Startup To Scale, What CEOs Learn - Austen Allred (Bloomtech) and Al Doan (Missouri Star Quilt Co)
Al Doan (previous podcast guest and partner in Rolling Fun) is back for some laughs. We are also joined by Austen Allred, cofounder and CEO of Bloomtech and Twitter extraordinaire.
Bloomtech is a badass company. You might know the company by its previous name, Lambda School. They’re teaching people how to code for zero upfront cost, de-risking technical education. The three of us dive into the lessons Austen learned throughout his Bloomtech journey.
We explore Artificial Intelligence’s impact on developer education, hiring executives, managing boards, and much more.
Links to Platforms:
Here’s what I learned from the episode:
Bloomtech rode a crazy hype wave. At the peak, they had the perception that they could do no wrong. At the trough, press called them downright evil.
Hiring in startups is hard. Roles can outgrow people quickly. You have to hire at the right level. And sometimes you don’t know what you are looking for when hiring.
Knowing what’s working and what’s not often comes down to gut instinct, and that's ok.
Just because someone has a company like Uber on their resume doesn’t mean they are actually a good hire.
A common regret is waiting too long to fire someone.
There’s a difference between good advice and advice that "sounds right" or feels good.
You see all your personal flaws reflected in the giant organization you are running. Companies mirror founders’ flaws.
People overcomplicate things. Just do the simple, obvious, unsexy stuff to get to where you need to go.
ChatGPT has helped dramatically cut the time and cost on developing curriculum for BloomTech. (But you still have to be careful using it because it can very confidently give you wrong answers.)
Bread is not your typical dev shop. They're like a technical cofounder team that you can add a whole product team as a pod. So, if you are non-technical founders or you want to spin up a new project, a new "swim lane" in your company quickly with very talented people, talk to Bread.
If you reach out to them, please tell them Eric sent you. It's madebybread.com. Check that page out. It's very cool. It's very well designed and will give you a sense of what they can do.
Learn more about Al Doan:
Learn more about Austen Allred:
Additional episodes if you enjoyed:
Episode Transcript:
Eric Jorgenson: Wait, before you put your phone down, if you love this podcast, please give it a quick review. Thank you so much. Okay, here we go. Hello again and welcome. I’m Eric Jorgensen. I don't know much. I still don't know how to spell the word rhythm. But I have some very smart friends to help me figure things out. And if you listen to this podcast, then no matter who, where, or when you are, you do too. Together, we will explore how technology, investing, and entrepreneurship can create a brighter, more abundant future. Today, my guests are Al Doan and Austen Allred. Al is a regular to the show, a partner in our early stage tech fund Rolling Fun. And today we have a good friend of Al’s and a fantastic founder Austen Allred. Austen is the co-founder and CEO of BloomTech. It was previously known as Lambda School; you might know it under that name. Austen's also pretty Twitter famous. He's got a great presence, has some great takes on Twitter. BloomTech teaches people how to code for zero upfront cost. They totally derisk technical education. It is a badass company. I admire it tremendously. They've grown super quickly over the last six years. I don't know what kind of numbers they're doing; I know they’ve raise $120 million. I know they've educated thousands of students, many, many thousands of students. And today we're going to talk about the evolution of BloomTech, everything Austen has learned as they've sort of evolved from the scrappy startup to a tech company. Al on a very similar journey. And they just kind of spar and trade lessons and share things that they've learned that are going to be helpful for you as a founder or an operator or in whatever you're doing. We riff on a few things. We talk about how AI could impact developer education and how BloomTech’s using it already, hiring executives, managing boards, all kinds of interesting stuff. This podcast is one of a few projects I work on. To read my book, blog, newsletter, or invest alongside us in early stage tech companies, please visit ejorgenson.com. That investment fund I mentioned, Al’s a partner in. We also have a third partner, Bo. We've all been angel investing for years. We managed to fund a few billion dollar companies between the three of us. This fund that we started last year lets us invest your money alongside ours into some of these companies too. We look for the most promising founders of early stage tech companies we can find around the world that we think can 100x and build something beautiful that improves all of our lives. If you love this episode, these conversations, and these lessons, you'll love learning about the companies we invest in. And as you'll hear, Al actually did invest in BloomTech early on. So this is a very key conversation as an example of some of the companies that we like to invest in. I'm honored that many readers and listeners have already joined the fund as co-investors. You can learn more at rolling.fun, which is linked in the show notes below. Accredited investors can invest with us through AngelList today. You can check out some of the podcast episodes previously with Bo and Al to learn more about Rolling Fun. Those are linked in the show notes as well. If you have any questions or you'd like to hear more, please reach out. Our conversation will start shortly with Austen and Al. Until then, here are the show's sponsors. And if you're pulling out your phone to skip them, that's another great opportunity to leave a review for this podcast. It really means so much. It's how the show grows. Thank you so much.
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I'm excited to bring you together. I know you guys go way back, but I don’t know where you met.
Al Doan: Yeah, you didn’t have to bring us together. We're bringing you together.
Eric Jorgenson: You're allowing me to pretend like I know you better than I do. That's beautiful.
Austen Allred: Are you really 6’9, by the way?
Al Doan: 6’9, me? No, I'm 6’7.
Eric Jorgenson: Which he says because I'm 6’6.
Austen Allred: I’m 5’6. So, you know, rounding it up.
Al Doan: Austin gets free piggyback rides from us, wherever he wants to go.
Eric Jorgenson: If you wanted to hire a personal Sherpa, I think you could, Austen.
Austen Allred: Probably. Yeah. [inaudible 1:05] a sherpa if you think about it, so we’re good.
Al Doan: That's fair. Alright. Eric, what's this show about? What are we doing here?
Eric Jorgenson: We're just shooting the shit.
Al Doan: We're already in it.
Austen Allred: Are we on? Oh, my gosh, when were we on? Yeah, like 20 minutes ago.
Al Doan: All that was off the record, all of it.
Eric Jorgenson: We record everything. And that's-
Austen Allred: You need to do one of those like- he had a Netflix show for a while. And he'd be like, alright, and now we're going to go to commercial, and then he would just like start shooting the breeze with the people. They had no commercials. It was a Netflix show. People thought they're going off camera. And he’d be like, and we’re back. It's one of my favorite bits that I've ever seen.
Al Doan: Austen, are you in St. George now? Is this home?
Austen Allred: Yes, it’s temporary home. We're bouncing around all the time. But yeah.
Al Doan: I remember when you were living in San Francisco, you told me a great story about a man that tried to stick a lollipop in your daughter's mouth and you're like I'm leaving. I'm out of here. I never want to be here again.
Austen Allred: My wife was like I don't know if I can handle this place anymore. San Francisco has a lot of pluses and a lot of minuses. We'll put it that way.
Al Doan: It's a full ledger on both sides.
Eric Jorgenson: Of all the creepy stories I've heard about San Francisco and lived, that's I think the worst.
Al Doan: Plot twist, it was me. I’m the homeless man. That's such a like, I'm going to take this, this tastes great. That child needs this. Let me give it to them right now.
Austen Allred: I mean, it's specific enough that people don't like question if it's real. Like, no way. I couldn't make that up in my wildest dreams. And someone's like, oh, you need to make sure that you're in a safe area like yeah, this is like the Presidio. Like, that was not in the tenderloin when that occurred. But anyway, good times.
Al Doan: So southern Utah is delighting you right now? The Instagram looks great, man. Like, every night I feel like you get the perfect walk with the family.
Eric Jorgenson: You're really evangelizing Southern Utah effectively.
Austen Allred: It’s a lot of fun. I mean, the amount that we pay here versus San Francisco is obviously laughable. And people here are like everything's so expensive. Like you don't even know what expensive means. We bought a house that's like up against the Red Rocks. There's a trail that runs through our backyard and there's a pool in the backyard and it's just a fun spot to be, pretty idyllic. It’s a good time.
Al Doan: Dude, I feel like the last time we hung out was in your like penthouse office downtown San Francisco when Lambda could do no wrong and like you were just getting monster leases and stuff, and it was like hey, look at this. Do you still even have an office? Are you guys-
Austen Allred: No, that lease, it was a sublease. So it's like a one year sub lease with a contractual right to go three years. And then it ended in like June 2020. You can keep that one.
Al Doan: This just in, all buildings half off.
Austen Allred: We’ll let you guys take that one back. And actually, we had just leased a giant office in Lehi as well, in one of those big mountain buildings. I think it was, I can't remember how many square feet it was, but it was lots, like 5000 or 6000 square feet or something like that. And we had people- I would go swing by and there'd be like two people there like, no, don't get rid of the office. I’m like we'll find something that's not this. So, we got lucky. We subleased it to another company. And yeah, we've been office-free for- well, I shouldn't- There is a- we technically have an office in a WeWork somewhere, which I don’t even know if I should talk about this, that we're required to have for regulatory purposes, so they can come and inspect student records. It's literally like 100 square feet, and on the door, it's in a WeWork somewhere, on the door, there’s a sign. It's like, if you're from the Bureau of Private Post-Secondary Education, I've stepped out, give me a call. And then we are required to keep all of our student records on file. So there's a flash drive, and it has to be in a locked filing cabinet. So, there's a locked filing cabinet that if you open it up, there's a flash drive in there. That’s clearly not what was being thought about when the law was written but we are compliant.
Al Doan: MacBook Air running inside the cabin that you just AirDrop files to.
Eric Jorgenson: I love that's your cost structure, competing with universities that own like entire towns and power plants and everything.
Austen Allred: Yeah, it's a little bit different, a little bit different. We have what was the- I saw Harvard now has more administration than faculty or than students for the first time ever. So like literally sub one to one teacher to student or admin to student ratio – I’m sure teacher to student is still pretty high. Admin to student, yeah. We can win on cost structure, that's easy. You just have to win on everything else.
Al Doan: Harvard was funny. I am now an alum of Harvard because of the OPM program. And I feel like a third of the teachers are exactly what I thought a Harvard professor would be like, magical in the classroom. A third of them are the worst teachers I've ever had in my life. And then a third of them, I'm like you're unremarkable in every way. And I was like that's kind of every university I've ever been to. Like, in my mind, it was like the threshold to teach there would be amazing. You get there and you’re like you guys are just shuffling people around like everybody else.
Austen Allred: If anything, it’s the opposite. Because you can like, if you went to Harvard and all of your teachers were mediocre, you still- thumbs up, Harvard.
Al Doan: You're incentivized to like oh, still amazing.
Austen Allred: Yeah. If you go to like Southern Mississippi Community College, and everyone sucks, you’re like that freakin’ school didn't do what I wanted.
Al Doan: Dude, how is the BloomTech world these days?
Austen Allred: It's really good. I kind of like- we're in a really good spot now where, so we kind of road this wave, this narrative/hype cycle where, in my mind, we've kind of always been right here, and the hype cycle went where it was like, oh, my gosh, they can literally do no wrong. And we were like we’re probably not that good.
Al Doan: They were throwing hit pieces at you, they failed one guy one time.
Austen Allred: And then it went to like, oh, my gosh, that is the worst thing ever. Like, we're not that bad. And now we're in a lucky spot where like if you go back and read the articles of where like the perception of what people thought would be true about us, like the quality of the team and instruction and product, they're all now what we wish that they were when all of the hype was there, but all the hype is gone. And it's awesome. Like, I don't have to- it used to be, I think people underestimate how difficult it is to operate in that environment where like, don't get me wrong, it's awesome to be like everything you do becomes an article the next day. But it was literally every message that I would send to students would end up in some online magazine somewhere. It's just like- and every message to employees, every word that I said would be like I know that someone's going to try to take this out of context and try to slam me for it. So you operate in a world where it's like how do we not accidentally say anything that could potentially rub anybody the wrong way? And you just can't run a business like that. You fundamentally cannot. And now we're like, you know what, we're just going to do what we think is the right thing, and nobody cares. And it's awesome. I wouldn’t say nobody cares, but I don't fear- I don't have to get calls in the middle of night, like an article just dropped and you need to get your PR team to respond to this reporter who's not going to change anything because they don't care anyways.
Eric Jorgenson: How much did that affect the actual operating of the business, or was it just annoying?
Austen Allred: Well, I go back and forth on this because what we probably should have done would be to- the goal of the business is to find a way to do the right thing, regardless of what is being said. But when the pressure from the press and from- like that flow directly to students is so intense, you have to take that into consideration when you're thinking what is the right thing? So honestly, it's a little bit paralyzing. Because imagine, look at like Elon Musk now, and to be clear, we're nowhere near the order of magnitude of that.
Al Doan: Good, thanks for clearing that up.
Austen Allred: You have to like become- they’re now at the point where he's basically just going to do whatever he wants, and people are going to write the stories they want, and who cares. But we weren't that- we weren’t strong enough as a business, I don't think, to do that yet. Now, looking back in retrospect-
Al Doan: You were a year or two in and got like blessed by Silicon Valley, I feel like. And then the outcome, like the point that you guys set that you're like we're going to go and build this great thing that's going to revolutionize this thing, everybody held you to that standard as a two year old company, where like you're not there yet, I can't believe it. Like, there's no grace for the build out or for putting the team together or the ability to fail on like our small cohorts, we do alright with our big cohorts. It was wild to watch.
Austen Allred: And the funny thing is that's never changed for me. I'm still on this path to like all the stuff that we're saying about how we're going to train a million people a year, and we're going to change education, like that's still all 100% true to me. I think the rest of the valley is not like- There are a few people who still get it and believe and would invest if we needed investment, etc., etc. But you also- the advantages we have now are, at the time, you're trying to recruit people. And your inbox is like full of resumes of people with absolutely incredible pedigrees. And you have no experience as a founder on like are these people for real or not? And I still don't think I'm good enough at hiring that I could have a 95% hit rate in hiring executives. I'm sure it'd be way better now than it was back then. Back then, I worked with a few competent executives in my entire career, and I didn't even really, really know what that looked like.
Al Doan: How do you pattern match to something you've never experienced?
Austen Allred: And something that happens frequently when you're like a seed stage startup and you're- we've even had some of these conversations, Al, when you were early investing, and I was like, hey, I hired this guy to be the VP of X and this person to be the VP of Y.
Al Doan: Give me a big hug, man.
Austen Allred: You kind of went in and talked to some of those guys for different reasons. And it was like, Austen, clearly that person should not be the VP of X, like they shouldn't even be director level. You don't know what a good VP looks like. And until you have a really great VP that you're just like, oh, that person that I just like dropped into this world, and they solve all the problems automatically, and they had to switch out a bunch of the team, and they had to change the way everything was run, and they show you how things are done, like ah, that's- it's not really a smart person that I thought was really great. That's not what a VP is necessarily. And then, we started looking, trying to pattern match for that. And it's still maybe 50/50. It’s just so hard. And the thing about hiring executives is the best executives, they know exactly what's happening when you're going through an interview loop. They know exactly what you want to hear, and they know exactly how to answer that stuff. And then they have enough people that you can background check them with that they know will say good things about the references. So, it’s just hard.
Al Doan: You call his brother, what are you expecting him to say?
Austen Allred: And, yeah, now that like one of the biggest trends that we have as a company is we've gone through different cycles of different people, some people that I wish we could have kept, some people that they weren't the right fit for one reason or another. But now I look at my team, and I'm like, yeah, this is like if I could have started with this team, everything would have been a hundred times easier.
Al Doan: Do you think so? Or was it-
Eric Jorgenson: Is that even possible?
Al Doan: Well, in my mind, I mean, the seed stage route is like you and a bunch of buddies are doing all the roles. And that's where a lot of these guys that are like great at helping you succeed but bad at building an organization to do sales or something. Like, you pull these folks in, and then as the job formalizes, it outgrows them. And then it grows, what do they say, every three years, you sort of cycle the C suite in the startup. And it's like could these guys have been the startup guys? Or did it have to come to- like, did you have to sort of walk this road to get here?
Austen Allred: It might be the latter. Like it might be there's just no way of building that, you can't build that team overnight, no matter what. And that's what I'm saying with like when it comes- if you have a 90% awesome executive hire rate, that still means 10% of the time, you're missing. And to be clear, when I say that, it's not always executives’ fault. It's usually your fault or you look for the wrong thing or you don't even understand what you're looking for. And so, it just takes time to build out the right team. And the other thing, looking back, is we were growing so insanely fast that it was like you'd hire a person for a role, and six months later, they wouldn't be the right fit for that role because so much had changed and so much had grown. So I'm actually really grateful for we got out of the spotlight, we got out of the hype cycle, we started building a real business. And now I'm like, yes, this is- we're really lucky in that regard. And even little stuff that I don't think- so we had a procurement process that was looser than it should have been because it was like how do we buy the software? Like, I don't know, dude, do you need it? Go buy it, whatever.
Al Doan: You got your engineer negotiating terms on this stuff, and he's like-
Austen Allred: Yeah, and you sign crazy contracts that the other side is like, alright, here's the starting point of negotiation. And then you come back and like, yeah, let's do it. Like oh. Yeah. So we've had time to build stronger processes, to build better software, to build better teams. And I think it's a blessing in disguise. So there was a tweet the other day where someone posted like, okay, imagine there's a red door, if you go through the red door, you can save $10 million. There's a blue door, if you go through the blue door, you can go back 10 years and fix all the mistakes that you made. And like, oh, blue door, I would save so much more than $10 million, it's not even funny. But somebody else pointed out in my response to that, but would you know what you know now and would you have the- like, is the scar tissue that you have now as a result of making those mistakes?
Al Doan: Yeah, you have to go back with the knowledge you have now.
Eric Jorgenson: You don’t want to roll all those dice again. No.
Al Doan: It's so funny on the people stuff. I remember some of the mismatches that hurt the worst for me, we had one time where we needed a- I thought I needed a COO, so we went and recruited a great COO, who was actually a good director of fulfillment because what I needed was a director of fulfillment. So we hired him in at the wrong spot, so he was too high up the chain. He was compensated too highly. And once we figured out the role he was doing and what he was solving for us was here, but then we needed a COO, like there's no way of going around it. And so we ended up having to fire him, split ways. It was not his fault, good guy, good at what he did, but like mismatched, and then all the momentum of a year and a half of figuring that out. Like we hired a head of marketing. What we needed was a director of digital, and so then like she's this lone wolf that can't hire a team and doesn't know- really we didn't even interview for hiring a team. We wanted to know if she was good at running paid ads and stuff. And so, then she was our head of marketing. And we're stuck.
Austen Allred: And you’re like why aren’t you doing brand stuff and SEO? They’re like I don't know how to do that. I never even implied that I could do any of that. This is all on you. You’re like yeah, you are totally right.
Al Doan: Yeah, because like the first hire into some of that stuff is more about you just figuring out what you actually need. And then you come back in two years to say, okay, now I'm sort of directionally aligned on this.
Austen Allred: If you're like- I see this all the time when there's like a product driven startup CEO. And it gets to the point where it's like, hey, you need to go hire a CFO, head of finance, VP of finance, which level do you need? They have no idea. And then it's like, okay, go hire somebody, and they go interview people. And I've sat it in a couple of interviews just because I was trying to help somebody out. And they're like, so do you like Excel and stuff? You are like oh my gosh. Can you do the numbers and make sure that I know how much money we have in the bank? And they're like, who does your accounting? They’re like, define accounting? Like alright.
Al Doan: That is the hardest thing for a founder CEO is you're supposed to hold everybody accountable. But you have no idea what a good marketer is supposed to do. Like, then you hire that person, and you sort of- like your hands are tied almost where you're like, are they doing a good job, and somebody else will come in and look at it and take a pot shot real quick and be like they're working- you get twice as much out of a good CMO if you X, Y, and Z. But literally everybody there, you're supposed to be good enough to hold the marketer accountable, good enough to hold the finance guy accountable. And really, a lot of us are just like product guys that like we know what we want in the product, and we wish everybody else would do their job real good.
Eric Jorgenson: How do you get oriented to that? Like, what resources or people or whatever? Like, how do you figure out when you've made one of those mistakes?
Austen Allred: I mean, this is going to- there's a couple of pieces. One is like just networking, you talk with folks that know what they're talking about. Like we figured pretty early on the finance and the way that money moves around and when do you borrow, when do you sell, you have like a whole asset management side of the company effectively. And so, we brought in someone as an advisor who's really excellent at that. And we actually have a couple advisors. And so, I can go to them and be like, hey, here's this person, and here's their- and it can be-
Al Doan: Would you have your advisors help interview?
Austen Allred: No. I mean, you could, but most of the best advisors are so freaking busy that they're just like, they're going to sit there with you for four hours.
Al Doan: Who can you give your problem to where they'll solve it and you don’t have to be accountable?
Austen Allred: I mean, and then how do you know they're the right person who- So I think at the end of the day, it becomes like you develop a gut instinct for what's working and what's not, and you just get enough scar tissue that you've seen it and you understand what good looks like and what bad looks like. I think the hardest thing for me as a founder was there were hires that I made that three months in, I'm feeling like something's off here. But I’d go to them and be like, hey, this feels off. And they’re the expert in that thing. And so, they will explain to you, no, your expectations are out of line, and what really should be happening is X, Y, Z. And it doesn't sit right with you, but who are you as the 25 year old kid to go to this 40 year old head of whatever and be like, no, no, no, listen. But that's what you have to do as a founder. You have to like- and I think in retrospect, well, I overweighted resumes and especially resumes at a company you admire as like-
Al Doan: I worked at Uber, I worked at-
Austen Allred: Totally. Oh, my gosh, you worked at Uber, you must know how to do hyper growth or you must know how to do X. And actually, my CFO was very early at Uber, so this is a good example. And he'll tell you like, look, four fifths of the people that were at Uber when I was there I would never in a million years hire again. And Uber was growing so fast. It's not like they were firing people right and left. It's just everybody's scrambling trying to keep everything on the rails. And there are divisions of Uber that are well known for having done incredible things. And he's still like, I still wouldn't hire- I would hire this guy and this guy out of that department or this girl and this person, and nobody else I would touch with a 10,000 foot pole because it was just growing so quickly that if you just got on board and didn't do something incredibly egregious, you were there the whole time, and that's on your resume forever.
Al Doan: That's a good startup move, man. That's like if you're in the valley, that's great.
Austen Allred: There'll be people who jump from hot startup to hot startup, provide no value, but then they have a resume that says, hey, I led a very important initiative at startup A, a very important initiative at startup B. And you’re like, oh my gosh, it's a unicorn hire, I'm going to throw a giant package at them. And by the time you figure out a year later that they're not doing anything, they've vested one year of equity, and it takes another three months to get them out of the company. They go on to the next one. And they made millions and millions of dollars. Maybe I'm being unfair to- I'm thinking of specific people, obviously. But that's a thing.
Eric Jorgenson: And when you're a darling in the press, I'm sure you get all of- there's a line out the door of those people who want in.
Austen Allred: And that's the other thing is you had so many people who their greatest desire was to put your company name on their resume and investors as well. Like, there are people who invested in our seed round and turned that into a career because they went and talked to a VC fund.
Al Doan: I'm Rolling Fun now on my Lambda.
Austen Allred: Other than the massive company you started, that's-
Al Doan: The only thing on my business card is Austen took my money very early.
Eric Jorgenson: I think the first time I met Al, he was wearing a Lambda School hat. And I had just met you also. And I was like, Al, how'd you get that hat? I love Lambda School. And you were like, I invested. I was like, oh, this guy knows whats up.
Austen Allred: Like, in seriousness, you have fair-weather friends and fair-weather employees and fair-weather customers, and when everything in Silicon Valley land is these guys are amazing, people will jump on board. And at the first sign of the littlest trouble, they are like, oh, my gosh, I'm going to go find the next crypto company to go join, and they do. But you don’t- it's just so hard. It's so hard to say I would have done these things differently in retrospect because I know that now with the knowledge I have, but with the knowledge I had then, you are just flying blind for so much of starting a company. And I don't think there's any way around it.
Al Doan: It's funny too, man, I think that most of the time, like you're talking about gut feeling with some of these guys. And most of the time, I can't think of a single example where I knew they were the wrong fit. And then I waited for whatever milestone I had in my head and I was-
Austen Allred: But three months later they completely turned around.
Al Doan: Well, you'll go like a year and a half. And now they solve a problem because they're not hurting the organization but everybody's figured out how to work around them. And then, by the time you finally do it and sort of pull the thorn out, like you knew it was the right thing a year and a half ago, but it took you all this time to get to the point of doing it. My one regret, well, the probably the most common regret that I think I have as a business leader but then the CEOs that I work with, the most common regret is like I just waited too long.
Austen Allred: 100%. And people tell you that and you're like, yeah, everybody says you wait too long. And the number of times that I've gone to lunch or dinner with another founder, and it's like what's on your mind, like I just have this person in this role. And I'm trying to figure out how to make it work. And you’re like I already know how this- the fact that you're coming to dinner and the thing that is stressing you out the most is this individual person, and you've been thinking about this for weeks, and you've been unable to solve it. And you're like you probably want to make a change in that role. Yeah, but they're-
Al Doan: Two years later, and they're like, I finally did it.
Austen Allred: I don't know why I waited so long. But you have to go through it a few times to realize that. We've had a few examples more recently, none at the executive level, where, I don't know how much of this I should be talking about, but where it’s like, okay, this is so clearly not working, and people around are like, alright, let's create a plan and do six months and see if they improve. It's like does anybody in this room honestly feel like we're going to look back six months from now and be like, oh, wow, that was great. It's our fault for recruiting the wrong person, and let's be graceful and help the person find the next role.
Al Doan: It's hard because there's a cultural thing around like you want to give people a real chance, you want to make sure that they- that you're not expecting them to knock it out of the park until they know the organization and there's a few months in and stuff. There's all that stuff, which as a young founder, you're just like getting impressed on you from movies or other people's experience. You're like, wait, we can't fire him yet. When’s the right time?
Eric Jorgenson: There’s rules around it too, right?
Austen Allred: You go to the HR person and they’re like, okay, to be buttoned up, you need to put them on a formal improvement plan and then give them at least three months to do this and then you need to submit a formal warning. And then it's like, yeah, and you learn a lot of advice is fake along the way. Which maybe is another- anyway.
Al Doan: What does that mean? A lot of- It sounds very real. Like, I think that checks out in my litmus test as I'm thinking about the amount of people that are willing to help, but the help is like very misguided, where I'm like that- no, that was terrible advice. Why did you say? But like, what's the-
Austen Allred: What are examples I feel comfortable sharing?
Al Doan: You don't have to share any.
Austen Allred: Just like if you were to- so this is one of the jokes that I have with a couple of the C level folks at BloomTech. Like, if you were to ask Twitter what to do about this situation, what would Twitter say? Okay, let's do the opposite of whatever that thing is. And so often, just there's advice that just sounds really good, and it just- and if you were to ask somebody who had no idea what they were talking about, that's what they would say. But the reality is that's just going to lead you down a bad path. And so, I can't think of any examples. But you also have to build your ability to discern between good advice and advice that feels good. And there's a difference.
Al Doan: It's kind of like how every weight loss thing is like lose weight with this one great trick, eat a banana and spin on your head. And it's like nobody ever says lose weight with this one trick of exercise and diet. It's like we're always looking for the shortcut or that easy roundabout. And so like the charlatans are so attracted to us, especially as we're like dying a slow death, you want somebody that says, oh, hire me, the recruiter, I'll find the perfect guy, and he'll solve all your problems. You say, amazing, I just throw money at you, and you'll make the problem go away, let's go, yeah.
Austen Allred: The other thing that I have made the mistake of several times, and I’ve talked a little bit in the past about how running a company is a really good way to see all of your personal flaws reflected in this giant organization that's just mirroring, like not intentionally, but it will have all the same flaws that you do. So, there are a couple flaws that we have- there are a couple mistakes that we made consistently were, one, we were looking for some crazy creative solution that would just fix this problem in the next month because we don't have a year to like sit down. And so one example, when we were like, alright, there are a handful of folks who aren't getting hired, and they're not responding to our career coaches. And it's just like what can we do? And we figured out that if we basically gave them jobs, that they would show up and do those jobs and people would be really happy. And so, I talked with the career coaches about what we need to do, and they're like, no, we need to, just going back to fundamentals, we need to build these things into the school so it makes sure they have- you don't get through this part of the school without having a great portfolio project and your resume in shape and your LinkedIn and shape, and then we need to be monitoring where they're applying and how they're applying, and we can make that easier. And so that's going to take us a month and a half to get all those processes in place. Then we need the tooling so that we can monitor them applying to jobs and we can adjust. And that all has to be- like it's best when people apply to jobs if they send a customized email, and people just aren't doing that. And we've talked to them, and it's because they don't really know what to say. So we can build tooling that helps them do that and automate that. And that's another three months. Okay, we're talking about six months here before- yeah, that's like it may as well be forever away. And so, it's like, how can we solve this tomorrow? Oh, well, what if we just, we hired a giant sales team, they went out and they found jobs for everybody. And we covered the first month salary, and we could get people into those jobs. And we can brute force that right now. And it started working. And it was breaking even. And then while I'm off over here focused on this brute force solution, all the other people are like behind the scenes going back, like okay, we're going to go back and like fix the fundamental stuff while Austen is distracted with this crazy idea. And pretty soon, the fundamental stuff was working so well that all the crazy stuff was just unnecessary and expensive and wasn't actually- So I think we overcomplicated things oftentimes where if you were to ask somebody, what do you think we need to do in order to have X result, they’d be like well, the first three things I would do would be x, y, z. Yeah, obviously. But what if we-
Al Doan: Don't give me the Sunday School answers.
Austen Allred: Yeah, what if we find a way to go above and beyond and do something crazy and creative that no one's ever- and you do that, and it works sometimes. But oftentimes, it's simplest just to do the super obvious unsexy stuff that gets you where you need to go.
Al Doan: I feel like most of the time, all the random, fun ideas that we concoct to like save time, at the end, you say, alright, well, I guess it's been a year and a half. So let's just do three months, and we'll get this thing right and we can be done. But the amount of time it takes to get it right never changes. But I'm happy to do 10 ideas for a month at a time that all fail because I'm trying to fix it immediately, piss away 10 months, and then be like, oh, okay, now I can be patient, we'll just get it done.
Austen Allred: Yeah, the patience part is really hard, especially as a founder. Like you're built- Companies are successful, in part, because you are impatient, because like another kind of lesson I've learned is, and I don’t know if the topic that we want to talk about is what lessons did Austen learn along the way, but then I completely lost my train of thought.
Al Doan: Patience, we were talking about patience.
Austen Allred: Yeah, I guess it is less about patience and more about like just do the really simple unsexy things really, really well. And like, oh, so the other thought I had was there's like this world of corporate BS about how companies have to run. And it always- it's managers who aren't builders who want to have a ton of meetings, and they want to over plan everything. And you can get to a point where doing the simple things takes 10 times as long because you have to plan it. And then you have to do a pump up all hands where everybody gets excited about it. And then you have to distribute the work. If you can eliminate all of that stuff and focus as much time, effort, and energy as possible on doing the simple things that everybody knows need to happen, you get 10 times further 10 times faster anyways. It's off- It's surprising.
Al Doan: Is it just doing the right thing with disregard to processes. Is that sort of what you’re getting at?
Austen Allred: There’s some of that. So, there's two things here. One is especially at the highest levels of a company, when you hire somebody, they want to do something that's new and exciting and stimulating as opposed to like there was time that we went to our marketing team. It's like, alright, what would be really cool. It's like, alright, we need- if we use AI and like deep fakes, you can do this crazy stuff. And you can spin that into videos and make a thousand versions of it. It’s like what are we solving for? We’d like to see more applications coming in. Okay. Let me ask another question, what would be the easiest possible way to know that applications were coming in? Oh, well, we have a lot of links coming to our website, but we don't have content on a lot of the stuff that people are searching for. So we could write like 10 blog posts. Okay. What we're trying to do this sexy intellectually stimulating-
Al Doan: Just a dream killer.
Austen Allred: Yeah, I mean, anyway, just like the- there's just a lot of incentive to go beyond the mark, not even incentive, but like desire to do things that are new and exciting and uncertain that can be helpful at times. But also, if you were to- and watching Elon takeover Twitter was an interesting example of this where it's like what could Twitter do, and there are million crazy, crazy ideas. And from talking to folks who are on the inside, the stuff that actually is moving the needle for Twitter is like, hey, what if we made stuff load a little faster? What if we added this really simple feature that everybody has been asking for? Not like, well, we should turn it into this crazy new platform.
Al Doan: Make the old ones a little bit contextual.
Austen Allred: Yeah, what if we used- Yeah, if you talk to- I don't know if I’ve ever talked to anybody who has run a successful Twitter ad. And that's the entirety of your business. So maybe, it's one place to look. Yeah, so all that is to say I think it's really easy to look beyond the mark and to overshoot what actually needs to happen. And one of the other things that I've learned that inked and that is really easy for folks at like the highest levels of the company called director, executive, VP, like that kind of thing, to be completely out of touch with what is actually happening and looking at data to try to figure it out. The number of times that we've been like, alright, seems like from the data, X, Y, and Z is happening. What if we run an AB test so that we can do this over here and do that over there, and then six weeks from now, we'll have results that are not quite statistically significant, but it'll be interesting. That's really compelling. What's the end that we're talking about here? Well, so far, it's like 50.
Al Doan: We have the data now, what decision have we made, any?
Austen Allred: It's like what if we just Slack those 50 people and ask them, what about X? And then you do that in 30 seconds, and you have all the answers. And there is also like a little bit of like we need to be very data driven. And the right way to do statistically significant data driven experiments is to, let's create this experiment. And the number of times that we've taught- I often find you're like looking at some set of data, and there's some anomaly in the data. You're like, oh, that's interesting. What can we tweak to see how that anomaly changes over time? And then you're like, okay, well, how many people is this? And then it's really small. And can you just talk to those people and figure it out instantly? Oftentimes, you can. So there's a tendency to overcomplicate stuff.
Eric Jorgenson: I thought that was a good tweet you had of like, if you already know something, you don't need to wait for the data to prove it.
Austen Allred: Yeah. If you're talking to your users, and they're all telling you hey, this. Alright, let's design an experiment to see if they're right. Or we can just do it.
Eric Jorgenson: Is there a profile behind that? Is that like you hire a bunch of former consultants who are just really like biased towards that kind of operating mode?
Al Doan: Yeah, who are you sub-tweeting?
Eric Jorgenson: Are people just like protecting their judgment and their career?
Austen Allred: Once you get beyond a certain level of scale where it's impossible to have all of your insight from asking everybody everything, you kind of just get caught in this mode where the way we learn things is by looking at the data and you forget that oftentimes it's far- data is one way to get understanding and to test things. But you forget the brute force, simple method of just talking to the people who are involved generally will tell you what you need to.
Al Doan: I've also found there's a really strong muscle in just like having a good idea. Like, at my company, I've worked in here 15 years. And I'm like, guys, this is going to blow. Like, no one's going to care about this. We did a referral program where it's like $20 to get- and tell 10 of your friends. And I was like, I promise you, not a single grandma has been waiting for the day that we held a $20 bill in front of her and said, now will you tell your friends. I was like this is a terrible idea. We spent 35 grand on the ambassador program and signed up for the thing and like nobody cares. And it's like, guys, we know, we know these people enough that we can make the guess. Like, a marketing program where like, yeah, these guys will try and dive into the data so heavily that they can't make- they can't come up with their own idea. It ends up being like we're just following whatever the user is. It's like I’m a big fan of like the human driven product development. But that's letting the user break the tie. You’ve got to come up with your own stuff that you're trying to get them to follow. And then you're watching what they're interested in. But this like, the data is the holy grail, I think, has had a lot of a heyday for a lot of people coming up the ranks, which is-
Austen Allred: I think it’s one thing if you're like, hey, we're Amazon, and we can throw an experiment on the homepage, and 30 seconds later, we have statistically significant x. It’s another thing if it's like, alright, how do we get something that's meaningful out of these 25 people, you just go to talk to the 25 people.
Al Doan: And even if you have statistically significant stuff, the thing I find a lot is like fast forward to the end of this experiment. Like we have the results. And the blue button worked real good. Do we just turn all the buttons blue? Like what are you trying to answer right now? I don't know. That's a great question. We're just excited to run some tests.
Austen Allred: Another thing that is interesting is like getting people to actually use the product. Like, there are times when people are like, alright, our retention rate in this particular unit has dipped three points, did we change something in the assessments? Like where are people failing in this giant funnel? What's happening? And then I'm like, why don’t you just go through it? Like, go look at the curriculum, go look at it and see what you find. And it's like, oh, yeah, this was super- This entire thing was so confusing, the way we worded it. It's like, alright, we could have backed into that by looking at retention data, or we could have just tried it.
Al Doan: That is so hard to get people out of their dashboards and into the product to feel like, man, I'm just like, alright, you're a brand new user. Where does your brain tell you to click? What do you want to do now?
Austen Allred: And I'm guilty of that as well. We've all been guilty of it where it's like I wake up in the morning, and I check dashboards. How often do I wake up in the morning and try a product and see what feels off? Not as often as I probably should be.
Eric Jorgenson: Has that changed? I feel like a lot of this conversation has been kind of like the startup to tech transition of like finding more patience and doing the fundamentals and dealing more with execs. Like, did you- How different is that from the early days of just like following intuition, executing against the vision, not worried about the data because you just feel like you have a strong opinion about how the world should work?
Austen Allred: So my opinion on this has become pretty strong where I think the best companies are those that retain that founder spirit of I'm just going to go figure it out and do what needs to be done. And where you start to lose touch, for lack of a better way to describe it, anything that feels corporate to you as a founder should be a red flag. And there's a lot of like- or overly corporate. I don’t know. There's a lot of- and you get to the point where it's like, well, we're at this stage, you have to do X, Y, Z because that's the way big companies operate. Oftentimes, I've found that that's the wrong move. There’s stuff like, hey, let's normalize comp, that makes a lot of sense. But that doesn't feel corporate, that just feels not dumb.
Al Doan: It just makes HR’s life easier.
Austen Allred: Yeah. But when it's like, hey, we need to define this really rigid decision making process and make sure that before anybody makes a decision, they fill out this form, they file it in this way so that anybody in the company can go and look back, that feels a little over the top to me. And then you try it, and everything just grinds to a halt because everyone's waiting for approval from everybody to do anything. Okay, that was actually dumb.
Al Doan: It's sort of cyclical. Like if you wanted to leave the company right now, the person that comes in is not you, it's going to be the stabilizing hand. It's going to be the guy that isn't going to make any erratic moves, and everything's a little more formal, and we're going to slow way down, but the risk goes down. And then when that needs to be innovated, the board says, this sucks, like we need higher growth, we're not doing enough. The guy they bring in is a you. They'll bring a you in that breaks all that and it's like pull all this out, and we're going in there. And then when that guy is there or that girl is there, they are- the company culture sort of follows them. But if they ever want to leave, you can't replace a you with another you. That would destroy everything.
Austen Allred: Yeah, but I think there's also like, there's just a fundamental- like I mentioned- I didn’t finish my thought, but I was reading a book by the founder of Trader Joe's, and I tweeted about this earlier today, but he would, whenever they hired an executive, he would force every executive to spend a year on the storeroom floor like as a cashier or as a manager. Like they would have their post MBA salary, whatever, and it feels a little extreme. But I think if you can afford that, having a CFO who's actually been walking the floors in the store for a year would have so much more knowledge than, okay, CFO come here and come look at this income statement and tell me what you think we need to change.
Eric Jorgenson: Epic filter for ego too.
Austen Allred: Oh, 100%. Yeah, if someone’s like I would never- like alright. That's the best-
Al Doan: Can you imagine being a grocery store, like if I was going to go take the CFO job at a grocery store or like a pizza chain. They're like, now you’ve got to make pizzas for a year before you get to do this. I'd be like, no, man, I'm going to go to the next grocery store.
Eric Jorgenson: This is Jiro Dreams of Sushi.
Austen Allred: To be fair, a year feels like a long time for me. You might be able to get away with three months or six months. But that's actually another role that I've kind of instituted is we call it player coaches only. Like there's nobody at the company who just manages and is unwilling to touch the actual product or like the product of whatever that team is. And it maybe that's something that breaks down at a certain level, I don't know. And it's not even that like your day to day should be doing the thing. But if you're not even willing to do the thing, and you're like, no, no, listen, my job is ordering people around to do the work, and then I sit back here and make sure they're all doing a good job, that's as red of a flag as I've ever seen.
Al Doan: That gets said in such sneaky ways. Like wait, did I hear that right?
Austen Allred: When I say that today, people are like, whoa, but you can't expect an engineering manager to like spend all day coding. Like look, I hear you. But if an engineering manager isn't like pulling up your code and looking at it and commenting on it, and if they don't understand the code that you're writing, they're fundamentally not doing the job. If all they're doing is managing like how happy is the product team and how are this person's peers rating them, that's not good management.
Al Doan: Shifting gears a little bit I guess, what's fun out there for you right now? Like you've always been a little bit of a futurist as you've stared into the ether. Like we sort of jam on the same stuff. I feel like we're like- it just gets excited. It's been funny watching the Elon saga, man. I'm like, I keep meaning to pick up the phone and just be like, what? What do you think is happening?
Austen Allred: That’s just free entertainment.
Al Doan: Oh, it’s amazing. What's out there that's amusing you and interesting you and being fun right now?
Eric Jorgenson: I want to hear your case for why SpaceX will be the biggest company of all time. I know that's a thing that you went off on before, and I'm curious.
Austen Allred: It's pretty straightforward actually.
Al Doan: Is this a recent tweet or-?
Eric Jorgenson: You’ve got to pay more attention to Austen's Twitter, man. You're missing tweets.
Austen Allred: Al, how dare you?
Al Doan: I’m on the For You page, not the not the Following.
Eric Jorgenson: The algorithm, you got to-
Al Doan: Do you guys remember when Zuck did that, when he introduced the newsfeed and people like lost their mind? And they were like, you've ruined it, you peeping toms, like you are the worst product lead ever.
Eric Jorgenson: There was a riot about every change for a decade. Yeah.
Austen Allred: Well, some of our employees were there on the product team at the time that that was happening.
Al Doan: Was it Twitter or Facebook?
Austen Allred: Facebook when they changed from the wall to the newsfeed. And like they- I mean, the people that I know really well were like, they couldn't be bigger Zuck fans, if even though now they are like this VR thing seems dumb. But at the time, there like all of these users were like rioting. There were millions of people joining Facebook groups or pages or whatever the equivalent was at the time, they were like, bring back- you suck, Facebook, we’re going to leave. They’re like yeah, we'd sit there, and we would look at the data and we would AB test. And everything was like all the metrics were 10x with the newsfeed. And then we'd go in, and we’d talk to people and like, why do you not like the wall? I don't know, I just kind of liked this page because everybody else was doing it. And like, okay, well, tell me what you miss about the wall. Like, well, I miss that you could leave messages on other people's profiles. Like, well, what if you could still do that? Like, do you really not like the news- anyway, so they dug in a little bit deeper and the popular narrative was just completely not what Facebook was seeing at all. And so, they're like, no, we're staying the course. And it seems obvious now that the newsfeed would like- now it’s very core to the business. Now, if you'd like go back and get rid of the newsfeed, you're left with right hand sidebar ads. Not to mention, when you go mobile, like how do you monetize it. It's a completely revolutionary thing. But the folks that I know will refer to that as like the moment where they saw Zuck truly become a leader and be like, no, everything in my intuition says the newsfeed is better. All the data says the newsfeed is better. 90% of the user interviews are saying the newsfeed is better. So, I don't care who's joining what Facebook groups. We're going all in on this path.
Al Doan: Do you- so like I bought a new Oculus around Christmas. When I saw the, what's it called, the codec avatar that Facebook's working on. Have you seen that one? The very realistic-
Austen Allred: I haven’t touch it. I think you brought one to my house. Did you bring one to my house like three years ago? Do you remember that? In San Francisco? The only time you visited my house.
Al Doan: I think I might have, actually. Dude, but I think the killer app- Well, one, like I bought it, unboxed it, like $2,000, I bought the pro ultra super edition. And I put it on, and like it is the crappiest onboarding experience of all time. Like I have no idea what I'm supposed to do with it. Like you can pretend to shoot a bow. But like if I could put that on, and Zoom would be the killer app for me, like Zoom where the ultra realistic avatars, where all three of us are sitting in a room instead of me staring at a dumb flat screen of you guys would be a thousand times cooler. I'm like I would take every meeting in friggin VR.
Austen Allred: That’s such a 35 year old white guy thing to say. Like the ultimate- you can play games on it. You can box with it. But if you could have meetings with this thing, man.
Al Doan: Well, Zoom is plenty big and it's built around like a bunch of people staring at each other on a screen. It's like, man, let me actually spend my day in a room where I feel like I'm pretend interacting with people instead of just like staring at it and putting it down and like it would murder it but-
Eric Jorgenson: You could just punch people during board meetings, no consequences.
Al Doan: I’m telling you, man, like this- The stuff that makes no sense to me is the goofy pretend avatar like we are all block shapes walking around with hands petting each other. It's like I don't get what you're trying to do here, but man, let me do some real business in here where we are as though we are in the same room. This feels magic if it ever gets there.
Austen Allred: Interesting. Yeah, I don't think I've tried it other than- that was, what, three, four years ago at least. It’s funny, I’m like oh it was two years ago, but that's completely ignoring like the two years of COVID. Just like those disappear in my mental timeline. It was a while ago.
Al Doan: The footnote 2020.
Eric Jorgenson: Is AI changing anything for Lambda? Like has it changed the kind of like educational approach?
Austen Allred: Our curriculum development is 10 times faster now, literally.
Al Doan: You just have ChatGPT write it all.
Austen Allred: I mean, you have to like- ChatGPT is like very powerful if you are an expert at something, and you need something to do the grunt work, because it does mislead sometimes. Like it will straight up give you very confidently the wrong answers or something that doesn't work. But for our instructional design team, they- like this wasn't something that we had planned on at all. It was just like, hey, writing this course and developing, we have like very rigorous, very intense instructional design and curriculum development processes. And basically, move stuff from six months to six weeks kind of thing.
Al Doan: It is magic to never stare at like a blank document be like, chapter one. Just you always have something to work off of.
Austen Allred: I was playing with it with our head of instructional design right as it came out. And I was like, alright, we're just on Zoom, let's see what this thing can do. And so, I’m like describe to me what the if word does in JavaScript and give me 300 words. It spit out pretty good text. Okay, that's compelling. And then the design guy was like, I don't care about that. I can write that in 30 seconds. So that's just thinking into the keyboard. So alright, how about this, ChatGPT, give me 20 example solutions of when I would use the if keyword in a programming challenge and the corresponding solutions with descriptions of why the code would work, and it spits that out. And then they're like, okay, now we're talking. I would be sitting there being like, alright, let's create a loaf of bread. And then we're going to say, if there's- if the loaf of bread has more than five slices. Yeah, just painful. So, stuff like that. And it checks code samples really fast as it writes them. And they’ve spent 10 times as much time doing it as I have. Like, that was my- Okay, cool. Yeah, see if that is interesting at some point. And then they have like perfected their methods of like how they use it. But yeah, it got to the point where it was like, hey, ChatGPT is down. We're going to be offline for a couple hours. We're just going to go lunch. We’re not going to sit here without ChatGPT. So I'm pretty bullish on that. And that's just the first simple application of it.
Al Doan: Have you seen any companies that are like doing cool stuff with it?
Austen Allred: Yeah, it's hard because right now, there are a bunch of companies that are like, hey, we're going to do AI for x. Oh, awesome. Like what is the- what are you doing? You basically figure out they're sending random prompts to ChatGPT and returning it, like they're basically a very specific user interface for ChatGPT, which can be cool, like the other text creation companies like Jarvis, whatever, like, hey, write a blog post that's SEO, uses these keywords, and it will do that well. And basically, all that entire company is is a user interface. And they have toyed with the prompts for ChatGPT to know exactly what prompt you have to give it to get the right thing instead of you trying to figure it out on your own. And I've invested in a couple of AI companies. One, they do like software that overlays your webcam and can turn- like Snapchat filters, but anything, or they can take full on like text and then take an image of your face and then turn it into somebody reading the text, basically like on demand deep fake type stuff. So, it's really interesting, but it's all really early and really difficult to tell who's going to win. Outside of like I'm sure Open AI will do great. They're not going to- they have a pretty compelling lead. And then Stable Diffusion stuff is really compelling.
Al Doan: It is such a cool time to like be watching all this stuff happen around us. This is like fun tech again. Like we get another window of like really fun, cool stuff being done.
Austen Allred: Yeah, I don’t think there's anything that's felt quite this way since like the iPhone, which is like, okay, here's this completely new world, and it changes these seven things, but it doesn't change these two things. So, what can we build? And then from a founder’s perspective, how can I build a sustainable competitive advantage with this? Like, that's the thing that I've been held up on with a lot of AI companies is like, yeah, you can build a quick user interface to plug something into ChatGPT. But if there's not anything more than that, anybody can claim even 30 seconds. Yeah, so we will see.
Eric Jorgenson: You can imagine it widening a lot of like existing moats, I think. Like, BloomTech could transition over the next 10 years from class based to like basically tutors. And the thing that makes up the gap is AI that is just like clever enough to know exactly what each person needs to hear or see at each given step.
Austen Allred: Yeah, and a couple of things that are kind of- so ChatGPT is trained against the internet basically. There's some people that are trying to tweak it to like, okay, ingest my knowledge base of my company, and then you can be a customer service-y thing. But it's hard, like it can't do that without additional training. So, they're like force feeding it a bunch of prompts, it learns a bunch of stuff, and then trying to use that. But for us, it's not quite- It's actually a little bit scary as a tutor, so to speak, because it's very confidently gives you answers that are right 90% of the time. But if you don't have somebody to point out the 10% that are wrong, like you can send somebody down a totally incorrect path. And that's worse than no tutor in some way.
Al Doan: Teach me the wrong algebra. You've ruined my math foundation.
Austen Allred: If you'd like ingrained that and drilled that. So I know folks that are – can I talk about this yet? There are folks who are building really, really good, not through ChatGPT, but math tutors that are like focused just on training their model to be the best one on one math tutor in the world. That I think could- that I buy. I'm invested in a company, but I will wait for them. I think it's not announced yet. For us, the biggest one right now is curriculum development. We can build a new course that would’ve cost us a million dollars for 50k now.
Al Doan: What is the bottleneck to the next big moment of growth for you guys? What's the thing waiting to be figured out?
Austen Allred: Yeah. So we, for a long time, had pretty insane growth and a lot of future revenue that was coming later. But we needed VC to plug that gap. And it's one of the things where the faster you grow, you're not getting off that treadmill anytime soon because then you raise more money, you grow even more, and then there's more revenue coming in, but it's still lagging behind your expenses. So we spent the past couple of years on trying to correct that to where- and it takes a lot of-
Al Doan: Are you guys going for profitability now?
Austen Allred: Yeah, I don’t know if I can say we're cashflow positive yet, but we're probably days not weeks away.
Al Doan: That's a huge win. That's great.
Austen Allred: Yeah. So there's- yeah, for a school like ours where people aren't paying anything upfront, it's the cashflow gap problem. I think we've solved that now. At a minimum, we'll be right on the cusp of profitability. And from [inaudible 1:09:59] standpoint, we will be profitable, but like will we be cashflow positive day to day. And really the big thing that we've been trying to get to for years is where if we enroll a marginal student, we bring in instant marginal profit, not money that comes six months later. And we've done that. So, basically, yeah, to use VC metrics, we have the right LTV and the right payback period, which is the most difficult part of the business we're in. It takes a really, really long time to get there.
Al Doan: So at that point, do you just 1,000x the number of students each month? Like is that the move?
Austen Allred: Within reason and with asterisks, yes.
Al Doan: You had me at within reason and with asterisks. That’s what my wife said when I said will you marry me?
Austen Allred: The short version is yes, we're working on 1000x-ing the size of the school, but we have to do that while sustaining outcomes and while keeping cash flow-
Al Doan: But there's nothing that's like we got to fix that, and then we can go and- man, that's such a fun-
Austen Allred: It was hard, dude.
Al Doan: You and I talking though the years, it’s like if my job could just be to go get students to come go through this amazing program, like it would be the easiest job in the world. Like, that's all I want to do. And no, I got to build the whole business to do all this stuff along the way.
Austen Allred: Yeah, we are finally back to where it’s like actually, so not to get too in the weeds, but the biggest problems you have are the entire point of the school is you don't pay anything upfront. So the revenue is by definition and delayed, and you have to gather enough data that you can underwrite something that can fast forward the cash. So, we checked that box. And the traditional, the way we billed, because we're growing so fast, was everything was manual, and kind of- There's an example I like to share. There's a time when we would have humans taking attendance of everybody just to know who was there and who wasn't because Zoom’s API was broken, and Slack’s API was broken. And stuff didn't work very well. And we didn't have enough of a product to easily determine who was there at the right time. We spent like $20,000 a week just taking attendance. And there are million little examples like that where you just have to productize the stuff that computers are really good at and stabilize the stuff that's really fragile. And that took years. There's just no- you can't do that overnight, no matter what you try to do. We are there now to where we can simply grow, and everything should work.
Al Doan: I feel like you also, correct me if I'm wrong, but you've kind of gone through a shift where because in the beginning of any business, it like consumes every waking moment. Do you find yourself sort of valuing some balance? Are you finding like fun things to do that aren't work? Have you gone on that sort of midlife crisis of a company journey, where you're like, alright, if I'm doing this for longer than two years, I'm going to need to build a life around this?
Austen Allred: I'm coming up on six years now, so it’s been a minute. But there's a time when like, actually, I think it was post our series B, so it would be like 2018, 2019, when I had probably gained 60 or 70 pounds, and I wasn't sleeping, I wasn't eating very well. I did not look healthy. And I was just working all the time. Didn't see my kids at all. And actually, credit to them, but a couple of our board members, I guess it was the entire board other than me and my cofounder at the time, kind of sat me down and they're like, hey, first things first, we see you tweeting at 3am. You need to sleep more. And I was like, no, no, I have kids that are awake at that time, so that’s when I'm tweeting. I can't really avoid that. And they're like, okay, well get a nanny, whatever you need to do to like get some sleep. We didn't end up getting a nanny. We just finally sleep trained our kids. And get a personal trainer if you have to, like if the company has to pay for it, whatever it takes to get you healthy, we will do that. Which was generous, and I respect their willingness to call that out because it would have been really easy for them to be like yeah, founder’s health is going to hell, but that's just what it is. So I started, like since then, I've lost probably 65 pounds. I'm pretty healthy. I work out pretty regularly. And recently, I started, possibly because of living in Southern Utah, playing golf, which is like it's hard not to play golf. But I figured out that- I started out and it was just like a fun thing to do with my wife on date night. And then I went out once on my own, you can get like a 5am tee time in the summer, so I went out at like 6am and just played for an hour, and you're just like walking around hitting the ball and thinking. And it was like the first time when in years when my mind just like slowed down. And I was just like- It is pretty therapeutic. So I've kept doing that to the extent that I can, although, in winter, you can’t- you can do it like once a week because the times are more difficult, et cetera, et cetera. And that's been good. And other than that, just still working a lot.
Eric Jorgenson: And then you found time to run a fund on the side too.
Austen Allred: My wife is very pleased for me to have something that wasn't just working all the time.
Al Doan: That is still one of favorite stories, though, of how that came together, man. It's the best. And I feel like it kind of supports each, like the more companies that you're invested in, the more places these guys can land out of Lambda. You're just creating job channels. Really Lambda should be paying you to run a fund, to invest in startups.
Austen Allred: Yeah, it started, like that was, without going too deep into the background of that, that was like I was working all the time. And I'd meet people just randomly, and I was like oh, my gosh, I have to invest in this company because it's just the coolest thing I've ever seen. And I would write like $1,000- we didn’t have any savings, I was still on founder salary. So investing like $1,000 at a time into these like seed stage companies. And my wife's like, what the hell? That's all the money we have. Companies are like this isn’t even worth me cashing the check. So basically, nothing's changed. I don't, not to- I don’t do really anything that I wouldn't do just organically and naturally. Like, I just naturally come across companies. I even hired a guy to do all the back office stuff. So even like just putting the stuff into AngelList and managing the wire that goes out. Because AngelList has automated 90% of it, I hired somebody to do the other 10%. So, yeah, it's just like I come across cool companies and founders that I respect and admire, and I can put a zero behind my checks now, a couple zeros behind the $1,000 checks that I would write them. Other than that, nothing’s changed. It's great. It’s awesome.
Al Doan: I remember the early days of my investing, my approach was I'm going to write these 10k checks into these small startups. And if I need to go and recruit an engineer for the Quilt Company, it was going to cost me 50, 60 grand anyway. And so, I'll stroke a 10k check into this stuff. And then I'm the first guy to know if their company goes bust. I’d be like, hey, guys, you need a place to land, it’s no big dea. Like, really, this is just a recruiting fee that I’m paying in. But the downside, I can offer them jobs, this works out for me.
Austen Allred: Companies that I've invested in have 100 plus engineers at those companies, so it's kind of a whole ecosystem that works out pretty well.
Al Doan: You're playing 3d chess, man. It's amazing.
Austen Allred: Not intentionally. People ask me that all the time. How did you think about building a Twitter strategy such that you'd have enough followers that it would be like- I had a really bad habit of tweeting and then it became an advantage over time. It was pretty cool.
Al Doan: The funniest was in the early days where they’re like what are you guys doing for- I remember asking, I was talking to your whole team. And I was like, what do you guys do to get more applicants? They're like, Austin just tweets. That was your whole strategy in the beginning. Austen will tweet a thing, and then like 100 more applicants come in.
Austen Allred: Shocking effective. There's a while when we had like a marketing department. It was like- well, we still have a marketing department, but it's all different people now. They'd be like here are the things that we need to do this quarter. And they'd have like a list of three or four things and then there'd be another slide and it would be, and Austen needs to tweet at least three times about this initiative. It was like metric that they were tracking, it was like OKR. Like we need Austen to tweet this many times about this many things.
Eric Jorgenson: I feel like there’s a direct correlation between willingness to get called an idiot on Twitter and earning money. What's up, Porter?
Al Doan: This is Ronnie. Ronnie, you want to say hi? I got twins. We are having our fourth and final. I got a baby girl on the way in April. And we are wrapping it up there.
Austen Allred: Literally wrapping it up.
Al Doan: Being a dad is great. You knew me through all my long, lonely single years.
Austen Allred: I knew you as like the fun single guy and now you’ve got four kids.
Al Doan: Now settled down, teaching a four year old to ride a motorcycle like an irresponsible father.
Austen Allred: We got- a BB gun.
Austen Allred: Did you really?
Austen Allred: It's like the classic Red Rider and you have to pump it. He can like barely pump it.
Al Doan: As a kid, you're like this could kill a man. As an adult you’re like, oh, it’s fine.
Austen Allred: We need to like drive off into the wilderness. And so we drive off in the middle of nowhere, like put up a little target. Honestly, if you shot the dog in the backyard, I don’t think it would do anything.
Al Doan: Alright, gents, I got to go to karate. You know me.
Eric Jorgenson: Al’s got to go to karate. We better wrap it up. Huge pleasure, both of you guys.
Al Doan: Austen, it's great to chat, man. and I got to come out and I want to come play a round of golf.
Austen Allred: Yeah, for sure. Always open.
Eric Jorgenson: I appreciate you hanging out with us today. Thank you for listening. If you liked this episode, you will love my episodes with Rolling Fun with Al and Bo, similar energy. The most recent ones are number 53 and number 49. Also, Kevin Espiritu who is in another amazing conversation similar to Al and Austen, like scrappy early start, been a CEO and founder all the way from the beginning doing it all themselves to hundreds of millions in business. Great lessons learned in that one. That's episode number 16 about Epic Gardening. And another founder, friend, and CEO, Brett Kopf, number 40, the founder of Omella and Remind, excellent at customer driven development, very thoughtful leader and product builder. So please check out those episodes. Check out Athenago.com and madebybread.com, our sponsors for this episode, or invest alongside me and my partners at Rolling Run. Links to all of that is in the show notes. For a free way to support the show and one more time please leave a quick review or text this episode to a friend or co-worker you think would enjoy it. I love you. Thank you. Goodbye.