Article
From learning to earning
We believe that providing relevant skills for employment, as well as professional and vocational training in the most employable professions is becoming the next battleground for EdTech companies.
December 2, 2020

Article
We believe that providing relevant skills for employment, as well as professional and vocational training in the most employable professions is becoming the next battleground for EdTech companies.
December 2, 2020
Why do people spend so much time on education - is it worth it? I spent over 20 years in formal education from primary school to post-graduate degree, and I consider this period some of the most enjoyable time in my life. You learn something new every day, while making friends on the way, and above all you are young and carefree. But was the time well-spent from the point of view of getting the most highly paid job out there? …and is everything about money? Perhaps not.
In my view, that much time spent in education, although highly enjoyable, is a real luxury and as with all luxuries, highly exclusive. In my case, growing up in the former Soviet Union, I benefited from extraordinarily generous state subsidy. I was able not only to study absolutely for free, but also received a monthly allowance for living expenses, enough to regularly visit my parents by plane or take an overnight train to see the first McDonalds in Russia… but that is another story.
For most people, bar the “eternal students”1 who may still benefit from the generous education systems which still exist in some places, the idea is to get a job as quickly as possible, start earning and paying off the student debt accumulated during the years of study.
Those student debts are indeed significant, considering for example, that the cost of education in the US has, according to the Bureau of Labor Statistics2, risen by more than 12 times over the last 40 years, which is approximately 4 times greater than the overall rate of inflation. As a result, in the US graduates owe on average $30,000 of debts and most worryingly 41% of them are under-employed3.
One of the reasons for such a high underemployment figure for the US graduates is that they have not acquired the relevant skills they need for a specific job. According to McKinsey’s America’s Future of Work report”4: “Workforce skills have been a growing concern in the United States for many years. Now technology demands new and higher-level skills, including more critical thinking, creativity, and socioemotional skills. The skills needed in fast-growing STEM5 roles, in particular, are continuously evolving. The old model of front-loading education early in life needs to give way to lifelong learning. Training and education can no longer end when workers are in their twenties and carry them through the decades”.
The need to develop relevant skills for employment is well understood, which is why they are part of the UN Sustainable Development Goal no 4. Target 4.4: “By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship”. Specifically stating that “beyond work-specific skills, emphasis must be placed on developing high-level cognitive and non-cognitive/transferable skills, such as problem solving, critical thinking, creativity, teamwork, communication skills and conflict resolution, which can be used across a range of occupational fields.”6
It is not just the type of skills but the profile of the job market and demand for certain professions that are constantly evolving. On the one hand automation is phasing out jobs7 in office support, production work, food services and retail sales. On the other hand, demographics such as ageing population in particular boosts demand for example for qualified healthcare professionals, which is now becoming the fastest growing profession in the US.
Chart 1. McKinsey forecast for potential job growth in the US, 2017 to 2030
Source: McKinsey Global Institute (2019). The future of work in America: People and places, today and tomorrow. Derived from https://www.mckinsey.com/featured-insights/future-of-work/americas-future-of-work
"Chegg will continue to expand [its] offerings and make it easier for students to accelerate their path from learning to earning. Students are increasingly looking to improve their professional opportunities by learning the most relevant job skills, either while in school or soon after"
Dan Rosensweig, CEO of Chegg 9
Another company – 2U Inc - makes their strategic development direction even clearer. With its 2017 acquisition of short courses provider ‘GetSmarter’ and the 2019 acquisition of Boot Camps business ‘Trilogy’, the company now offers the full spectrum of courses priced from $1,000-5,000 which take 1-2 months to complete, to $10,000-20,000 Boot Camps that take around 6 months, to full degrees taking up to 3 years that could be priced at $200,000 or more.
What is interesting is that the benefits of this strategy are now becoming clear, because the short courses revenue is growing at more than 2 times the rate of growth of traditional degrees10. Is this the beginning of the end of the traditional educations system as we know it?
Picture 1. 2U Inc’s full range of courses in terms of duration and costs
Sources: Credit Suisse, 2U Inc; based on 2Q 2020 results presentation & investor call transcript10
Providing shorter courses that develop skills most valued by employers is the next battleground for education companies because they cut the time from “learning to earning”. This battle itself is a result of extremely high inflation in the costs of education evidenced in very high student debt upon graduation from university plus the rising number of graduates who are still unemployed. Change in job profiles due to automation and population ageing, and lack of high-level cognitive and non-cognitive/transferable skills that employers need drive the demand for lifelong learning as opposed to traditional degrees. As a result companies involved are currently experiencing growth rates much higher than those of traditional education providers.
We do not think that the traditional form of front-loading education will disappear altogether because that experience of formal education is what equips one with the ability to learn and pick relevant courses later in life. However, over the long-term we see an interesting investment opportunity in short-courses, vocational and other forms of lifelong learning.
Risks
Sources
1 https://www.ekathimerini.com/242878/article/ekathimerini/news/eternal-students-will-have-to-graduate-or-drop-out, accessed on September 25, 2020
2 Credit Suisse based on Bureau of Labor Statistics data
3 https://s21.q4cdn.com/596622263/files/doc_financials/2020/q2/Chegg-Q220-Investor-Deck.pdf, p7, accessed on September 25, 2020
4 https://www.mckinsey.com/featured-insights/future-of-work/americas-future-of-work, accessed on September 25, 2020
5 STEM: Science, technology, engineering, mathematics
6 https://sdg4education2030.org/the-goal, accessed on September 25, 2020
7 “The Technology Trap” by Carl Benedikt Frey, 2019, Princeton University Press
8 Chegg’s press release announcing its acquisition of ‘Thinkful’ 4/9/2019 https://investor.chegg.com/Press-Releases/press-release-details/2019/Chegg-to-Acquire-Online-Skills-Based-Learning-Platform-Thinkful-to-Help-Students-Accelerate-their-Path-from-Learning-to-Earning/default.aspx, accessed on September 24, 2020
9 Chegg’s press release announcing its acquisition of ‘Thinkful’ 4/9/2019 https://investor.chegg.com/Press-Releases/press-release-details/2019/Chegg-to-Acquire-Online-Skills-Based-Learning-Platform-Thinkful-to-Help-Students-Accelerate-their-Path-from-Learning-to-Earning/default.aspx, accessed on September 25, 2020
10 2Q20 Earnings _ Investor Presentation _ FINAL (q4cdn.com) (PDF), accessed on September 23, 2020
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