 So welcome everybody. This is the what's next panel. We're going to be talking about evidence-based practice, impact investing, and pay for success and how they may collide. So the setup for this is really following on some of the themes from yesterday where Penelope Douglas and her panel were talking about what's our vision for the future, what is the good economy, and what are the steps that we might want to undertake or avoid undertaking to get there. So we're thinking for this panel about what is our vision of where we'd like to be in 20 years? What does the just economy have in it? How can we imagine in 20 years living in a society where there is fundamentally more equality for people where they have the opportunity to live empowered lives and access basic services? And we all kind of intuitively know this is the vision that many social entrepreneurs have, that many impact investors have, that philanthropy has, and that government has, and yet we're still struggling with how to get there. What we're going to do today actually is attack this from the point of view of three trends. And I have some amazing panelists here to represent these three trends. They are all beyond experts in each one. And we're lucky to have them really saying what are the, what are the implications of these trends alone? What are the implications of these trends together? And how might we actually interact with them to get to our vision of a just society? So I'm actually going to let each of you introduce yourselves for a minute so that I don't butcher your titles. And what we're going to do is we're going to have Victoria Vrana talking about big data. So that's trend number one. We have Anthony Buglevine talking about impact investing, trend number two, and Laura Cannon talking about pay for success, trend number three. So would you just go ahead? Sure. Hi, everyone. I'm Victoria Vrana, and I'm a senior program officer in the Global Policy and Advocacy Division of the Bill and Melinda Gates Foundation. I work on a team called the Charitable Sector Support Team, and we make systems-level investments to help strengthen the entire social sector. We're a small team, and that's a really big goal, so we're very focused in that goal. We work on policy and advocacy issues, and we work on strengthening the use of data and information and knowledge in the sector. And that's what I'm going to be talking about today. Great. Thanks. I'm Anthony Buglevine. Great to see everyone, especially given how beautiful it is, and I know the view outside is better than looking this way. So I appreciate everyone being here. I am the CEO of the Nonprofit Finance Fund. We are a 30-plus-year community finance institution here in the U.S. that lends primarily to nonprofits across a range of sectors and also runs a advisory practice that advises both nonprofits as well as foundations and other grant makers on how to be more effective connecting the money they have to the mission outcomes they seek. And in addition, I'm also the founding chairman of the Global Impact Investing Network, which has worked globally over the last few years to popularize and really create discipline around the overarching idea that I think brings many people to SOCAP, and that is the fundamental realization that for-profit investing can be a morally legitimate and economically effective way to address the social issues we care about. So happy to talk today about that particular trend and how it intersects with these two trends in incredibly exciting and also incredibly dangerous ways. Good morning, my name is Laura Kalanian, and I'm currently a scholar in residence at UC Berkeley, and I'm a senior fellow with the Foundation Center, and I'm a visiting fellow at the NYU Wagner School for Public Policy. But the reason I'm talking about Pay for Success is because in May of 2012, I was the lead author on a white paper that McKinsey and Company published From Potential to Action, bringing social impact bonds to the U.S., and if you haven't seen that report or the webinar and the cartoon and all of the resources on the McKinsey website, I encourage you to take a look at McKinsey on Society, all one word, backslash, S-I-V, for social impact bond. Fantastic. So before we get started, I actually wanted to learn a little bit about who we have in the room, to help us direct our comments a little bit. How many people in the room work in for-profit sector? So about half. How many in the non-profit sector? Ooh, okay, about 60%. How many government? Just a few. How many people concentrate their efforts on emerging markets, developing markets? How many people concentrate their efforts on developed markets? Okay, a little bit more. How many people both? All right, so maybe about 30. Everyone see those? Okay, and how many people in the audience have, are familiar with what a pay for success or a social impact bond is? So a lot of familiarity. So that saves you some time. Great. Good, thank you so much. So what we're gonna do is start off this discussion by talking about what these three trends are. And I'm gonna ask each panelist to be very concise and kind of bring us up to speed on what the kind of core movement is with each of these trends that's going on right now. And then talk about, let's say we're going to get to this vision of a just society. What's gonna need to go right? And what are the things that are gonna lead us if these things continue in the best of possible ways to get to that vision? We're gonna do that first and then we're actually gonna come around and ask them what could go wrong, but we're gonna start with the glass half full. So Victoria, would you like to start? Sure, well thanks again for having me. It's a real treat to talk about these topics with the experts, including all of you in the room. I know we really hope to have an interactive discussion and have a lot of time for Q and A. So Kathy talked about a future in 20 years and it makes me think about when I started my career 20 years ago. I work for the Bill and Melinda Gates Foundation now but then I was the first employee of a really tiny women's NGO that was helping groups get online. And data then, big data for us, was when you could hook up a 9,600 bond modem. Those dial-ups, I see some faces who might remember the sound of those modems and getting data from an FTP site. There was no worldwide web back then, right? So I'm happy to say we've come a long way. Data and technology have come a long way. But what was true then, it's true now. I know it's gonna be true in 20 years. Data are not the point. Technology is not the point. They're really the fuel for the innovations like impact investing and pay for success. It's really about people and performance and precision. So data are about people because some of the most powerful data come from people and communities, citizens and beneficiaries who can share information on the assets in their communities, the needs, and give feedback, create strong feedback loops about the services and the products they're receiving. Data are about people because they allow for collaboration. If we know who does what, when, where and how, we can join together to actually make progress in a collective way. Data are about performance because they allow for the real-time analysis that let us course correct and continually improve what we're doing and iterate. They're also about performance and we're gonna talk a lot more about this because ultimately we wanna drive capital to what works and we wanna scale what works. So data are a critical piece of making that happen. Finally, data are about precision and I actually think this is one of the most important ways to use data. It's about setting goals and measuring progress to those goals. Bill Gates in his annual letter this year wrote a lot about measurement and he said that one of the biggest reasons efforts fail is by choosing the wrong measure. We all know if we drive really fast in the wrong direction we're gonna get lost, we're gonna get nowhere. So setting goals and measuring are really critical. 20 years from now, I know we're successful if we're not talking about data. There are no more panels about big data, open data, any kind of data. We've solved some of these problems that are holding us back right now. We're really in our sector with all the hype. We're kind of at the beginning of supply and use and flow of data. There are a lot of barriers in our way. We can technologically overcome those in 20 years and be focusing on the actual tools to get social change done in the world. Fantastic, Anthony? So just picking up on that point, I hadn't planned to say this but I'll say the exact same thing. The 20 years from now we will have succeeded if we similarly are not having conversations about impact investing but we're having conversations about the social good we have achieved in the same way that when the venture capital industry started, there was a lot of talk about this crazy idea that an investor could create a portfolio in which there are many failures but that the few successes would create well for the investor and that whole system would work. We don't spend as much time talking about the industry right now as we're talking about the companies they've backed and the changes that those companies make in our lives. So I'd say similarly, but just to step back, it's a great framing question of what will have happened over 20 year time frame so that we live in a more just and vibrant society and that this, what we represent has contributed to that and in order to answer that question, we have to understand what is going on outside this room during those 20 years and the context in which we work is crucial for us to be successful in making what we do relevant and to be very blunt. For those of you focused in the Western world, the single most important context we have to understand for the next 20 years is demography and the disproportionate resources that governments are going to be spending on healthcare related to aging populations. So if we are going to be making a contribution over the next 20 years through impact investing, it has got to be within the context of what have we done as impact investors to enable our societies to preserve the basic safety net services we currently have as government's strengths. That has to be how we think about our success and for those of you who are working in emerging markets, there I think again, if there is economic growth, then the most important question over the next 20 years is how does that growth get more actively and widely shared by more people in society? So for impact investors to have made a substantial contribution to creating a more just and vibrant society, we have to have been able to answer those two questions. What have we done in the West so that our investments enable our safety net to be preserved while government retreats and what have we done in the rest of the world to ensure that growth is more accurately shared? As a bit of context for that, the organization I run, it's sort of we have one window into this question which is focused on where impact investing can make a difference in the US non-profit sector. So just to give you a bit of context and data related to how we see it, which I think is relevant, I know we have some people in the audience from the UK and from Europe where I think there's a very similar dynamic. Right now the basic story for us in the safety net in the West is that demand for services has gone up because of a set of structural factors related to not just the recession but the nature of employment and the fact that it no longer generates a reliable path to the middle class. At the same time that the money available to provide these services has gone down. We do an annual survey with the Sport of the Bank of America Foundation where we pull nonprofits around the US and just three sort of headline numbers. About 20% increase in demand for services for homeless shelters, soup kitchens, healthcare facilities. Those, demand has gone up about 20% per year the last few years. Around 80% of those organizations anticipate demand going up again. One half of all these organizations don't currently have the financing they need to meet that demand. And interesting for you, the finance people in the room if you're talking about investing, about half of those organizations have 90 days or less of cash on hand. That's the way these businesses run. They are very low margin with very little safety. And so again, 20 years from now, let's say impact investing has made a huge difference in this system. What would have happened? I think there's really three things we have to do. As a system, we have to become more efficient. We are going to have less resources from government and the demands are up. So what have we done as investors to fund gains in efficiency? I'm happy to talk more detail about that later on. The second thing we have to do is not just make the existing system more efficient but we have to promote the scaling up of innovation. I think this is something that SoCAP is very good at talking about. There are lots of entrepreneurs. Some of them are going to grow and when they grow they're going to enable us to produce a better society at a lower cost. That's not the whole story. We also are going to have substantial sectors of our society that still rely on current players who have to get more efficient. And then the last thing, and this links to both Victoria's point about data and what I'm sure Laura will talk about with PayForSuccess is more of the money we allocate as a society has got to go to things that work. Those are really the only three ways we can navigate through the next 20 years where we have growing demands in our social system and less money. So what are investors going to do? I'll just finish with brief examples of what investors could be doing to contribute to those three things happening. Take health care in the West. We have got to transform the delivery of health care just to cost imperative. Aging populations cannot be served in the way we have in the past. Investors can finance the transformation of institutional elder care from treating people in nursing homes to enabling people to live at home. It costs about $5,000 to retrofit a home so that people can live in that home longer compared to the $20,000 or $30,000 that costs to treat them in nursing homes. So we are going to have to build more nursing homes and there's a financing angle there. We're also going to have to be making those kinds of investments in the innovation and adaptation. Health care is one example. In the delivery of social services, we've got to figure out how we can be investing in preventative services and again, I'm sure Laura will talk more about that. There's a role for investors to play to find those things that can make a difference where we can get repaid because we're saving society even more than we're putting in. And then finally, a huge issue especially in the West is around job creation. And so we can invest in those companies who through how they produce are showing a new model for jobs that enable people to secure a whole set of services and support that they're not getting from the safety net. So I think it's not just about counting the number of jobs that our investees create or looking at the revenue growth but it's being part of the movement to reimagine the relationship between employers and employees and really capitalizing a new set of companies that are gonna show a new way to create corporate entities that actually generate sustainable livelihoods for their employees, not just corporate profits. And so if we can do those three things, I really believe that this movement could be a big part of the transformation we need as a society to get through this window we have to get through demographically. So we have new kinds of data on outcomes that we hope will be a little bit subsumed in the future and the conversation will be about the outcomes not about the means that we get them. We have goals around efficiency, scale and effectiveness. How does pay for success bridge those two? So we did a short prep call before coming to see all of you and doing this panel but we didn't script ourselves out to the level of detail that it might appear because of the amount of consistency you're gonna hear in all of these presentations. So I'm gonna pick up very squarely on some of the stuff that Anthony was talking about. I know a lot of you are familiar with the concept of pay for success but just to quickly recap, in the status quo now, basically the payment is made at the beginning of the process and there's a hope and an expectation that the intervention, the program will be successful but the money's paid up front and while there may be a review or a report down the road, it's not really contingent. The financing's not contingent on whether or not the program succeeded but pay for success flips that around and basically says we're gonna wait and see if your intervention worked, if your program was successful and if it was successful at an acceptable level then we're gonna pay you for having delivered this program and if you don't reach those outcomes, if you don't deliver those results we're not gonna pay you and the we is typically government which is the largest funder of most of our social services, right? And obviously there's some risk that gets shifted there so somebody's paying up front whether it falls on the shoulders of impact investors or whether it falls on the shoulders of our non-profit organizations to have some working capital in hand which sounds pretty depressing based on what Anthony just shared in terms of the survey statistics about 90 days of cash on hand but there's some risk that gets shifted there. The intention is that we're trying to be in Anthony's words more efficient we're trying to be more effective and seek out less expensive, more effective solutions to the problems that we're trying to solve. So where does pay for success contribute to this 20 years down the road, better world? Well, hopefully we're working better and that means that government has transformed how it performs to be a little bit more thoughtful about effectiveness, efficiency, preventive programs as Anthony says which can save not just dollars but wear and tear on our communities and families. Also working better, driving more resources to high performing non-profits which is something I think Victoria referenced. Just to understand which organizations and which interventions are most likely to be successful and making sure those are the organizations that have the funding and those are the organizations that are delivering most of our programs. A second way that pay for success can contribute is helping us to work bigger. Going to scale is also a topic that's already come up on this panel and that's really in my mind one of the most appealing aspects of the social impact bond, that it helps take programs that philanthropy has paid to develop a proof of concept and to pilot and to demonstrate that it works and actually gets those to scale. Only government can really bring those programs to full scale and there's always been this gap where philanthropy says, well look we did the pilot and we proved that this worked but we're only philanthropy, we don't have enough money. We're sitting here waiting for government to notice these great programs that now have come online and really bring them to all the people who need them but government moves slowly. It's got another set of priorities. There are entrenched interests. They are serving the needs of a lot of people and so it's hard to actually get government to notice these new programs and bring them up to scale but something like a social impact bond sort of smooths over that moment of transition and it enables that handoff between philanthropy which is the risk capital of the social sector to government which is the scale up capital of the social sector. A third way that I think pay for success can help contribute to this better world in 20 years is by helping us to work smarter. Again, Anthony was talking about what works and in my mind this is by encouraging a sector wide perspective on really understanding which interventions are going to be most useful, most helpful to address a given problem. That means you need to understand your intervention and you need to have data that substantiates that your intervention works but your intervention isn't sitting in a vacuum. It's sitting amongst a whole galaxy of other potential solutions to the same problem. So you need to start to be able to talk about how your intervention compares to others. Not just mine's better than yours or yours is better than mine but what is mine better for? Which population will my intervention most likely be most successful for? What's the timeframe we're talking about? What are the other exogenous circumstances that we need to take into consideration? So understanding how multiple interventions seeking to solve a similar problem compare with one another both in terms of efficacy, cost and sort of fit for purpose when they're the right way. So I would say pay for success can help us work better, help us work bigger and help us work smarter. So I have a question for the panelists which is kind of a, so if we're looking 20 years out what has to come first, right? It seems like we almost have a top down and a bottoms up approach that are kind of budding against each other here, right? We have big data which the word big, right? Kind of assume we're gonna amass large amounts of new understandings of things at larger levels and try to make sense of them, right? And then we have at the other end we have we're gonna look at particular interventions and try to really fine tune what it costs to achieve them and what we're getting out of them. What is your opinion, any of the three of you, about how, kind of what's the chicken and egg here in terms of actually unleashing the power of these, of these happenings? I think that they need to keep moving forward together, right? Because when I am thinking about the information that you need to compare your program to other programs with similar goals, you need all that data. You need as much relevant information as possible to understand the benefits of your program and the other programs that are out there and the comparative benefits of these programs against one another. You also need people who are willing to take that risk because when government shifts the risk and someone has to pay at the beginning because government's only gonna pay once the results are evident, you need impact investors to be available and present and wanting to participate. And they want something to put their money into and pay for success is an appealing concept and it allows impact investors to partner with government. And so I'm not sure, I can't see one of these having to get out in front of the others. I hope that they'll continue to kind of march forward. I totally agree with that. I mean, one of the things we need to have data at scale that will help us do these kinds of things are the right incentives. Right now in the social sector, there are disincentives to share data, lots of them. And having money on the table that requires actually collecting and sharing of data, needing to be able to compare, actually helps drive standardization of data. And so those are the incentives. And it's really a flywheel that you have to start turning. We, as much as there's a lot of talk about being drowning in data and we're overwhelmed by information, we're overwhelmed by content. But when you look really hard to find programs that are evidence-based that you can scale, it's tough. There's not a lot out there actually. It's expensive, it's time consuming. It's expensive, it's tough. And when you're an entrepreneur and you're trying to figure out who else is doing what you're doing and where you can benchmark yourself and what's the community level data you need to make good decisions, that's really hard stuff to find too. There are little islands of data that aren't well connected. So these kind of interventions drive the incentives that will help us scale data. Yeah, I agree with Victoria. It's a flywheel that puts it together. But the flywheel doesn't get turning from talk, it gets turned from action. In my sense, I think the arc of SoCAP, how many of you have been here all five SoCAPs last four years? So there's a lot of new people. But the arc of SoCAP I think is quite indicative of the arc of impact investing in some of these other movements, which is first we convene around a theory. Wouldn't it be amazing or we have the sense that we can make for-profit investments that can address social problems. Then we go through the second phase of announcements. I'm launching a $200 million fund. I'm launching a new initiative. Kathy's launching a new center at Luke Fuqua School. And then we go to a third phase, which is what have we learned from actually having done the things that we announced two years ago. And that's where we generate insight from action if we do it with a sense that it's not just about running our own businesses and making our own investments, but we are contributing to information and data and not just hype. There's distinction between words and insight is really important. But I think this flywheel gets driven by action that allows the theory to actually encounter reality. And it gets much more difficult and much more complicated, but that's where we actually learn. I don't think we learn from getting together and sort of having the pronouncements in the theory. And that's what's exciting about where we are. And 20 years from now, we will be successful to the extent that we've got that flywheel going based on an interaction between action and learning, and that that really becomes the next phase of what this community does. Fantastic. So let's say the flywheel goes, but not everything goes to plan. What are some of the pitfalls? What are some of the ways that these trends could actually lead us astray? Victoria? Well, my kids just started school last week. And so the easy way for me to remember this is thinking about really simple, but really bad math equations. So some of the pitfalls, I think we could run into, if you take one plus one plus one, and you get zero. Basically, all of this data adds up to nothing. You know, data, as Anthony was saying, it's really about insight and it's about learning. So we can't derive insight and meaning and knowledge from data unless we can connect it. Right now, again, we have these islands of data. You know a lot about one organization. Where does that get you? You may know a lot about one country and the health indicators in that country. Then where does that get you? So I think right now, we have a very fragmented and isolated data system. We need a strong information infrastructure that can serve donors and government and beneficiaries and enterprise leaders. That infrastructure needs to be built for all with robust data hubs, information standards, really well-designed knowledge applications. If we don't build that with all users in mind, we run the risk of having a lot of numbers and not a lot of meaning. The other equation I think of is when you take one plus one plus one and you get four. So when data leads you to the wrong answer. And I think there's a couple reasons why this happens. One is when you don't have the subject matter experts in the room when you design the system to collect the data or analyze the data. You will either collect the wrong things or you'll get to the wrong answer. And that's a real problem. There's another reason for getting the wrong answer and that kind of goes back to the disincentives in our sector for sharing data. There are not a lot of incentives for actually being open with your data and being true with your data. When I was at Venture Philanthropy Partners before I joined the Gates Foundation, we worked with a fantastic nonprofit organization and we were helping them build their capacity to really count their outputs and their outcomes. And as they got better at doing that, they went from serving 4,000 young people to 2,000 young people. We thought that was great, right? We knew that they were actually eliminating their duplicate counts. They were tracking people through multiple programs. That was fantastic progress. I doubt they shared that with their other funders. Actually, I don't blame them. I wouldn't either. So we don't really incentivize the accurate sharing of data. The last big obstacle that I think we can run into is if we take one, and one, and one, and we get 100. We put too much emphasis on data. I'm a little less worried about this one, but it could happen if we end up just funding what works to the extent of not allowing for supporting innovation. If we just, we don't have the patience for the kind of improvement and learning that we need to have. And if we just do what's measurable in a quantifiable way and ignore those things that are a little bit harder to measure if we don't tackle those big evaluation problems. So those are three of the obstacles I see. Fantastic. So I think one thing that we see with our clients is given those statistics I mentioned, it is increasingly hard to deliver services that support your mission given that demand has gone up and revenues from governments become less reliable. We have a lot of clients who are responding to that sense of crisis by saying, well now if I can attract impact investing and I can start a new social enterprise business line or I can expand using investment, there will be organizations that bankrupt themselves and whose supporters will kill them through what they think is kindness. So on a micro level, misunderstanding the fundamental role that investment capital plays, which is to finance innovation or growth that is ultimately paid for by either customers or government, that's the formula. And I'm really worried that more and more people are misunderstanding and think, well my government funding is leaving, impact investing can come and step in. It can't, investment does not pay for the delivery of social services. It finances, the improvements an organization can make up front, someone else has to pay. So on a micro level, there are gonna be organizations that walk down that line and at a moment in their evolution where they should have been focused on business discipline and seeking sustainable, reliable payment sources are gonna instead be chasing impact investments and they're gonna go bankrupt, investors are gonna lose their money. At a macro level, just echoing what Victoria said, it's not just about the individual organizations, it's about fundamentally, will these trends lead us as a society to abscond from our fundamental responsibility to take care of each other? So we can certainly imagine this is already happening for political reasons. And I think a big story about data is data is not truth. It's an input into a political process from which decisions get made. And the intersection of data and investing with politics, especially over the next 20 years when there is going to be a war about what we do with the shrinking resources available to the collective wealth of our societies, how these trends intersect with that political battle. And just to be specific, there are going to be people who believe that a good society is one in which people get to keep their money, don't pay as much taxes and take care of themselves. They can privatize their kids' education, they can privatize their healthcare, they can take corporate-sponsored public transportation to work and corporate-sponsored transportation, not public. That group of people could really latch on to these trends and say, this is great. We've always said that nonprofits that don't prove they can do right things shouldn't get funded, let's cut out their funding. Now that we can pay for things at work, let's not pay for anything else. And hey, the investors can step in, so let's cut social spending. That's where these trends could be put to work for a political agenda that I don't think anyone in this room supports. And so how are we gonna avoid that happening? First of all, the next time we have this conversation, we can't have a one government official and 150 of everyone else and think we're actually gonna get things done. So what we do has got to be much more intentionally and deliberately understood as part of a political process. We have to contribute to our renewed sense in our societies in the West and in emerging markets that we have an obligation to take care of each other. If we don't have that renewed sense, then none of this works. You can have the best date in the world but there won't be money to fund programs and investors can have the most innovative and interesting ideas of who to finance but there won't be anyone to scale those organizations up through revenues. And so what we can do to make sure that we're a part of not allowing, not being complicit in the abandonment of government's sense of its obligation to each other. And it's a real danger in the pay for success world where if we can find those things at work because we can intervene at an early stage that's cheaper, then it can allow us politically to underfund and not just to reduce spending but to reduce spending much more than we should on treating things that need to be treated because we can assume that all that can be done through prevention. Much more pro-clear on impact investing. I think if we focus on chasing deals, if we measure our success by how much capital we put to work rather than the social problems we saw, then that's a whole area. I think we've talked about it in many socaps in the past. And then again, I think just taking data and pay for success and too narrowly focusing on only those things that have the data that they can support and that really do create savings and leaving everything else that needs to be done, not done. The last thing I'll say is we will fail if we think that the market is going to clear without effort. So if we believe that raising investment capital and identifying programs at work will inevitably lead to great organizations being able to access that capital and scale up, we're very naive. We do a lot of work at the Nonprofit Finance Fund that is intentionally trying to clear that market. So when money is available and programs work, there is still a lot of effort required to help the organizations that need to tap into that money scale up to scale up. You can't just have a sort of very economically driven view of the way the world works that once the incentives are in place, the market clears. It doesn't. And if we don't have foundations and governments willing to invest in that kind of adaptation, which can't be capitalized by investments, then we're gonna have a lot of money chasing too few deals and a lot of great organizations not scaling up because we won't have the government money there because we wouldn't have mustard that political argument as well. So again, this will sound consistent with what you've already heard, which either means we're right or Groupthink is running rampant here at Socap. What are the three things that pay for success could contribute to a worst world in 20 years? Well, we could be a lot dumber because pay for success at some level can discourage innovation, right? You want to keep putting your money into the things that you know work, the 20 things that the Coalition for Evidence-Based Policy tells us work. And those are the only ones that get funding and people stop experimenting and they stop taking risks and they start, they stop coming up with new ideas and innovating. So we end up being a lot dumber in 20 years. We also become very short term in our focus and our thinking because well, the impact investors want to see a return in three years or maybe five years or maybe seven years if they're feeling really, really patient. And government wants to see some results within the term of the current elected officials or at least short term enough that they can feel like they make a commitment and government will be standing behind that commitment. But a lot of good social programs are not going to demonstrate their best results in three years or five years or seven years. And so if we're looking for things that come through that are observable within that short timeframe, we could be missing out on things like early childhood and things around workforce development and things around health. And then the third thing, we could be much more narrow. And this has to do with both being narrow in terms of the approaches we take, thinking everything can be solved through a market-based approach and exclude things like movement building or legislative change, regulatory change, walking away from things that are important in our society like civil rights and human rights because they're not that market appropriate as ways to make social change. But also we become more narrow because NGOs who try to run before they can walk get eliminated because they want to subscribe to pay for success, they have an innovation, they think it works, maybe they don't have a lot of information about it yet they think it works and they're going after those impact investors and they fail and it becomes a very public failure because it's been part of a social impact bond, it's visible, government's involved, it's on the front page of the newspaper. And I don't believe that we should be putting money into organizations that perform poorly. But I do think we need to be thoughtful about when an organization is ready for the strong inspection and the high expectations of impact investing and pay for success. So a worst world could be, pay for success could contribute to a worst world by making us dumber, by making us focused on only the short term and by really narrowing the tools in the toolbox and the number of organizations that are out there to deliver. Let's pick up on this point about expectations. I think that's really important that especially if data does allow us to be much more transparent about successes and failures. I think there's a lot of naivety in rooms like this about what it actually takes to solve social problems. And part of that naivety is what fuels us. We wouldn't be here if we actually knew what it was gonna take and how freaking hard it is. And a lot of our investors wouldn't necessarily invest in our organizations if they really understood what it takes. And that's fine. And I think a great example of this is the first social impact bond in Petersburg or in the UK. I invested in that bond as part of the Rockville Foundation's PRI program that was running in the time at the time. And we were, so first of all, the theory is unbelievably exciting. So there's the theory. Then there was the announcement. They were actually putting a real deal together. And the metrics and the deal, it was really pitched around the intervention is so obviously a better way to solve this problem. We are gonna make so much in savings that this is just a no-brainer. And that's what you have to do to sort of get that first deal done. Recently, they announced publicly the first set of data. So it's about a five-year cohort that the first cohort has come through and we actually have real data. So I was coming to the train. I live in New Jersey. I work in Manhattan. I was on the train in the morning doing my morning Twitter. And by the time I got to my morning train, the British people had woken up and there were about 30 messages saying, amazing success. First pilot data from Petersburg is out there. It's a success. One of the ministers was up there. He'd a nice press release saying, well, this proves that it works. And then they had the actual numbers. And this goes back to, we didn't have to rely on just bold assertions. We actually now had some data. And I know what the original projections were and I know what the current numbers are. So I wrote to a good friend of mine who runs that program and I said, I've been reading the hype this morning. Am I wrong that what the findings actually show is, yes, this is on track to certainly meet the demands of the investors, but the reality of implementing it is so much harder than any of us thought it was going to be. Because going from that initial really powerful theory to the reality, the numbers weren't as good as we had anticipated at the beginning. They are still very powerful. It's a great initiative. But being realistic about the expectations we're setting among a set of constituents who are not as aware of what it takes as we are in getting that right, we can't assume that we're not going to be effective if we get into the details and we're depressing and overly complicated about everything. But at the same time, if we allow ourselves to get overtaken by the hype, a good friend of mine got out of the microfinance equity investing business because the new rounds of funds being raised a few years ago, we're sort of ratcheting up expectations to the point where he couldn't compete with the realistic expectations. And a lot of fund managers talk about this trajectory where you have some successes and then it just sort of ratchets up and you start having to chase an unrealistic set of expectations. And I think that's something that we really need to avoid doing. And it's about how do we translate the knowledge of people who actually know what it takes to get this done to an audience that's not as aware but does need the right mix of details without being overly detailed but with also out being simplistic. You just crystallized a point that I like to make, which I also think is really interesting in this marketplace, which is the institutions that have been involved in the conversation around how to affect real social change up until very recently around this new pay for success contracting have been inherently flexible, right? Have been able to say, oh, well, that didn't work the way you expected. Let's renegotiate what we're gonna do next. And it seems to me that one of the real pitfalls in the new pay for success era is contractually nailing everything down at the beginning and having a set of players that are not able to be flexible anymore that may not even be the same players three years later when you go back with the data and you have learnings now about what you really learned about this intervention. It seems like that's one of the pitfalls of taking the approach of finance and contracts and applying it kind of so squarely to social change. I'd love to pick up on this point about one of the challenges is if we are focusing our data on the new stuff, we'll have real clarity about what's not working in the new stuff. Do you think that the benchmarks in our minds which aren't as data driven about what used to work might be unrealistic? So are we gonna compare the messy reality of the new stuff we really know through data with some idealized notions of what the benchmarks are? And how do you think about that for shipping over time? Yeah, as you were describing that challenge, I think about there's right sizing of expectations and there's also the right sizing of measurement and evaluation and I think right now we're still kind of all over the map. So you have funders demanding random control trial evaluations for things that are really just still getting started and really a developmental evaluation approach where you're learning and you're moving and you're flexible would be much more appropriate. I think that once you're seriously scaling a program you do need rigorous evaluation and data collection. Maybe still some flexibility but much more heavy on the rigor side. At the same time, just because you're piloting something and you're in the innovation stage or the kind of mezzanine stage it doesn't mean data goes out the window, right? You still use data to inform the design of your program. You listen to those who are receiving services and you get that feedback loop going. So I think we have to right size evaluation just as much as we need to right size expectations but we're not there yet and there's a lot of wasted money at this point still and a lot of wasted effort on the part of entrepreneurs and funders. So we're gonna turn to what do we do about this? What's in our power collectively in our institutions individually to make this go the right way? And I'm gonna ask each panelist to very briefly because we wanna have time for some audience feedback to talk about two things each of you that you think we should do to drive this in the right direction. Okay, so super quick. I mean, I referred to earlier that I think we're still at early days on supply and flow and use in the social sector with data. There are easy things that everyone in this room could do to contribute to the supply, set goals and start to measure even for yourself, even internally. That's probably if there's one piece of advice I could give that's the biggest piece. You can also contribute to that beginning amassing of data that'll allow us to benchmark. There's a bunch of different ways. Launched here at SoCAP this week is something called Impact Space. I see Brian Walsh in the audience who's one of the people behind this. Impact Space is like the crunch base for impact investing. You can go on as an individual, as an organization, as an investor, there's a ton of profiles on there. You could correct your own profile, add to it, enhance it or create one. If you're a nonprofit, you can do the same thing with GuideStar. You can add lots of information including performance data. We don't even have some of the most basic data we need about organizations right now. Every one of us could write a review to greatnonprofits.org, which is basically like the yelp of the nonprofit sector for organizations where you volunteer to contribute money. And if you're a foundation, any foundations in the room, there's something called the reporting commitment where 17 foundations, including the Gates Foundation, have committed to and are sharing grants data on a regular, timely basis in a consistent format. It's very basic, it's just about what we're funding, where, but it begins to create that body of data that we need to really be able to make decisions. Great, thanks. So I'll give you two and I'll make them both alliterated, so you only have to remember one consonant and that C. So the two things are consider your context and contribute to the commons. And I'll be really practical. It's really easy how you can make sure that what we do is embedded in an understanding of the world in which we live. It's a really simple thing to do. Every time you're having a conversation about impact investing or data, pay for success, simply ask yourself and the people around you two questions. Could we be having this conversation at another point in time? So is what we're doing related to understanding that there was a big recession in the West, that there's a set of things happening in this moment in the time that India's slowing down? You know, if you're in India, is, right now, are you having an impact investing conversation in India that you could have had six months ago? If you are, you're having the wrong conversation because what's happened in the last six months is the economy slowed down, is under a certain set of constraints that we've got to make relevant to these conversations. So ask yourself, could I be having this conversation at a time? And then ask yourself, could I be having this conversation at another place? If you're sitting in the US having a conversation that you could be having in Brazil, in terms, then you're not having a conversation that's understanding the realities of what's happening around us because the context are different. So that's really easy. When you come to a conference like SoCAP, if you feel that we as panelists are having a conversation that could be happening in another moment in time or in another place, raise your hand and say, what about this moment and the context we're in? And same thing with your boards and with the conversations you have among friends. So consider the context of the first. And then the second one, and I will admit, I don't live the, I don't walk the talk as much as I should, is contributing to the commons. And what I mean is, whatever you're doing, I happen to run a community development finance institution in the US. Many of you do similar work. You might be investors, entrepreneurs. The reality of getting your job done on a day-to-day basis is so demanding that it's often easy to become incredibly myopic and not have time to do things, other than the things you absolutely have to do right now to get your work done. So right now, the Non-Private Finance Fund, we don't have a lot of donors asking us to contribute to the data commons in a standardized way. So for us to meet our very short-term goals as an institution, we don't need to report data using the iris standards that the Golden Pact Investing Network has supported. And I can tell you, at every given day, it is, I don't have the luxury to put money or time into doing things I don't have to do. But if all of us optimize for our short-term needs, then we are not going to create the collective conditions that we all will be able to thrive in. And so making a small focus in your organization, in your own life that says, I will do something on a weekly basis for half an hour, on a monthly basis for an hour that isn't just about my short-term needs in organization, but that contributes to the commons. I think the easy thing to do if you're an impact investor is use the iris standards. If you're going to measure data, measure them in a way that's collective, and be slightly more open and honest than you might be comfortable doing to talk about how difficult it is to do what we do and some of the failures. I think those are two things we can do that are the biggest contributions we can make that ultimately make it easier for us to meet our day-to-day targets, but in the very short-term, that won't be as visible. Great, Laura. Okay, so for pay for success and social impact bonds in particular, what can we do? First thing, remember this is just a tool, right? This is not the coming of the Messiah. This is a tool. Like any tool, you've got to use it properly for what it's intended to do best. So I would say, I would assert that social impact bonds are good tools to scale preventive interventions that have been proven already to work. If you're trying to use the Sib to do something else, it's probably not going to work out well for you. And the level of hype and excitement around this new approach really outstrips our experience with it. People I think are now trying to direct a social impact bond to do a whole variety of things beyond what it's really well-suited to do because it's the new, new thing. And so everybody wants to do a social impact bond because it's so exciting and it's going to attract impact investors and put them on the map back up a little bit, right? Remember that it's a tool. Understand what it's best suited to be used for and use it appropriately. And then the second thing to do is, frankly, just do the hard work. If you want to use these tools, before you're ready to put together a social impact bond, you have a lot of things you need to do. You need to develop an intervention. You need to test it and pilot it and realize how to make it work. You need to codify it. You need to develop the evidence around it to show that it's efficacious. You need to do the cost-benefit analysis on a comparative basis relative to other interventions. I mean, there's a whole long list of things you need to know. That's all we got to do. But before you even start to imagine whether the social impact bond is the right tool to scale up your terrific intervention. And part of doing the hard work is personally being educated about what we're all talking about. So if anybody actually thinks that a social impact bond is a bond, please go read the McKinsey report because the first thing you need to do is get clear about what these things are, what they're not, what we're talking about, and understand that sometimes as we borrow our financial markets vocabulary, we stretch these terms a little bit and it just adds to the confusion. Great. So we have about 10 minutes left. I'm told that there is a roving microphone somewhere in the room. Not sure where that is. Anybody have a microphone? No? Okay, well ask your question and I'll repeat it. Yes. There we go. I'm getting a little bit ahead of us here. Maybe this is 10 socaps down the road, but to me, there are some major structural difficulties that we're gonna run into both on the demand and the supply side. On the demand side, of course, if you have, without rewriting the article, excuse me. Yeah, without rewriting the articles of incorporation for a lot of institutional investors, they will not be able to really plan the impact space at least is, under my understanding, without violating the fiduciary obligation to their shareholders. And then from the supply side, from what I've heard from a lot of people in different organizations is that there's just not the deal flow too. People are very much interested in placing early stage money in paper success and impact investments, but they just don't have the deal flow. And with some of my work at non-profit violence fund, thank you Andy. I learned just how difficult it is to properly capitalize the non-profit organizations that are doing these good interventions, even at small scale, let alone taking that to big scale. And so my questions are, what if any solutions exist to solve both the structural finance side for the organizations doing these interventions and what if any solutions are available short of convincing Chevron to change to a B Corp or something to provide the appropriately aligned incentives on the demand side. I think that's for you, Andy. And the microphone can go back there next. I'll take at least the first part of that and maybe the panelists thoughts in a second. So this question of what is it gonna take to actually change the way investment practice works and change the rules around investments so that the social impact of the investments we make can be a consideration. So first of all, and some of you probably heard me mention this before, but we came up with a phrase impact investing in 2008 and it had two very intentional, we intentionally adopted the term because of a double meaning. That impact investments would be those investments that generate an impact. So when I said earlier an impact investment can be an effective way to scale up a social solution. We were talking about money could be put to work and could fund non-profit and for-profit organizations that would use this money to solve social problems. There was also an intentional second part of the meaning which was that the impact investing movement wouldn't just unlock money for impact, but would actually impact the way that investing itself was done. And I think we've got to keep both of those in balance. So we've talked a lot about how do you get money to great organizations that can scale up? That's the first part. But let's not forget that for this journey to be completed and for this movement to realize its potential does require us to hold on to that second meaning which was we will impact the way investment itself is practiced. And that's a very large noble goal. There's very, we know what the pieces are. So right now in the UK there's a proposal to enable impact investments to get capital gains tax relief so that an impact investor when they consider an investment can actually look at not just the financial return but also the potential to get a tax write off so that it starts to have the kind of financial return more like charity. Those sort of tax treatment is very important. Here in the US, the Obama administration has been very good about broadening the definitions of what can qualify as an impact investment for private foundations, which Treasury has put out a new set. So we're seeing those pieces starting to form. It is gonna be about regulation. I don't think institutional investors are going to wake up one day and want to get out of their comfort zone. I think they're going to respond to pressures that come from their customers and from regulation. And as soon as those pressures are there, they will respond. But that's how I think we're gonna get the broader impact on the investment community itself. I think the generational issue we haven't talked about, part of considering the context is not just where we are in time but how the, where we are demographically. There is a lot of evidence that younger people are much more connected to these ideas than older people. US Trust, part of Bank of America now did a recent wealth advisory survey where they actually asked a set of questions about impact investing, which is remarkable in and of itself. But part of the data showed very clearly that the millennial generation, these are customers of theirs who have five to 10 million dollars at least in their portfolios. 29 to 34, 45 year olds, younger people in that survey, almost double in terms of responding to a set of questions about would you put your money to work with your values? Would you trade off on return in order to get social good? Interestingly, more of them said we would take on more risk to get social good rather than trade off and return. Clearly, there's something happening with the younger generation. Kathy teaches a business school. I teach a Columbia business school. There is something that's happened to there that I think will be part of this long-term structure shift. Great, we have a question over here. Hi, I'm Seb from the social investment business in London. I guess roughly equivalent to the nonprofit finance fund in the UK. I'd like to explore the role of government a bit more in this, and particularly government as a purchaser of services because it strikes me that that's by far the most important role that the government has in this transition. And we talked a bit about the kind of system changes that are needed in terms of purchasing different kinds of services. So more focus on prevention. If you take health, less minimizing focus on clinical interventions and getting more care provided in communities and provided by community organizations. There's clearly a policy angle for that and there's a macro political debate that needs to happen to try and shift that agenda. But our experience is also that that happens most successfully when individuals who work for government agencies who are actually the ones making individual contractual decisions in a city, in a region are empowered and aware of the choices that they can make to do things differently. They have access to the data. They have the relationships with nonprofits that can create a market in which they can operate and which they can buy services. What do we think we can do to best influence the individuals in government agencies that can actually bring about that change? Because yes, government is a massive bureaucracy and it's very difficult to influence and there is a top-down policy agenda but there's also a bottom-up agenda around empowering the individuals who can actually make those choices. Good question. So I'm not sure that voters are thinking about social innovation when they go to the polls and they select their mayor or their governor or the executive but where we've seen people who are brave, willing, thoughtful, have a diverse background and they come into these roles like Mayor Bloomberg in New York City, Deval Patrick in the state of Massachusetts and they're willing to say to the folks who are working with them, look, I'm gonna have a chief innovation officer. I'm gonna undertake the Human Services Data Project like they did in New York City. You see a symbiotic approach to understanding data, getting data first, reaching out and creating public-private partnerships with the business sector and being creative and thoughtful about how to transform government performance. So where we all in the social sector space observe a chief executive going into a mayor's office or a governor's office who has, and the person has a bit of a track record or a background that suggests they might be open to understanding how to work with performance data, how to partner with the private sector, how to understand replacing entrenched social service solutions with new programs that have been proven to be effective. I think that's where you start the conversations. In a lot of places, the chief executives are starting these conversations and starting with data, starting with more traditional public-private partnerships before moving into things like social impact bonds and pay for success. Just a bill on that for a second because I'm based in Washington, D.C. And I love the question because I think it is so much about individual change agents with inside government. And there really is a trend in the U.S. right now that I hope will continue where public policy and data and that combination, which is normally really geeky and boring in terms of the geeks and the wonks, but it's somehow becoming kind of cool. There's an energy and there's actually an influx of young people into these positions right now. My neighbor is the chief innovation officer of Montgomery County, Maryland. It's a county the size of Charlotte. And they're doing all kinds of amazing things out of a really tiny office with a tiny budget. You have Jen Polka going into the White House, the founder of Code for America. So that innovation in government right now, the time is right for that. I hope some of that is happening in the U.K., but I think it really is another one of those trends we could have up on the stage here right now. So to give recognition where recognition is due, the person who conceived this panel is our government person in the room in Galloway. So we want to thank Ian for framing this for us today. Clearly we have people starting to think this way and bringing us together as a community to think about how we can act better in this way. So please join me in thanking our panelists as well. Fantastic conversation.