Equalizing nations: looking at technology versus government

I’ve long been fascinated with developing countries. Most of the world’s population resides here and the quality of life and per capita productivity is much inferior to that of the rest of the world. As William Gibson once said, “the future is here, it’s just unevenly distributed.” So when the policies and technology exist to enable a better quality of life, why does this uneven distribution still exist?

An intriguing answer came in the book: “Why nations fail”, which argues that countries that succeed basically have the following characteristics:

  1. Incentives to invest and innovate via private property rights and enforceable contract law.
  2. Education and infrastructure so that investment and growth can occur.
  3. Governance by its citizens via democratic principles, rather than a small elite.
  4. A monopoly on controlling violence (no mafia, vigilantes, etc.).

Interestingly enough, I think none of these things must only be provided by a state. In fact, today we have a couple examples of prominent B2C ‘marketplaces’ for instance that essentially do the same. A couple of examples include Uber, Mechanical Turk and AirBnB (all companies that have done quite well in developing countries):

  1. Incentives to invest: In many countries it doesn’t make sense to invest in property, business, etc since the government takes the vast majority of the benefits. However, making a home nicer on AirBnb or driving a nicer car via Uber allows you to participate in the upside via the fee that is transferred from one consumer to the next. These marketplaces have dodged the need for government intervention by providing the means for value and monetary benefit from one individual to the next via marketplace mechanisms.
  2. Education and infrastructure: Many countries have poor educational systems and so folks can’t grow up to take on high-value jobs. However, Uber, for instance, pursues a narrow value prop (driving safely and creating an enjoyable experience) and as a result can provide the required training themselves. Further, the infrastructure (a car, payment transfer, website hosting, etc.) is provided with zero upfront cost, enabling it to be affordable for anyone to participate.
  3. Democratic “rule”: In many countries, a dictator rules and so policies can change on a dime. Marketplaces, in contrast, act more like democracies since they are owned by hundreds if not thousands of individual investors who vote to make core changes in the companies structures and decision making. These companies are almost always set up as Delaware C corps, meaning that governance is set up almost to mimic democratic principals (since these have been deemed by the investment community as the most ‘investable’).
  4. Monopoly enforcement on violence: Marketplaces provide value in many ways, but one of the most important is to ensure civility and fairness. If they don’t, consumers will flock to another marketplace that does. As a result, these companies have published guidelines that history has shown they enforce.

I believe we’re starting to see the early signs of how these marketplaces can enable success in developing countries. Uber, Mechanical Turk, and AirBnB are just a couple categories, and they are categories that require the least training and education for their workforces.

The next level of marketplaces that could enable productivity are those that invest in real training, and as a result are able to connect individuals in these countries to opportunities across the world (higher paying jobs). Naturally, these wouldn’t be the first marketplaces that thrive in developing countries. Training is not easy — it’s time intensive and not everyone can succeed. And the infrastructure required to connect these workers in a productive manner to global job opportunities is significant. For these types of companies to be successful, you’d need at the very least:

  1. Robust internet
  2. Elegant communication tools (messaging, call, and video)
  3. An ecosystem of global companies that are set up to hire and work remotely

But we may be here. In countries like Mexico, the internet has just become stable enough. In the last three years, WhatsApp and Slack have emerged to enable messaging and audio. Zoom has emerged to enable video communication. And now with Wufoo, Zapier, Gitlab, etc, companies that are 100% distributed, there is the precedent for companies set up to hire and enable distributed workforces with at least if not greater productivity than that of centralized workforces.

The remaining piece to enable these next-generation marketplaces is training and then the creation of the actual marketplace that can broker the connection between these newly qualified workers and jobs they could be set up for success. Education is hard — it takes time, motivation, and dedication. And it may need to happen not only on the labor side but also on the hiring side to ensure the employers are set up to work well with distributed workers. So I wouldn’t suggest tackling the harder training opportunities first — on the spectrum of easy to hard, remember Uber and AirBnb started with easy opportunities. Here’s a very incomplete list of the ‘easy’ marketplace opportunities that require the least training:

  • driving/delivery (via Uber/Lyft)
  • hosting (via AirBnB)
  • repetitive tasks like data entry (via Mechanical Turk)

The next layer of opportunities might be as follows:

  • call center customer service (via LiveOps)
  • sales (not yet done)
  • recruiters (not yet done)

And then hard opportunities may still be a couple years out:

  • programming (starting via lambda school)
  • administrative assistants (starting via Fin and Magic)
  • accounting
  • nursing

A new marketplace focused just on remote opportunities in order to enable workforces in developing countries, could start by training remote workers in sales and recruiting, both huge needs for new age high growth companies, and work its way up to harder to train and higher paying jobs.

Eventually, if a marketplace like this works, it could break workforces in developing countries out of the low-income → poor education → lack of opportunity → inability to move cycle. As these workers gain income, countries could get wealthier, economies would be stimulated, and countries regimes would be incentivized to create policies that encourage workers to stay or they face losing workers to more progressive countries.