November 14, 2017
Why We Started Lambda School
Austen Allred

Before I moved to San Francisco I lived in a small town near my wife’s family farm (the town pictured above). Life was much simpler there; most people I knew worked as “sprinkler boys,” sold cars at the local Chevrolet dealership, or worked the register at the town’s only frozen yogurt shop.

It was like going back in time, in a way, to the kind of small-town, simple life that most of my colleagues in San Francisco could scarcely imagine.

Maybe in Another Life

One day one of the more ambitious young people in that town called me up to ask if I’d ever heard of this thing called a “code bootcamp” (it was 2016). I explained to him that I knew a lot of people who had gone through code bootcamps, to varying degrees of success, and some of them even had six figure jobs.

He became excited as he told me about building his own computer when he was younger, writing some simple code just for fun as a teenager, and daydreamed about making $100,000/yr. Then he asked how much it costs.

“About $10,000.”

He just laughed, and said, “Maybe in another life.”

I was taken aback. I asked him why that wasn’t an option, told him all about loans and financing options available, and did everything short of offering to sponsor him myself, when he told me what was really holding him back.

He was living (and feeding a family) on just under $20,000/yr. To risk $10,000 — half of his annual salary — on a code bootcamp (or on much of anything, for that matter) was simply unthinkable.

A Mere $10,000

Many of us “rich” folk in the Bay Area forget — or perhaps never realize — that for many people $10,000 is an unimaginably large amount of money. Not only because you’re not making much, but because close to every penny of what you are making is going into just staying alive.

For many hard-working people who have never been in debt for anything other than land or a house, the risk simply isn’t worth it. Compound that with the fact that you can’t even bankrupt your way out of student loans, and many hard-working Americans are rightly recognizing that choosing education could mean destitution for the rest of their lives.

There’s absolutely no reason it needs to be this way.

Here, Not Evenly Distributed

I thoroughly believe that the only way the country will be able to move forward and train this and future generations is by not only reducing the costof higher education, but by eliminating the risk of higher education.

We need to replace the current model of education with something that doesn’t leave people broke for the rest of their lives if it doesn’t work out.

And if we’re not willing to do that, if we’re not willing to share that risk, what does that say about our educational institutions?

If we promise someone that our education will help them get a job, and we’re wrong about that, why should we be paid? Conversely, if what we promise is actually obtainable, can’t we leverage that financial likelihood as institutions, and share the risk with the student?

We need to align the incentives of the school with the incentives of the student.

Every school I talk to somehow misses this. If we’re going to make a difference in the lives of everyday people, it can’t be in a scenario where a prospective student has to weigh the risk and try to determine to what extent a school is exaggerating or lying. The economic incentives must be structured so that a student can enter without worrying if their lives will be over should it not work out. Students will happily pay even high dollar amounts if they do end up in a new, high-paying career.

We’ve structured the cost for Lambda School’s flagship, six-month-long Computer Science program the following way:

If you attend Lambda School and get a job that pays over $50,000/yr, you pay us 17% of that amount for two years (up to $30,000 total).

If, for some reason, you don’t get a job that pays over that amount, or you don’t end up working in the industry you train for, you never pay us a dime. It is literally a risk-free education. We don’t even require a deposit.

That means that not only can students enter without taking out expensive loans, they can enroll knowing that they won’t owe a penny, ever, if the school doesn’t work for them.

That’s a dramatic shift that changes everything we do as an institution.

Economic Justification

Interestingly, in making this kind of shift in business model, we unlock an incredible amount of possibilities.

If you’re a code bootcamp, and you charge $20,000, you can train people with those $20,000 minus whatever you’re taking in margins. If you want to double how much time you spend training, you have to double your prices, but you quickly find that the market won’t support a $40,000 ticket price, even if people would benefit more than $20,000 more from the extra $20,000 of education.

Going back to the example above, if the code bootcamps are to be believed, it was $10,000 separating someone from making $20,000/yr and making $60,000–100,000/yr. That makes zero economic sense, but it’s the reality we live in.

At Lambda School, with a model where we don’t get paid unless students find a job that pays over $50,000/yr, we’ve found that we can and will do whatever it takes to ensure that people get high-paying jobs. That includes expensive instructors (from Google, NASA, and MIT), classes that have more than three times as much instruction as even the best code bootcamps, live help available all day long, and a recruiting and placement team to make sure our students get placed. We even help our students negotiate. That alone will probably earn the average student more than the cost of attending.

We’ve only been around for a few months at Lambda School, but we’re already seeing people with job offers that pay more than they previously imagined possible. We’re seeing people that were applying to McDonald’s at the same time they were applying for Lambda School. After being accepted into Lambda School, they’re ending up with six figure jobs as software engineers.

The difference of business model is subtle, but it’s important.

Lambda School doesn’t just train people; Lambda School bets on them.

And that’s the way it should be.