845: The Education Evolution - with Dan Rosensweig, President & CEO, Chegg

Joe Sallustio: Welcome back everybody. It's your time to ed up on the EdUp Experience podcast where we make education your business. This is your host, Dr. Joe Sallustio. You probably know my voice. I've done a couple of these podcast episodes over the last four years. Of course, this will come out about two weeks from now, but we have recently passed our four-year anniversary of this podcast interviewing so many people in and around higher education.

Today, I was joking with my guest that he runs a decent-sized company, I'd say, and he has been avoiding me. So I had to bring in like a spent - I had to bring in a smoking gun. Find one of his buddies, get with his buddy, say "Hey, would you invite him on because maybe he'll respond back to you?" We'll give him a chance to verify this story that I'm telling, but not yet. I want to bring in my guest co-host first. You heard him, I don't know, a couple years ago probably the last time we spoke. 

When we spoke last, he was leading one of the largest online institutions in the country. Ladies and gentlemen, let me get him on the microphone. His name is Peter Cohen. He is the former president of University of Phoenix, senior advisor at Boston Consulting Group and board member for various K-12 companies. Peter, welcome back.

Peter Cohen: Thanks, Joe. Great to be back. Dan speaks for himself on how he got involved in this. But I did reach out to him when you said, who would be the most interesting person that I could have on as a co-host to hear about their views on higher education. And Dan was the first person that came to my mind. I'm thrilled you did it.

Joe Sallustio: I didn't think you would do it, Peter, but you did it. And that is that you revealed the name of my guest before I got a chance to introduce them, which is a very common rookie mistake for my first-time co-hosts. Almost every first-time co-host makes the same mistake. We know his name is Dan, but we don't know what company he works for yet. So you only got halfway to the reveal, but you stopped yourself. So well done. Because I got to give them the applause and everything. But all right. So it's back to you then. Right. But I just want to say that that is very common rookie mistake, but also a good teaser. I'm starting to think that maybe we'll build that in from now on. 

But Peter, before I get to Dan, Dan question mark, last time we interviewed you, you're a college president, University of Phoenix now doing other stuff. How's your transition been? How's life?

Peter Cohen: You know, I left the University of Phoenix just about two years ago to retire with the idea that I would take care of my grandkids. I would take long walks with my wife. I'd read all the books that were on my shelf and that I wouldn't work very hard. And I've taken on eight part-time jobs since then, including being a board member or board chair for five different companies and then working with two private equity groups and being a senior advisor, which means, you know, balls and gray for Boston Consulting.

So I'd say I've failed at the retirement portion of that concept, but I'm enjoying myself and continuing to be active in both K-12 and higher ed space. And I can't think there's anything more important for American society than trying to get this right. So I'm glad I can contribute the rest of my values and my time here to that endeavor.

Joe Sallustio: Bullseye. I'm not sure whether I give you any applause for failing to retire or tell you thank you for not retiring, but your contributions to the industry are well known and thank you for your great work. But let's get to our guest that you helped me secure. I don't know what you did to get him, but he's here. Ladies and gentlemen, he is Dan Rosensweig. He is the CEO at Chegg. You've heard of it. Dan, what's going on?

Dan Rosensweig: Well, first of all, thank you for inviting me. And you're right, Peter did reach out. I apologize for not saying yes in the past, but it took Peter one email. You know, nice job, by the way. And so I was grateful. A lot of that is because I didn't grow up in the industry, and Peter not only grew up in the industry, but grew the industry up. And I was relating to him that one of the things that Chegg is focused on now is mental health and recognizing that it is beyond a crisis. And I can give you all the statistics that should scare you if you're an educator or a parent or even a student. 

But I remember meeting with Peter when he was at University of Phoenix and he was educating me as to beyond the price of education and probably what we're gonna talk about today, which is what is the value of the current higher education. But also that the primary reason other than money that people fall out of education is because of the rest of life, whether it be healthcare. I think Peter, you were the first person to tell me just what percentage of college students are actually parents. 26% of them are parents that overwhelmingly they're women. They're women with jobs and kids. And then you had this mental health crisis and that changed so much of how Chegg thinks about the world now just based on one conversation that we had and we've gone as far as to offer every student that subscribes to Chegg free access to Calm as an example, a meditation app. We're building into using AI to build into building a coach and a relationship and confidence builders. So I credit Peter for that. And so when Peter reached out, I absolutely said, yes. So here I am.

Joe Sallustio: Well, he thinks a lot. Thanks a lot for doing what I couldn't do getting Dan over here. So I appreciate you. But Dan, I want to kind of start not at the beginning, but at a new beginning. And I don't want to rehash what we all know for what we for those of us that follow Chegg. But I'm going to give a quick summary and then ask you a question. For those who don't know, Chegg hit a COVID peak, doubled the business. And since then, the business has, I would say, been normalizing. And you could change my wording if you want, post-COVID peak, but still healthier than it was pre-COVID, from what I understand and the research that I've done. That COVID peak does a lot of things to people. You go, "My God, look at this amazing thing." And then you go, "Well, wait a minute. That was an anomaly for many companies in higher ed." But you come out of it now, you're normalizing, you've had the AI disruption, which I know you'll hit on, you've talked about the mental health. Set the vision for us as you've hit this new beginning for Chegg as the CEO of Vision Reset, of Vision Crystallization or Clarification. What's on your mind going forward for Chegg?

Dan Rosensweig: Yeah, a phenomenal description. So thank you for that. You know, it's interesting. I joined Chegg in 2010 after being the CEO of Guitar Hero. When you're the CEO of Guitar Hero and you launched Guitar Hero 5 and you launched Band Hero with a young emerging artist named Taylor Swift and you signed Eminem and Jay-Z to DJ Hero and then a year later, you go to your family and you say, I'm gonna rent textbooks for a living. And so there obviously has to be something much deeper about it. And what I realized was my oldest daughter, Rachel, was going through the college process and she had a younger sister and it became increasingly clear to me that the process of higher education had not really changed in 30 years. And then you go on the college tours and you recognize that the lecture is still the way people learn and that we're measuring things on silly things that have nothing to do with the quality or relevancy of education as they relate to college rankings.

You know, I was very fortunate that at that point in my life, I had accumulated enough experience to be able to do something that I thought might matter. Everything else I did, I loved and I had fun and worked with incredible people, but there's very few things in the world that matter more than the future of children and young people and their opportunities and their hope. And I had been a product and still am a product of the American dream with grandparents that had immigrated here into this country and a lot of people wouldn't hire them because of who they were, but they always focused on a good attitude, hard work, learning, and caring about young people. And my mom was a public school teacher for 39 years. My brother actually works in education, even though he's a janitor, but he still works in the high school outside of Chicago where his son went. And so it's always something that's been ingrained in me, which is that education is one of the components that can unlock a much more hopeful future. And that's what brought me to Chegg. 

And so when you ask what's changed, truthfully, the ability to do some of these things has changed because of technology, because of cultural shifts, because of cultural norms, because of the diversity of this country, and now because of AI. The ability to deliver is what's changed. But the goal has always been to improve the lives and the outcomes of younger people who have raised their hands, put themselves in the arena and said, I want a future. And in order for me to get the future that I want, I need to put an effort into learning things and doing things. And so Chegg has always focused on one of the biggest obstacles to student success and how do we reduce them? So we started with textbook rental because the price of education is still too damn high. But the fact that textbooks back in the day were the equivalent of 25% of annual tuition is a ripoff and insane.

Joe Sallustio: Yikes.

Dan Rosensweig: So we started with that and, you know, the publishers have had to change their entire business model because Chegg invented the rental model. And that allowed us to build a brand and a reputation among students that we cared about them. And then everything else we've done has been to eliminate other problems. The biggest thing that we do today is online homework help. We help students that struggle with understanding the concepts or who are struggling in their life as Peter taught me, which is so many of them, 62% of college graduates today are women. A large percentage of them are working women and have children. Well, they don't have time to do all the things that a traditional student has had the opportunity to do. The big growth right now is online education. Peter knew that when he went to University of Phoenix. The fact is the fastest growing parts of where people are going are online because they don't have the time.

And so everything Chegg does is to make learning easier, less stressful, more relevant and specific to you and what you need so that you can master the subject and do better. And that vision is not gonna change ever. What we offer within that context has changed. How we can offer it has changed, but that will never change. We're student first.

Joe Sallustio: Amazing. What do you say, and Peter, I'm gonna pass it to you right after this so you could take, 'cause you, I know you have a lot of questions, but that vision that you speak of sounds very clear. You have detractors though. You have those that go "Oh Chegg, you know, Chegg and these other sites. They facilitate cheating students. Really? That's the only reason they go there." The services that you're talking about are, are other than that, right? And textbook rentals has nothing to do with, with, with that. Yeah. What do you say to detractors that understand or don't understand what you're doing?

Dan Rosensweig: I stopped wasting my time with detractors because once you realize people's motivations, which are to protect what they want or to protect what benefits them, then you realize that nothing would have been invented. We wouldn't have invented the internet. We wouldn't have invented any of these things, right? So I put the detractors where they belong, which is if they say, look, there's something that Chegg could be doing better. I listened to that. But when they're completely opposed to accessible, affordable, relevant, personalized help so that students can master a subject that they need to learn to improve their own lives, then the problem is them. It's not Chegg that writes test questions, that rents test questions from publishers that have been used in thousands of university tests before. That's the professors that do that. 

All Chegg does is say, if you don't understand it, we're going to help you understand from beginning to end. Why is it the case? What are the elements that make up the case? What are the definitions that make up the case? It's actually step by step. If you just want the answer, you can go to your friend, you can go to your parents, can go to Google, you go to a classmate. That's not what Chegg was designed to do. And what you've noticed over the last couple of years, particularly since the launch of OpenAI, is the detractors are very, very, very much in the minority.

But we did actually do a survey. And of the people that, of the professors and the administrators that knew Chegg, only 4% are against us. 50% have no opinion and the near other 50% all think it's positive. 'Cause you know why? They recognize that the demographics of this country have changed, that who goes to higher education, they don't have a history of education in their household. English may not even be their primary, their first language. 25% of all college students today, English is their second language. And they may be immigrants or first-time college, you know, in their family going to college students, or they may be parents or mothers or working parents. Any opportunity that you can provide a platform that lets somebody affordably and accurately and confidently learn and master a subject should be something we all root for. Tell them like it is. So that's my answer, which is if you believe technology doesn't exist, if you believe the internet doesn't exist, if you believe that you can't use your phone to call or text a friend, then you can continue to hide out where you are and blame other people for the problems. But right now, here's what we know. 50% of all students don't go on to higher education. How come? 40% of students that do go on to higher education don't complete it. How come? And of all of them, almost 80% of them have taken out a loan of which 40% never pay back. This is lunacy.

Joe Sallustio: So it is lunacy.

Dan Rosensweig: So the question isn't what does Chegg do? Chegg supports those kids in their efforts when they're trying to do well. The question is, what can we do about the system itself to make it more affordable, more relevant, and give you more employable skills? That's where I'd like our attention to focus on. But I'm willing to take on the detractors because of the 8 million people that use Chegg every year. They love us.

Joe Sallustio: Yeah, you know, you make a good point about the model, the model, the model, the higher ed model itself has been resistant to change. So therefore, by its nature, it's resistant to anything that forces its change. COVID was a good example of that and had nothing to do with any kind of technology. It was a pandemic and all of a sudden everybody had to change something. Some went right back to where they were. Others have used it as a catalyst to propel themselves.

And Peter, I know you know a lot about what Dan's talking about, both detractors, because University of Phoenix has had its detractors over the years and also as an institution. I'm very, very close with Bill Pepicello, the former president of University of Phoenix, who is one of my mentors. And I talk to him probably two, three times a week. The point being is that look at all the good it has done. University of Phoenix has more graduates than like 90% of the universities across the country because of the massive amount they've put out and you don't even know it. So you've had your share of these kinds of conversations, Peter, haven't you?

Peter Cohen: Yeah, look, anybody who bucks the status quo in higher education, whether it's what John Sperling did at University of Phoenix to support adult learners who the traditional California system wouldn't support, or what Dan is doing with Chegg to help people understand the material that's been presented to them by a professor in the simplest fashion possible to help them take advantage of the very small amounts of time they have to study. Anybody who goes down those roads is gonna have detractors and we've seen it kind of all our lives. 

Dan, an interesting question for you around that. So it would seem to me that with the explosion of ChatGPT, that the detractors who were saying, well, Chegg just gives you the answer, now recognize that everybody can get the answer just by simply typing into their phone, any question in the universe. And if it's been written about anywhere before, anywhere that's online, you can get an answer from ChatGPT. So in essence, everybody can cheat on the facts today because they can get the answer somewhere. So in some ways it's it's no longer cheating, it's just the way of the world. And I'm wondering, has that sort of damped down the people who are concerned about what Chegg does because now it's really ubiquitous. And then the second part of that that I'd like to talk about is how has that impacted your business model because people can go to ChatGPT and type in a question and get an answer.

Dan Rosensweig: Yeah, look, those are the core questions of today, meaning those are the things that we are focused on. So Peter, you hit it right on the head. So on the first thing, yes. So the detractors of Chegg have diminished quite significantly. Again, it turned out there was only about 4%. They were just what the press liked to cover, right? They weren't covering professors that say, yes, I am an adjunct professor teaching at three schools earning $30,000 a year, and any chance I can to help my kids learn, I'm actually telling them to subscribe to Chegg. They don't write that story, right? They don't write the story that if you use Chegg, you actually stay in school longer, because that's a positive story. It's not what the press does.

But with the advent of ChatGPT, it really did change the game because there is an acknowledgement that there's nothing you're going to be able to do when Microsoft invests that kind of money in technology. And then all of a sudden Google has that kind of technology. You're not going to end that technology from happening. What ChatGPT actually does isn't great for students and that's why Chegg's retention numbers are through the roof. We're actually setting record retention numbers because ChatGPT, as you point out, Peter, could give you the answer, but not why it's the answer, not how you get there, won't recognize what part you didn't understand and teach you that part or build you a test automatically or quiz the things that Chegg will and does do for you. 

We're sort of the opposite, which is we're push AI, which is we already know who you are, where you go to school, what you're struggling with. And so we can push, would you like us to build you a test? Do you understand that this is the part that you're missing? We'll just focus on this part. They can't do that. So the actual learning, it really highlights what Chegg does for learning versus answers. So that point has become really important to us. The second thing is that ChatGPT is an illusion of accuracy. It's not actually accurate. It has no need to be and has never made a claim that it was accurate because what ChatGPT, what AI does currently, it looks backwards to your point. If it's ever been asked in 90% of the questions that professors use, as you know, they bought, they didn't even write them themselves. They don't even look at whether the student understands it. And that's frustrating to us because we do and we can help you learn it because if you upload it, we'll tell you this is what you made a mistake on and this is why it's a mistake and we'll teach it to you.

So what we do is actually become more important because you can actually compare us to something else. And ChatGPT gives the illusion because it writes just enough to lead you to believe that it might be accurate. The second thing is that what they do that Chegg has never done is they write your papers. We don't do that, right? You can't type in and say, Chegg write me a paper. We don't have the technology to do that. We've never had an interest in doing that. So to that degree, it's made Chegg look more like the good guy that we've always believed that we are and always hoped to be and always try to work towards even being better at. 

The second question is, of course, the gazillion dollar question, which is AI, a generic generative AI versus an expert vertical. So through any of us that have grown up in the internet, and I grew up being a publisher of the largest computer magazine running the largest tech site, being the CEO of Yahoo, so I've been in tech for a long time. One of the things I've learned is that generalists are really good at doing general things, but specialists are what win in verticals. So, you know, the portals never won in commerce. Google never won in commerce. We all go to Amazon. They never won in travel. We all use the travel sites. And it's because what verticals have is they have a very distinct data set, which Chegg only has of 14 years worth of history, a hundred million questions that have been asked or answered.

In the month of January alone, we answered another 2.6 million new questions that had not been asked before. Surprise. So it was actually a big surprise to us. You know, having accurate, relevant, up to date, contextualized within the process of learning for learning differentiates us. And so when ChatGPT first came out a year ago November, we didn't really see an impact of it. Then on the February earnings call, I said, we haven't really seen anything, but mostly that's because nobody goes back to school in December and January. In May, what I said was we're beginning to see an impact of it. And that of course, you know, was the worst public five minutes of my life having lost 40 years of my value. 

So, but what nobody could know from that moment until there was more time was what's the real impact. Since then it's become clear that what they do isn't what we do. What they do is not necessarily accurate. They don't really focus on sort of the homework help kinds of questions. They're better for ideation and writing. That's not what Chegg does. Chegg is for learning specific subjects. Rather than work with their large language model, we used our own data set. And by using that own data set, we can have greater confidence in the relevance and personalization and accuracy.

Joe Sallustio: You're talking about Cheggmate, right?

Dan Rosensweig: Well, Cheggmate is what we called it last April. It's actually now just Chegg. Okay. Because one of the lessons that I learned was that AI was not going to be the thing. AI was going to be within the thing. And so for us, we can go to the 160,000 human experts we have if we don't have confidence in AI accuracy yet in a certain vertical, or we can go to our automated answers. In the month of January, we had 500,000 questions that we sent to humans to answer, and we had 2.2 million questions that we were able to answer with great confidence and immediacy using our automated answers with AI. And that's because we have that 100 million set of data and all the history from a school or a professor. 

And where we're going next is even more exciting, which is we're gonna say, look, it looks, Joe, like you're struggling with X. Do you want us to write you a quiz for it? Do you want a definition for it? Then after that, we're gonna be able to say, look, do you want us to assess you? Then we're gonna build a coach, which will go a lot to the mental health, which is, look, it looks like your test is in two weeks. Do you want us to write you a timing plan? Because time management is really hard for young people. It's really hard for anybody. And so we'll be able to bring them, push to them so they don't have to ask. They don't have to be desperate at the last moment. That reduction of stress allows for students to do better, to sleep better. We'll be able to do things like if we connect to your Oura ring or if you're using Calm, we'll be able to say, looks like you haven't slept well in the last few days. Do you want us to give you a meditation app?

We intend to serve the whole student the way the school has never been able to do and we'll be able to do it scalable. So yes, ChatGPT initially siphoned a small subset of our users, but we didn't know if it was gonna get bigger. So we did this terrible thing on an earnings call, we told the truth. And as a result of telling the truth, we got spanked. But the real business problem turns out what Joe mentioned at the very beginning, which was we had in 2019, we had a couple of hundred million dollars in revenue. We're now up to 700 million in revenue, all of the Chegg services. If you had taken us from 2019 to 2023 and got rid of the peak COVID year, we'd look like an incredible grower of revenue and profits.

Joe Sallustio: You've also described that to someone, took Chegg off it and just showed the line and showed that COVID year, they wouldn't believe that that's something like that. I mean, it's such an anomaly.

Dan Rosensweig: We doubled the number of new accounts that we would that we brought in in 2019. By 2021, we had twice as many new accounts come in. Now, a lot of that was because schools didn't know what to do. They were putting tests online. They were trying to figure it out. I don't blame the school for not knowing what to do when COVID hit. What I do say is for 10 years before that, we've been telling the schools exactly what Peter went into, which is that the age of college-age students are getting older, they have jobs, they have families, they can't go full-time. Online, online, online. And because they never built things that online schools did. So for example, you can't use any online service to cheat on online schools because everything is built into the actual product itself. You're not even ripped off on textbooks. 

So the fastest growing school in the country is Southern New Hampshire University, which is an online school. While the demographics are flat, they probably added 30,000 more students. So, you know, from my perspective, AI is going to go from a - has gone Peter from a Mike Tyson punch in the face for our generation, more of a UFC takedown in this generation to a tailwind, which is we now can use it to the advantage of the students. So what's happening is the number of questions you can ask has gone up. The number of categories has gone up, which expands our TAM. We've ensured for the quality by building quality algorithms and metrics. And the cost of answering the question has dropped by nearly 10-fold. And so our ability to answer more at a lower price with greater immediacy and similar accuracy will make Chegg the preeminent vertical again in the education space and that's what we're working towards. 

And then when we have these other services, like, do you know what job skills you need? Imagine a scenario, Peter, where we can say to you, we know where you're going to school. We know you're taking finance. We know kids from your school ultimately go into these 10 companies in your state. We know what the average salary is. We know what skills they want. Would you like us to assess you to see if you have those skills? And if you don't, would you like us to teach you those skills? This is what AI is gonna let us build. That's how the vision expands, Joe, from what we could do before to what we can do now.

Peter Cohen: Dan, you are so spot on there. And I think a couple of things you said are worth repeating. When AI first came out, you created a product that had AI in its name to reflect the fact that we're on the train too. And then you recognize that AI as the tool enhances your cost structure by making it more efficient. It enhances learning by making it more personalized. It allowed you to connect data and dots that you wouldn't otherwise be able to do in real time to create learning paths and help people understand where they need to go next. And that the power of the AI is basically its invisibility as opposed to calling AI the product. You moved into this skills area, which I'd love to talk a little bit about with you.

I know there's a Chegg skills product. One of the challenges that I was always frustrated with in traditional higher education was that when employers talk to higher education institutions, they would find that the institutions were not preparing those students for employment. And the language of education and the language of skills for employment were completely disconnected. And at Phoenix, we tried to change the language and correlate all of our courses and all of our course content to the specific skills that the federal government had matched to specific jobs. So you knew what skills you had, what skills you needed in order to get the next job. And as I think about the future, this is a question for you and you mentioned just briefly, this concept of helping colleges prepare students for careers, which is why about 90% of students go to college in the first place is to get ahead in their careers. How are you seeing that unfold and sort of how quickly are you gonna be able to recognize this vision of being able to help somebody understand what they know, what they need to know, and what job that will get them, how to the gaps, and where to fill those gaps. Because that is kind of the holy grail, I think, for the piecework. That's why college should exist.

Dan Rosensweig: That's why college should exist. You're right. 90%, 88%, we had students go to get a better job. And 53% of college professors don't think it's their responsibility to give you skills for your first job. So therein is everything you need to know. The fact that the price of college has gone up, the government has given everybody money, and that you can't return on that money based on the job you get from what you learned in college, that's the problem with the college loan system, is they never cap the price of education, and they never focused on what curriculum that makes you actually employable enough to pay the loan back. Nobody would mind taking out a loan if what you got from the loan was the ability to return on that and make more money. The problem today is, the average salary is $25,000 leaving school, 50% go into sales because they didn't get any employable skills. And we've got this technological revolution going on where you need to have these skills.

Joe Sallustio: It's fuzzy math.

Dan Rosensweig: So it is fuzzy math. And so going to exactly Peter's question, what's changed for Chegg? Well, as you said, originally we went on from a small group of loud naysayers to now actual colleges and institutions contacting us directly and asking for help in two things. One, we supply homework help. Because we only talked about the competitive schools, but you know there's schools in this country that have 35,000 students in it that take 100% of those that apply and less than 10% graduate. And those are the not-for-profit colleges. So it's in their best interest from a business perspective to actually get those students to learn and stay in. So there's an opportunity now for Chegg to build what was a direct-to-consumer product into these institutions. 

As part of that, Peter, and the skills part that you talked about earlier, we recognized a long time ago that because of technology, remember I was a publisher of PC Magazine, large computer magazine at the time, technology is going to change every couple of years whether we like it or not. And so whatever you learned is not gonna be enough for you to be effective in every part of your career. So, you know, I'm a liberal arts lover. My kids went to a liberal arts school. So the ability to match critical thinking and analysis and question and thought along with practical actual skills that can be useful. So if you ask a financial, one of the big hedge funds, what do you look for when you hire? Well, they need to be brilliant. They need to this and you do that. I said, but if they did all that and didn't know how to use a spreadsheet, would you hire them? No was pretty much the answer. Right. 

And so it's this recognition that these two things need to be tied together. It's not teach this and not teach this. It's expand this. And what's fascinating to me and really a positive, positive, positive step is we recently met with the head of the teachers union, which, you know, mostly focused on K through 12, not higher education. And Randy sees exactly what we see, which is 50% of the kids that graduate high school don't go on to higher education. So what are they actually prepared for? We've got a free education system. It's called K through 12. Imagine a scenario where you're combining the great subjects you learn with subjects that you also could learn. And what we're also seeing is not only can we go direct, not only are corporations working with us to skill their employees that didn't come in with those skills, but we're seeing a few institutions say, can we offer some of these to our students? And in those cases, the institution is actually willing to buy them and provide them to students because they recognize what's the value of their institution if people who go there don't get a job. It goes...

There's only a couple of schools that by name feel like they guarantee you employment when there's 4,500 schools in this country. You're seeing a lot of these smaller schools close or sell themselves. So the administrators, the presidents know what you do. The challenge is educators fear loss of importance, loss of relevance, and loss of job. And what we've got to do is a better job of helping them understand this is not, should not be at their expense. This should be adding value to what they already do. And that's gonna take a long time because government organizations of which 70% of all kids go to state schools, which are government organizations, right? They don't change quickly because no one's made them change. But the parents have changed, the students have changed, the employers have changed. And so if you ask me why I have hope now that they'll change, it's because if employers won't hire from your school, why would kids go there? And so, this is what I think the technological revolution is causing to have happen. It's just not gonna happen as fast as it should on behalf of the students. And so that's why Chegg is trying to provide those capabilities over the next several years, where we'll say, we know what job you're likely to go for. We know what they need. 

And there's a real focus on something called durable skills, not just how do you code? Because you know what? AI will code for you. It's these durable skills. How do you work in a team? How do you critical think? How do you communicate to people? Stupid things like how do you write an email? These young people have never been in a situation. Everything they've done is been online or on their phone. Human interaction is still an essential part of human life. And especially in the workplace. So I do think it's moving in that direction. I know we're going to be supplying those capabilities and those assessments, and I hope to work with institutions to be able to provide it to them because as an employer, everybody wins.

Joe Sallustio: One comment, Peter, and then I'll pass back to you. Dan, you said earlier the word scalable sticks out for me because scalable, when we think about scalable, we think about people or accounts or members. For higher ed, scalable to me means is a part of speed. How do I scale my curriculum builds to be faster? You know, when an employer comes to me and says, really need somebody that has this. If I can't get that in my curriculum and start Monday, then it's not something that's scalable. If I have to go to a bunch of committees to get something approved, to have somebody look at it and dissect it and run through the months and months and months of change, that employer moves on to another school that can do it faster for this grant or another service that can provide it. But that's where we and Peter, you know, that's where higher ed really has trouble because we have systems that are built to not scale. Period.

Peter Cohen: Yeah, part of that is that the systems are built around a government rubric called the Carnegie unit. That's not necessarily the best unit for learning, which is why when you compare a college course to a course that comes out of a training company, the training company's course may be much more immersive, much more engaging, much more interactive, but doesn't follow the Carnegie unit rubric that forces you to have a certain amount of direct teacher interaction, a certain amount of homework support afterwards. And because of that, we can't quickly build to employers needs. And that is one of the things that I think needs to change in the way hired institutions are currently running and the way they currently are connecting to employers. 

And Dan, I wanted to talk to you about the employer side of this because I think there's an opportunity there and I was curious if you've already gone after it. You mentioned the durable skills which used to be called 21st century skills about 20 years ago. Or soft skills.

Dan Rosensweig: Yeah, soft skills. Now they call them durable skills, but it's the same issue.

Peter Cohen: As human beings, need to be able to communicate, collaborate, be creative, critically think, have character, and those kinds of things that separate human beings from machines in general. And colleges don't measure those well. And if one of the frustrations employers have is that kids graduate from college and they can't demonstrate that they have those skills, but they also need the types of hard skills that you were talking about, whether it's math skills or computer literacy skills or physics skills or medicine skills, et cetera.

Dan Rosensweig: How to write, how to think, how to ask questions, all of them.

Peter Cohen: Yeah. And so the question for you is you think about a future state for Chegg. Are you looking at all going directly to employers and saying, look, we can help you reskill and upskill your employees by directly being your partner? Because we're not bound by kind of the slowness of the higher ed institutions, which are trying to retain this rubric that is government regulated. Have you considered that at all?

Dan Rosensweig: Yes, and we do it. And actually, it's a really great question because it's really interesting time for it. So of the many mistakes that I have made in my career, one of them is when I wanted to get into skills, we bought a direct-to-student skills company because Chegg was direct-to-students because institutions have all that politics. They forget that they actually are supposed to serve the student, which is Chegg is student first. That doesn't mean we always do a great job or write. We try. Our North Star is what does the student need? Where the institution has a lot of mouths to feed and we only had one. 

So when we went out to get into the skills business, recognizing that all of these students were going to be coming out with a lack of the necessary employable skills beyond the skills that they learn in school, that the employers wanted in addition to the things that they learned in school. But at that exact moment is the time when we almost were at full employment. And so therefore corporations started to offer it as a benefit to their employees. We will pay for it. You don't have to pay for it yourself. So we have since pivoted that business to go directly to institutions, to corporations, and through a partner Guild, which I know Peter's familiar with, where they bring a series of learning tools and skills to their employees. That business has more than doubled for us in just the last few years as an example of its importance. 

So if you look at Chegg as a report card on higher education, what it says is students are not able to learn everything professors want them to learn in the short period of time they have them and isn't able to do it scalable because we no longer have homogeneous students coming into the classroom, diverse backgrounds, diverse countries, diverse languages, diverse home situations. That's made it harder on professors, not easier. That's not fair to the professors. Chegg can do that at scale because we can personalize around where that person is and meet them where they are. Skills is becoming the same thing. 

And so what's changing with employers is it went from we want coding boot camps, which we were never a big fan of because that's only a small subset of people that were gonna learn to code. Neither of my daughters wanted to learn to code. I made them learn. They're like, they're still not forgiving me. They wanted liberal arts and they've done really well with liberal arts and I'm proud of them. But what's happening now is you have to be bespoke. You have to say, what is this particular employer's needs at this particular moment? So when we work with Walmart through Guild, they focused on their frontline workers. But when you work with other organizations they work with, they may be working with middle managers. 

And so one of the other real benefits to AI is the time in which it takes to build curriculum around skills has dropped from months to weeks. And the cost has dropped from hundreds of thousands of dollars to more in the 40 to $50,000 range. And so we have absolutely moved aggressively in that area. It's probably the fastest growing part of our business today. And we work through Guild, direct with corporations and increasingly, there's a request for us to work with institutions and what I mean by that is institutions of higher education. So it's the pairing of those two things. 

You know, people who wanted to be negative said, well, not everybody wants to be an engineer and we shouldn't be teaching people to get jobs. It's like, it was never about that. Ask yourself why a student is going there. What is it they need to learn to be a great citizen, to be a great friend, to be an ethical person, and what do they need to learn in order to be able to be employable in a modern corporation. Remember, we built agricultural schools when the United States was primarily an agricultural world. Institutions have always done that. Why there's a fight about it now was confusing to me. But I think the realization that your institution may not survive if you don't has changed the game. Because if you're going to get state funds and employers are telling the governor, we can't employ somebody from your state school, we know the pressure is gonna be on them.

Joe Sallustio: Dan, we wanna be sensitive to your time. We ask two questions to end every episode. Really one's more of an open mic moment for you. What else do you wanna say about Chegg? What else do you wanna say about Chegg? Anything at all, open mic, take the opportunity and close us out with what you see for the future of higher education. Very open-ended on both of them.

Dan Rosensweig: Look, I'll just limit what I say about Chegg to this. We're proud of what we do. We're proud of who we do it for, and we care about the future of young people around the world. And we want to put the most powerful tool in their hand, which is ability to learn what they want to learn, the way they learn it best, and be supportive of them as they do it 24-7, and not around someone else's needs, but theirs. And the fact that we have probably close to 25 million people in the current workforce that were Chegg users at some point in their life is a real point of pride for us. And the technology of AI is going to be worked to the advantage of the student through Chegg in a way that no generalist AI environment can do it. And that has always been the history of technology and the internet, and we expect that to work to our advantage. So I would leave it at that. We're here as student first. 

The state of higher education is exactly where you think it is. It is a scary time to be in higher education. It is a scary time for college presidents who have alumni who don't agree with the choices that have been made over the last couple of years. It is important that people who come out of those schools represent themselves well in the workplace to generate future students to those schools. It's important that we recognize that the speed and pace of change is unlike anything I've experienced and I've been in tech since 1983. I used to sell advertising to Steve Jobs and Bill Gates and Michael Dell and Larry Ellison personally. And when you look at the fact that we've now got companies that are worth $3 trillion, $2 trillion, $1 trillion and they're all based on utilizing technology to the advantage of the business they're in and the people that use them. Education needs to accelerate their willingness to understand that they're gonna make mistakes, but the biggest mistake is not taking the chance to evolve. The biggest mistake is ignoring what's happening around them with the hope that we will go away, because it isn't going away. 

So my fondest wish is that we can be a great partner to those that are looking to utilize this technology, but can't afford it individually, because not every school is huge. Most of the schools are not huge. We've got some very big ones. And then the other fact that I would just point out to you is that students are voting. They're going to the largest state schools with big football programs. Why? Because they're saying the experience is more important than the education brand name. The second thing is they're going overwhelmingly to online schools because they're older and they need it for time efficiency. And so you're seeing growth in there. And then you're seeing a very giant growth in HBCUs because the government finally funded them to the degree where people feeling a sense of community going to those places. And so if you're running a school and you're saying, do I stay relevant? Look at what kids are voting with and then ask yourselves, how do I get there? And Chegg wants to be your partner in doing that. And that's, I don't know, Peter, if I missed any of the bigger points or if you wanna add to that.

Peter Cohen: Look, I think you're spot on there. Higher education is part of what we need in America post high school to get people into jobs and being good citizens in society. We know that only a third of adults actually have a college degree. So the other two thirds still need to be educated. This diaspora of opportunity to continue to skill, upskill, and reskill people outside of universities is actually bigger than what happens in universities. And universities could own that space as well, differently because they know how to teach people. I actually think higher education, because things change so slowly in America, I think many of them will get it. To your point, the ones who do get it will get bigger and the ones who don't get it, as you already pointed out, will either become absorbed by other universities or closed down. We're seeing more of that as time goes on. But the smart people, and there's many, many smart people in education, will figure out how to serve the broader adult population as you already identified, which are now making up the majority of students in universities.

Dan Rosensweig: And if I just add to that, I think that was perfect, which is there are people that have been leading in the previous part of education, like Arizona State University, which has went to online, went to offline, went to support, went to work with corporations like Starbucks. Not everything works, but the fact that they put themselves out there, I think was a game changer. If you look on the other coast, you look at Northeastern just opened up a $200 million AI lab. They're doing everything, they have an 86% graduation rate over six years because they marry education and employability. And they have the highest demand that they've ever seen. And so you can see what works in the minds of students and parents and employers. And I agree, higher education should not go away. It should be enhanced. Higher education should evolve the way it is traditionally evolved. And we root for them and we want to work with them and so do others by the way. I just, the signals are clear. This is the confusing part is how to do it. It shouldn't be if to do it. 

And I think that's if I can leave one message to anybody, including my own company, we know AI is going to be a part of everyday life. We know that we're moving from a knowledge economy to a capabilities economy. What can you do for me? And in those worlds, every one of us needs to evolve. And the bigger companies, and you can look at schools like they're bigger companies, Microsoft, Google, Apple, Amazon, they're winning big because they have the resources to do it. This is about willingness. And my company had to change on a dime less than a year ago, and in less than a year, we completely changed the user interface, completely changed the way we answer questions, completely changed how we use technology. Because if we hadn't, we wouldn't necessarily have been here. Now we've got a chance to grow again. And I root for higher education institutions to do the same thing.

Joe Sallustio: You talk about willingness, Dan, and I appreciate your willingness to come on this podcast, even though I had to lobby Peter to convince you. But now that you have and we know each other and I see that you're at home, I just want you to remember. Just call me up. You know, I make home visits. So if there's another. I'm ready for that. I pity the. Nice couch over there for me to chill out. 

I know honestly it's been an honor to have you on, but I want to let my first my guest co-host go. He's Peter Cohen, board member, advisor, former college president, educator extraordinaire. Peter, what do you think of this episode and this conversation?

Peter Cohen: I think Dan is leading the charge on what can be done to help students get through college and that student persistence and student retention is key to a college's ultimate success. And his company is one of the companies that makes sure that students do persist and succeed. And if you're gonna spend the money to get into college, we wanna make sure that you get the benefit by graduating from college. So Dan, thank you for what you're doing to help students succeed.

Dan Rosensweig: Well, thank you, my friend. And thanks for being somebody who gave me that piece of advice, which is reform the way we think about helping the whole student and not just that one part.

Joe Sallustio: Ladies and gentlemen, my guest, he is your guest. He is Dan Rosensweig. He is the CEO of Chegg and he is leading one heck of a company. I would watch out for 2024 from Chegg. Dan, we hope you could stretch you got to stretch your legs, so to speak, on this podcast and you had a good time.

Dan Rosensweig: I enjoyed it because it's important talking to people that care about the future of young people and what they need and what they're capable of. You know, when you reach a stage in life that Peter and I are at, there's really nothing more important because this is an amazing country with amazing opportunities, with all the problems that people think we have and we have them all. It's still the only one that somebody can come from nowhere or anywhere and have an idea and have a chance to succeed in life. And what we forget about these kids is they're putting their hand up, they're entering the arena. And you gotta love them for that. And anything we can do to help them is worth taking time for.

Joe Sallustio: Ladies and gentlemen, you've just ed-upped.