Shares of language learning platform Duolingo (NASDAQ:DUOL) moved higher on Tuesday afternoon following a controversial decision. Management disclosed that the company cut some contractors, partly attributed to the wider deployment of generative artificial intelligence (AI). Further, the Duolingo layoffs underscore a much broader discussion about AI replacing human workers. Still, the framework isn’t quite as clear-cut as the mainstream narrative would suggest.
According to a Bloomberg report, the language learning specialist “offboarded” about 10% of its contractors. Per a company spokesperson on Monday, “[w]e just no longer need as many people to do the type of work some of these contractors were doing. Part of that could be attributed to AI.” While blunt, the Duolingo layoffs weren’t exactly a surprise.
In November, Duolingo CEO Luis von Ahn stated in a letter to shareholders that the company is using generative AI to produce “new content dramatically faster.” Such material includes scripts and visual presentations that help teach languages. The educational technology (edtech) specialist also introduced a premium tier — Duolingo Max — which features AI-generated feedback and conversations in other languages.
To clarify, the spokesperson mentioned that the job reduction doesn’t represent a “straight replacement” of workers with AI. Notably, many of Duolingo’s full-time employees and contractors use the technology in their work. Further, no full-time workers were impacted by this latest round of Duolingo layoffs.
Duolingo Layoffs Align With a Broader Debate
While the aforementioned employees may be breathing a sigh of relief, the Duolingo layoffs still impose an uncomfortable discussion. In April, the World Economic Forum estimated that AI would cause “significant labor-market disruption” over the next five years. In fairness, the report stated that the net impact may be a net positive so long as workers re-up their skills.
Still, that may be of little comfort to those already axed and whose jobs may be on the chopping block next. In June, online tutoring platform Chegg (NYSE:CHGG) stated that it would cut 4% of its workforce. Ironically, it stated that it would better incorporate AI into its tutoring, even though AI itself disrupted its business.
Also last year, IBM (NYSE:IBM) stated that it would pause hiring for roles it believes can be replaced by AI in the next few years. So, the Duolingo layoffs align with a broader debate, contrasting potential accelerated productivity against human needs.
Nevertheless, those fearing a doom-and-gloom outcome must consider the tremendous risks of wider AI adoption. In particular, AI and deep learning systems suffer from the “black box problem.” Essentially, because of the opaque nature of how digital intelligence protocols arrive at their decisions, it’s incredibly difficult to backtrack the processes leading up to unwanted outcomes.
In other words, when humans make mistakes in work environments, it’s easier to pinpoint causality: lack of sleep, excessive distractions, office conflicts, etc. However, when AI systems err, the missteps often offer little in the way of potential causal explanations. Ultimately, the lack of outcome predictability may hamper net productivity, not improve it.
Why It Matters
Moving forward, if the AI replacement trend underscoring the Duolingo layoffs continues unabated, it may raise broader valuation concerns. Stated differently, if companies can replace critical functions with AI, end-users and consumers may question the true value of the underlying product. After all, why pay for an AI-powered language-learning service when a free AI platform can get you similar results?
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
