Social return on investment

- [Voiceover] In the last video, we figured out where we could be in 10 years in terms of total usage. And the reason why we really like the total usage as our focus is because it's a combination of reach and engagement. We clearly want to grow our reach, but we also want to grow how engaged a student is over a certain period of time. It's important to realize what this number represents. You might be tempted to compare it to minutes in a classroom, or minutes in a school, but every minute in a classroom and every minute in a school is not a time where the student is necessarily focused on task as we might all remember from our classroom experiences. It might be significant amounts of time where you are not directly learning. These minutes that we measure on the Khan Academy, these are minutes that are much more likely to be time where the student is engaged. Where they're actively doing an exercise; actively reading; actively watching a video; or as timed actively working with another member of the community; or writing a computer program, or working on their portfolio. So in a lot of ways, it's not a fair comparison to say, well how many minutes is someone in a classroom? This is highly engaged minutes. But anyway, that got us to this fairly ambitious goal. As you said, this is a lot of engagement, and this is a multiple of how many students there are in some of the largest countries in the world. So these are, at this point, in 10 years, Khan Academy could be reaching many, many, many students at a very engaged level. Now, anytime you're deciding where to allocate resources in the world, you don't just think about the return you get. And as a not-for-profit, our return is in terms of social impact, as opposed to some type of profit. But you also need to think about, well, what is the investment required? And if you are in a for-profit, you would say okay, let me take what I get, divided by how much I put in, and that will give me some type of a return calculation. And you can get arbitrarily sophisticated, taking present values and discount rates and whatever else. But what I want to do in this video is really continue the back of the envelope calculations, to think about the social return of investment of Khan Academy. And think about how that can grow over time. So, right over here, these first three columns are exactly what I did up here in the previous video, where I talked about, okay, how reach grows ten-fold over the next 10 years. How engagement grows ten-fold. Our monthly learning time grows a hundred fold. But then I start to include some information about our budget. So this right over here, this is our rough monthly budget at Khan Academy right now. It's about 2.5 million, and I have it growing up 20% per year over the next 10 years to 15 and a half million. And that, once again, is an approximation. I don't know exactly how fast Khan Academy's budget is going to grow five years from now, six years from now. But thats a reasonable assumption. It might accelerate, depending if we find some sources of revnue. Or if there's a huge impact opportunity. Or it might slow down because of other macro factors, or we just decide we don't need to grow our budget. And over here, we have the percent from philanthropy. And this is interesting because if our mission is a free world-class education for anyone, anywhere, and we're committed to never putting a gate on the student in terms of some type of a pay gate, or we never want to put ads on the site, how do we get resources other than from philanthropy? And answers even today, we have about 50% of this year's budget is going to come from non-philanthropic sources. And those include the corporate partnerships. And actually, corporate partnerships include a lot of things. It includes things like what we're doing with the college board, where they're investing in us so that we can develop the very mission-aligned work around preparing students for college. You have the partnership with the Bank of America. Once again, that's something that they view valuable for their brand. So it's not philanthropic. But it's very aligned with what we are doing around empowering people financially. We have revenue from things like Learn Storm, where it is a corporate social responsibility, but once again, the corporations find value being associated with it. And as we go forward, we get more reach and our brand gets hopefully, more enhanced. We see more and more folks wanting to work with us. And we see other, other sources of revenue opening up as well. There could be sources of revenue around college remediation. And once again, these are things we would never... This wouldn't be about charging the students. This would be about, well, if we can help a college save costs in some significant way. If we can help a school district save costs in some significant way. Well maybe we can create tools for them, or create solutions for them that can help us fund our broader mission of a free world-class education for anyone, anywhere. And so because we see these sources of revenue only increasing, mission-aligned revenue only increasing especially as a proportion of our total budget. You can see that the total percentage from philanthropy goes down. I actually have our monthly budget from philanthropy growing about 8% per year over the next 10 years. This obviously is not an 8% difference, it's an 8% compounded, growing by 8% compounded over 10 years. But what's interesting is, if you can come up with these estimates, and this is a pretty firm number. But if you then can come up with an estimate for in 10 years, we could think about what's the cost per learning hour today and in 10 years. And even today, that cost is about 31 cents per learning hour. And I want to emphasize the hour over here. And I did an hour just to make these numbers at least in the pennies so that we're not talking about fraction of pennies. Over here we talked a lot about millions of minutes. These are per learning hour. So even today, we're about 31 cents of philanthropic dollars per learning hour at Khan Academy. And if we achieve this target right over here, we're going to be actually a little under a penny per learning hour. Or another way you could say it, it's a dollar per 60 learning hours. However you want to think about it. And so that, just as a, you know, just numerically, seems like a pretty good deal. If I could give a dollar and a student is going to learn for 60 hours, that seems pretty high impact. But how could we come up with maybe a social return around that? Well, we could try to quantify what the value of a learning hour actually is. And so if you see your investment, and then get the value, well then that gives you a return. So, hey, if I invest 31 cents per learning hour, the value of a learning hour is a dollar. Well, that's going to be a 320% return. One dollar divided by my return, divided by my investment over here, which by any stretch of the imagination from the investing world is a very high social return. In fact, in a lot of places, it's even hard to measure, even make a back of the envelope return like this. But this is a very good number, and it's worth calling out. This is assuming one dollar value of a learning hour, which, at least to me, seems like a very conservative number. If you assume what these learning hours are, the level of engagement, these are students on task, getting things personalized for them. Getting it on demand, where there probably is not a tutor available. And as we talk about in the vision, it isn't just about videos, exercises, articles, what alleys we have today, it's about our future moralities. It's about students learning from each other, peer-to-peer. And so if you think about tutoring in the developed world, it's anywhere between 10 and 50 dollars plus per hour. And even if you're getting tutoring from the developing world, you're still talking about things that are probably north of a dollar per hour. So this is a... I feel pretty good about this, but you could try out different numbers here and think about what you're going to get. But the numbers, almost no matter what reasonable thing you put here, become pretty crazy. Especially if we continue to scale our impact. Then our philanthropic social return, if its value of a learning hour is a dollar, but the cost of a learning hour is only a penny, then you start having, and it's actually under a penny. It rounded up to a penny. Then you have these kind of crazy numbers when you think about their actual return. Obviously, I'm committing my life to Khan Academy for a reason. It's because I don't think there is a higher social return for our time as a team, and I'd like to think we could always make the case to philanthropists that this is an incredibly high social return for their philanthropic dollar.