I was reading about the launch of the Lagos Education Access Fund last week, and it struck me that we are witnessing a massive industrial shift in how governments actually buy social change. We have spent plenty of time on this show discussing social impact bonds, which always felt like these artisanal, one off experiments. But what happened in Nigeria on March sixteenth, twenty twenty-six, with Governor Sanwo-Olu launching that twenty-five million dollar partnership, feels like a different beast entirely. It is part of this much larger movement toward what people are calling outcomes funds. Today's prompt from Daniel is about exactly this evolution, specifically looking at the Education Outcomes Fund and the massive five hundred million pound fund the United Kingdom is spinning up for child poverty.
It is a fundamental pivot from boutique to wholesale, Corn. For years, the criticism of social impact bonds was that the transaction costs were just too high. You would spend eighteen months and hundreds of thousands of dollars in legal fees just to set up a small program for a few hundred people. It was like trying to build a custom car from scratch every time you wanted to go to the grocery store. But the Education Outcomes Fund, or the E O F, is trying to solve that by acting as a platform. They have already mobilized over one hundred thirty million dollars across places like Sierra Leone, Ghana, and now Lagos. Herman Poppleberry here, by the way, and I have been digging into their latest progress report from March eighteenth. They are not just doing one project at a time anymore. They are creating a standardized system where the price of a specific outcome, like a child reaching a certain literacy level, is set in advance.
That sounds like we are turning social services into a commodity market. If I am the Governor of Lagos and I am looking at fifty thousand out of school children, I am not just asking for a program. I am looking for a guaranteed result. But Daniel's first question is the one that always gets people riled up. Is this for profit impact investing? Because when we hear about the E O F being hosted by U N I C E F, it sounds like traditional charity, but then you see names like Bridges Outcomes Partnerships involved.
It is absolutely for profit in its structure, but we have to be precise about what that means. In a traditional grant model, a government or a foundation gives money to a non profit, and the money is gone. If the program fails, the money is still gone. In this wholesale outcomes model, private impact investors, like Bridges Outcomes Partnerships or Big Society Capital, provide the upfront working capital. They take the risk. If the service providers hit those pre agreed literacy or enrollment targets, the government, which we call the outcome payer, repays the investors with a modest return, usually in the single digits. If the targets are not met, the investors lose their money. The taxpayer is shielded from the cost of failure. This is the vision of an impact economy that Sir Ronald Cohen, the chair of the E O F, has been pushing for decades. He wants to move from a world of just risk and return to a world of risk, return, and impact.
I can hear the skeptics already. You are basically saying that we are allowing private investors to make a profit off of impoverished children in Lagos or struggling families in the United Kingdom. Does that not create a perverse incentive where the investor is more worried about their internal rate of return than the actual well being of the child? You have been waiting to tell me why this is more efficient than the old way, so give me the steelman for the for profit side.
The efficiency comes from the transfer of risk and the focus on performance. Under the old grant system, a provider gets paid to show up. They get paid to run a workshop or build a school, regardless of whether anyone actually learns anything. In the E O F model, the investor is highly incentivized to ensure the provider is actually succeeding. They are not just writing a check and walking away. They are providing intensive management and data tracking because their capital is at risk. We saw this in the Sierra Leone Education Innovation Challenge, or S L E I C. They reported learning gains equivalent to an extra year of schooling for over one hundred thousand children compared to traditional models. That happened because the investors were obsessed with the data and pivoted the approach when things were not working. They were not just following a rigid grant proposal; they were chasing a result.
That leads directly into Daniel's second question about how these funds support the service provider. In the past, the big fear with pay for success was teaching to the test. If you tell me you will only pay me if a kid passes a specific literacy exam, I am going to spend every second on that exam and ignore everything else that makes a child whole. How does a massive fund like the five hundred million pound Better Futures Fund in the United Kingdom avoid that kind of metric fixation?
This is where the technical side gets really interesting. The E O F and the Better Futures Fund use something called an outcomes rate card. Instead of a rigid contract for a single metric, they create a menu of prices for different results. For example, you might get a certain amount for a child re entering school, a different amount for them staying for a year, and another amount for a specific jump in reading scores. This allows for a more holistic view. But the real secret sauce is technical assistance. Unlike the early social impact bonds, these funds have dedicated teams that work with the small, local non profits. They help them with data systems, financial management, and operational scaling. They are not just judging them; they are coaching them to hit the targets. Mila Lukic, the C E O of Bridges Outcomes Partnerships, often emphasizes that their role is to provide the flexible capital and the management expertise that these smaller providers usually lack.
But wait, if the investor is the one providing the coaching, are they not just micromanaging the non profit to ensure their own payout? I am picturing a local charity in a London borough trying to help kids at risk of reoffending, and suddenly they have a bunch of suits from a private equity firm telling them how to run their youth club because the summer bidding for that five hundred million pound fund is coming up.
It is a partnership, not a dictatorship. The providers actually tend to like this model because they have more flexibility. In a traditional government grant, you are often locked into a very specific line item budget. You have to spend exactly this much on pens and exactly that much on rent. If you realize halfway through that you actually need more social workers and fewer pens, you are stuck in a bureaucratic nightmare to change the grant. In an outcomes fund, the government does not care how you spend the money as long as you get the result. The provider and the investor can pivot in real time. This is what we call moving from inputs to outcomes. It gives providers the freedom to innovate. If they find a better way to reach a child, they can do it without asking for permission from a government clerk.
I want to push back on the scale of this. We are talking about a one billion dollar goal for the E O F by twenty thirty. That sounds huge until you realize that national education budgets are in the hundreds of billions. Is this really a wholesale shift, or is it just a slightly larger boutique? Even the UK fund, five hundred million pounds over ten years, aiming to help two hundred thousand children. That is a drop in the bucket for a country of sixty-seven million people.
You have to look at where this fits in the broader international finance landscape, which was Daniel's third point. These funds are the primary example of what we call blended finance. They sit right in the middle between traditional foreign aid, like what you would see from the World Bank or the Global Partnership for Education, and pure private capital markets. The goal is not to replace the entire education budget. The goal is to use that one billion dollars as a catalyst to prove what works. Once you have a proven rate card for literacy in Nigeria, the government can then take its own massive budget and start buying outcomes directly using those same metrics. It is about moving the entire public sector toward a performance culture. It is a way to de risk innovation for the government.
It sounds like a very corporate way of looking at the world, which I know appeals to your nerdy side, Herman. But there is a sovereignty issue here. If the Education Outcomes Fund is the one setting the metrics and the prices, are they not effectively setting social policy for a sovereign nation? If I am a citizen in a country where the E O F is active, I might wonder why an independent trust fund hosted by U N I C E F is the one deciding what a successful education looks like for my children.
That is a valid tension, and it is something Amel Karboul, the C E O of the E O F, has had to navigate carefully. The way they handle it is by ensuring the government is the ultimate outcome payer. The E O F does not just walk in and impose a model. They work with the national government to define what the targets should be. In the case of the UK Better Futures Fund, which Chancellor Rachel Reeves has made a pillar of their plan for change, the government is very much in the driver's seat. They are the ones saying we have a crisis in youth reoffending and child poverty, and we are willing to pay for these specific results. The fund is just the mechanism to make that happen efficiently. It is a tool for the state, not a replacement for it.
Let us talk about the risks of creaming or cherry picking. This is the classic criticism of any results based system. If I am an investor and my money is on the line, I am going to want the provider to work with the kids who are easiest to help. The ones who are just on the edge of passing. Why would I ever take a risk on the most difficult, most traumatized, or most remote children if the payout is the same?
You solve that through weighted pricing on the rate card. This is where the technical design becomes crucial. You pay more for the harder cases. If a child has been out of school for three years, the payout for getting them back in is significantly higher than for a child who just missed a few months. You can also use eligibility requirements to ensure the program is only targeting the most vulnerable populations. If you get the pricing wrong, you create bad incentives. But if you get it right, you actually drive resources to the people who were previously ignored because they were seen as too difficult or too expensive to help under a flat grant model. It turns the hardest cases into the most valuable opportunities for the investor.
We discussed something similar back in episode thirteen fifty-three regarding the impact paradox. The idea was that sometimes solving a problem actually kills the profit motive for the investor. If you are too successful at improving literacy, do you eventually work yourself out of a job?
That is the ultimate goal, right? But we are so far from that reality in global education. There are hundreds of millions of children who are not learning the basics. These funds are trying to bridge the gap between the current state of inefficiency and a future where government spending is actually tied to human progress. What is happening this summer in the United Kingdom is going to be a massive bellwether. The bidding process for that five hundred million pound fund will show us if the private sector really has the appetite to take on risk at that scale. If it works there, in a developed economy with complex social needs, it becomes the blueprint for every other Western nation. It is about proving that you can scale compassion through capital.
I find it interesting that this is gaining traction right now. We are in an era of tight budgets and high debt. Governments are desperate for ways to do more with less. This model allows them to say we are only paying for what works. It is a very pro taxpayer, pro accountability stance. But I do worry about the human element getting lost in the spreadsheets. When you reduce a child's progress to a binary metric on a rate card, do you lose the nuances of their life? A kid might not hit the literacy target this year because their family lost their housing, but the program might have been the only stable thing in their life. Does the investor just see that as a failed investment?
That is the hardest part of this. But we have to compare it to the alternative. The alternative is the current system where we often have no idea if the money we are spending is helping at all. We are currently flying blind in many social programs. These funds at least provide a flashlight. They force us to ask what we are actually trying to achieve and how we will know if we got there. And because of the technical assistance and the flexibility for providers, you often get more person centered care, not less, because the staff are not buried in paperwork about how they spent every penny on supplies. They are focused on the kid because the kid is the outcome. It shifts the conversation from what we did to what we achieved.
The Lagos launch is particularly bold because they are aiming for fifty thousand out of school children. That is a massive operational challenge. It is not just about teaching; it is about the logistics of finding these kids and bringing them back into a system that might have failed them before. The E O F progress report from March eighteenth says they have mobilized one hundred thirty million dollars so far. That is a lot of at risk capital. If these programs fail, these impact investors are going to take a huge hit.
They are, and that is exactly why they are so motivated. It is a different kind of skin in the game. Sir Ronald Cohen argues that we are moving toward a world where the measurement of impact is just as rigorous as the measurement of profit. The wholesale outcomes fund is the infrastructure for that world. It turns social impact into a professionalized, data driven industry. It is the industrialization of empathy. Instead of a thousand small charities doing their own thing, you have a coordinated effort with shared metrics and shared goals.
It feels like the end of the charity era in some ways. Not that people will stop being generous, but that the large scale work of social change is becoming more like an engineering problem than a philanthropic one. If you want to build a bridge, you hire an engineer and pay them when the bridge is standing. Why should education or poverty reduction be any different?
That is the core philosophy. And it connects back to what we talked about in episode thirteen forty-one about the philanthropy paradox. The shift from traditional giving to R O I focused social investment is accelerating because the problems are too big for charity alone. We need the trillions of dollars in the private capital markets to move toward social good, and they won't do that without a clear structure for risk and return. These funds provide that structure. They create a bridge between the world of finance and the world of social work.
So, as we look toward the summer of twenty twenty-six and the UK bidding process, what should our listeners be watching for? If you are an investor or just someone interested in public policy, what are the red flags or the green lights in these new funds?
Watch the metrics. If the metrics are too simple, they will be gamed. If they are too complex, the transaction costs will creep back up and kill the model. The sweet spot is a set of outcomes that are easy to verify but hard to achieve without real, deep work with the beneficiaries. Also, look at who the providers are. If it is only big international N G O s winning the contracts, then the model is failing to support local capacity. But if you see small, local organizations getting the technical assistance they need to scale, then the wholesale model is actually working. The goal is to empower the local provider, not just the international investor.
It is a high stakes game. We are essentially betting that the tools of capitalism can solve the problems that capitalism is often accused of creating. It is a bold experiment, and the next few years will tell us if it can actually reach that one billion dollar scale or if it will get bogged down in the same old bureaucracy. The Lagos Education Access Fund, or L E A F, is a twenty-five million dollar test case for this. If they can reintegrate fifty thousand children in one of the most complex cities on earth, it will be hard to argue with the results.
The E O F reaching ten million children by twenty thirty is the big goal. If they can hit that, it will be the most significant shift in development finance in our lifetime. It moves us away from the colonial model of aid, where we just drop money from above, and toward a model of partnership based on mutual accountability. It is about dignity for the provider and results for the child.
Well, it is certainly more interesting than just another government white paper. I am curious to see if the UK fund can actually get matched by that other five hundred million pounds from local governments and philanthropists. That would bring the total to a billion pounds just for children in the UK. That is a serious commitment to the outcomes model. Rachel Reeves is betting a lot of political capital on this.
It is, and it puts the United Kingdom at the forefront of this movement globally. They are treating child poverty like a problem that can be solved with the right incentives and the right data. It is a massive test for the current government's plan for change. If they can show a real reduction in youth reoffending and child poverty through this model, it will change how social policy is made forever.
We will have to keep a close eye on those summer bidding results. For now, it seems like the era of the boutique social impact bond is officially over, and the era of the wholesale outcomes fund has begun. It is more complex, more technical, and carries a lot more risk, but the potential for scale is finally there. We are moving from the artisanal to the industrial.
That is the key word. Scale. We have spent decades doing small things well. Now we are trying to do big things effectively. It is a journey from the heart to the head, without hopefully losing the heart along the way. We are learning how to measure what matters so we can fund what works.
That feels like a good place to wrap this one. We have covered a lot of ground, from Lagos to London, and the technical mechanics of how we might actually pay for a better future. It is a world of rate cards, technical assistance, and at risk capital, but at the center of it is still a child in a classroom.
It is a fascinating space, and I am glad Daniel sent this prompt. It gave us a chance to see how these theories we have talked about for years are finally hitting the ground in a big way. The progress report from the E O F shows that this is no longer just a theory; it is a one hundred thirty million dollar reality.
Thanks as always to our producer, Hilbert Flumingtop, for keeping the gears turning behind the scenes. And a big thanks to Modal for providing the G P U credits that power the technical side of this show. This has been My Weird Prompts. If you are enjoying these deep dives into the mechanics of social change and technology, search for My Weird Prompts on Telegram to get notified whenever a new episode drops.
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