The Bay Area Social Impact Collaboration Zone (BASIC-Z) solves community challenges by gathering ideas from many disparate sources and puts the best ones into practice. The goal is for a diversity of citizens, companies and government agencies to be able to act together more rapidly and cost-effectively to prevent social harm.
The problem with failing to address a preventable problem early is that the costs of addressing it later can grow by large multiples over time when one considers the ripple effects across a community.
Some illustrative examples:
- When a drunk driver has a major collision, economic costs are created not only for the accident victim but also for any passengers in either car, as well as everyone associated with the driver and passengers: family, friends, and employers.
- Homelessness is a direct health threat for the homeless, but it also can also create public health costs in the form of extra emergency room visits, as well as economic costs for nearby property owners and for the banks that own mortgages in the area; it also creates costs for local businesses in the form of diminished foot traffic.
- An adult parent who has a heart attack due to lack of exercise creates costs not only to himself or herself, but for his or her employer, family, and insurance company.
The problem with failing to address a preventable problem early is that the costs of addressing it later can grow by large multiples over time when one considers the ripple effects across a community.
Accidents involving drunk drivers can be prevented in many ways, such as by ensuring that any given drunk individual gets a ride home from someone who is sober. The costs homelessness creates can be avoided by creating access to low-cost housing, training and economic opportunities for relevant individuals. It would likewise be more cost-effective to provide exercise equipment next to playgrounds which parents could use while supervising their kids playing rather than pay for the medical costs and other costs that heart problems caused by a sedentary life style might incur in the future.
Given that prevention is more cost-effective than cure in many cases, why are so many avoidable problems not prevented?
There are three core reasons why society, in the past, has frequently failed to embrace cost-effective measures to prevent future social harm. In order to create solutions in the future, governments, companies, civic sector organizations and citizens will have to overcome these hurdles:
(1) The Free Rider Challenge. The benefits may be spread over a general population rather than individual clients. The benefits from something like adult exercise equipment in playgrounds for parents are dispersed among all who would use it. No single insurance company or employer could benefit sufficiently from such an innovation to underwrite its costs because many of the benefits would accrue to clients who patronize their competition.
(2) The Every-Place-is-Unique Challenge. While any given combination of specific social innovations might be right for a specific community, each community is different. Even with the best data on past approaches there is no certainty that any given approach in any given community will work out. Often the best local social innovations build not only on models that exist elsewhere but are based on whatever unique capabilities and unusual challenges exist in a particular community.
(3) The Challenge of Local Consent. Social innovations need the strong support of its various stakeholders and beneficiaries in order to be successful. It has historically not been easy to ensure that a broad range of businesses, government agencies, and citizens understand all facets of the challenges they face together and have sensitivity to the points of view of others. For collaboration to occur, a wide spectrum of stakeholders - individuals and institutions - needs to be able to receive benefits from prevention. If this collaboration itself is structured so that any tiny fraction of stakeholders can manipulate the process for their own ends, the process is unlikely to lead to sufficient trust and specific results which all major stakeholders can accept. Social innovations need to be selected based on what a diversity of stakeholders would collectively support if they had good conditions in which to understand the issues and the tradeoffs involved.
The mission of BASIC-Z is to prevent future social harm in a cost-effective way. While BASIC-Z is identified as being applicable in the Bay Area of California, this approach can apply in almost any region in which stakeholders can be gathered to consider outcomes, how harm can be prevented, and seek to take the right ideas and put them into action in a very cost-effective way.
BASIC-Z is designed to overcome in so far as it is possible "The Free Rider Challenge.", "The Every-Place-is-Unique Challenge", and the "The Challenge of Local Consen" which are three core reasons for past failure to prevent these forms of social harm.
BASIC-Z creates an economic context that addresses complexities of collaboration, such as “free rider” concerns, for companies to forge shared social challenges. By creating a collaboration for the prevention of costs which multiple companies share, and by engaging a diversity of stakeholders in a transparent process to do so, companies can overcome a tragedy of the commons in which no company addresses shared problems.
BASIC-Z will create a social enterprise incubator to improve the efficiency and effectiveness of the community’s ability to address shared social challenges. The incubator, in which peoples’ skills and talents can be shared among various social enterprises, will create an incentives structure for collaboration that ensures that social enterprises assist one another where possible. Angel employees will pool equity across social ventures, and businesses will contribute excess capacities and resources that they have to help scale social capacities to address shared social challenges.
BASIC-Z also addresses community specificity and stakeholder diversity by the use of the Deliberative Society process, which is a special kind of public consultation which ensures that all individuals and institutions can be meaningfully represented without any tiny faction distorting the overall outcomes of the process. The Deliberative Society process ensures that diverse stakeholders are involved in selecting, revising and accepting solutions that are right for their community.
The Deliberative Society methodology determines what stakeholders would want and what they would think about any tradeoffs if they had accurate information and sufficient time to deliberate with one another. The methodology is designed to secure the process against manipulation, bias, misinformation, and corruption. The Deliberative Society process improves decision-making in three ways: in the design of contracts with companies and governments to pay for future saving; in decisions about which social innovations should be invested in; and about which social innovation deserves what share of the financial returns for success. In addition to ensuring the quality of these decisions, the Deliberative Society Process helps to create political and reputational legitimacy for BASIC-Z for all stakeholders.
Timing
This is the right time for the BASIC-Z approach. The Deliberative Society process builds on the Deliberative Polling methodology. The data from the 2011 California Deliberative Poll called What’s Next CA? suggests that there is strong support for the measurement and consideration of outcomes for budgeting in California and that support for such measures rises when people discuss them. An initiative based on these results will be on the ballot in 2012. Deliberative Polling has also found that the public is able to grapple effectively with trade-offs related to prevention. In Deliberative Polls in China, citizens have chosen to invest in preventative health measures such as sewage treatment plants once they understood the long term medical and financial savings from such measures. Social Impact Bonds (which is when the government agrees to pay social service organizations and investors based on future government financial savings) are being piloted in England and have been adopted as part of President Obama’s 2012 budget with the name “Pay For Success Bonds”.
Once companies and governments have had a chance to consider the tradeoffs of investing today in prevention vs. deferring such costs to the future, the hypothesis of BASIC-Z is that government agencies and groups of companies will be willing in certain areas to commit a fraction of future savings to entities willing to invest in creating those savings today. Specifically, BASIC-Z assumes that collaborative groups will invest a fraction of the future potential savings that social innovations would achieve. The mechanism for this investment would be Social Impact Bonds, for example. Social Impact Bonds are not true bonds, but instead pay a financial return if and when quantitative targets are achieved (i.e. reducing the number of drunk driving accidents has dropped significantly.)
As the Prime Contractor, BASIC-Z will need to cover expenses associated with Deliberative Polls, communications programs, and incubator leadership and associated expenses. As the Prime Contractor, BASIC-Z will lead and implement systems for aggregating and efficiently sharing social capital, knowledge and physical capacity. Applying this process at this stage increases shared knowledge and understanding among stakeholders.
Once commitments have been secured for companies and governments to pay a fraction of these future savings, there is a risk-reduced opportunity for impact investment capital to provide seed funding to launch the creation, incubation and scaling of these social innovations.
Because governments and companies collaborate to pay for success, and because multiple innovations can mutually reinforce one another, BASIC-Z can take a portfolio approach to investment, investing in the right group of innovations to achieve a single objective through multiple approaches. The reason why this can be particularly successful is that the portfolio approach allows multiple approaches to reinforce each other. When programs have been successful in the past, there is rarely a clear sense of what factors or were relatively more important in achieving the positive social outcomes. It’s important to understand the effectiveness of separate strategies despite the difficulty of determining objectively which approach had which effect and the degree to which several approaches were synergistic. The Deliberative Society Process, through deliberations among beneficiaries and stakeholders, can securely and scientifically measure the relative importance of different social innovations in the prevention of harm.
BASIC-Z is designed to address problems faced each of seven critical kinds of stakeholders:
- Local Governments
- Have more social challenges that they wish to address than they have been able to successfully address in the past
- Need political and community support if efforts to address social challenges are to succeed
- Have limited funds that they cannot afford to risk on programs that may or may not achieve their intended goals
- Corporations
- Need more profit through social costs being reduced
- Need certainty that social outcomes are addressed and cost savings have materialized before hard dollars get spent
- Need to be perceived publicly as supporting community’s effort to address local challenges
- Need to minimize the risk of free riders to optimize financial returns.
- Volunteers
- Need context in which their skills can be utilized
- Need motivating elements in order to prioritize volunteer commitments above other activities.
- Need excellent support from sufficient staff to ensure meaningful productivity and enjoyment
- Staff of social enterprises
- Need cashflow to support themselves
- Need meaningful, interesting work throughout the cycle of social enterprises needs rising and falling
- Need high probability of reasonably good returns, want a modest probability of exceptional returns.
- Beneficiaries
- Need to be consulted about how social objectives will be achieved
- Need to be involved in creating social change of which they are a part
- Need to have multiple dimensions of needs which are interconnected addressed simultaneously
- Investors
- Need the financial return to outperform the associated risk.
- Need strongly positive social returns
Local Governments
Local Governments aspire to address more effectively challenges related to education, transportation, public safety, regional health and homelessness; but they have limited funds that they cannot afford to risk on programs that may or may not achieve their intended goals. Governments need certainty that social outcomes will be addressed and cost savings will materialize before hard dollars get spent. The social impact bonds/pay-for-success bonds component of BASIC-Z creates a mechanism whereby local governments spend hard dollars only after the government has saved money as a result of early work by social entrepreneurs and community members have materialized.
Local governments need political and community support for efforts to address social challenges to be sustainable. However, when governments seek to engage the community on how to address these social challenges, it’s often the case that small factions bias or disproportionately influence the results of mechanisms for garnering public feedback. BASIC-Z assumes (on the basis of extensive prior experience) that rigorous and balanced deliberation among a diversity of stakeholders cam lead to increased and unbiased understanding. The kind of dialogue the process generates can create the conditions in which political leaders and companies can accurately consider the tradeoffs they face, and can commit future funds based on future savings. The premise that individuals will support outcomes-focused approaches more once they have deliberated is supported by the California Deliberative Poll in 2011 (an initiative based on the results will be on the state ballot in 2012).
Deliberation can create political capital by ensuring that policies have legitimacy in addressing the needs people reveal once they understand the issues.
The cost to local governments of failing to prevent preventable problems can be much higher than paying for early intervention. However, due to limited funds, local governments often hesitate to invest in cost-effective prevention measures that are likely to reduce pressure on future budgets but which require scarce hard cash in the present. BASIC-Z designs a means by which governments can break this cycle: BASIC-Z persuades governments and companies to commit a fraction of future savings as an incentive to motivate private sector capital to invest in achieving social outcomes when it is most cost-effective to do so. (Governments might also invest in social impact bonds at the front end, in part by committing under-utilized infrastructure--such as unused buildings or unused advertising space).
The Deliberative Process is key to institutionalizing and creating sustainable pubic acceptance of social impact bonds/pay-for-success bonds.
Corporations
Increasingly, in recent decades, large corporations have been gathering data on their own operations to identify where cost savings could occur (in keeping with the values of the organization). Social problems often add significantly to the cost of doing business in a particular area. These shared challenges represent opportunities to improve profitability through multi-sector collaboration in some of the following core categories of business costs.
Transportation
At any large company, a non-trivial number of employees in a given region miss work and have medical costs due to having been victims in car accidents caused by drunk drivers.
There are not incentives in place, however, for any one company to address this problem on its own despite the fact that in the region as a whole, the cost of failing to prevent these accidents is large.
BASIC-Z would approach this challenge by seeking contracts with a diversity of employers and insurance companies in the region who would be willing to pay a fraction of future savings if drunk driving accidents involving people for whom they bear costs are reduced in a quantifiable way through a portfolio of approaches.
After BASIC-Z has secured these contracts and received investor funds, it would begin with social business plan competitions and hackathons with small cash prizes. The best results from these would be given fellowships to develop their business proposals more thoroughly. Some of these would go straight to pilot stage, whereas others would require more resources and community support before implementation. Social entrepreneurs would then take proposals that require larger-scale community participation larger investments through the broader deliberative process.
The portfolio approach to reducing drunk driving might include traditional methods proven to have a modest but significant impact, methods selected and then refined through community input, and experimental pilot projects.
In this instance, a traditional approach would be the one reported by the World Health Organization in 2009, in which “mass media campaigns were associated with a median decrease of 13% in total alcohol-related crashes,” as well as with “a median decrease of 10% in injury-producing alcohol-related crashes.”[1] A local social entrepeneur could be recruited to make the case for such an approach in the Deliberative Process, where it could be refined based on local input (for example how local identity and cultural norms make a particular kind of media campaign more likely to succeed and receive support from a diversity of stakeholders and constituencies.)
New methods can be gathered through hackathon and social business plan competitions. Suggestions might include putting breathalyzers in bars or a proposal for taxi companies to provide free rides for drunk people in exchange for other commercial benefits (such as free advertising space) or a program to provide free non-alcoholic drinks to designated drivers. Social entrepreneurs backing projects selected in this initial screening phase might be given three- to six-month fellowships to research and de-bug their approach and gauge the potential willingness of key collaborators to participate. (For example, the social entrepreneur backing the idea of serving free non-alcoholic drinks to designated drivers could survey designated drivers about whether this would motivate them to be designated drivers more often and survey bars about the expected cost involved and incentives that bars would find persuasive.) Once this short-term research on potential proposals has been conducted, the proposals are taken to the briefing committee for the Deliberative Process to identify arguments for and against each of the potential innovations. Those selected through the Deliberative Process would receive larger investments and their application would be scaled to the target zone. (For example, taxis might be paid significant resources in order to purchase in bulk special cards that bartenders could give out to drunk clients to give to taxis to get home safely).
Some approaches, such as putting breathalyzers in bars, may or may not be good ideas, but may be judged by BASIC-Z opportunistically to merit low-cost pilots to test whether they can work and are considered very likely to not create harmful side effects. In other words, broad community consent is not required to begin a test of modest scope. If pilots are successful, then these innovations may be selected in future rounds of the Deliberative Process for larger-scale investments.
The savings from these social innovations are quantified by comparing the change in drunk driving costs among the relevant population locally to other populations of similar size in comparable regions (beyond that which could be attributed to random fluctuation).
Health
At any large company, a non-trivial number of employees in a given region miss work and create costs due to preventable diseases (including some heart attacks and some forms of diabetes).
While companies can address some dimensions of employee health through what food options it makes available in company cafeterias (if it has them) and through having gyms on corporate premises, employees’ health can be affected by things they do outside of work—such as getting or not getting exercise.
There are not incentives, however, for any one company to address this problem on its own across the community as a whole.
One example is a social innovation that is common in China and Brazil that could be explored, evaluated economically, and then selected through the Deliberative Process: placing all-weather permanent outdoor exercise equipment for adults adjacent to children’s play areas in playgrounds. A stainless steel elliptical machine anchored in concrete next to the swing set and jungle gym. This lets parents work out while watching their kids. Parents also often chat with one another building social capital while exercising and supervising. In practice, this social innovation would be deployed in conjunction with other health-related social innovations which together could make a sufficient economic impact to pay for the portfolio. If enough parents working at large companies make health gains by using this exercise equipment and through other social innovations, then the resultant savings in health care costs at large companies could repay the cost of these interventions.
Homelessness
In addition to the intrinsic harm to the homeless themselves, there are community costs of homelessness. Hospitals bear the cost of preventable, expensive emergency room visits. Local businesses suffer economically when foot traffic declines as due to high-density homelessness. Banks and property owners suffer economically when high-density homelessness drives property values down.
But no one business can tackle the problem of homelessness alone because the incentives are not there for them to do so on a solo basis.
BASIC-Z would approach this challenge by seeking contracts with a diversity of hospitals, local businesses (possibly through existing Business Improvement Districts-BIDS), local property owners, and banks which own local mortgages. These contracts would obligate them to pay a faction of the future profits they would make if homelessness were significantly reduced in a responsible and sustainable way.
Traditional approaches, such as providing temporary housing and job training to the homeless can be invested in once they’re selected by the Deliberative Process. London will be investing in these kinds of interventions now that they have announced a Social Impact Bond to address homelessness.[2]
A less traditional approach that has had some early indicators of potential success could be explored through the Deliberative Process or piloted. One example might be based on the experience of Noisbridge, a “hacker space” for technologists and artists in San Francisco. Noisbridge has never had as part of its mission to work with homeless people. Nonetheless, a non-trivial number of homeless people (more than the founders of Noisebridge can easily count) have secured financial self-sufficiency visiting the 24 hour space, learning how to use the machinery and computers, learning skills from hackers and technologists there, and launching very low-capital-intensive businesses which got them to positions of financial security. Perhaps this approach could be repeated and scaled.
Education/Training
BASIC-Z would approach this challenge by seeking contracts with a diversity of employers and insurance companies in the region who would be willing to pay a fraction of future savings if drunk driving accidents involving people for whom they bear costs are reduced in a quantifiable way through a portfolio of approaches.
A portion of the employees of any major company are hired from the local population. Companies bear the cost of the additional training required for people hired locally who lack skills compared with those of employees educated in communities with better school systems. Because property values in a community are directly impacted positively or negatively by the quality of the schools, banks, which own many of the local mortgages, are financially impacted by the quality of the schools, as well.
There would not be sufficient incentives for any one bank or any one company to address a local challenge on the scale of local education.
BASIC-Z would approach this challenge by getting a group of companies which hire large numbers of local people and banks which own a substantial amount of local property to commit a fraction of future profits to social innovations (if those innovations create marked improvement in educational performance compared to comparable regions). This might include deepening collaborations between local universities and local school systems, providing additional after-school programs and tutoring resources.
A Deliberative Process could evaluate a diversity of social innovations that have been tried elsewhere in the world based on available data on them. For example, existing databases of social innovations such as Like Minded[3] could be drawn on. One could also utilize existing meta-analysis of educational innovations such as that found in the book Visible Learning: A Synthesis of Over 800 Meta-Analyses Relating to Achievement by John Hattie.
Participants
BASIC-Z is designed to mitigate the up-front risk to social entrepreneurs by creating an early stage for learning and experimentation ( involving competitions, hackathons, fellowships and committees of experts ) in which social innovations can be refined and developed before they face public scrutiny and deliberation.
Process
The process from the social-entrepreneur’s perspective flows something like this:
- Contract is secured by BASIC-Z with companies and/or government agencies to pay a fraction of future savings (only if such savings materialize).
- BASIC-Z requests applications in social business plan competitions and hackathons. Individuals receive small amounts of equity in the pool of all BASIC-Z investments in ventures for having participated in hackathons.
- Some ventures receive fellowships to research further or funds for a small pilot to develop their model for a specified period.
- When social innovations are ready, they are taken to all stakeholders for deliberation.
- When the most promising social innovations are selected by deliberation, a multi-year investment plan is made so that they can deliver services successfully.
- Staff of the incubator can float between incubated projects when they have down time. From the social entrepreneur’s point of view: Contracts are secured with entities for follow-on investments of in-kind resources and capital at pre-determined percentages and rates (related to risk, milestone, level of contribution into venture so far, etc.).
- Even people who are fully utilized reserve a tiny portion of their month to share expertise on matters for which they are uniquely qualified to advise other social ventures being incubated
Paid staff of social enterprises
- Need cashflow to support themselves
- Need meaningful, interesting work throughout the economic cycle as any individual social enterprise’s needs rise and fall.
- Need high probability of reasonably good returns, want a modest probability of exceptional returns.
Angel employees including the staff and co-founders of startups face the challenge of uneven returns due to lack of diversification. Startups have uneven demand for the skills of each individual which can lead to extremely uneven utilization rates of skills. A typical incubator is inefficient from the point of view of the employees: traditionally, each employee works for only one company. An employee’s equity is therefore not as diversified as investors who can spread risk across ten or more enterprises.
From the staff at social enterprise point of view: A portion of salaries gets paid in cash, a portion in equity in the venture a person is working on, and a portion in a pool of equity across a group of social enterprises (who have some relevance to each other in terms of desire to collaborate and relevant learning that could arise from collaboration), and then a stake in the pool of all entities.[4]
Part-time staff who contribute in more extensive ways online or offline to support local social innovations by contributing to social innovation “blue print models” of how these innovations can be successful can be rewarded with small amounts of equity in the social venture based on these contributions.
Individuals selected to deliberate as part of a relevant population can also get shares in the pool of social innovations in exchange for deliberating, and this is part of how they become more responsive to addressing challenges in the pool.
Once social enterprises have been selected to receive performance-based contracts, BASIC-Z signs with companies and governments, investment capital is made available, and social ventures begin their work.
These social innovations can also be structured as joint ventures with existing organizations. Social enterprises can also be begun from scratch.
One key attribute of successful incubators is the degree to which participants share expertise among different entities. When employees have spare bandwidth, they can work with other incubated companies who have a demand for their skills. This gives entrepreneurs the kind of flexibility that “intraprenurs” at large organizations have, but that entrepreneurs on their own typically do not have. As a company needs more of a skilled resource, they can seek to access latent time available from any other skilled individuals within the incubator.
Because individuals receive a portion of their financial return from the pool of companies as shareholders, they are more likely to offer high-quality assistance when they are working part-time for different social ventures. To the extent that social enterprises depend on labor, staff can earn shares of the overall BASIC-Z investments in outcomes if they contribute time to achieving these impacts. This creates a large community of stakeholders, people in the region literally and figuratively shareholders in outcomes in the common interest.
This access to on-demand contextually-relevant expertise can provide critical leverage for social enterprises. This leverage is made possible by reducing the transaction cost of accessing optimal knowledge that can prevent problems from becoming more acute than they have to be. Effectively applying a highly-skilled temporary worker model to the latent bandwidth of people within the social change startup ecosystem can be a strong source of leverage. It lets a CFO allocate his or her skills across 20 very early stage companies, or across five relatively early stage entities. When the CFO needs to focus on one entity as a prime commitment, there are other skilled, trusted individuals within the incubator who can take his/her place.
Because each staff person can earn some of their remuneration in stock in the venture they are helping as an angel employee, some of their remuneration from the group of companies they help on the side, and some of their remuneration from the pool of all companies, they are incentivized to be helpful, and they have more diversified returns than an angel employee working at one company alone.
Skilled in-demand individuals, such as a busy CEO or CTO can offer more modest contributions of time such as “office hours” in which he or she reserves 2 hours a month to meet with individuals who need his or her expertise; this limited time commitment can still provide profound value. These contributions from individuals and entities can be structured as part of the investment architecture in the entities (in other words, entities are responsible for providing services to the commons in addition to what they get paid specifically for). A single sub-contracted entity and one or multiple co-founding social entrepreneurs take primary responsibility for individual social ventures.
The estimated size of the incubator will vary depending on stage of process, level of funding available/financial value of outcomes contracted, and scale of impact investor resources allocated per social innovation.
To be clear, although the seed stage of investment can be undertaken opportunistically to provide some enterprises initial time to get off the ground conceptually through micro-fellowships, for larger scale resources must be allocated through the Deliberative Process. Initial expert suggestions, social business plan competitions, hackathons, and short-term targeted research fellowships are conducted.[5]Ideas are also gathered in deliberative processes from the public. Expert reviews are conducted to identify a subset of these proposed innovations which have a social entrepreneur to lead them and which have a cost-effectiveness model which proves economic viability based on costs and future revenues to be earned if the social innovation is successful. This economic analysis will focus on whether outcomes can be achieved in such a way that future savings can be multiple times the cost of investing in the creation of those savings at an earlier in time.[6] Angel employees can then earn positive returns as shareholders in the pool over time.[7]
Volunteers
Volunteers and part-time employees of BASIC-Z programs need opportunities for collaboration in which their skills can be utilized effectively. For some the challenge of working on a social goal is more than enough reward for their efforts. Approximately 5% of Americans volunteer for more than a month’s worth of labor a year based on the Bureau of Labor Statistics.
Some volunteers would appreciate incentives for participation in social change. These can be direct incentives in the form of cultural goods like tickets to performing arts venues, or equity incentives such as a modest share in social enterprises individuals help to achieve outcomes.
Beneficiaries
Beneficiaries include the homeless themselves for programs that reduce homelessness, the individuals who receive the free rides who would otherwise have driven drunk and had a car accident, etc. It includes the people who did not get into a car accident but would have had it not been for the social program. Beneficiaries need to be consulted about how social objectives will be achieved. Beneficiaries need to be involved in the design process of the social change of which they are an integral part. On another level, the entire community can be the beneficiary of a given social innovation.
Beneficiaries have an influence on the design of social innovations through a fair deliberative process, and, after programs are successful, on assigning responsibility for their success through deliberative processes. Once overall quantitative metrics of savings are achieved and BASIC-Z has received funds based on meeting these metrics from companies and governments based on success or partial success, a Deliberative Society process is used to evaluate relative responsibility among a variety of social innovations and programs which may have been relevant in varying degrees to the outcomes which have been achieved.
Beneficiaries and investors benefit from mutually-reinforcing social innovations. Mutually-reinforcing innovations can be grouped together with stakeholder buy-in with this approach. Outcomes to be achieved require coordination across multiple sub-contracted entities responsible for multiple social innovations. In typical Social Impact bonds, the government selects organizations to address issues and pays them if successful. Instead, BASIC-Z will oversee the selection process through the Deliberative Society process (described above) and will ensure coordination among selected participants (described below). In this sense it is acting as a Prime Contractor on behalf of the government(s). The Harlem Children’s Zone in New York City achieved economies of scale of social change in outcomes based on mutually-reinforcing social innovations. Funds are then paid in proportion to relative importance to beneficiaries. This gets measured with greater qualitative insight in terms of meaning to these people’s lives through deliberation. This ensures that the most meaningful forms of value get understood by the community, and that financial return is correlated with social gains that have been achieved.
Investors
There are two sets of investors: the impact investors who see the program overall, and those investment groups who specifically fund each Social Impact Bond.
For the seed investment group, BASIC-Z removes social issues that have suppressed revenues and also builds an incubator that can in some cases provide additional future investment opportunities.
There are several mechanisms BASIC-Z uses to reduce risks and costs:
- Targeting social impact as specifically as possible to reduce free-rider risks
- Angel employee pools create leverage for cash capital
- Angel employees ability to rotate between projects during down periods create financial leverage by not having to over-hire for each enterprise
- Under-utilized infrastructure can be donated or invested via barter system to reduce costs through sharing mechanisms
- Mutually reinforcing innovations can help achieve multiple outcomes simultaneously
- Portfolio approach brings diversification benefits
- Deliberative Society process gathers community knowledge for optimal targeting
- Deliberative Society process lowers cost of recruitment
- Duplicate legal documentation will allow legal costs to be shared across social enterprises
10. By levering the bonds (for example at several dollars of return per dollar paid), the bonds can return a higher rate than typical of Social Impact Bonds
Optimally, investors can invest in an individual social venture or they can invest in pools of social ventures organized by outcome area (health, energy, poverty, education) or by risk (i.e. only social innovations that are quite similar to ones tried elsewhere in the world, as opposed to more experimental research and development approaches). Mechanisms can be provided for effective transparency of operations sufficient to allow for the financial investment in portfolios of innovations.
[2] http://www.civilsociety.co.uk/finance/news/content/12142/bidding_process_opens_for_5m_rough_sleepers_social_impact_bond
[4] Individuals have a partial ability to balance ratios of relative commitment, but they do not have full control of this (i.e. while they must remain partially invested in their group of companies, and their individual company, they can choose to invest more or less in the pool of all companies).
[5] This private research can be supplemented by access to relevant existing commons on social innovation (www.likeminded.org), or existing meta-analysis of medical, education, transportation or other social innovations such as "Visible Learning: A Synthesis of Over 800 Meta-Analyses Relating to Achievement by John Hattie
[6] Yes, individual social entrepreneurs can build social innovations inspired by existing models of social innovation. Experts will be responsible for assessing the level of risk that is involved in whatever modules contain new risks, or whether the new innovation is building upon components that have already been tested.
[7] They can keep their shares and grow the value of them, or sell small amounts of shares over time to derive income from having volunteered in the selection phase. Similar equity incentives can be offered to people who contribute to the social innovation database when their contributions are used by the enterprise in important ways.
BASIC-Z
- BASIC-Z facilitates the creation of contracts among companies and governments which obligate those contracted to pay an amount equivalent to a fraction of potential future savings which would be created through social innovations, based on certain conditions. These conditions are determined via deliberative processes, which are also conducted by BASIC-Z.
- BASIC-Z selects social innovations through preliminary competitions. Some of these social innovations need to be proven out and they are given time to prepare before being taken to the broader public.
- Innovations that are ready for larger scale community resources either because they have conducted sufficiently detailed planning or pilot success, and expert opinion on them can present a crystallization of the risk, these innovations can be selected to be scaled through a Deliberative Processes involving a diversity of stakeholders. Some innovations involve little risk to the community and can be begun at low cost. In these kinds of instances BASIC-Z can invest opportunistically in social innovations.
The Deliberative Society process has discrete steps which are further explained in Appendix A, but summarized here:
Convene a Briefing Committee of diverse experts to create materials which identify the arguments for and against each alternative approach.In the case of a social innovation, this could include experts on the issue (homelessness, drunk driving, diabetes, recidivism etc.), experts on the methodology being applied to create a social change, experts on the market of all methodologies applied in such contexts, individuals who would be the beneficiaries of the social innovation (but which may have preferences about which approach they would find most sustainable), and people with start expertise in terms of finance, marketing, and other disciplines of particular relevance to that enterprise.
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- The briefing committee can have working groups that work on each innovation’s pros and cons, and then innovations can be analyzed in larger briefing committees once drafts have been created.
Convene a random sample of the population in an in-person Deliberative Poll. Population defined carefully to reflect who needs to be bought in. If there is a separate need for beneficiary buy-in, a deliberation among beneficiaries can be conducted.
- If there is a need for provider buy-in, a deliberative process among prospective volunteers can be conducted.
- If there is a need for the whole population to be bought in as this issue has deeper civic consequences, then a random sample of the whole population can be gathered.
- The sample size can be increased to meet the political capital needs of the occasion.
- The briefing committee can have working groups that work on each innovation’s pros and cons, and then innovations can be analyzed in larger briefing committees once drafts have been created.
- Conduct the in-person Deliberative Poll.
- The video production of the event as well as journalistic coverage and the experience of observers of the event who include both potentially allied agencies and organizations as well as potential volunteers/part-time angel employees is key.
- The goal is to ensure that the community of relevance to that outcome and that innovation gathers to understand if it is right and if so to be prepared for future collaboration based on the experience.
- Analyze the in-person event, followed by revise documents for Online Deliberation. Transcripts can be reviewed to ensure there were no profound biases according to gender, class, race, education, political affiliation or otherwise.
- Conduct Online Deliberation with the entire population invited to participate. Suggested revisions to individual innovations can be proposed.
- People can suggest ideas about how potentially harmful side effects can be mitigated.
- People can share empirical assumptions about what they think might happen as a result of these innovations and they can cite facts which they think could be relevant to the discussion with links to external materials. Under-utilized capacities of relevance to the innovation scenario get suggested such that the social entrepreneur who is working on their plan can revise the plan.
- In a sense this can be a public hackathon in which the blueprint for the social innovation is public for three months in which people make suggestions, and the model gets updated and improved according to critiques and ideas that get offered and offers of contribution of time that get put forward.
- By the time the innovation gets to the broader community for deliberation about scale of resources to be applied to it, it has already gathered micro-commitments of a variety of kinds and innovation insights that can substantially increase its likelihood of success through this level of radical transparency. Individuals who contribute intellectually to the innovation can earn small amounts of stock in the social innovation if their contributions get used.
- Analyze online event. This is conducted by experts and social entrepreneurs who iterate their innovations during online dialogue
- Convene Briefing Committee to revise documents for a second in-person Deliberative Poll. The revised innovations social entrepreneurs espouse are considered by briefing committee in light of online dialogue. They prepare the final briefing materials for Second Deliberative Poll in which substantially different questions get asked based on the collective intelligence of the broader population.
- Convene second random sample of population for Second Deliberative Poll in-person event
- Analysis of Second Deliberative Poll
10. Final report of recommendations that achieve informed consent
- BASIC-Z receives investment from social impact investors in which future return is based on the probability of success of a particular social intervention or group of social interventions.
- BASIC-Z provides incubation services – including infrastructural support, mentoring, and social connection - for these social innovations
- BASIC-Z receives payments from companies and governments based on success.
- Investors’ return is based on the success of the entrepreneurial ventures in meeting their outcome targets, rather than requiring the entrepreneurial ventures to return a profit on their activities. In other words the bond issuers will save money when the entrepreneurs meet their outcome goals.
Deliberative Polling was invented by Reframe it Board Member James Fishkin who is also the Director of the Stanford Center for Deliberative Democracy. Reframe It® (www.reframeit.com) created the Deliberative Society process and is seeking to apply the methodology in a diversity of contexts in different parts of the world.
If implemented this set of technologies and protocols would have a major impact. Like!!
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This is great. The stakeholder contracts are key. We're pursuing Health Impact Bonds as a way of securing pay-for-success contracts with health insurers, employers and others that benefit from upstream prevention. See Fast Company article and let me know if we can be helpful: http://www.fastcoexist.com/1679711/what-impact-investing-could-do-for-he....
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Very creative and includes the main care-abouts from the various stakeholders. I would be interested to cotribute/volunteer. Perhaps the deliberative poll can be mashed up with a kickstarter approach of not only monetary pledges. Great hack.
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