Tradable Income-Based Securities (TIBS)
Idea title: Tradable Income-Based Securities (TIBS)
One Sentence description: A new type of public-private partnership that provides a financially-viable way to scale social enterprises and therefore scale the supply side of social procurement
Addressing topic: Social Procurement Challenge
Team members: Nat Ware
Provide an overview of your solution and how it solves the problem along with a short description of your inspiration behind the idea:
Describe your solution in detail, providing a high-level business plan addressing how you would implement your solution:
Mathematically, DEMI can be calculated as follows:
As such, if an investor’s profit (denoted by the symbol for pi) is known, then a simple adjustment gives the social impact of the investment. If profit is unknown, it can be calculated by summating the disbursements to date and the current security price Ps, less the initial transfer Pi and investment cost C.
There are numerous advantages to DEMI over the prevailing approach of Social Return On Investment (SROI). These include its objectivity as a market-based measure, its ability to compare programs covering different social outcomes, its continuous rather than intermittent nature, its explicit focus on marginal rather than absolute social impact, its ability to easily ascertain the counterfactual impact, and the lack of need for separate funding to calculate. Given this, DEMI could improve social impact measurement, helping capital allocation decision-making be more evidence-driven and less emotion-driven.
For more information on DEMI, see the following two documents:
- Detailed Explanation of DEMI: https://drive.google.com/file/d/1rTpdhMhLW7SLpQCjzzyZyX9Kfg4hwnOs/view?usp=sharing. This document provides (a) an explanation of how DEMI can be easily, continuously and accurately calculated, and (b) the arguments for using non-appropriated marginal change in the PDV of expected lifetime income as a proxy for social impact.
- The seven economic properties that a measure of social impact should possess: https://drive.google.com/file/d/1nS5dmH-VR72JDrFnnk2Rz1u-H_GKHjkE/view?usp=sharing. Importantly, DEMI satisfies all seven properties, whereas other measures of social impact satisfy at most three properties.
Additional Information on Contract Allocation
The terms Pi and x could be set so that if the contract were awarded to a different investor and social enterprise, that alternative investor would exactly break-even, earning no profit and no loss. In this way, the investor that is awarded the contract only generates a financial return if their social impact is greater than the counterfactual. Initially, Pi and x would be determined via negotiation. However, once enough investors and social enterprises are interested in this contractual arrangement, Pi and x could be set via a competitive bidding process, such as a second-price sealed-bid (Vickrey) auction. This would mean that the contract is awarded to the investor with the highest bid at the level of the second-highest bid. Since the investor in the second most effective investor-enterprise pairing would keep bidding until the point where they would make no profit, Pi and x would automatically be set so that the counterfactual investment would generate zero-profit. In this way, the investor only makes a profit (and the government only passes on more than they receive in the initial lump-sum) if the investor-enterprise partnership results in greater social impact than the counterfactual. This is a way of guaranteeing that the government only ever passes on a subset of the tax revenue that they otherwise would not have had.
Outline the budget required to achieve the ambition of your idea:
I genuinely believe that this idea can become the default way to scale the supply side of good procurement across Australia and around the world. The goal is to help 5,000 social enterprises and 500,000 disadvantaged Australians by 2025. This is ambitious yet achievable because TIBS enables social enterprises to be scaled up in a financially viable manner.
Partnerships are critical for a stronger idea and delivering a solution. Who are the key stakeholders within your idea? Is your solution the result of a collaborative approach? If not, are you looking to bring other partners along:
To strengthen the likelihood of success, a broad foundation of evidence is critical. What’s the evidence base that points towards your solution being a success? Is your solution addressing an unmet gap in the market:
Who are the key beneficiaries of your solution:
Do you have funding partners interested in your idea:
Describe your most successful experience executing a solution to a problem:
Ten years ago, at the age of just 19, I realized that there were lots of opportunities for talented young Australians to donate with their money, but few opportunities for them to donate with their minds in a way that was manageable alongside full-time study. At the same time, I saw first-hand that many social enterprises were resource constrained, lacking expertise in specific areas, facing significant challenges, and not operating at their full potential.
As such, I founded 180 Degrees Consulting (a) to enable future Australian social entrepreneurs to donate with their minds and to develop as social impact leaders via hands-on problem solving and skill-based volunteering, and (b) to help resource-constrained social enterprises to improve and expand their services so they can help more disadvantaged Australians.
The way 180 Degrees works is that we (i) carefully select, train, mentor and develop top young talent, (ii) optimally match that talent to social enterprises needing specific support and expertise, and then (iii) carefully manage every aspect of the engagement process to ensure quality control and the best possible outcomes for social enterprises. In this way, social enterprises receive much-needed high-quality strategic and operational assistance, and talented youth can make a meaningful contribution to their local Australian communities and develop valuable transferable skills.
Over the past decade, I have grown 180 Degrees into the world’s largest consultancy for non-profits and social enterprises. We now operate in 33 countries, have over 5000 volunteer consultants working at any one point in time via 85 local branches, and have provided over 2.6 million hours of high-quality services to help 2129 social enterprises to increase education accessibility, improve health outcomes, reduce homelessness, and alleviate poverty. At the same time, we have developed 14,946 future leaders and social entrepreneurs. The fact that 96.8% of clients say that would recommend 180 Degrees to other social enterprises illustrates the value for organisations, while the fact that over 30% of our consultants say they have changed their career plans to be more socially-focused (including many deciding to become social entrepreneurs) highlights the lifelong impact of the 180 Degrees model. I have personally dedicated over 25,000 hours to 180 Degrees over the past decade because I am passionate about building the social enterprise sector, and committed to improving the lives of vulnerable Australians.
Optional visual/picture/infographic that demonstrates your idea:
The following three-minute video explains how Tradable Income-Based Securities (TIBS) can scale the supply side of good procurement.
The following diagram/table illustrates how TIBS would work where the social impact accrues to disadvantaged individuals receiving services. This is a modified process to what would occur when the social impact accrues to disadvantaged individuals involved in the supply of goods and services.
Idea Opened: 12:41 AM, Tuesday 31 October 2017
Idea Closes: 06:00 PM, Friday 03 November 2017
Time to go: Closed