Hadn't heard the documentary story, thanks for sharing!
Were there any choices in the first few years that you think made a particularly big difference in setting Amazon up for what it is today? Anything you're particularly proud of that you did there?
I think you're overall on the money here, but I would probably be a bit more cautious on #3 (at least private units). Some of the managed rental providers that focus on urban markets seem to be doing OK. Sonder raised a new round in June[1], albeit after laying off part of their workforce.
Swedish and biased here, but as far as I understand a large share of the deaths come from nursing homes. The tactics to limit the spread in those homes failed. However, that is largely a separate question of policies for the broader population, which is what most news outlets have been reporting as controversial.
Not sure about Second Measure specifically, but many credit card players sell anonymized purchasing data. Investors often look at this to predict how companies are performing.
As others have said, there aren't any clear cut answers. Disclaimer: I'm not a lawyer, and you should ask a lawyer to be sure. At any rate, a few suggestions (assuming you're EU):
- You could enter on an ESTA, which gives you 90 days. If you leave the US (Can+Mex doesn't count) and come back, the counter re-sets. Note that you're not allowed to work on ESTA, which means that drawing a salary is a no no. But if you desperately wanted to, you could probably figure out how to get paid in your home country or whatever would work for you.
- E-2 visa. A lot of EU countries have a treaty with US which says that: if a company is A) majority (>50%) owned by people/groups from your home country and B) someone from the country (doesn't have to be you) has invested ~$50K-250K (equity, not debt) in the company, then the company can apply for an E-2 visa for their key employees. It takes 1-3 months to process from what I hear, and the investment is substantial, but it's at least one more route that is available.
If anyone has more info on the two above, please feel free to correct me - I feel like I learn new things about the E-2 every time I speak to a new lawyer.
Approach 1 doesn't give you a work permit. It's merely an explanation of how you can spend 90 days in the US as a EU citizen. But I don't think Yellow Incubator would dive that deep to see if you have the proper immigration papers.
Approach 2 makes sense for some. If you're just setting up a company to be in this incubator, then I 100% agree with you. But if you're working on something, and you think it'll have a better chance at succeeding if you're in the US, then it might very well make sense for you to get that kind of a visa. Many people (not involved with this incubator) do : )
Does anyone have the bull case counter to this? Similar to aresant I don't mean to belittle WeWork's achievement but these facts, alongside the headlines from CEO claiming that: "Our valuation and size today are much more based on our energy and spirituality than it is on a multiple of revenue."[0] it's easy to be skeptical. Again - would be great to hear the optimist's take on this, if anyone has it.
There's a strong argument to make that executives are strongly incentivized to make their companies riskier and more prone to bankruptcy in the long run.
The bulk of executive compensation is in either outright equity ownership, or increasing bonuses based on equity price increases. Equity can be viewed as a call option on the enterprise value of the firm [1].
If you own a call option, you can increase its value by either making it 1) more in the money (by directly increasing the enterprise value, i.e. by generating value 'the honest way') or 2) increasing volatility directly, either by taking real economic risks (investing in more assets) or utilizing leverage (debt). Here we see both.
Note that financial investors in a company can be perfectly OK with results that boost the bottom line today, but lead to disaster down the road, so long as they're convinced there will be a short-term boost in the share price (at which point they exit and sell to the next sucker).
In terms of "tech" start-ups fads, the current fad is crypto-currency, it was "social" before that, and I'm optimistic that there will be a fad after the blockchain. The optimist isn't worrying about "the first tenants off the boat" in a recession, the optimist looks forwards to the next bull run, and whatever the next fad actually ends up being, those companies are going to need office space, and WeWorks is betting on selling shovels in the form of office space.
Just like companies have moved their computing to the cloud, the bet by WeWorks is that office space itself can be thought of in the same way. Sure, companies having their own office space will never go away just like on-prem will never go away, but for a specific type of company, WeWorks is betting that it's a niche that's still big enough to justify their $20 billion valuation.
They do add some value; basically, having an office manager, and for a sole proprietorship who may be big on plans but short on time, it may be better to exchange money for WeWork amenities, rather than spending time dealing with office stuff, eg going to supermarket to stock the office with snacks.
WeWorks isn't selling office space by the sq foot, but similarly, Apple doesn't sell computers by the gigabyte of RAM either. They sell being a part of a sexy glamorous office full of other people seizing life by the horns and living life to the fullest, including meetups, and happy hours, and an app. Gotta have an app. People don't do the boring office job that your parent's did, at a WeWorks space. (Whether or not people are doing the same boring office job is besides the point, that's what they're selling.) By building their brand, and offering convenience and consistency, the goal is to just be where sole proprietorships and tiny companies work, during this fad, and the next.
There's a gambler's case to be made for almost any new debt issue.
It's really just a matter of sorting out where the notes one is considering are in the pecking order and estimating the probability of the issuer going bankrupt to put reasonable bounds on expected return of principle if they fail.
A similar estimate can then be made on the probability of default or restructuring for the notes under consideration.
Given that information and a big enough coupon, a quarter-Kelly or half-Kelly bet may not be unreasonable.
At this point there are too many unknowns to make that case however.
We'll have to see what coupon they decide on and enumerate the things that could knock them out or severely limit their free cash flow.
To your quote from the CEO, it's not a great way to market debt issues tbh. WeWork really isn't any different from any other REIT and one does not lend a REIT money because they are great people.
I’m not sure about that WeWork is considerably more expensive than running your own lease or even renting old school managed offices.
I did succeed because it had a lot of customers with a lot of money to burn (startups) and it offered very good networking opportunities, later on it offered top of the line real estate and services but they were never the economic option.
In a recession when there won’t be VC money to burn and an infinite amount of rounds to raise it I don’t think they’ll do very well.
Traditional businesses won’t get much value from most of their offerings and if they would be cutting back then cheap lease in industrial parks and sub prime locations would be what they’ll be after.
During a recession, businesses--large and small--are going to cut out all the frivolous VC-style perks: snacks, booze, trendy furniture, etc.
WeWork isn't cost effective vs renting your own office space, it just removes the friction (and yes, some of the related costs) involved with getting a "trendy" SV-style office.
During a crunch, I think we'll see alot of these businesses retreat to sparser accomodations in run of the mill office buildings removed from downtown. WeWork will be constrained in this environment, since the record leases they are signing will place a pretty high floor on how much they can lower prices to compete...
If the market rages for another 5 years, WeWork is gonna hit it out of the park. If we recession before that, it'll implode spectacularly.
Looks great! I'm a huge fan of content like Alt-Shift-X and Every Frame A Painting, do you hope to move in that direction over time? Not necessarily yourself, but providing tools/space for creators to produce it?
Let me know if there's a show you're a superfan of and would like to contribute to! Right now, I only have a few shows up, but I take requests if you email me at david@spoiled.tv
For example, my sister is re-watching Battlestar Galactica with her boyfriend and she wants to contribute to it.
The problem with the bootcamp gold rush is and has always been the business model. You have a few major variables:
1. How much can a person pay you?
2. How many people can you fit in a classroom?
3. How long can the classes be while still maintaining a profit margin?
Based on those constraints bootcamps try to teach as much as possible. Within those constraints bootcamps found one model that worked and cloned it hundreds of times: A bunch of people in a classroom for 12 weeks paying $10-15k each. Some will try to chop off a couple weeks, some charge $18k instead of $10k, but it's fundamentally the same.
Every single bootcamp recognizes that this is not a great way to train engineers. 12 weeks simply isn't enough. But there's enough of a shortage or engineering talent that bootcamps could get away with it for a while.
Sure, in an ideal world you would actually train the students based on what they need to make hiring companies happy, but change any of the variables in the above equation and the whole business model falls apart. If you want to make the classes 2x the length you'd have to charge 2x the price, and can you get large numbers of people to pay $25-40k out of pocket? Not a chance.
We had to really start from first principles, and start with a new business model, which changes everything else.
The main thing we wanted was incentives aligned with our students; so we started from, "What if we didn't get paid unless students get a job?" That forced us to change everything else. I actually thought it might not be possible for a while.
I don't consider Lambda School to be a code bootcamp. We're six or seven months long full-time, which is 2.5x the length of a code bootcamp, plus a month of pre-course work. A few graduates have applied to Lambda School after having paid another school $15k and haven't even been able to pass our prep work.
I think we're on the _short_ end of what a solid engineering education should be. But we have enough time to teach true fundamentals, our students don't just write JavaScript, but also Python and C, they have an apprenticeship where they ship real projects that make real money on real teams, and they actually learn to think and write real code, not just pump out quick apps then struggle when confronted with anything new.
We can be flexible on class size so long as we keep a good teacher:student ratios because we're entirely online (which, by the way, is actually a superior learning experience to offline). We can pick the best students regardless of financial ability because our pool of potential students isn't limited to people with 20k in their pockets that can move to San Francisco. We actually have _more_ support for students, because our instructors scale across classes when they're not teaching, and we can do some tricky financial stuff on the backend to make sure students are guaranteed a job before they pay.
All of that combined lets us open up a promise, which is what really matters for students at the end of the day - attend for free until you get hired.
I think we'll see massive consolidation in the bootcamp space in coming months, and it's already started (Dev Bootcamp, Iron Yard, Bloc, Viking Code School, and more have either been acquired or closed). That's very healthy, and frankly there are some sleazy bootcamps that only exist because of marketing. You could wipe the bottom 80% of bootcamps off the face of the earth and it would probably be a net positive for everyone. I think we'll get there in the next 3-4 years.
I assume "tricky financial stuff on the backend" means referral fees for placing students, and the like. Can you go into more detail on this?
I'm also curious how your online training works. Is it an inverted classroom model (read / watch stuff before class, discuss material and exercises in class?), or self-paced, or what? My experience is that online training doesn't work as well as face-to-face training, but this is in a very different context (training developers who already have jobs == they never do homework).
We keep some of the financial stuff close to the chest, but there are ways we use wall street and robust capital markets to help fund student tuition upfront.
Everything we do is real-time, interactive, and absolutely not self-paced. There's supplemental material that's a flipped classroom model, but that's definitely not the main focus.
Thanks for the writeup, great summary of all most all Bootcamps fundamental problems.
> The problem with the bootcamp gold rush is and has always been the business model. You have a few major variables:
> 1. How much can a person pay you?
> 2. How many people can you fit in a classroom?
>3. How long can the classes be while still maintaining a profit margin?
> Every single bootcamp recognizes that this is not a great way to train engineers. 12 weeks simply isn't enough.
> The main thing we wanted was incentives aligned with our students; so we started from, "What if we didn't get paid unless students get a job?" That forced us to change everything else. I actually thought it might not be possible for a while.
> I don't consider Lambda School to be a code bootcamp. We're six or seven months long full-time, which is 2.5x the length of a code bootcamp, plus a month of pre-course work
> All of that combined lets us open up a promise, which is what really matters for students at the end of the day -
> Every single bootcamp recognizes that this is not a great way to train engineers
This isn't quite true. I work for Hack Reactor and we're doing well with this model. But every single staff member is also passionate about our students (including those at top), so that might explain why we work if others do not.
Hack Reactor and App Academy are legitimate and do their best, but a 75% hiring rate after 6 months according to CIRR is less than ideal by al accounts. I’m certain that would be closer to 100% with another few months.
Austen is hella right about his thesis: bootcamps are not getting enough students across the finish line right now. They need higher admissions bars, more classroom hours, and/or other good ideas. Hack Reactor is (imo) one of the high-water marks of this line of thinking. Lambda and Holberton are others.
I think he's miscast the three variables though -- partly because he's got a bit of a dog in the race. (As I do -- "we're not a bootcamp" is something many bootcamp founders, yours truly included, have said.) Anyway here's another perspective on the matter:
#1 is mostly right -- bootcamps are limited in price, and this is a huge constraint. It's wrong in an important way: it should be "How much can I charge before a student picks another bootcamp". This problem gets easier, but doesn't go away, if a bootcamp uses a deferred-tuition model. Evidence for my formulation here: App Academy and Hack Reactor have the same kinds of student outcomes problems, because we're both facing the same demon, which is the low-cost bootcamp that prevents us from charging more and spending more on product quality.
Austen's #2 and #3 are both about specific ways to tweak the bootcamp's expense : quality ratio. This is an interesting topic that goes really deep, and I think Austen's reduction is (honestly) pretty heavy on the marketing content. If I were to boil it into two bullets it'd go like this.
#2 "Can you run a good program, online or offline, that isn't classroom-based." Here, by "classroom" I mean "15-40 students and teachers that know each other personally", and it can and does happen online. (Viking Code School, and Hack Reactor Remote, do online/classroom-based programs.) Classroom programs are very challenging to operate: they introduce discrete start dates, fill rate problems, etc. But it's hard to reproduce the quality of a classroom-based program in eg a mentor-driven or community-driven program. I think the answer here will be "kind of", and hybrid classroom-like programs will win.
#3 "Can you get students to pay $10k+ for an online program". Online can be better than offline -- Hack Reactor Remote is our top-performing campus right now. However, few people want to buy it, despite the fact that it doesn't involve moving to SF. Perhaps Lambda has figured something out here -- I don't know about their growth numbers. I hear Thinkful has. Generally, I think the bootcamp space will mostly become hybrid online/offline. I bet half of Lambda's students are in SF, they meet up in person already, and Lambda does or will facilitate/market this.
My #2 and #3 are also poor formulations of the fundamental challenge here -- the quality : cost ratio. For instance, my favorite recent innovation in the bootcamp space (evidenced by Holberton, and maybe Lambda?) is to offset tuition costs and increase grad expertise by bundling an internship and taking a bite of internship income. This doesn't pertain to my #2 or #3 (or Austen's) but it's a way to solve the top-line problem Austen mentioned.
Anyway, TLDR: another bootcamp founder agrees with Austen's thesis; quibbles on details in ways you might find interesting.
I think you hit the nail on the head with this question:
> #2 "Can you run a good program, online or offline, that isn't classroom-based."
In my opinion, every learning experience that requires teachers and/or a physical space is highly limited by its margins, and, as you said, will be much more sensitive to price-based competition.
If you want to increase the quality of the output, you need to increase the number of teacher-hours and real-estate-hours. Considering that labor and real estate are two of the most expensive resources you can think of, that is quite limiting.
Can we really think of a scenario where a high-quality learning experience is not limited by those two resources? I think Thinkful is doing a pretty good job. There is plenty of pedagogical evidence of the high impact that mentor-led education has (e.g. Bloom's 2 Sigma Problem). However, I think they are quite limited in a way that I consider crucial to solving the education problem:
They are very dependent on their mentor-led approach, both from a marketing and a financial point of view. That makes them very expensive and don't let them approach the problem/solution challenge from a more global point of view (i.e. only people in the US can, at scale, afford to pay $15k for a training like this, and their Income Share Agreement is only available to people in the US).
My main question here is this: What makes a mentor such an important element in the formula for student success? Is it the guiding, the technical knowledge, the accountability, the motivation?
My thesis here is that technical knowledge is not that important, but accountability, guiding and motivation are. At Microverse, we currently have students all around the world who are learning to code as part of distributed teams. They key here is that they spend almost 8 hours per day doing pair programming and holding each other accountable. We are "outsourcing" the task of holding students accountable to the students themselves.
However, there is also the motivation and the guiding aspect of the role of the mentor that students themselves can't take care of. In order to solve that, we are using quantitative/discrete input from the students that trigger the intervention of a more experienced mentor.
Also, one of my main hypothesis is that creating more content is not the key to adding value. There is already so much high-quality content available for free that only needs to be curated. And Thinkful (and almost every other player) is not understanding this part either.
Some students will think that they are paying for nothing if there are no teachers, no mentors, no physical space and no original content. However, if you flip the pricing in the way that Lambda School is doing by charging after the program, then the student perspective changes because she knows the only thing that matters is the outcome, and the payment is tied to that outcome.
We (Microverse) are the only training program that is currently offering an ISA available to anyone in the world. And there is a very simple reason why we can afford to do that: we don't have teachers, we don't create content, and we don't need to pay for real estate, all while making our remote experience accessible to everyone and while designing an experience from a motivation/accountability point of view through peer-to-peer work. All of this makes our margins way bigger, and that gives us much more room to take risks.
Were there any choices in the first few years that you think made a particularly big difference in setting Amazon up for what it is today? Anything you're particularly proud of that you did there?