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 VTL 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. So, the opportunities for servicing education, they're actually not in the U.S.; they're actually in Asia. So, like, 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. 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.

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, any self? Yeah, exactly. 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'd love to hear probably from Keith why I'm wrong.

But I think what happened was post-World War II 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.

All right, 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...