Thematic Equities

Artificial intelligence (AI) may have an overall positive impact on educational outcomes and return on investments (ROI) in the sector. Nevertheless, there could be negative consequences for certain business models as well as job losses, especially among lower-skilled professionals.

Generative text is something we all need to adapt to... We adapted to calculators and changed what we tested for in math class, I imagine. This is a more extreme version of that, no doubt, but also the benefits of it are more extreme as well.

Sam Altman, CEO, and co-Founder of OpenAI¹

An earthquake with an aftershock

The launch of OpenAI’s chatbot, ChatGPT, in November 2022, introducing its large language model (LLM) to consumers, had a seismic effect on many sectors, including education. It became the fastest-growing consumer application in history, reaching 100 million subscribers within just two months after launch.2

In April 2023, we took part in ASU-GSV,3 one of the world’s largest education conferences, attended by more than 7,000 participants,4 many of whom were teachers worried about potential job losses due to the threat that AI could pose to their profession. Most of the sessions were devoted to the impact of ChatGPT, which indicated that AI is likely to remain a dominant topic for the sector for a while, competing even with fundamental considerations in the case of certain stocks.

A real aftershock for the sector came in May 2023 when Chegg, a prominent EdTech company, admitted that ChatGPT was having a negative impact on its customer growth.5 The subsequent stock reaction over the following week was severe, both in the education and the career mobility segments. Most notably, Chegg’s share price fell ~42% and 2Uֹ’s price dropped ~26% in the education technology space, while Fiverr lost ~26% and Upwork slumped ~16% in the career mobility space.6

Cheating or an efficiency tool?

To demonstrate the benefits of using ChatGPT, we asked it to write the section below. After several attempts and under our guidance regarding the conclusions, the title and the tone of the article, we obtained the following outcome.

AI + HI = ROI: Maximizing efficiency and enhancing education through AI integration (by ChatGPT)

Introduction:

The integration of Artificial Intelligence (AI) in education brings forth numerous benefits, including increased efficiencies, enhanced learning experiences, and improved return on investments (ROI). This article explores the positive impact of AI in education from various perspectives, such as teaching assistants, educators, students, and investors. While acknowledging the potential for job transformation, it emphasizes the importance of maximizing efficiency while preserving the value of human interaction (HI) in education.

1. Empowering teaching assistants and enhancing efficiency:

AI technology empowers teaching assistants by automating administrative tasks, enabling them to focus on personalized guidance, adaptive instruction, and meaningful student interactions. This collaboration between AI and teaching assistants improves efficiency, allowing educators to maximize their impact on student learning outcomes.

2. Enriching educational experiences for students:

AI algorithms facilitate personalized learning experiences, adaptive tutoring, and data-driven insights into student performance. Teaching assistants leverage AI tools to provide targeted interventions, support individualized learning paths, and foster student engagement. The combination of AI-powered tools and human interaction enriches educational experiences, promoting effective learning and growth.

3. Investor perspectives: driving ROI through efficiency:

The implementation of AI in education drives operational efficiency, reduces costs, and enhances educational outcomes. By automating administrative processes, optimizing resource allocation, and leveraging data analytics, institutions can improve ROI and provide a more efficient and effective educational environment. AI integration presents opportunities for investors to contribute to the growth and innovation of the education sector.

Conclusion:

The integration of AI in education presents immense potential for maximizing efficiency and enhancing education. While acknowledging the potential for job transformation, the focus remains on optimizing processes, improving learning experiences, and achieving a positive ROI. AI empowers teaching assistants to provide personalized support, adapt instruction, and foster student engagement. It enables institutions to drive efficiency and make data-informed decisions. By embracing the benefits of AI while preserving the value of human interaction, education can undergo transformative improvements, benefiting educators, students, and investors alike. The continuous pursuit of efficiency and innovation through AI integration ensures a future-ready education system that prepares learners for success in a rapidly evolving world.

In our view, the article sounds rather mechanical and the general tone is overly positive. However, by outsourcing the time-consuming writing to ChatGPT, we saved time and received a decent outcome written under our guidance. This leads us to believe that ChatGPT could:

  • empower teachers by freeing up their time from administrative tasks and allowing them instead to focus more on students instead, thus improving educational outcomes.
  • enrich the student learning experience, which – again – may improve outcomes.
  • improve investor returns through efficiency.

From the students’ perspective, it gives them a chance to learn how to use a very practical tool that they will most likely leverage further in their future careers. Furthermore, students know that they are still required to understand and learn the material to pass their exams.

Co-pilot for teachers freeing their time to focus on interactions with students

The most obvious advantage for teachers is the ability to outsource many administrative tasks to ChatGPT, such as planning lessons, generating exercises, or drafting emails, enabling them to focus on individual students. To demonstrate this functionality, we asked ChatGPT to plan a history lesson about the French Revolution for high-school students.

Lesson topic: The French Revolution: causes, events, and impact (by ChatGPT)

Objective: To provide students with an understanding of the causes, key events, and the impact of the French Revolution, enabling them to analyze its significance in shaping modern France and its influence on global history.

Duration: Approximately 60 minutes

Lesson outline:

1. Introduction (5 minutes)

  • Begin the lesson by engaging students in a discussion about revolutions and their significance in history.
  • Highlight the importance of the French Revolution as a major turning point in world history.

2. Historical context (10 minutes)

  • Provide an overview of the political, social, and economic conditions in France leading up to the revolution.
  • Discuss factors such as the absolute monarchy, the Estates system, economic inequality, and Enlightenment ideas that contributed to the revolutionary sentiment.

3. Causes of the French Revolution (15 minutes)

  • Present the primary causes of the French Revolution, including financial crisis, social inequality, Enlightenment ideals, and political discontent.
  • Discuss the role of influential figures such as Maximilien Robespierre and Jean-Jacques Rousseau in shaping revolutionary thought.

4. Key events of the French Revolution (25 minutes)

  • Discuss the major events of the French Revolution, including the Estates-General, the storming of the Bastille, the Reign of Terror, and the rise and fall of Napoleon Bonaparte.
  • Explore the significance of each event, its impact on the course of the revolution, and its implications for French society.

5. Legacy and impact (10 minutes)

  • Examine the long-term effects of the French Revolution on France and the wider world.
  • Discuss the establishment of a republic, the spread of revolutionary ideals, and the impact on subsequent revolutions, nationalism, and the development of modern political systems.

6. Analysis and discussion (5 minutes)

  • Encourage students to analyze the causes, events, and consequences of the French Revolution.
  • Engage students in a class discussion about the significance of the revolution and its relevance to contemporary society.

7. Conclusion (5 minutes)

  • Summarize the key points covered in the lesson.
  • Encourage students to further explore the French Revolution through additional readings or research.
  • Highlight the importance of understanding historical revolutions and their impact on shaping societies.

Note: The above lesson outline is a general framework, and it can be adjusted based on the specific needs of the class, available time, and the level of understanding of the students. Visual aids, primary source documents, and interactive activities can be incorporated to enhance student engagement and deepen their understanding of the French Revolution.

If we analyze the content of the lesson plan, it is of good quality, with guidance for the teacher on how to improve educational outcomes. However, notice the discrepancy: the lesson was supposed to last 60 minutes, whereas the sum of the individual parts total 75 minutes. ChatGPT is a language model rather than a calculator and its abilities are constrained by the quality and quantity of data it has been trained on. As a result, its usefulness in math and exact sciences is currently limited.

Teachers work 10 hours and 40 minutes a day on average. Approximately 30% of their daily workday consists of administrative tasks and planning lessons.7 This time could be spent more efficiently by addressing students’ individual weaknesses or finding more engaging supporting materials, which in turn could improve teachers’ morale. Only 20% of teachers in American public schools claim that they are very satisfied with their jobs.8 More engaged students and better motivated teachers should lead to better educational outcomes.

Job losses or efficiency gains?

When teachers spend less time on administrative tasks, there could be a temptation to increase their workload, for example, by assigning more classes to the same teacher. This could relieve some pressure on the industry to find new teachers, which is a major issue, because many teachers retired during the COVID-19 pandemic for health reasons or due to stress.9 For investors in the education sector, this would mean higher returns since costs savings and efficiency gains could increase margins. This effect would be most noticeable in the case of companies where high labor costs push margins down.

With a shortage of 69 million teachers around the world, we think that schools are unlikely to dismiss qualified teachers, and therefore fears of large layoffs in the education sector are unwarranted.10 In our view, outsourcing administrative tasks to an AI-powered platform would make the profession more rewarding, since teachers would have more time to focus on human interactions and finding the “individual key” to each student, which, in fact, may have been the exact reason why they had chosen the profession in the first place. (The idea of spending weekends marking papers or filling out administrative forms seems far less appealing). However, we can see some pressure on entry-level teaching assistants, who used to perform those mundane tasks, to either upgrade their skillset and become qualified teachers or to retrain and work in other industries.

The question of whether AI takes jobs or creates them remains open to debate. As an example, if elements of a code can be written by AI, one might think that the world no longer needs so many coders. However, one could also argue that today every company in the world is seeking to incorporate AI into their products or services, and therefore there will be an even greater need for IT professionals who understand and know how to use AI. Coders might be much more productive if they use AI to create standard pieces of a code and focus instead on designing complex structures and inventing new applications. As a result, their jobs may become even more interesting and fulfilling.

AI + HI = ROI

According to a US tutoring company, there are several benefits of AI:

  • Better student retention when there is a lesson plan for every lesson. Students appreciate lesson plans; however, before ChatGPT emerged, it was challenging to persuade tutors to prepare them.
  • Better tutor retention since lesson preparation takes less time.
  • Access to additional free content covering 3,000 subjects.
  • Better sales productivity thanks to using AI for training and replacing sales scoring previously done by an AI-supported call center.
  • Cost savings obtained via closing that call center and automating some coding jobs – up to 30% of the code is now produced by AI.

Overall, through better retention, costs savings, and productivity gains, the company was able to improve the lifetime value of its services and reach earnings before interest, taxes, depreciation, and amortization (EBITDA) profitability ahead of the plan.

AI to increase teachers’ efficiency

We believe that AI is a revolutionary efficiency tool that will greatly increase the productivity of many workers, as the calculator once did for engineers, as Sam Altman noted. It may also improve job satisfaction for many professionals, allowing them to focus on more complex and therefore professionally more professionally rewarding tasks. Teachers, who spend about 30% of their time today on administrative tasks including lesson planning, will be able to dedicate more of their time to interacting with students, which for many was precisely the reason why they chose the profession. This may lead to better educational outcomes. At the same time, we think that fears of significant job losses among teachers are exaggerated, given the shortage of 69 million qualified teachers after COVID-19 pandemic. Finally, AI is anti-inflationary, which should relieve the pressure on margins that some companies in the sector experienced when the tight job market tightened. This should be particularly visible for companies with low margins due to a high labor component. The same can be said about other sectors that struggled with the shortage of labor, especially low-skilled labor.

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