Is the Prize the Future? (Week 6)

It was recently announced that one of Elon Musk’s social investments, the funding for the XPRIZE in Global Learning, had selected its finalists for its grand prize of $10 million, which is to be awarded to the endeavor that shows the greatest gains in basic academic skills after a field-testing component in Tanzania.[1] Amongst those finalists is a machine learning group from here at Carnegie Mellon who have created a RoboTutor focused on reading and math. While the readings this week focus on creating innovation ecosystems that are amenable to social ventures, the overarching question seems to be whether or not the way forward lies in public-private partnerships, governmental interventions, or perhaps the kind of competitive model represented by the XPRIZE.

The future has deeper roots in the past than what we might realize. An article from The Wall Street Journal in 2010, specifically highlighting the (at the time) fifteen year history of the XPRIZE, noted that the practice of awarding funding as a reward for innovation could be traced back to the Longitude Act, when the British Parliament offered financial rewards to anyone who could figure out how to calculate longitude while at sea.[2] The same sort of incentive was on offer for the first transatlantic flight (thanks to funding from a New York hotelier). What the article seems to conclude is that the prize model spurs innovation, precisely because it takes much of the financial risk of innovation off of society: “With an inducement prize, the sponsor pays only for ideas that actually meet the prize criteria. In other words, technology contests shift the risk of innovation from the patrons to the solver community.”[3] In economic terms, this model increases the total value to society because it anticipates that a producer would never act irresponsibly with respect to its own surplus.

One of the questions that I find myself grappling with, though, is whether the prize model has the potential to exploit participants, or at least to create a scenario ripe for financial ruin on the part of aspiring innovators who are so determined in their pursuit of a prize that they put too much on the line in the process. All of the risks of innovation are borne by the individuals or teams, or their sponsors; not everyone has major institutional affiliation, such as the aforementioned CMU folks, or generous research funding. Even with the potential ethical drawbacks, though, the prize model is one that seems ideal for leveraging the vast wealth of forward-thinking philanthropists with a particular interest in a specific field (such as Musk’s in education). It creates momentum, generates positive publicity for both supporters and beneficiaries, and focuses significant intellectual resources on a single problem until a viable solution is found. With so many complementary ways to support innovation, the prize model may be a truly effective way to continue to diversify the funding portfolio.

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[1] https://www.forbes.com/sites/peterhigh/2017/09/18/possibly-elon-musks-biggest-idea-yet-revolutionizing-education/#4cf9dd184888

[2] https://www.wsj.com/articles/SB10001424052748704505804575483423120157674

[3] Ibid.

Goal Shifts Resulting From Government Shifts

This week’s readings regarding policies and ecosystems for social innovation ranged over ten years of publication dates from 2007 to 2017. The political climate has changed significantly over that timeframe, which inevitably led to a shift in federal policy. After reading Michele Jolin’s “Innovating the White House” article from the Stanford Social Innovation Review published in the spring prior to the 2008 election, I was curious as to how the sentiment and goals might have changed between that publication and the most recent election and turned to the same source for clues.

One of the main ideas for new White House Office solutions in the 2008 article was the suggestion to create a “White House Office of Social Innovation and Impact” in order to coordinate the reorganization of the federal government and its resources. A year later, the “White House Office of Social Innovation and Civic Participation” was indeed created. As Claire Dunning explained in her November 2016 “Advocating and Giving During the Trump Administration: Five History Lessons for the Social Sector” article immediately following Trump’s election, this implementation encouraged a private charitable sector using governing tools. I felt that one of the most relevant lessons from history that Dunning identified was the idea of considering personal donations part of a mass movement. Often donations will be made as “a means of participating in a progressive movement,” such as the current surge of donors to organizations like Planned Parenthood. It seems possible that social innovation might receive funding based on similar motivations in this current government situation.

While the 2008 election centered on the creation of programs for social innovation, the challenge in the most recent election pointed to the importance of nuancing these developments from the past eight years. Another November 2016 article, “Structuring Innovation in the Next Administration,” noted that it was time to shift “social innovation policy from pilot programs and one-off experiments toward an embedded practice in government.” To improve policy for the future, both articles noted that these changes would require taking lessons from history and building on past success. However, one of the biggest differences in suggestions from 2016 vs 2008 was the new idea of embracing a culture that enables risk. Historically, governments are typically risk averse by nature. On the other hand, social innovation requires a certain level of trial and error. Overall, it seems as if the goal of social innovation in government has evolved from filling gaps to promoting experimentation and creativity. Embracing this shift would require a significant amount of buy-in from the current government officials. Unfortunately, while the previous administration was making significant progress in this direction, there is definitely a concern unique to this political climate that the new administration will allow these efforts to evaporate.

Assuming these efforts do continue, is the future of social innovation policy limited to focusing programs put in place over the past 8 years, or is there room for evolution, expansion, and risk over future presidential terms?

https://ssir.org/articles/entry/advocating_and_giving_during_the_trump_administration_five_history_lessons

https://ssir.org/articles/entry/structuring_innovation_in_the_next_administration

Innovative Policy Matters

Innovative Policy Matters

Non-profits and social entrepreneurs have the flexibility and know-how of how to address the issues and topics facing their immediate and targeted communities. By financing their evaluation and impact strategies, governments will not only gain more information about which best practices and models are most effective, but they will also contribute to the investing trends that reward the work that works! 

Evidence-based research on program performance[1] can allow the United States and other nations to make more informed decisions about funding and investing in the social innovation and non-profit sector. By not taking into consideration the vast range of possible approaches to help specific and unique challenges, governments run the risk of wasting millions of dollars while also not helping groups and citizens solve the problems they face. Even in instances where policy like basic income could very well help mitigate loss of income with workforce displacement, we saw in the reading that [2]this policy’s design cannot be applied on a standard basis across the board. Some governments just do not have the financial bandwidth to support the costs of carrying out the policy and evaluating its effectiveness. However, governments can take advantage of the smaller scale of social entrepreneurs and nonprofits to experiment and test out new approaches. Feedback on these projects can inform policy makers on how successful methods can be applied at a larger scale or be suggested as a best practice model.

There are hundreds of thousands of non-profits, civic groups and social entrepreneurs domestic and abroad tackling a wide range of issues, using various methods to do so. It seems to be less than probable that one or a few methods of supporting these initiatives will best meet the needs of all.

Policies regarding funding social innovation must be dynamic in design in order to work within the budgetary constraints of the government and meet the evaluation and feedback loop needed to assess the impact. Obama’s administration was on the correct path with the creation of the White House Office of Social Innovation and Civic participation. This group’s research, funding and presentation strategy has allowed them to build bipartisan support around social impact and draw attention to both the social and economic benefits to investing in social innovation.

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[1] https://economix.blogs.nytimes.com/2014/04/14/equal-opportunity-and-social-innovation-obamas-policy-agenda/

[2] https://www.theguardian.com/world/2017/jan/03/finland-trials-basic-income-for-unemployed

Steps to create a Sustainable Ecosystem for Social Enterprise

With governments all over the world attempting to play an active role in mobilizing social enterprise and empowering social innovations, one would think that the social enterprise ecosystem is thriving and is having a profound impact on society as we speak. Well, unfortunately the policy driven governmental support isn't enough to sustain the ecosystems that are being created. The article by Forbes: " Why We Aren’t Getting the Full Benefit of Social Innovation—and What the Government Should Do About It ", is a good starting point for understanding the why. From this article, I identify two key tasks that the government should have a direct role in to create a Sustainable Ecosystem where the Social Enterprises can thrive and grow.

During my time, as an exchange student, in the Baltic States and Nordic Nations I had visited quite a few government sponsored start-up conventions and seminars. The majority of the northern European governments being socialist-inclined means that their agendas align with social enterprise when it comes to new founding companies. The two key activities that struck me the government's there focused on were namely: Finance and Leadership, which are very crucial in creating a framework which can sustain ecosystems for social enterprises.

Finance,

Social enterprises experience challenges in securing support and financing for their ventures. A lack of collateral to secure loans and poor support structures are inhibitors for social enterprises to grow. A major issue is that many social entrepreneurs report a lack of access to capital, whereas impact investors report a lack of investment ready ventures. This shows that there is a  mismatch between the needs and knowledge of social entrepreneurs and investors respectively. Securing financing for the development and implementation of services is a crucial component for any social innovation. The government should be helping in developing diversified funding possibilities for social innovation initiatives and social enterprises. And at the same time, support the development of a customized financial support system of financiers and intermediary organizations. Micro loans and social banking , Social investment funds, Innovation checks and Crowd funding schemes are a few promising ways in which the government can help create a support structure for social ventures on a large scale. 

Leadership,

 To build and sustain a capacity to solve the complex challenges in the domain of social  development, a league of competent and resourceful leaders are required. Competence development and cultivation is needed to successfully lead any complex processes, to deliver support to social innovations, and to develop priors that match these needs. The government needs to increase formal and informal education on social innovation while actively supporting progressive pedagogies that allow students to become producers of solutions and proponents for change. Molding leadership and competence development within the established innovation and business support systems is one way to do it. Education systems that allow both academic and non-academic sectors to engage in social innovations practice and theory, and build proficiency related to tools for social innovation and entrepreneurship, are crucial in this respect.

Want to solve inequity? Support social business creation.

Social innovation to bridge the wealth divide lies at the heart of smart government policy. This by no means is a panacea for solving the rising inequality mentioned by Thomas Piketty in "Capital in the 21st Century"(Greenblatt et al 2014). In fact, it is quite difficult to find a balance between government involvement and the free market. As referenced in my last posting, a method for doing so can be through Social Impact Bonds. This provides part risk mitigation and part incentive structure for social entrepreneurs. Funding social ventures is an alternative for directing tax revenue and will be explored more in the post. 

How should investment be made in social ventures? One way is to start in generation of new ideas and people into the sector. According to the Center for American progress, creating a "pipeline of future entrepreneurial efforts in the critical non-profit sector" should be the goal of the current administration (Jolin 2007). This idea was undertaken by the Obama administration and the creation of the Office of Social Innovation and Civic Participation. This office created sources of revenue and support for social entrepreneurs that sought to address the challenges faced by America. One of the ways that this was accomplished was the creation of the Social Innovation Fund which, "makes grants to social sector intermediaries"(Greenblatt 2014). This represents a means of directing funding toward problem solvers instead of relying on the government as the soul problem-solver.

What are other places we could direct government funding? Social support programs such as a basic universal income could be an alternative instead of funding the social innovation fund. By giving all persons who fall under a certain income level a basic income we could ensure they are able to live until they find work. This does not solve the problem of how do we empower small business, which is the best way to bridge the gap between the poor and the 1%. Yes, giving people a basic income is a sufficient means of ensuring they can survive that month; however, it doesn’t provide them a way out of poverty. Rather it makes them dependent on the basic income. Creating systems that enable more people from the bottom of the income ladder to open small businesses would serves as a strong means for empowering them out of poverty. 

In summation, the goal of government should be to encourage business especially those that are socially minded. This can be accomplished by designating grants for businesses that address social inequity and focus on ventures that serve the end stakeholders. As mentioned in an earlier posting by Bob, the impact is just as important as the bottom line. The role of the government should be in rewarding enterprises that focus on this mission as well as the sustainability aspect. In doing so inequality between the income ladder can be addressed and social businesses can be started by those at the lower end of the pyramid. 

References:

Greenblatt, Jonathan. Tyson, Laura. "Opportunity for All and Social Innovation: Obama's Policy Agenda", New York Times. 2014.

Jolin, Michele. "Investing in Social Entrepreneurship and Fostering Social Innovation". Center for American Progress. 2007.

Hell..to the Funder-in-Chief

My submission this week pertains to the political climate that is necessary to foster social innovation. This relates to this week’s readings because the political ecosystem is inextricably linked to the ecosystem that is required to spark social innovation at a national scale.

Paul Carttar’s article described the government’s role in fostering social innovation as that of “funder-in-chief.” The article suggests that this status provides the federal government with a unique responsibility to increase social innovation and impact. The Obama Administration embraced this role when it established its Office of Social innovation and Civic Participation.

At first glance, Michele Jolin’s Innovating the White House article was eerily prophetic. She predicted the creation of the Office of Social Innovation and Civic Participation and the creation of a Social Innovation Fund. However, I discovered that after President Obama was elected, she was appointed as a Senior Advisor on Social Innovation.

Among other things, as the Opportunity for All and Social Innovation article notes, the administration pioneered Pay for Success, or Social Impact Bond (SIB) financing to promote and expand social innovation. We touched on SIBs in last week’s reading and it seemed to me that this would attract bipartisan support. However, I am much more doubtful after reading this week’s readings. We now have an administration that seems hell bent on erasing all remnants of the previous administration, irrespective of the financial and societal costs. This commitment, paired with a do-nothing congress, seems likely to damage the climate necessary for the “funder-in-chief” to expand on innovation.

Again, I am left wondering, if the toxicity of the politically climate does not change, what are the effects this will have on the larger social innovation ecosystem?