3 ms·

A couple thoughts if we were to "scale" the income-sharing contract concept beyond a novelty: 1. If there is, say, a hundred or even ten possible candidates to

A couple thoughts if we were to "scale" the income-sharing contract concept beyond a novelty: 1. If there is, say, a hundred or even ten possible candidates to pick from, due diligence becomes brutal. Health information, full social media dumps, detailed financial disclosures etc. Also rampant discrimination. If it is unregulated, it's basically what insurance companies would like to be doing but with no limits. 2. If it is for five years and with no big payout at the end, the value of such a contract (via discounted cash flows) is likely pretty low and accordingly would be the funding. Note that LambdaSchool owns the whole "equity" of a person (no splitting into X shares) and gives you a service (at scale) instead of cash, so it probably makes sense for them. 3. It would be fun to see the accounting sorcery possible for shielding and offloading your earnings to other entities, to pay your investors (?)... preferably nothing. Besides, people, as opposed to companies, are rarely truly profit-maximizing entities. Maybe in the second year your guy decides to be content with a mid-range salary and devote all his time to studying meditation. But hey, theoretically you could try to escape inflation with such a crazy scheme if the interest rates on "real" bonds would stay very low...

ghaff 6y ago
>gives you a service (at scale) instead of cash Yeah, this sort of payback scheme probably needs a few characteristics to make sense which apply in this case. - Incremental cost of a student is relatively low. So even if, say, 25% of the class doesn't pan out, they didn't cost you a lot that has to be somehow passed on to the other 75%. - Likelihood that graduates can get at least a workaday job at a decent salary are pretty decent. This probably wouldn't work for film school.
jkhdigital 6y ago
Indeed, due diligence is inherently not scalable. The world of finance has done everything in its power to overcome this constraint—basically all forms of risk pooling—but if nobody actually does the due diligence then you get stuff like NINJA mortgages repackaged into CDOs with AAA ratings on the senior tranche.

ghaff 6y ago

>gives you a service (at scale) instead of cash Yeah, this sort of payback scheme probably needs a few characteristics to make sense which apply in this case. - Incremental cost of a student is relatively low. So even if, say, 25% of the class doesn't pan out, they didn't cost you a lot that has to be somehow passed on to the other 75%. - Likelihood that graduates can get at least a workaday job at a decent salary are pretty decent. This probably wouldn't work for film school.

jkhdigital 6y ago

Indeed, due diligence is inherently not scalable. The world of finance has done everything in its power to overcome this constraint—basically all forms of risk pooling—but if nobody actually does the due diligence then you get stuff like NINJA mortgages repackaged into CDOs with AAA ratings on the senior tranche.