[asd33313131]

Right now we treat it as income for tax purposes but this may change in the future, as we optimize the model and the tax treatment. Due to this, depending on a person's situation, the $2000 might not nearly be enough.

We think of ourselves as underwriting, in the financial sense, someone's near- to medium-term earnings. Some of the negative tax treatment is offset by our assumption of risk. If a person has the skills to go out and freelance and earn $10,000 over 5 months -- and can bear the risk of not earning that -- then we aren't necessarily the right fit. In the freelance case, income would be 1099, which includes both sides of FICA tax, but it also includes the risk of not finding enough clients. When people use us, they are guaranteeing $10k which allows them to plan and learn without worrying.

This is actually similar to how IPOs work. If you are company who wants to sell public stock to investors, there's a possibility that not enough people will buy your stock at a reasonably price if you sell directly to investors. So historically, investment banks would underwrite this transaction and price your stock and buy 100% of your offering. The company gets enough money at a reasonably price and then the investment banker goes out and sells it to investors. In this case, the company may have left money on the table, but their absolute risk is lower, since it's now the investment banker who bears it. Some companies, however, are in such a strong position (like Spotify) that they don't need the investment banker and they just sell directly to the market. Similarly, some individuals have such good prospects/finances that they don't need us, and that's not our market.

[michaelmrose]

Lets take a hypothetical. A family with medical insurance costing $660 and medical expenses with insurance of $200 with 1 person able to work and no monetary help forthcoming from the state.

Paying just over the threshold for free medical care for the state means substantial costs for the learner who will pay hundreds of dollars more for earning literally $50 too much to qualify for free medical.

We aren't talking about people whose prospects are to good to need an option like this we are actually talking about people who are trapped in poverty because earning slightly more ends up being ruinously expensive instead of a step up.

It's profoundly depressing.

[asd33313131]

We definitely need to dig more into this, but I think you're right, sometimes income from us would push people over limits -- at least the way it's currently structured. Could you share what thresholds you are talking about?

E.g. if the threshold is 5k, we pay 10k, medical insurance goes to $1000 from $0, it might be still positive for the trainee (earning $10k - $tax - $1000 might be better than no earnings at all).

[michaelmrose]

In WA state the threshhold is 138% of the federal poverty line. 1940 I believe for a family of 2. 1900 would literally be more money than 2000 sad to say.

Stupid question time. It seems like the money would more accurately be expressed as a loan. Is there a reason it's expressed as income? Complexity of lending regulation? Lending regulation particularly disallowing the chosen model?

[asd33313131]

It's not a loan and more akin to equity; there are parallels to the talent agency world. If you wanted to do our program and get paid less than $2000, we could accommodate this via a side agreement or other arrangement potentially.