The Chicago School of Economics And George Soros: New Theories for an Impoverished World

The Human Capital and Economic Opportunity Global Working Group (HCEO), referenced in my prior post, is run by James Heckman, Stephen Durlauf, and Robert Dugger. It operates out of the Center for the Economics of Human Development (CEHD) at the University of Chicago, and its fiscal sponsor is the Institute for New Economic Thinking (INET), an entity that emerged in the aftermath of the global financial crisis of 2008. INET funds research, grooms young economists, and convenes gatherings promoting the work of its 1,100+ experts. George Soros pledged $50 million from Open Society to create INET as a vehicle to explore “new thinking and new rules for the world economy.” Heckman, Dugger, and Durlauf are all involved in the operations of INET.

Interactive link to map below here.

HCEO Map

The 2.5-minute video below features Soros speaking about why he created INET and what he hopes to accomplish.

(Soros) “The prevailing paradigm of the efficient markets hypothesis, rational choice theory, has actually run into bankruptcy-very similar to the bankruptcy of the global financial system after Lehman Brothers. The first phase of INET was to show the bankruptcy of the existing, and that-I hate to use this term-is “mission accomplished.” …That phase is now pretty well done as far as INET is concerned. We are now at a phase where we have to produce a new theory.

So, it’s now a constructive phase, and that has to be primarily directed at academia, at the economics departments of the universities. But it has to also address the burning policy issues, and we now have Senior Fellow, Lord Adair Turner (chair of the UK Financial Services Authority 2008-2013) joining us who will be in charge of developing that aspect of INET. In the long term I hope that this very rapid development can be maintained.

What is new economic thinking? A fundamental rethinking of assumptions and axioms on which economic theory has been based, because economics has been trying to come up with universally valid laws similar to Newtonian laws in physics. That, I think, is an impossibility, so you need a new approach with different methods and also different criteria of what’s acceptable.” George Soros, link to video

In 2013, Soros’s Open Society commissioned a working paper entitled, Impact Investing in Education: An Overview of the Current Landscape, from D. Capital Partners. The paper surfaced the following opportunities for private capital deployment, primarily aimed at the Global South: 1) provide education services in areas where the government is absent 2) spur “innovation” where governments are under-resourced and 3) develop alternative, “premium” choices where free public education is already established.

The featured image for this post identifies key players targeting “base of pyramid” populations for “investments” in infrastructure, people (student loans), and technology. D. Capital Partners described the latter as “a particularly promising arena for impact investors to seed innovations that have crosscutting commercial potential, especially if they can be deployed in large-volume markets.” The controversial tech-oriented education network, Bridge International Academies, funded by the Chan Zuckerberg Initiative, the Gates Foundation and Omidyar Network, became the largest education network in Kenya in 2013, the year the report was released.

Interactive link to map below here.

INET

INET’s other major funder is William Janeway, Managing Director of Technology, Media, and Communications for Warburg Pincus. Warburg Pincus is a private equity firm led by Timothy Geithner who served as CEO of the New York Federal Reserve then as Secretary of the Treasury under Obama where he oversaw the Troubled Asset Relief Program (TARP). This January Warburg Pincus closed an investment deal, in partnership with Genesis Capital, for $120 million in D-round financing for Zhangmen, China’s most popular online education tutoring app. In 2015 the company invested $60 million in the predictive analytics software firm Civitas Learning for the development of an applied data science platform that would provide “personalized” insights into higher education instructional delivery. Janeway’s wife Weslie, the President of the Pyewacket Foundation, has an interest in and funds genetics research.

While pitching in a relatively small contribution of $10,000 in 2015, it is notable that Drummond Pike, former head of the Tides Foundation, is also part of this project. The Tides Foundation distributes hundreds of millions of dollars each year to social causes; see their 2016 990 tax form here. The Maker Education Initiative (Maker Ed), an outgrowth of Dale Dougherty’s Maker Faire movement, is one of the Tide Center’s sponsored programs.

My fellow Philadelphians should note Richard Vague contributed $25,000 to INET. Vague, a managing partner for Gabriel Investments (1735 Market St), exited his business ventures in the energy and credit-card sectors and now serves on the boards of Penn Medicine and several regional museums and cultural institutions. Local business, HappyCog (1430 Walnut St), was hired to do the website rebranding for INET in 2015. There are ties right here in my hometown to INET’s global operations.

In 2015, INET distributed over 100 grants totaling $1.8 million. Most were in the $40,000 to $60,000 range and funded economic research proposals addressing such issues as: Managing a Changing Global Financial System, Measuring Structure and Risk in the Financial System, Behavior and the Economy, Environmental Economics, and Political Economy of Income and Wealth Distribution and Inequality Dynamics. The University of Chicago received $500,000 for “inequality,” presumably funneled over to HCEO. INET’s grants are primarily to academic and research institutions in North America and Europe, though a few awards in 2015 were directed to individuals and to universities in South America. Below is one page of fifteen that comprise the INET grant list for 2015. See the full list here.

INET Grants 2

The largest grant in 2015, $994,000, was to the University of Oxford where the Institute for New Economic Thinking at the Oxford Martin School is based. See image below for their nine programmatic research areas.

INET at Oxford

 

In June of 2011 Heckman and Dugger participated in an inaugural conference call for the INET-funded HCEO working group focused on “Markets.” Introductory remarks were given by Dr. Lance Lochner, economist from the University of Western Ontario who specializes in the development of human capital over a person’s lifecycle. Next Heckman described the vision of INET and the role of HCEO, noting the importance of interdisciplinary research and the need to address “issue pockets that the markets have not addressed.” The remainder of the call was given over to Dugger who presented their plans to reform early childhood development interventions using “innovative” financial mechanisms like social impact bonds. This was the year BEFORE the Riker’s Island SIB, the country’s first, was launched in 2012.  The Salt Lake City pre-k SIB came online the following year. The screen shots below are notes from the call HCEO posted online. You can read the full three-page document here.

INET HCEO Call 2011 -2

INET HCEO 2011 Phone Call

In the video above, Soros, identified a need for a new criteria of “what is acceptable.” Which leads me to wonder how will INET and HCEO’s 1,100+ economists set those criteria? Is an indigenous child getting a chromebook pre-k education, who has no running water in her home “acceptable?” Is a “school in a box” instructional model delivered by scripted educators in sub-standard learning conditions in Africa “acceptable?” Is it “acceptable” for Chicago’s black and brown children to be compelled to learn and deliver standardized test scores in classrooms where cleaning services are MIA while investors like Goldman Sachs reap maximum payouts on their pay for success investments? Will we allow economists like Heckman and pitchmen like Dugger to offer up equations and justifications so billionaires like JB Pritzker can assign “value” to an infant, anticipate the child’s future needs, “fix” them in advance with cheap, scaleable technological “solutions” so their public benefits can be raided for private profit?

It’s time to speak up for those who need us. Unplug these children and give them the human contact and care they deserve.

Previous posts about the ReadyNation Global Business Summit on Early Childhood:

Pre-K Profit: ReadyNation Hosts Global Business Leaders in New York City This November: Link

Making Childhood Pay: Arthur Rolnick, Steven Rothschild and ReadyNation: Link

Galton and Global Education Futures Forum: Scientific Racism Looking Backwards and Forwards: Link

Heckman and Pritzker Pitch Apps as Poverty “Solutions” Yielding A 13% Rate of Return: Link

The Chicago School of Economics and George Soros: New Theories for An Impoverished World: Link

Heckman and Pritzker Pitch Apps as Poverty “Solutions” Yielding a 13% Return on Investment

This is the fourth in a series providing context for the Global Business Summit on Early Childhood that ReadyNation will be hosting in New York City November 1-2, 2018. The featured image is from an article pitching Waterford Upstart online preschool, piloted in Utah, a state experimenting with funding early childhood education using social impact bonds. The caption on the photo states that this four year old doesn’t have running water in her home, but she does have access to literacy education on a chromebook.

The focus of this post is Dr. James Heckman, a professor of economics at the University of Chicago since the early 1970s. Much of his research focuses on investments in early childhood as it pertains to labor markets. In 2000, Dr. Heckman was awarded the Nobel Prize in Economic Sciences for contributions to the field of micro-econometrics. James Heckman; Arthur Rolnick, former senior researcher at the Minneapolis Federal Reserve; and Robert Dugger, venture capitalist and ReadyNation advisor, have worked together for decades. Below is a relationship map for Heckman. See the interactive version here.

Heckman Little Sis

Heckman; Dugger, and Stephen Durlauf, another professor of economics at the University of Chicago, lead the Human Capital and Economic Opportunity Global Working Group (HCEO). Launched in 2010, the initiative is run by the Center for the Economics of Human Capital Development and supported financially by the Institute for New Economic Thinking, a think tank established by George Soros in the aftermath of the financial collapse of 2008. Yes, Soros is funding human capital research conducted by a professor working out of the Becker (Milton) Friedman Institute for Economics at the University of Chicago. In the short video below, Heckman describes how HCEO fosters interdisciplinary research between 400+ academics who research poverty and then use that research to influence public policy.

HCEO’s six focus areas are closely linked to the social impact investment sector: childhood interventions, family inequality, health inequality, identity and personality, inequality measurement and policy, and markets.

HCEO Funding

With financial support from JB Pritzker via the Pritzker Children’s Initiative, Heckman’s academic work has been organized into an online tool kit to promote early childhood education as an investment opportunity, one they claim could yield a 13% annual rate of return once health outcomes are taken into account.

Suzanne Muchin’s branding firm Mind + Matter Studio developed The Heckman Equation website. Muchin served for four years as Vice President of programs for Teach for America and serves on the board of 1871, a tech accelerator based in Chicago’s Merchandise Mart launched by Pritzker in 2012.

Heckman Equation

Pritzker is a tech-oriented venture capitalist and politician. His sister Penny served on the Chicago Board of Education and later as Commerce Secretary in the Obama administration. In 2014, the Pritzker Foundation joined with the Gates, Irving Harris, and Kaiser Family Foundations and the Buffett Early Childhood Fund to create the First Five Years Fund to expand universal pre-k access. Pritzker has participated, as a funder, in two pilot early childhood social impact bond programs in the United States; one in Salt Lake City and the other in Chicago. If you are not up to speed on the history of and dangers posed by SIBs and pay for success programs, spend some time looking over the resources here.

In the trailer for a new documentary on social impact bonds, The Invisible Heart, Pritzker states:

“We are in the nascent stages of a social impact bond boom. Could be as big as the New York Stock Exchange…I’ve heard (people say), why are we letting investors make money off of our children. Well, that’s silly.” JB Pritzker

Pritzker is the Democratic candidate in the Illinois governor’s race. He has also thrown money to the Silicon Valley Community Foundation’s campaign “Choose Children,” that is pushing to elect a governor of California who will be a “champion of young children.” Of course the subtext here is that Silicon Valley hopes to install a governor who will scale pay for success early childhood education programs, programs that will tap the state’s millions of vulnerable children as profit centers.

Choose Children CA

Heckman and Pritzker have been laying the groundwork for the early childhood impact investing market for years. The remainder of this post is comprised of clips and transcripts I pulled from a presentation the two men gave in San Diego in 2016. The passages that follow make it clear the formerly worthy idea of “whole child” education has been completely hijacked by global finance. It also explains why in some districts in Maine half the report card rubrics now revolve around evaluations of “habits of mind.”

If you have time to watch the entire hour, I encourage you to listen as these two men discuss their plans to create tools that will measure non-cognitive skills in service of outcomes-based contracts and a futures market in infant and toddler data. They are creating the next “big short” right before our eyes, and this time it’s not homes hanging in the balance, it’s our children. As if IQ scores weren’t awful enough, now they are developing an IQ equivalent for Big 5 character traits: openness, conscientiousness, extraversion, agreeableness, and neuroticism. They want to define and rate our kids according to their “soft skills.”

Kauffman ReadyNation SIB 2

Below are presentation highlights in case you don’t have time to listen to the clips:

  • Poverty it’s not just about money, it’s about “parenting, encouragement and skills.”
  • Investing in young children yields higher results relative to workforce and life outcomes than do investments in older children and teens.
  • The highest returns will be on interventions directed at ages 0 to 3.
  • Children have achievement gaps documented as early as age 3.
  • IQ doesn’t increase much after a child reaches the age of 10, but interventions can continue to shape a child’s “character skills” to improve workforce outcomes.
  • It’s not just about being smart; it’s about being motivated.
  • Heckman identifies non-cognitive skills as a “target of opportunity” for investors.
  • But first they need to develop an inventory of social emotional skills to assess, track, and measure non-cognitive traits. (For the purposes of predicting outcomes for impact investment evaluation).
  • Having the OECD (promoter of PISA) on board is a good sign.
  • By “improving outcomes” through interventions, they claim poor children will require fewer public expenditures in the future. Social impact bonds will then capture those anticipated savings as profit to be handed over to private investors.
  • Factoring in health outcomes, the return on these investments could be as high as 13% per year, which is HUGE.
  • Pritzker plans to identify cheap, scalable interventions-like parenting apps. (Because all impoverished families really need is an app to tell them what they should be doing to parent their children.)
  • There has been push-back from both ends of the political spectrum against using Pay for Success to Fund early childhood interventions, but they were able to convince communities by using compelling financial structures and promising “results.”
  • In closing, Heckman says you have to get parents on board or the whole thing is going to fail.

Do you hear that parents?!

Their talk was sponsored by Education Synergy Alliance, whose director Laura Kohn came from Seattle where she worked as a state-level advocate for the Gates Foundation, and San Diego Grantmakers, a collaborative that has been promoting use of Pay for Success in program delivery. Connie Matsui, social entrepreneur and former chair of the San Diego Foundation, brought Heckman and Prizker to San Diego in 2016.

This two-minute clip is from JB Pritzker’s introduction. Watch it here.

Heckman Pritzker

(Pritzker) “Really, I’m just grateful for the opportunity to be here. I had the opportunity to be here earlier today, and so did Jim, to speak to the larger community foundations where they are doing amazing work and where so many communities from around the country that have large endowments and lots of donor advised funds are beginning to look at early childhood development as an important arena for them. I’m, of course, particularly grateful to be asked to join Professor Heckman and to share thoughts today on a subject that I care deeply about, and that I believe is maybe the most important issue facing us in the country today, early childhood development.

So in truth, I’m a businessman (fortune valued at $3.4 billion), and I’m not a Nobel prize winner. No one will ever claim I will win anything like that. I’m lucky to share a stage occasionally with Professor Heckman. So I’ll speak from my heart about what I care about deeply and from the position that I come from. I’m here to solicit you for your business. I want to make a pitch to you today. It’s a subject that I care about, that’s about making investments. And so if you’re ready for my pitch…if you invest with me, and you invest with Professor Heckman we can not only unlock human potential, but we can also get you at HUGE return on your investment. So, do you want to hear the rest of my pitch?”

The middle section of the presentation, between timestamp 23:30 and timestamp 35:00, features Dr. Heckman presenting his theories about the importance of character education in public schools; that non-cognitive (social emotional) skills are more important to workforce outcomes than cognitive (academic) performance. He goes on to discuss the importance of interventions linked to non-cognitive skills training to health outcomes. Heckman proposes that certain interventions will yield an impressive rate of return of up to 13% once health outcomes are considered. Watch a seven-minute excerpt here.

(Heckman) “Poverty, as we understand it now is not just money. Poverty, of course the way we measure it IS money, but actually it’s more than that. We’ve come to understand that it’s not JUST money. And that is what the great experiment was launched by Johnson. We’ve also come to understand it has to do with parenting, encouragement and basically this set of skills. And I think what we have now is a much more comprehensive notion.

So basically we think the early lives play a very important role for promoting social mobility, for promoting equality. And then miracle of miracles and we started following these people using the same kind of experiments that were started, but then stopped in the wake of the war on poverty, and head start. What we found was, yes, actually IQ did fade out after about age 10, just like Jenson said, just like everybody said.

And guess what? When we follow these people to age 40 and 50, these people have very high social and economic returns, and it came exactly through this mechanism of character skills and engagement. And surprise of surprise, even though these kids didn’t have any higher IQ, it also turned out they actually did have higher test scores. Why? Because these achievement test scores involve more than just being smart, it’s being motivated

We think about the skills problem, and JB referred to this skills problem, it’s an enormous problem. So we looked for examples at this measure, the civil international adult literacy survey that’s taken every few years. It’s basically America, the United States, when stacked up against all of the OECD countries is the worst in terms of percentages of people who are at the lowest rung of literacy and numeracy. We mentioned another dimension of this is the fact that among children, among males 16 to 26 eligible for military service, only about 25% are actually qualified. They’re mostly disqualified, a lot of it has to do with cognitive deficits and so forth. Now these are preventable, because we know from these interventions that we can do something about it.

We have the skills problem. But how do you promote skills? That leads to another issue if you…look at test score gaps, which is what sees a lot of attention between the haves and the have-nots; if you look at age 18 you see a tremendous gap between those kids who have parents who are college-educated and those whose parents are high school drop outs, mothers probably, ok. So if you look at the graph you’ll also see that that gap is there before they enter school, and it’s actually there at age three, which is the earliest age we can reliably measure these things.

So now wait a minute, you can say oh we’re talking about genetics, that’s a perfect eugenic argument, right? These people are born dumb to dumb parents and their dumb parents didn’t get education, so therefore this is just the manifestation of what Charles Murray was talking about. The answer is no, because what we’ve done is we’ve actually randomly assigned these children, put them in different environments, enriched their local environment, their parenting environment, the school environments. And we then track them against students who didn’t receive such supplementation early in life, and we find they’re much better performing. But we need a much richer inventory of how we decide what’s better and a deeper understanding of what the skills are that make them successful in life.

So, I think a good measure of how much the world has changed in terms of thinking about skills is a new report issued by the OECD. The OECD was the group that promotes the PISA exam, so every few years you know Shanghai is very proud and has some of the highest PISA scores in the world. And you go into China and you go into Hong Kong and they are lower and very envious. But the OECD now is getting the point. It only got it recently, but it’s now starting to say we need to inventory exactly these character skills, because they’ve been shown to be predictive, they’re also highly malleable, and they’re actually highly valuable even to somewhat later ages.

So even when we think we can’t boost IQ, that might be very difficult because the rank is stable and your ranking in the IQ distribution is pretty well established as JB was saying around 8, 9, 10 or somewhere in that zone. It is still true that these character skills are more manipulable (malleable?). In the sense they are actually our target of opportunity. So a much deeper understanding, and I think when we go in and look at what the economic and social benefits are of these interventions, we have a deeper and more comprehensive evaluation system looking at both cognitive and non-cognitive skills.

But to come to the economic return; we can see substantial benefits. So we have actually computed the rate of return, the kind of rate of return that venture capitalists worry about, and should properly worry about, and that many of you probably worry about. What we found was the rate of return on something like the Perry Preschool Program was somewhere between seven and ten percent per annum, per annum, which is extremely high. If you look at the US stock market average investment in equity between 45 and 2008, that’s above that. Great, ok so you’re actually finding it’s a very, very good investment. These are targeted towards kids who are disadvantaged; it’s providing family supplementation. We can talk about the details of those programs. Then, more recently, we did some studies and this blew people out; it blew me out. We also followed another group of children who are actually followed now in the wake of the Perry study, but in Raleigh Durham, North Carolina. We followed these children up to age 35, and we not only gave them the standard measures of unemployment, crime, participation in the larger society, but we also looked at health.

We asked how did they look in terms of health? What we found was that those children, now actually adults, have much lower risk factors for all the adult onset diseases: lower propensity for diabetes, lower cardiovascular conditions. And what we see is that there is not only a benefit that comes, but health. How can that be? It’s because of that same notion of regulation behavior, following numeracy, getting engaged in the larger society. We find less smoking, less drinking, less engagement in unhealthy lifestyles in the wake of having these higher levels of cognitive and non-cognitive skills. So, you know, we’re in the process of learning. But the fact of the matter is we’re getting a very high rate of return for that intervention. Preliminary evidence is suggesting somewhere between 11 and 13 percent IF we include the enhanced health benefits.”

This section is from the question and answer period and closing to the presentation. Timestamp 48:50, watch it here.

Pritzker Heckman Panel

(Pritzker) “That expense that you talked about; gee, that’s a very expensive intervention? That’s taken into account in these returns, okay. So it’s not like, I mean, the expense gets you that return. So it doesn’t matter that your investment was a thousand dollars or a hundred dollars or five thousand dollars. The return is what you get on those dollars invested.

(Heckman) But in addition to the direct expense you’re also going to get the welfare cost of raising taxes, so that’s also factored in here, so the sum of ten percent or the return is after accounting for actually the direct cost of hiring the teachers and the cost of collecting taxes to finance those. So that’s why I think it’s a fairly compelling study…if you look at the evidence I’m happy to send you the papers we’ve written, and we’re writing more. But you are finding very strong precision about these estimates.

(Pritzker) And we’re not advocating for very, very expensive interventions specifically. There are lots of scalable, much less expensive interventions. In fact, that’s what I spend my time looking for and helping to evaluate the scalability of, because ultimately that’s how we’re going to get the federal, state, and local governments to adopt them. Right? They’ve got to feel less expensive, but the reality is the more expensive actually works, too…

(Heckman) It’s an area of evolution. We really want to find out what’s best practice and what’s cheaper, right?

(Pritzker) The returns on preschool are much lower than on 0 to 3. So the interventions on 0 to 3 that we know work are home visitation, just as an example. Home visitation works.

Now there’s an expensive version of home visitation, and there’s a less expensive version of home visitation. And there’s been lots of study on these home visitation programs, but the critical component of it is reaching the parent. The parent is the first and best teacher for a child and if you can reach a parent, almost every parent, almost, wants to be a good parent. So we know what works and we know what are some scalable versions. Some of them, by the way, are texting programs. So almost every poor parent in America has a smart phone, and there are programs just for reminding parents what things work, and they want to know and they want to do these things and they’ll find time to do them.

Ready4K

But back to getting communities to buy in, it is very hard, and we got involved, I’ll talk about social impact bonds. But basically bringing preschool to Utah, a state where the political environment for preschool is hard; we did it with a finance plan that made sense for Utah, for Salt Lake. It got community engagement in it and support for it, because, frankly because we showed them what the results would look like.

So we started with that. There was resistance on both ends for preschool for example and any kind of early childhood education. On one end of the political spectrum the resistance is, you’re interfering with the parent-child relationship; you’re somehow interceding, the government is being paternalistic and getting engaged in something that should be a private matter. That’s one side of the political spectrum. On the other side of the political spectrum are the views that well with a social impact bond is why are private investors getting involved in something government should do? The government should get all the returns on this, the taxpayers should get all the returns-I happen to agree with that, that the government should put forward. But how many people think, how many people have a surplus in their local, state or federal government right now? None.”

Previous posts about the ReadyNation Global Business Summit on Early Childhood:

Pre-K Profit: ReadyNation Hosts Global Business Leaders in New York City This November: Link

Making Childhood Pay: Arthur Rolnick, Steven Rothschild and ReadyNation: Link

Galton and Global Education Futures Forum: Scientific Racism Looking Backwards and Forwards: Link

 

 

Galton and Global Education Futures Forum: Scientific Racism Looking Backwards and Forwards

Psychology, Economics and Human Capital

I spent much of my weekend researching Dr. James Heckman, Nobel prize-winning professor of economics from the University of Chicago who specializes in research around investments in human capital. I plan to write a more extensive piece on him shortly. In the meantime you can check out his Little Sis map-in-progress here. Heckman is a colleague of Arthur Rolnick (see my previous post) and Robert Dugger, host of the upcoming ReadyNation Global Business Summit on Early Childhood.

I believe the research Heckman has been conducting with “grit” expert, Angela Duckworth is extremely dangerous. The two are principal investigators for the Research Network on the Determinants of Life Course Capabilities and Outcomes based in the University of Chicago’s Center for the Economics of Human Development. I will share several excerpts from the publication they co-authored in 2008 for the National Bureau of Economic Research with Lex Borghans and Bas Ter Weel, The Economics and Psychology of Personality Traits.

Duckworth’s research for the publication was supported by the Templeton Foundation. The image below shows the program areas to which Templeton gives: Science & The Big Questions; Character Virtue Development; Individual Freedom and Free Markets; Voluntary Family Planning; Genetics; and Exceptional Cognitive Talent and Genius.

Templeton Foundation Funding Areas

 

Heckman’s research was supported by the National Institutes of Health; the J.B. Pritzker Consortium on Early Childhood Development, a funder of the Chicago early learning social impact bond; and the Pew Charitable Trusts, sponsor of the Invest in Kids Working Group that became ReadyNation.

Their work makes it clear Social Emotional Learning (SEL) data collection is about developing profiles for economic and labor forecasts.

Heckman Duckworth Econ:Psych 2008

I found the next quote incredibly disturbing. Our children’s personalities are not theirs to mine for “soft skills.” Our children are not human capital to be molded to the demands of a dysfunctional economy, offered up to future employers at the lowest possible wage. This sexist, racist excerpt shows why it is imperative that our children’s social-emotional lives not be shoved into rubrics, NOT be collected, and definitely NOT be allowed to fall into the hands of the kinds of people who would put forth pronouncements like this. Keep in mind this research was, in part, funded with money from the National Institutes of Health, NIHR01-HD043411.

Heckman:Duckworth Econ Pych 2008-2

The next section makes it clear the psychological data collected will be used to benefit those who are managing labor, and employees should expect to be profiled and manipulated through the use of incentives that pressure them to fall into line.

Heckman:Duckworth Econ:Psych 2008-3

The final excerpt amplifies concerns I have had about neuroscience and “learning engineers” in public education. See my post about Melina Uncapher’s work at Neuroscape at UC San Francisco here.

Heckman:Duckworth Econ:Psych 2008-4

After finishing the report I couldn’t help but feel I’d been transported back to the time of Duckworth’s role model, Sir Francis Galton, a Victorian pioneer in the field of eugenics; only now with genetic sequencing, machine learning, and artificial vision. Note the feature image at the top of this post taken from a clip of one of Duckworth’s Coursera lectures, timestamp 55 seconds.

Global Education Futures Forum: Future of Education Map

Later that morning, I got caught up in an online discussion about educational technology with an “innovative” educator and a software engineer both of whom felt any concerns parents may have with 1:1 device implementation in schools must simply be ones of improper implementation. It was difficult to get them to understand that technology use in classrooms is increasing in order to generate data that will facilitate evaluation of social impact investments. I tried to emphasize my concerns about student data collection and the profiling that was taking place via classroom devices. I wanted them to grasp the power behind the policy changes we are seeing, so I directed them to the Global Education Futures Forum website. One of the people threw out the “tin foil hat” line, at which point I asked them to review the list of GEF advisors.

These are the members based in the United States:

Howard Rheingold, Stanford University

Charles Fadel, Harvard Graduate School of Education

Tom Vander Ark, Learn Capital (Former Education Director, Gates Foundation)

Henry Etzkowitz, Stanford University

Leah Rosovsky, Vice President Strategy and Programs, Harvard University

Andrea Saveri, Bay-Area Consultant, Former Research Director Institute for the Future

They had to agree those people are hard to dismiss.

I was glad the conversation had taken place, because it presented an opportunity for me to revisit the Future of Global Education Map. It had been some time since I’d looked at it, and it was stunning to see many items echoing emerging developments in digital economy, blockchain digital identity, neural interfaces, augmented and virtual reality, inappropriate use of technology for our youngest learners, de-professionalization of teaching, human capital engineering, and direct talent investment. I took a screenshot of a portion of the map to post on that thread, and then thought it would be good to pull some of the items to share more widely as a follow up to the information I had found in the above publication and my prior piece on Rolnick’s and Rothschild’s work on Human Capital Performance Bonds.

GEF Human Capital Slide

The map spans the timeframe 2015-2035, but the items featured below are all positioned between 2016 and 2020. You can look over the complete infographic here. It’s breathtaking in terms of what is envisioned, and how quickly we’re progressing.

From the website:

“This map has been created as part of a Global Education Futures initiative, prepared by the Re-engineering Futures Group. This map is the result of five years of work that brought hundreds of Russian and international experts into co-creative vision building for the future of education. This map represents key trends driving the transformation of educational systems, and the forecast of events and technologies that will make significant impact on the future of education. In the context of this project, education is understood as a multitude of institutions that support training, nurturing, professional and personal development throughout our human life-including kindergartens, schools, colleges, universities, and other types of educational institutions.”

“Obligatory universal net ID is introduced.”

“Independent digital currencies become real alternatives to national currencies.”

“Crisis necessitates cuts in education budgets. New education formats are in high demand.”

“Establishment of a platform converting alternative merit-based currencies or earned points to pay for online education services.”

“Crowd-schooling: self-organized schools where boundaries between teachers and students disappear, and curriculum is assembled by crowdsourcing measures.”

“IT companies emerge as leaders in the global education market.”

“Successful passage of a computer game counts as education course.”

“Online virtual games form personal values.”

“Pre-school and primary school become playgrounds that use augmented reality technology.”

“New models of investment into promising youth – “human futures” – adopted by pension funds and private investors.”

“Personal data and advanced big data models allow efficient mass-scale recommendation services for education and career tracks.”

“Periodic online assessment of psychophysical status to adjust individual educational trajectory.”

“Free will donations via social networks to people one considers important in advancing their career.”

“Technologies that enable prenatal education based on big data, audiovisual stimulation, and biofeedback.”

“Students get individualized recommendations on their education in accordance with their genotype.”

“Virtual jail-compulsory education of prisoners occurs in virtual reality simulators.”

“Developing countries attract students by creating educational spaces free from strict state regulation.”

See the complete info-graphic of the image below here.

GEF Education Finance Map

So, are we ready for this?

 

Making Childhood Pay: Arthur Rolnick, Steven Rothschild, and ReadyNation

This post provides additional background on the ReadyNation Global Business Summit on Early Childhood Education that will take place at the Grand Hyatt hotel in New York City November 1-2, 2018. No U.S. educators or policy advocates may attend unless they come with at least four pre-approved business sponsors. Review the draft agenda here.

This is the second in a series. Read part one here.

Where did ReadyNation come from?

The idea emerged from a conversation three men had on a conference call during the summer of 2003:

  • Arthur Rolnick, senior researcher at the Minneapolis Federal Reserve
  • Robert Dugger, financial policy analyst and venture capitalist
  • James Heckman, University of Chicago economics professor

Its first incarnation, the “Investing in Kids Working Group,” focused on researching returns on early childhood investments, developing finance mechanisms, and crafting policy recommendations. Over the past fifteen years Dugger, in consultation with Heckman and Rolnick and with support from the Pew Charitable Trusts, gradually built a structure to undergird a global investment market fueled by debt associated with provision of early childhood education services.

The push for early childhood education access is NOT being driven by a desire to meet the basic human needs of children. Rather financial interests that view children as cogs in a national workforce development program are pushing it; and they see preschoolers as lumps of human capital to be plugged into economic forecasts. This is all happening at a time when human services are being privatized in the name of scalable, outcomes-driven social entrepreneurship. The trailer for a new documentary, The Invisible Heart, on social impact bonds indicates how much capital is flowing into this new market.

Arthur Rolnick, Steven Rothschild, and Pay for Performance

Much of my research has focused on the Boston area (global finance), the Bay Area (tech), Chicago (blockchain), and New York (urban policy). So I was surprised to find what may be a key piece of this puzzle actually comes out of Minneapolis Minnesota. Though perhaps the fact that Minnesota is home to the nation’s first charter school, City Academy that opened in St. Paul in 1992, indicates local conditions favor neoliberal reforms.

Arthur (Art) Rolnick spent his 40-year career as a senior economic researcher at the Minneapolis Federal Reserve Bank. During that time he also served as an associate professor in the economics department of the University of Minnesota and was co-director of the Human Capital Research Collaborative in the Humphrey School of Public Affairs. The Collaborative houses the Chicago Longitudinal Study whose researchers are tracking the short and long term effects of early intervention on 1,000 students who attended Chicago’s Child-Parent Centers in 1984-85.

The Chicago Child-Parent Centers were service providers for one of the nation’s first two early childhood social impact bonds, begun in December 2014. The Chicago SIB included payout metrics tied to third grade literacy scores. Thus far the program has issued maximum payments to investors including Pritzker, Goldman-Sachs and Northern trust. According to this report from the Institute for Child Success, it is possible that over the seventeen-year time horizon for the SIB, $34 million could be paid out on the initial $16.9 investment.

Click here for the interactive version of this map.

Rolnick Rothschild Connection

Rolnick connected with Steven Rothschild, a former vice president at General Mills who left the corporate sector and launched Twin Cities RISE!, an “innovative anti-poverty” program that provided workforce training for low income adults, in the mid 1990s. Rothschild arranged with the state of Minnesota to provide services via an outcomes-based contracting arrangement where the organization was only paid when the “economic value” they provided to the state by increasing taxes (paid by those placed in jobs) and decreasing state expenditures (reduced costs for social services or incarceration) met approved targets.

Arthur Rolnick and Gary Stern of the Minneapolis Federal Reserve worked with Rothschild and Twin Cities Rise! to develop the economic analysis in support of the outcomes-based contracting initiative. Rolnick’s work with Rothschild eventually led him to examine the economic implications of early childhood interventions using data from the High/Scope Perry Preschool Study. In 2003, the year Rolnick had that auspicious phone call with Robert Dugger and James Heckman, he and and Rob Grunewald, regional economic analyst, put out the following report for the Minneapolis Federal Reserve: Early Childhood Development: Economic Development with a High Public Return.

In a 2006 profile of Rolnick, Minnesota journalist and blogger Kevin Featherly notes that report catalyzed $1 million in seed money for the Minnesota Early Learning Foundation, a project of the Minnesota Business for Early Learning. It also put Rolnick and Grunewald on the lecture circuit for the next several years where they touted early childhood education as a prudent economic investment. Weatherly likened Rolnick’s schedule after the release of the report to that of a presidential candidate, sharing the stage with Jeb Bush at the National Governor’s Convention, the head of the Gates Foundation at the National Council of State Legislatures, and presenting to a global audience at the World Bank.

Rothschild who served on the boards of the Greater Twin Cities United Way and Minneapolis Foundation, went on to found the consulting firm Invest in Outcomes and write the Non Non-Profit, a book that exhorted non-profits to focus on the Return on Investment (ROI) and measurable economic outcomes of the services they provide. These ideas eventually led the Minnesota legislature to adopt the “Pay for Performance Act” in 2011 that appropriated $10 million for a pilot program to develop Human Capital Performance Bonds or HuCaps.

Rothschild provides a detailed explanation of how HuCaps function in a 2013 article for the San Francisco Federal Reserve’s publication Community Development Investment Review. HuCaps differ from social impact bonds in that they are true bonds and tap into the state bond markets; which, in theory, could give them access to significantly more capital-trillions of dollars rather than millions. In this podcast with the St. Louis Federal Reserve, Rothschild describes the model developed by Twin Cities RISE! as the basis for much of the social impact investing activities that have emerged over the past decade.

Continuum of InvestingSource for this slide.

As structured in the Minnesota legislation, the service provider is the one that takes the risk rather than the investor. If the provider is not able to meet the target metrics they are the ones who will not be paid. As a consequence, HuCaps have not yet taken off; see Propel Nonprofit’s analysis here.

HuCap StructureSource for this slide.

Nevertheless, there are those who have not given up on the Human Capital Performance Bond approach. Arnold Packer, former director of the education reform and workforce development SCANS 2000 Center based out of Johns Hopkins University, wrote about HuCaps for the Brookings Institution in 2015 (the co-chair of the Commission on Evidence-Based Policy Making is Bruce Haskins also of Brookings). He noted that Milton Friedman was among the first to float the idea of leveraging private investment in human capital development. Take a minute to watch this one-minute video, from Institute for the Future, that portrays a college student contemplating entering into an income-sharing arrangement in exchange for tuition.

The idea that states could issue bonds for human capital in the same way they do for infrastructure like bridges, and that future savings will be created as people attain higher paying jobs due to their improved human capital, is central to the HuCap premise. In order to justify future cost savings, those receiving services must be tracked, so their “outcomes” can be measured over time. According to Arnold:

“This reform requires a shift in thinking on all sides, investors in human resources (early childhood education falls into this category) will have to consider statistically estimated benefits in terms of future cost savings and revenue as equivalent to projected revenue from a toll road. Government agencies will have to coordinate in order to structure attractive Human Resource bonds, since different agencies at different levels of government, benefit from the savings resulting from earlier investments.” Source

This model of finance, if ever widely adopted, would demand all recipients of public services (including education) be part of the government’s statistical estimate. Because many early-intervention services are directed at families, a person’s predictive profile would likely start to be amassed prenatally; babies assigned a Decentralized Identifier (DID), before they are even born. Estimates would be made about the likelihood a person would need to access services in the future, what those services would be, and what they would cost. Assessments would be made about the anticipated tax revenue a person would in turn generate over their lifetime. All of this data would need to be calculated in order to determine the impact metrics for the investors and structure “attractive human resource bonds.”

Before the rise of cloud-based computing, such a level of tracking would have been impossible. Having access to data to make those predictions would have been difficult to obtain. But that is rapidly changing in this world of Big Data, digital identity and “moneyball for kids.” The bi-partisan Commission on Evidence-Based Policy Making concluded public hearings in February 2017, and the vast majority of those providing testimony favored creating enormous pools of data to inform public policy decisions.

Evidence Based Policy Making

Read the report.

Responsibilities of the Commission on Evidence Based Policy Making:

CEP charges

Things seem to be on hold for the moment with Human Capital Performance Bonds, but I feel strongly they may be simply waiting in the wings until Blockchain sovereign identity is normalized. An Illinois state Blockchain task force (note Pritzker, backer of early childhood SIBs is running a well-funded campaign for governor of Illinois now) has developed preliminary recommendations linking public service benefits to citizens using Blockchain technology. They even envision building in behavioral incentives tied to the provision of services through digital economic platforms. See the diagram below for an illustration of how they might incentivize food purchases.

Blockchain SNAP Nudge

Read the report.

Of course the implications of this type of manipulation for people who live in food deserts with limited access to fresh produce remains unaddressed. And it doesn’t take a stretch of the imagination to see how other choices might be economically incentivized: which online course to take (the evidence-based one); which training program (the evidence-based one); which therapy provider (the evidence-based one); which medical treatment (the evidence-based one). But by whose measure? Who sets the metrics? Who profits when “evidence-based” standards are imposed?

How will independently-owned, neighborhood-based child care centers fare in this new landscape? If they are shuttered, what will the economic impacts be for communities, especially in economically distressed neighborhoods where such businesses are important sources of employment? Will small-scale providers be willing to collect the “human capital” data required to take advantage of pay for success investments? If they are willing, would they even have the money to purchase the technology (smart tables, anyone?) required to gather their “impact” evidence?

Smart Tables

Rob Grunewald, Rolnick’s collaborater on the Federal Reserve Early Childhood paper, is on the ReadyNation Summit planning committee. Rolnick is part of a workshop, “Scalable Success Stories in Early Childhood Programs,” at 11:45 on Friday, November 2nd.

Rolnick ReadyNation Agenda

The “pay for performance” finance mechanism dreamed up by Rothschild and Rolnick in the 1990s is particularly well-suited to this age of Internet of Things data collection, surveillance, predictive analytics, financialization, and economic precocity. This is why we should all be very concerned about ReadyNation’s Global Business Summit on Early Childhood; especially because it so clearly discourages early childhood educators and policy advocates from attending.

Next up, Dr. James Heckman and the Institute for New Economic Thinking.