Charter, Public Health, and Catholic Charity Interests Help Launch “Disruptive” Pay for Success Program

Silicon Valley Community Foundation, Part Four

Click here for the introduction and parts one, two, three, and five.

In a 2013 interview for the Mission Investors Exchange publication, “Community Foundation Field Guide to Impact Investing,” Chief Giving Officer Ellen Clement Glass stated there had been talk of exploring impact investing as early as 2006, before the Silicon Valley Community Foundation had even been officially established. There was a pause following the foundation’s post-merger transition and the financial meltdown of 2008, but after a period of recovery, SVCF began to earnestly investigate “innovative finance” in 2012.

Glass went on to say  SVCF leveraged “the relationships we had with city government, local providers, donors, and related organizations to identify the needs and participate collectively in learning how these new types of experimental financial structures function.” They undertook a collaboration with Step Up Silicon Valley, the Health Trust, and Catholic Charities that resulted in the creation of “Welcome Home,” a social impact bond that became the first county-led pay for success program in the United States.

Interactive version of the map below here.

SVCF saw itself as a local expert positioned to convene stakeholders, identify champions, build capacity among government officials and local providers, and mitigate risks that might compromise the deal. The 2013 report “From Idea to Action: Pay for Success in Santa Clara County” prepared for The Health Trust provides important background on the process and identifies key supporters, including Dave Cortese a Santa Clara County Supervisor, and Gary Graves, the county’s Chief Operating Officer who served on the Advisory Board for Third Sector Capital Partners starting in 2016.

To set the stage for the social impact bond, which was approved in 2013 then funded and implemented in 2015, the Health Trust hosted an “innovation summit.” Harvard Business School professor Clayton Christensen facilitated the event, which was held in San Jose in January 2012. Christensen has built his academic and consulting reputation on disruption, particularly of the health and education sectors. Education activists may be familiar with his promotion of blended, “personalized” learning via the Clayton Christensen Center for Disruptive Innovation, which he co-founded with protégé Michael Horn. 100 attendees at that Health Trust event were invited to apply for grants to pursue their own “disruptive innovations.” Interactive map here.

Fred Ferrer was the Health Trust’s CEO at the time and also board chair of Rocketship Education a charter chain in San Jose, known for its extensive use of e-learning and classrooms that evoke cubicle-filled call centers.

Ferrer maintains close ties with the Santa Clara County Office of Education, home to Datazone and Strong Start, where he is an adjunct lecturer as well as with Santa Clara University. He is also the founder of Manzanita Solutions, a non-profit management consultancy specializing in health care and early childhood education. The interconnectedness of healthcare and education is a constant in impact investing; both lend themselves to datafication for the purposes of impact measurement.

Three months after Christensen’s kick-off, SVCF hosted a follow up event with Catholic Charities and Step Up Silicon Valley. They brought in Steve Rothschild from Minneapolis to present on Human Capital Performance Bonds. Rothschild, former vice president of General Mills, had just published “The Non Nonprofit: For-Proft Thinking For Nonprofit Success.” The book advanced the idea of creating “economic value” by implementing social programs in ways that are market driven and tied to success metrics. Bill Drayton, elder statesman of social entrepreneurship, as well as the president of Catholic CharitiesUSA and United Way Worldwide all gave the book their stamp of approval.

As it turns out, SVCF’s first executive director also hails from the Twin Cities. Before coming to Mountain View, Emmett Carson headed the Minneapolis Foundation. The Twin Cities is where Rothschild and Art Rolnick, former research economist with the Minneapolis Federal Reserve, helped refine the concept of outcomes-based government contracting.  Rolnick, as you may remember, is a close associate of human capital economist and early childhood education investment promoter James Heckman, more on that here. Carson was a vocal advocate for expanding early childhood education programs during his time in Minnesota. Rothschild has served on the Minneapolis Foundation board. Given their common interests, it seems highly likely Carson and Rothschild’s paths had crossed before.

Interactive version of the map below here.

While in Minneapolis, Carson’s wife, Jacqueline Copeland, worked as the vice president of philanthropic services for US Bancorp. Copeland, a social entrepreneur whose LinkedIn profile touts her work on a study for the Ford Foundation that turned into Obama’s “My Brother’s Keeper” initiative, joined Catholic Charities of Santa Clara County as COO in 2014 where she worked until 2018, the year Carson left SVCF. This is notable, because both SVCF and Catholic Charities were influential partners in the development of the Welcome Home SIB.

Step Up Silicon Valley (SUSV) and Catholic Charities received $150,000 from the Health Trust’s disruption grant program for development of the pay for success model. SVCF and Santa Clara County each contributed an additional $75,000. Step Up Silicon Valley was created by Catholic Charities as a “poverty lab” to catalyze systems change in the social service sector of Silicon Valley. Its “1,000 Out of Poverty” effort became a testbed to refine elements of the program, including the “Self-Sufficiency Measure,” a “scorecard” tracking the “progress” of low-income clients in the areas of food, housing, healthcare, education and income. Such systems of consolidated data-tracking are a prerequisite for outcomes-based contracting to scale. SUSV worked with Community Technology Alliance (CTA), a non-profit set up to harness technology to create data-driven solutions to poverty. Together they customized the tool, which is based on one created in Arizona. CTA’s board members are embedded in the tech community and certainly have a financial stake in the transition of the nonprofit social sector to a data-driven, market-based model. Below is a short video describing CTA’s approach to real-time, human service data collection.

Step Up Silicon Valley drew upon the principles embedded “National Opportunity for Community Renewal Act” or NOCRA, draft legislation that had been developed with input from Catholic CharitiesUSA. That legislation was introduced in 2010 and again 2011 by Pennsylvania senator Robert Casey and Massachusetts congressman James McGovern, both Democrats. NOCRA’s lobbying efforts were national in scope with  700 delegates brought to the capital to advocate on behalf of the bill in September 2010. Still, the legislation did not pass. Nevertheless supporters continued to push the program’s recommendations. Step Up Silicon Valley was later designated one of six NOCRA Laboratory Projects that would be used to pilot “results-based,” “market-driven,” “systems-changing” solutions to poverty even without the benefit of federal legislation in place. A timeline on page 28 of the report “10 Years In The Making,” specifically states “SUSV used the NOCRA principles to launch pay for success.”

The role Catholic Charities played advancing Santa Clara County’s social impact initiatives is significant. “Welcome Home” was not simply a local pilot project, but a prototype whose success or failure had implications for a much larger investment program. The Vatican held global impact investing conferences in 2014, 2016 and 2018. You can be sure many are keeping a close eye on how Santa Clara County’s projects develop. Poverty “impact investments” in the United States can be testing grounds for similar global development aid programs and vice versa. Social Impact Bonds (SIBs), one mechanism for Pay for success implementation, has a counterpart in Development Investment Bonds (DIBs). What happens with digital education of the type Ferrer, Zuckerberg, Gates, Omidyar, et al promote in the Bay Area does carry over to ICT education deployment abroad, see Bridge International Academies and the Educate Girls DIB. They inform one another. The cloud has made the world an increasingly small place for those operating in fin-tech. Globalization is embedded into everything.

Sir Ronald Cohen, father of the Social Impact Bond concept, and Matthew Bannick, of Omidyar Network, presented at all three Vatican’s impact investing conferences. In addition to religious officials, representatives from global aid, venture capital, and private foundation groups were all in attendance. Omidyar Network, whose program areas include global impact investing, digital identity, emerging tech, finclusion and education, was a sponsor of the 2018 gathering. The conference agenda notes they even hosted a special dinner for attendees at Ristorante Arturo on the second evening. Makes you wonder if the diners had any moral twinges as they ate given the day’s discussions on deploying capital to the bottom of the economic pyramid and refugee management.

Two of the 2018 speakers, Radha Basu and James Kohler, had local ties being associated with Santa Clara University, a Jesuit school that partnered on the Step Up Silicon Valley effort. The university had representatives on SUSV’s Outcomes Leadership Council, assisted with implementing the program’s poverty simulations, led its Income Working Group, and sponsored a “Learning and Development Series.” The university also happens to be the alma mater of Fred Ferrer. Ferrer still coordinates a public health leadership program there and was awarded an honorary doctorate of public service in 2014.

Basu and Kohler both worked as corporate executives for Hewlett Packard early in their careers, went on to pursue technology-based social entrepreneurship ventures, and maintain ties with Santa Clara University. Basu founded and directs the Frugal Innovation Lab that matches engineering students with NGOs seeking technology solutions. She and her husband also created several businesses to train low-income people in India as IT call center and AI data analysis workers. Kohler heads the Miller Center for Social Entrepreneurship and spent 25 years managing RedLeaf Venture Capital in the Bay Area.

Kohler also serves on the Catholic Relief Services (CRS) Advisory Committee on Impact Investing which aims to test and evaluate various proofs of concept for impact investing. He is co-chair of its education working group, which is charged with creating a “Learning Institute” to teach people, in Catholic charity groups but also others,  about impact investing and to identify financial advisors who can help with investments. Clearly CRS is developing capacity to scale the model. Its 2017 financial statement indicates CRS held $174 million in investment assets, though it remains unclear how much of it might be directed into impact investment programs.

I hope to do further research into the intersection of the tech sector and Catholic charity. What is happening in Santa Clara County is not a one-off. Last April, Total Impact in partnership with ImpactPHL (additional information here) brought 300 social entrepreneurs to the Cira Center to discuss “good capital.”

Total Impact Philadelphia from Good Capital Project on Vimeo.

Many of the key players who participated in the Social Impact Partnerships Pay for Success Act celebration (described here) were in the room, including Jim Sorenson and Andrea Phillips. One of the keynote speakers was Sister Mary Scullion of Project Home, a prominent Catholic advocate for homeless services in Philadelphia.

In the spring of 2017 Project Home received a portion of a $1.1 million award from the Nonprofit Finance Fund (NFF) to provide housing for those needing substance use and mental health treatment under a Pay for Success arrangement. In a press release, NFF CEO Anthony Bugg-Levine was quoted “Pay for Success is an early proving ground in the movement toward outcomes-based approaches to social services, where payment is based on results achieved instead of services delivered.”

It is imperative that we recognize such a model is designed to function in tandem with technological surveillance systems coming out of Silicon Valley. Phones, tablets, sensors, biometric wearables will be foisted on the global poor, whether they be refugees or single moms living out of cars. This digital divide must be crossed in order to gather “proof” of “what works” and justify predatory profit-taking by the Vatican, Omidyar, Gates, and all the rest. The price the poor will be forced to pay is their personal agency, autonomy, and basic humanity. If we were decent people, we would not require digital identity systems in order to provide shelter and care. It is because we are allowing systems of care to be transformed into investment markets that Internet of Things trackers and data dashboards of “self-sufficiency measures” are required.

Clearly there is tremendous money pushing Rothschild’s “non-nonprofit” model that will track the poor as they are “managed” by initiatives that ultimately serve the data overlords.  As I said previously, “To Serve Man” is not a good intention, but rather a venture capital cookbook for profitable poverty management.


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