Winning at the Nonsensical

I’m really crushing on Chris Dixon right now and the above talk that he did at a recent event where he shared some thoughts on how great VC investments typically engage with ideas that seem stupid rather than the good ideas that are, well, obviously ”good ideas.”

The premise is quite simple: Big companies, academics, and the like are already working hard on those so-called good ideas. Opportunity lies in the ideas that are less obvious or less naturally intuitive.

via Peter Thiel

I love Chris’ example of Google and how they provided a very contrarian model to the modus operandi of the day where the goal was “stickiness” and making sure that people would stay at their site (or “portals” as they were called back then).

Google’s operating procedure was different as they would provide a reason to leave their site as quickly as possible based on a level of quality in results that was more than just competitive, it was distinctly better.

But in many people’s eyes, as Chris reflects, this was a “terrible” idea and was not of interest to many business owners of the day. It was a “bad” idea that now is generating truckloads of money (so unfortunate for that one potential investor!).

You Need to Know a Secret

Peter Thiel has said many times over that you need to know a secret in terms of making a bad idea one that can be eventually be a success. What he means by this is quite succinct:

Something you believe that most other people don’t believe.

It’s a fascinating question and one that can have you staying late into the night and early morning wrestling with and it’s one that we’ve wrestled with here at The Iron Yard more than a handful of times.

What’s nice is that our wrestling has to do more with the pragmatic implementations of our already-decided secrets rather than the fundamental secret(s) themselves. In other words, we have been (and will continue to be) mission and principle driven and we know who we are and what we are trying to achieve.

The question, then, is how we do this better than anyone else in our field and how we practice executing against our secret better than anyone will ever attempt.

We’ve already described one core strategy here with our focus on People First as well as our intense focus on Culture Development. How we do this for our core “product” or offering is by extending those truths to both our customers and employees…and doing a few things that don’t make ‘traditional business sense’ on paper.

For our customers, we focus intensely on their needs as future technology professionals. We stack the deck, so to speak, so far in their favor that they cannot fail. We provide more than just a technical toolkit; we give them soft-skills training, lunch-and-learns with industry professionals, access to professional designers to help with their work, discounts and access to conferences and local events, individual guidance and support in their job search (until they find one), freelance work when they need it, and, on top of all of that, a lifelong access to our incredibly large (and growing) ecosystem of coworking environments, accelerator cohorts, and successful academy alumni.

Here’s the secret, though: You can’t stack the deck in someone’s favor if you’re trying to squeeze every dollar possible out of the system. This is where we diverge from some ‘smart’ business practices (and many of our competitors).

In order to be fully committed, we’ve ensured that our financial model follows our philosophy. You see, the go-to model for code schools is to get a “kickback” for placement services through recruiting professionals and firms taking anywhere from 15-30% (and sometimes even more!) of the first year’s salary upon successful placement (with possible retention bonuses). We don’t do any of that.

Instead, we provide un-biased counsel, coaching, and introductions to these various parties with none of those financial strings attached. The result? We can provide the very best guidance and placement without a financial motive mucking up the process (or lurking deep on our financial bottom-lines), or giving us any level of motivation to push a graduate in a career direction that’s not best for them. We are for our students 100%, both implicitly and explicitly.

Another component of commitment to our students is class size. Again, our approach is different than many other places and, to be frank, limits the amount of cash we can make from a single class of students. Do the math: if average tuition for a code school is between $8k and $15k, having 15 students in a class is a good business model.

But having 40 students in a class…that’s big money. The only problem with that big money is that, unless you’re hiring more talent to get the student-teacher ratio down (which eats into profits), the amount of individualized help and mentorship that each person receives is severely diluted.

We started out with a very small number of students and worked our way up to a class size that ensured each student would have full access to the highly experienced, professional teacher (not just a TA or helper). On the balance sheet, that means we’re limiting our income potential. Seems silly, right? But not so much when you think about quality, which has been our goal from day one.

These are probably the reasons we’re batting 100% right now on our placement guarantee, although we get to work with some pretty great raw materials (i.e. we train highly talented and motivated students)!

Another area we’re a bit unconventional: Our teachers and instructors.

Many times, instructors are the hardest piece of the puzzle to find when you’re running a code school. They’re also the most important piece. Many times schools employ teachers who have other jobs, are between gigs, teach at a university, etc. because 1) it’s incredibly hard to find high-end development talent no-matter who you are, and 2) those situations allow for a much lower salary requirement.

Again, we’ve placed our chips on the opposite bet. We find the most talented developers we can, ensure they have the experience and talent to teach, pay them a full, competitive salary, then give them more than three paid months a year off to pursue programming passions, go on vacation, do freelance work, run side companies, etc. In fact, some of our instructors make more money than the partners at the company. Crazy, right? Again, not when you think about our commitment to quality. Happy, motivated instructors are the lifeblood of what we do, and making their jobs as awesome as possible will make the results our students get as awesome as possible.

To our competitors these things appear somewhat nonsensical – why give up obvious money-making opportunities when you could be adding to the top-line revenue figure quite easily? It may not make any sense to them, while at the very same time it makes entirely good sense to us.

And I’ll be frank, at this time I feel like it’s not just our competitive advantage but it’s our unique secret and our belief that it will make for a much more successful venture in the long run. We also know the problem better than anyone else in our space: Engineering is about people first, placement second; people first, problems, products, and projects a very distant second.

It always boils down to people and we’re pretty darn good at that.

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About theironyard

The Iron Yard exists to create exceptional growth and mentorship for people, their companies and their ideas through code education and startup accelerators.