The tech industry often touts AI as a magical, autonomous solution, but the reality is far grittier. Behind the glossy veneer of automation lies a massive workforce of low-wage labourers, primarily in countries like the Philippines and India. These workers perform tasks that AI cannot yet handle or train the AI to eventually take over. This practice is not limited to small startups but extends to tech giants like Google and Facebook, which rely on thousands of offshore workers for tasks such as content moderation.
For instance, a company I studied, which matched buyers and sellers of local services in the US, had only four software engineers in San Francisco. Instead of developing sophisticated algorithms, they outsourced the bulk of the work to a hundred workers in the Philippines. These workers used their discretion to match service requests with providers, performing monotonous yet essential tasks to keep the platform running.
The incentives driving these companies are primarily shaped by venture capital (VC) funding. Venture capitalists provide financial backing with the expectation of short-term profits, often at the expense of sustainable business models. This dynamic creates a stark divide: a small group of well-compensated employees in San Francisco with stock options and benefits, and a much larger group of low-wage contractors offshore.
These offshore workers are often treated as disposable assets. They are lured by the illusion of being part of a “team” or “family,” only to be discarded once they have helped the company meet its VC benchmarks. This exploitative model extends to places like Las Vegas, where frontline workers bear the brunt of customer dissatisfaction caused by constant product changes dictated by San Francisco engineers.
The tech industry’s promise of automation often falls short. Companies like Facebook continue to rely heavily on human labour for tasks like content moderation, despite yearly assurances from Mark Zuckerberg that AI will soon take over. This reliance on human discretion underscores the complexity of these tasks, which are too nuanced for AI to handle alone.
Moreover, the VC model exacerbates the problem by prioritising shareholder value over all else. This shift from a post-war era focus on multiple stakeholders to a singular emphasis on shareholders has led to significant cuts in research and development, employee training, and product quality. The term “enshittification” aptly describes how companies lure users with high-quality services only to degrade them once they achieve a dominant market position.
The Uber model exemplifies this trend. Despite raising prices to satisfy shareholders, Uber has yet to prove it can consistently turn a profit. The company’s constant experimentation and pivoting have left drivers and customers alike in precarious positions, with many drivers facing financial ruin due to ever-lowering pay rates.
This VC-driven dynamic is not confined to tech. Private equity has infiltrated various sectors, from veterinary services to nursing homes, applying the same principles of extracting maximum value at the expense of quality and worker satisfaction.
To counteract these issues, we need to explore alternative business models and regulatory measures. Government loan programmes could support non-profits and cooperatives, providing viable alternatives to the VC-backed model. Publicly controlled investment funds could prioritise technologies that benefit communities rather than just investors.
Additionally, policy changes such as increasing capital gains tax and closing loopholes like the carried interest and qualified small business tax deductions could diminish the outsized influence of top-tier investors. By experimenting with these and other regulatory measures, we can promote a more equitable distribution of the benefits generated by technological advancements.
In summary, the current VC model in the tech industry fosters a cycle of exploitation and short-termism, benefiting a small elite while marginalising a vast workforce. To build a more equitable future, we must explore and support alternative models that prioritise long-term sustainability and shared prosperity.