Apr 3, 2019 · 1h 0m · y-combinator
A CS Education That's Free Until You Get a Job - Austen Allred of Lambda School · Y Combinator
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In this Y Combinator interview, Lambda School CEO Austen Allred discusses how Income Share Agreements, project-based pedagogy, and data-driven risk modeling transform vocational education and unlock mispriced human talent.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. How this is scored →
The partners as informed peer 4.2 Guest teaching 5.0 Guest disagreement 1.9 The partners pushing back 2.2
speaking balance: gold is the partners, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 41:29 Rejecting conventional bootcamp orthodoxies on online education
Austen forcefully dismisses the prevailing industry consensus that students require skin-in-the-game upfront payments or physical classrooms to succeed.
Hardest push from the partners ▶ 35:10 Challenging admissions risk models on algorithmic racial biasCraig directly confronts Austen with a listener question questioning whether automated risk models will replicate and reinforce historical hiring disparities.
Biggest teaching moment ▶ 30:25 Explaining the 90/10 federal funding rule and nursing shortagesAusten educates the host on how the Department of Labor metrics and the higher-education 90/10 regulation restrict nursing school capacities.
The partners hold their own ▶ 53:15 Invoking Michael Seibel's framework on remote work trade-offsCraig asserts his own grasp of startup organizational design by quoting Michael Seibel regarding how remote setups exhaust a company's innovation bandwidth.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | The partners as informed peer | Guest teaching | Guest disagreement | The partners pushing back | Why |
|---|---|---|---|---|---|---|
| Accessibility, Stipends, and the Y Combinator Perception Problem | 4 | 3 | 1 | 3 | Craig introduces questions from Twitter challenging whether a full-time unpaid program is solely accessible to the wealthy. Austen addresses this by explaining part-time offerings, living stipend pilots, and admissions selection filtering. | |
| Origin of the ISA Model vs. Traditional Higher Education Debt | 3 | 5 | 2 | 2 | Austen explains the genesis of the ISA model based on rural Utah income disparities and critiques predatory federal loan incentives at for-profit colleges. Craig relates through his own college debt experience at NYU. | |
| Speed to Market, Opportunity Cost, and Building Student Networks | 5 | 4 | 1 | 2 | Craig highlights his own undergraduate strategy of early workforce immersion and asks how Lambda recreates networking benefits. Austen contrasts traditional 4-year degree opportunity cost with Lambda's 9-month acceleration and structured network placement. | |
| Tactical Networking and Career Coaching Infrastructure | 4 | 5 | 1 | 1 | Craig asks how Austen breaks down networking tactically for students. Austen details career coaching, LinkedIn search strategies for informational interviews, and dedicated interview sourcers acting as talent agents. | |
| Unbundling Higher Education: Vocational Trade vs. Liberal Arts | 4 | 4 | 2 | 3 | Craig probes whether unbundling higher education harms the liberal arts. Austen clarifies that Lambda operates strictly as a vocational trade school, rejecting the premise that universities hold a monopoly on liberal arts enrichment. | |
| Competitive Moats Beyond the Income Share Agreement | 3 | 6 | 3 | 2 | When asked about defending against copycat income share agreements, Austen dismisses the ISA as a mere wrapper, arguing that proprietary risk underwriting and remote completion pedagogical moats are far harder to replicate. | |
| Venture Capital Strategy, Bootstrapping vs. Scaling, and Past Startup Lessons | 4 | 4 | 2 | 2 | Austen explains why Lambda transitioned from bootstrapped profitability to raising venture capital after mathematical modeling, and recounts the collapse of an earlier startup after a Series A lead backed out on Christmas Eve. | |
| The Growth Book, Founder Confidence, and Human Capital Mispricing | 4 | 5 | 2 | 2 | Craig questions Austen on how he rebuilt founder confidence after failure, prompting Austen to explain his Kickstarter growth book and Paul Graham's essay on human capital leverage and compensation measurement. | |
| Human Capital as an Asset Class and Addressing Labor Shortages | 4 | 7 | 2 | 2 | Austen delivers an extensive breakdown of human capital as an inefficient asset class, analyzing labor shortages in nursing caused by the federal 90/10 funding regulation. | |
| Risk Modeling, Machine Learning in Admissions, and Algorithmic Bias | 5 | 6 | 2 | 3 | Craig pushes Austen on whether machine learning risk underwriting might perpetuate historical tech hiring biases. Austen responds with empirical demographic figures from Lambda's student body, noting that removing upfront fees inherently expands access to underrepresented talent. | |
| Physical vs. Remote Campus Strategy and Instructional Design | 4 | 5 | 1 | 2 | Craig asks if Lambda would ever purchase physical college infrastructure. Austen explains the cost advantage of distributed housing and how online instructional design must proactively compete with digital distractions like Netflix and Facebook. | |
| Overcoming Skepticism, Pedagogy for Autodidacts, and Learning by Building | 5 | 6 | 3 | 2 | Austen rejects conventional coding bootcamp skepticism regarding online completion and skin-in-the-game requirements, advocating for inverted curricula that let students build visual apps on day one before tackling low-level C memory management. | |
| Rapid Scaling, Executive Hiring, and the Remote Work Debate | 6 | 5 | 2 | 3 | Austen discusses the bottleneck of hiring executive talent outside Silicon Valley, while Craig cites Michael Seibel's principle that operating a fully remote organization consumes one of a startup's rare innovation allocations. |
Statements from this episode (25)
Allred: Lambda School grads get six-figure job offers immediately upon applying
“Like the minute they start applying, they get interviews, they get hired, they get a six-figure job, and it's like, what were we waiting for, right?”
Allred: Lambda School is testing living stipends for students
“We have experiments running where we pay people living stipends. That will be expanding greatly. We'll be announcing something in the near future along those lines in concert with a few other tech leaders here in the valley.”
Allred: MIT PhDs and 1600 SATs do not correlate with startup success
“But just because you went, you have a PhD in computer science from MIT and you got a 1600 on the SATs as a freshman doesn't necessarily mean you'll have a successful company. It's not directly correlated.”
Allred: University of Phoenix incentives are misaligned by government-backed loans
“They're backed by, the loans are backed by Uncle Sam, and whether or not you're successful, they get paid. So the incentives are fundamentally misaligned, and if the University of Phoenix can get you to sign a piece of paper, they get 80 grand.”
Allred: Advising students to attend college at any cost is bad advice
“Everybody growing up just said, go to college. Doesn't matter what it costs. Just get a degree. It doesn't matter what you study and you'll be successful. And I think my generation is now realizing like that's fundamentally untrue. It isn't only not good advic…”
Allred: Lambda School grads are financially $250K ahead of university peers
“By the time the student's graduating from university, the Lambda School student has three years of experience and has paid Lambda School off and is a quarter million dollars ahead, at least, of the university grad.”
Allred: Lambda School is currently hiring 37 interview sourcers
“We are hiring right now, 37 interview sourcers.”
Allred: Lambda School will eventually operate as a talent agency
“The future we're going to look a lot like a talent agency basically for software engineers and designers and whatever else.”
Allred: Debt-funded liberal arts degrees are impractical for mid-career switchers
“The prospect of, let's take out 50,000 dollars of loans to study Shakespeare is not a bad thing per se, but probably not the right thing at the right time.”
Allred: Lambda School is fundamentally a vocational trade school
“So we are, yeah, we are entirely Vocational we're a trade school basically, and we want to help you make as much money as you can.”
Allred: Lambda School graduates more than 85% of its starting students
“Now we're graduating, you know, more than 85% of students that start day one, and a lot of the dropout is because of reasons outside of our control.”
Allred: Lambda School was already profitable prior to joining Y Combinator
“We were profitable by any definition.”
Allred: His growth hacking book Kickstarter generated $120,000 in sales
“And I emailed everybody who had subscribed to my blog and said, alright, we're launching this Kickstarter, and I'm gonna finish up this book, and the Kickstarter did something like a 120,000 dollars in sales.”
Allred: Google spent $100 million in compensation to retain Sundar Pichai
“Google has in the past spent a hundred million dollars to retain Sundar and stuff like that.”
Allred: Human capital is the most unoptimized asset class in history
“Human capital is the most unoptimized asset class we've ever had.”
Allred: Lambda School may launch a nursing school by late 2019
“So you know, we're not working on it right, right now, but don't be surprised if you hear by the end of this year, an announcement that Lambda nursing is going live and we're launching a nursing school”
Allred: ML will soon predict candidate software engineering success before tuition
“Pretty soon you can underwrite the likelihood that a person will be a successful software engineer before they've paid a dollar.”
Allred: Lambda School's student body is less than 50% white
“So we're, I think as a school, we're less than half white, which is not the traditional makeup of a code school by any stretch of the imagination.”
Allred: Lambda School's top engineers are more diverse than Stanford students
“Our students who are great engineers are generally speaking more diverse than Stanford would be.”
Allred: Only 50% of people who bought his $100 book downloaded it
“50% of the people that bought the book ever downloaded it, even.”
Allred: Software engineers need C, but shouldn't start with memory management
“Like, you do need to know how to write C to be a good engineer. You do need to know how memory management works, but maybe let's not start with memory management as like an entry level point to software engineering.”
Allred: Remote work is not yet established enough for junior engineers
“A, I don't think remote work is built into enough companies yet where I would be comfortable telling somebody that I love that they should start their career as a remote junior software engineer.”
Allred: The best high-growth companies will continue to be built in Silicon Valley
“I think the best high growth companies are still going to be built in Silicon Valley for right now, or at least they'll have an executive team in Silicon Valley.”
Allred: Quantitative analysts consistently underestimate product quality because it resists measurement
“There's no way you can quantify product quality very well. So people who are looking at things from a quantitative standpoint underestimate it every single time.”
Allred: Tesla Model S build quality is worse, but user experience wins
“The Model S, like, the materials are worse. The build is probably not as good. Like, they're not as good at, like, assembling the pieces, but just the experience of that car versus the other one, it's not even close. And so Tesla's probably the canonical examp…”