England Discards the The Old Math

It doesn't take too long in London before noticing the emergence of a new math.  Social Innovators in England are busy creating new equations to address tough, hard to solve social and environmental challenges.  To start they exposed the fallacies of the 'old' math.

Here is one equation that is no longer useful and which prevents the civil sector from fulfilling one of its key functions: preventing social problems.

Costly crisis intervention reduces the resources available to address the root causes resulting in more crises which equals another round of costly crisis interventions.

This insidious, vicious circle sucks up all the resources and prevents innovative responses to address the causes.  It doesn't add up.  Our social systems are concentrating on the symptoms with little attention paid to prevention.

If we are to bring creativity and innovation into play we need a new math similar to what is being developed here.  We need equations that free up resources to address the up stream causes thereby preventing the down stream crises. 

One creative British alternative to the old math is the Social Impact Bond which is under development by Social Finance UK.  The concept is elegant. 

A 'promise' is secured from government to reward initiatives which result in better social outcomes, while reducing costs, particularly in the medium to long term.  Government pays only when success is demonstrated.  For example, keeping first time offenders from re-offending.  Imagine the savings if a young person becomes inspired to develop their talents rather than spend a lifetime in and out of prison?

Funds are then raised from non-government investors who provide the working capital to finance the intervention and demonstrate the success. If successful, government pays up, the investors get their money back and additional capital is available to maintain the successful solution.  The size of the payment depends on how successful the outcomes are.  

Social Impact Bonds are a relatively risk free way for governments to finance preventative approaches; they encourage and reward the genuine innovators; and they break the vicious cycle of the old math.

I will write more about Social Impact Bonds in the future since two papers are about to be published by my colleagues at Causeway about adapting Social Impact Bonds to British Columbia and Canada.

In the meantime Vickie and I are off to Oxford to present at Canada Day just prior to the start of the Skoll World Forum on Social Entrepreneurship.  For extensive reporting from Skoll including a team of 30 bloggers follow Social Edge.

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