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Tradable Income-Based Securities (TIBS)

The idea

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:

I have spent the past decade working with over 2000 social enterprises that supply goods and services to businesses and governments. What I have discovered is that the main reason why social enterprises cannot scale (and the reason why the supply side of social procurement is so limited) is the difficulty social enterprises face in obtaining growth capital.
 
Social enterprises often need sizable amounts of upfront capital to train disadvantaged individuals before they can commence work as employees, to pay salaries in the short-term, and to make the fixed-cost investments that are necessary (such as building IT platforms to manage their operations). There is a time-lag between necessary expenditure and sales revenue. This results in cash-flow problems that limit the ability of social enterprises to be profitable in the short-term, and thereby prevents demand-led scaling via earned income. The problem is not a lack of demand for social enterprise goods/services, but that social enterprises cannot meet existing demand because they lack a viable growth financing mechanism.
 
Existing attempts to provide the requisite growth capital are all problematic. Philanthropic capital is often insufficient, debt financing often involves significant risk to social enterprises that they are unwilling or unable to bear, and equity financing may not be possible because of below-market returns or the social enterprise’s legal structure.
 
But what if I told you that there’s a way to scale the supply side of good procurement by providing social enterprises with the necessary growth capital in a way that (a) does not cost governments anything, (b) does not rely on grants, (c) does not cost disadvantaged individuals anything, (d) does not involve social enterprises bearing any risk of debt financing , and (e) makes a profit for investors. It sounds too good to be true, but it’s not.
 
Tradable Income-Based Securities (or TIBS) is an innovative way to finance the growth of social enterprises, and therefore scale the supply side of good procurement, by using a new type of public-private partnership.
 
The idea, in brief, is that traditional investors fund the expansion of social enterprises that help disadvantaged individuals - such as social enterprises that provide refugees, those with disabilities, and indigenous Australians with vocational training and employment. This assistance, by its nature, increases the expected lifetime incomes of those disadvantaged individuals, and therefore increases government tax revenue. Each year, for a set number of years, governments pass back to investors a portion of the additional tax revenue they receive.
 
By way of example, suppose there was a social enterprise that trained and employed disadvantaged individuals as programmers. With TIBS, investors could fund the social enterprise to train and employ 10,000 additional disadvantaged individuals, in return for 30% of the tax revenue attributable to them for ten years. The investors would pay the government a lump-sum amount upfront as the initial purchase price of the security, would fund and support the social enterprise expansion, and would receive the 30% of the tax revenue. 
 
This arrangement is mutually beneficial.
 
Social enterprises receive growth capital from investors so they can make the necessary upfront expenditure. They are able to expand at no cost to themselves, and without bearing any risk.
 
Procurers have their demand finally met, due to greater social enterprise capacity.
 
Disadvantaged individuals receive benefits at no cost. They just pay the usual tax rate. They’re effectively paying for their own training with their future tax money.
 
Governments pay nothing upfront, and there are mathematical ways to structure the contract so they only ever pass on what they otherwise would not have had.
 
Investors can have a substantial social impact, without needing to sacrifice profit. Since the securities (the rights to the portion of tax revenue) are tradable, investors can profit in the short-term with uncapped upside.
 
There’s no trade-off between social and financial returns. Investors and social enterprises are incentivised to provide the highest quality support to disadvantaged individuals involved in the production of their goods and services, because what maximizes social impact is what maximizes profit. A true win-win.
 
Importantly, this one idea could enable thousands of great social enterprise ideas to be scaled in a financially sustainable manner.
 
 

Describe your solution in detail, providing a high-level business plan addressing how you would implement your solution:

Ideal Situation 

When it comes to social procurement, one would like to know ex ante which social enterprise is objectively expected to have the greatest social impact, given there are multiple ways to achieve each social outcome. Then, those social enterprises would ideally receive growth capital to scale their capacity in a way that (a) does not cost disadvantaged individuals they are helping anything at any time, (b) does not require the government to pay, (c) does not rely on donations or grants, (d) does not involve the social enterprises paying anything or bearing any risk, and (e) generates profit for investors. Finally, we would want to easily measure the social impact of the social enterprises ex post. Remarkably, this is possible.
 
Conceptual Foundation
 
The following idea arises from a deep understanding of the relationship between, and sequencing of, social value creation and financial value creation. Importantly, in the vast majority of cases where social enterprises help disadvantaged individuals (such as by providing them with training and employment), the effect is increased expected lifetime incomes of those individuals. This in turn increases the expected taxation revenue for the government. If this financial value that is subsequently created from social value can be attributed to and appropriated by those that finance social enterprises, then there may be greater incentive and capability to fund social enterprises expansion in the first place - which corresponds to scaling the supply side of good procurement. Such attribution and appropriation is indeed possible.
 
A New Form of Public-Private Partnership
 
Suppose there is a new form of public-private partnership whereby private investors partner with social enterprises. The government contracts with pairs of investors and social enterprises to provide support to consenting disadvantaged individuals. Rather than paying the investors in traditional ways, the government instead issues the investors with Tradable Income-Based Securities (TIBS) that pay out every year as a function of the incomes of those individuals receiving support. The right to this flow of payments is tradable, so the price of TIBS is a function of the present discounted value of the expected lifetime incomes of the individuals receiving help.
 
This new form of public-private partnership can be broken down into six key steps, as shown in the diagram below.
 
TIBS
 
Step 1: Contract Agreement (Government, Investors and Social Enterprises)
 
Suppose there is a social enterprise, from which goods/services are procured, that is effective but not operating at scale. That social enterprise could partner with an investor to jointly bid/pitch to the government for a contract to scale their operations. The government could then award a contract to the investor and social enterprise pair (this contract could either be negotiated directly or could be awarded via a competitive auction process). This contract would have five components and would take the following form: (s, q, N, Pi, x). s is the specific type of support the social enterprise provides to disadvantaged individuals (such as on-the-job training). q is the quantity of support to be provided (such as the number of years). N refers to the population of individuals who have consented to receive such assistance. Pi is an initial lump-sum payment to be made from the investor to the government. x is a proportion of the taxation revenue from the individuals receiving support, which will be transferred annually by the government to the investor (or whoever owns the TIBS).
 
By way of illustration, the Australian government could contract with an investor and social enterprise to provide hospitality training and employment to 5,000 newly resettled refugees, with an initial payment of $5 million from the investor to the Australian government (Pi = $5M) and 20% of the taxation revenue that is collected from those refugees over ten years to be passed on (x = 0.2).
 
Step 2. Initial Transfer (Investor to Government)
 
Once the contract is agreed, an initial lump-sum (Pi) is transferred from the investor to the government, which can be viewed as the purchase price of the TIBS.
 
This payment ensures that inaction or low-effort by investors or social enterprises would result in a financial loss. Investors only profit if the support provided to disadvantaged individuals (by the social enterprises) is of a high enough quality so as to increase the expected lifetime incomes of those individuals, and thereby increase the stream of transfer payments, to the point that it more than offsets the initial transfer. In this way, high effort is incentivized and a high degree of social impact is guaranteed.
 
Step 3. Social Impact Generation (Social Enterprise to Individuals)
 
Investors fund the expansion of the social enterprises that they have partnered with. This funding enables social enterprises with existing expertise to dramatically increase their supply of goods and services, thereby increasing the supply side of good procurement. This simultaneously enables the social enterprises to increase their social impact by helping more disadvantaged individuals. Since investors benefit financially from good social outcomes, they have an incentive to select the most effective social enterprises and to hold them accountable for their effort and performance.
 
Step 4. Securities Exchange (Investor to Investor)
 
After the social enterprise expansion has been financed, investors may sell the TIBS that they own to others, who then acquire the right to the stream of transfer payments from the government. The market price of TIBS reflects the present discounted value of expected future government transfers.
 
This ability for investors to sell the right to future streams of payments is of crucial importance. It means the long-term impacts of investments are incorporated into the short-term decision-making calculus of investors.
 
Step 5. Taxation (Individuals to Government)
 
Each year, those who have received support from social enterprises pay taxation to the government based on their income. They do not pay a higher taxation rate as a result of TIBS.
 
Step 6. Tax Transfer (Government to Investor)
 
Every year for the agreed time-period (such as three or ten years), the government passes on to TIBS holders (initially the investors) the agreed portion of taxation revenue it collects from the individuals that have received support.
 
In this way, the government utilizes its existing institutional role as the collector and enforcer of taxation payments to act as an intermediary facilitator between individuals and investors. This avoids the need for investors to collect and enforce income-based payments, which would be logistically, financially, and legally problematic.
 
Analysis of TIBS
 
This innovative new type of public-private partnership works by combining the best elements of microequity, value capture, auctions, government institutional capabilities, business profit motivation, social impact bonds, and market exchanges, in a new way. It is a truly collaborative, flexible, and mutually beneficial partnership.
 
Importantly, social and financial returns are perfectly aligned. The selfish action for investors to take is also the altruistic action – to generate social outcomes by funding and supporting social enterprises to provide the highest-quality support to disadvantaged populations. It is then that profit is maximized, because this maximizes the expected lifetime incomes of the population, thereby increasing the price of TIBS. The capacity for investors to sell TIBS allows realised returns within a typical fund time-horizon of 3-10 years, despite investments having longer-term benefits. This makes short-term profit possible, enabling investments to occur in the first place. Given that the potential financial upside for investors is unlimited, and that investment capital far exceeds philanthropic capital, the supply side of good procurement could increase substantially.
 
Since investors finance social enterprises, this would reduce the time social enterprises need to spend raising funds, allowing more time for programmatic improvements. Social enterprises could scale their supply of goods and services, and thereby have a larger impact.
 
Governments would benefit substantially from this partnership. Rather than spending taxpayer money on social enterprises that help disadvantaged populations, they receive money upfront. They never pay any set amount. Rather, they simply transfer a portion of the taxation benefit. The taxation transferred only exceeds the initial lump sum received when the social enterprise turns out to be more effective at creating social impact than the expected effectiveness of the counterfactual social enterprise (there are mathematical ways to guarantee this ). In other words, governments only ever have a positive net transfer to investors when they receive a marginal taxation gain that is attributable to those investors. They only pass on a subset of what they otherwise would not have had.
 
Importantly, there is no need for businesses or governments procuring goods/services to guess which social enterprise is the most effective, which solves a major challenge in social procurement. The social enterprises with the greatest effectiveness expect to be able to increase incomes, taxation revenue, and therefore the price of TIBS the most. As such, investors expect to profit the most by financing their expansion (as compared with social enterprises with a lower expected effectiveness). Since these investors expect to profit the most, they will bid the highest and win the contract. In this way, there is truthful revelation of effectiveness. This reduces the risk to the government - both financially and politically.
 
Disadvantaged individuals are able to receive the most inherently effective support, with investors and social enterprises exerting the greatest effort, at zero cost. Since individuals simply pay the taxation they would have otherwise paid, there are no additional challenges regarding adverse selection, moral hazard, misreporting, or enforcement.
 
Full Worked Example
 
A complete illustration of how TIBS can scale the supply side of social procurement can be found here: goo.gl/b8nLt7
 
Easy Adaptations
 
This model is very flexible. It can easily be adapted for cases where the social impact from good procurement accrues to disadvantaged individuals receiving goods and services, rather than those supplying goods and services. For example, if a government contracts with an enterprise to provide hospitality training to homeless individuals, who would then go on to work at other businesses (not the entity providing the training), this model would still work.
 
Discounted Expected Marginal Impact
 
This type of public-private partnership has an added benefit. It allows for a new market-based measure of social impact. This measure, which we can call DEMI (Discounted Expected Marginal Impact), uses the change in discounted expected lifetime income as a proxy for social impact. The change in discounted expected lifetime income can be determined from changes in the price of TIBS, since government transfers are a monotonically increasing function of income.

Mathematically, DEMI can be calculated as follows:

                      DEMI Formula                      

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:

 

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.

Importantly, this idea does not require a large budget and is very scalable. I will not be funding social enterprises to expand their supply of goods and services, but rather facilitating investor funding. The main costs are essential administration expenses for the first three years (approximately $90,000-$140,000). After this time, the administration costs will be funded in a sustainable manner by taking a small cut of the exchange of trade. That is, whenever investors sell the tradable securities on the market, a cut of approximately 1% will be taken, which will cover the running and facilitation costs of TIBS.
 
$25,000 would enable costs to be covered for the first six to nine months of operation, enabling initial projects to be commenced and further funding to be obtained. Specifically, in the first six months, I will utilise my extensive networks to facilitate and launch three initial projects with social enterprises that help the following beneficiary groups – indigenous Australians, resettled refugees, and the automation-induced unemployed. In each case, a social enterprise will be selected that helps individuals in accordance with their needs (such as by providing hospitality employment or coding training). An estimated 5,000-10,000 Australians will begin to benefit in 2018 alone. Operations will then be dramatically scaled up from 2019 onwards.

 

 

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:

This idea is for a new type of public-private partnership, so is very collaborative in nature. 
 
I believe that a major problem with the status quo is that we typically try to finance and scale the supply side of good procurement using one type of stakeholder.
 
The scale of the problems facing our world demands solutions that no one stakeholder can supply. What is needed is a new type of public-private partnership that gets all stakeholders working in the interests of disadvantaged populations.
 
TIBS brings together the government, investors, social enterprises, and disadvantaged individuals, in a flexible, collaborative and mutually beneficial way. This is done by aligning their incentives, leveraging their different strengths, and working with the system we already have.

 

 

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:

I have worked with over 2000 social enterprises over the course of a decade, and know first-hand the challenges they face in scaling their supply of goods and services. In most cases, the problem is not a lack of demand for their services, but that they do not have access to growth capital. I also know that existing approaches to financing the growth of social enterprises are all problematic.
 
It was for this reason that I undertook a PhD at Oxford on a Rhodes Scholarship on how to finance the scaling of social enterprises in Australia. I researched the shortcomings of relying on earned income to scale, the shortcomings of debt financing, the shortcomings of income­-contingent loans, and the shortcomings of social impact bonds. I then invented TIBS as a way to overcome all the problems I had identified. Following this, I interviewed over 100 experts (investors, government officials and community leaders) to refine the TIBS model, did 50 pages of mathematical modelling to prove the concept, researched in-depth every potential concern with TIBS (and I found every concern to be either invalid or easily overcome), and wrote over 100,000 words on the topic. I am more than happy to provide all my research to anyone that is interested. This research demonstrates that there is a clear gap in the market and shows that there is extensive support from all key stakeholders for the TIBS model.
 
More specifically, two of the closest approaches to TIBS are income­-contingent loans and social impact bonds. Income­-contingent loans (where an individual repays a percentage of their income in addition to taxation) have problems of adverse selection, moral hazard, income misreporting, and enforcement difficulties. TIBS overcomes this because payments to investors are a subset of taxation, not in addition to taxation. Social impact bonds are in some ways the reverse of TIBS. With TIBS, governments actually receive money upfront as the purchase price of the security, and only pay in the future what they otherwise would not have had (there are contractual ways of ensuring this). This is a much stronger government value proposition than with SIBs, where cashflows are the reverse and there is symmetric downside. Also, with SIBs, investors have capped upside and illiquid investments. With TIBS, investments are liquid with uncapped upside.

 

 

Who are the key beneficiaries of your solution:

At present, there are millions of disadvantaged individuals who could benefit from social enterprise assistance, and thousands of social enterprises that are unable to scale the supply of their goods and services. 
 
My solution enables social enterprises to obtain the growth capital they desperately need to scale their supply of goods and services. At present, many social enterprises cannot meet the demand for their services, and there are thousands of great social enterprise ideas that never take off, because there is not a viable growth financing mechanism. TIBS is one idea that can make thousands of great social enterprise ideas a reality.
 
TIBS also enables disadvantaged individuals (including resettled refugees, indigenous Australians, and the 1 in 6 workers who will become unemployed in the next decade) to obtain the support of social enterprises and receive training (and other types of support) free-of-charge. This enables them to have dignity, gain employment, support their families, and fulfil their potential.
 
Investors can profit in the short-term with uncapped upside, because social and financial returns are perfectly aligned. This enables traditional capital to be directed towards social enterprises and social investments, which could be transformative.
 
Procurers of goods and services are likely to be more willing and able to purchase from social enterprises, given that social enterprises are now able to operate on a much larger scale. Furthermore, procurers do not need to guess which social enterprises have the greatest social impact, as those that have the greatest impact are most likely to (a) be supported and financed by investors (as, with TIBS, the social enterprises that have the greatest expected social impact also have the greatest expected greatest financial return for investors), and (b) be awarded the contract (see a full worked example of the contract allocation process via the following link: goo.gl/b8nLt7). 
 
Governments receive money in the short-term (what they often care most about) by helping social enterprises and disadvantaged individuals, and only pass on in the future a portion of the tax revenue they otherwise would not have had. As such, political and budget constraints involved in financing social enterprises and financing service provision to disadvantaged populations are overcome. Also, governments may save a significant amount of money via reduced welfare expenditure (as individuals previously on unemployment benefits are now more likely to have a secure job). Furthermore, governments are able to discover ex ante which social enterprises are likely to be the most effective (given that expected effectiveness is revealed truthfully via the contract allocation process), and know ex post how effective the social enterprises were (as the market price gives an indication of this).
 
As such, the solution is innovative, collaborative, flexible, and mutually beneficial.

 

 

Do you have funding partners interested in your idea:

Yes, I have already obtained strong support for TIBS from many key stakeholders, including (a) numerous social enterprises that train and employ disadvantaged individuals, (b) indigenous community leaders, (c) mainstream investors (for example, I recently had an in-depth meeting with the Global Head of Investment for Swiss Re, who controls A$280 billion in assets, and who indicated a strong desire to invest in TIBS when it is implemented), (d) procurement specialists at large Fortune 500 companies, and (e) several high-profile government officials who are actively looking for better ways to identify which social enterprises will be most effective in advance and looking for better ways to finance reskilling to the millions who will become unemployed due to automation.
 
While no funding has been secured so far (given that the idea is new), I am confident that with the $25,000 from Eidos, I will be able to attract additional financial support. The $25,000 would seed fund this idea, which could go on to become the default growth financing mechanism for social enterprises worldwide.

 

 

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.

I am confident that, with the $25,000 from Eidos to launch the idea, TIBS will be every bit as successful as 180 Degrees Consulting (or more successful). This idea is informed by, and builds on, my decade of experience working with social enterprises. Furthermore, I recently completed an MBA at Oxford where I was awarded Top Oxford MBA Student, and so I'm very confident I have the business know-how to make this idea a reality.
 
 

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.

Video:

 

Modified Concept:

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.

TIBS Diagram 2

 

 

Idea Opened: 12:41 AM, Tuesday 31 October 2017
Idea Closes: 06:00 PM, Friday 03 November 2017
Time to go: Closed

 

Do you want to contribute to this idea?

The context

Idea Opened: 12:10 AM, Tuesday 31 October 2017
Idea Closes: 06:11 PM, Friday 03 November 2017
Time to go: Closed

Do you want to contribute to this idea?

Idea Activity

Idea Activity

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Nat Ware commented on the idea Tradable Income-Based Securities (TIBS)

Belinda Morrissey Geoff Woolcock Matt Perfect Many thanks for your useful questions and feedback. I just put together a full worked example, as suggested, which hopefully makes things a bit clearer! Here's the link: https://drive.google.com/file/d/1bHA5oS1siro646zEBuJI1i7LbanHXkV3/view?usp=sharing.

Please let me know if you have any questions, or if you would like me to provide you with anything else. Thanks again.

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Dr. Jodie Goldney commented on the idea Tradable Income-Based Securities (TIBS)

Nat congratulations on getting to the next round! You have obviously put a huge amount of thought into how your concept will work.  Good luck for the next round, and taking your idea to market.  Cheers Jodie

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Belinda Morrissey commented on the idea Tradable Income-Based Securities (TIBS)

Many thanks Nat - I will indeed look into these documents. Do these docs include any worked examples?

 

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Challenges Support commented on the idea Tradable Income-Based Securities (TIBS)

All good Nat Ware  - Belinda will have been notified when I @mentioned her smile 

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Challenges Support is now contributing to this idea Tradable Income-Based Securities (TIBS)

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Challenges Support commented on the idea Tradable Income-Based Securities (TIBS)

Thanks Nat Ware. I think Belinda Morrissey might also be interested in seeing your responses to Geoff Woolcock s questions 

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Geoff Woolcock is now contributing to this idea Tradable Income-Based Securities (TIBS)

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Geoff Woolcock commented on the idea Tradable Income-Based Securities (TIBS)

Nat, it is still unclear - as for other social bond trials - as to how a change in discounted expected lifetime income would be calculated? Wouldn't this be just as contentious as other outcome measures?

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Belinda Morrissey commented on the idea Tradable Income-Based Securities (TIBS)

Thanks for your quick response Nat, really appreciated. Great to engage with you this way. 

Best,

Belinda

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Belinda Morrissey commented on the idea Tradable Income-Based Securities (TIBS)

Hi Nat,

Great video, thanks for submitting this. In your video example there is a much clearer cause/effect relationship. However I note that in the video you don't mention the initial lump sum payment by the investor to the government at the commencement of the security. This payment was unclear to me as the investor also funds the social enterprise, and so appears to be paying twice. Could you clarify this for me?

Many thanks,

Belinda

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Ben Montgomery is now contributing to this idea Tradable Income-Based Securities (TIBS)

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Ben Montgomery commented on the idea Tradable Income-Based Securities (TIBS)

Pure genius. At first I didn't quite understand it. It took me a while to get it given it's a complicated idea. But once I understood it, I thought "this is amazing and so smart". It makes enormous sense. I've read through all the ideas in the challenge and in my view this is the only one that is truly disruptive, innovative and collaborative. It could very well be game-changing. Good work. 

I especially love how you solve so many challenges at the same time - how to know in advance which services are best (tick), how to incentivise high effort in the provision of services (tick), how to perfectly align social and financial returns without the simplistic option of donating profit which isn't really social entrepreneurship (tick), how to measure social impact accurately without incurring huge costs in the process (tick), how to measure the counterfactual social impact (tick), how to enable governments to make a surplus in the short-term (tick), how to enable investors to profit (tick), how to fund social enterprises to massively scale their supply (tick), how to help disadvantaged individuals without requiring them to pay or bear risk (tick).

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Belinda Morrissey is now contributing to this idea Tradable Income-Based Securities (TIBS)

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Belinda Morrissey commented on the idea Tradable Income-Based Securities (TIBS)

Hi Nat - thanks for submitting this idea, it is truly innovative! I can see that the concept is the culmination of many years of deep thinking, research and discussions within the sector. Just wondering if you could help me understand the relationship between the future taxation flows from the govt to the investor - is there a sufficient cause and effect between the recipient receiving vocational training (as an example) and then moving through to employment to de-risk future returns for investors? i.e. within the examples you have modelled how long would a recipient need to be employed and paying taxes before the investor regains principle plus returns? I realise this can be modelled using your equations but as there are many factors in gaining employment over and above training/pathways management how does the model factor in time taken to gain employment or the potential that the recipient does not gain employment at all?

Also could you elaborate on the level of support the investors would provide the service providers? Am I correct in understanding this covers the cost of delivery of the service by the provider or have I misinterpreted this?

Thanks again for submitting your concept - I love the disruption factor! Appreciate your thoughts on my questions above - I am sure you have covered all these issues and I know that there is only so much detail you can provide within an application, but it is helpful to expand my understanding. Good luck with the Challenge.

Best,

Belinda

 

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Matt Perfect is now contributing to this idea Tradable Income-Based Securities (TIBS)

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Matt Perfect commented on the idea Tradable Income-Based Securities (TIBS)

Hi Nat. Thanks for sharing this idea. This certainly looks to be a very innovative way of funding government procurement of social services. I am wondering if/ how it could be adapted for other types of 'Good Procurement' where the benefit to the individual (e.g. training) is delivered alongside a benefit to a procurement customer (e.g. delivery of a cleaning service). In this case, is there some way the future tax revenue could be used to subsidise the cost of the procurement? If so it could create a competitive advantage for a social enterprise delivering a social outcome alongside a procurement outcome. Good luck!

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Dr. Jodie Goldney is now contributing to this idea Tradable Income-Based Securities (TIBS)

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Dr. Jodie Goldney commented on the idea Tradable Income-Based Securities (TIBS)

Hi Nat, thanks for your idea-there is obviously a lot of thought and work behind it.  Just to clarify my understanding, are you advocating that government grants/tax breaks etc for companies are all linked to dual application?  Such that for example, an education company has to demonstrate that it is re-investing in education for people with a lived experience of disability....and government will then waive that proportion of tax that it effectively saves by not having to address that social concern financially?

In terms of re-purposing staff...I'm thinking that the NDIS reform might make a great pilot space for this idea...because there is already an employee shortfall, so if you have the right skills and attributes, jobs are pretty much guaranteed...and even more so if you are rural and remote locations. 

And for what it's worth, I'd be very happy to promote this idea through my linked in networks.  My end, it seems like the kind of idea that would be great to throw out to the crowd sourcing space.  Would be great to have someone doing the spade work in terms of generating support for your concept.

Good luck with it all.

 

Cheers

 

Jodie

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Nat Ware is now contributing to this idea Tradable Income-Based Securities (TIBS)

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Contributors

Nat Ware Founder & CEO, 180 Degrees Consulting (the world's largest volunteer consultancy)
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Dr. Jodie Goldney Founding Director
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Matt Perfect Founder and Impact Spender
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Belinda Morrissey Executive Officer
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Ben Montgomery Social Impact Research Director
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Geoff Woolcock
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