Build the right incentives, w/VIPKid’s Cindy Mi

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If you have two bodies, take The sun. And the earth. Since the time of Isaac Newton, we know exactly how these two bodies

Move together in time. So we can say okay, where will be the earth? In one billion years. Or where was the earth one billion years ago?

That's Doctor Fabio Pagucci. He's an astrophysicist at the Center for Astrophysics at Harvard University. And he's describing A fact that scientists have known since the seventeen hundreds.

When you study two celestial bodies in orbit. Like the sun and the earth. You can calculate their movements according to the gravitational pull they exert on each other. But There's a catch.

I stress the fact that this can be done only with two bodies. Okay. If you have three bodies or more bodies This cannot be done. This is not that uh we are not able to do it yet.

It just impossible to біда, і will never bi dan. It's true. Once you introduce a third body to the mix. The future movements of all three.

become mathematically impossible to predict. This quandary is known as the three body problem. Or N body problem. If you prefer variables to numbers.

In two thousand nine. Two scientists ran a simulation. that demonstrated what this means. They altered. Just a little.

The path of Mercury's orbit around the sun. We're talking about millimeters, so m basically less than an inch. And the outcome is that in some of these simulations, either Mercury was completely ejected by the solar system. Or it fell into the sun. That's right.

A few millimeters of shift in one planet's orbit. Affected the others with catastrophic results. Which makes you wonder. What sort of disturbance in the universe might create such a shift? If you have a little perturbation, for example an asteroid

That's no problem, the body's very very small. Батіфів а стар. or a black hole that passes close by through the solar system, that's gonna completely disrupt the solar system. Luckily.

Our solar system has So far. Been spared from the disruption of a black hole. But in business. Disruptions happen.

All the time. On the orbits of customers. Suppliers. and employees around your business are difficult to predict.

But you actually have one advantage. In a business three body problem. You have the tools to adjust how these different orbits interact. And you do that. With the power of incentives.

That's why I believe building the right incentives is key to scaling your business. But You will need to keep balancing. And rebalancing. Those incentives to hold the system together.

You gotta have incredible talent at every position. Like this is a huge push. There are fires burning when you're going out. Can you believe it? Such an idiot. And then you go back to this is totally gonna be amazing. There are so many easy ways. I have no idea what to do. Sorry, we made a mistake. But you have to time it right. Oops. It just seems absolutely nutball. Ten years later and be like, well that's just how you do it. We haven't made it just how you do it. This is masters of scale.

I'm Reed Hoffman. Co-founder of LinkedIn. Partner Greylock. And your host. And I believe building the right incentives is key to scaling your business.

But You will need to keep balancing. And rebalancing. Those incentives to hold the system together. Charting the future paths of complex systems contains a frustrating number of unknowns.

Whether you're talking about planets. Or a business ecosystem. Those paths may look stable, but But Tini changes to one. can have big impacts on the other.

And of course. Every so often. A stray black hole comes crashing through. One way to keep these groups moving in harmony is by thinking in terms of incentives.

This could mean everything, from lowering prices to bring in customers, to raising salaries to attract top talent. When you adjust incentives. You affect the trajectories of every stakeholder that orbits your business. But creating incentives. Isn't something you do once.

Because incentives change. As people do. For example A three year old. might be motivated by a balloon.

Or Toy Chuck. As an adult. It might be stock options or health insurance. Try motivating a toddler. With the promise.

of a dental plan. This natural progression. It's true of everyone within your ecosystem too. So you must constantly check in. and revisit the value propositions driving scale.

It's a journey. That lasts. As long as your business does. I wanted to talk to Cindy Me about this. Because as the founder and CEO of the online learning platform.

The IP kid. Cindy has long expertise in how to create And adjust incentives. The IP Kid was founded as an app. To connect native Chinese speaking students

Ages four to twelve. With native English speaking teachers from the US, Canada. And beyond. The classes immerse young students in English. So the teachers themselves

Aren't required to speak Chinese. The IP kid didn't invent immersive language classes, of course. But Cindy helped bring the process online. with unique one on one video sessions that make it easier for young kids to focus. VIP Kid Teachers also incentivizes their students with games, stories, bright colors, and lots.

of positive reinforcement. At its height. The IP kit hit a$3.5 billion valuation. with over a hundred thousand teachers on their platform, delivering two hundred million classes. As a team.

These days. The IP kid is in the midst of a massive pivot. Prompted by a policy change in China. Which we'll get to later in the show. But their scale journey.

is one of classic entrepreneurial lessons. On handcrafting. Slashing and burning. Crisis management and grit. In Cindy's case, what ties these lessons together is her masterful use of creating and adjusting incentives.

to land each pivot. Intriguingly. Cindy's origin story of becoming an ed tech founder. Starts with her becoming Disincentivized.

in school. I moved to a city called Harby. near the Russia border when I was the seventh grade, and then I met a math teacher whom You know, obviously hate me. It's kind of a still nightmare.

If I think about that math teacher in a math class when I didn't do well, I lost a semester of learning because Uh change of school and I lost all my confidence in learning math. The obvious disdain. From Cindy's teacher took a dramatic turn one day. I would read science fiction books in the math class.

And then one day she tore the book. And then she threw it at me and she kicked me out of the classroom. And she said, You're the worst student ever, Matt, and you don't belong here. This would be embarrassing for anyone. But for a student in the Chinese educational system at that time. It was borderline ruinous.

In that awful moment. Cindy lost any incentive. To push past your obstacles in the class. Instead, she disengaged. This demotivated feeling.

is one I actually remember from my own middle school experience. Which I shared with Cindy. When I was in seventh grade, I was taking a French class that was so boring that I read a science fiction book all through class. And when I was asked any questions, I said jeune sais pas. You know, which I don't know was the thing. Out of curiosity, what kinds of science fiction were you reading, if you remember, as the escape from a horrible classroom experience?

It's a science fiction magazine and they spend all my lunch money buying those magazines. And then early on had the story of the old susine who wrote the famous I think three body problem. Three body problem, yep. Right. Yes. As you may have guessed. This exchange with Cindy about Liu Ji Sin. Inspired our planetary metaphor. At the top of the show.

Cindy's love of science fiction was a gateway for her curiosity about the wider world. That curiosity Became its own incentive. Even as she tuned out of math class. She tuned in.

To a different project. Teaching herself English. The first English song I learned it's Country Road by John Dever, so technically he's my first English teacher. The lyric said, Country Road, take me home to the place I belong, West Virginia, Mountain Mama. Country Road, take me home.

Got me wonder about this global curiosity, where is West Virginia and why do the seni call the mountain Mama? Prescindy. Learning the answers to these tantalizing questions was all the incentive she needed.

She started buying herself English lessons. on audio cassette. If you remember those. She had another way. to accelerate her learning as well.

Her uncle. Was in the tutoring business. Teaching English to small children. I joined my uncle part time for his tutoring school. in the place where he lived, a two bedroom apartment where it's a bedroom at night, but classroom during the day. So

I saw him and his wife uh my auntie in law teaching all the time and then I would help them during the weekend. I saw those three year old, four year old learning English while I learned myself and then I had so much fun, you know, interacting with the kids and see how my uncle attracted their attention by engaging the kids, playing games with them, telling them stories, even cook for them, or bought a few computers. That's nineteen ninety.

Seven in China. That's like very early on. Kids are so attracted to that. Cindy watched her uncle. Teach a master class. Not just in English, but in creating the right incentives. Because four year olds respond.

To stories and games, not Severe rote memorization. For Cindy. who is not much older than these children herself. Something clicked.

School. didn't have to be a place of humiliation and shame. It could be a place where learning Is fun. Cindy enjoyed helping her uncle.

As a teaching assistant. but she was soon thrust into the role of instructor. The first class was I think a coincidence. My uncle in law was sick and my uncle said Oh we can't find any replacement teacher, so you know. Why don't you go?

Cindy was given the news at seven o'clock. For a class. That would start at eight. I was totally unprepared, but then he said, You know, they're just learning A, B, C, and D's. Why don't you go have some fun, teach them all these alphabet, and then No, tell them some stories and that's three hours. He sounded easy, but then I walked in there

Twenty students, three year old, one little cousin, uh brother and sister, they got into a fight. I have to pull them away and then tell the a story to the whole class. Now thanks to my science fiction stories. They all got attracted to the story and they wanted more. And then I was able to say, Let's learn all these letters and then we'll be able to, you know, enjoy more stories. As incentive structures go. This one. is a classic.

First, endure this hardship. For a greater reward. Right after. But there's a second lesson. We can learn from Cindy's offer to her students.

There are often ways for buyer and seller. Or, in this case, teacher and pupil. to align their incentives. Cindy wanted to share her sci fi adventure stories with the children. Just like the children.

Wanted to hear them. Both. We're looking forward. To the reward. With this fact in place.

The children were perfectly happy. To take on the ABCs. Keep this in mind. When you think about the relationship between yourself And your customer.

Or if you have a marketplace product, the relationship between customers and providers. their incentives may not be totally aligned. But they don't have to be fully oppositional either. Bolstered by her successful trial by fire with a three year old. Cindy lean into teaching.

She helped her uncle with his tutoring business, and in two thousand She helped them move to Beijing. To form a brand new brick and mortar school. They called it. A B C

English. I was seventeen years old. So I've been a student learning English for a few years and also I've been teaching part time for a couple of years. But then that's a critical moment of life.

Do I Go to college. Or Do I Start

to teach English like full time with my uncle and build this English thing. So I had a very hard time making that decision. This was a huge risk for Cindy. Especially in an environment where higher education was not only valued. But considered the only route to success.

But the possibilities entrepreneurship had to offer. Or a powerful incentive. Cindy decided. It was worth a shot. So we drove a Volkswagen car.

from Harbing back to Beijing. So that's a few days drive. When we got there, it's a time when Beijing just suc successfully got approved for the two thousand eight Olympics. I can still remember the night where everyone celebrates In the city, and it feels such a global atmosphere, right? People are thinking, wow, Beijing is gonna be international city now. Everyone is coming to Beijing. So Great time for parents to decide for their kids. Now they want to learn English.

The Olympics. Put a clear incentive in front of the parents of Beijing. They had eight years before their city would be on the world stage. Cindy and her uncle. We're there to help the next generation.

Get ready. What were some of the early lessons in that effort to start ABC English? You can always dream big, but you gotta start small. So the first year trying to get From zero student in Beijing where nobody knows about us, to a hundred student is such a struggle. There are just a few of us, and then we all need to be both teachers and student recruiters. This is an excellent observation.

and key to building any network product. You need to get multiple flywheel spinning at once. On the customer side and the provider side. by offering the right incentives. A B C English.

Was a brick and mortar education company. But the rules for growth. Are the same. As for online businesses. Cindy needed to recruit teachers and students.

At the same time. Calibrating The incentives for each. So typical day generally we start fro six thirty when we stand in front of the schools and trying to send out flyers to the parents and then persuade them that they should come for trial class.

And then parents were like Who are you, what do you do, why would we be there? I'm we will be like we have all these little books or pencils or even school bags for your kid as a gift. Why don't you just come for a few lessons and see for yourself whether you like it. Giving out little school bags. was a modest enticement. But the handcrafted charm worked.

Parents. Did start to enroll. in ABC's learning centers and the company. Started to thrive. Soon one hundred students became two hundred.

And eventually. Many more. From two thousand to two thousand twelve. Through that many years of building the company, we had twenty thousand students. That's a very proud number compared to a hundred, right? We could spend an entire episode breaking down what helped the company grow their customer base by 200x.

Like orienting their success around students' overall engagement. and not just mastery of certain isolated skills. Or Like fostering a strong connection. Between teachers, students, and their families.

But instead, we're going to accelerate. The point. Or after a dozen years in business, ABC English. Hit a plateau. Two major challenges. Number one is the content problem. Cause

The content are Basically books. And then it's never been updated, it's not interactive enough for the kids. when children are all on portable devices these days

Gamification, interactive games, nothing can attract them. In the span of time. That ABC English had been running. A wandering star. called the smartphone.

had disrupted multiple industries. Including education. Of course. China was the center of smartphone manufacturing. took a little longer for iPhones to start making their way into the hands of Chinese customers.

But by 2012. Eighty two percent of the Chinese population. had a cell phone. And Chinese customers were buying smartphones. At a faster rate.

than in the US. And then teachers by then in two thousand twelve sometimes are still using audio cassettes in the classrooms where you're having all these fancy big TV screen that you can utilize for teaching. So content is a ch such a challenge. But as a brick and mortar company With a small number of students you don't have that investment into content.

Remember. Incentives change over time. What appeals to an infant. Isn't what appeals to that same child. As a teenager.

And what held the attention of kids in the early two thousands. Wouldn't cut it. for the kids of twenty twelve. But there was a second incentives problem Cindy was dealing with. And this one.

couldn't be solved with a device. The bigger problem is the teacher supply problem. Cause apparently parents all believe it, not only in China, but Asia, anywhere people want to learn English, you should learn from teachers from the US or Canada. But then it's so difficult to Get teachers to Make it to China.

The demand. for native English speaking teachers was fast outpacing Cindy's ability to recruit them. For some people. Moving thousands of miles away to teach English in a place where you don't speak the language yourself. is a daring adventure.

For others. It can sound daunting. Lonely Or even frightening. I tried really hard to bring teachers from the US.

Two China. I even went to Portland, Oregon, and rented a place. right off the city library. I got so many interests, but no one actually went because everyone said, Oh, we've got the house and the dog, the family, the kids sorry. cannot make it, right? So then I thought I should really try to do it online. Today.

A pivot to online teaching. Seems like a natural decision. But in the pre-pandemic Pre-Zoom World of twenty twelve.

It seemed more like a story. From Cindy's sci fi magazines. Even so Putting classes online. would create a much improved value proposition for teachers.

To recruit instructors from the West. Without asking them to move halfway around the world. It seemed like the right direction. Just one problem.

I tried a online division and failed. Miserably. I can't hire tech talent and also the brick and morty don't really understand the value of the tech talents. My uncle was like Salk option? What do you mean? I mean so it didn't really work. In solving one incentives challenge, she had open up another. Cindy saw she wasn't going to be able to win the talent she needed.

If she was gonna get this new idea off the ground. She was going to have to send an asteroid crashing through her current business. The idea was to get the online division of the previous company slash and burnt and move on and start anew. So I really fought hard with my family for the idea that Now I want to start something by myself again. And they're like, Are you crazy out of your mind? There are twenty thousand students and then then you want to build from zero again. But then I said, There's no way I can do this. I've got to start anew. This was clearly

A jump off the cliff moment. In Cindy's entrepreneurial journey. But the incentive. For her to make the leap. was compelling.

She saw that the flywheel at her old company Was stuck. And she had a better chance of putting the right incentive structures in place by building something new. From scratch. When you've built substantial wealth through your business, it's often tied up in a single equity position.

The upside is real, but so is the risk, and knowing when to act isn't always obvious. Creative planning works with business owners to build a strategy around concentrated equity. When to diversify, how to manage tax risk, and how to protect what you've spent years. Building. Creative planning where wealth works together.

Learn more at creative planning dot com slash masters of scale. Humans will never be more intelligent than AI. There's gonna be two types of companies. Those are great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi.

And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week I sit down with the pioneers shaping our future. And we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show.

Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. We're back. On how to create.

And keep creating. Better incentives within your business. With Cindy Mee of VIP Kid. If you're enjoying this episode. We hope you're incentivized to share it with friends.

Just hit the share button. in your podcast app. And to hear my complete conversation with Cindy, become a master's scale member. at masterscale dot com. There.

You'll hear some great moments we didn't have time for in the episode. Like how VIP Kid developed a reciprocal program for their English speaking teachers to learn Mandarin. And you'll hear. how they navigated the international spotlight. After an investment.

From the late Kobe Bryant. You won't want to miss it. When we left off. Cindy had slashed and burned the tutoring business she tended for a dozen years in order to build something new. She started.

By heading back to school. to pursue her MBA. This included a semester abroad. at Cornell University. And it was there.

that she started observing the real incentives that might drive Western teachers to her mission. When I traveled, I see so many amazing people, teachers in K twelve. They love to teach. They care so much and they're so humble and they're so caring and passionate, but then They don't have Part time job.

With this observation under her belt. Sydney created a new business plan. Finished your semester abroad. then returned home to China to build a brand new company. She called it.

VIP Kid So it build on a bunch of stuff you already knew, right? Which is like, okay, how do we create really good learning experiences? How do we have Yeah, students having delight in education. But now you have new elements. You have, oh well, it has to be done through technology. You have to recruit teachers because you have to have this network. When I think about this

online platform. They describe it as a double sided impossible trinity. Escale. The double sided Impossible Trinity at scale. May sound more like

A killer band name. In a classic business term. But when Cindy describes what it means. What it actually resembles most. Is the three body problem.

From the start of the show. Student Success and teacher success viewed on a lot of the things they want. I so I think they all want affordability, flexibility, and stability.

But then on different terms. and they they're always conflicting with each other. So for affordability, teacher want higher income and student want lower cost. And then for stability teacher want more quantity of classes, student want the quality of the teaching so that they have a great experience. For flexibility teacher want more flexible schedule? on their own terms and then parents want more choices to find out the teacher they're most suitable with.

So if you put these two triangles together, then How do we build on the student success and teacher success? For a platform to work. Cindy knew she would have to manage those three different incentive drivers. Affordability.

Flexibility. And stability. And How they manifest. On the student side.

Versus the teacher side. Is different. But which player do you orient around first? For Cindy, the choice was clear. we focused on the student for the first one year. We cannot really design for the teacher yet because if we don't have any student, then there's no story going forward.

Exactly. If the IP Kid was going to succeed, it had to put the child's learning experience at the center of its gravitational universe. Because in the end. How well the student learns. is the measuring stick that matters.

The IP Kid Focused in on that goal. Way. Way in. There came

Four. For students. The four students are children of our first investors. Three of them. And one is a friend child of my co founder, Jesse. Teaching the children of our investors and of our co-founder's good friend.

Cindy definitely had incentive to make the platform work. But in those early days of video conferencing. The IP kid was navigating questions like how to use colorful backdrop. Without causing the webcams to blur. Or how to support.

Picture in picture. Animations. Every day we're so nervous and the online classroom experience for the start was a challenge. How do you build the content online with a shared screen to the kids? In the beginning there cannot be videos. It just Photos, but then can you make animated photos so it looks like it's moving? And then how do you design that lip letter B so kids really love it?

We just have to show the parents this works and how it works. So the parents see for themselves. So it's around that engagement for the student and to build the relationship with the parents so they trust the experience. Orienting around student learning incentives would be the company's guiding star. The VIP Kid team Worked for months.

developing their platform. Around the four young children. They improve their video software. and helped hone the teachers twenty five minute lesson plans.

When they were satisfied with their learning experience, they made a video promoting VIP Kid. For social media. It was a much updated version. Of standing outside schools with flyers. and gift bags of school supplies.

We're saying, oh, this is a second cohort of pilot program. We're looking for more kids now. We're finally open. Limited offering, only 10 Cs. It was a bit of manufactured scarcity. But Cindy saw immediately. How the perception of exclusivity Motivated parents.

We had fifty more inquiries. Wow, everyone tried to call me because they saw this program like oh so limited the video experience looks so good. And they have so many questions. Every parent's can I work online? What is a video conferencing software? How is a content design? Where's your teachers? How can I schedule? Because they were still small. Cindy could take the handcrafted step. of calling and meeting one on one with parents.

Considering enrollment. Answer those questions. This attention to detail became its own incentive for parents to enroll. By the end of the year we have our one hundred students.

At this point. The VIP Kid flywheel. was gathering speed. Parents. We're telling other parents.

And in fact. One end up telling. A lot of people. So there was um parent. She is a key opinion leader on uh the Weibo, the Twitter of China.

And one day she just felt happy about her child learning with us on the platform and she posted a few photos of the kid. Very cool. Where you had sat in front of computer screen with a teacher. And then all of a sudden her followers Th this is also limited supply stuff. They're like, How do I sign up? I want to sign up. We Got panic because there are a few thousand.

Register Kim in On the day. And the parents try to call us or contact us through all the social media. Some said, Is it a scam? What's wrong with you people? Why don't you pick up your phones? So Everybody, the co founders, even our engineers caught on the phone talk to parents. Engineers are very unhappy. They're like we're so busy with all the coding and we don't want to talk to people. Why do we have to be customer service?

Note. Not every disruption to your planetary system. Will be negative. Like a collapsing star. It could.

Be a delegation of friendly aliens. Bringing transformative technology. But it will still upend. Your system of incentives. At VIP Kidd, suddenly.

Everyone in the company. including grumbling engineers. was recalibrating their orbit. The company wide scramble to accommodate demand. highlighted a larger scale challenge for the company.

We don't have enough teachers at all. So every day we start to wrap up has around Where do we find the teachers? If you'll remember, this was where Cindy got stuck in her quest to grow her last school. She didn't have enough native English speaking teachers living locally.

and incentivizing teachers to move from the US and Canada. had proven a challenge. But as an online platform. The IP kids potential recruitment pool. Was every teacher in North America.

Who needed some extra cash. Which basically means every K twel teacher out there. Cindy knew from her time in the US that many teachers there, unfortunately. Don't earn as much as they deserve. So they often look.

For supplemental income. But here. Notice how Cindy made an important choice. and how VIP Kid calibrated their pitch. All right.

Head of teacher community, Kevin Cling, she's amazing. She always say the first hundred people defines the community. for first hundred teacher we're looking for really defines who we are. That's a lesson. For every company. And especially

any network platform. The first hundred people Really do set the tone. And shape of the culture. So you need to be intentional.

But who you attract. And how? To start recruiting the teachers we didn't put out a advertisement, say, teach online, make twenty bucks an hour. We thought we wouldn't get the right people. So we put out a campaign to our teachers. but also in social media online and we say join the fun.

B the inspiration. Notice, Cindy wasn't talking about changing the payment incentive itself. She was talking about how it was presented to their teacher market. And when the first applicants came in. She saw they were people incentivized, not by money.

But by the rewards of the job. The first ten teachers, many of them are teach for all fellows. And then they have their network around the world. We actually talked about that Teach for All Network. with the organization's founder.

Wendy Cop. You can find that episode. In our show feed. Those are amazing young people who love education. That's why they got into this two year program where they barely make a little money or no money, right? Just to to teach. So I think we really got the first hundred teachers right.

This is a powerful lesson. and building incentives into your business. Part of the game design you use to build your platform. It's about which incentives you highlight. At what time?

Cindy's team. Took this principle to heart. as they continue to build out the incentive structure of their platform. The IP Kid built a rating system for the teachers, just like Uber. Or task grab it.

or any other marketplace platform. Instead of five stars, the teachers will get rated. Five apples. And with that high grade. Would come real.

Tangible benefits. So teachers who does a great work can have priority uh booking because parents tend to choose to work with the ones that have a great Apple rating in our system. The IP kid also chose to make parents' comments visible. And left room for teachers to leave comments for parents.

This was a way. to create feedback loops to help teachers and students get better results. In terms of the class experience, we have a designed loop where all these ratings, comments are given to the teachers on their portal. So they're encouraged to improve by learning more material online, engaging with their mentors.

So that's a loop. And then when the students after learning the class take assessment, they would then be pushed with more content so that they can improve as well. But then beside The designed ones there are a lot natural ones as well. For example, we have the student earning uh rewards and then they can use those

for like a greeting card for the teachers. So students will be writing a beautiful card to the teacher and build the relationship. You can hear. How these feedback loops tie the fates of each player together. The incentive. For each person.

To serve their counterpart well. orbiting around each other. Instead of spinning off.

On their own trajectories. VIP Kid also used clever incentive tactics. To get their existing teachers to recruit new ones. to grow from ten teachers to a hundred teachers is not that bad. But then the problem is how to get it to a hundred thousand. We started by thinking, well

It can never work by performance marketing, right? You can never get to the right people. It's just such a close community. So then we launched This referrals program where We launched a portal for the teachers for them to Check and see the status of their referees?

This referral program Let current teachers cultivate high quality referrals. And check in on their progress. In other words. It both distributed the work of recruitment.

and gamified it. We did tell the teachers if you bring a friend on board, teach, then you will get a hundred US dollars. So we do have a lot of teacher social media. Navigated A hosted by our teacher ambassador. This referral system was a massive recruitment and training unlock.

Social media channels with names like Teacher Mike. Or teacher Stephanie. would get tens of thousands of views, in which current VIP Kid teachers would advise new teachers on everything. from how to create props.

And animated backgrounds. How to work your mic. And video camera. We also build a whole coaching system around it. Because teacher are natural coaches. The referral system.

had an obvious benefit, the VIB Kid. an accelerating scale. and an equally obvious financial benefit to the teachers making the referrals. But it also benefited the new teachers in a real way. Giving them tools to succeed.

in their new video classroom environment. This story. Is a great reminder that one way to keep up with evolving conditions is to incent your users to invest in the platform. It's a way. To distribute the work.

Without eroding the quality of returns. Eventually. The IP kid. Was receiving ten to twenty thousand teacher applications a month. They started expanding their offerings to subjects like science, math.

In history. And they began hosting major conventions for teachers around the United States. In twenty eighteen. They cleared a five hundred million dollar round of financing. By twenty twenty.

When that pandemic started introducing everyone. to the idea of online school. VIP Kid had reached a three point five billion dollar valuation. They had around a hundred thousand teachers in their system.

With around a million students. throughout their then eight year lifespan. And that Where we might Have ended the story.

Except for the fact. That in twenty twenty one. A truly seismic policy change in China. Ribbed a hole in the foundation. of the VIP Kid universe.

In August of that year. The Chinese government made two announcements. One. They were banning all. For profit tutoring companies.

For core school subjects. And two. They were banning the use. of foreign based tutors. Shares in education funds, including VIP Kid.

Plummeted. And the industry. was sent reeling. The company had two months.

To comply. The policy shift happens, it must feel just like the ground falling out from underneath you relative to the level of impact. on the business. So how did you think about it? How did you start adjusting? What were the lessons from that early adjustment? Your description of uh floor f falling right under the feet is such a precise one, it's almost like earthquake. So it doesn't allow live streaming tutoring from any teacher offshore from China. It is such a

unexpected challenge for everyone on the team, including myself, of course. But I think it's even more Disheartening. to feel the pain of the teachers when they lose the connection, relationship with their students, the family they've known for years. And also The fact

that it impact so much on their income. It just Breaks my heart, I know many teachers livelihood. depend on it. Remember

with any multiplayer system. Each trajectory. Affects the others. When part of the system is disrupted, so are the rest. The first few months has been

So challenging. Then we just share with the teachers acknowledging The fact right so it's gonna be worth The four years. It's Getting better.

In a moment like this, when a black hole opens up. And throws your system into chaos. Remember. That you Are the central gravitational force keeping your stakeholders together.

It means Above all. Being human. With all your constituent groups. That's what Cindy kept in mind.

When she recorded a video. for all VIP Kid instructors in October of twenty twenty one. I think I did a recording, the team and I, we did it over twenty times just to make sure that We we convey. The right message.

We assure the teachers that we're there for the long run, so when there is a will, there must be a way, so we're working on it day and night. um to find that new lighthouse. One unexpected outcome of this moment. was the response Cindy received.

From the teacher community. One thing I want to mention is I really appreciate our teachers' support. and empathy along the way. They they just sent so many emails from LinkedIn saying, you know, stay strong. We're here with you through this hard time. We're VIPK changed my life. I'm not gonna leave.

This incredible support provided Cindy with all the incentive. She needed to keep going. Instead of folding VIP Kid. She pivoted their base of operations to Singapore. And they're now expanding.

The work across Asia. There is a Global Nis from parents. To learn English.

in ACM there are one point five billion people. Who wants to learn English? And they all want to learn from North American teachers. I so it just so natural that we work with these parents. And also I think now we think about it, there are so many

More amazing partners. Oh there. Those partners include Topaka, a Vietnamese learning company. that recently created a mashup with VIP Kid called Topaka Kid. Cindy also cited another surprising partner.

American school districts. whose student outcomes have suffered due to the pandemic. We are serving quite many school districts and schools here in the United States. The learning loss needs to be addressed. So many schools, school district reach out to us and saying, you know, why don't you help children reading and math? and improve their learning.

But Sending her team. No, it'll take time. To make all the necessary adjustments to their ecosystem. In the meantime Your teacher community needs tangible incentives to stick around.

So VIP Kid. sent out a huge survey to every teacher in its network. Trying to assess. What form those incentives? might take.

We send out a questionnaire to forty thousand teachers, then we got almost twenty thousand replies. So that's really amazing. They took twenty minutes to do the questionnaire, telling us what they're good at, what they want to do. Once the survey results came back. Send in her team. Design a new program.

based on what their teachers told them might get them to stay. It's a membership program. To help teachers grow their own careers. They call it. VIP teacher.

We would have our teachers Be odd. their own personal brand. And also through the partners. and also the effort of their own teach on their own terms.

We provide them with all the system, the tool, the transaction, everything they need. And also we provide continued education to horn teachers' skills in this creator economy, so they can even do more. The IP teachers. Also receive tools for growing their networks. And hosting events. It's all in service.

Of helping teachers build their personal brands. Teachers are The creator of the new age. They can teach a lesson, they can build curriculum, they can build all their Instagram, uh YouTube, TikTok content, they can coach other teachers, they can be advisors to to schools and school districts, they can even start an online school. under their own name, under their own brand, everything is designed For the teachers.

Income. for the teacher's stability and for the teacher's flexibility. If you remember, the IP Kid was designed to put the student at the center of the universe. With VIP Teacher. That shifts.

Time will tell. Whether the VIP teacher membership platform will succeed. Remember the teachings of the N body problem. Even small changes. much less seismic ones have big impacts you can't predict.

But As of now. V IP teacher has a four thousand person wait list. They're building. And rebuilding.

Using the best incentives within their reach. How will these incentives affect the communities of families, students, and teachers in orbit around them? We don't know yet. But that's the beauty. of a challenge that lasts as long as your business does.

I'm Reed Hoffman. Thanks for listening. Masters of Scale is a Wait What original. Our executive producers are June Cohen, Darren Triff, and Jordan McLeod. Our head of content and production is Lori Hoffman.

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