This was a long and fascinating read! It really brings to light some of the cultural problems at play in silicon valley and venture capitalism, or the tech world in general. It's like, at it's...
This was a long and fascinating read! It really brings to light some of the cultural problems at play in silicon valley and venture capitalism, or the tech world in general.
It's like, at it's core, the idea for the school was intriguing, but certainly not worthy of the levels of hype and attention from investors. There was no secret sauce, no proprietary technology. It seems anyone with money could easily setup a similar school. Were people just investing in this guy? Was Austen the secret sauce?
There seems to be many similarities between this story and so many others coming out of the tech world in the last 10 years. Austen is a massive piece of shit, but it does seem like there is a system at play that enabled and empowered him to do so much damage.
It's pretty fucked up when you think about how many people he fucked over. It's such a vulnerable place to be and takes a lot of courage to start over and go back to school. This guy preyed on that vulnerability, and lied, cheated and did whatever it took to continue to live his tech bro fantasy.
This guy should do jail time, and I really hope that somehow the victims can be made right.
Yes, I agree that this sort of thing happens a lot. Many of us are just reading the news and forums and going by which ideas sound interesting or alarming, along with "social proof." If...
Yes, I agree that this sort of thing happens a lot.
Many of us are just reading the news and forums and going by which ideas sound interesting or alarming, along with "social proof." If YCombinator accepted them, it's because they met with the founders and saw something in them, right?
It doesn't mean that much. Investors vet their investments less than you'd expect. They have little incentive to do it, because it's a hit-driven business. They fund a lot of companies and a few pay off. Also, which companies make it big is very difficult to tell in advance. Sometimes bad ideas turn out to be good. Sometimes a bad idea really is bad, but the founders do a "pivot" to a better idea. So, there's a lot of fear of missing out, where they don't want to miss an investment that turns out to be a big hit.
So getting funded doesn't actually prove much at all. For example, FTX got funding. Deferring to social proof was so strong that even people who worked directly with Bankman-Fried and had been deceived by him later changed their minds. Because they hadn't seen him in a while, and a lot of people seemed to like him, so maybe he had learned to be a better person in the years since then?
To really understand what's going on at any given company, you need to do a deep investigation, and there's no incentive to do that when you're just casually reading the news. So we all take shortcuts. People take sides based on vibes.
After reading a deep investigation like this, in hindsight, it's a lot easier to see why it was a bad idea all along and that there were signs that the founder was dishonest.
So for me, the lesson is to be less confident when getting a surface impression by skimming the news. Other people's opinions can turn out to be right in retrospect, but when it's not something they have actual experience with, they're just uninformed opinions, made based on heuristic shortcuts about which side to take. The rumor mill is a hint generator that you can't ignore, but if everyone is using heuristic shortcuts and nobody can verify anything, it's easy to be overconfident.
I don't know how the system could change to keep the wrong people from getting money, while also allowing people with good ideas and a dream to be funded sometimes.
In early 2020, leaked communications with investors exposed dismal results. Most students weren't hired. What little money the school made came from quietly reselling student debt to hedge funds.
It turned out the income share agreements were rigged. When graduates landed jobs unrelated to programming— everything from legal assistant to mailman— the company went after them anyway.
Following the leaks, the company lost control of the narrative and their cheerleaders turned on them, realizing Lambda School was just another Uber, an unethical, untenable, profit-driven startup who took a gambit evading the law, hoping to grow too big to fail before the law catches up. Except Uber was good at being bad, and Lambda School combined malfeasance with incompetence, burning up to $11.8 million per quarter on a business that didn't work.
In under two years, Lambda School went from the hottest startup in Silicon Valley to a veritable pariah, unable to raise money as its bank account drained. As executives fled and investors expunged it from their resumes, a series of layoffs cut the school's staff from hundreds to dozens.
With mounting legal bills and an unredeemable brand, the company rebranded as, "The Bloom Institute of Technology." Disgruntled employees leaked the news a few days early, robbing the company the power to spin it as anything more than failure.
…
Lambda School targeted single mothers, the disabled, reformed convicts, and people struggling with serious medical problems. They lost tens of thousands of dollars, some lost years of their lives, on a broken, predatory program.
When students surfaced problems to staff, staff blamed the victims, gaslighting them with, "Trust the process," or blaming everything on "imposter syndrome." As the company unraveled, upset students overran the official /r/LambdaSchool subreddit with criticism. As Austen deleted posts, students created a rogue Discord to discuss legal options. Austen tried to contain things by pretending to be a student under a sock puppet account.
…
As mentioned earlier, colleges tried ISAs for years before Lambda School. Why were they abandoned? It seems impossible to construct ISAs in a way that benefits the student without exposing the school to more risk.
It's expected that programs that offer ISAs will have worse hiring results than those that ask for payment up-front. Apologists blame it on students who attend for free, decide they don't like coding, and drop out because there's no "skin in the game." Maybe that's a thing, but I think it's much more likely that the students who need an ISA, the students barely getting by, face more struggles than the people who can afford to pay up front.
If a school wants to reduce the risk, they could be more rigorous in admissions, only accepting the students they're sure will pay them back. That means either denying admission to anyone who genuinely needs the ISA, or charging different people different prices based on their risk. If you squint, this looks like an argument for payday loans. If nobody else will service these groups, is it better to offer something at a higher price than to offer nothing at all?
Push past these ethical quandaries and we get to the technical problems. How do you prove that the school did its job? If a student majors in math and finds a job in programming, does that count? What happens if the student gets hired, but gets laid off a month later?
As you go down this path, you speed-run the student loan system, reinventing concepts like hardship-deferments and income-driven repayment forgiveness. We should absolutely overhaul American education, but if we want to make lives better for millions of indebted students as quickly as possible, the fastest pain relief would come from better educating people on existing escape hatches.
Going back to ISAs, let's focus on the thorniest clause of the contract: "You pay nothing if you don't find a job in a related field within X years." What is a fair value for X? If you pick 'one year,' students may take on an unrelated job just to run down their clock. The longer you pick for the length, the more it benefits scammers.
For a clever scammer, ISAs offer a smoke screen. As early warning signs about Lambda School popped up, critics were met with, "How can it be a scam? You only pay when you get a job!" If the company stayed afloat, it must mean the program works?
It takes several years for an ISAs to pay back the company, yet a company needs that money right away, because teachers don't take rain checks. Lambda School's solution was to sell half their ISAs to hedge funds at a discount, in exchange for cash up front.
Nobody told the students about these deals. Their marketing claimed, "We don't get paid until you do." Students thought that if the school was solvent, the program had to work, right? In reality, the company was burning through venture capital at a staggering rate, and propped up by hedge funds.
This was a long and fascinating read! It really brings to light some of the cultural problems at play in silicon valley and venture capitalism, or the tech world in general.
It's like, at it's core, the idea for the school was intriguing, but certainly not worthy of the levels of hype and attention from investors. There was no secret sauce, no proprietary technology. It seems anyone with money could easily setup a similar school. Were people just investing in this guy? Was Austen the secret sauce?
There seems to be many similarities between this story and so many others coming out of the tech world in the last 10 years. Austen is a massive piece of shit, but it does seem like there is a system at play that enabled and empowered him to do so much damage.
It's pretty fucked up when you think about how many people he fucked over. It's such a vulnerable place to be and takes a lot of courage to start over and go back to school. This guy preyed on that vulnerability, and lied, cheated and did whatever it took to continue to live his tech bro fantasy.
This guy should do jail time, and I really hope that somehow the victims can be made right.
Yes, I agree that this sort of thing happens a lot.
Many of us are just reading the news and forums and going by which ideas sound interesting or alarming, along with "social proof." If YCombinator accepted them, it's because they met with the founders and saw something in them, right?
It doesn't mean that much. Investors vet their investments less than you'd expect. They have little incentive to do it, because it's a hit-driven business. They fund a lot of companies and a few pay off. Also, which companies make it big is very difficult to tell in advance. Sometimes bad ideas turn out to be good. Sometimes a bad idea really is bad, but the founders do a "pivot" to a better idea. So, there's a lot of fear of missing out, where they don't want to miss an investment that turns out to be a big hit.
So getting funded doesn't actually prove much at all. For example, FTX got funding. Deferring to social proof was so strong that even people who worked directly with Bankman-Fried and had been deceived by him later changed their minds. Because they hadn't seen him in a while, and a lot of people seemed to like him, so maybe he had learned to be a better person in the years since then?
To really understand what's going on at any given company, you need to do a deep investigation, and there's no incentive to do that when you're just casually reading the news. So we all take shortcuts. People take sides based on vibes.
After reading a deep investigation like this, in hindsight, it's a lot easier to see why it was a bad idea all along and that there were signs that the founder was dishonest.
So for me, the lesson is to be less confident when getting a surface impression by skimming the news. Other people's opinions can turn out to be right in retrospect, but when it's not something they have actual experience with, they're just uninformed opinions, made based on heuristic shortcuts about which side to take. The rumor mill is a hint generator that you can't ignore, but if everyone is using heuristic shortcuts and nobody can verify anything, it's easy to be overconfident.
I don't know how the system could change to keep the wrong people from getting money, while also allowing people with good ideas and a dream to be funded sometimes.
From the article:
…
…