After years of watching Washington policymakers fight over the budget and the deficit, I think it's past time for us to acknowledge that these conversations -- about the fiscal cliff, the debt ceiling, and so on -- are simply missing the point. Instead of talking about how to solve our most intractable social problems, or what we can do differently to solve them, the conversation simply circles around whether we should be spending more or less money. We need solutions, new ideas and smarter investments to make a real difference.
Our country faces serious problems -- more than 40 percent of children in about 2,000 schools in this country are not graduating from high school. Of the students who enter college, only half will earn a college degree in six years. The government in 2009 spent $18 billion on job training programs, but we know little about their effectiveness. The unemployed can't seem to find jobs even after training, yet there are thousands of jobs that don't get filled daily. Recidivism rates are high even though we know there are programs that work to break the cycle of re-offending. We need a deeper conversation about how we solve our problems, and how we create incentives that lead to positive outcomes and breakthrough results. In this tough budget environment we need to generate bold new ideas and experiment with new ways to operate if we want results.
We need a discussion about ideas, innovation, and the need to make bold changes to address some of our toughest challenges. There are many social programs in this country run by nonprofits, social entrepreneurs and others in the social sector that are achieving results, but they face serious challenges -- tighter budgets, lack of access to growth capital, and difficulties retaining talent. The social sector needs change, and it needs it at scale. The government and the private sector need to be engaged in this change. More simply put we need transformative change.
This will require fundamental changes in how social policy is designed and executed. Success in the sector should not just be based on the number of people served, but also on how many people leave the program in a better situation. This will require a wholesale shift in the large sector of providers as well as the way government does its work. It will take bold, thoughtful, and courageous policy makers at all levels of government to change the conversation.
I have written quite a bit about the incredible opportunity that foundations and the private sector have to drive responsible growth through impact investing (see blogs here and here). And, it is important to remember that there are real solutions making a difference and can set an example for future initiatives. There are cities, states, and groups within the federal government working with foundations, the private sector and investors to drive change. New solutions include:
Innovation funds for scale
The Social Innovation Fund and the i3 Fund set a new way to do business, investing in what works. That means providing money to organizations that have proven results and helping scale their impact. The Social Innovation Fund (SIF) provided more than money, it represented a wholesale change in the role of government in social policy -- moving it away from provider of assistance to catalyst of change. The SIF focused on scaling impact and measuring the outcomes, which encouraged a focus on results.
What does that look like in practice? One example of a SIF grantee is Venture Philanthropy Partners, a Case Foundation grantee, which created youthCONNECT with a goal to help 20,000 young people in five years to successfully transition to productive, self-sufficient adulthood, including college completion, employment and healthier lives. A $4 million investment from the government leveraged another $13 million of matching grants from philanthropy. Additionally, the programs will be rigorously evaluated. This is an effective public private partnership. This is exactly what the government should be doing -- catalyzing change and scaling solutions in the social sector. We need more innovation funds in partnership with philanthropy for scale.
The public sector has recently started to experiment with a promising new model of paying for success in the social sector. Social Impact Bonds are financial instruments that enable governments to recruit private investors to fund a social initiative (e.g. reducing recidivism rates) and to provide a return to those investors if the initiative achieves the stated outcomes. Investors absorb the risk of the project's success, and they only get their money if they get results. This focuses the government on identifying exactly what result (or outcome) they want to achieve. It enables investors to take a hard looks at the risk for achieving an outcome, bringing more rigor to the process of selecting organizations and their ability to achieve results. And, it ensures financial incentives are tied to positive outcomes versus potentially negative for-profit incentives, such as per prisoner management fees.
This represents a significant shift in the way government spends its money and tracks success. Given our budget challenges, this is a great way for government to refocus energy in the social sector: define the outcomes and parameters to achieve those outcomes, then pay only if outcomes are achieved. Some cities and states are already experimenting with Impact Bonds -- Massachusetts, New York State, New York City, and Fresno, Calif., among them. We should and could be doing more. This is a real public private partnership that can achieve results.
This is investing in businesses achieving both financial and social returns, with an intent for impact. These businesses are already changing the game like Revolution Foods, which provides healthy, unprocessed meals to students in over 600 schools. Just the fact that Revolution Foods is competing in the school meal market has forced other providers to offer healthier options. That is literally market changing. Creating more incentives for businesses to have social impact and financial returns can't be bad, right? Other examples include Seventh Generation, Tom's Shoes, and Wireless Generation. Some impact investments will fail, but so will plenty of non-impact investments. Taking on risk is the only way we will find those business models that can work.
Prizes and challenges
Prizes and challenges provide great opportunities to unearth new ideas, innovative solutions and different ways to solve problems. Government agencies define a problem and set a goal, then ask the public to propose solutions. The government has the ability to crowd source innovative ideas from individuals, businesses and non-profits worldwide. This is a great bottom up opportunity for communities, nonprofits, businesses and others to collaborate for change. Why not create more funds for prizes and challenges? Prizes and challenges can be conducted internally within an agency or externally, to allow others to bring in new ideas. These competitions require time and effort to design and administer, but what an opportunity to harness the expertise of a workforce or the creativity and energy of a community. Some agencies within the federal government are already doing this. The Case Foundation has worked with the White House to host two public-private strategy sessions for federal government employees to explore innovations and tools in this new arena. And more than 150 federal government challenges adding up to millions of dollars have been launched on challenge.gov. How can we encourage more -- and at the state and local level, too -- to join in?
Interactive technology and social media
Interactive technology and social media have changed the way we live sparked global revolutions, and, if applied appropriately, has the potential to be a game changer for the social sector. Finding better ways to leverage interactive technology will help look at data differently and will allow for greater collaboration and participation to solve problems. Already technology (and information) in many forms is changing the way we operate -- from mobile technology and applications to "big data" and data-based decision making. We still have a long way to go -- and technology makes large players, including government, uncomfortable. But, it's here to stay and we need to find new models that can better leverage its potential for good.
Across the United States and around the world we are seeing how technology is already changing the paradigm. We have seen the big protest movements mobilize through social networks, but fewer people know about organizations like iFoster, an aggregation site focused on providing resources and support for at-risk youth that are leaving the foster care system to help them become successful adults. In the 18 months since its launch, iFoster has become one of the largest sites serving child welfare agencies and low income families, supporting over one million children across 50 states.
There is also great work being done to bring new technology to local government in the United States. Organizations like Code for America -- a team made up of web geeks, city experts, and technology industry leaders that work with cities to innovate -- are driving the creation of new technology for engagement and are running an accelerator to support disruptive civic startups.
These organizations are disrupting the system. We need more disruption!
These are a few ways of achieving change that have already been started. There are undoubtedly many more. These changes could happen faster and more effectively, but we need a new way of thinking about policy and moving our political conversations forward. There are people, organizations, and businesses across the country that are committed to making real, measurable and concrete differences in their communities and around the world. The government can only benefit from finding new and innovative ways to support their efforts.