The 50 richest families in America are betting on this trend

Yeah. So in 2005 I got married, which was also the first year of podcasting. I did a podcast actually at Stanford. That was my last one. And then I went silent for 20 years. And then now my youngest daughter is about to go to college. And so now I'm back on the road, right? I'm back in the limelight and I hopefully Alpha will be doing it for the next 20 years to fix education.

Actually in high school I wrote a paper about AI and so really in high school I was writing a paper on AI. One of the paragraphs said neural nets are decades away. I then went to Stanford and I was in class with the father of expert systems at AI, Professor Feigenbaum. So my buddies and I, you know, were like, we can't sit in Spanish class anymore. So, we dropped out. Um, you know, back then it was rare and so the parents are not excited. My dad famously said, "You're a moron." And then we built Trilogy and our claim to fame actually in the '90s. It was the first AI product to sell a billion dollars.

Oh, no. No. Well, then we had the idea which was you could build this product called the configurator, which was expert systems had a range of things that they could solve. Configuration was one of the domains that they've been trying to solve since the late '70s basically and you know by the late '80s I was like, oh, we can totally do this.

The first product we had that started the company was a configurator. Just think of a configurator on like, you know, a car website or Dell computer where you're configuring your computer. Now just imagine it if it's a million times more complicated, which is a room-size phone switch or a Boeing airplane or, you know, back then mainframe computers, you know, big manufacturing systems. That the problem back then is reps would be out in the field selling these complicated products and then what would happen is they'd get to the manufacturing line and the manufacturing line didn't build them. It was an unbuildable configuration. And so being able to take that knowledge of what is a correct configuration, put it in your thousands of sales reps' hands so they would sell accurate configurations would save millions of dollars a day to the Fortune 500. So we just found all the Fortune 500 manufacturing companies and said we can take what all this huge problem is costing you, just $8 zillion dollars, put it in this sales builder, which your sales reps would be able to build correct configurations and then you'd pay us millions and millions of dollars for it. And so that was our first product and that's what launched the company and that was the first one that, you know, drove the billion dollars of revenue.

Yeah. Well, there is, you know, if you want the long haul, there's a 2005 podcast where I was presenting to Stanford about why if you're doing what we're doing, it's the dumbest thing you could do, but you got to try it anyway, which is no, the Fortune 500 does not want to buy from a kid dropping out of college, right? And we lived painfully. It took three and a half years. But the flip side to it, if you ever build a product that the Fortune 500 wants and it saves them, you know, hundreds of millions of dollars, they will buy it from you because they have no other choice. We went into multiple sales cycles where, you know, they go in and at the end of it, they'd be like, "Oh, we're going to go hire back then Andersen Consulting or we're going to call, you know, one of these, Oracle to solve this problem." And when those companies couldn't solve it, they would come back to us. We were the most expensive software you could buy in the '90s because we also had super high pricing because we're like, they're not going to buy from us unless they have to know it's worth hundreds of millions of dollars, right? We are their last choice on the list and what you're like, okay, we got to deal with these guys. Then you're like, great, I'm going to charge you lots of money because you have no other choice.

And back to there's some background that helps on that is Jack Welch, who was CEO of GE. My dad was a strategic planner and so I grew up in that GE culture and I remember telling my dad I was like, "God, that's just TV. They're like the only cool thing you guys make." And he's like, "Oh, let's talk about the gross margin of a CAT scanner versus a commodity TV." And so I was learning all of that from, you know, a young age. And so that helped when I was ready to start my business that I understood ROI and, you know, that I was going to be selling value and all of those things. But then I took that and said, I'm going to be the best product manager and I'm going to put the two together. And I actually think today with Alpha, that's a lot of what I'm doing is just taking the product management part and the go-to-market business part and saying if you took those two things, how would you change education?

Yeah. Well, so once we had it, it took us, you know, we dropped out. It took three and a half years to actually build the product and convince anybody to buy it. But then as soon as they started to buy, Silicon Graphics bought it, Hewlett-Packard bought it, AT&T, IBM, right? It just we started to roll through the biggest companies with, you know, massively, you know, high pricing.

You know, we were in Austin where they didn't have lots of software engineering back then. And so we hired 2,000 Ivy League graduates, you know, MIT and Stanford, and brought them to Austin. So our claim to fame in the '90s was if you ask Microsoft, you know, Bill Gates, who's the only company who out-recruits us out of college, right? They were at their peak. So Microsoft would win 90% of college graduates back then and we against them won 70%. Bill Gates literally flew down to Austin to figure out why we were getting the best graduates. And this is also how intense, you know, he was, is we're at dinner and he's literally going through every single person that we had made an offer to, you know, here's Fred here and you're offering him back then, you know, $48,000, you know, and we sort of reverse engineered how you guys hump, you know, and we think he's like a $38,000 guy, you know, why, what was his technical capability that you really liked? I mean, it was crazy the level of detail he went through, right? Because it was a fight for talent, and if you're getting talent, you got to get the best people.

Well, no, it was...

What it was, he's like, I will call. He's like, after leaving, he's like, I'm going to call every single candidate who has a Trilogy offer and a Microsoft offer, and I'm personally going to call them. And I'm like, I need the candidates more than you do, Bill. And I, you know, this is just, I'll just escalate. I'll just escalate. I'll bring them on a trip and we'll do a week ski trip and I'll ask him how was the last time you'll ever talk to Bill Gates. You know, how does that call him because he's never going to have time to talk to you again because he's got tens of thousands of boys. And so, but they did for the period in the '90s, right? A would have, you know, whether it was Ballmer, Gates, or Mike Maples, the other third in the office of the president, those three would call all our candidates and we would just continue to fight and it was escalating, right? It's just we needed them more than they did.

You set out, you have a goal and you just do whatever it takes to achieve the goal. And there's no amount of work you wouldn't do to hit the goal. Just like this, I have to win the recruiting award. I have to win. I have, if I don't beat Microsoft and get the best talent, my company's doomed. And so whatever it would take, right? And I think that's true. You know, for everything that you want to do, you just have to have and back to that gear. I had been lucky enough that I do find what I love to work on. So, I love build the stuff in the '90s, right? And it was awesome. And so, I was loving every minute of it. And, you know, if I look at what I'm doing with education right now, I have the best job in the world. So, I'm working 7 by 24, you know, a lot of education. And there's nothing that we won't go do to figure out how to go fix this and get this to a billion people. And I think just back to entrepreneurs, they have that gear, right? And Bill Gates has that gear. You know, today is the world's best at it. It's Elon, right? You know, when you go to dinner with him, you're just like, "Oh, I suck." Like, he is so much better, right? That his level of intensity and working on the most important problem and being able to focus on it is just a critical skill. And if you want story, I guess going back to the early days. So my dad had terminal cancer, but he said, you know, look, you know, I basically have 18 months. How about I sit on your board and help you, you know, figure it out? You're a young punk who doesn't know what he's doing. But it was obvious that I had, you know, caught the tiger by the tail and, you know, and there was a meeting where this massive deliverable we had to hit for Hewlett-Packard. It was one of our first one and HP's, you know, yay or nay was everything. And he's like, "Is your entire company focused on this?" And, you know, we have the board for... I'm like, "Absolutely, of course we do. Totally focused on it." And he's like, "So, your engineering team, like if I asked them, you know, what percent of their time do they focus on Hewlett-Packard versus all the other companies?" And I'm like, "100% on Hewlett-Packard. Everybody understands we are not going to miss this." And he's like, "Really? Okay." Stops the board meeting, goes out and says, "Get Bill Reed who ran our development." He's like, "Bring him in here. You've got a lot of customers, Bill, you know, working on this stuff. What percent of this team is working on Hewlett-Packard?" And Bill's like, "Well, since you come from traditional work, you know, traditional world, I would generally say 200% because we're working 80 hours a week. Every single person's working 80 hours a week on Hewlett-Packard and that leaves us an extra 20 hours a week to work on, you know, the other customers, right?" And that's the kind of thing where, you know, when you're talking about intensity and focus, right, and your team trying to deliver on it, right, it's just, it's, you know, and I was like, oh, thank God, great, you know.

Completely, that was right. And that is exactly the, when you talk about intensity when you're trying to solve this, right?

Well, actually, so this you can go look. There was a cover story in the Wall Street Journal about this because it was actually their money and you know we get all these kids down and they're like, I want to be an entrepreneur. I'm risk-taking. That's who I am. I'm like, great. So at the end of our Trilogy University 100 days, you know, if enough of the teams that hit their goals, we would take everybody to Vegas and then we would get everybody around a roulette wheel, right? And we'd say you have to bet one month salary on the number, right? And so everybody would have to put one month salary down. And you know, there's a lot of people who are like, well, I'm not an idiot. I don't want to bet one month's salary on it. And we're like, first of all, that's not a huge risk. You're going to be asking a venture capitalist someday to give you millions of dollars. And you're literally not willing to take any risk at all. And so we would do that every year. And the Wall Street Journal wrote this big story about it. I actually got a lot of flack from parents after they read the story. They're like, "What are you doing to my dad who just got out of college?" But yet, back to just, you know, pushing people, you know, if you want, here's another intensity. We actually, Trilogy University, you know, there's Harvard Business, you know, case studies on it and you can read about it, but we literally had a swap program with the Navy SEALs. Literally the Navy SEALs are like, "Okay, you know, we're going to send a couple of our SEALs over to your program and you send a couple of your Trilogy kids to California to go be part of ours." It was sort of physical versus the mental. And you know, it was that level that we were considered by the SEALs the only thing on the standard and rigor that would equal them on the physical side. And kids, you know, back to recruiting kids when they would be like, "Oh my god, you know, I get to go do..." Oh, they'd only last a week, you know, or, you know, really a few days before they...

They're actually super smart, right? They filter, right? So, they were coming in as super capable. Now they'd never been in an environment where you're having to make it was the kind of thing of a different environment of decisions and things like that than their other ones. But it was, you know, it was those kind of things when you talk about intensity and doing things that are non-traditional. I'm all about that, right?

That's a huge insight which is this is the hardest 100 days of their life and that was what allowed us to recruit them against Microsoft or all these other companies. I was actually at the board of directors of a Fortune 10 company and we had taken some of their mechies who wanted to go to Trilogy instead of their company. They're like, how are they going to this little company, you know, instead of us?

I'm like, well, during the internship, you made it easy, right? And so, they're just, oh, I'm not doing anything significant. And when they come down to Trilogy, it's going to be the hardest thing they ever did. They're going to work on something significant. And kids want to do awesome things, right? And mapping it now to our education. We talk about the kindergarteners climbing 40-foot rock wall. It's the same thing. Kids want to go do hard things. Now, they need to be supported through it. You can't take a kindergartener and say good luck, right? You need to sit there and you have to have high standards and high support. You need both parts. But, you know, we have these, you know, what we Alpha tests where you do all these crazy workshops, you know, and then you have to test to pass it. You got to climb the 40-foot rock wall. You know, our second graders got to run a 5K. Our eighth graders have to do a Tough Mudder or they also all have to cross the finish line at the same time. You know, we have all these tests, but the ones that drive back to the most excitement, I mean, they all are hard, are the ones where the kids can beat their parents. Like there is nothing that motivates a student more and a kid more than them being able to go head-to-head with their parent and winning like fair, not where the parent tank. Like they love that. Kids love that. One of our claims on the, you know, is kids love school more than vacation, right? I can't build a school that kids love more than vacation if I have low standards. It is the reason they're excited is because they're going at their friends doing hard things.

Yeah, sure. So, you're never going to convince anybody that configuration is sexy, right? Versus all the other options. However, the AI algorithms that underlie configuration at the time were some of the most complicated computer science problems you could solve. And so when you're sitting there and you're looking, oh, I'm going to go do an about box for Microsoft Word as choice A or you're going to go work with the smartest people tackling this challenge that no one's been able to solve before, right? It is a technically impossible challenge and the best computer scientists like, you know, in 1985, Rice, Stanford, MIT, their number one computer scientists all came down or graduates all came to Alpha, right? And that is because we were working on the hardest problems. It's the same thing, you know, people always ask, you know, when you know in on companies, why do people do startups? Like why do they go down to SpaceX? Why do you do it? And it's like because I'm with other people who are super smart, who are working hard and we're all trying to do something that's really, really hard. The Navy SEALs. Why do you join the Navy SEALs, right? It is the camaraderie. It is the, you know, everybody together that starts in kindergarten. It starts in kids love this stuff, right? And it goes up to they're getting out of college and then late career. Like the people who are joining us, you know, who are, you know, my generation of my age. These are people who are like, "Okay, I'm going to go spend the next decade trying to fix education and it's going to be a nightmare. It's going to be super hard, right?" But they want to get in and do it because the alternative is, oh, I'm going to fire and play golf all day. And you know, the challenge and the excitement is what motivates people.

No, it's the exact opposite, which is most parents are one or the other. They are either high standards, low support. Just throw your kid in and figure it out. Good luck, right? And that's what's going to cause grit is you're just going to keep struggling. Okay, that's a clever way to do it because they'll try a little for a little bit, but then they'll decide it's too hard and bail, right? And you get tons of disengagement with that path. You can do the other one. I'm high support, low standards, which is, oh, I don't ever want stress, right? But I'm going to be there supporting the whole time. I'm going to do it. And that's terrible because you never learn how to do hard challenges. You never learn resiliency and grit, right? You never get self-confidence because you never tried something hard that you struggled through. And so you have to give the scaffolding and show people how they get there.

Yeah. Let me give you the school one and then I'll give you the company one, which is I go to the seventh grade is my first year. I'm like, all of you guys could get a hundred on a Texas STAAR. And they're like, Mr. Liemandt, that's impossible. No way. Can't get a hundred. I'm like, no, no, no. I'll give you a $100 bill. 100 for 100, right? And it's still impossible. Can't just right. I don't know how to do it. And I was like, "No, no, no. Here's the catch. Any grade level." And they're like, "You're going to let me take a kindergarten test and give me a hundred bucks for a Texas, you know, $100 STAAR?" I'm like, "Well, they start in the third grade." And so the kid's like, done. Goes and takes a third grade test. It's 100. They're like, "Can I do fourth grade?" And you're like, "Absolutely." They do fourth grade. And then they do fifth grade. And they only get an 82 because they didn't know all that. They hadn't done their school and not given the mastery right through it. And this is where you have to give the scaffolding. Do you want the AI tutor to look the ones you miss and give you those lessons that will get you to 100? And the kid looks at it and is like, "Ah, that's not going to take me a week of work. Sure, for another hundred bucks, I'll do it." And then they do fifth grade and then sixth grade. And by the time they get to seventh, what you've done is you've changed their mindset that when you're getting hundreds, all the grade levels, you're like, "Well, obviously I can do fifth grade. Obviously can get it to sixth grade. It's just a matter of work and then it's just a matter of work to do it in seventh grade." And so you've taken a kid who thinks it's impossible and you've given them a scaffolding, right, to work through plus motivation because motivation matters, right? And you give them scaffolding and motivation to do it. So if you're building a company, it's going to be the same thing. Go build a billion-dollar product. Okay, that seems hard, right? You're like, what is the scaffolding you're giving your team where you're making it where they understand, okay, I know how to get and that's the part when you think about high standards if you as a company give high standard with no support, they don't know how to get there, they'll try for a while and then they'll disengage. Lots of companies are trying to move their companies to be AI first, right? We want to be an AI first company and they're basically like, here, here's, you know, cloud code, good luck, right? And what is the scaffolding you're going to be able to do to get your people to that standard? Are you able to sit there and role model this is what excellence is? This is what we mean by excellence. And then once you show them here's how you, if you don't have the skills, how you can repeat it. And so that's the part when you look about, you know, this is HR is am I getting the people in who have the skills to do it and then can I give them the training and the motivation model where they want to.

So no, I was not good with human psychology and I did want to build the company and how I got there is one of the most important hires I ever made is this guy Jim Abel who was my head of HR who would coach me through a lot of this where I started very much as high standards, low support. He was the one who was like, "Look, here's the part. Here's what you have to do if you want to bring your team with you. Here is the organization you have to build if you're going to bring once I had, you know, 2,000 employees." And I'm like, "Oh my god, you know, what do I do?" He was the key insight on that side. And then, you know, on the school side now, there's this, there's a professor, Dr. Yeager, who's written a great book that every parent should read, which is called 10 to 25, the science of motivating your kid from age 10 to 25. He's the one who actually developed our child development side and how our adults, our guides work, which is he mentor mindset, high standards, high support. And he's done a ton of studies that actually show literally with wording changes where you can take a student and just say, "Look, I'm about to give you feedback that's going to be hard, but it's only because I know you can go crush this, right? It's because I know you can do it." Back to the growth, the Tony Robbins part, right? The growth mindset. And it's I'm giving it to you because I know you can do it and so here's what you'll need to go do and you can then give them the coaching. Back to that book 10 to 25 is a every parent should read it and it actually is our model where people say how does Alpha work.