“Failure is punished, and success isn’t rewarded, so it’s not surprising that we don’t have people introducing changes.”
As part of the NewCo Shift Dialogs, I had a chance to interview Max Ventilla, founder and CEO of AltSchool. You can watch the video here, but because we had to cut it down for time, many fascinating portions of the conversation did not make it into the video. Below is the full transcript, with light editing for clarity.
Let’s start with AltSchool’s mission.
Max Ventilla: AltSchool’s mission is to enable all children to achieve their full potential.
Isn’t that the mission of the public school system?
I’d say the mission of a public school system is to allow those children to achieve their full potential.
What’s the difference?
You need to create a network. You need to have a network effect where people are flocking to a new ecosystem that’s getting better and better, not because they’re altruistic, but because it’s the best. In the same way that the search engine or the social network or the blood pressure medication that you use is going to be the best because of the number of people who use it, not because of how few use it.
When you think about the mission of the public school, it’s to ensure that there’s access to a basic level of education for every child, at least in the public school system of Western democracies. It isn’t necessarily to make sure that that child gets to be the best they can be. What’s the different educational philosophy that you take at AltSchool?
We start with a different notion of what quality is. We believe that a quality education is one that allows for a personalized path for the student, and that results in not just academic progress, but as importantly or more importantly, non-academic progress. If you look ahead to the 2030s, 2040s, when kids in school today are going to be adults, the grit that they have, the perseverance that they have, the ability to direct themselves, the ability to seek out problems and not just solve problems, certainly for those of us who’ve got a glimpse of the future, working in Silicon Valley, it’s pretty obvious that those are the skills that you’re going to need to have. Those are the characteristic that you’re going to have to be successful, not just being good at English and math and knowing history.
Tell me the AltSchool creation myth. What happened that made you say, “Oh, I know what I’m going to do. I’m going to try to fix the educational system.”
It was, not surprisingly, a few things coming together. I’m not an educator. I’ve been an entrepreneur and a technologist my entire career, since the mid 90s. My mom’s a teacher, and my sister’s a teacher, actually now at AltSchool. It’s not that I didn’t have it in my vicinity, but it’s certainly not what I would have expected my job to be. In late 2012, when I was finishing a second tour at Google. I left once, to start Aardvark in 2007, which Google bought back in 2010. I was at Google a second time for three years. I was starting to ask — what next? A group of really amazing engineers were running this cross-Google personalization team with me. And that was right as my daughter was applying to preschool. You scratch the itch that you have. My wife and I just were shocked at the state of things. Not so much in preschool, but looking ahead to elementary school.
I’m going to hazard a guess that you were applying to a certain set of preschools because you had looked at the public education and said, “I don’t think that’s for me.”
Thinking about university and graduate school, there’s this notion that if you don’t pick right for your two-year-old, they’re going to be penniless and alone when they’re 30.
Especially thinking about university and graduate school, there’s this notion that if you don’t pick right for your two-year-old, they’re going to be penniless and alone when they’re 30. What’s crazy about that is there’s actually some truth to it. That’s what’s appalling. My wife and I started going down this route of saying, our daughter’s really different than us. The world that she’s going to grow up into is really different than the world that we grew up into. Her school should be really different. So let me go look at all the different schools. Oh wow, they look really terrifyingly similar to the schools we went to in the 80s. You start to say, what would a different school look like? For us, that meant going down the path of a group home school.
What’s a group home school?
A home school experience that you don’t do entirely on your own. You get sort of a village, a group of people together. I had this somewhat shocking experience, talking with friends who had kids that were roughly the age of my daughter, and telling them “I’m not really finding what I want. I’d love to have something that really meets my daughter where she is, and isn’t just about academic learning.” It’s about non-academic learning and actually allows my family to have a life and flexibility and doesn’t chain us to whatever that school demands of us that day.
So there’s the public school, which is one-size-fits-all. They have a lot of resources, particularly for kids with learning differences that that have been mandated by law, state by state. Then there’s the private school experience, which you described, which is if you don’t get into the right preschool, it’s quite possible you won’t go to the right college. It’s all over before you started. You were looking for a third way. But it’s a long path from looking for a third way to the mission as you described of AltSchool.
I agree. You’ve got these two separate arcs. Former Googlers and I are thinking about what big thing do we dedicate ourselves to next? Where is our background in technology and personalized technology relevant? What can we work on for the long term? Because you don’t leave a place like Google to do something hokey and small. It’s a high bar. At the same time there’s, as a parent, this search for something different. At TED, a little over three years ago, when the TED prize that year was on education, they had a number of education speakers. There was a little bit of an “Aha” moment, that wait a moment, this thing that I want personally actually calls out for the kind of solution, like a platform solution, a systemic solution, a network solution, that I kind of know how to build, that I’ve built many times and this team has built many times before. We can be one part among this huge ecosystem of players that actually feels really missing. At the end of the day, I don’t think it’s about, oh, but for us this problem would have never been solved. I don’t know if you’ve read Kevin Kelly’s book What Technology Wants.
Oh, yes.
You don’t leave a place like Google to do something hokey and small. It’s a high bar.
I believe that there’s kind of frontier, and you can accelerate it a little bit. That’s what we want to do. We want to accelerate it a little bit. We want the eventual solution to education to be a system that gets better with scale, not worse with scale. A system that has accelerating improvements that actually keeps pace with the changes in the world around, so that you’re preparing kids for that future. We want that to come sooner. We want move from a million people becoming adults a year who are prepared to participate in the 21st century, to 2 million, then 5 million, and 10 million.
When you say a million people graduate as adults capable of being adults in that economy, where did that come from? Where did you get that number?
You can think about it as two ways. You can do the very top-down, “How many people are born each year? How many people become 18 or 20, or whatever your cut off is, each year? OK, what fraction of them are in what geography?” You can whittle it down to about one percent and say, “There’s about one percent.” Or you can build up. You can say, “OK, let me actually look at the number of universities. Let me look at the number of of people going into jobs. Let me look at the number of people earning above a certain amount, or having a certain life expectancy.” That way, too, you end up with about a million people, out of closer to a hundred million who are adults, they’re just adults who aren’t ready to participate in the 21st century.
This is a huge issue. Jeff Weiner is very much about this as well at LinkedIn, and Brad Smith at Microsoft. It’s interesting that it really is the tech community who seems to be most vigorously waving the flag of, “Hey, guys. We need to pay attention to this education gap.”
Do you know why? Because technology is an accelerant. Human beings on their own are linear, and technology is exponential. Certainly, with Moore’s Law in full swing, it’s clearly exponential. When you’re in technology, you realize that it’s both an enormous opportunity and it’s an enormous threat. It matters hugely whether you’re on one side or the other. There’s these cliches. It’s like 1.01 to some enormous power is a huge number, and 0.99 to some enormous number is zero. Little differences matter. You think about virality, being just above or just below some coefficient. People in technology actually really internalize, “Oh, if you’re not on one side of this, you’re on the other.” Small differences can have enormous effects when they’re involved in these kind of exponential systems. That plays very much into our outlook on education, which is, “We know what AI can do.” Right now, vertical AI is plowing through different sectors and industries, whether it’s driving today, or call center employees tomorrow.
It’s systematically extracting jobs from the economy. That’s how people who are frightened of it think about it.
The technology always extracts. It always rolls over, and it always pushes new jobs in front of it. We don’t know if AI is going to be more of the same, or something different. I would argue that you’ve had one big trick that humans figured out over the last 500 years. Before computers, it was fossil fuels.
But now we’re discovering how to pull free mental work out of the ground. That’s going to be a huge trick over the next 50 years.
The idea that you can pull free physical work out of the ground, that was a really good trick, and it resulted in all of these exponential curves. But now we’re discovering how to pull free mental work out of the ground. That’s going to be an equivalent, huge trick over the next 50 years. It’s going to create that same kind of inflection point, and it’s going to create even more opportunity and much more displacement. I have a hard time understanding how the way that we best prepare the next generation for that future, is to have literally all of education policy, all of education decisions determined by folks that don’t really have a foot in that world. I’m not saying that all of the sudden, “Oh, it’s about software.” The worst use of software in technology is in replacement of humans. This whole, “Oh, I give an iPad to a kid, and I walk away.” That’s craziness. AR and VR, that’s not going to be it, either. It’s about human beings. It’s about the relationship that kids have with their peers, with adults. That’s what creates the motivation that creates the learning, but it seems odd to me that the purpose of school is to prepare kids for the future, and you don’t have people in the mix thinking about education or education policy, who are very familiar with the future at all.
This ladders to how you actually create AltSchool. You didn’t just think, “OK, my job is to get some space and put some teachers in there, and start teaching.” You conceived of it very similarly to how an at-scale technology company conceives of a big project, as a sort of full-stack business. “We’ve got to do the infrastructure, we’ve got to think about how the data’s collected and how it folds back into insights and iteration. We have to think about, “What are the applications we’ll be running over the infrastructure and how they interact?” Describe this idea of a full-stack school, or a full-stack education platform.
I take a step back and say, “OK, we can all agree on a certain set of things. We can all agree that the purpose of school is to prepare kids for the future. We can all agree that school’s have to change if they’re going to prepare kids for the future, because the future is representing more and more change faster and faster.” A top-down system of education, where you have all these different islands, where this school district, and that charter management organization, and this private school don’t talk to each other, don’t benefit each other, have no interoperability. That’s not going to result in what you want. It’s not going to result in accelerating improvements. It’s not going to result in economies of scale. It’s going to result in the same thing that we’ve had for decades.
That system that we currently have moves very slowly because there’s not a lot of interoperability, there’s not a lot of insights and learning being driven through. Each school is really an island.
Think about it in terms of what creates accelerating improvements in other ecosystems, like the Internet. It’s basically Darwinian evolution. You have mutation. You have people who are able to introduce small changes into the system, and then you have some selection process by which the changes that are beneficial, when someone figures something out, that propagates. Changes that are not beneficial get damped out. In the traditional education system, you have the opposite. It’s almost impossible to change everything, anything, right? Like, “Oh, you want to make the school day a little bit longer. You want to use this book instead of that book.” You can’t do that, because then everything else to change. It’s this kind of like spaghetti mess, where you pull out any certain characteristic of the system, and everything else topples down, so you don’t want to change anything. The second piece, think about it. If you’re a teacher, and you make a change, and it doesn’t work, then that’s terrible. You’re punished for screwing that up.
There’s no value of experimentation, of failure, of iteration.
No, and if it succeeds, then it’s limited to just your classroom. You have exactly the opposite incentive system. Failure is punished, and success isn’t rewarded, so it’s not surprising that we don’t have people introducing changes and then the good changes propagating, despite the fact that the charter system was intended to do just that. It was intended to have a million flowers blooming, and the things that worked spreading to other charters, back to district public, but the interoperability isn’t there to work. That’s in some senses, what we can all agree that we need, and the question is, “How do you get there? Do you get there by making incremental changes on the existing system? Do you try and go to big public schools that rightly are conservative, and ask them to suddenly fundamentally change how they behave?” That would be surprising if it would work. Our aim is to say no, you start off to the side. That’s where full stack comes in. Starting off to the side means being able to create new schools, being able to hire the teachers, being able to design then classrooms, being able to create the pedagogy approach and the software and hardware capabilities that support that, making as much use of the great things that people have already figured out as possible. We’re a 150 person start-up. Even with 50 engineers, which is more engineers than pretty much any elementary school system on the planet, that’s not enough to really build a lot of stuff.
I want to get back to full stack… There is an objection that I think is so strong in our social fabric, which is these are kids’ lives, we don’t want to mess it up. We know the system’s not very good, but all of us went through it. Some of us did well. Some of us did poorly but making changes to that system seems dangerous because we don’t really know what’s going to work and not work. We don’t want these young kids to be guinea pigs in a failed lab experiment.
That’s actually exactly wrong. You want these kids to be scientists. You want these kids to be experimenting. You want them to be trying things out. You want them to be iterative. You want them to understand that never failing is a guarantee of never actually succeeding at the things that matter. There are certain things that are immutable, and you need to create two separate categories in terms of what are you changing and how are you approaching it. There’s safety. There’s security. There you make darn sure that it works. We are able as an organization that has tremendous resources and that has a really amazing mission that great people want to work on.
What’s the difference in the classroom and the experience of the kids in an AltSchool compared to a typical public school?
It’s three things. Number one it’s that the education is personalized. There’s a culture that that student is driving their own experience and that they have agency, especially as they get older and older, about not just what are they doing but how are they being evaluated? How are they setting goals? How are they representing their knowledge? Second, that it is equally about their academic learning and about their non-academic learning. That their character skills matter, that their grit, their perseverance, that their experience with being successful after failing a bunch of times is as much a part of the education as I said. They’re learning history facts and knowing how to multiply two digit numbers.
Do you compare stuff to Common Core? Do you do standardized testing?
Absolutely.
After eighth grade, they’ve had this 8 or 10 years of awesome AltSchool, then go to public high school, what happens to them? It must be kind of a shock.
Let me get back to the third thing that’s different, which is that they’re part of a network. That the quality comes not just from the classroom teacher that’s in front of them in that moment but from the rest of the people, the educators, the parents, the students, the experts, the engineers behind the scenes in the system. Those things are actually quite different than what goes on in typical classroom. There are a lot of other things that are very similar. The kids are coming to school nine to three with a flexible drop off and pick up, similar number of hours, 180 days a year. They are learning the things that Common Core would dictate that they would learn in other schools. They’re certainly having to adjust if they went to another school with more of a block schedule. But these are kids who have learned all of the things that they would be expected to learn elsewhere, and they’ve internalized their motivation. They have agency. They’re going to do well especially in a high school that we’re helping them select. It’s not just we put in all this effort into personalizing the education, then we say we hope you find a good place to spend the next four years. No, we systematize. We think about how do we really get good at matching a kid with the prospective places that are going to be a good fit for them and making the best case possible from this digital portfolio that we have, that that child is a good fit from the perspective of that school.
What happens when a kid after 8 or 10 years of this extraordinary experience, ends up in a ‘normal;’ high school? They’re self-directed, now they’re going to a public high school or to a high school that doesn’t teach the same way that AltSchool. Is that a massive letdown?
We started with K-8, elementary school, and we’re actually moving down now into preschool because we feel like if we do our job right, then kids are going to be prepared for everything that comes after. If you have that foundation of academic learning, and you have that foundation of non-academic learning. You’re a person who can motivate yourself. You’re a person who can stick with it. You’re a person who can seek out the right problems and work with others in a way where they want to keep working with you, you’re going to do well in a high school. You’re going to have to get used to the fact that there’s a 45-minute block schedule. The learning is more subject-siloed. But as you get older, there’s actually an expectation that you can justify more autonomy, more responsibility, and these kids are doubly able to justify and make use of that autonomy. For us, we’re not just saying we spent all this time personalizing the education for you. We hope you find a good high school. Good luck. We are actively figuring out, what’s the best prospective place for that kid to continue and making the best case possible as they apply through the digital portfolio that we have, through our own understanding of that student, that this kid is a really great fit for that high school, whether it’s a place local or anywhere in the country.
Let’s talk about the role that information and data plays in the platform that you’ve built. A lot of the articles about AltSchool focus and obsess on this particular item because it’s the tech part from the outside view. There’s cameras in the classroom that record the interactions, so that you can look and get insights from them later. There’s a flow of information that goes around from teacher to student to parent and back around again.
Then there’s metadata that you pull to gain insights that otherwise you wouldn’t have. That’s fundamental to the idea of scale. You get hundreds or thousands of schools all on a similar platform, the insights start to get to Google scale in terms of what you can see and how you can start to tune the engine so to speak. Give us a sense of the information flows of an AltSchool.
First off, the background of the team is in personalization, so recommendation technology is hugely relevant because we start with a representation of each child. We believe that the vast majority of the learning should happen non-digitally. It does. In any AltSchool classroom, most of what a kid is doing is not on a screen, but for every kid, we have a digital representation of the important things that relate to that child’s learning, not just their academic learning but also their non-academic learning. Everything logistic that goes into setting up the experience for them, whether it’s who has permission to pick them up or their allergy information. You name it. If you have that accurate and actionable representation for each child, now you can start to personalize the whole experience for that child. You can create that kind of loop you described where because we can represent a child well, we can match them to the right experiences. Where because we can evaluate what happened, what worked, what didn’t work for them in those experiences, we can improve our representation of that child for the benefit of that child. You have two very different privacy regimes. You have things the video footage that we described that’s for the benefit of the actual student and the teacher so they can use it as a superpower, to reflect on what happened, to get feedback from others. Then you have the data that is anonymized, that’s aggregated, that’s for the benefit of everybody, but it has essentially no privacy implication there. By controlling the whole environment, we get to do something very interesting from a technical perspective. At Google, you’re used to having very little information about a huge number of people. The question here is when you have a lot of information about someone, how can you use that for their benefit? How can you ensure that to the extent that there is a privacy implication, there’s clear value that’s being created for that student or for that family or for that educator in terms of their accelerating development.
When I talk with someone like you, I tend to get excited about the ideas. It’s good to step out of the technology/future forward, future positive point of view and think about it. Maybe someone watching this who lives maybe not in San Francisco or New York, has young children, is excited by this idea and gets how this could be a very impactful way to think about education, but then pulls back and says, “From the people that brought you Google, your new education system,” and they get scared because they’re a little bit scared of Google. How do you address that fear?
That’s part of the broader fear of technology. What I’ll say is if you don’t use technology to bring down the cost of complexity, if you don’t use technology to allow you to be more flexible, then you have to standardize no matter what industry or practice you’re talking about. That’s what we have in traditional education. We have extreme standardization. We have this model that’s been around for about 150 years that was born in a mass production factory era. In order for a teacher to do their job and not drown, they need to make all of these simplifying assumptions, namely that every single 10-year-old in their class is roughly at a certain level of learning in every subject. That’s just not true. In AltSchool, over 50 percent of the milestones that each child is working on is not at their age. It’s sometimes below, and generally above their age. The idea that, “Oh, let’s just make the assumption that a 10-year old is right around this level of learning in each of these 10 subjects,” that’s wrong most of the time. When you make all of those assumptions, when you say, “OK, well, I can’t grade 20 different demonstrations of knowledge that come back from 20 different kids, so I’m going to standardize, I’m going to say, ‘This is the way I’m going to test you, so that I can grade it quickly,’” you’re essentially training kids to think like computers. There’s an irony, which is that if you don’t use technology in education, you’re training humans to do the kind of thinking that computers are getting better and better and better at doing.
That’s what we have in traditional education. We have extreme standardization. We have this model that’s been around for about 150 years that was born in a mass production factory era.
Rote thinking.
Rote thinking. You look at these charts that show repetitive physical labor and repetitive mental labor is going away, because that’s what computers and machines do well. How do you get closer to what…? Studies have shown is enormously effective — one-to-one teaching. If you have a teacher for every student, there’s two standard deviations of improvement in terms of the progress of that student.
This is why the private school system has flourished. It is now next to impossible to get into the top private schools in any city in the country, because there is so much demand for what is understood to be a far superior product, because of the ability of teachers to have a much smaller classroom and one-to-one relationships.
At least that’s what’s being sold. But that’s not where the quality comes from. The quality comes from positive student selection. It doesn’t come from dramatically lower ratios. It doesn’t come from dramatically more personalization.
Because you’re picking the best students, you have the best results.
Sure. If you have a school where one out of a hundred kids get in, and overwhelmingly, the kids that are getting in are coming from families that have higher income levels, that have higher parent education levels, you are positively selecting to an enormous degree. Part of that positive selection makes the parents’ job, makes the teachers’ job easier, no question. If you have a set of students who all are better set up to learn every day, they’re not dealing with the kind of traumas at home that many kids in lower-income families are dealing with, then it’s easier to do a great job. That’s not to say that they don’t work enormously hard. It’s not to say that it’s easy at all.
Very strong selection bias.
There’s a very strong correlation with positive student and parent selection. The quality of the education that comes out the other end.
AltSchool is a private school. Your tuitions are similar to many private schools. You must have the same kind of positive selection bias in terms of your first set of students.
Actually less, in terms of the first students, and it’s for a few reasons. First off, we actively don’t positively student select. The way that we think about a classroom, especially in a mixed-age environment where we’re personalizing the education, is about putting together a balanced classroom. We’re not trying to max out on these cognitive and character dimensions. We’re not representative of a kind of average cross-section in a public school. No way. These are parents who are actively seeking out a new school. They’re going through the process to apply. We are charging tuition for the vast majority of those families that would be prohibitive for a lot of the families in San Francisco or the other geographies we operate, but it’s much closer to a representative population than a typical private school, and part of it is also we’re a new school. New schools are going to attract, especially when we actively market through online channels versus through word of mouth in specific neighborhoods. We’re in neighborhoods that are much more diverse, like we’re in SoMa, we’re in Dogpatch. That’s not necessarily the typical neighborhood for private schools to open. We’re private because it allows us to be faster, to learn and to try things out, and less constrained. We have eight schools that will be open this September. We’d probably still be working on our first school if it was going to open as a public school. That’s not a fault of the public system. The public school system shouldn’t be the place where it’s necessarily super easy to open schools and suddenly get kids. There should be more guardrails in the public school system. We’re also talking about smaller schools. These are 60-kid, 80-kid, 100-kid schools that are run by teachers, and they’re different than the way that you would think of traditional schools…
What does an AltSchool look like? Typical schools have a gym, it has lockers, it has a central area where you eat lunch or a cafeteria. Your schools don’t have that look and feel to them. Part of it is because you made a decision about the infrastructure, what’s really important, and what’s not, and what you can maybe rent or lease from the community around you. Are there flag football teams at AltSchools?
There may not be flag football teams, but we do field some sports teams. We have a very good girls’ basketball team here in the city, and a bunch of kids who are part of the intramural soccer league. You can start from the position of, in a place like San Francisco, in a place like Brooklyn, there’s a lot that the community can offer. How little do I need to have in each school, not only so that I can make it easier to start more schools, but also so that I can actually have kids out in the community, so that I can, from early ages, be training kids to be in a city. Think about athletics, and how few adults you know stay athletic by playing a club sport with their good friends every day from 4:00 to 5:30? Do you know a single adult who stays athletic like that?
No.
Probably close to 100 percent of those adults as kids were taught, “This is the way that you’re athletic,” and so we’re training kids to behave in a certain way that doesn’t translate to adulthood. That makes it very hard to transition to adulthood in terms of everything from the way that you stay physically fit to the way that you motivate yourself, the way that you judge your success, the way that you make friends. For both motivations, it’s important to make use of the city so that you lower the bar to start a great school, and so that you’re training kids to behave in the ways that they’re going to have to behave as adults.
What you do is you say, “OK, our school is in Dogpatch, and there are local fields, or there are local gyms,” there are local resources that you incorporate into the network in a way. Is that a fair way of putting it?
Yes. And you create big, multipurpose classrooms, and point of fact, indoor or dedicated outdoor play spaces are probably the only thing that we try and actually have shared within each site, but for a lot of the other things, you use the community. Think about school lunches, for example. If you go to a school, and you ask them, “How much does it cost you to produce a lunch?”, they’ll probably tell you, “It’s about a dollar.” That doesn’t include what the physical cafeteria costs. It doesn’t include the salary of the cafeteria worker. It doesn’t include the appliances that they use. You add all that stuff up, and it’s generally much more expensive to provide a bad meal to a kid, a meal that you would never eat, given the choice of what you could eat, than to actually make use of services or, again, the community at large to be feeding a smaller school. You can’t have 500 kids streaming out to the community. They would overwhelm the community, but 50 kids? 100 kids in a school, you can, actually use the community to a much greater extent.
It’s generally much more expensive to provide a bad meal to a kid, a meal that you would never eat, given the choice of what you could eat, than to actually make use of services or the community at large to feed a smaller school
I want to pull back…The school system that you found yourself dissatisfied with, either the public school system as it currently exists — neither of those were satisfying to you, because they both came, as you put it, from an industrial era approach to standardization that didn’t leverage technology. It didn’t exist at that point to leverage. It really was, “Here’s an industrial era system to educate our kids for a fossil fuel economy.”
You have an education system that was created for a mass production era, and now we’re in a mass customization era. You have a traditional education system that’s all about turning generalist agrarian producers into specialized consumers of goods and information. We’re entering an era where being a producer of knowledge, being a producer of goods, being a producer of jobs is the way to be successful. It is the way to be happy, and it’s possible because you have these unbelievable platforms that have been created that elevate the individual through the combination of digital technology and society. When I looked at the life that I thought my daughter would have, when I looked at the life that I wanted my daughter to have, and now my son, who’s almost three, I wanted them to be entrepreneurial. I wanted them to be introspective. I felt like those were pillars on which a successful life would be built, and those aren’t the goals of the 19th-century education model that we have. They will be, and they can be the goals of the 21st-century education model that we develop.
Given what you just said, about the significant shift that AltSchool represents from one educational model to one that anticipates the world we’re all going to live in, then we’re certainly in that transition period of that shift right now. How do you scale this? How does AltSchool go from six or seven schools in New York and California, to being a platform that increasingly is drawing even public schools into its network?
This goes back to your full stack question. We have always conceived AltSchool as being part of that ecosystem shift in three phases. Phase one is full stack. You open schools. It’s small-scale. You’re talking about maybe getting up to thousands of kids. All of the costs are you. You pay for the rent, you pay for the teachers’ salaries, you pay for the Wi-Fi connection, you pay for the software. Move from there to what we’re calling AltSchool Open. This is a platform of software and services that we use, which we announced about two months ago at South by Southwest. We’re taking this platform of software and services that we use to support our own schools, and making it available for other people who want to be part of this approach. We’re talking to partners now, couple on a 2017 time frame, many more on a 2018 time frame, many, many more on a 2019 time frame, who would take new schools, increasingly charter schools, public schools, that are going to be progressive schools, regardless, but who can be progressive schools to a greater extent, easier, and as part of this accelerating trend of improvement, as part of this network. That’s the second phase that we’re working on right now. That’s the kind of focus of AltSchool. To take the schools we have today and make them consistent, make them high quality, foster community, make them sustainable, and have that be the foundation, in terms of our approach, that other people build on, and to also start pulling in other technology companies, other content companies. We have about 30 partnerships right now for creating this kind of platform. We want to do the vast minority of work. The way that any good operating system delivers the vast minority of the functionality that you benefit from. That’s the second phase. The idea is that eventually, especially in a sector that’s as fragmented as the US education system, that you get to 100,000, 200,000, 500,000 student scale through people starting new schools that are interoperable with each other that are supported by a common platform that pulls in more and more of the amazing inputs that are available in 2016. At that point, for some smaller school systems, it starts to be crazy for them not to take use of that platform, especially when you’re talking about hundreds of dollars per student per year in terms of what it costs you for everything that systematically elevates your ability to personalize, to focus on the non-academic learning.
You have raised over $100 million, so when you’re pitching to the big money, like Andreessen or Founders Fund, and you’re saying, “Here’s the total addressable market,” is it the US school system?
It’s the global system and what could reasonably be spent on, let’s say, high fixed cost, low variable cost inputs to quality. We believe that a future can exist where about 10 cents of every dollar is spent on, essentially, R&D, things that have a very, very high fixed cost, that cost billions or tens of billions of dollars to develop, that everybody can use that cost almost nothing for the additional person to use, and that actually gets better with more and more people using it. If you look at other sectors, if you look at enterprise in general, if you look at health care, if you look at energy, that’s not an unreasonable number. That’s the kind of number that drives those accelerating improvements for everybody, that creates this kind of network, that creates this kind of network effect. That’s what we think is the addressable market in a very different ecosystem that can exist a generation from now.
Will you be satisfied if it turns out that 5 or 10 years from now, you’ve got 20, 40, or 60 really great schools, but the world has not taken you to their chest and said, “This is what I want to do. I’m in. Let’s get on the AltSchool platform?”
You need to be at about 50,000 student scale in order to make the kind of technology investment that we’re geared up to make annually work.
Technically speaking, you need to be at about 50,000 student scale in order to make the kind of technology investment that we’re geared up to make annually work. There’s some minimum scale below which it’s not sustainable. You need to think about how you pivot this, but that’s a low number. I don’t think any of my cofounders who are in this for 10 years in terms of the vest that we have, for all of the very senior people have joined on to this effort. That’s not what we’re doing this for. We’re doing this, not only to have a much, much bigger scale, but I think really, critically, to be a much, much smaller part of that scale. We want to be a catalyst for moving back from this immense fragmentation we have in the education space on both sides. You have, literally, over 1,000 school districts in the United States that each have their own little bylaws, their own little practices, that are each reinventing the wheel, and on the other hand, you have hundreds of different systems for how content is provided, or for how progress is evaluated, or for how the back office works.
It’s the sausage. It’s a messy, fragmented, inefficient, low-quality system. There is an American sensibility about that which says, “But it’s ours,” right? It’s awful, but we embrace it, and then the parents get very involved. It’s so embedded, and here comes some very smart, very accomplished Silicon Valley entrepreneurs who say, “We’re going to hack this system. We’ve got an idea.” I’m with you, but it seems like such a big lift. Do you ever sometimes wake up and go, “I can’t believe that I’m trying to fix the education system”?
Often, yeah. It’s a grind, and I think that it’s a grind for the right reasons. It’s a grind because we’re approaching this as a marathon, not a sprint.
You are a for-profit company, but you are not a typical for-profit company. There are many for-profit educational companies that operate in the margins in various parts of the educational system. You are a public benefit corporation, which is different. As you mentioned earlier, you have a 10-year vest for most of your cofounders, which is much longer than the typical startup. Tell me what it is that made you set this company up differently, and what is different about being a PBC?
AltSchool is part of a much bigger movement, and a much bigger opportunity to create a fourth sector in the economy. You have the public sector, you have the non-profit sector, and you have the for-profit sector today. I believe that between the non-profit and the for-profit sector, there’s the opportunity and the need for another sector, let’s call it the “For benefit sector,” that’s as different from the for-profit and the non-profit sectors as they are from each other. What would that sector be? That sector would be for the broader benefit of society, taking capital from investors and generating a return for those investors that justifies the risks that they take. I believe that those companies will still generate a profit, but the way that they will generate a profit will be different than a typical or an average for profit company operates. Let me create a distinction. If you’re a company, and you make a billion dollars in profit each year, that’s great for you, but if I look at, what did you spend on to generate that profit, and it’s all sales, marketing, and lobbying, it’s hard to argue that you’re creating enormous benefit for society. If there are massive externalities to what you’re doing, and for the billion dollars of profit that you make, society pays a billion, 10 billion in costs.
By externalities, just for clarity, you mean impact to the environment, impact to communities that you are involved in.
Exactly. If you’re dumping toxic waste in the lake that everybody drinks out of and you’re making a billion dollars in profit, that’s not net benefit for the society that you’re part of. I believe that you can make these distinctions rigorously. You can say, “A for-profit company that’s generating its profits through R&D, that’s generating its profits by creating a higher-quality service that costs people less and along the way having all kinds of positive externalities — that’s a different kind of organization.” That’s what I would call a fourth-sector.
We call them NewCos. We’re talking about extreme NewCos or what we call total NewCos. Companies that are driven by their mission, as you are, and have also actually taken the step of canonizing that mission into the structure, legally, of their company. Which is what you’ve done with the PBC.
That’s right. The PBC technically does one really important thing, which is it elevates, in terms of the behavior of the board of the company, who runs the company, the mission of the company and their decision-making alongside the maximization of profit. It allows for the company to behave differently — to uphold the mission, to deliver on the mission — even if the effect of that would be negative in the short term, against the interest of profits. I believe that in the future there will be more and more definition for what these companies are. There will be more and more support for these companies, because I have to say today, it’s extremely hard running one of these companies. The Valley and the way that companies are funded isn’t set up to drive more of these companies and the success of these companies. Finally, I believe that we’re going to be able to be more rigid as a society and say, “OK, if you want to be one of these companies, and you want to have certain advantages, then you have to operate in this certain way.”
You’re not only trying to rethink the educational system and move it from a fossil fuel era to an information-driven era, you’re also trying to help spearhead a movement of a new approach to company building and a new set of expectations of what a company can possibly do.
“Spearheading” is too strong. We’re doing our best to align ourselves with what we think and hope is going to come, and if we can lend, kind of, momentum to that movement and benefit from there being more formality and more support for these type of companies, that’s great for us. Our primary purpose is always, “How do we achieve the mission?” I did a stint in my career in finance, and across technology-minded CEOs, and particularly financially minded, and so I think that in order to build a certain type of company, you have to align yourself with a certain type of capital. We’ve done that informally. It’s not random that Founders Fund and Andreessen Horowitz, who are the newest entrants to the top tier VCs, are our VCs. It’s not random that alongside those venture capital funds, we’ve brought in John Doerr, Mark Zuckerberg, and Emerson Collective, to fund a very long-term endeavor, and something that isn’t about these kind of profits, which we don’t think create massively more value, massively more benefit. It’s about these type of profits, which become this kind of self-sustaining engine for what we really believe can exist, which is a platform, and something that takes a minority of the dollars and spits back a majority of the improvements that the broader education system enjoys.
In the past 10 years, there’s been a phenomenon of very bright, successful entrepreneurs like yourself, who have made a lot of money, or what most people would consider to be a lot of money. They have most of their life still ahead of them, and particularly, their most powerful years of entrepreneurial creation ahead of them, as you did when you decided to AltSchool. Instead of saying, “Well, that’s great. I’m going to go take extreme kite-surfing lessons and wander around,” they say, “I’m going to start a company to make a real difference in this fourth sector.” Are you finding there are more people like that? Is this a trend, or are you unique?
Oh, no. It’s certainly a trend. I look at it my buddy, Adrian, from Google, who’s doing something in the health space. I look at Max Levchin, and what he’s doing in the health space. I look at a lot of the people that are tackling the finance sector, and trying to create something which, for people across the spectrum of wealth, allows them to tap onto these accelerating improvements and be much better served. I see myself as one of at least a hundred people that have gone through this, and I think it’s only going to increase. Ultimately, it’s about a kind of addiction. It’s about, “I want to work on something big, and I’m not ready to leave startups behind.”
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