Social Impact Bonds (SIBs) are a private financing mechanism used to fund social programs. Also termed 'Pay For Success,' and 'Outcomes Based' or 'Performance Based' financing, these partnerships involve private entities funding projects aimed at improving social outcomes. If by the end of the project period, 'success' metrics are met (according to third-party evaluators), investors then profit by being paid interest on top of the reimbursed government funds for the cost of the project. This page includes a collection of updates and critical perspectives on these profit structures and on Blockchain Identity systems, de-centralized online ledger programs, poised to be the data backbone that would provide 'proof' of 'program impact' for investors. For files related to Blockchain, see: http://bit.ly/Blockchain_Files. [Note: Views presented on this page are re-shared from external websites and may not necessarily represent the views nor official position of the curator nor employer of the curator.]
By Tristan Greene "Artificial intelligence often doesn’t work the same for Black people as it does for white people. Sometimes it’s a matter of vastly different user experiences, like when voice assistants struggle to understand words from Black voices. Other times, such as when cancer detection systems don’t account for race, it’s a matter of life and death.
So who’s fault is it?
Setting aside intentionally malicious uses of AI software, such as facial recognition and crime prediction systems for law enforcement, we can assume the problem is with bias.
But bias isn’t just obviously racist ideations hidden inside the algorithm. It usually manifests unintentionally. It’s a safe bet to assume, barring sabotage, the people at Amazon’s AI department aren’t trying to build racist facial recognition software. But they do, and it took the company’s leadership far too long to admit it.
Amazon argues that its software works the same for all faces when users set it to the proper threshold for accuracy. Unfortunately, the higher the accuracy threshold is set in a facial recognition system, the lower the odds the system will match faces in the wild with faces in a database.
Cops use these systems set at a threshold low enough to get a hit when they scan a face, even if that means setting it lower than Amazon’s peer-reviewed parameters for minimum acceptable accuracy.
But, we already new facial recognition was inherently biased against Black faces. And we know that cops in the US and other nations still use it, which means our governments are funding the research on the front end and purchasing it on the back end.
This means the reality of false arrests for Black people is, in current status quo and practice, an acceptable risk as long as it results in some valid ones too. That’s a shitty business model.
Basically, the rules of engagement in the global business world dictate that you can’t build a car that’s been proven to be less safe for Black people. But you can program a car with a computer vision system that’s been proven less reliable at recognizing Black pedestrians than white ones and regulators won’t bat an eye.
The question is why? And the answer’s simple: because it makes money.
Even when every human in the loop has good intentions, bias can manifest at an unstoppable scale in almost any AI project that deals with data related to humans.
Google and other companies have released AI-powered mammogram screening systems that don’t work as well on Black breasts as white ones. Think about that for a second.
The developers, doctors, and researchers who worked on those programs almost certainly did so with the best interests of their clients, patients, and the general public at heart. Let’s assume we all really hate cancer. But it still works better for white people.
And that’s because the threshold for commercialization in the artificial intelligence community is set far too low all the way around. We need to invest heavily in cancer research, but we don’t need to commercialize biased AI: research and business are two different things.
The doctor using a cancer screening system has to trust the marketing and sales team from the company selling it. The sales and marketing team have to trust the management team. The management team has to take the word of development team. The dev team has to take it on good faith that the research team accounted for bias. The research team has to also take it on faith that the company they bought the datasets from (or the publicly available dataset they downloaded) used diverse sources.
And nobody has any receipts because of the privacy issues involved when you’re dealing with human data.
Now, this isn’t always the case. Very rarely, you can trace the datasets all the way back to real people and see exactly how diverse the training data really is. But here’s the problem: those verifiable datasets are almost always too small to train a system robust enough to, for example, detect the demographic nuances of cancer distributions or understand how to differentiate shadows from features in Black faces.
That’s why, for example, when the FDA decides whether an AI system is ethical to use, it just requires companies to provide small batch studies showing the software in use, not prove the diversity of the data used to train the AI.
Any AI team worth their salt can come up with a demo that shows their product working under the best of circumstances. Then all they have to do is support the demo with the results of previous peer-review (where other researchers use the same datasets to come to the same conclusions). Meanwhile, in many cases, the developers themselves have no clue what’s actually in the datasets other than what they’ve been told – much less the regulators.
In my experience as an AI journalist – that being, someone who has been pitched tens of thousands of stories – the vast majority of all commercial AI entities claim to check for bias. Yet, scant an hour can pass without a social media company, big tech, or government having to admit they’ve somehow managed to use algorithms that were racially biased and are working to solve the problem.
But they aren’t. Because the problem is that those entities have commercialized a product that works better for white people than Black people.
From inception to production, everyone involved in bringing an AI product to life can be focused on building something for the greater good, but the moment a human decides to sell, buy, or use an AI system for non-research purposes that they know works better for one race than another: they’ve decided that there is an acceptable amount of racial bias. That’s the definition of systemic racism derived from racist privilege.
But what’s the real harm?
Hearkening back to the mammogram AI problem, when one class or race of people get better treatment than others because of inherent privilege, it creates an unjust economy. In other words: if the bar for commercial acceptability is “if it works for whites but not Blacks,” and it’s easier to develop systems with bias than without, then it becomes more lucrative to focus on developing systems that don’t work well for Black people than it does to develop systems that work equally well for Black people. This is the current state of commercial artificial intelligence.
And it will remain that way as long as VC’s, big tech, and governments continue to set the bar for commercialization so low. Until things change, they’re effectively “shorting” Black lives by profiting from systems that work better for whites."
"Given the turbulent, even frothy environment for disruptive digital technologies, one novel entrant promises to be among the frothiest: blockchain. The secure distributed ledger technology behind Bitcoin, blockchain has exploded out of the realm of the dubious cryptocurrency into a hype-driven category of its own.
VC money is pouring into numerous blockchain startups. IBM is betting the farm on the technology. Pundits around the globe are calling for blockchain to reinvent everything from equities trading to charitable giving.
And yet, aside from Bitcoin itself, real-world implementations of blockchain are few and far between. Has the hype exceeded the reality? Let’s see what a number of skeptics have to say."...
Privatization in US higher education has recently been framed as the new normal, or something scholars treat as the default state of affairs with little expectation of change in the foreseeable future. In this chapter we synthesize the literature on privatization, calling for a renewed research agenda that challenges this normalization and reinvigorates study of this important topic. More specifically, we analyze the conceptualizations, origins, catalysts, and manifestations of privatization in the literature. We advance five arguments about the privatization throughout the chapter, underscoring conceptual murkiness, fragmented lines of inquiry, unanswered questions, and methodological limitations. We propose a multilevel framework to understand the privatization literature and bring together disparate strands of inquiry. We conclude by outlining a renewed research agenda on privatization, highlighting several directions for future research and advocating for improved data and research methods."
Link to post with video of speech can be accessed here.
Selected segment below:
..."But it’s not just for cryptocurrency, because anything can be stored on the blockchain. And that’s how they’re going to implement social impact investing or human capital finance. So, what is that? Social impact investing is when you make an investment not just for a financial return, but to make a socially beneficial investment. As an example, if the government notices that people who don’t graduate from high school are statistically more likely to be addicted to drugs, or incarcerated, and that costs money for the government, then Goldman Sachs can come along and say hey, I have an intervention that will increase the rate of high school graduation, and then the government will pay them money if it turns out that their intervention results in the change that they advertised.
As a real example, there is in Brazil what is called the Boa Vista Digital Identity Pilot. How this works is they take poor families and they give them a digital identity on the Ethereum blockchain and they send a home visitor to their house with an iPad that used machine vision to track their kids. And if the AI behind the machine vision detects measurable behavioral change on behalf of the kids – that is, in the direction that the social impact investors want – then the payments are given out to Goldman Sachs or Vanguard or whatever investment bank is behind the investment.
The Boa Vista program is tied to the Bolsa Familia program which is already giving conditional cash transfers to these poor families. It is conditional on their kids attending school, and their kids being fully vaccinated. So it’s tying behavioural compliance to receiving money from the government, and it’s gamifying that compliance in the way that it’s being tracked. And this is the future of UBI, universal basic income. It’s going to be on the blockchain, it’s going to be tied to a digital ID, and it’s going to be based on whether you comply with what the government wants you to do.
And as I said, you can put anything on the blockchain, you can ‘tokenize’ anything. The South African company Bankymoon is putting blockchain on Smart Meters to track all of your energy usage. When you track everything like this it enables hedge funds to bet through futures markets on where certain trackable metrics are going to be going in the future. For instance hedge funds are already betting on water futures in California, they are betting on whether water will be plentiful or scarce. In 2008 they bet that millions of Americans would lose their homes. And you can be sure that once social impact investing has been enabled by the blockchain they’re going to be betting on whether little African children are receiving their vaccinations or not.
You can see this in Cardano Africa, where five million Ethiopian schoolchildren are going to be put on the blockchain and have all of their academic records tracked: their attendance, their test scores, everything. And the minister of Ethiopia that implemented this program explicitly said that they need this to compete in the 4th industrial revolution.
So this is the digitally planned future that the elites want to implement. It’s not going to be a mass depopulation event, they don’t need that, birth rates are already low. It’s going to be a digital panopticon, which is a system where you are always observed at all times but you don’t know when and if you being observed at that moment. They want full-spectrum dominance, they want to control and surveil all economic activity on Earth, and what we need is full-spectrum refusal. Do not go along with any of this. And it’s difficult because the entire economy is built around implementing this future, whether you work in medicine or you work in technology or you work in education."...
"Writer Anand Giridharadas describes in his book " Winners Take All: The Elite Charade of Changing the World " why the rich do not pay taxes, but with their philanthropy determine the course of the world (and thereby undermine our democracy). "Last year, more than four hundred billion dollars were spent on philanthropy in the United States. This is nearly going beyond the government budget - excluding the budget for defense. "
This is just one of the insights of the former New York Times columnist and writer Anand Giridharadas. He paints a picture of a parallel government: one that is not democratic, but that is run by the super-rich of this world.
If rich people and companies avoid paying taxes as much as possible, but depict the government as bureaucratic and then are taking credit when they open a new university building or hospital because their name is on it - what is left of our democracy?
Giridharadas therefore advocates a return to the public interest through renewed cooperation within our democratic institutions. Because, that's how the writer rhetorically summarizes the problem:
"Which rich person or company has done more for the elderly in the United States than social security?"
"Which rich person or company has done more for health care for the poor than Medicaid?"
"Which rich person or company has done more for women than the right to vote?"
"Which rich person or company has done more for African Americans than the Votings Rights Act and the Civil Rights Act?"
An interview with Anand Giridharadas about the super-rich and how they undermine democracy.
Interview & direction: Britta Hosman Research: Henneke Hagen / Arja van den Bergh Edit and Online composition: Daan Kuys Production: Olivier Schuringa Commissioning Editors: Bregtje van der Haak & Doke Romeijn
By Contributing Writer Julianne M. Romanello, Ph.D.
In the elite circles of big philanthropy, Tulsa, Oklahoma has earned quite a reputation. Tulsa received the Readers’ Choice Award for “Best City for Philanthropy” in a 2018 poll conducted by The Chronicle of Philanthropy. This was not the first time Tulsa received national attention for its generosity. In 2012, local NPR-affiliate KWGS-Tulsa reported that Tulsa ranked in the top 20 cities for philanthropy. When one envisions charitable giving in Tulsa, a number of familiar names come to mind. However, none is more prominent than that of George Kaiser, the billionaire banker, tech-investor, oilman, and the man behind the George Kaiser Family Foundation (GKFF). Not only is GKFF a behemoth in its own right, it is also the major donor to the Tulsa Community Foundation (TCF), which, according to a 2016 report, was the second-largest community foundation in the country by assets.
Earlier this year, U.S. News and World Reports published an article entitled “Oklahoma Relies on Philanthropy for Basic Services”, which raised serious concerns about the magnitude of philanthropic influence in Oklahoma, a state that has seen “among the most significant [public] disinvestment” in the nation. “Without public oversight, [philanthropic] foundations can fund the work they care about without any of the decision-making power transferred to ordinary citizens.” In other words, when philanthropic foundations provide the financial or administrative resources for public programs in education, healthcare, the justice system, recreational offerings, or even records administration, they more or less get to establish the terms regarding the operation, delivery, and guiding principles of those services. The users of public services, the voting public, and taxpayers often find themselves with little choice but to accept the terms of service that have been set by the wealthy, politically-unaccountable philanthropists who fund them. In Tulsa, Mr. Kaiser’s GKFF funds a portfolio of public service initiatives that include focus areas in education, health and family well-being, criminal justice, and promoting a vibrant and inclusive Tulsa. TCF, which was established under Mr. Kaiser’s leadership and receives substantial support from GKFF, directly supports initiatives in the following areas: information technology services, emergency disaster relief, professional development and funding strategies, medical-related financial hardship assistance, planned giving services, regional affiliate programs, and education. TCF also supervises over 250 Partner-Agency Funds. Given the reach of GKFF and TCF, one can hardly underestimate the scope of Mr. Kaiser’s influence in Tulsa. Lindsay Jordan, a Tulsa philanthropic adviser, told U.S. News that, “Those of us in philanthropy call [Mr. Kaiser] the ‘benevolent overlord of Tulsa.’”
In this series, I consider how Mr. Kaiser’s philanthropy affects the people of North Tulsa. In this first part, I examine Mr. Kaiser’s strategic approach: the social impact model of philanthropic giving. This approach aims at “social impacts”—benchmarks of success that are trackable, measureable, scaleable, and, ultimately, profitable. Importantly, these social impacts are discrete outcomes (for example, improved performance on a reading assessment) rather than a holistic vision of thriving that would render further philanthropic interventions in North Tulsa unnecessary. Mr. Kaiser’s social impact philanthropy benefits from relatively recent trends in public administration, especially “Social Innovation Finance” (SIF). SIF combines “Pay for Success” (PFS) contracts, Public-Private-Partnerships (P3s), and a new financial instrument, the Social Impact Bond (SIB), which enables securities investors to speculate on the success, or failure, of programs designed to result in specific social change outcomes. These mechanisms set up a structure for transforming philanthropic investments in under-resourced communities into profits—into real, financial gains as well as valuable human data. Because profits are tied to specific outcomes, social impact programs have an added incentive to implement a system of nudges, or social controls, designed to ensure maximum program compliance. Mr. Kaiser’s social impact philanthropy sets up the conditions for a cycle of future wealth- and data-extraction from the residents of North Tulsa, the Black community in general, and the people living in poverty who rely on Kaiser-sponsored social services.
Social Impact Investing and Pay For Success
The relationship between big philanthropy and social accountability is a topic that has become increasingly salient as the gap between America’s wealthiest individuals and the bottom 90% continues its rapid expansion. For those in the lower wealth percentiles, the gap has enormous consequences on the ability of individuals to provide for their most basic needs or, as Forbes put it, “the poorest 50% of Americans are literally getting crushed by the weight of rising inequalities.” Though 2019 confronts us with circumstances that make this question urgent, the question is not new. Even in the early days, the power of big philanthropy gave rise to concerns about the erosion of public oversight. One historical sketch cites a 1912 warning about the power of the Rockefeller Foundation, whose “domination” was “being rapidly extended to control the education and ‘social service’ of the Nation.”
Thomas J. Tierney, an expert on philanthropic strategy and co-founder of the Bridgespan Group, explained that what is relatively new, however, is “social impact” philanthropy, a business-model approach that seeks to increase both “impact and financial returns by continuously striving to achieve better results with the same or fewer resources.” In 2007, he called on the philanthropy sector to appropriate practices widely used in business. This came after The Annenberg Foundation released a report in 2002 that showed only mixed results for its Annenberg Challenge, a landmark campaign to transform public schools across the country. The takeaway from the Challenge and the report was that the problems facing society are so massive that they must be addressed according to the business principle of “disciplined, quantifiable, and financially centered bottom-line thinking—crunching numbers and keeping score.” Data—lots of it—is key: “Mountains of solid data combined with thoughtful, rational decision-making are essential to achieving results. The right numbers, correctly crunched, provide a source of competitive advantage.”
Although results-based philanthropy might be more effective at tackling massive social challenges, it carries its own host of problems. One danger of a quantitative, outcomes-oriented approach to setting and evaluating social impact benchmarks is that the philanthropic organization becomes a business de facto, albeit one with tax-exempt status. Moreover, in an increasingly complex and connected world, the input-output effectiveness assessments of specific social interventions become valuable in their own right. Funded by the deep pockets of big philanthropy and capable of touching almost every aspect of clients’ lives, these assessments can achieve remarkable levels of precision and comprehensiveness in collecting the data used to develop the next round of “changemaking” strategies. When the assessment data becomes more valuable than the mission-specific outcome of the intervention, what is to prevent a service organization from dropping the philanthropy mantle altogether and wholly embracing the business model?
This brings us to the business of “impact investing,” which, in a 2016 article, Forbes Managing Editor Kerry A. Dolan describes as “leveraging private capital for social good” through decisions made on the basis of the growing body of research on the connections between social spending and specific outcomes. Dolan, who oversees the Forbes’ annual World’s Billionaires List as well as its 400 Richest Americans List, observed that impact investors look to fund initiatives that are aligned with their values and are well-managed, but that explains only part of their motivation. In addition, she writes, “impact investors are motivated by double or even triple bottom-line opportunities to earn a financial return while also doing something good for society. Securing a financial return helps ensure that the organization generates measurable impact that is scalable and self-sustaining over time.”
How is it that social impact investments generate a financial return for socially-conscious investors? In order to answer that question, one must look to the work of University of Chicago economist James Heckman, whose “Heckman Equation” is notable for demonstrating how investments in early childhood education programs may generate up to a 13% ROI, as a Center for High Impact Philanthropy whitepaper explains, or even up to 15%, as reported by Forbes. Alison McDowell, a respected blogger and public lecturer on the subject of impact investing, has extensively researched and written about this process in her blog, WrenchInTheGears.com. She explains that Professor Heckman’s insight into the financial benefits of targeted social interventions, pitched in combination with a business strategy for scaling developed by the tech-oriented venture capitalist and Illinois politician J.B. Pritzker, can persuade policy makers to replace traditional public services with private high-impact programs. In other words, strategic investments in social programs that have a proven record of meeting certain benchmarks yield substantial economic benefits for those served by the programs, for governments, for investors, and for society at large. This proven record of economic gains can serve as a selling point to government service providers who might be persuaded to outsource public services if a private service provider (backed by high-impact investors) can virtually guarantee a certain set of desirable outcomes.
Goal-oriented philanthropic investors have seized upon the social impact investing model by forming large consortiums of like-minded, super-wealthy social “change-makers” in order to combine their investment resources and drive large-scale, innovative responses to pressing social concerns. One example of such a consortium is Blue Meridian Partners, a conglomerate of super-wealthy impact investors, including former New York mayor and founder of Bloomberg Philanthropies, Michael Bloomberg. Blue Meridian’s website states, “We make big bets, up to $200 million, on each of our investees. Scaling plans are at the heart of Blue Meridian’s large-scale investments.” To that end, Blue Meridian’s investees receive flexible, upfront growth capital and annual payments for successful completion of performance milestones.
Blue Meridian only invests in programs that can demonstrate successful outcomes. Any program receiving Blue Meridian funding must carefully monitor its work and share the results with a Managing Director assigned to their sponsored programs. This investment gives Blue Meridian access to the stores of data about the populations who receive assistance from these sponsored programs as well as data linked to the success rates of specific interventions. This data may become a valuable source of information for developing commercial strategies in unrelated business ventures. In other words, impact investors, like Blue Meridian, receive a very valuable benefit from high-impact philanthropy: a virtual goldmine of “human data capital”—information about how people make choices, what external factors may be applied to individuals for the purposes of altering behaviors, how certain populations might differ from others in key respects — all of which provides high-impact philanthropists with the tools they need to effect the social change that they wish to see.
Social Innovation Finance and Surveillance Capitalism
In the past decade, economists and businessmen have figured out a way to monetize the success potential of social impact programs by analyzing the human behavioral data collected by social impact philanthropy and using it to speculate on social-innovation-finance-agreements futures. The Social Innovation Finance (SIF) model is a new funding mechanism designed to facilitate the large-scale implementation of successful results-oriented social interventions in a way that poses little financial risk to taxpayers. SIF combines two instruments: 1) a performance, or “Pay for Success” (PFS), contract that stipulates the specific results that constitute program “success,” and 2) a privately-issued “Social Impact Bond” (SIB), or operating loan, to cover the upfront costs of delivering the service intervention. According to The National Conference of State Legislatures:
Social Impact Bonds (SIBs), a type of pay-for-success funding agreement, work by allowing private entities to provide upfront capital that government can repay later. This makes SIBs essentially a contract between a private entity and the public sector. The private party commits to pay for a program that leads to improved social results and public sector savings. The private investors are then repaid when contractually agreed upon objectives are achieved.
The SIF funding mechanism is often referred to simply as PFS financing or SIB financing and its popularity is growing. A 2019 report by Nonprofit Finance Fund, a leader in PFS program development and financing, states that, in 2018, 25 PFS were programs implemented across the country in multiple policy areas and supported by both state and federal legislation. Consistently, advocates highlight the potential of PFS projects to bring about necessary social innovations based on evidence-based practices that are effective and free of partisan or personal bias.
Because SIF pays for results achieved “outcomes” rather than “outputs,” the private funders who cover the up-front costs of service delivery have a financial incentive to ensure that social service providers know and employ the most effective methods for meeting performance expectations. One way to do this is to collect as much human behavioral data as possible in order to develop very accurate predictive algorithms. The SIF system encourages social impact investors to extract as much human data as possible–data about experiences, thoughts, choices, feelings, preferences, and any other factors that help investors predict and modify human behavior. This data may be collected from things like surveys, reports, camera and audio surveillance, access badges, web-based learning or record-keeping applications (such as educational technology and training programs), even video games. It is analyzed not simply to understand how or why people make the choices that they do, but also to determine how some choices may be encouraged and others discouraged. It has the potential to create a lucrative cycle of impact protocols that not only promote the mission-oriented outcomes that social impact investors support, but also generate an ROI for the social impact investors.
In her recent book, The Age of Surveillance Capitalism, Harvard professor Emerita Shoshana Zuboff explains how companies like Google and Facebook harvest data from users, often without their consent, in order to develop products that are able to predict and control behavior. In an interview with The Harvard Gazette, Zuboff stated:
The competitive dynamics of surveillance capitalism have created some really powerful economic imperatives that are driving these firms to produce better and better behavioral-prediction products. Ultimately, they’ve discovered that this requires not only amassing huge volumes of data, but actually intervening in our behavior. The shift is from monitoring to what the data scientists call “actuating.” Surveillance capitalists now develop “economies of action,” as they learn to tune, herd, and condition our behavior with subtle and subliminal cues, rewards, and punishments that shunt us toward their most profitable outcomes.
Although she is referring to for-profit commercial activities, the dynamics of surveillance capitalism apply to social impact philanthropy as well. Quoting from Zuboff’s book,an article in The Guardian explains that “prediction products are traded in a new kind of marketplace that I call behavioural futures markets. Surveillance capitalists have grown immensely wealthy from these trading operations, for many companies are willing to lay bets on our future behaviour.” Social impact bonds, or pay-for-success contracts, become the stuff of behavioral futures markets for which investors and financial speculators may take a “short” or “long” position in the same way they would with any other type of financial instrument. Only in this case, the course of an individual’s life is the object of speculation. In this way, social impact philanthropy makes a commodity of the vulnerable people whom it claims to serve through their social programs. Program assessment data–the data harvested from the recipients of philanthropic social interventions and which is used to quantify impact–contributes to the development of more sophisticated and effective social interventions. It gives financial speculators a strategic advantage in selecting behavioral-futures investments positions (and these might be on the side of success or on the side of the failure of some interventions) that are most likely to generate maximum profits.
What does this complicated system of high-impact social changemaking have to do with Tulsa? A lot, actually. Tulsa relies on Mr. Kaiser’s philanthropy for the provision of many basic social services, such as education, housing, and healthcare. Mr. Kaiser is one of the principal members of Blue Meridian Partners, which has a special regional initiative in Tulsa. Mr. Kaiser also serves on the Leadership Advisory Council of Too Small to Fail with J.B. Pritzker, whose work with Professor Heckman has contributed to the Social Impact Bond market and, as a result, to the hyper-growth of surveillance capitalism. Mr. Kaiser’s ties to the Silicon Valley Tech industry, the world of big philanthropy, and the human data capital markets touch the interests of all Tulsa residents.
One source reports that Mr. Kaiser has been called “the godfather of Tulsa philanthropy.” His influence is wide and deep and continues to expand. GKFF, in fact, was the major supporter of Oklahoma’s first PFS program, the Women In Recovery prison diversion program, which went into effect in 2017. Moreover, the State of Oklahoma recently enacted the “Pay for Success Act” on November 1st of this year (Oklahoma Statutes, Section 9010.2 of Title 62), which encourages greater reliance on public-private-partnerships and PFS programs to tackle social policy issues. The ways in which this situation affects the lives of North Tulsans who depend on the public services administered by Mr. Kaiser’s social impact programs–and how this, in turn, affects the flourishing and political power of the larger North Tulsa community–will be the subject of my next piece in this series."
"It was, in the vernacular of corporate America, a win-win: a bond that paid for preschool for underprivileged children in Utah while also making money for investors.
Goldman Sachs announced last month that its investment in a Utah preschool program had helped 109 “at-risk” kindergartners avoid special education. The investment also resulted in a $260,000 payout for the Wall Street firm, the first of many payments that is expected from the investment.
Gov. Gary R. Herbert of Utah hailed the program as a model for a new way of financing public projects. Such so-called social impact bonds are a new kind of public-private partnership, promising financing from Wall Street and imposing a goal on local governments.
Yet since the Utah results were disclosed, questions have emerged about whether the program achieved the success that was claimed. Nine early-education experts who reviewed the program for The New York Times quickly identified a number of irregularities in how the program’s success was measured, which seem to have led Goldman and the state to significantly overstate the effect that the investment had achieved in helping young children avoid special education.
Goldman said its investment had helped almost 99 percent of the Utah children it was tracking avoid special education in kindergarten. The bank received a payment for each of those children.
The big problem, researchers say, is that even well-funded preschool programs — and the Utah program was not well funded — have been found to reduce the number of students needing special education by, at most, 50 percent. Most programs yield a reduction of closer to 10 or 20 percent.
The program’s unusual success — and the payments to Goldman that were in direct proportion to that success — were based on what researchers say was a faulty assumption that many of the children in the program would have needed special education without the preschool, despite there being little evidence or previous research to indicate that this was the case.
“We’re all happy if Goldman Sachs makes money as long as they are making it with smart investments that make a real difference,” said Clive Belfield, an economics professor at Queens College in New York, who studies early childhood education. “Here they seem to have either performed a miracle, or these kids weren’t in line for special education in the first place.”
The concerns about the program are a reminder of how hard it is to properly structure public-private partnerships like social impact bonds, which depend on easily verifiable and commonly agreed-upon methods of measuring success for goals that can be hard to define, such as student success."...
Finding such measurements is increasingly important as government programs face cutbacks, and public officials look to find private investors willing to address the funding gap. Social impact bonds have been described as one of the most promising ways to harness this money.
Indeed, these bonds will be the focus of a conference hosted by the Federal Reserve Bank of Philadelphia on Wednesday, when the mayor of Philadelphia, Michael Nutter, and a representative from the White House will speak, along with the Goldman executive who oversaw the Utah program.
But the criticism of the Utah program points to issues that could hinder the wider adoption of the concept of social impact bonds. Kenneth A. Dodge, a professor at the Sanford School of Public Policy at Duke, who has been an advocate for the pay-for-success model, said that if the model was to succeed it would have to be done differently than it was in Utah.
“It is a step in the right direction, but this is not the criteria I hope we hold ourselves to ultimately,” he said.
More immediately, the apparent overstatement of the Utah program’s results mean that the payments that Goldman — and a philanthropic partner, theJ.B. & M.K. Pritzker Family Foundation — recently received from the state of Utah and the local United Way were probably also higher than they should have been.
A spokeswoman for Goldman, Leslie Shribman, deferred questions about the methods used to determine the payments it had received to Utah officials, who she said had developed the methodology.
“To just assume that all these children would have gone to special education is kind of ridiculous,” said Ellen S. Peisner-Feinberg, a senior scientist at the Frank Porter Graham Child Development Institute.
Mr. Innocenti, who administered the tests in Utah, said that from 30 to 50 percent of the children in the preschool program come from homes where English is not the only language. He said the school decided to test the children in English, despite the many non-English-speaking children, because the preschool program is conducted in English.
Before Goldman executives made the investment, they could see that the Utah school district’s methodology was leading large numbers of children to be identified as at-risk, thus elevating the number of children whom the school district could later say were avoiding special education. From 2006 to 2009, 30 to 40 percent of the children in the preschool program scored below 70 on the P.P.V.T., even though typically just 3 percent of 4-year-olds score this low. Almost none of the children ended up needing special education.
When Goldman negotiated its investment, it adopted the school district’s methodology as the basis for its payments. It also gave itself a generous leeway to be paid pack. As long as 50 percent of the children in the program avoid special education, Goldman will earn back its money and 5 percent interest — more than Utah would have paid if it had borrowed the money through the bond market. If the current rate of success continues, it will easily make more than that.
Ms. Peisner-Feinberg said that before these sorts of investment are considered again, investors and schools needed better ways to measure them. “You have to be sure you have very rigorous ways of measuring the impact to make sure that it’s legitimate in terms of the outcome you get,” she said. “That didn’t happen here.”...
"Now that social problems have reached epic proportions there is money to be made scaling them back IF they can be tracked as metrics on the data dashboards being pushed by Microsoft and Salesforce. Finance and technology interests make fine partners in that regard. Impact investors demand data, which justifies digital surveillance, and tech and telecom interests make money off the software, hardware, and cloud computing.
Moving forward everything will be assessed in terms of IMPACT, kind of like the technocrats tracking the energy credits. Thanks to Mark Zuckerberg among others, the Trilateral Commission now has Pavlovian tools to tweak and nudge the masses, digital pawns, in real time. It is at the point of “impact” that authoritarianism tightens its grip. So who gets to decide who or what will be impacted? Can a person refuse to be tracked as data for corporate profit? Who gets to decide what metrics are chosen? What if a community desires an outcome that cannot be reduced to a metric? Does it get taken off the table, replaced by a less consequential but more measurable definition of “success?” Kind of like a third grade reading score. How will metrics shape service delivery? I’m guessing more and more interactions will become digitally mediated. Who specifies how the tracking happens? How is it analyzed? By a person? An algorithm? What are the payouts?"...
...
"Who exactly is going to come out ahead if we allow global investment markets to be built on disaster and misery? If those markets are profitable aren’t we likely to end up with MORE disaster and misery, albeit better managed? Investors seek to increase the source of their profit, not eliminate it. That’s just the sick logic of it.
We are at a tipping point after years of austerity. Governments, unable to keep doing more with less, have shifted responsibilities to non-profit providers to care for their people; and private investors and their foundations are fronting money for services. The linchpin that makes this work is performance-based contracting, which was designed to appease fiscal conservatives and centrist liberals. Minneapolis Federal Reserve economist Arthur Rolnick developed the outcomes-based contract model in the mid 1990s in collaboration with former General Mills executive turned non-profit guru Steve Rothschild. Useful to note that charter schools were invented in the Twin Cities right about that same time.
Rolnick and Rothschild also promoted Human Capital Bonds or HUCAPs, an idea that hasn’t yet gotten off the ground, but I fear the concept is still waiting in the wings. Rolnick spent the latter half of his career with hedge fund manager Robert Dugger and Nobel prize winning economist Jim Heckman working on an “Invest in Kids” agenda that would transform pre-natal care, home visits, early childhood education, and early literacy programs into global investment markets built on child and family data surveillance."...
"Wrench in the Gears is primarily a blog about education, and the dehumanizing influence technology wields over classroom instruction. In doing this work, I’ve come to understand that, at its root, the shift to digital “education” is about aggregating vast datasets on children than can be mined for profit in the impact-investing sector. This tactic is not limited to education. In fact, it threatens to engulf ALL public services.
Through outsourcing and the imposition of hard metrics, “what works” lobbyists intend to push the poor, and those teetering on the brink of poverty, into an abyss of impact-driven digital slavery. They’ll pull the non-profits in, along with their clients, since “what works” government hinges on their complicity. Moving forward, non-profits will increasingly run outsourced programs and will be required to deliver the data demanded by outcomes-based contracts. Services will be reengineered to fit the constraints of data dashboards-human life reduced to numbers to meet the demands of global capital.
The Bipartisan Budget Act of 2018, signed into law this February, created a new $100 million Pay for Success Fund at the US Department of the Treasury. Merchant banking firms like Ridge-Lane have marshaled teams of advisors to get in on the action. Financiers and tech billionaires are grooming candidates across the country, hoping their chosen ones will usher in a wave of Pay for Success initiatives that will rival the stock market.
At its core, the new theory of “economic thinking” promoted by INET is riddled with rot. While George Soros, James Heckman, and Robert Dugger attempt to cast social impact investment programs as socially conscious and “progressive,” the public deserves to know the truth. That truth is that these predators will NOT feed hungry children UNLESS they can profit from it."...
"Three weeks after New York City expanded its historic preschool initiative to three-year-olds, Richard Buery held forth on his signature achievement at the Puck Building, owned by Charles Kushner and his son, Jared, Donald Trump’s son-in-law. Bill de Blasio’s deputy mayor of strategic policy initiatives, architect of “PreK for All,” exhaled.
Many had expected him to fail. All eyes were on America’s largest school district. Critics predicted a train wreck, the inevitable result of a rapid scale-up—a sacrifice of quality for access. I welcomed this bold experiment, a key element of the mayor’s agenda to combat inequality. Here was a model of government as a force for change, confirming early childhood education as a public good.
Yet I worried. Wages for preschool teachers in community-based organizations, home for the majority of four-year-olds, hovered around the poverty level, thousands of dollars less than their public school peers. Charter schools were grabbing up the city’s limited space, overcrowding a threat to the small class sizes in which young children thrive. And how would they fare in the most segregated school district in the country?
The following resolution was reviewed and approved at the 2019 National NAACP Conference in Detroit, Michigan. (Pg. 62-63 of full set of resolutions).
Resolution in Opposition to the Use of Blockchain Identity Systems
WHEREAS Blockchain technologies are being developed as tools of digital identity management; and
WHEREAS, transaction data pertaining to vital records, voting, ownership, healthcare, professional and educational credentials, employment, and financial income can be stored on Blockchain systems; and
WHEREAS, global technology interests are placing heavy pressure on governments to scale Blockchain adoption as a financial tool within proposals to privatize public services, including ‘Public-Private Partnerships (P3); and
WHEREAS, governmental interests are exploring the use of ‘smart contracts’ on Blockchain as a means of delivering public benefits; and
WHEREAS, public benefits distributed via ‘smart contracts’ can incorporate coded interventions that preference specific behavioral outcomes; and
WHEREAS, the use of “programmable money/digital currency” may undermine the ability of benefit recipients to make autonomous economic choices, and indenture the future wealth of such populations; and
WHEREAS, aggregation of an individual’s public benefit data within a Blockchain identity system could exacerbate punitive profiling of recipients of services; and
WHEREAS, prototypes linking Blockchain systems to profit extraction through social impact investment initiatives have already been developed; and
WHEREAS, hundreds of billions of dollars have already been directed into social impact investments by the world’s most powerful individuals and financial institutions; and
WHEREAS, consolidation of personal data in Blockchain identity systems will position the global poor who receive benefits via smart contracts to become data backbones upon which “impact” metrics would rest, in effect amplifying investment wealth of elite investors on the backs of vulnerable communities; and
WHEREAS, researchers have warned of the harms of relying on Blockchain systems, given the immutable nature of the technology that would mean false data and/or embedded vulnerabilities would never fully be able to be reversed, remedied, redacted, nor deleted; and
WHEREAS, security flaws are already rampant in Blockchain systems that claim to be secure, leading to the compromised integrity of the systems, and to highly sensitive personal information being vulnerable to exploitation;
THEREFORE BE IT RESOLVED that the NAACP opposes any state or federal legislation that would require an individual to create a Blockchain identity in order to receive any public services or benefits, including but not limited to: education, healthcare, addiction treatment, behavioral health services, law enforcement, housing, and/or food and nutrition.
THEREFORE BE IT FURTHER RESOLVED, that the NAACP will engage in community education efforts to communicate to the public about the structure, function, benefits, and inherent risks of Blockchain technologies."
[Re-sharing does not indicate endorsement]. The proposed solutions in the accompanying article are untested, unproven, and poised to do more harm than good for the vulnerable communities whose data will be placed on to Blockchain platforms.
"By Shanzhai City Holdings
"The Brazilian government is implementing a nation-wide early child development program to conduct weekly home visits to vulnerable children and their families in order to identify risks and opportunities for child development. In the city of Boa Vista, the program is named Survive and Thrive Boa Vista Early Childhood Program (the “STBV”) and aims to tackle the continued high rates of neonatal mortality and the large disparities in early childhood development. Targeting children between 0 and 3 years old living in deprived and low-income families who have already participated in income transfer programs such as bolsa familia, the Boa Vista Municipality Government expects the STBV can eventually eliminate neonatal mortality in the city, and in longer term education inequality."...
"With the newly-signed Every Student Succeeds Act (ESSA) becoming the K-12 law of the land, some critics are decrying one particular clause: the “Pay for Success” initiative. It's a program that allows for private investors to profit from returns on the upfront financing of educational programs, for example, with social impact bonds.
In layman’s terms, Pay for Success means that private firms can step up to pay for public services. They’re then repaid with interest, subsequently turning a profit, if the services funded result in cost savings for the state.
Within the new ESSA package, the Pay for Success initiative can be found on page 797, within a section describing Title II funds. It reads:
PAY FOR SUCCESS INITIATIVE.— The term ‘pay for success initiative’ means a performance-based grant, contract, or cooperative agreement awarded by a public entity in which a commitment is made to pay for improved outcomes that result in social benefit and direct cost savings or cost avoidance to the public sector. Such an initiative shall include—
(A) a feasibility study on the initiative describing how the proposed intervention is based on evidence of effectiveness;
(B) a rigorous, third-party evaluation that uses experimental or quasi-experimental design or other research methodologies that allow for the strongest possible causal inferences to determine whether the initiative has met its proposed outcomes;
(C) an annual, publicly available report on the progress of the initiative; and
(D) a requirement that payments are made to the recipient of a grant, contract, or cooperative agreement only when agreed upon outcomes are achieved, except that the entity may make payments to the third party conducting the evaluation described in subparagraph (B).
Sen. Orin Hatch (R-UT) takes credit for the inclusion of the initiative.
“With Pay for Success, state and local leaders will be empowered to fund initiatives that deliver real results for their communities and schools,” Hatch said in a release on his website. “Rather than being limited by what federal bureaucrats at the Department of Education think best, funding should be more connected to local innovation and successful outcomes.”
He pointed out that specific interventions “are not spelled out… allowing providers the flexibility to adopt whatever strategies they determine will be most effective,” noting also that, in some cases, “private investment provides upfront financing, taking on the risk that the intervention won’t succeed and recovering the investment if it does.”
On her blog, Deutsh29, teacher and statistician Dr. Mercedes Schneider, author of the book "A Chronicle of Echoes: Who's Who in the Implosion of American Public Education," noted that pay-for-success initiatives are also found within Title I, Part D, (“Prevention and Intervention Programs for Children and Youth Who Are Neglected, Delinquent, or At Risk”) and in Title IV, Part A, (“Student Support and Academic Enrichment Grants,” section 4108, “Activities to Support Safe and Healthy Students”) of the new bill.
Dr. Schneider is a staunch critic of Pay for Success' inclusion.
“The lure of Pay for Success is the money,” she said. “So, in states where market-based education reform has taken hold, Pay for Success is more likely to be heralded as benevolence and the profit motive downplayed-- and it will likely lead to scandal.”
Some other education advocates agree.
Former assistant U.S. education secretary and New York University education historian Diane Ravitch called the initiative an outright “threat,” telling readers of her blog to phone lawmakers "at once to stop this money-making scheme.”
Some parents, teachers, and education activists have already created an online petition calling for the initiative’s removal from the ESSA."...
"The DAO, the distributed autonomous organization that had collected over $150m worth of the cryptocurrency ether, has reportedly been hacked, sparking a broad market sell-off.
A leaderless organization comprised of a series of smart contracts written on the ethereum codebase, The DAO has lost 3.6m ether, which is currently sitting in a separate wallet after being split off into a separate grouping dubbed a “child DAO”.
Ether markets plunged on the news, falling below $13 in trading on the cryptocurrency exchange Poloniex. With ether currently trading at roughly $17.50 per coin, that puts the value of the stolen cryptocurrency at more than $60m.
News of the hack first began to circulate on Reddit and other social media sites this morning, prompting Ethereum co-founder Vitalik Buterin to call for a pause in trading in ether markets as well as those for DAO tokens, which are used to vote on funding proposals for the decentralized group.
TheDAO was launched in May using open-source code written by Slock.it, an Ethereum-focused startup based in Germany. The DAO is designed to operate like a venture capital fund empowering it members to fund ethereum projects.
To become a voting member of The DAO tokens were sold in exchange for ether during a month-long “creation phase” that resulted in $162m worth of ether being raised. A measure was built into The DAO code that allows for “child DAOs” to be formed in which members could split off for various purposes.
Earlier this week, word of a so-called “recursive call” attack that could be used to drain some smart contract accounts emerged following a blog post by Bitcoin Foundation founder Peter Vessenes. A solution was produced by Slock.it and uploaded to GitHub.
For now, the ethers moved to the second DAO appear to be frozen. Gustav Simonsson, a member of the Ethereum Foundation that helps over see the Ethereum codebase, posted on Reddit the funds in question can’t be spent until 14th July, as they are locked in that child DAO’s creation phase.
Next steps include a possible two-part fork of the Ethereum blockchain, as explained in a note published by Buterin. The fork would not roll back or reverse any transactions, but instead seek to prevent the further drain of ethers from The DAO by providing a mechanism for reacquiring them."...
Abstract This Article examines the matrix of vulnerabilities that low-income people face as a result of the collection and aggregation of big data and the application of predictive analytics. On one hand, big data systems could reverse growing economic inequality by expanding access to opportunities for low-income people. On the other hand, big data could widen economic gaps by making it possible to prey on low-income people or to exclude them from opportunities due to biases entrenched in algorithmic decision-making tools. New kinds of “networked privacy” harms, in which users are simultaneously held liable for their own behavior and the actions of those in their networks, may have particularly negative impacts on the poor. This Article reports on original empirical findings from a large, nationally-representative telephone survey with an oversample of low-income American adults, and highlights how these patterns make particular groups of low-status Internet users uniquely vulnerable to various forms of surveillance and networked privacy-related problems.In particular, a greater reliance on mobile connectivity, combined with lower usage of privacy-enhancing strategies, may contribute to various privacy and security-related harms. The Article then discusses three scenarios in which big data—including data gathered from social media inputs—is being aggregated to make predictions about individual behavior: employment screening, access to higher education, and predictive policing. Analysis of the legal frameworks surrounding these case studies reveals a lack of legal protections to counter digital discrimination against low-income people. In light of these legal gaps, the Article assesses leading proposals for enhancing digital privacy through the lens of class vulnerability, including comprehensive consumer privacy legislation, digital literacy, notice and choice regimes, and due process approaches. As policymakers consider reforms, the Article urges greater attention to impacts on low-income persons and communities."
"An experiment using a Social Impact Bond (SIB) to reduce the rate at which juvenile offenders return to jail—so-called “recidivism”—at the troubled Rikers Island prison didn’t work, despite being hailed as a success by some.
The concept of SIBs is for private investors to lend money to governments for the funding of programs that, if successfully delivered, will generate long-term savings. Repayment of upfront funds is triggered when an independent evaluator certifies that programs have achieved the promised results.
Proponents argue that SIBs should be used— at no cost to taxpayers—to test to see which innovative ideas can make a dent in intractable social problems.
The SIB at Rikers Island funded a cognitive behavioral therapy program for youths detained at the New York City prison, with the goal of “reducing the high recidivism rate for this population by focusing on personal responsibility education, training, and counseling,” according to the MDRC, an intermediary managing organization. Many eyes were on Rikers because SIBs are considered the new silver bullet for America’s failure to invest in social programs that address poverty, mental illness, and crime.
The failure of the Rikers experiment to achieve the project’s intended outcomes raises more questions than answers, particularly with regard to the potential of SIBs to address complex social problems and serve vulnerable communities. Goldman Sachs lent $7.2 million to New York City to fund the project to reduce recidivism among the 3,000 16- to 18-year-old males detained at Rikers Island, of whom half return to jail each year. An 8.5 percent reduction in the rate of recidivism would have triggered repayment, and greater than 10 percent reduction would have led to a profit for Goldman—between $500,000 and $2.1 million, depending on rate of reduction.
In addition to Goldman, the complex and potentially costly structure included an intermediary managing organization, an independent evaluator, and a service provider. Bloomberg Philanthropies guaranteed $6 million, or 83 percent, of the SIB loan, substantially reducing Goldman Sachs’s risk.
However, in July, the Vera Institute concluded that the intervention had failed to reduce recidivism. Consequently, the program will end in August.
In science, failure can still be deemed a kind of success, since data can be helpful in revising or shelving a working hypothesis. But did the Rikers SIB experiment provide that kind of clarity? The claims of success at Rikers hinge on the assertion that the program cost taxpayers nothing. Indeed, the city isn’t on the hook for any repayment, but we don’t know the true cost of the intervention.
According to MDRC, “the arrangement required considerable in-kind support from city government leaders and staff.” These are real costs—paid with taxpayer dollars—and should be part of the accounting equation.
A further claim by supporters, that the SIB will provide valuable data to help ascertain what is and is not effective for future experiments, remains to be seen; the Vera Institute’s full evaluation won’t be released until September, and the summary findings don’t provide sufficient details. That said, there are certain lessons we can take from this failed experiment:
When SIBs fail, social problems persist: Taxpayers avoided paying some costs for the program, but the underlying problems that contribute to recidivism remain.
The scope of SIBs is limited by the demand for short-term results: Most social problems are complex and require comprehensive programs and policies that stay the course. A bias toward programs that produce quick, measurable results narrows the public dialogue and waters down findings.
SIBs divert investments that could be used in other ways: Philanthropy plays an important role in funding social interventions. In light of the failure of this first-in-the-nation SIB-funded intervention, philanthropic organizations may be asked to bear more of the risk to keep SIBs attractive to investors. A 2013 report by MDRC notes that it “may be necessary for benevolent funders to step in to ‘smooth the curve’ for traditional investors.” Not only does this undermine a key claim of SIBs, that they shift responsibility to the private sector alone, but it suggests that philanthropic dollars might be diverted from directly funding other innovative programs, shouldering risk for private investors instead.
The range of factors needed to create meaningful change in the lives of young people who face multiple social and economic challenges is beyond the control of any one social intervention. There are far too many questions remaining to conclude that SIBs are an effective vehicle for funding social programs. Other approaches, such as reducing misdemeanor arrests, disrupting the school-to-prison pipeline, changes to the bail system, and raising the age of criminal responsibility would have significant impact on the numbers who cycle through Rikers. If the goal is to solve social problems, not privatize the public sector, we should consider a simpler solution—public investment in schools, jobs, social programs and innovative criminal justice."...
"Have you ever heard of a social impact bond? It’s a kooky financial instrument – a bond that “pays off” when some socially desirable outcome is reached.
The idea is that people with money put that money to some “positive” purpose, and if it works out they get their money back with a bonus for a job well done. It’s meant to incentivize socially positive change in the market. Instead of only caring about profit, the reasoning goes, social impact bonds will give rich people and companies a reason to care about healthy communities.
So, for example, New York City issued a social impact bond in 2012 around recidivism for jails. Recidivism, which is the tendency for people to return to prison, has to go down for the bond to pay off. So Goldman Sachs made a bet that they could lower the recidivism rate for certain jails in the NYC area.
Or who knows, maybe they sold that bond three times over to their clients, and they are left short the bond. Maybe they are actually, internally, making a bet that more people are going to jail in the future. That’s the thing about financial instruments, they are flexible little doodads.
Also, and here’s a crucial element to look for when you hear about social impact bonds: the city of New York didn’t actually put up any money to issue the bonds. That was done instead by Goldman Sachs and MDRC, a local nonprofit. However, NYC might be on the hook if recidivism rates actually go down. On the other hand fewer people would be in jail in that case, so maybe the numbers would work out overall, I’m not sure. Theoretically, in that best case scenario, the city would also have the knowledge of how to reduce recidivism rates, so they’d be happy for that as well.
Which is how we get to the underlying goal of the social impact bond: namely, looking for privately financed “solutions” to social problems. The reasoning is that governments are inefficient and cannot be expected to solve deep problems associated to jails or homelessness, but private companies and possibly innovative non-profits might have the answers.
As another example, there’s a Massachusetts anti-homelessness social impact bond initiative, set up in 2014 with $1 million in philanthropic funding and $2.5 million in private capital investments, with the following description: “the investors assume project risk by financing services up front with the promise of Commonwealth repayment only in the event of success”.
It’s a good idea to try things out and see what works for the big problems like homelessness and recidivism. That’s not up for debate. However, it’s not clear that social impact bonds are the best approach to this. There’s a real danger that it’s going end up being a lot like the charter school movement: they juice their numbers by weeding out problematic students, they are unaccountable, and even when they tout success their “solutions” don’t scale.
Here’s a big red flag on the whole social impact bond parade: Goldman Sachs was caught rigging the definition of success for a social impact bond in Utah. It revolved around a preschool program that was supposed to keep kids out of special ed. Again, it was hailed by the Utah Governor as “a model for a new way of financing public projects.” But when enormous success was claimed, it seemed like the books had been cooked.
Basically, Goldman Sachs got paid back, and rewarded, if enough kids who were expected to go into special ed actually didn’t. But the problems started with how find the kids “expected to go into special ed.”
Namely, they administered a test known as the PPVT, and if the kid got a score lower than 70, they were deemed “headed to special ed.” But the test was administered in English, when up to half of the preschoolers didn’t speak English at home. And also, the PPVT was never meant to measure kids for special ed needs in the first place. In fact, it’s a vocabulary test. Kids are shown a picture and a word or two of description – in English – is spoken, and the kid is supposed to say the number of the picture associated with the description. Here’s a sample:
Weirdly, non-native speakers didn’t do so well. Lo and behold, after a couple of years where the kids learned English, most of them headed to normal classrooms, and Goldman Sachs got paid back. From the article:
"From 2006 to 2009, 30 to 40 percent of the children in the preschool program scored below 70 on the P.P.V.T., even though typically just 3 percent of 4-year-olds score this low. Almost none of the children ended up needing special education."
Let’s take a step back. We’re asking for help from private finance companies to solve big hard societal problems, and we’re putting huge money on the line. There’s a problem with this approach. We are asking for gaming such as the above. We should expect to see more of it.
Worst case scenario: financiers are betting against the “socially beneficial” outcomes. It’s possible, we saw it happen in the housing crisis. From their perspective, it doesn’t make sense to have a market where you can’t bet against something, and if they think the chances of a positive outcome are overblown, they’d be stupid not to. And of course, if they can influence the result directly, then why not. It could get ugly.
Here’s my hope: that we soon realize that engaging like this doesn’t solve any problems, and moreover it wastes time and money. Financial incentives are not compatible with the scientific approach, and basic research depends on money not being directly involved. When private financiers want to get involved in this stuff, it’s because they can profit off of it, not because they want to help."
"We know that investing in early childhood has one of the highest returns on investment for society, but it has historically not attracted the same levels of early stage capital as other age groups. Now, early childhood innovation and investment are increasing. Hear from impact investors who are investing in this market. What are the most exciting areas for innovation and which problems need to be solved? What does the future of this market hold for investors and for children and families?"
Programming descriptions are generated by participants and do not necessarily reflect the opinions of SXSW."
"Blockchain-powered computer programs promise to revolutionize the digital economy, but new research suggests they’re far from secure.
Computer programs that run on blockchains are shaking up the financial system. But much of the hype around what are called smart contracts is just that. It’s a brand-new field. Technologists are just beginning to figure out how to design them so they can be relied on not to lose people’s money, and—as a new survey of Ethereum smart contracts illustrates—security researchers are only now coming to terms with what a smart-contract vulnerability even looks like.
Digital vending machines: The term “smart contract” comes from digital currency pioneer Nick Szabo, who coined it more than 20 years ago (and who may or may not be Satoshi Nakamoto). The basic idea, he wrote, is that “many kinds of contractual clauses (such as collateral, bonding, delineation of property rights, etc.) can be embedded in the hardware and software we deal with, in such a way as to make a breach of contract expensive (if desired, sometimes prohibitively so) for the breacher.” Szabo called physical vending machines a “primitive ancestor of smart contracts,” since they take coins and dispense a product and the correct change according to the displayed price.
Enter the blockchain: Today, the most common conception of a smart contract is a computer program stored on a blockchain. A blockchain is essentially a shared accounting ledger that uses cryptography and a network of computers to track assets and secure the ledger from tampering. For Bitcoin, that gives two parties who don’t know each other an ironclad guarantee that an agreed upon transfer of funds will happen as expected—that is, no one will get cheated.
Smart contracts are where things get interesting. Using a smart contract, two people could create a system that withdraws funds from one person’s account—a parent’s, let’s say—and deposits them into a child’s account if and when the child’s balance falls below a certain level. And that’s just the simplest example—in theory, smart contracts can be used to program all kinds of financial agreements, from derivatives contracts to auctions to blockchain-powered escrow accounts.
ICOs everywhere: One of the most popular applications of smart contracts has been to create new cryptocurrencies. A few of them have provided glimpses of a new kind of economy in which a purpose-made digital currency can be used for a “decentralized” service, like data storage or digital currency trading. Investor excitement over the promise of such applications has helped fuel the ICO craze, which has raised over $5 billion. (What the hell is an ICO? ← Here’s a primer)
But hold your horses: Technologists still don’t have a full picture of what a security hole in a smart contract looks like, says Ilya Sergey, a computer scientist at University College London, who coauthored a study on the topic published last week.
Users learned this the hard way in 2016 when a hacker stole $50 million from the so-called Decentralized Autonomous Organization, which was based on the Ethereum blockchain. And in November around $150 million suddenly became inaccessible to users of the wallet service Parity, which is also rooted in Ethereum.
Sergey and colleagues used a novel tool to analyze a sample of nearly one million Ethereum smart contracts, flagging around 34,000 as vulnerable—including the one that led to the Parity mishap. Sergey compares the team’s work to interacting with a vending machine, as though the researchers randomly pushed buttons and recorded the conditions that made the machine act in unintended ways. “I believe that a large number of vulnerabilities are still to be discovered and formally specified,” Sergey says."...
To get content containing either thought or leadership enter:
To get content containing both thought and leadership enter:
To get content containing the expression thought leadership enter:
You can enter several keywords and you can refine them whenever you want. Our suggestion engine uses more signals but entering a few keywords here will rapidly give you great content to curate.
Your new post is loading...
![George Kaiser’s Social Impact Philanthropy: How a Billionaire Transformed North Tulsa’s Misery into a Cash Cow [Part 1] // New Tulsa Star | Social Impact Bonds, "Pay For Success," Results-Based Contracting, and Blockchain Digital Identity Systems | Scoop.it](https://img.scoop.it/Wfomv-gruqstGkaSfkTejzl72eJkfbmt4t8yenImKBVvK0kTmF0xjctABnaLJIm9)
![What’s Really at Stake with [Blockchain] Vaccine Passports | Social Impact Bonds, "Pay For Success," Results-Based Contracting, and Blockchain Digital Identity Systems | Scoop.it](https://img.scoop.it/uWNxdH4E-TUef8KISaqkkjl72eJkfbmt4t8yenImKBVvK0kTmF0xjctABnaLJIm9)
