Journalist Vincent Woo reflects on his piece, "Lambda School's Misleading Promises" | E1039

TL;DR

A freelance journalist uncovers fraud and misleading promises at coding school Lambda School, revealing issues with income sharing agreements (ISAs) and placement rates.

Transcript

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Key Insights

• 🤨 Lambda School's income sharing agreements (ISAs) offer an alternative payment structure for students, but the selling of ISAs raises ethical concerns.
• 😘 The estimated placement rate at Lambda School is lower than reported, potentially impacting students' career prospects and financial outcomes.
• 😀 Education startups like Lambda School face challenges in scaling and providing effective online instruction, particularly for highly technical fields like UX design.

Questions & Answers

Q: What is unique about Lambda School's payment structure?

Lambda School allows students to pay a percentage of their post-graduation salary through income sharing agreements (ISAs), rather than requiring upfront tuition fees.

Q: What evidence of fraud did the journalist uncover?

The journalist found evidence of Lambda School selling individual ISAs, despite claims that they would never do so. This contradicts their previous statements and raises concerns about their integrity.

Q: What is the estimated actual placement rate at Lambda School?

Based on interviews with former students and internal documents, the placement rate is estimated to be around 50-70%, significantly lower than the claimed 86%.

Q: How has Lambda School responded to the allegations?

Lambda School has faced criticism and is now facing legal threats against the journalist. They have made some adjustments and released a report showing a lower placement rate, but there are still concerns about their transparency and practices.

Summary

In this episode of This Week in Startups, Jason Calacanis interviews Vincent Woo, a journalist who wrote an article titled "Lambda School's Misleading Promises" for New York Magazine. They discuss the allegations of fraud and dishonesty surrounding Lambda School, a coding bootcamp that uses an Income Share Agreement (ISA) as a payment model. Vincent reveals insider information about Lambda School's sale of individual ISAs to hedge funds, contradicting their previous claims. They also discuss the discrepancy in placement rates and the challenges of remote education.

Questions & Answers

Q: Why did Vincent write the story about Lambda School?

Vincent came across a tweet from a Lambda School executive claiming the company would be worth $100 billion, which struck him as an aggressive and odd claim. He started investigating and discovered strange things about the school, leading him to write the story.

Q: What is the allegation of fraud made against Lambda School?

Vincent alleges that Lambda School's CEO, Austin Allred, repeatedly lied about never selling ISAs, when in fact they sold individual ISAs to hedge funds. This dishonesty is considered fraud.

Q: What is an ISA?

An ISA, or Income Share Agreement, is a contract between a school and a student in which the student agrees to pay a percentage of their salary after graduation, instead of paying tuition upfront.

Q: Why would Lambda School sell ISAs to hedge funds?

Lambda School sold ISAs to hedge funds in order to improve their cash flow. They received upfront payment for the ISAs and didn't have to wait for students to graduate and start earning salaries.

Q: Is there a problem with selling ISAs to hedge funds?

Selling ISAs to hedge funds is not inherently wrong. The issue is the dishonesty and lack of transparency from Lambda School about selling them, especially when they claimed they would never sell ISAs.

Q: What is the placement rate of Lambda School?

The reported placement rate by Lambda School is 86%, but it is disputed by Vincent and some students. Vincent estimates the true placement rate to be around 50%. Other bootcamps have placement rates of 80% or higher.

Q: Why did some Lambda School students want to negotiate the cancellation of their ISAs?

Some students felt that the program did not deliver on its promises and wanted to attend a different bootcamp. They believed that the cancellation of their ISAs would give them more options in pursuing their careers.

Q: What is the advantage of in-person education over remote education?

In-person education allows for better interaction between students and instructors. It allows instructors to provide personalized attention and immediate help, which is difficult to replicate in a remote setting.

Q: Why did Lambda School expand into new programs like UX?

Lambda School sought to scale and offer a variety of programs to increase their potential valuation. However, the UX program turned out to be a disaster, as it lacked a clear curriculum and failed to teach necessary skills.

Q: Is Lambda School an inclusive option for education?

Lambda School aims to be inclusive by offering an affordable option for education, but Vincent raises concerns about the financial burden on students, especially those who already come from disadvantaged backgrounds.

Takeaways

The allegations of fraud and dishonesty surrounding Lambda School raise significant concerns about the transparency and ethical practices of the coding bootcamp. It is important for educational institutions to be honest and upfront about their financial arrangements, placement rates, and the quality of their programs. The debate around remote education versus in-person education continues, highlighting the trade-offs between convenience and the effectiveness of learning.

Summary & Key Takeaways

• Lambda School uses ISAs, where students pay a percentage of their salary after graduation instead of upfront tuition fees.

• The journalist uncovers evidence of fraud, including the selling of ISAs and false claims about placement rates.

• Placement rates at Lambda School are lower than reported, with estimates around 50-70% instead of the claimed 86%.