Lambda School Pt. 2-1: Category

Intro

I wanted to add an update to my intro from my last post in this series, in which I said Lambda School had raised $4M in financing. About a month ago, they announced that they closed another $14M in Series A funding, led by Google with participation from Stripe and others.

Before we head on, I’ll provide my usual disclaimer
Some of this analysis may be deeply flawed as I’m relying only on public information and my own lived experience. I have no access to the guts of the company as I used to with my consulting clients, so a lot of what I do here will be conjecture and opinion. This will result in the construction of narratives that are most likely only partial reflections of Lambda’s reality. I suspect that how correct I am will follow a normal distribution: mostly somewhat right with a few strong hits and complete misses.

And since we’ll be talking about higher education, I’ll add another disclaimer: the views presented here do not reflect the opinions or views of my alma mater, Georgetown University, where I serve in some formal capacities on a volunteer basis.

The Origins of Education

In my last post, I mentioned how, in the 1960s, college transformed from being a place of exploration into a place to develop the skills to court an employer. That view is a tiny snippet of the massive history of education; to rely on it heavily in our analysis is shortsighted and misses the bigger picture. So, today, we’re going to zoom out and look at the history of higher education. (Note: I’ll devote a future post to the educational sub-category of bootcamps and other places to upskill).

For most of human history, there was no such thing as education in the way we think of it today. When humans lived in nomadic hunter-gatherer tribes, children learned empirically through play and interaction with the world around them. As we shifted into agrarian societies, children were forced to give up play in favor of labor; they had to help plant and harvest crops.

As agrarian societies gave way to true civilizations, the only people who got broad educations were the children of royalty (generally scribes were drawn from the nobility). For some examples, the Assyrian king Ashurbanipal was educated as a scribe and Alexander the Great was famously tutored by Aristotle.

Then, at varying periods in history, the creation of schools expanded education to lesser nobles and were based on the prevailing religions of the region. In ancient India, students would seek out Gurus from whom to learn the religious texts of the Vedas and Upanishads alongside practical skills like medicine and war. In China, philosophers like Confucius and Laozi would gather disciples to teach rites and customs. In Israel, Jewish priests opened the first yeshivas to educate young men in the practices of the faith. In the Greco-Roman world, schools taught disciplines like debate, art & music, and of course literature (which focused on the gods and demigods). 

The Rise of Modern Education

As monotheistic religions began to expand in reach and influence, religious institutions became the venues and foci of education. Christian monasteries would transcribe religious texts and train young men to become monks and members of the clergy. Madrassas in the Middle East and Africa did the same as Islam expanded. This religious education was the foundation for most universities of any significant age. For example, Oxford, Cambridge, and Harvard, arguably the most significant institutions of higher education in the (Western?) world were founded as centers of religious instruction. This persisted until the Enlightenment (though modern seminaries are the descendants of these religious schools).

As religion began to fade in the wake of the Enlightenment era, universities shifted to teach the “liberal arts.” The disciplines that constitute liberal arts are descended from the Greco-Roman educational tradition, in which schools inculcated the necessary skills to become a member of the polis. And though we think of Athens as a democracy, it was quite limited in scope compared to the democracies of today (Athens’ political polis was composed of a relatively small number of elite, educated Athenian men).

Given this tradition, universities post-Enlightenment really just existed to provide a broad education to societal elites so they’d have something to talk about with each other. In the early 1900s, as the Industrial Revolution plowed ahead, colleges shifted to offer more practical instruction. But relatively few people went to college until after WWII. Veterans used the GI bill to get university educations, which had become a bit more exclusive due to the creation of the SAT. Since universities knew the government would reimburse them, they marketed heavily to increase enrollment. Couple this with the Cold War necessitating STEM research and you get greatly increased enrollment.

In the 1980s, colleges discovered the Mt. Holyoke phenomenon: the economic reality that application rates would go up as tuition costs increased (i.e. that price created prestige). This is part of what explains the dramatic tuition rise over the last decade(s).

College Today

So now, we find ourselves in a society where everyone is urged to go to college. However, many colleges have exorbitant tuition costs. For these prices, you’d expect to get a great education, but many college grads are unemployed. I believe this is because many colleges have hung on to the liberal arts educations of old. 

Liberal arts were initially taught to the elite in order to make them well-rounded and cultured. These were not meant to be pragmatic work skills but rather social graces. Many schools’ insistence on teaching these disciplines does not serve their students, who need to get jobs. 

Liberal arts make sense in those universities that still strive to educate social elites (e.g. the top 10 or 20 schools).  In these schools, the name brand and prestige of the school alone is enough for many grads to get jobs. And the price premium they charge is not charged for the quality of their education but rather for their brand and for access to their student and alumni networks, which are literally composed of the people who run the world. Unfortunately, many schools have been fast followers and increased their tuition to match or even surpass the highest-ranked schools. This does not serve students, obviously.

Most colleges should simply not exist. Harvard professor Clayton Christensen recently remarked that half of the 4000 US colleges and universities will cease to exist in the next decades or two (source). While this view might be a bit hyperbolic, I do think Christensen is onto something. The Dept of Education and Moody’s agree with this view, as well. Christensen states that “online education will become a more cost-effective way for students to receive an education, effectively undermining the business models of traditional institutions and running them out of business.”

So if most colleges are both not worth it for students / are members of a dying breed, how do you effectively fill the power vacuum?

Lambda’s Strategic Category Choice:

If strategy is about choices, what has Lambda decided to do in the context of the competitive set of colleges? 

First, traditional college is a Veblen good: a good for which demand increases as the price (and therefore exclusivity) increases, because of its appeal as a status symbol. This is why people are willing to go to war and sue Harvard over its admissions policies. The attractiveness of the brand is so great that young kids will literally structure their lives around getting in. Inherent in this attractiveness comes the caveat that that the institution can never expand. If Harvard opened an offshoot in Kansas or started accepting double the students, its reputation would take a massive hit. 

Lambda, in striking contrast, has chosen not to turn itself into a Veblen good. Lambda seeks to accept as many motivated students as its infrastructure can bear; furthermore, tuition is entirely contingent on getting a job. You don’t pay at all if you don’t get a job in tech paying $50k+. I’m curious as to whether this play will work out. I suspect that the Lambda brand will be built on employers’ satisfaction with graduates’ skills.

This brings me to my next point: traditional colleges have been widely accused of grade inflation. This means that professors and administrators have artificially boosted students’ grades. From this, we can gather that students’ grades are not an accurate reflection of their capabilities. If grades were ever indicative, they are no longer.

Lambda doesn’t really have grades in the traditional sense. Every single assignment is a project scored on a 3-point scale: 1 means you missed the mark, 2 means you completed the basics in the allotted time, and 3 means you completed the basic goals and additional goals in the allotted time. Due to the lack of emphasis on grades, Lambda is encouraging students to explore and experiment without the dread of failure. Quantitative grading diminish students’ interest in learning, academic risk taking, and their quality of thinking (source).

The one knock I can think of against Lambda is that they may not be able to attract the quality of professor that, say, Stanford can. Let us take, for example, Andrew Ng. Professor Ng is an AI researcher who teaches at Stanford and works at Baidu. There are numerous CS professors in similar arrangements; in this way they can make exorbitant salaries at tech companies while keeping the brand of their institutions and being able to conduct their own research.

At this point in time, Lambda lacks the salaries and brand to be able to do this. But I doubt they’d want to. Lambda, as an institution, has sought to cut away all the chaff that doesn’t help students get jobs. Professor research, generally, doesn’t play into students getting a job (except for a few professor-student duos who make massive breakthroughs like Church and Turing or Bush and Shannon, and can go on to do whatever they please). 

It’s evident Lambda has picked apart the dynamics of the college “market.”  If I were to summarize Lambda’s category choice in a tweet, it’d go a bit like this:

Create an “anti-Veblen” institution that builds its brand on employer satisfaction; generate such satisfaction by cutting away every element of traditional college that doesn’t impact student skill-building.

Future Strategic Implications:

Lambda is currently expanding into new geographies. I think this is the first test of the anti-Veblen approach. The team’s intuition about being massively open rather than massively exclusionary is tough to check; I believe it will take at least a few years for it to bear itself out or break. 

The key indicator here is whether we see a pronounced alumni network effect at Lambda like one does at Harvard or Stanford (i.e. will alumni actively solicit each other for open roles and hire new grads at a huge scale).

If the notion of building brand on employer sentiment bears out, I suspect Lambda’s alumni network effect will be exceptionally strong. Given that Lambda identifies as a “trade school” rather than a college, it does not purport to do anything except help students develop skills and land jobs. Because of this, I think the Lambda network will be more career-minded than most institutions’ alumni networks, and due to that, will share more job opps and hire more from the network as older grads gain more hiring responsibility.

I’ll leave off here. Next post will cover the other side of the competitive set: bootcamps.

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