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Business Models for the Future of Education
Jon:
Welcome to episode 290 of The Digital Life, a show about our insights into the future of design and technology. I’m your host, Jon Follett, and with me is founder and co-host, Dirk Knemeyer.
Dirk:
Greetings listeners.
Jon:
This week, we’ll be talking about the future of education, and the business models that drive it. The impetus for this particular episode, was a news item that I spotted indicating that a unaccredited but still popular online school called Lambda school, which trains engineers in software development, had received 30 million dollars in their Series B funding round. AndLambda school is one among many of this code camp style schools that enables people to upscale themselves, move from whatever their current careers may be, into hopefully a more lucrative field for them coding software, which has endless need right now. There aren’t enough engineers, software developers really to fill all the job openings. So, in this particular example, I see some really interesting indicators of where education and training may be going as emerging technology is more and more become part of our innovation economy.
So you have all these fantastic technologies, and you don’t have enough people to fill the jobs that they require, because they require a different set of skills than maybe what some universities, colleges, schools might be generating the students to do those particular jobs. They’re just not meeting the demand. Before we get into that broader topic, there’s a second part of this story that I find really fascinating, which is the way in which you can pay for this education fromLambda school. It’s a 30-week software engineering course, and so you can either pay 20 grand, which is your tuition. So you can pay that as you would maybe if you attended a university, or you can do this thing called an ISA, which stands for an Income Share Agreement, and it essentially means that you will pay the school 17% of your salary, from your job that you get after you complete your coursework, and that’s for a period of two years. It caps out at 30 grand, so you’re not going to pay more than 30 grand for your education.
And if you don’t get a job after five years, you don’t owe them anything. So in this way, Lambda school is attaching its success in training you for these skill, taking on some of the risk. So it’s saying, “These skills we know are in demand, so we’re going to enable students who might not otherwise be able to afford this type of education, we’re going to make it possible for you.” And I thought that was a really fascinating model, and I don’t know how I feel about it. In one way, it kind of feels like economically that might work a lot better for people than carrying a load of debt, and at the same time, signing over a percentage of your salary seems a little funny. Dirk, what was your impression of this ISA business model type?
Dirk:
I think the business model was interesting, and when you sort of break it between the business model and thenLambda specifically, finding creative ways to allow people to educate themselves, in order to both provide for themselves, and the people they care about, and to fill opportunities in the workforce is necessary and important.Lambda is not a pioneer here, models like this have existed before, but it’s an interesting model and an example in this case, specifically with Lambda, of trying to innovate beyond, “Here’s this giant pain pill that you have to take in order to get the education.” There was a school by someone in the design field, Jared Spool. I think it was originally called The Unicorn Institute. I think now it’s called something different, but that school the tuition is massive. It’s in the many tens of thousands of dollars, and that makes it difficult to commit to that, and to make it happen. And that school may be able to exist as a small entity for a small number of students, but it will never scale, and have a bigger and broader impact. A model likeLambda as well. Now, talking aboutLambda specifically, the reason thatLambda is able to do this, is that it’s an online only course load, their infrastructure is online course delivery infrastructure, and some time of the teachers. They advertise, “Oh, you can slack with your instructor.” So the slack with the instructor is the only thing at the end of the day that really costs them ongoing money, once they have the platform made, because if we think about it, there is all of this free available online education, among many others. Like the type of education they’re giving, is worth very little in the marketplace. It’s generally free. There’s other things like MasterClass, which again you don’t have teacher interaction but for under $100 a year, or something sort of obscenely affordable, you can get access to this trove of classes, from like the best people in all of these different disciplines to teach yourself.
So Lambda’s offering something that is a commodity, that is in the market generally seen as something to be given away, or to be acquired at a very small price, and they’re charging tens of thousands of dollars for it. They set as an anchor their $20,000 price point, in order to sort make you sign up for the more attractive model of paying them even more, significantly more downstream. So to me in that way, I don’t find it particularly altruistic, I find it particularly capitalistic, and they’re offering something where, what they have to pay their instructors to teach this online course and then slack with the students who reach out to slack them in some limited way. They’re going to be grossly profitable doing this. Good, creative, interesting, has a chance at scale to make an impact. All good, but I definitely see it as self serving motivation more than serving the public, because of the price model, what they have. And I’m sure that’s why they’re getting so much investment and so much attention, it’s because there’s just the opportunity to make gross amounts of money with it, which is generally what Silicon Valley’s all about.
Jon:
Yeah. I think there’s probably … having not taken a Lambda course, I’m sure there’s an array of things … I do know they have some help in finding jobs for instance. I’m sure there are other elements that you would include in that tuition cost, aside from just the basic instruction and Slacking with the instructor. All that being said, there is no reason any venture capital will put any money in it, if they couldn’t double their money to take it out. So that’s a point well made, I think.
Dirk:
It’s a near free gamble for them on this model, but if you make over $50,000 and you’re paying a percentage, and it’s one that’s really to maximize the money for them, it’s just really smart, from a “how do we profit as much as possible from this.” I think there’s other ways that the same thing as a nonprofit, or in some different structure could be offering and instead of $20,000 as a base, it could be $5000, it could be $500 as a base potentially. It just scales the magnitude beyond what’s required. And again, we’re in capitalism, it’s a perfectly acceptable and fine thing, that’s consistent with how the system work, but for me I’m not … There’s a lot of fawning over Lambda, people are really impressed, and I’m a lot less impressed, because to me it’s more transparent on the profit sides.
Jon:
Yeah. I think it’s worth also considering this particular business model in the context of the higher education market, and then also more broadly as we anticipate technologies will be continuing to automate and change our economy, and people will need to upscale and rescale themselves throughout their careers. What are some of the ways that people can do that effectively, and move on from whatever it is they’re doing, where there might be a bit of a crunch, no longer there are jobs available and move on to the next thing. And I think in a lot of ways, this particular example with Lambda and code schools generally speaking, is sort of a precursor of what we can expect in the future. So, business models that are geared towards pushing people in the direction of a technology and providing them with some skill basis to work from, and I think what that neglects, or what that particular type of educational system will leave out, I think, is all the benefits that you would get from the polar opposite.
Which would be the more liberal arts education focused on whether it be writing, reading, understanding. Everything from science and literature, and getting sort of a broad survey, as opposed to very specific job-specific skills that you can use in the market place immediately. And I don’t know whether these two models will come crashing into each other, but it seems to me like we have these competing entities of very quickly moving technologies, university systems which are extremely expensive, and then the quest to find meaningful and ongoing work, which is only going to change even further as more technologies take shape. Dirk, when you think about how these worlds where continuous education is going to be a prerequisite for being able to compete, what do you see? How do you see the traditional university model and these more technical type schools in emerging technology? How does that all come together? Or is there even other …? I’m sure there are other ways that we could approach this realm of education as well.
Dirk:
In terms of technology and automation changing the skills required to do work, for people who are already working, I think it’s going to be more integrated into life. I think it’s going to be less of, “I’m going to attend this program.” It’s not going to be this thing, Lambda school, or General Assembly, or whatever the case. I think it’s going to be more woven in and integrated just into how we are online, and how we’re already going through our things. I think it will shift down more to a feature, a product level as opposed to a company level that these things will sort of manifest. Not just from a video perspective but more of like the Lynda.com, check in and checkout model, as opposed to the, “Here’s this big place that I’m going to make this big investment in.”
Jon:
That’s interesting. Yeah. I think it’s hard for me to reconcile the need for continuous learning. It’s hard for me to reconcile that as a separate piece, because in a lot of ways I feel like when I was at university, when I went to college, I, in some ways learned how I should go about learning, like what things worked for me, what things didn’t, and that’s how I apply it to learning new skills. So at university I had the opportunity to learn about lots of things that I will probably not use in my everyday life. Whether it’s Shakespeare, or poetry, or writing short stories, or whatever, but I draw on all that as I learned new skills, and it gives me perspective. So I do feel like there’s this need for constant education, and then also need for a really strong base from what’s to work. It’s a huge problem already, and I think it’s worthy of our attention nationally, because we can’t have students who are in perpetual debt, but at the same time we can’t have education that’s completely contingent on you working to fund that in some … basically a revenue sharing agreement.
I feel like all this is headed for an interesting collision course, and that’s of course where innovation happens, but it’s a struggle for me, because I know what I took away from university, and that being so valuable for how I learn today, and at the same time I know the price tag of it, and the price tag today is huge whereas something like Lambda school seems almost … It’s extremely affordable in comparison. You’re not talking 200 grand, you’re talking 20. So I can see the appeal there. And obviously this is a topic that we’ll be exploring more as we dig into the future of education.
Dirk:
Yeah. It’s also unclear to me, and I don’t think either one of us are qualified to answer this, but it’s unclear to me that it’s an apples-to-apples comparison of a Lambda education to the sort of institution that you’re slotting in as $200,000 a year. I mean, right away Lambda’s online only and the other isn’t.
Jon:
Sure.
Dirk:
I don’t know that they even belong in the same category frankly, although I don’t think either of us are deep enough into sort of the Lambda product to say one way or the other with any confidence.
Jon:
Sure. What I can say with confidence is I did receive a terrific education at university, which now seems like a very expensive investment, just based on today’s price tags. It makes me concerned for sure. So I’d like to make a little announcement about what we’re doing here at The Digital Life. We’re transforming into sort of next iteration called Creative Next. Creative Next is about future proofing designers, engineers, writers, researchers and entrepreneurs to prepare for collaboration with smart machines, and enabling us to transform our jobs and improve our lives. Each episode of The Creative Next Podcast will introduce you to a compelling innovator, who’s going to offer a new perspective on critical issues related to our creative futures. The show, Creative Next will be presented across six seasons, and our first season on learning will be debuting on February 19th. So we encourage you to check out the next iteration, the next evolve of The Digital Life, it’s Creative Next, and you can check out a sample episode of the show at CreativeNext.org.
Listeners, remember that when you’re listening to the show, you can follow along with the things that we’re mentioning here in real time. Just head over to TheDigitaLife.com. That’s just one L in the digital life, and go to the page for this episode. We’ve included links to pretty much everything mentioned by everyone, so it’s a rich information resource to take advantage of while you’re listening, or afterwards if you’re trying to remember something that you liked. You can find The Digital Life on iTunes, SoundCloud, Stitcher, Player FM and Google Play, and if you’d like to follow us outside of the show, you can follow me on Twitter @jonfollett. That’s J-O-N F-O-L-L-E-T-T, and of course the whole show is brought to you by GoInvo, a studio designing the future of healthcare and emerging technologies, which you can check out at GoInvo.com. That’s G-O-I-N-V-O dot com. Dirk?
Dirk:
You can follow me on Twitter @dknemeyer. That’s at D-K-N-E-M-E-Y-E-R and thanks so much for listening.
Jon:
That’s it for episode 290 of The Digital Life. For Dirk Knemeyer, I’m Jon Follett and we’ll see you next time.
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Jon:
Welcome to episode 290 of The Digital Life, a show about our insights into the future of design and technology. I’m your host, Jon Follett, and with me is founder and co-host, Dirk Knemeyer.
Dirk:
Greetings listeners.
Jon:
This week, we’ll be talking about the future of education, and the business models that drive it. The impetus for this particular episode, was a news item that I spotted indicating that a unaccredited but still popular online school called Lambda school, which trains engineers in software development, had received 30 million dollars in their Series B funding round. AndLambda school is one among many of this code camp style schools that enables people to upscale themselves, move from whatever their current careers may be, into hopefully a more lucrative field for them coding software, which has endless need right now. There aren’t enough engineers, software developers really to fill all the job openings. So, in this particular example, I see some really interesting indicators of where education and training may be going as emerging technology is more and more become part of our innovation economy.
So you have all these fantastic technologies, and you don’t have enough people to fill the jobs that they require, because they require a different set of skills than maybe what some universities, colleges, schools might be generating the students to do those particular jobs. They’re just not meeting the demand. Before we get into that broader topic, there’s a second part of this story that I find really fascinating, which is the way in which you can pay for this education fromLambda school. It’s a 30-week software engineering course, and so you can either pay 20 grand, which is your tuition. So you can pay that as you would maybe if you attended a university, or you can do this thing called an ISA, which stands for an Income Share Agreement, and it essentially means that you will pay the school 17% of your salary, from your job that you get after you complete your coursework, and that’s for a period of two years. It caps out at 30 grand, so you’re not going to pay more than 30 grand for your education.
And if you don’t get a job after five years, you don’t owe them anything. So in this way, Lambda school is attaching its success in training you for these skill, taking on some of the risk. So it’s saying, “These skills we know are in demand, so we’re going to enable students who might not otherwise be able to afford this type of education, we’re going to make it possible for you.” And I thought that was a really fascinating model, and I don’t know how I feel about it. In one way, it kind of feels like economically that might work a lot better for people than carrying a load of debt, and at the same time, signing over a percentage of your salary seems a little funny. Dirk, what was your impression of this ISA business model type?
Dirk:
I think the business model was interesting, and when you sort of break it between the business model and thenLambda specifically, finding creative ways to allow people to educate themselves, in order to both provide for themselves, and the people they care about, and to fill opportunities in the workforce is necessary and important.Lambda is not a pioneer here, models like this have existed before, but it’s an interesting model and an example in this case, specifically with Lambda, of trying to innovate beyond, “Here’s this giant pain pill that you have to take in order to get the education.” There was a school by someone in the design field, Jared Spool. I think it was originally called The Unicorn Institute. I think now it’s called something different, but that school the tuition is massive. It’s in the many tens of thousands of dollars, and that makes it difficult to commit to that, and to make it happen. And that school may be able to exist as a small entity for a small number of students, but it will never scale, and have a bigger and broader impact. A model likeLambda as well. Now, talking aboutLambda specifically, the reason thatLambda is able to do this, is that it’s an online only course load, their infrastructure is online course delivery infrastructure, and some time of the teachers. They advertise, “Oh, you can slack with your instructor.” So the slack with the instructor is the only thing at the end of the day that really costs them ongoing money, once they have the platform made, because if we think about it, there is all of this free available online education, among many others. Like the type of education they’re giving, is worth very little in the marketplace. It’s generally free. There’s other things like MasterClass, which again you don’t have teacher interaction but for under $100 a year, or something sort of obscenely affordable, you can get access to this trove of classes, from like the best people in all of these different disciplines to teach yourself.
So Lambda’s offering something that is a commodity, that is in the market generally seen as something to be given away, or to be acquired at a very small price, and they’re charging tens of thousands of dollars for it. They set as an anchor their $20,000 price point, in order to sort make you sign up for the more attractive model of paying them even more, significantly more downstream. So to me in that way, I don’t find it particularly altruistic, I find it particularly capitalistic, and they’re offering something where, what they have to pay their instructors to teach this online course and then slack with the students who reach out to slack them in some limited way. They’re going to be grossly profitable doing this. Good, creative, interesting, has a chance at scale to make an impact. All good, but I definitely see it as self serving motivation more than serving the public, because of the price model, what they have. And I’m sure that’s why they’re getting so much investment and so much attention, it’s because there’s just the opportunity to make gross amounts of money with it, which is generally what Silicon Valley’s all about.
Jon:
Yeah. I think there’s probably … having not taken a Lambda course, I’m sure there’s an array of things … I do know they have some help in finding jobs for instance. I’m sure there are other elements that you would include in that tuition cost, aside from just the basic instruction and Slacking with the instructor. All that being said, there is no reason any venture capital will put any money in it, if they couldn’t double their money to take it out. So that’s a point well made, I think.
Dirk:
It’s a near free gamble for them on this model, but if you make over $50,000 and you’re paying a percentage, and it’s one that’s really to maximize the money for them, it’s just really smart, from a “how do we profit as much as possible from this.” I think there’s other ways that the same thing as a nonprofit, or in some different structure could be offering and instead of $20,000 as a base, it could be $5000, it could be $500 as a base potentially. It just scales the magnitude beyond what’s required. And again, we’re in capitalism, it’s a perfectly acceptable and fine thing, that’s consistent with how the system work, but for me I’m not … There’s a lot of fawning over Lambda, people are really impressed, and I’m a lot less impressed, because to me it’s more transparent on the profit sides.
Jon:
Yeah. I think it’s worth also considering this particular business model in the context of the higher education market, and then also more broadly as we anticipate technologies will be continuing to automate and change our economy, and people will need to upscale and rescale themselves throughout their careers. What are some of the ways that people can do that effectively, and move on from whatever it is they’re doing, where there might be a bit of a crunch, no longer there are jobs available and move on to the next thing. And I think in a lot of ways, this particular example with Lambda and code schools generally speaking, is sort of a precursor of what we can expect in the future. So, business models that are geared towards pushing people in the direction of a technology and providing them with some skill basis to work from, and I think what that neglects, or what that particular type of educational system will leave out, I think, is all the benefits that you would get from the polar opposite.
Which would be the more liberal arts education focused on whether it be writing, reading, understanding. Everything from science and literature, and getting sort of a broad survey, as opposed to very specific job-specific skills that you can use in the market place immediately. And I don’t know whether these two models will come crashing into each other, but it seems to me like we have these competing entities of very quickly moving technologies, university systems which are extremely expensive, and then the quest to find meaningful and ongoing work, which is only going to change even further as more technologies take shape. Dirk, when you think about how these worlds where continuous education is going to be a prerequisite for being able to compete, what do you see? How do you see the traditional university model and these more technical type schools in emerging technology? How does that all come together? Or is there even other …? I’m sure there are other ways that we could approach this realm of education as well.
Dirk:
In terms of technology and automation changing the skills required to do work, for people who are already working, I think it’s going to be more integrated into life. I think it’s going to be less of, “I’m going to attend this program.” It’s not going to be this thing, Lambda school, or General Assembly, or whatever the case. I think it’s going to be more woven in and integrated just into how we are online, and how we’re already going through our things. I think it will shift down more to a feature, a product level as opposed to a company level that these things will sort of manifest. Not just from a video perspective but more of like the Lynda.com, check in and checkout model, as opposed to the, “Here’s this big place that I’m going to make this big investment in.”
Jon:
That’s interesting. Yeah. I think it’s hard for me to reconcile the need for continuous learning. It’s hard for me to reconcile that as a separate piece, because in a lot of ways I feel like when I was at university, when I went to college, I, in some ways learned how I should go about learning, like what things worked for me, what things didn’t, and that’s how I apply it to learning new skills. So at university I had the opportunity to learn about lots of things that I will probably not use in my everyday life. Whether it’s Shakespeare, or poetry, or writing short stories, or whatever, but I draw on all that as I learned new skills, and it gives me perspective. So I do feel like there’s this need for constant education, and then also need for a really strong base from what’s to work. It’s a huge problem already, and I think it’s worthy of our attention nationally, because we can’t have students who are in perpetual debt, but at the same time we can’t have education that’s completely contingent on you working to fund that in some … basically a revenue sharing agreement.
I feel like all this is headed for an interesting collision course, and that’s of course where innovation happens, but it’s a struggle for me, because I know what I took away from university, and that being so valuable for how I learn today, and at the same time I know the price tag of it, and the price tag today is huge whereas something like Lambda school seems almost … It’s extremely affordable in comparison. You’re not talking 200 grand, you’re talking 20. So I can see the appeal there. And obviously this is a topic that we’ll be exploring more as we dig into the future of education.
Dirk:
Yeah. It’s also unclear to me, and I don’t think either one of us are qualified to answer this, but it’s unclear to me that it’s an apples-to-apples comparison of a Lambda education to the sort of institution that you’re slotting in as $200,000 a year. I mean, right away Lambda’s online only and the other isn’t.
Jon:
Sure.
Dirk:
I don’t know that they even belong in the same category frankly, although I don’t think either of us are deep enough into sort of the Lambda product to say one way or the other with any confidence.
Jon:
Sure. What I can say with confidence is I did receive a terrific education at university, which now seems like a very expensive investment, just based on today’s price tags. It makes me concerned for sure. So I’d like to make a little announcement about what we’re doing here at The Digital Life. We’re transforming into sort of next iteration called Creative Next. Creative Next is about future proofing designers, engineers, writers, researchers and entrepreneurs to prepare for collaboration with smart machines, and enabling us to transform our jobs and improve our lives. Each episode of The Creative Next Podcast will introduce you to a compelling innovator, who’s going to offer a new perspective on critical issues related to our creative futures. The show, Creative Next will be presented across six seasons, and our first season on learning will be debuting on February 19th. So we encourage you to check out the next iteration, the next evolve of The Digital Life, it’s Creative Next, and you can check out a sample episode of the show at CreativeNext.org.
Listeners, remember that when you’re listening to the show, you can follow along with the things that we’re mentioning here in real time. Just head over to TheDigitaLife.com. That’s just one L in the digital life, and go to the page for this episode. We’ve included links to pretty much everything mentioned by everyone, so it’s a rich information resource to take advantage of while you’re listening, or afterwards if you’re trying to remember something that you liked. You can find The Digital Life on iTunes, SoundCloud, Stitcher, Player FM and Google Play, and if you’d like to follow us outside of the show, you can follow me on Twitter @jonfollett. That’s J-O-N F-O-L-L-E-T-T, and of course the whole show is brought to you by GoInvo, a studio designing the future of healthcare and emerging technologies, which you can check out at GoInvo.com. That’s G-O-I-N-V-O dot com. Dirk?
Dirk:
You can follow me on Twitter @dknemeyer. That’s at D-K-N-E-M-E-Y-E-R and thanks so much for listening.
Jon:
That’s it for episode 290 of The Digital Life. For Dirk Knemeyer, I’m Jon Follett and we’ll see you next time.