Mind Sprites

Inspired by Becoming a Magician by Autotransluscence

​By investing in ourselves whether our intentions are selfish or altruistic the world creates a result which looks the same on paper. The future you has more resources to share. In the massive multiplayer game of life you are leveling up:
  1. The ability to entertain or inspire
  2. Knowledge to make or heal
  3. The means to build or give
  4. A wildcard: physical or mental strength and energy to recursively feedback into the engine. Exhaust as fuel. Mechanically that’s the way a turbocharged engine actually works.
Aiming to complete a marathon is not about joy or the experience. It’s the story you tell yourself about the kind of person you can become. You want to become the kind of person that can finish a marathon. Imagine what else that person can do. Just imagine.

The quest is underway

Look at the mechanism that kicks off once you set out to train. There’s an unsaid fantasy:  I am going to be Me 2.0. The finish line will be a signal that the new you has arrived. The goal ain’t the thing, it’s a proxy for the thing. As urgently as you want to be the better thing, you will fixate on the proxy.

In your desperate pursuit, the unsaid vision of future you propels you forward. It builds an invisible audience in your mind. It cheers when you make good time on your practice run. It boos when you skip a session because you were out late the nite before. That audience is like lane assistance on your car, correcting your path when you veer.

That subconscious audience exerts a lot of influence for a bunch of nameless mind sprites. Their whispers are your self-talk. Their shouts are your self-doubt. You’re chasing a proxy and that’s ok. But beware to inspect your vision and don’t let its sprites into the game without a ticket.

Adjust your mirrors

Who does your fantasy future self serve?

What are the values of that future self?

Are you sure you want to conjure an audience for it?

The people you surround yourself in real life will also act as lane assistance. We commonly hear how we are the average of the 5 people you spend the most time with. They are your real-life audience. Their mindsets are contagious. Their optimism, pessimism, energy, and honesty are subconscious benchmarks. Think carefully about this. Are they nudging you towards the right course?

If I’m wrong about this it’s because I’m underestimating their influence.

Setting milestones

The small challenges en route should feel just slightly out of reach. The final destination should be uncomfortably ambitious. This compensates for the fact that we overestimate what we can do in the near term and underestimate what we can do in the long term.

A small change in initial conditions can result in a wide error in the point of arrival. The course correction tweaks along the way cannot overcome an angle of incidence that was wildly off the mark. Just ask a sailor.

My reaction to Lambda School

I took a free 4 week intro course at Lambda on full-stack web development. I’ve taken a number of online courses on different platforms including Udacity, Khan Academy, and Datacamp. I was especially impressed with Lambda but I was drawn into looking at their income share agreements (ISA) since they resemble option contracts, a furry little construct that I’m pretty familiar with. Lambda’s ISA charges the student 17% of their gross income after they graduate so long as the student is making more than $50,000 per year and the total payments are capped at $30,000. If 5 years passes after graduating, any remaining balance is forgiven.

Lambda is buying a call option on their students (technically it looks more like a call spread since it has a cap) by fronting the cost, ie the option premium, to educate its students. Ever wonder what the most efficient way to give a wide swath of people a chance to improve their careers is? Try aligning your next paycheck with theirs. While all schools have a vested interest in their students succeeding, Lambda’s interest depends on it far more directly and its vision hacks the power of incentives.

Unbundling

Stratechery’s Ben Thompson on Shane Parrish’s podcast discusses how technology enabled “unbundling” dimensions of hospitality and retail noting how Ebay and AirBnb “digitized trust”. Consider how hotel brands achieved dominance by exploiting scale to standardize in markets that heavily indexed on a single dimension such as safety. By creating a system of reviews and standardizing the process but not the product, AirBnB was able to unlock a plurality of accommodations giving consumers a practical choice in ranking a wider array of preferences than what could previously be served.

Lambda performs the same function in education. It unbundles skill from pedigree while selecting for persistence. Many employers tolerate paying for some averaged indicator of skill and pedigree but an employer looking at a Lambda student pays an unbundled price which acquires more of what they want for less. And this is a better outcome for both employer and crucially the student who might not have otherwise had been hired if they didn’t have a more direct path to both acquire and advertise their skills.

While the ISAs de-risk the student’s well founded concerns of the price of education Lambda must de-risk the employers’ concerns since ultimately, the employers are going to be the ones who effectively pay Lambda back. There is a relentless focus on what the market demands ultimately tightening the correlation between what employers want and what the candidate can deliver.

Solving

Conventional college paths compel students to gamble on a system which loads them with debt tied to murky promises of future employment.

  • Skills are financed at a price which is not economically linked to potential return.
  • Return is increasingly not captured, risk is held by student and taxpayer.
  • No mechanism for ensuring the price of the risk is commensurate with potential
    return.

Lambda is an imaginative inversion which better allocates the price and owners of the fundamental risk of investing in training.

  • Skills are financed by marketplace (Lambda’s stakeholders)
  • Return is recovered by value students bring to market

A familiar, time tested business recipe lies under the hood allowing for the Lambda model to earn a profit and be self-sustaining.

  • Vertical integration: Source raw material, refine, pre-sell to end user
  • Quality control: Obsessively attend to the need of the student and the end client
  • Scale: Port process geographically, into adjacent studies, and eventually to any market where significant headcounts are being offered premium wages.

My take

I have been an option market maker and portfolio manager for the better part of 20 years. If I can competently price, assume, and manage the risks that the market wants to transfer I get paid.

It is not a stretch to argue that Lambda is a market making business that warehouses a risk that both the suppliers and consumers of talent prefer to transfer. In this case Lambda is positive sum, especially for those who need its path the most. There will
always be well-pedigreed teens who can gather a conventional education with little or manageable debt and have real choices that do not impair his/her future. But it’s the student confronted with a Hobson’s choice about taking on no education or an
overpriced one who has the most to gain from Lambda delivering on its mission.

I am a big fan of their multi-angle approach to providing employers and students a win-win proposition by underwriting then mitigating the unpooled risks that individual learners own.

  • I dig their initiative to teach students personal finance now that they will be on
    their way towards actually saving. That’s a proper career services office!
  • I dig the ambition to extend beyond coding in the future.
  • I dig the commitment to creating the best product — “Build Weeks”,
    collaboration with employers, simulating actual production environments (Slack, team based learning), relevant capstone projects

While a properly structured ISA is very elegant, I can imagine it being perceived as too radical. But I say paying hundreds of thousands dollars for an education that is untethered to any reasonable expectation of a return is radical. Lambda is a long overdue experiment. The incrementalism in changing the status quo is a response to legacy institutions’ self-preserving instinct and doesn’t reflect the degree to which its customers (ie the students) are under-served. Lambda is seizing this gap in the market between what students need to thrive in a skills based marketplace and the outmoded value proposition in conventional higher ed.

Being educated is a key to a free society and should be the default option but its price should not be an indenture. If Lambda can de-risk the alternative path for students by providing employers with effective hires then it will validate a real choice for future learners.

The implications of its success have far-reaching effects. A market based alternative which does not rely on uneconomical subsidized loans offers a sustainable equilibrium for all stakeholders. Employers will have reduced risk in their hires, students will be less indebted, taxpayers can stop underwriting poorly performing debt, and alas the policy makers who may be fully aware of the system’s unsuitability but are beholden to incremental measures can go work on something else.

Lambda’s laser focused commitment to listening to and serving the needs of both students and employers is the key to value and abundance for all stakeholders. I am not surprised the last couple years has proved the concept and it’s now ramping.

As Y Combinator founder Paul Graham said of Lambda’s founder Austen Allred:

Its future appears unbounded and we should all hope it is.