Tag Archives: innovazione sociale

Disrupting learning: is education going down the way of the music industry?

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According to Business Insider, the Khan Academy has just raised an extra 5 million dollars in funding. It was started in 2004 by an MIT graduate called Salman Khan, who started tutoring his cousin in math via Yahoo’s Doodle notepad. It went so well that other members of his family asked him to do the same, so Salman decided to record his lectures as videos and upload them onto YouTube. At this point, of course, they could be shared, and they were. This way of learning became very popular, and seven years later the Khan Academy is a well-funded charity that draws 39 million page views a month.

Assume 20 pageviews (videos) make up one student’s day of schooling; assume further 25 students in a real-life classroom, and 22 days of school in a month. That means that the Khan Academy takes the place of a very large 3500-classrooms school, being taught by, at most, ten extremely skillful teachers. Plus, each student can proceed at their own pace, with no need to sync with others that might prefer different speeds or learning times. Given the well known limits of traditional education as a learning method, it is easy to foresee continued success for endeavors of this kind.The Khan Academy’s successes may be a sign that a significant fraction of that market is going to get commodified, fast. When that happened to the music industry, it lashed back, hirinfg lobbyists to build legal barriers around its stream of revenues and lawyers to sue high school kids guilty of unlawfully sharing music files. I am not looking forward to what happens when universities get wind that they are being bypassed. Students in countries like the UK, where university tuition fees stands at three thousand pounds per year, are certainly going to want to bypass them: the alternative is getting into student debt, and the financial crisis is teaching us a thing or two about debt. Things could get ugly.

Marco De Rossi, the young founder of the Italian peer-to-peer online school Oilproject, dreams of putting online, on video every lecture of every course of every university in the country for free viewing. He certainly has the community to do it: what he needs is a one-line piece of legislation, that puts squarely in the public domain the intellectual property rights of taxpayer-funded university lectures. My guess is that it is now or never: either this legislation is made now or the education lobbyists will lock it down for good. Until the next Tahrir Square.

Edgeryders: the Council of Europe and the world we are building

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Young Europeans are having trouble completing their transition towards full independence. The problem bites deeper here, because our social model is based on the status of full-time, long term employee, that unlocks important social and economic rights (in France, where I live now, if you don’t work you have no right to health care). This generates tensions, because it forces young people to fight for this status at all costs, even if it got very difficult to obtain and even if many of them would like to explore different roads. Result: 20% of 15-34 years old, in Europe, is not in employment, education or training. It is not even a matter of being young anymore: young people are in the line of fire, but citizens of all ages are losing autonomy.

The paradox is that the currently young generation is probably the most creative, generous, idealist, collaborative ever. Everywhere you look young people are creating, seemingly out of thin air, their own jobs in entirely new businesses like my friends at CriticalCity or the extraordinary twentysomethings at Blackshape Aircraft; they experiment new ways to share resources, from their couches to motor vehicles, or going out to live off the beaten track; others still are building new way to meaningful activism, making their voice heard and matter in an age of crisis of representative democracies. These people don’t know each other, and they act independently; and yet, one can’t help get the feeling that their projects are somehow coherent, as if they were pieces of the same emergent future. The OpenStreetMap 2008 video (above) is of course completely unrelated, but it makes for a great metaphor of this emergence; and it gives me the same feeling of elation and hope.

The Council of Europe has an idea: try to dig out all of these experiences; aggregate them; validate them through peer-to-peer assessment; and use them to propose to the European Commission and its own member states a new strategy. We might call it adaptive; in plain terms, it is about:

  1. figuring out what the young people of Europe are already doing to build the world we will all inhabit in twenty years. The proof of the cake is in the eating: if they struggle so hard to build something, it means they really want it. So that gives you a goal for your policy.
  2. if possible, help them with it, in the sense of creating the conditions for these strategies – that today require a lot of resourcefulness and self-sacrifice, and are de facto accessible only to a minority – become viable for the average young person.
  3. if it’s not possible to help them, get out of their way, by refraining from projecting onto them the social and economic model of the 70s. It is the one most senior European decision makers grew up in, but that does not make it the best or the best suited to this day and age.

This will be done through a web project, characterized by fully open and constructive interaction. Its final result will be presented in a high profile conference, probably in May 2012. I have the honor of managing this project, and the good fortune of having been able to put together a stellar team (I will introduce them in a subsequent post). I need to credit the Social Cohesion Research and Development Division of the Council of Europe for believing in the project, and for the courage demonstrated in rolling out such an open initiative.

The project is called Edgeryders. The platform will launch in late October; for now we have put online a provisional blog to start the conversation. Come say hello, and, if you think we are credible, pass word around: we will need all the wisdom and all the help we can get. And you, and we too, that means all of us are the real experts on future building: we struggle with it every day.

Financial innovation for social business: what are the risks?

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Antonella Noya all’OECD (grazie!) mi ha passato un loro rapporto, The Changing Boundaries of Social Enterprises, in cui si cerca di fare il punto sugli ultimi dieci anni di impresa sociale nei paesi industrializzati. Sono stati anni importanti per questo settore, da tutti i punti di vista: di crescita e strutturazione, legislativo e anche finanziario. Da quest’ultimo punto di vista un riassunto potrebbe essere questo: le imprese sociali sono sottocapitalizzate, e stentano in particolare ad accedere a strumenti finanziari diversi dal prestito (loan) e dal contributo (grant). Molta innovazione finanziaria ha cercato di risolvere questo problema. Antonella Noya at OECD (thanks!) pointed me to their report The Changing Boundaries of Social Enterprises, in which they attempt to render the past ten years of social enterprise in developed countries. It’s been an important ten years for this sector, from all points of view: growth, legislation and finance too. From a finance perspective, an executive summary could as follows: social enterprises are undercapitalized and find it difficult to access financial instruments other than traditional loans or grants. A lot of financial innovation was thrown at the problem.

Il rapporto OECD fa un elenco impressionante: venture philantropy, prestiti “pazienti”, piattaforme di crowdfunding à la Kickstarter, indici per misurare la performance sociale degli investimenti come i Dow Jones Sustainability Indices e così via. Tutto bene? Sì e no. Sì, perché il problema esiste e si sta cercando di affrontarlo. No, perché si stanno facendo cose che ricalcano un po’ troppo da vicino la precedente ondata di innovazione finanziaria — quella, tanto per capirci, che ha portato alla crisi globale del 2008. The OECD report has an impressive list: venture philantropy, “patient” loans, crowdfunding platforms à la Kickstarter, social performance assessment tools like the Dow Jones Sustainability Indices and so on. All’s well then? Yes and no. Yes, because the problem exists and is being looked into. No, because it is being addressed in a way which is a little too reminiscent of that other wave of financial innovation, the one that gave us the 2008 global meltdown.

Considerate Blue Orchard. La loro idea è semplice: mettere in comunicazione gli investitori istituzionali (per esempio i fondi pensione), che vogliono comprare prodotti finanziari etici, con il microcredito. E come si fa? Per cominciare si fanno molti microprestiti. Ciascun prestito corrisponde a un attivo nel bilancio del microcreditore. A questo punto il microcreditore prende tutti questi piccoli attivi di bilancio, e li usa per garantire l’emissione di un’obbligazione (cioè uno strumento finanziario derivato da quello primario, cioè il microprestito) che poi rivende all’investitore istituzionale. Fatto! Quest’ultimo ha fatto un investimento etico senza bisogno di imparare a distinguere tra loro i microprestiti e i microcreditori. Per contro, l’istituzione di microcredito ha reperito liquidità aggiuntiva, e può fare altro microcredito. Perfetto, no?Consider Blue Orchard. It’s a simple idea: connect institutional investors (say, pension funds) wanting to invest ethically with microlending. How does that work? It begins with some institution making microloans. Each of them creates an asset in the balance sheet of the microlending institutions. Now this microlender takes all of these assets, packages them up and uses them as collateral to back a bond (which is a derivative product, its primary being of course the microloans) which he then sells to the institutional investor. And it’s done! The latter has been enabled to invest ethically without actually having to be able to tell which microborrowers to lend to. At the same time, the microlending institution has gained extra liquidity, and can go on to make more microlending. Great!

Non necessariamente. Questo processo in finanza si chiama cartolarizzazione: il suo effetto ultimo è quello di allontanare il debitore dal creditore finale. Prima della cartolarizzazione i mutui casa venivano concessi da banche locali, che conoscevano il debitore ed erano ragionevolmente in grado di valutarne l’affidabilità. Se quest’ultimo si trovava in cattive acque, la banca locale faceva il possibile per consentirgli di ristrutturare il debito: in fondo si trattava di un cliente e di un membro di quella comunità, ed era interesse della banca che la comunità che serviva fosse il più prospera possibile. Con la cartolarizzazione, però, il mutuo del signor Rossi viene impacchettato con altri in uno strumento derivato, e rivenduto a un investitore non locale: se va bene un fondo, se va male un hedge fund molto aggressivo. Appena Rossi ritarda con un pagamento, questo investitore non ha nessuna ragione di essere comprensivo: farà la cosa che gli conviene nell’immediato, visto che non partecipa alla comunità locale in cui Rossi vive. Cosa faranno i fondi pensione che comprano i prodotti Blue Orchard se dovessero trovare che i rendimenti sono troppo bassi? Se decidono che devono rientrare immediatamente dei loro crediti, quale sarà l’effetto di questo rientro sul microcreditore? Può essere costretto a rientrare a sua volta, compromettendo il beneficio sociale di avere investito sul proprio lavoro?Or is it? The process described is called securitization. One of its effects is to separate the borrower from the final lender (in this example the pension fund). Before they got securitized, home mortgages were issued by local banks, that knew borrowers personally and could assess their creditworthiness reasonably well. If they got it wrong and the borrower found it difficult to repay the debt, the bank would do its best to get him back on track, possibly restructuring her debt: after all, she was a client, and lived in the same local community as the bank. The more prosperous the community, the better things were for the bank. After securitization, all this changed: now John Smith’s mortgage is repackaged and sold to a nonlocal lender — a pension fund at best, a very aggressive hedge fund at worst. As soon as Mr. Smith starts falling behind with his payments, this investor has no reason to be understanding: it will try to maximize its immediate gain, as he has no stake in Smith and his community’s long-run prosperity. What will the pension funds that purchase Blue Orchard’s products if they find that the returns are too low? If they decide to exit fast, what will the consequences be for the microborrowers? Could they be forced to pay their debit back or lose their assets too? Could this wipe out the social benefit of the poorest of the poor investing in themselves?

Discorsi simili si possono fare per i “mercati di capitale etico” in via di collaudo in diversi paesi, come ETHEX nel Regno Unito o la Bolsa des Valores Sociais in Brasile. Il mercato azionario che conosciamo ha portato molti capitali alle imprese for profit, al prezzo di indurle a una prospettiva di breve termine: un buon risultato trimestrale è fondamentale per non perdere la fiducia del mercato. Cosa succederebbe alle imprese sociali le cui azioni (sì, alcune emettono azioni) fossero scambiate alla borsa di Londra o New York?Similar questions can be asked for ethical capital markets being rolled out in some countries, like ETHEX in the UK or Bolsa des Valores Sociais in Brazil. The stock market as we know it brought a fresh stream of capital to for profit enterprises, but at the price of making them focus away from long term growth and onto quarterly results. What would happen to social enterprises once their shares (yes, some do issue shares) are traded in Wall Street or London?

Sono domande inquietanti. Ma fare finta di niente sarebbe peggio: non abbiamo scelta se non cercare le risposte.These are unsettling questions. But looking the other way would be much worse: we have no choice butlook fo the answers.