‘Learn or earn’: Chegg CEO explains how wage inflation has impacted higher education
Chegg CEO Dan Rosensweig joins Yahoo Finance Live to discuss inflation, the future of higher education, consumer spending, the possibility of a recession, and the outlook for growth post-pandemic.
Video Transcript
JARED BLIKRE: Switching gears, Chegg has struggled so far in 2022, with the stock falling year to date. Our own Brian Sozzi spoke with Chegg CEO Dan Rosensweig in Davos on the future of higher education and the possibility of a recession.
DAN ROSENSWEIG: It's great to see you.
BRIAN SOZZI: Yeah, I took-- you have to take off the time in this weather, you know, work on that tan a little bit.
DAN ROSENSWEIG: Well, you know, thank God they have it in the summertime rather than in the wintertime. It's my first trip here, and I don't think I would have made the winter.
BRIAN SOZZI: What are some of your early learnings?
DAN ROSENSWEIG: I think the early learnings are that there's real sincerity around people trying to address and understand the volatility of the world, the speed in which things are changing. And there seems to be clarity over the fact that government institutions have been stepping backwards rather than forwards. And at least for this audience, a lot of businesses have had to step up and fill roles historically that they haven't done before.
BRIAN SOZZI: Let's talk some education, because on your last earnings call, you said something that was just mind-blowing to me. You said, 1 million students forgoed or postponed higher education the past two years. Why?
DAN ROSENSWEIG: Yeah, look, there's a number of reasons why, but probably the biggest surprise was the speed in which it happened. And it's because-- you know, we talk about inflation today, but this is really about wage inflation. Imagine you're somebody who has been in a job that doesn't pay very well, and suddenly you can make double or triple if your choice is to learn or earn.
And so a million of these students said-- these are community college students, four-year students that go to state schools that historically probably might not have even finished or taken six to eight years to finish. So the economic opportunity for them was too great, and it really helps you understand how many people are in that position where the money mattered that much.
BRIAN SOZZI: How do you get them or lure them back into higher education and getting the skills they need for these post-pandemic jobs?
DAN ROSENSWEIG: Yeah, it's a fair question, and I think some of it will be the economy. Historically, education has gone up during a recession. I do not hope for a recession, obviously. But also, the value of education has to be redefined. What's the cost? What's the curriculum? What's the value? What's the pot of gold at the end of the rainbow if you do it?
For the case of Chegg, who provides academic support and skills as our skills business continues to evolve and students are taking different pathways towards careers, we have plenty of opportunities to grow. But I don't know it's about luring them back as much as if they see the value and spending the time and borrowing that money, then they'll come back.
BRIAN SOZZI: What's the biggest service you're working on now?
DAN ROSENSWEIG: I think we're working on a number of services. Our international growth in the US, we're working on expanding beyond STEMB into other forms of academic support. And then our skills business, which is our partners, Guild-- they're phenomenal-- we are helping educate frontline workers to job skills of the present and the future that will make them more stable in their jobs, more employable, and earn more money. And that's really fulfilling, and that business with our partnership with Guild is going really well.
BRIAN SOZZI: You mentioned recession. Does it feel like recession time?
DAN ROSENSWEIG: Look, I think all of us would admit we don't know what it feels like. You know, we had the pandemic. Then we had back to work. Then we didn't have back to work. Then we have inflation. Then we have wage inflation. Then we have a war. I think anybody who's trying to predict things based on old barometers will get it wrong. I do think that the consumer is going to slow down, but I just don't know by how much or for how long. But I do think, you know, we're experiencing that already. You're seeing as costs go up and businesses and costs go up to consumer, they will have to spend less. I just hope it doesn't reach stagflation.
BRIAN SOZZI: Do you think we're near stagflation?
DAN ROSENSWEIG: I don't think we're there yet. I think we'll know that closer to a year from now. But I do worry that there are so many forces fighting for the same answer that have different needs, whether it's governments or whether it's, you know, families or whether it's businesses. So it's a very tough task for these folks, and I don't envy them.
BRIAN SOZZI: I'm convinced you know everybody here at the World Economic Forum.
DAN ROSENSWEIG: I've met a few.
BRIAN SOZZI: Yeah, you're a World Economic Forum. You know a lot of business leaders. You've been around the tech sector for many, many years. What is this tech sell-off mean to you? I mean, this has been a route. Is it near a bottom?
DAN ROSENSWEIG: Well, for some companies, it feels like it has to be near a bottom because stocks can go to zero but they shouldn't.
BRIAN SOZZI: [LAUGHS]
DAN ROSENSWEIG: And, look, I think it's a series of things about inflation concerns, pulling out of countries that historically could have been growth countries for people, multiple compression. But most times, it used to be companies would do things that would hurt investors. That's not the case now. It's investors that are doing things that are hurting companies and their stock prices.
This will be a pendulum. It's difficult for people in the tech space simply because we have so many employees who get equity, and it's a dramatic change overnight. And it's got to be addressed, and you've got to help people understand it. But the businesses themselves are fundamentally strong, profitable, growing. So I think this will clear up. It's just nobody knows when.
BRIAN SOZZI: Are you surprised by the reaction to your quarter? Your subscriber growth-- you still have subscriber growth.
DAN ROSENSWEIG: Yeah, we're growing. We're profitable. We make free cash flow. Look, I'm no longer surprised by anything that happens in the public market. Sometimes it feels like the public markets have become FanDuel. And that won't last forever, but we are in a moment of time. And the goal of any good company like ours-- it has a great mission to help students advance their lives through learning and learning support-- is to just build a great company that can grow, that can be profitable, that produce free cash flow. We do all of those things now. And at some point, the public markets will understand it, reflected it. But we're just going to keep building and keep growing.
BRIAN SOZZI: I hear you're a big Yahoo Finance user.
DAN ROSENSWEIG: I am. I remain a big Yahoo Finance user. I'm very proud of the work that you guys do. And look, Yahoo Finance was the first people to bring information to the average person in real time with high quality, and you guys have never veered from that mission. So I'm proud of you guys.
