PLY: Crunchy maths in the analysis to start the week (fortunately my wife has her own coffee brand so I can derive some stimulus before coming to terms with such tricky sums of an AM). Interesting reading…
Meanwhile over in our major newsletter, Exchange Invest, we’re celebrating it’s third birthday. Have a great week…
“Pray” For Success: How To Take the Guesswork Out Of Social Finance
Jason Saul – Huffington Post
The high-profile failure of a Social Impact Bond (SIB) experiment at Riker’s Islandbegs the question: how can we de-risk investment in SIBs, and social programming generally? SIBs are largely predicated on private investors assuming the risk that programs will succeed at producing desired social benefits. In the Riker’s Island example, Goldman Sachs lost $1.2M and Bloomberg Philanthropies lost $6M because a juvenile recidivism intervention failed to work. Some backers hailed it a success nonetheless, insofar as the government didn’t have to pay for the program. But was it really a success? Will investors be more attracted to SIBs in the future?
Investors can only assume risks that they understand, and quantify. In the case of SIBs, it appears unlikely that Goldman, or other SIB investors were adequately able to evaluate the risk. And if they did try to assess the risk, they certainly didn’t guess right. While the program underlying the Riker’s SIB, Adolescent Behavioral Learning Experience (ABLE) intervention, was purported to be “evidence-based,” the designation remains fairly arbitrary. What does it take to deem a program “evidence-based”? Does the program need to be 20% effective? 50% effective? 80% effective? Proven effective once? And how reliable does the evidence have to be? Indeed, a comprehensive academic meta-analysis of the program’s core model, Moral Reconation Theory (MRT), suggests that the intervention was not very effective. In fact, the meta-analysis, based on 33 underlying studies, found an overall r-squared of .16 (a statistical measure of efficacy), indicating that the MRT intervention was barely effective in the past. The researchers even suggest that the MRT was “more successful with adult than juvenile defenders” in institutional settings, such as Rikers. Finally, the vast majority of the evidence on MRT was produced by Correctional Consulting, Inc. the for-profit company that invented the program.