Tradable Income-Based Securities (TIBS)

Nat Ware

Idea: Tradable Income-Based Securities (TIBS) – A New Type of Public-Private Partnership to Finance Reskilling to the Technologically-Induced Unemployed

Policy Theme(s): Future of Work

Country: USA

  • @NatJWare
  • @NatWare
  • /natware
  • /nware

Bio:

Nat Ware is a “social impact architect” is the sense that he uses theoretical microeconomics to redesign human systems to improve social and environmental outcomes, and then works to bring those redesigned systems into effect. He is the Founder and CEO of 180 Degrees Consulting, the world’s largest consultancy for non-profits and social enterprises, with 90 branches across 35 countries. To date, over 3 million hours of volunteer consulting services have been provided to help over 2500 mission-driven organizations to improve and expand their services (www.180dc.org). Nat is a Rhodes Scholar, and at Oxford received the Saïd Prize for Top MBA Student and the Arthur Lewis Prize for Best Performance in Development Economics. Prior to Oxford, he studied at Sydney University, where he received both the University Medal (the highest academic award) and the Convocation Medal for Best All-Rounder (1/40,000 students). Nat is a Forbes 30 Under 30 listmaker, the Australian (NSW/ACT) Young Achiever of the Year, a Goldman Sachs Global Leader, a World Economic Forum Global Shaper, has swum the English Channel with friends to raise money for charity, was a Visiting Fellow at Princeton, once taught a postgraduate course ‘Innovation, Strategy and Global Business’ at the age of 21, has completed a full Ironman triathlon, has given three acclaimed TEDx talks on social impact that have been viewed over 700,000 times, and is the only ever two-time Global Winner of the St Gallen Wings of Excellence Award.

What is your idea?

1 in 6 workers in the G7 will become unemployed by 2030 due to technological advances including automation, robotics, and AI. We currently lack a way to finance high-quality reskilling at the scale required. Without a new approach, poverty and inequality will increase.

Tradable Income-Based Securities (TIBS) is an innovative way to retrain unemployed individuals without costing them anything, without any donations, without costing governments anything, and while making a profit for investors.

The idea, in brief, is that governments award contracts to investors to provide vocational training to consenting individuals. This training, by its nature, increases expected lifetime incomes, and therefore government tax revenue. Each year, for a set period, governments pass back to investors a portion of the additional tax revenue.

For example, suppose autonomous vehicles cause millions of drivers to become unemployed. With TIBS, governments could award contracts to provide one-year coding training courses to them, in return for 20% of tax revenue attributable to them for five years.

This arrangement is mutually beneficial. It aligns the incentives and leverages the strengths of different stakeholders.

Individuals receive training at no cost. They just pay the usual tax rate. They’re effectively paying for their own investments with their future tax money.

Governments pay nothing upfront, and there are mathematical ways to structure the contract so they only pass on what they otherwise would not have had.

Investors can create social impact without having to sacrifice or share profit. Once training has been provided, investors can sell the right to the payment stream, enabling them to profit in the short-term with uncapped upside.

With this new type of public-private partnership, there’s no trade-off between social and financial returns. Investors are incentivized to provide the highest quality training, because this increases expected lifetime incomes, the market price of the TIBS, and therefore profit. What maximizes social impact is what maximizes profit. A true win-win.

What inspired your idea?

This idea arose from a deep understanding of the relationship between, and sequencing of, social value creation and financial value creation. When human capital investments are made, the common effect is increased expected lifetime incomes of individuals receiving investments. This increases the expected taxation revenue for the government. If this financial value that is subsequently created from social impact can be attributed to and appropriated by those that finance investments (that is, if the positive externality of taxation revenue can be internalized), then there will be greater incentive and capability to provide high-quality reskilling to disadvantaged populations.

Such attribution and appropriation is possible because of this core innovation: taxation revenue can be a form of payment to private investors. It is commonly assumed that the stakeholder that provides training must be the same stakeholder that collects and enforces payments. This need not be the case.

TIBS was also invented to overcome all the shortcomings with existing approaches to financing reskilling. First, governments are often unable to finance reskilling at scale due to (a) a short-term time-horizon leading to underinvestment in education with long-term returns, (b) political pressure to not increase the deficit and to not spend too much taxpayer money on non-tax-paying individuals, (c) an inability to accurately identify ex ante the most effective training providers, and (d) non-alignment of social/financial returns when payments are based on inputs. Second, income-contingent loans have the problems of moral hazard, adverse selection, and enforcement difficulty, which TIBS overcomes by having payments as a subset of, rather than addition to, taxation revenue. Third, social impact bonds have poor government and investor value propositions, which TIBS overcomes by reversing the order of cash flows to the government, (b) accurately identifying ex ante the most effective training providers, and (c) making investor returns short-term, uncapped and liquid.

What makes your idea audacious?

It is audacious because:

1) It is innovative. TIBS has never been done before.

2) It is scalable. TIBS could become the default way to finance high-quality reskilling to millions of G7 citizens.

3) It is disruptive. TIBS internalizes positive externalities and uses this as a form of payment.

4) It achieves the seemingly impossible. With TIBS, governments are guaranteed to never lose out and to only ever pass on a portion of what they otherwise would not have had. This guarantee is possible because the investor contract is allocated via a Vickrey auction, which enables the counterfactual investment to be determined, and thereby the marginal increase is expected taxation revenue to be known.

5) It optimally leverages stakeholder strengths. TIBS combines the institutional capabilities of governments with the innovative capabilities of the private sector.

6) It perfectly aligns social and financial returns. With TIBS, the selfish action for investors to take is the altruistic action.

Erase All Kittens

Dee Saigal, Leonie Van Der Linde, and Shwetal Shah

Idea:  Erase All Kittens: an innovative web-base platform game to inspire girls to code

Policy Theme(s): Gender Equality, Future of Work

Country: United Kingdom

  • eraseallkittens.com
  • @EraseAllKittens
  • /drumrollhq

Bio:

Dee Saigal, the CEO is an award-winning creative and writer with six years experience in the advertising industry, most recently at TBWA Paris. She leads the overall business direction and strategy for E.A.K. and works on all creative content including level design, characters, and interactive dialogue, as well regularly beta-testing the product with children.

Leonie Van Der Linde, the Lead Artworker, graduated from Central Saint Martins before working on E.A.K., specialising in Illustration, Graphic Design and Animation. She is the concept artist for E.A.K.’s artwork and animations, which are then developed further in her unique and quirky style. 

Shwetal Shah works as the Head of Global Partnerships and Outreach at Erase All Kittens, an award-winning start-up creating a platform adventure game that inspires girls to code and teaches them professional languages. Shwetal was also named a UN Empower Women “Champion for Change” and was nominated for Forbes 30 Under 30 by Forbes Asia.

What is your idea?

Erase All Kittens is an innovative web-based platform game, designed from the ground-up to eliminate the fear that girls have of technology, and to inspire girls to code so that they can become creators rather than consumers of technology.

What inspired your idea?

E.A.K. was created because the founders believed that something needed to be done about the fact that not enough children are being inspired by Computer Science, particularly girls. They are incredibly passionate about encouraging children to code and create, and after carrying out years of research – speaking with hundreds of children and schoolteachers, they strongly believe that creativity is at the heart of solving this problem. They are now thought leaders on this subject, having been invited to speak at many events and on European panels, and working with other organisations to solve this global issue.

Despite not having previous experience in gaming, the founders come from creative backgrounds and bootstrapped a learning game which now has 125,000 players in over 100 countries.

What makes your idea audacious?

Most girls say that coding and engineering are “too difficult” and “more for boys”, and the biggest drop-off in interest is after the age of eleven. A study by WISE has shown that if girls aren’t interested in STEM before this age, they are unlikely to ever be interested. (1). Sadly, teaching girls to code has been ignored. Only 21% of the STEM workforce in the G7 is made up of women (2) and the G7 has the lowest percentage of female engineering professionals at less than 10%. Engineering is important to the G7- it contributes 26% of our GDP or £127,580,000,000 to our economy. Enabling women to meet their full potential in work could add as much as $28 trillion to annual GDP in 2025 (3).

Our prototype (60 minutes of gameplay) has been proven to eliminate fears that girls have of coding, and effectively teaches basic HTML via an ‘instant results’ mechanic and story-driven gameplay. We are designing and building E.A.K. to deliver essential skills and capabilities to girls to prepare them for 21st Century degrees and careers, so that they can participate in the economy and society. Our goal is to allow young girls to acquire the skills to enable them to become tomorrow’s innovators and creative problem-solvers. By inspiring and empowering girls at a young age, E.A.K. could help build a more diverse UK tech workforce which will drive the UK economy in the 21st century.

Sovereign Automation Fund

Viet Vu and Logan Graham

Idea:  Sovereign Automation Fund: Workers Owning the Future of Automation

Policy Theme(s): Future of Work

Country: Canada

  • @vviet93

Bio:

Viet is an economist with the Brookfield Institute, working on a broad set of issues, from the impact of automation to the Canadian economy, to defining the technology sector, and looking at the state of entrepreneurship in Canada. An applied microeconomist by training, he brings an Economics training from both the theoretical and the empirical perspective. Viet holds a BA in Economics from UBC and a MSc in Economics from the LSE.

  • @logancgraham

Bio:

Logan is currently pursuing a DPhil in Machine Learning at the University of Oxford as a Rhodes scholar. His research focuses on using causality to make machine learning more efficient and generalizable. He has also lead research on the future of automation and consulted for the UK government and various FTSE 100 companies on the topic. Logan founded RAIL, an applied machine learning lab using AI to tackle social problems. He holds a BA in Economics from UBC.

Logan and Viet met outside of a classroom they both took in second year of university (2012), and have worked together on numerous occasions, including performing economics research.

What is your idea?

A significant proportion of tasks today are automatable across the G7. Automation and AI increase productivity, create higher-tech industries, and make work safer – but at many workers’ short term expense. And though we want a future where new technology is adopted we must also find ways to eliminate the financial and social cost these workers’ experience. Therefore, we need to incentivize growth as well as redistribution.

We propose giving workers ownership in how automation will affect their work, and a financial share in the productivity improvements they drive through automation. We are inspired by pension investment funds, co-operative businesses, and the age-old suggestions of citizen wealth funds that own long-term stakes in large businesses.

Conveniently, workers themselves have the most knowledge about the tasks they perform and how to improve them. Empowering them with the right resources they become consultants and entrepreneurs driving change at the heart of their industries.

This requires developing a vehicle to reward equity to workers for productivity improvements and to allocate profits to that vehicle.

What inspired your idea?

Both of us have been familiar with numerous reports looking at the potential impact of automation, with these reports often reporting a number – % of workforce at risk of being automated. We both felt as if many of these reports treated automation as an exogenous force, something that will “just happen” to us, without any human control over it.

Then, in March, Viet had the opportunity to visit three towns and cities in southwestern Ontario to speak with citizens who are directly affected by automation – from factory owners, and workers, union leaders, farmers, economic developers, and municipality staff, they all felt as if automation was an unknown force that they can’t fully comprehend, that was taking their livelihood away.

We rejected this notion, but we also understood why people felt as if automation was an exogenous force. We believe it was due to two factors: the tie between one’s personal identity and one’s job, as well as a lack of agency in one’s decision to automate. In many instances, people’s jobs were part of their identity – what made them who they are – and someone else has always decided to take it away.

This led us to think about whether there were any way for workers to drive the process of automation rather than have it be something that happens to them. This led us to the idea of how we can disentangle one’s job and one’s livelihood, and how a machinist can be compensated for the gains their business get by automating the machinist’s jobs in the most efficient manner.

What makes your idea audacious?

We believe our idea is audacious for two reasons; firstly because it forces us to radically decouple jobs and people. A person’s skills, abilities, and knowledge is more than what they perform in their occupations and jobs. Only when we can decouple it can we treat automation as a potential benefit – even if automation can automate parts of or an entire occupation, it is unlikely to be able to automate a person’s skills and experiences. Secondly, our proposal, for the first time, give workers agency in determining their future, and allowing them to benefit directly from the gains of automation. The same amount of goods and services (if not more) are produced with automation – it’s time everyone has access to these new abundances we create.

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