How Duolingo Fixed AI
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Hello, and welcome to the TLDR podcast, a show about the culture, gossip, and business of money. And this week, ¿Cómo empararé una lengua su teléfono? My name is Devin Friedman. I am here with my co-hosts. Matt Keres is the director of product for WellSimple. Matthew, how's your week?

My week is awesome. I saw all these advertisements for Wicked, and so I've been listening to the soundtrack to try to, like, get into the mood. Wow. That is a mental picture. Why is that the pop culture thing that you glommed onto? Like, that's of all the things going on, Wicked is the one that you're like, I can't skip Wicked. I read this article about how they were just spending an enormous amount of money on the movie, and I was like, wow, what gave them the confidence to do that? It must be good. Yeah.

Sarah Rieger is the business and markets correspondent for the TLDR newsletter coming to us from her home office in Alberta. What's going on? There is so much snow outside. I'm kind of tempted to just let it pile up and like never leave, you know, just not shovel, just stay in here. Can you steer into it and just like bake an apple pie and stoke the fire? Oh, 100%. I've been making many soups, so I'm all set. Cozy through the end times. I love it.

And this week, we are joined by a special guest host, Elamin Abdelmahmoud, who is a culture writer, the author of the bestselling book, Son of Elsewhere, and the host of the CBC Pop Culture podcast,

commotion. Alameen, I'm very happy that you're here. You're going to save us from ourselves today. I'm thrilled that I'm here, but also just thrilled to hear about Matthew seeing Wicked. To me, it's compelling that we live in such different universes, that this is the first time that Wicked has entered your airspace. Until they spent a billion dollars on it, it did not exist to Matthew.

Well, they just haven't made any charts yet. I mean, I'm just going to make Wicked the chart version. I'm going to go see Wicked immediately after this in honor of Matthew. Okay, we have a really exciting show. We're going to talk about why Canada Post is in a sort of state of financial failure and if it's fair to put it in the position that it's in.

We're going to talk about how we learn and whether Duolingo is built for that. And we're going to talk about how to make money at the movies. And we're going to start with you, Sarah Rieger.

Who is making or losing money right now that's interesting to you? Canada Post is losing so much money that it could actually run out of the cash it has on hand by next year. At the time of recording this, postal workers are still on strike over wages and changing roles. So I want to talk about kind of how we ended up here and what mail delivery in Canada might look like in the future.

Can you quantify for us how much money Canada Post is losing? In the last six years, which is how long ago Canada Post last earned a profit, it has lost $3 billion, $750 million if that was just last year, and it's on track to lose money again this year. I'm going to ask Matt

Cara is the minister of, is this number large or small? Is this number large or small? I mean, that level of losses around $750 million a year could be big or small depending on the context. Very big if you're a private company, small if you're a part of the government. That sort of gets at what the issue is here, right, Sarah? Yeah.

Yeah, and that's kind of the weird thing about Canada Post. So it used to be part of the government, which means it was fully funded. But that changed in 1981 when it was turned into a crown corporation, which means it's still owned by the government, but it's not funded by tax dollars. The idea at the time was by making it operate as a corporation, which needs to make money, it would have more incentive to kind of operate efficiently.

But it's hamstrung, right? Like the rules are different for how the Canada Post can operate versus how a private corporation can operate. Totally. Canada Post is legally required to somehow deliver mail to all Canadians, no matter where they live, but it has to finance all that delivery itself as a for-profit corporation, which has caused some trouble as the type and the amount of mail we receive has really changed over the years. Yeah, let's get into that. Well,

Well, I'm curious, how much letter mail do you guys send or receive in a normal week? Does weird garbage like stuff from banks that want to lend me money and circulars and all that, does that count as letter mail? No, that's actually something called direct marketing. And that makes money for Canada Post. I'm talking like a postcard. An actual letter from a person? Like something in an envelope. Yeah, or say from your bank account.

Wait, hang on. It's Christmas card season. Do you not send any Christmas cards whatsoever? I just like the culture of Christmas cards I think is so annoying where it's like, look at my family and here we are, like, here's a picture of us on the beach. You don't have to have a picture of yourself on it. You can just say, hey, have a nice holiday.

I got one postcard in the last month from my niece who stayed in my house and she sent me a thank you. That's it. Yeah. So the amount of regular mail people are sending and receiving hit its peak in 2006 and has dropped since then. Back in 2006, the average household was getting about seven letters a week. Now it's just two. But that doesn't mean like the amount of deliveries people are getting has dropped. Right.

So we're not getting letter mail. We're getting... Well, in my case, garbage I've ordered from Amazon. Canada Post has a monopoly on letter mail delivery. But the bulk of money right now in mail is in package deliveries, which Canada Post doesn't have a monopoly on. Yeah, I mean, in some way, it's like the rules that Canada Post has to operate under are for a different era. So, like, what's the answer here?

Is there any argument that's like, yeah, keep funding Canada Post and let it lose some money every year? So I think there's a divide in what people are saying should happen with Canada Post. Some, like Carleton professor Ian Lee, have really suggested they need to cut down services and restructure to make the company more competitive with these e-commerce businesses. So that could look like franchising out post offices, changing mail carrier routes to be more dynamic instead of the same route every day, and cutting down all door-to-door delivery costs.

But the Postal Workers Union has suggested something kind of more expansive as a vision for the company, which would be rolling out postal banking to serve people who live near post offices but not near banks or credit unions. And also just other services, like even checking in on seniors. And the government could choose to subsidize it, too. Like, if it feels like protecting access to rural mail is important, it could remove some of this requirement for profitability.

But I do think the main thing is it can't keep trying to do both of these things, like operate as a competitive company and give service to everyone. Matthew, if you can channel Elon Musk here, what would the super small government free market people say about what should happen to Canada Post?

I mean, the super free market people would say that it shouldn't exist and that this is one of the many services that the government should just let the private sector do more inexpensively. The problem that I see is just like the scale of government is just so big relative to like what most people's experience with money is that whenever they hear a number that the government spends, even if it's like the smallest thing they're spending on, they're like, wow, that is a huge number. Like we should go deal with that problem.

But like in the scale of the stuff that Canada is spending on, like backing up Canada Post is like a rounding error. I totally agree. It does seem like a small price to pay. I learned firsthand how important Canada Post access is since moving out of a big city because my house isn't actually like registered on any delivery maps or Canada Post maps. But...

Because it is a government service, I'm guaranteed a free P.O. box. So if I drive into the nearest town, I can receive mail and I get like prescriptions delivered by mail. Those would not be as easy to access out here. And, you know, I hesitate to think of a senior or someone really low income who couldn't pay for the career alternatives to that.

And isn't part of the purpose of government to do things that are not profitable to provide greater good for people? Yeah. You know, I think the question is whether it is worth spending a little bit of the government's money to, like, make sure that everyone, not just most Canadians, get access to delivery. And two, that, like...

You're not subject to the whims of some big foreign corporations to get a core service in your country that like, you know, if you got into a spat with UPS, they threatened to pull out. You like wouldn't be up Schitt's Creek. You'd be able to help people get the mail. And that was, of course, you were not swearing. You were referring to the great Canadian television show. I thought that show is in Wyoming. Yeah.

Oh, wow. Oh, wow. Is that a different one? I mean, we can't make him go too fast. Let's let him get through Wicked and then this can be next for him. Did you know that you can still get mail? Yes, I know about mail. No, but I'm talking about like mail mail. All right, Matt.

You're up. Who is making or losing money that's interesting to you right now? Duolingo, you know, the single biggest language learning app in the world. The one with like the fun, quirky owl mascot and all of the bright colors. That company is making a whole lot of money and it's doing it all in a way that, you know, I personally find really fascinating as a perspective on like the world and how AI is actually starting to impact our lives.

That's interesting to me because I haven't really been following it as a business story. I actually have used it a bunch off and on. And I'm always like, how does this company make money?

One way that I found it useful to understand how Duolingo is winning is actually just to look at how the stock and the company performed over the last couple of years. Back in 2022, Duolingo actually seemed like it was probably one of the worst positioned companies in the world. It was burning money, much of it on marketing, and it looked like it was going to be one of the first companies that would fall prey to ChatGPT since its whole business revolves around translation. But

Duolingo has completely bounced back and is now up about, you know, almost 2x since when it IPO. It's doing better than all the major markets and they're and they're profitable. They're not all that profitable, but, you know, they're pulling in around 100 million dollars a year in profits. Better than Canada Post. Exactly.

You know, I think that the way that they did it was by like using AI as a tool to help them like keep people engaged in a way that they could never before, which shows that they're like complementary to AI, not, you know, something that's going to be like wrote and replaced by it.

And you actually see it more and more explicitly in their product design over the last couple of years. Like their video call product, where you can get a video call with an AI avatar named Lily that will know what language you're trying to learn and what words you know, and will just chat with you. And the way that the avatar is trained is like, okay, Devon only knows 200 words of Italian.

try to talk to him and answer his questions using mostly those 200 words. And then the other thing they did is like they've mastered some of the social dynamics that I think have worked so well for Meta, in particular friend streaks. You know, how many days in a row you're opening up Duolingo and doing your lesson and you can like post that to a group of friends and like congratulate each other. Hold on, we're overlooking the most powerful tool that Duolingo has in its arsenal, which is just like how sad the bird looks.

If you've not been keeping up with your streak. I feel like I just like ended his life every time that I'm like, oh, I'm so sorry. That's on me. I'll come back tomorrow. And that was like actually a real innovation. Like I noticed that.

Like it changes on your tile so that my kids are like, dad, you suck. Dad, you're murdering the bird. Please do your lesson so that the bird can be happy today. I mean, that kind of stuff is all over the product. They've like bought animation studios to make, you know, do their own animations for different things in the app. It's like freaking amazing.

What does it tell us about what people want? Like what's Duolingo doing well that makes it successful? What insight does it have about us? The core insight is

I think from having used it myself and also from like reading their like company blog where they talk about how they work is that that education is about engagement. The CEO, Luis Van An, has a quote in an interview he gave a couple weeks ago that really like struck with me, which is when given the choice between like engagement and education, the choice is easy. They will go for the engagement every single time.

And the reason that they do that is because the hardest part about teaching something to somebody is getting them to show up and continue trying. And so when they think about how to design their product and when they think about their success, they mostly mark themselves in how many people are continued and come back and

And if you actually look at the stats, it's pretty amazing. They have 130 million people that use their product every month, and about 40% of those use it every day, which is sort of like Facebook-level engagement levels. I usually think that any app that works on an engagement model and a gamification model is fundamentally bad for humanity. But the fact that the goals of the company in this case are actually aligned with the

The goals of the person using the app makes me feel good about Duolingo. Like, hey, they want you to stay on this app so you can learn Italian. And then you stayed on the app and then you learned Italian. One thing that actually really shocked me, guess what's the most studied language on Duolingo globally? French. Icelandic. I was just going to say, like, Mandarin? English. Almost 50% of people are...

on Duolingo are trying to learn English. It makes you think that like the real use case here is not people who

are doing this for fun, but people who have a real vested interest in learning another language so they can get a job. Yeah, actually one of the big questions that people had over the last couple of years was, "Oh my God, now that the travel boom is floundering out, are people not going to use Duolingo anymore?" And that really hasn't hurt the company at all because that's not the main reason that people use the product. It might be for somebody like me or maybe you, Devon, but the main reason people use the product is as a core part of their lives.

I usually tell myself that I don't actually care how companies make their money, as long as it's legal. But there was something about doing the research into Duolingo that made me feel really good. And so I either... Oh my God, we touched Matthew's heart. Yeah, either I have a heart or I'm just being swayed by all the bright colors and the cute owl. The, the... Yes, very good.

All right, El-Amin, the moment we have all been waiting for, your inaugural, who is making or losing money that is interesting to you right now? I wanted to talk about a movie. I want to talk about this new movie called Anora.

because it is having a really interesting box office success. Specifically, what I want to talk about is the release strategy that they're having, because I think the way that they're releasing this movie tells us something about the movie industry right now, and potentially, I think it could be a blueprint for how an indie movie can break through all the noise and then potentially succeed. All right, so we're really going to get into...

How do movies make money? Can little tiny movies survive in the world we live in now? But let us begin with what is a Nora? Okay, so I haven't seen a Nora yet. I haven't seen it either.

And, you know, people love this movie. It's like about a sex worker who works at a club and gets whisked away by a Russian gangster of some kind. Yeah, that's kind of what we generally know about it. It is already at this point one of the frontrunners for all the major big Oscar categories, but like...

The fact that we have heard of the hype but have not seen the movie is actually a part of the strategy of this platform release, which is the thing when you choke the demand by not making it available in every theater everywhere. When it came out in October, it started out with a run in six theaters.

Six theaters only. But what it managed to do in those six theaters is it managed to have the second highest per screen average in terms of bringing in money of the decade so far. That's a pretty impressive kind of haul.

And then they start slowly expanding it. When you have something that is like tiny and intimate like this one, you need word of mouth and you need energy that sort of picks up over sometimes weeks, sometimes months and months and months. Are they trying to make the movie go viral? Is that basically what this approach is about?

And sometimes the virality is an explicit part of this. But the central proposition of a platform release is to take the money out of the conversation so that the only conversation there is, is the quality of the movie, why you should go see this movie. You've seen this work for movies like Everything Everywhere All at Once, you know, is a kind of movie that like had this platform release very limited at the start. And then word of mouth grows and everybody says, boy, what a weird movie. You really got to go see it. All right, let me ask you this.

What's the conventional wisdom about how you can make money in a movie theater? Well, the problem is that those numbers have been skewed by a couple of things. One, they've been skewed by streaming, but then they've also been skewed by Marvel. Marvel has had this very odd...

unbelievable, never seen before run of every single movie is you put $200 million token in and then you pull the lever and then $2 billion comes out. So if you're a theater, you're looking at a Marvel movie and saying, yes, this will be the thing that makes this work.

But if I can just return us to Enora for a moment, the conventional wisdom has been that there's been very little room for that kind of movie in the general atmosphere. And what the platform release teaches us is you can still do it. You just have to be smart about it.

But, you know, my question is how repeatable is the Enora phenomenon? I think that what I'm interested in is maybe the creation of two lanes. But I would like, you know, ideally is for when you go to see your local multiplex and

you know, and there's 12 screens at that movie theater, and maybe 10 of them are playing a Marvel movie. There's a couple of theaters in there that have room for the Anoras and are interested in, you know, pushing cinema forward in some kind of way. How different is this from, like, the way that things always were? Like, in the past, there were some movies that were in all theaters and some movies that were in some theaters, right?

Today, you're clearly saying that, like, yes, the movies that are in all theaters are really only these mega hits. Is it that the other smaller movies aren't getting made or it's just that, like, the distribution is just different now?

Some of those choices that were available to you in a movie theater 25, 30 years ago are not available now. I think what's fundamentally happened is distributors have started looking at the cost of getting a movie to a theater and then getting everybody to show up at the movie theater to watch that movie to be so prohibitively high that they're hedging all the time.

And so what you're starting to see is with these smaller movies, they're more likely to go to streaming. And in fact, they end up being made directly for streaming. And as a result, you just get a little bit less choice.

The thing I'm just trying to wrap my head around is like, does that actually matter for anyone? I'm going to let Elamin answer and be smarter than me, but I'm going to put my opinion in anyway. The thing that streaming does is that it changes the model of what you're trying to get people to do, which is subscribe to your platform rather than like a piece of content or be interested in a movie, right? So you're going to take fewer gambles. The

You know, it's like the famous story is Back to the Future was like a sort of a box office snore for many, many, many months until people discovered it and it made more money than anyone ever could imagine. But it never would have if it were in the movie theater for, you know, how long movies are now in movie theaters before they get pulled.

Now, that's the economic case. Matthew, I'm going to make the emotional case, if you will, which is that when you go to the movie theater at your local AMC and Nicole Kidman comes out and she says, we come to this place for magic, that

That's a real thing, right? Like to me and to a lot of people, movie theaters used to be slash kind of are their own forms of cathedral. Like it's a way of communing with art that is fundamentally different than you watching a movie at home with your phone out. You should be able to experience a meaningful cinematic creation, a piece of art, if you will.

in those places. And if we're talking about sort of the balance between art and commerce, art has been getting its ass kicked for a little while. And it's kind of nice to figure out what strategy art can use to maybe get up off the mat for like one minute. That makes sense. It's compelling and sad. Compelling and sad. I have a heart in this one too. That's beautiful. In this episode, Matthew finds his heart.

All right, that's it for this episode. Sarah Rieger, tell them what they learned. We learned that Canada Post is struggling, but if you don't send Christmas cards, you might not care. We learned that Duolingo is using AI and gamification for good. And we learned that there's still hope for indie movies to capture our wallets as well as our hearts. Okay, everyone, thank you so much for listening. This show is sponsored by Wealthsimple. It is made by me, Devin Friedman, Matt Keres, Sarah Rieger, with Mathilde Erfolino, Leah Fetter, Kat Angus, and Jared Sullivan.

Help from Tom Johnson and Alison Hopkins, fact-checking by Brennan Doherty, theme music by Andy Huckbill, and engineering by Emma Munger. Special thanks again this week to Elamin Abdelmahmoud.

The TLDR podcast is offered by Wealthsimple Media Incorporated and is for informational purposes only. The content in the TLDR podcast is not investment advice, a recommendation to buy or sell assets or securities, and does not represent the views of Wealthsimple Financial Corporation or any of its other subsidiaries or affiliates. Wealthsimple Media Incorporated does not endorse any third-party views referencing this content. More information at wealthsimple.com slash TLDR.