that as a churchgoer, but you just can't argue that that’s what happened to the status of the church.

Well, at some point the the locus of intellectual effort moved outside of the clergy and the monasteries…the Middle Ages ended after all.

And so look at the Renaissance; it was all patronage-based. It’s not set in stone that universities are where the intellectual horsepower has to sit, necessarily. Some of it may cease to exist, some of it may not, but it will find a home.

True. Michelangelo these days would have a Patreon account.

The Medicis were big users!

Boccaccio would obviously be on Substack nowadays.

Ok, so to wrap up, pitch me on something new that Lambda is doing that I haven’t heard about.

Ok, I’ll pitch the Lambda School Fellows program. One of the really interesting things is that our students are really good at doing the work, and for many of them getting an interview, or the interview process really, is just a way to trip up. So we've bypassed that with the fellows program where we basically just say, hey, they're gonna start working on Monday and we're gonna see how that works.

Interviewing to determine who gets a job is a very suboptimal way to determine who should work for you. It's one of the best options that we have, but it's still not good. It's so hard to tell what it's actually going to be like to work with someone by sitting across the table from them and asking them a bunch of questions. I think there is a path where, in the future if you go to Lambda School, you don't have to interview for your first job ever; I think we can replace the interview with something far better.

I’ve been on both sides of the interview table, interviewed lots of people and done interviews, and even in a technical role where there’s some concrete way to gauge merit…

…it’s such a crapshoot, at every level. Even when I’m hiring an executive and I say, yeah, let’s spend 10 hours together and try to figure out who they are. If you’re going to marry somebody, you usually date them and have experiences together, you don’t just sit across the table from each other and ask questions. Not that those are analogous, necessarily, but if you could replace interviewing with something that actually gives you something more substantial, I think that would be a net win for everybody.

So how do you hire at Lambda School then? How do you do it?

We still hire with interviews! (laughs)

1

The United States’ social spending is just under 19% of GDP, which puts it above countries like Australia (16.7%) and Canada (18%), though below countries such as Spain (24.7%) and the United Kingdom (20.6%).


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