Cost vs Quality in Edtech – Keith Schacht, Avichal Garg, and Geoff Ralston

A vitro, you found it, prep me in 2001. Sold it ten years later, in 2011. That was actually the year we found it! Imagine K12, the world's first educational technology accelerator! And Keith, you founded Mystery Science, I think in 2013. We just celebrated our fourth birthday in January, and you just celebrated your fourth birthday with Doug Pelts. You guys actually did YC in summer 2017.

So, this, the idea of this podcast, was to have a conversation about educational technology, about maybe some current, past, and future stories around our on ed tech. One of the things that started the initiative for this conversation was a blog post that a VTOL wrote in 2011 titled "Why Educational Startups Do Not Succeed." His summary of that post, I'll just give it really quickly since he helpfully put it in the post itself, was that entrepreneurs in education built the wrong kind of business. They think of it as a quality problem when actually it's a cost problem. Building in education does not follow an Internet company's growth curve, and because of that, you have to think way longer term than venture capitalists are interested in funding you. The opportunities for servicing education, they're actually not in the U.S., they're actually in Asia. So, it's not really gonna be relevant for another five years. That was in 2011.

So, maybe it's relevant now because that would have led us to 2016. Maybe eventually you can start by sort of reflecting on why you wrote that post and how you're thinking about it today. And then, hopefully, you guys can start having a conversation about that.

Yeah, I think it's great. That's a great summary; that's a great intro. I mean, the genesis of that blog post for us was really, we started this company. We had a lot of ideas around how to make education better using machine learning and using technology and personalization. It turned out a lot of people wanted that in the early days, and so we got some early signal that that's actually what the market wanted. Then, very quickly, things started to plateau from a growth perspective. I think my conclusion was that we'd saturated a lot of the early adopters, and the mainstream market just wanted different things. The mainstream market really cared much more about cost rather than quality.

The fundamental sort of disconnect between people who start education businesses and the consumer themselves is fundamentally that the people who start education businesses tend to care much, much more about the quality of the product. And in the U.S., the average consumer just looks at it differently, and the buying psychology is fundamentally different. There are a whole host of reasons why that's the case that we can get into. I think I actually have very interesting downstream ramifications on things like politics about whether people value education.

Yeah, I mean, actually, so if we want to sort of unpack that, the thing I think—and this is, I have very little other than anecdotal to back this up—so this is my current belief. If I could be wrong, I would love to hear probably from Keith why I'm wrong. But I think what happened was post-World War Two America was really good for a lot of people. I grew up in Ohio and Kentucky. And so, you know, if you're in the '60s or the '70s, you could get a job at the GM factory; you could make a good wage. Your spouse could make a good wage, so maybe together you make eighty thousand dollars a year working the factory, and a house cost eighty thousand dollars a year.

Alright, so that'd be like living in San Francisco, and you and your spouse make like three million dollars a year, and you never went to college. I think you would rationally look at that and be like, "Well, why would I go to college? I'm making three million dollars a year. I can buy my house, and I can have a great life." And then the people that were sort of born—let's just to make the math easy—let's say you were born in 1982, so you'd be 18 in the year 2000, you'd be graduating from high school. The people who were born in 1982 were raised by people of that generation, and so kind of the value system sort of, I think, came from a belief that the world would still work that way.

But the world doesn't actually work that way, right? Like starting with 2000, you know, the Internet— with the crash in 2001, the massive, you know, there was in between little recession, a crash in 2008. So, basically, if you were an adult in 2000, you've kind of been in and out of work for most of your life. If you were kind of in that camp if you didn't go to college, and that kind of, I think, has bleed-over effects into things like politics, where like the system, the way you thought the world was going to work, the world doesn’t actually work that way anymore. And that disconnect has been a really hard transition, and there's this entire sort of, you know, 15 to 20-year range of adults that kind of got trapped by it, and I think we're seeing some of the effects of that right now in politics.

Keith, maybe you can react to that. I'm especially interested in this perspective that I think was more true in 2001 than it is in 2018, which is that if you're gonna make any money in educational technology, you better appeal directly to parents. Because schools weren't gonna pay for technology, actually, they'd been burned with a whole bunch of hardware and technology that wasn't so relevant to them at the time. That seems like it shifted a bit, so maybe you can.

Yeah, I mean, one interesting thing when talking about the space is, it's—I think it's actually hard to talk about the education space like elementary versus high school are totally different markets in many respects, and parents versus institutions are very different markets. So, it's interesting, you know, we often sort of group this as the education space or the education industry, and we have to be careful about generalizing.

I mean, just one, Lineman Mystery Science, we are helping fix science education in this country by giving elementary teachers a remote science expert to co-teach the class with them. So, we effectively sell schools a curriculum that replaces the textbook. You could think of it in a sense as a digital textbook in our whole pitch to teachers and to schools is that this is better; this is better education. It's better than the textbooks; it's better than whatever the conventional curriculum is, and it's notable that our teachers and the students and even parents increasingly are starting to recognize that it's better.

So, it does give me pause to hear, you know, you can't build a business by making something better. I think there are some interesting challenges to trying to—how you communicate that your product is better and how the customers appreciate it. But, yep, you know, so for just very early on, where we've gotten a lot of traction selling into schools and getting appreciated for making a better educational product, it does seem to be true to back up of each house point about parents in general not being willing to pay, especially sort of the mass-market, to be willing to pay for education quality.

The value that they place on that, in the United States at least, is still not clear that there's a lot of money being spent outside of school and education, but it's test prep and tutoring for pretty affluent families, isn't that true?

Yeah, it's, it is interesting, so we are preparing for a transition from selling to schools to selling direct to parents. And so, we’ve sort of dipped our toe in the water with homeschoolers, which is a relatively small market, and are getting ready to go mainstream. And so there's still a lot yet for us to prove about that, but there's a couple interesting observations that we've made so far.

I think the thing that makes the market a funny market, that the parent education market, is that you get this product for free. So, you know, basically, through property taxes, that's how you pay for school. But, you know, as an entrepreneur or trying to build a business in the space, that's interesting to compete with free out there because parents feel like, "Well, I have this thing." And so one thing we've noticed in interviewing parents is that at the very young age, parents feel very involved in learning. So, you know, from birth to when they send their kid off to kindergarten or preschool, the educational value of the products they're buying is one of the dominant factors in considering whether you're going to buy that speaking sound, or that play mat, or that book, or whatnot. It's a huge factor in buying decisions.

Once you send your kid off to school full-time, parents remain involved in some respects. I think reading is one of the main ones. They still think it’s their job to make sure they're reading regularly to their child and helping to reinforce, you know, their ability to read at home. And then it sort of drops off for the next six to eight years. Your involvement, as a parent in education, is making sure you're supporting the school and going to parent-teacher conferences and, you know, picking the right neighborhood. Or, you get involved in that respect—not by buying products and sort of delivering education at home. And then towards the end of high school, it kind of ramps up again with the whole, like, getting into college thing or shoring up a weak grade or whatnot.

Yeah, well it certainly seems that your prediction that venture capitalists wouldn't fund EdTech companies has not come true, especially since 2011. And it was very interesting—we found it, Imagine K12, in 2011, and the companies that we founded along received hundreds of millions of dollars in venture investment. So, obviously, venture capitalists saw opportunity somewhere, right?

Yeah, I think they basically made the mistake that I tried to call out in that post, which is I think they expected that the ramp of those companies from a business perspective would look like an Internet company ramp. Whereas I think—I mean, I don't know the numbers of the most of the American companies, but I think they pale in comparison to like Chinese education companies that go from like zero to a billion, you know, an IPO in seven years. It's just like the ramps are just crazy, and it's always like China and more people in China. I mean, that's part of it, right? And the public school system is much worse.

Exactly right. I think the cultural dynamics are different; the public school dynamics are different. There are a lot of factors there for sure. But the net effect of it, then ends up being on paper you might have a company here as an education company that's worth a hundred million dollars or two hundred million dollars and has raised a lot of venture capital. But do the revenue numbers actually back that up? Alright? Could you actually take that public on the market in two to three years at a billion dollar valuation? And what kind of revenue would you have to do to support that? And I think, by and large, that hasn't been the case, which is why you haven't really seen education company IPOs.

But is that unique to education companies? Because just take consumer tech, generally.

Yeah, there's many hundred million-dollar-plus valuation consumer tech companies that don't have the revenue to back it up.

Yeah, and there are also many consumer tech companies in China where the Chinese equivalent will scale much faster than the American equivalent.

Yeah, the reason I—so it’s certainly true that I think you have a lot of companies that end up in this kind of dead zone, but the reason they do is because there are some that make it out. Like every now and then you'll get a Snapchat, or a WhatsApp, or an Uber, or a Lyft, or a Stripe, like the list goes on. Right? Like, and most of these companies are not that old, right? Like these are all seven to eight-year-old companies. Right? So, it’s the hope that you stumble into an Uber or a Stripe that really, I think, supports the rest of the ecosystem. Right?

But I don't see, like, where is the Uber or the Stripe of the education space?

Yeah, the closest is probably, you know, ABC Mouse, instant billion-dollar valuation, straight to parents.

Yeah, and Teachers Pay Teachers would be another one.

Yeah, you know, Jugg is worth to a nap show. You know, that's actually a great example; that's actually the one that I use most often, which is by and large, if you look at Check the way they got to where they are, is they didn't reinvent digital learning; they just made textbooks cheaper.

Yeah, but they've come, they've almost completely shifted. If you look at their website today, yeah, they don't talk about textbooks anymore. They're there; there are a smarter way to student turn, whatever that means.

Yeah, so, you know, but I think it's all about digital education for technology, and you know, I know it's a multi-hundred million dollar business for them. I was gonna ask, you know, do you know what their number, how that number breaks down between like their core textbook business versus.

I think the core textbook business and volume is bigger, but the digital business is rapidly growing on scaling. So, it’s interesting. There are tech companies that are scaling, certainly revenue has been tough for many of them, although, you know, I look at companies like Mystery Science, which is actually scaled revenue without mentioning any numbers very well by selling to schools.

I do think selling to parents still, because of this free zone, and we have to be clear that for better or worse that free zone is for the mass-market middle America. There are plenty of more affluent families that spend tens of thousands of dollars over a year on private schools, on private tutors, on SAT prep, on all sorts of educational advantages that do constitute a pretty big market.

Right, yeah. And it's notable that ABC Mouse is in some ways, I think of them as the new LeapFrog; they're targeting that same age demographic that LeapFrog used to, which is outside of that free zone.

Yeah, it's the early state—like the early, yep.

Yeah, I think that, I mean, that pattern has held for a while too. That's why, I mean, in that blog post, I called out something like five years because I think what you're starting to see is cultural shifts just take a while, right? And I do think there is a cultural shift, and the cultural shift essentially is that generation of parents that were 18 in the year 2000, or you know, their parents now, and they have five-year-olds, right?

So, the person that was 18 in the year 2000 would be 36 today, so I probably, you know, they might have some young kids, and I think they're starting to look back at, you know, they probably don't have a 25-year-old, but they might have a six-year-old and eight-year-old, so starting to look back at their life and saying, "Wait a second, like what happened? The world changed."

And so I think people are generally pretty smart, and so they're starting—that cultural change is starting to happen, or that might be the 36-year-old that's now the head of the science department and is looking at it and saying, "Wait a second, I grew up with the Internet, like I get this. We should be better buying better stuff."

And so, I do think that change is happening, but we're kind of at like the early parts of that change, and hopefully, it accelerates, but I don't think we’re—like I don't think the mainstream is flipped quite yet.

There's another aspect of the cultural change which seems to me is a cultural change within schools which for me has shifted radically. You know, in 2011 when you wrote that post, the fact is that most schools were not connected with reasonable internet access. Today almost all of them in the United States are connected with enough bandwidth for more than one person because we're not too bit the same at the same time. Many schools have directors of technology and are thinking about their technology buying plan.

So, it seems to me—I don't know how you think about it.

Yeah, I think that's in the school space. I think that's one of the most significant things is, from my perspective, it seems like it is mirroring the enterprise cycle lagging about 10 years or so. So, when we started four years ago, we finally could assume that most of our teachers would have a computer and one computer in the classroom, a projector so the kids could see it, and an internet connection—not the best internet connection, often consumer-grade shared— it would slow down during lunch hour and then speed up afterward. But we could assume this baseline level, and that was 2014, you know?

So maybe that only happened around 2012 or so—that's relatively late compared to what happened in business. And so, you know, I think we are really deep into this first generation cycle where there's a whole wave of companies that are just bringing efficiency to schools. So, it's like, "Hey, now that we're on the Internet, we can make attendance easier, we can make grading easier, we can make student rostering easier, we can make a lot of back-office stuff," and so that's a whole wave of companies that aren't even involved in learning; they're just involved in making these business operations more efficient because, hey, Internet, software is good for that.

And then, there's the second parallel we're seeing, and this was part of the wave we're riding in other companies where it used to be that there were directors of technology in business who made this software purchasing decision and then rolled out to everyone and said, "You know, that's how the school director of technology started." And now, you know, we take the Salesforce sales model to these teachers where Salesforce didn't get permission from an IT department; they just got someone in marketing who signed up for a free account and got started, and then three or four or five more people got it, and eventually, the IT department had to take notice because they had 50 users in the company.

And so, we do the same thing with our software and in other EdTech companies too; I don't think we pioneered this.

Yeah, this pull model instead of the push model. Instead of having to wine and dine supervisors around the country, you actually convince/persuade teachers that you have a great product, and in the end, they persuade their administrators to buy it.

Yep, yep. And there's a bunch of interesting shifts that happened there. So, you know, Salesforce was selling against incumbent CRM providers; like I used to, more Oracle had a product like that, and their product looks different. Like, the onboarding for it looks different, and the cost structure looks different, and we're seeing that same shift.

We've got the Pearson, McGraw-Hill, Mifflin, that generation of companies who still assume they're going to sell top-down and rollout, right? And then Mystery Science and other tech companies that just do the a la carte enroll.

So, VTL, do you think your conclusions still stand today, however you modified your take given what's happened over the past—I mean, sort of gave it five years and it's been seven? Would you—let me just read your conclusions, and I'm wondering if you think they’re still valid today or whether you would counsel new ed tech entrepreneurs differently.

This is the good and the bad of things, and to be fair, I disagree with very little of what he wrote in 2001, right? And so the real question is, have we moved on? And if so, how should we move on?

Yeah, so your first point was don't make a better product, make a cheaper product.

Yeah, which, by the way, the sufficiency stuff that he's talking about plays directly to that.

Yeah, don't start in the U.S.; start in other developed countries because it’ll be too slow. Start in Asia. Don't take VC money. Don't target the middle class because they don’t really care. And don’t expect a quick flip or quick growth.

You wanna—you can take those as a whole or one at a time, however you like.

I think I can take them as a whole. I think they're generally still true, but there are pockets where it's starting to change.

And I think the places where you're starting to see a change are especially around—I think schools have changed a lot. I think things like, I was talking to Dan and Clever, and he was talking about how Chromebooks have just changed the landscape.

Dan, the CTO, correct?

Thank you. All the CTO becomes also is Clever, YC.

Yeah, Clever is a YC, yeah. It should be an Imagine K12—long story for another time.

So, he was making the really great observation that, to your point too, I think is that just changes the game. All of a sudden, you can actually assume that there's an internet connection and a thing that looks like a laptop and is pretty reasonable and has good specs.

So, I think kind of like the fundamentals have changed, but the way that the fundamentals then manifest in terms of startups is just starting to change because there’s a phase shift there.

So now that the Internet is good, now that the person making the decisions might be the department head or the teacher, now that there are—you can just sign up for it and you don’t need to go through the district, like all those are structural changes that have just started to happen in the last, you know, let's say two years, three years, that that's really gone mainstream.

So, I think looking forward now, so I think the question really is, like, are they still true today? Take a snapshot; I think the answer is mostly still true. But that's not really the question that, like, a startup should be asking or founders should be asking is like, "Will it be true in five years?"

I don't think it will be true in five years, right? Like if you're starting a company today, the question really is, are there enough customers for you to get going? And has the world evolved such that, in five years, it will be dramatically different and look a lot more like your early adopters? And I think it will.

Well, they're all forward-looking statements. So, I think you're basically saying ignore that blog post because the future looks—

I think, really bad. Our friend, I think the future looks a lot better. The feet of the present as of today still kind of looks like that, but the trend lines are good, right? And so, you look at Mystery Science; you look at No Red Ink or you look at Clever. They're all these companies that I think have managed to get pretty substantial traction.

And so if you're starting today, I think some of these markets are actually—you can get quickly, you can get nor any reasonable growth pretty quickly. I think the part of it that's still hard is actually the monetization, and I think that part of it is just gonna be phase-shifted and I think that will come.

And so it's—it kind of is a case-by-case basis. I think in the early, early parts of the market, kind of what Keith was saying, if you're targeting four-year-olds and five-year-olds and six-year-olds, you might actually be able to make a lot of progress and actually monetize because the buying psychology I think has changed.

If you're talking about 14-year-olds, you might not be able to. Right? And so it kind of depends on the market that you're going after. I still think that Asia thing is 100% true. Like I think if you just look at the growth of companies and the revenue in those markets, I think China is just an amazing, amazing market.

And so, unfortunately, it's not—most people are not faced with the decision of "Which should I start, a company in the U.S. or should I start a company in China?" It's like, it’s one or the other; it’s difficult in the U.S. to go.

Yeah, Persis, French, and vice versa. Don’t know the markets and vice versa. Yeah, and so that's not really for most people a decision point.

I think the more important decision point for most entrepreneurs probably is like "Which part of the market am I going after?" Why? Is it higher ed? Is it high school? Is it science education? Is it math education? Is it pre-K? There are a lot of ways to segment the market, and so I think some of those have moved much more than others, and the trajectory looks really good, so I think they're going to be pockets of pretty substantial change in the next five years, and some of the—I think we’ll just take a while longer.

Like, I actually think high schools will take a bit longer than some of these others just because of the phase shift, right? Like, the parents—you kind of have to have the market grow into it.

Keith, maybe we can talk a little bit about VTL's original first point, which was the precise opposite of what you guys did later, right? Which is not—don’t build a better product; build a cheaper product. You guys, in fact, didn't build a mass with the expensive product, but you built a better product. What you're—a whole idea was to build better science education, and I think this is an interesting conversation because the real issue in American education isn't price; it's quality.

It's how can we get better outcomes? Maybe you can reflect a little bit on.

Yeah, I mean, I'm that opportunity.

Yeah, so I definitely think there's opportunity to build a better product in the education space. I think right now that's absolutely true, and I think it was true four years ago even when we started that you could build a better product, and I think to the extent that the advice is useful of "Don't build a better product, build a cheaper one," it's not unique for the education space. Like there are many, many startups whose growth is driven by lowering costs.

You know, I mean, that the whole media space, like the news media space online is being driven by free newspapers instead of, you know, print newspapers. And lots of people argue, "Oh my gosh, consumers don't care about the quality of reporting anymore. All they care about is something that’s free."

And it’s, you know, I think it’s true that free is a really important driver in every industry, or lowering cost is an important driver in every industry, and that's not unique to education. But the conclusion that the consumer doesn’t care about quality, I think, is one I’m very hesitant to make because oftentimes we as the creator have a unique set of things that we think are important, and then we imbue that in a product.

And if it doesn't resonate with people in the same way, you know, it’s often— you have to charge a little bit more than it’s easy to think, "Oh, they just don’t care about quality." Like, I could imagine, you know, in the furniture space just to pick a totally different industry, you know, one of the high-end designer furniture stores for many years was Design Within Reach.

Never actually shopped there, but I walked in one, and they said like $20,000 couches—that's probably like the low-end couch there, you know? And you can imagine this—the whole fine furniture industry concluding, "The average consumer doesn’t care about design; they just want cheap stuff."

And then IKEA comes along and brings design to the masses.

So, do you think IKEA thinks so consumers don’t appreciate good design? It's like, "No, they absolutely do appreciate good design. They're not gonna pay twenty thousand dollars for a well-designed couch." They'll—but they'll pay five hundred bucks for a well-designed couch, maybe even if that was more of a balance for that sort of consumer between yes consciousness and quality.

Yeah, so I don't think there's something unique about the education space that the, you know, to conclude consumers don't appreciate this.

I think that you create more value, you price it right, and you play that—you have to figure out the market dynamics to scale. But what consumers, you know, customers appreciate it—in our case, we started out focusing on teachers.

And, you know, with the challenging thing in education—and this is also true of other industries—is how does the consumer know what's better? How does the customer know what's better? In teachers, well, you know, our particular customers, they don't have a lot of strong opinions about, you know, a better science resource would have the following attributes like so they're not searching for better necessarily, at least with a clear set of guidelines.

But when they see it, they can recognize it, and we hear all sorts of feedback from teachers like, "Wow, I've never seen it, a lesson taught this way before. I don’t know what it is about it; there's just something different." And you can see it in their testimonials that they're sort of groping at their own identification of what it is, so they can tell it, even though they can’t put their finger on it, you know?

And you can imagine a consumer like you make a healthier, you know, granola bar, and you know, the average consumer doesn't know what is the right balance of nutrients to make something healthier, but they could notice how they feel in the long run by changing their diet.

I think that's actually a good example.

Yeah, I mostly disagree with what you just said. Let me—I’ll give examples. Right? Tesla started at the high end, right? And like electric cars probably wouldn't happen had Tesla not priced it the way they did.

And there’s like a bunch of work that they had to do to come down. The iPhone kind of worked that way; like a lot of technology cycles I think actually work with things that are more expensive that are smaller and niche, and then they would come down in price over time because often there is a trade-off between quality and cost.

Now, in like content creation, I think you could argue that the tooling has gotten so much better that the cost of production has come down dramatically, and therefore you don't really have the same trade-offs that you used to.

And so I think with Mystery Science it’s a great example, right? Like software tooling's gotten so good that you guys can have massive leverage and create really high-quality stuff and price it very competitively, right? It's actually affordable for people, but it's really, really high quality.

But a lot of things don't have it as a trade-off, right? And so to the extent that you have to make the trade-off, I think that's actually where things get hard is like the average person is going to make likely a different trade-off than the person building the product.

And that's kind of where I think companies end up making the wrong trade-off is like the person building the product says, "Clearly, if it cost ten percent more but is 20 percent better or 30 percent better, I should—that’s a worthwhile trade-off." And that's actually not the buying psychology of the consumer, and that's where I think on the margin things get harder.

Well, do you think that's unique to education?

I think it's unique to certain things, and I think the characteristic of education that makes it—there are two parts of education which is kind of like healthcare that I think make it really hard. One is the long ROI cycle or it's just like it pays off in 20 years, and us like humans are just bad at that, right?

We—that's why healthcare, I think, has some of these challenges. And the other is I think your point, which is how do I know it's better, right? Like what do you—what tells me that it's better if the payoff cycle is 20 years or granola, right? Like better food for your nutrition is a great example, right? People make all sorts of suboptimal decisions in the short term when it's clear what the right long-term decisions are.

And most people just don't make the right long-term trade-off, and I think it’s exactly this; it's like the payoff is really, really long, and evaluating quality in the short term is really tough.

You wouldn't really argue that people don't make quality trade-offs, though, for food, would you?

They sure do. There might be wrong, and they might be a little opaque, but they sure do make those trade-offs all the time. And I think that's probably true in education as well and healthcare.

How do you—well, people think certain granolas are better than other granolas and think certain berries are better than other berries and think like there's pay the money for organic, for example, because they believe—and of course, there's—and part of that is that there are short hands for what quality tastes like.

So, you know, a Mystery Science lesson tastes better than a dry textbook without Doug's actually doing it. So, maybe there are ways for people to signal quality and to believe in quality.

I look at it kind of as like, you know, the way that I think—like the way that we would evaluate quality here, I think like making it fun and accessible is absolutely part of quality, but fundamentally, it's about driving educational outcomes, right?

Like if you didn't learn the thing, better is it actually better quality? I argue if you didn't actually learn the thing, like it's not a better quality need short hands because the ultimate educational outcome, which means you get a better job, it's more satisfying, higher paying, etc., is too long a cycle.

Yeah, what schools use and parents by default then uses test results.

Yeah, that’s right. I guess those are the outcomes that we have to use as a shorthand.

Yeah, I think this is more—I will argue that this is more of a symptom of a mismeasurement of a better education. Since, so much of a man about the way that people evaluate whether a product is a better educational product is very often with some internal set of standards and heuristic that a district will use for purchasing or it's a standardized assessment that they're gonna measure at the end of fifth grade and eighth grade or whatnot.

I personally questioned whether those are actually proxies for quality at all, yeah? And meanwhile, the thing that they ignore, which I think is the right proxy, is what's the level of student engagement? Like are students excited and eager to take the next step in that lesson or to understand this concept? And that's largely ignored by most people designing educational products because they're striving for some Platonic ideal of raising a standardized assessment, and they're just missing it.

And so when you understand that motivation is central to learning, you—I mean one of our internal principles—you can't teach a child something that they don't care to understand. Like if they don't want to understand it, no amount of trying to shove it down their throat will lead to any kind of learning outcome whatsoever.

And so when you understand that, when you see motivation as essential to learning, you get an immediate feedback loop, and students respond right away. You can tell whether they're learning; students want more of this, and so I think that this idea that there's a long cycle to measuring improvement is one of the sort of legacies of the educational system that we're still working to shed because we lack a real measure of learning.

Yeah, how percent agree that? I mean, I think a huge part of it is a side effect of the way that we do the measurements, and therefore like the way that we measure quality, quote-unquote, ends up skewing in a very particular way, which has all sorts of downstream—and I think the disconnect that people feel between, “Well, I've made a product which is better according to this mistaken measure of quality, but gosh, it's just not working in the market. Like I'm not getting in the reception,”—it's not that the market doesn't value quality, question the assumption.

It's maybe, maybe what I thought was an indication of better quality is really not an indication of better quality.

The, just to advance that conversation a little bit, something that I struggle with a lot is that the educational system that were stuck with today was building children building outcomes for a world that doesn't really exist anymore.

Yeah, the world has changed so much, and I think one of the issues we have with measuring quality is for what? I think there’s a lot of questions being posed as to what the value of an education actually is in actual long-term outcomes for children. How should we even think of that, and how would one advise an EdTech company who's trying to build some Platonic ideal in that world on what to do?

It's a great question. I think you're basically—I mean, that is the core of the problem, right? Is like what are we actually building the educational system for, and towards what end?

And I think I don't think there's a great answer right now, honestly. And I think it's as much a public policy question as it is a technology question: like what are we actually trying to optimize for?

And I think all that people are—for what it's worth, I think what's starting to happen is people are starting to at least realize that it's broken.

And so I think that whole generation of people that sort of went through that system and ended up kind of, you know, misaligned for the skills that you actually need in the job market today are realizing that system is broken, but I don't think there's like a cohesive plan that I've seen that says like here's how to actually fix it, and so I wish I knew the answer to that personally, but I don't think there's actually like—I don't think I haven't really seen a great solution to it, other than sort of very point-wise, "Oh we should have more STEM education," or we should, you know, get programming in earlier, you know, schools, or I think there's sort of these like point-wise solutions that are very tactical, but there isn’t like a cohesive strategy that I've seen.

Yeah, program is an interesting one.

Sorry, Keith, you wanted to say something.

Good. I think you absolutely have to have an opinion on that fundamental question. If you are building an education company, you have to have an opinion on what is the purpose of education because if it's to create more of a certain kind of professional because of a career shortage, that will lead to a whole set of decisions in an assessment of progress, or if it's, you know, GDP growth, or know, there's many—yeah, I think mistaken views of what the purpose of education is, and in the fact that as a culture, we don't have alignment on that, you know, that speaks to this system that's being pulled in so many different directions.

Yeah, I mean, I mean we hold a very strong unconventional view on it, and it's that the ultimate purpose of education is that children grow up and live happy and productive lives, and even taking something like science, like I think it is an absolute mistake to say that we should teach children more science because there are lots of STEM careers out there that need to be filled. Like that's absolutely the mistaken approach, and many people hold that view. Why?

That at least leads towards a bunch of wrong decisions.

Why do you think?

Um, it’s a great—it’s a great long conversation we're trying to convince it, but I'll give you a data point which will speak to it.

Yeah, I think if there was a young child who knew that he or she wanted to be a dancer, that's the profession they knew they wanted to be, and there was no chance that they wanted to pursue a STEM career, they should—that child too should learn science.

It's not that they should learn science because of a particular career outcome because the implication of that is once I decide that's not the career, then like forget this; I don’t need this knowledge anymore.

There's, I think there is a fundamental baseline understanding of the world that you're surrounded by, the way it works, and a—the habits of thinking that you form by figuring out how the world works.

And so science is this body of knowledge, this core knowledge about how the world works, and it's a methodology in discovering these truths about the world, and every child should learn that because it will enable them to be a happier and more successful dancer just as it will a happier and more successful programmer.

So, where do you think that bounds of that kind of end— is it like computer science and programming? Is it math? Is it, you know, writing skills?

Is it absolutely the right question? And it is a harder question to answer, which is so what does a core fundamental pedagogical, you know, a pedagogy and curriculum consists of in order to maximize for as many children as possible growing up and living happy and productive lives? Like that's—a lot of healthy debate that should be happening there.

I wish that was the debate that was happening. I wish there was agreement on the outcome and the purpose of this all, because that would be having the right discussion, not—you know, the industry would be having the right discussion.

I love that—that you make the point that people can live happier, more fulfilled lives by knowing science. I'm not sure that there's a lot of evidence to back that up, but I would like to make an appointment on the social case for certain kinds of education because what certain types of education does bring to kids is critical thinking and the ability to ask hard questions and think skeptically about the world, which seems relevant today for all sorts of reasons.

Wouldn't it be even a more powerful argument is that when we're educating our kids to be productive citizens of the 21st century, and without an understanding of the scientific method and what science implies for everything, how can you be that productive citizen?

What do you guys think?

Yeah, I mean, I think that's hard to argue with. I think critical thinking skills, you know, science, math, I would argue actually programming just as a framework to think logically and clearly about the world, writing—I think the ability to communicate effectively.

I think these are all just foundational skills regardless of what you end up doing, so no argument for me on that. I think the hard part is can you be happy and productive if you don't have a job? Like just to bring it back to earth a little bit is like if I can't feed my family, am I going to be happy and productive?

And that’s I think kind of like where the boundaries are, is like to what separates— wouldn't you argue as well that if you think clearly and you have great communication skills, you're better positioned to get a job in the world that's being created all around us than otherwise?

Maybe? I mean, I think so. I'd like to think so as somebody who loves reading philosophy in science fiction and, you know, loves music and all these things. I would like to think so, but, you know, like I think I think the edge cases are kind of the interesting ones.

Like you know, if you have an English degree, and you know, there’s a gross understatement— it's like that feels like a—like could that person learn how to do Python and SQL and like go get that job? Absolutely, they're smart; they could certainly do that.

But like that is—that like a missed opportunity? Is that person now like in an awkward place having taken a hundred thousand dollars in debt when they probably should have just like done—you know, could have done something else?

Not probably with me, and those like pound recondition— I think are the tough part.

But I think you have to be really careful with the societal argument, you know? And so there is a subtle switch where you're saying, "But what about the societal? This is good for all of us if people learn these skills."

And I agree with your restatement of it. It is—you’re right; it is good for every one of those individuals to learn those skills because it helps them, but I don't think we can justify this on the grounds of "but it’s good for society."

And I'll give you an example. My wife was with someone who was in, you know, AP math and in science classes in high school, and as a woman who was good at math, she got a lot of pressure to join the math team and be that the female math representative for the school.

And it was really hard for her for a while because her passion was history and the social sciences. But there was lots of pressure because it would be good for society to have more female representation, and she struggled with that for a little while.

Ultimately, she pursued the things that made her more happy and fulfilled—not the thing that other people felt would be good for society because of some metrics that we need to hit.

And I think that as soon as you hold a societal standard, you very quickly start to make decisions which will be at odds with what any one individual would want for themselves because it's best for society.

Yeah, and I think like probably a little bit more to me the hardest trade-offs are actually for the individual in those sort of like edge case situations.

Like it’s an interesting example like if your passion is in one direction and you could go really deep on that, but all the jobs are in the other direction—like setting aside some baseline level of scientific method and math and you're going to a good college— like so that’s kind of an interesting and hard individual trade-off, and that I think starts to get at actually like what is the purpose and what are you optimizing for as a system?

Because I think in a lot of those cases it, I think there are, you know, you can look at let’s say unemployment rates where people who have a college degree—and it’s it’s actually relatively low or it's below 5%—and it’s really like whether or not you have that college degree that changes whether or not you're employed.

But there are a lot of nuances to that—there’s underemployment, there’s having, and what kind of salary growth potential do you have? And I think—and I think I take a little bit more of a pragmatic approach of like probably more people should be getting computer science degrees and like learning data science, and that's better; if more people want to be getting a computer science degree, but it’s a—it’s a critical and important part of being happy and fulfilled that you have a like job that pays you well and you can like feed your family and you feel viable.

I'm like that's a—that’s an important part above and beyond like your—it's a whole separate conversation whether you believe that having a job is a critical part of happiness because—and it’s easy for those of us who have the sorts of jobs that frankly the people in this room have where they're, you know, we're the opposite of wage slaves, word, which is what most people are.

And so that's a different conversation. But it is interesting to talk about the societal goals of education too.

I mean, education, public education in the United States was a was was for the benefit of society as opposed to individuals who I don't think people really knew that that getting people ready to be good factory workers was good for them.

It was more about we need factory workers so we better educate them sufficiently so they can—they can be good.

Let’s bring the conversation back to education technology. My hope is that educational technology helps both individuals and society achieve outcomes that we in this room and in the country would be happy with.

What do you guys today recommend when you meet an EdTech founder? I suspect you probably say different things. Maybe you can each in turn say like if someone tells you about their EdTech startup.

It's a hard general question to answer, but where do you guys sort of go with your advice? Do you do—you'll start with you? Do you sort of channel your 2011 self, or do you talk about sort of how the world's changing and the opportunities that are thus created?

Yeah, I try to channel Keith a little bit and I ask them what their motivations are and try to do what's good for the individual.

Exceda, I don't think there's a right answer, right? There are a lot of reasons that people might want to start an education company, and so I think the foundational thing is really what is your motivation, and why are you doing it?

And I think especially in Silicon Valley, there's too much of a lens of well if it's not a billion-dollar outcome, if it's not a ten billion-dollar exit, it doesn't matter.

And there are lots of motivations that people may have, and so the first step I think is what is your motivation? And there are lots of great businesses that people should start and could start that have very, very meaningful impact on people's lives and in their communities.

And they'll be fifty million-dollar businesses or hundred-million-dollar businesses, and that's fantastic! Like people should go do those things.

But if that's—if that's kind of the zone that you're in, and that's your motivation, and that's what you want to do, then it comes down to, well, what are the right tactics to executing on that? And how do you stay really smart about it?

Because the worst possible scenario would be you had this great thing, it was actually working, but for example, tactically, just ended up raising money in the wrong way, and now you’ve kind of gutted your company because you don’t actually control it; you have these options or mispriced; nobody can actually make money by being at your company.

So, your all your best people leave again under this bad death spiral if you like greet your company in the wrong way.

So, I think the fundamental thing is what is your motivation? Why do you want to do it?

Okay, let’s figure out what the best way to make that happen is, and there are tons and tons of great education and EdTech businesses that are all in that spectrum.

That's not too different than any other startup any other story, right? In that way, that tactically—then the specific thing that I say about education is I try to get people to really double down in their understanding of what is the actual thing that you want to accomplish.

Like, you know, you have your motivations, and then if you're successful, a certain thing will happen in the world, and is the path that you're on the best way to necessarily make that thing happen in the world?

Are you better off—for example, if you're really into computer science education, there are lots of ways to make that happen that are not necessarily an education product, right?

Are you actually better off trying to do job retraining? Are you actually better off doing it outside of school? Are you better off doing it inside of school? Is it actually at the high school level or college level?

Are you going to target subpopulace? There are so many ways to actually go about making that happen that are sort of adjacent to EdTech, and so I think this kind of gets at, is like, what is EdTech exactly is an open question.

And they're kind of like EdTech heavy and a tech light and at-tech adjacent.

Yeah, we've really sort of skirted over the fact that now that I actually, Keith mentioned in the beginning, there's so many aspects to EdTech. You can slice and dice in many ways—from the homeschool market to the elementary school market to the high school, then post-secondary market to training sorts of markets.

Yeah, you know, at YC be funded lots of schools that train folks for like inside data fellows, exam data, Lam to school, and people to be programmers, so there's—there's actually a pretty broad field. It seems like the opportunity is only grown in it, and in what we're broadly calling EdTech, even in the United States a gal completely aside, right?

Yeah, totally. Yeah, and I think those actually—those things that are a little bit more on the fringes to me are some of the most interesting because they start to sort of redefine what it means to get an education, or they redefine outside the bounds of this sort of like public education, you know, real estate funded, tax-funded sort of model.

And start to explore what it means to actually get an education and stay educated and stay really—and I think those kinds of models are actually where there's a lot of potential innovation because they’re free from a lot of the constraints that exist in these models that have existed for fifty or hundred years, and that freedom I think breeds a lot of innovation.

I agree with most of what VTOL said, particularly with regards to giving some advice on picking a business they're gonna start, and most of my focus as well is on, you know, what are you gonna be so excited to work on that you're not going to give up after two to three, four years because it's probably gonna take you ten years.

So, that kind of heuristic when you're picking a business is more important than almost anything else.

But specific to the education space, I think there’s one—the most contrarian thing that I would share with someone is that the education space, you know, I like to say that we're a learning company, not an education company.

I'm very interested in learning and how to improve learning, and when you think of yourself as a learning company, learning is a field that's in its infancy right now. And it's—it's deceptive because it's an old industry, so it feels like, "Well, we figured all this out," and you know, that’s just like, I don’t know, some efficiency gains that are left and things like that.

But to me, learning is much more like genetic engineering or, you know, in figuring out how to arbitrarily sequence DNA and inject it into an organ is like the level of understanding we have about that.

Like we're still poking this black box of genetic engineering and trying to make stuff happen for the first time; that's the state of learning.

And fundamentally—at least even though science has progressed for so long, the science of the mind is so—is still at such a beginning. You take a field like physics, and we know so much about, you know, the farthest corners of the universe and the subatomic level, whereas our level of understanding of psychology is at the level of physics when it was—well, maybe the guys are angry, and they're shaking the ground, and that's why there's an earthquake.

Like we're still not that far beyond Freud, where it's like, "I don't know, maybe you went into this profession because your parents had a particular relationship with you, and they steered you in that direction."

It’s very much like opening a computer and noticing that when you press this sequence of buttons, this part heats up. Like that's our level of understanding of the brain is like we image this thing and we notice where the blood flows and try and draw these conclusions about how it's working.

So, if you—anyone who wants to start a company in the learning space, to the extent that you really think, focus on understanding the science of learning, it's a wide-open territory! Like we are actually—it's still discovering profound truths about even something as simple as like spaced repetition and the power of that, or the role of concept formation.

And what's the difference between being able to recite a fact and holding that fact as knowledge? Like we're at the beginning of a science, and to the extent you figure out anything new, there's huge business implications of that.

Are you optimistic, Keith, that we'll figure it out and that we'll see a transformation in American education over the next five, ten, fifteen, twenty years that will actually make for better outcomes for individuals and society?

And then maybe, VTL, if you could answer the same question afterwards, we can sort of close on that note.

Absolutely! I mean, I will say I'm long on the human race, right? So, we are very good at figuring things out and mastering sciences and then plumbing them to new depths, and we will do that for learning and for pedagogy as we have for all of the other sciences.

And you know, there is this industry and this infrastructure, this education infrastructure that will crumble and go away and be replaced by another version, and what's so exciting about the Internet is in, you know, the Internet generally, and Mobile in particular, is these disruptive forces give you these opportunities to rebuild the whole stack from the ground up.

So most likely the business opportunities in the learning space will be outside of the existing stack. Like it’s the fact that you can go straight to teachers and not have to go through an approval process is dramatically changing things.

The fact that there's an Internet, the cost structure fundamentally changes, and so it’s a parent's—so okay, so the science is wide open; the industry is gonna be transformed multiple times in the next decade.

And we will take learning to the next level.

Yeah, I'm hard to argue with not being optimistic about the human race.

You know, I mean, I guess it's at least as entrepreneurs. It's hard—you have to be an optimist, right?

Like you can't imagine you're gonna change the world for the better if you—if you think it’s almost a definition!

Yeah, you know, what's impossible? You're still gonna get a couple of that right. So, as an entrepreneur, I think it's hard to separate that, and so my—all of my beliefs are tinged by that personality trait.

But what I would say is I am very optimistic about the experiments that are happening by, you know, reaching teachers in new ways, reaching parents in new ways, platforms like the iPhone or Android or iPad, Chromebook that allow people to interact with information and novel and new and interesting ways.

And things that are happening on the fringes, things that are education but don't look like education. I think Insight is a good example. I think people sort of exploring the Internet on their own and kind of going down a rabbit hole of, you know, open source or, you know, YouTube as a platform with Khan Academy.

Like I think they're all these really interesting things happening on the fringes where some of them look like education, some of them look more like learning, and some of them look like job training, and so they all kind of have different flavors.

I'm less optimistic about the sort of the likelihood that we dramatically change the state of public education in the United States anytime soon because there's just so many entrenched components to that—from funding to, you know, the psychology that Keith was talking about where like for the first couple years, it's really on the parent, and then there's a handoff.

There's so many like cultural and governmental and public policy things kind of rolled into that. I think unbundling that is going to take a long time.

But I think there are a lot of entrepreneurs kind of on the fringes that are doing really interesting things, and that’s often how disruption happens, right? It kind of comes from the side a little bit and in very unexpected ways, and the timing can surprise you.

So maybe we can leave on a slightly more optimistic note, which is that I think even in public education, public education, we know a lot of what the solutions ought to be.

So we're kind of in a unique position where there's a lot of structural reasons it's hard to close the achievement gap and overall improve outcomes, but we do know a lot of the outcomes.

So since the stakes couldn't be higher, I think that we have good reason to believe that that knowledge will eventually matter and that things will get better.

I want to thank you both for podcasting with me this afternoon. It's been a great conversation. I've enjoyed it a lot.

Thanks.

Likewise!

Thanks, you!