Chegg CEO Dan Rosensweig joins Yahoo Finance Live anchors Julie Hyman and Brian Sozzi at the 2023 World Economic Forum in Davos, Switzerland, to discuss why students are choosing to move away from traditional education, the importance of reimagining education, how COVID-19 has impacted education, and the outlook for Chegg.

Video Transcript

[AUDIO LOGO]

JARED BLIKRE: As we continue to wind down our coverage of Davos, Julie and Brian caught up with the CEO of Chegg, Dan-- Chegg, Dan Rosensweig, to discuss the future of learning as well as the lasting impact COVID-19 had on the education system. Take a listen.

DAN ROSENSWEIG: Our focus has been on the student. If you go into Dartmouth or you're at Barnard, of course, you're thinking in person. But let's be honest. 70% of all kids that go to school in the United States, higher education, go to a state school. They're very large. It's not Dartmouth. It's not Barnard. So those environments are unique. They're very expensive. They're very edit. They determine, you know, what you want to learn, who's going to teach it to you.

Most of the other people in this country, 88% of them go to college to get a better job. The people that go to Barnard and Dartmouth assume they're going to get a good job. I mean, they may be nervous about it. But-- so I think we should stop trying to convince people to do one thing or the other and make all of it available and allow for whatever's best for their lifestyle.

So when you recognize that the average age of a college student is 25 years old in this country, many of them, 62% of them, are women, overwhelming majority are single women who have kids that are the older ages. I can't bring them into the classroom. They have jobs. They have kids. They have lives. So I think the mistake that people are making is thinking there's one size fits all.

BRIAN SOZZI: When you talk to educators of various institutions, do they-- are they telling you that students are still burnt out and they're still dealing with attention span issues, what, two-plus years into the pandemic?

DAN ROSENSWEIG: Well, the latter, yes, but they were dealing with that before the pandemic. I mean, we live in an instant gratification society. So we've trained our brains to every second have another stimulation. So that's been a challenge regardless. I think the incoming freshmen, I think it's almost back to what historically would have been considered normal.

There's still a million and a half people that left the system that haven't come back. Those are the people that are out there in the employment markets that used to go to community colleges or online schools or go to the four-year schools but never really intended to get a degree. But I would say that there is normalcy in terms of the standard college student these days.

JULIE HYMAN: Do you think that-- because of talking about coming to the student where they are, giving them what they need and the suite of choices, there's so much talk about upskilling over the past few years and trying to build the workforce that we need in the US. Even with the slowing job market, there are still those gaps. What percentage of education five years from now is going to be like it looks right now, right? Are we going to just see an overhaul of necessity?

DAN ROSENSWEIG: There should be an overhaul. I mean, that is the exact right question to ask. What you're going to see, what you have been seeing, is the students are moving away from traditional education to skills-based education that will allow them to be employable. So the United States economy has evolved from an agriculture economy to manufacturing economy, then the knowledge-based economy. And now it's going to a skills-based economy. Do you know how to do this? If so, I will pay you, and I will pay you well.

So I think the students are showing it where the biggest trends we see, more people going to the four-year state schools are like, look, if I can't get into the elite of elite of elite, why wouldn't I just go have a great time? Because what's the difference between the education here, here, or here? The second one is, because the US finally started investing in historically Black colleges and universities, there's a real surge for people of color to go to those schools. And then there's a very big surge in online-only schools. So that's where students are voting with their time, energy, and dollars. And I think you're going to see schools having to evolve, or they will go away.

BRIAN SOZZI: Well, on the topic of evolution, Julie, this is something you and I were talking about, this is, I would say, the first World Economic Forum where AI is being talked about in a different way. ChatGPT, these programs are coming to market, and they're coming to market in a big way. How do you see that changing what you do at Chegg?

DAN ROSENSWEIG: Again, a really fair question. So obviously, Chegg has been using AI and machine learning for quite some time to offer our services. I think we'd all agree that AI is now here in a significant way and in a more public viewing way. I also sit on the board of Adobe, as you know, and we have generative AI. And what they can do with images is just extraordinary, and you'll see all of these things coming out.

The question-- there's a lot of questions around AI that have to be asked, legal questions, ethical questions, who owns this? Who owns that? But in the interim as it relates to Chegg, we will and continue to use it to enhance what we offer, categories that we're not particularly deep in that we also want to provide inside our service. But I think we'd all agree after using ChatGPT, even as extraordinary as it is and even as the evolution that's going to come, it still needs human editors. Kids need to be certain that the information is correct. They don't learn one time and one way only. They also don't have the time to educate the system to get the information out that they want.

So the user interface, although cool, isn't really valuable to the students who are looking to learn and to evolve and need multiplatform, multimedia way of learning. So we'll use it to continue to enhance what we offer, and that's why our service gets better and better and better and our NPS scores are through the roof. And so actually, I think it's going to be a real benefit to Chegg.

JULIE HYMAN: I want to switch gears for-- as we wind up here. You've been in the tech and internet industry pretty much since the beginning of the era. I don't know if I would go-- but, you know, you've been doing this for a long time.

DAN ROSENSWEIG: 1983.

JULIE HYMAN: OK. Well, there you go. Yes, so before--

DAN ROSENSWEIG: 10 years before I was born.

BRIAN SOZZI: I was one.

[LAUGHTER]

JULIE HYMAN: So what do you make of this current cycle and where we are right now? After what was a horrible year for most tech stocks, now in a period of belt-tightening for the industry. We're looking at a slowdown in the economy. What are your thoughts on it?

DAN ROSENSWEIG: My thoughts are that it's following very normal patterns, which is there was 1987, there was 1991, there was 2001, there was 2008 for other reasons. These things are like a pendulum. So the overhiring was a result of people not really understanding the impact and how long the pandemic would last and what was permanent behavior and not permanent behavior. Also, investors were starting to give these incredible multiples to companies that were growing fast that would never have a chance to make money.

So I think you're seeing a-- as the market resets, you're seeing CEOs try to understand better two things. What is the real opportunity available? What do I need to support that opportunity and create great experiences and products and services, whether it's B2B or B2C? And then also, what is the investor community comfortable in you doing?

We are very fortunate at Chegg as we're not doing layoffs because we were very judicious. We sensed this was coming. We have the canary in the coal mine with college students. And so we've been able to grow and get even more profitable and have free cash flow. I think we're the only edtech company that is profitable. So I think in the tech cycle, it has a very short memory. It's like-- it's like the goldfish. It immediately forgets. So you're going to see AI now just. You're going to see huge valuations, Microsoft and OpenAI. I think--

BRIAN SOZZI: Is it just the tip of the iceberg, Dan, these Amazon layoffs? Is it a one-off company-specific, or we can now see more mass layoffs at other big cap tech this year?

DAN ROSENSWEIG: Well, they sound like mass layoffs because there's a lot of people whose lives are being affected, and it's terrible. But when a Microsoft lays off 11,000 people, it doesn't really matter. When Salesforce gets rid of 7,000 people and it's got 80,000 people, it's not that as a percentage of the universe. And fortunately, most of those people are still able to get jobs, because even though companies may not be hiring as much, they've had open jobs that they've not been able to fill that now they can fill.

I don't know that it continues at any significant level in terms of the same company going over and over and over. I do think that the larger companies are going to go first because they have the greatest clout and the greatest strength. And also, it's the biggest numbers. But I think they'll set the tone for other companies. I hope that it doesn't continue. What I would say is, companies can't sustain themselves if they can't be profitable. The public markets are not going to open for companies that are unprofitable in the near future, unless it's, you know, again, one of these new unicorns of AI. So we'll see how it plays out.

BRAD SMITH: And that was Chegg CEO Dan Rosensweig speaking with Yahoo Finance at the World Economic Forum in Davos, Switzerland.