Money should be the easy part: What’s the place of complexity in the innovation agenda?

Despite public opinion becoming hungrier by the day for greedy bankers’ comeuppance, there is quite a buzz for new financial instruments that would allegedly tackle the shortage in public funding for public services. The British government having set up a team in every department to develop a social impact bond is just one example.

I wonder if we really need to spend so much time and use so many resources engineering ever more complicated financial problems, when there is no actual lack of funding – at least private funding. The real challenge lies in understanding the complexity of societal challenges and of implementing effective measures.

To me, money seems to be the easy part in the equation. Perhaps the explanation is that unemployed bankers and policy-makers, addicted to finance, feel the need to find a new exciting field?

I was in Paris this week for the conference on funding social innovation and enterprises, organised by the Institute of Innovation and Social Entrepreneurship of ESSEC Business School. They invited me to a panel discussion on payment by results and social impact bond, together with Corrinne Callaway (Social Finance), Jim Robinson (UK Cabinet Office, Office of Civil Society) and Camille Guezennec (Institute of Strategic Studies, working for the French PM).

This is not my field, but I assume I was invited to play the bad cop and I did. It’s not difficult to highlight that roughly 90% of civil society practitioners and social enterpreneurs don’t understand what social finance is about and if it is relevant. What’s more, they wouldn’t be able to handle it even if they wanted to, due to a lack of what is called financial readiness. Practitioners would be happy with access to loans, however, if the banks did their job. I did it and worked perfectly for my organisation.

Moreover, I’m not sure that financial instruments like the social impact bond would go through a cost/opportunity check. The pilot on preventing re-offending in Peterborough, led by Social Finance, has required a significant injection of capital and expertise that might not make financial sense when such initiatives need to scale up. Not to mention the risk of frauds and exploitation as happened recently to microcredit; the sharks join as soon as they smell easy profits in a growing market.

Mine is not a call against innovation, but against waste. This excitement for complex financial instruments reminds me that our culture is sickly addicted to finance and losing sight of what really matters. Complexity lies in society and the effective solutions to its problems. We need a sophisticated approach to understanding society, and to devise measures to tackle its failures. Money should be the easy part.

This is something I learnt in running the social innovation competition in Naples. Today, we see that shortcomings of the project are due to spending too much time on the finacial side and not enough on deconstructing  the complexities of the multi-layered and interconnected environment. We also failed to devise a more articulated and phased strategy for implementation.

Actually, I suspect that prize challenges can deliver better results than financial instruments such as the social impact bond. At the very least they are cheaper, and with the ability to mobilise entire communities rather than just few experts and government officials.

Therefore, I want to undertake some cost/effective comparison between emerging innovative instruments. This is what policy-makers need to consider before deciding on which instruments to prioritise.