FORTE: Financing Of Return To Employment

Dr Nat Ware is an education-focused social entrepreneur, born in one of the poorest suburbs in Australia to two teachers. At 16, he raised $100,000 to rebuild a school in Mozambique. At 19, he founded 180 Degrees Consulting, and built it into the world’s largest consultancy for non-profits, with 160 branches across 38 countries. At 25, he did a PhD on education finance at Oxford to get to the heart of the problem and develop a better way of doing it. During this PhD, Nat invented the FORTE (Financing Of Return To Employment) approach, which he is now implementing worldwide. Nat is a Rhodes Scholar, Top Oxford MBA Student, Visiting Fellow at Princeton, Forbes 30Under30, Australian State Young Achiever of the Year, Goldman Sachs Global Leader, World Economic Forum Global Shaper, Oxford Vice-Chancellor’s Social Impact Award Winner, and only-ever Two-Time Global Winner of the St Gallen Wings of Excellence Award.

Millions have lost their jobs due to the pandemic and are suffering financially. The biggest impediment to retraining them for future jobs (so they can have financial security and achieve their full potential) is that we don't currently have a way to finance retraining at the scale required.

Forte is a new, innovative way to finance retraining at no cost to individuals or governments, and without needing philanthropy.

The Forte approach is based on the fact that training cost is often far less than the increase in future government income tax revenue caused that training. Forte enables individuals to pay for their own training with their own future taxes. Think of it as "Future Sofia's taxes paying for Present Sofia's training".

Individuals get training at no cost, governments can help disadvantaged groups and increase the skilled workforce without worsening the budget, and investors get low-risk high-yield returns. A true win-win.

With the Coronavirus pandemic, millions are being laid-off.

We need to provide them with opportunity to get back on their feet. But the world is fundamentally changing. The jobs of the future are not the jobs of the past. As many as one in four workers are going to need reskilling.

How can we finance high-quality vocational retraining at scale? 

Unfortunately, no existing approach works:

Savings? Most live paycheck to paycheck.

Loans? >50% cannot take out loans due to poor credit history and/or limited collateral.

Government Funding? Often not possible for economic or political reasons (may not want to use taxpayer money on non-taxpayers).

Philanthropy? Too limited.

Social Impact Bonds? Not cookie-cutter (takes time and cost to measure ad hoc metrics), low government value proposition (Forte's model reverses the cashflow), and relies on concessionary returns.

Income Share Agreements? Many intractable problems:

• Fine Line Between Investor Returns and Individual Exploitation  
• Limited Social Impact: Individuals pay and are subject to predatory investors
• Lack of Government Buy-In: As limited social impact
• Low Investor Returns: Due to adverse selection (those with highest expected incomes opt for non-ISAs) and moral hazard
• Income Reporting & Payment Enforcement Difficulties: Incomplete and inaccurate disclosures

While doing a PhD at Oxford on education finance, here’s something I discovered: That the cost of retraining is often far less than the increase in government taxation revenue caused by that training. That’s where the idea for Forte comes from. In essence, Forte enables education to be paid for with that increase in expected future tax.

In-practice, it works in 3 simple steps.

1. Via the Forte platform, investors can pay for the vocational training of individuals who would otherwise be paying no or negligible tax.

2. This training, by its nature, increases expected employment, incomes, and therefore government tax revenue.

3. Governments, as part of the contractual arrangement, pass back to investors (via the Forte blockchain platform) an agreed portion of the increase in tax revenue attributable to the training recipients, for a set period of time.

By way of example, suppose Lydia lost her hospitality job due to the pandemic and wants to be a programmer. With Forte, an investor could finance a six-month coding training course to 1000 people like Lydia, in return for 50% of the tax revenue attributable to them for 3 years.

This arrangement is mutually beneficial.

Forte can provide retraining at no cost to the following disadvantaged groups:

• Workers who are laid-off due to the Coronavirus pandemic
• Racial minorities
• Women who want to pursue STEM careers
• Aging populations who may want to learn new skills and keep working for several more years
• Workers in environmentally unfriendly industries (such as logging) who may need to reskill as part of the effort to address climate change
• Unemployed youth (given declining retail jobs)

We also serve training providers by providing them with a viable business model! Importantly, this one idea (Forte) can enable millions of great education/training ideas to become reality.

In each country we are (or will be) operating in, we have teams of volunteers on the ground speaking in-person to individuals to ascertain (a) whether they would like reskilling, (b) what skills they would like to learn, and (c) the challenges they are facing.

What we have heard from individuals is that they often do not have savings or credit history, do not want to bear the risk of a loan, and feel that ISAs are unfair and exploitative. We address these concerns because in our model there is no cost and no chance of exploitation.

One of humanity's greatest challenges will be how to support those who have suffered financially due to the Coronavirus pandemic. I believe Forte is the best way to elevate those who are suffering and enable them to achieve their potential, as Forte enables education (and healthcare) to be provided to people irrespective of their savings or credit history. 

This - Forte - is how we align morally agnostic profit seekers with what’s best for humanity. This is how we finance reskilling at the insane scale required. This is the only way to do it.

I spent 12 years running the non-profit 180 Degrees Consulting (www.180dc.org) and learning how to align social and financial returns within organizations. However, I wanted to develop ways of aligning social and financial returns at a systems level, so that capitalism would work in the best interests of humanity. As such, I did a PhD at Oxford on a Rhodes Scholarship applying rigorous economic analysis to the field of social finance. I looked at all the current ways we finance education and healthcare (including ISAs and SIBs) and became more and more convinced that none of these approaches can work at the scale required. I worked out that any way to finance education/healthcare should have 16 properties. I proved that no existing approach satisfies more than 8 of those, and then proved that the ONLY way to achieve all 16 desirable properties is with a new approach that nobody in the world is currently doing. I called this approach FORTE. This PhD was ranked in the top 1% of all Oxford PhDs. Rather than having this sit on a bookshelf collecting dust, I have dedicated my life to bringing this to life and making it happen.

For me, Forte is not just another venture. This is my life's work. If after 4-5 years of PhD research I was not absolutely convinced that this can and should become a main way we elevate disadvantaged populations worldwide, I would not be working tirelessly to make the Forte approach happen worldwide. 

At a fundamental level, I get passionate about great ideas. And I think the greatest ideas are those that are mutually beneficial, scalable, and align social and financial returns at a systems level. That is what Forte does. I do not know of another initiative that can plausibly help a billion people over the next decade. In many ways, Forte is transforming capitalism so it elevates the most underserved. This is trickle up economics, not trickle down.

I'm passionate about this because I did not come from wealth. Quite the opposite. I had my first proper haircut at 16. 

I also love Forte because it can become the business model for millions of non-profits and social enterprises worldwide. So many social impact organisations rely on donations and cannot scale. Forte is the way thousands of great education and healthcare organizations can scale to help more people in need.

We are the right team to deliver this for several reasons:

1. Expertise: I did my PhD at Oxford on a Rhodes Scholarship on this very topic. As part of his PhD, I invented the FORTE approach to education/healthcare finance. Given I did 4-5 years of rigorous research on the topic (including hundreds of interviews and hundreds of pages of economic/financial modeling), I'm confident that I know more about this financing approach than anyone else.

2. Track Record: Prior to Forte, I founded the non-profit 180 Degrees Consulting (www.180dc.org) and over the course of a decade grew it into the world's largest consultancy for non-profits and social enterprises, with 160 branches across 38 countries and over 5 million hours of consulting services provided.

3. Business Know-How: I was honored to receive the "Said Prize for Top MBA Student at Oxford". Given this, I'm confident that I have the financial and business management expertise to enable Forte to have an impact on a world scale.

4. Diversity: Our team is extremely diverse, when it comes to gender, ethnicity, sexuality and professional backgrounds. We are majority women and majority ethnic minority.

5. Commitment: Everyone on our team is taking significant pay cuts to build Forte into a high-impact global social venture, because we believe 100% in the solution and mission.

I was raised in a low-income household of five children, surviving on a small teacher’s salary. My dad cut my hair until I was 16, and my regular birthday present was a tennis ball to throw with my brother. We barely scraped by, but my parents always prioritised education and taught me the importance of education. So throughout school I borrowed every textbook I could and stayed up each night teaching myself math and other topics. I had to make many sacrifices in the process, but eventually my perseverance was rewarded when I received scholarships to allow me to attend top institutions in Australia and then Oxford. I feel very lucky to have been able to transform socio-economic adversity into educational opportunity, and want everyone to have the same opportunities.

As a different example, I had been training hard to do a full Ironman Triathlon when I broke my right hand in an accident and needed invasive hand surgery. Instead of giving up, I persevered. I taught myself to swim and cycle again, and completed the event a year later.

At the age of 18 I came up with the idea of starting a non-profit consultancy to enable university students to donate with their minds, not just with their money. At the time, sooo many people told me I was out of my mind. "You're too young," "students can't do consulting," "you can't make a difference," "you're joking right". But I mobilised a team of volunteers, persevered, and never looked back.

Over the past 13 years, I've grown 180 Degrees (www.180dc.org) from nothing into the world's largest volunteer consultancy and world's largest consultancy for non-profits and social enterprises. We now have 168 branches across 38 countries, have provided over 5 million hours of services , and helped over 6200 non-profits to improve their work and expand their impact. Through this, we've improved the lives of over 20 million people. We've also trained over 35,000 future social impact leaders.

I led the organization for 11 years as Founder/CEO (leading a core team of 60 people and 10,000 volunteers working each day around the world). Now I serve as Chair of the Board so that I can focus on similarly growing Forte into a high-impact global organization. 

This approach is entirely new. For my PhD, I discovered that any way to finance retraining/healthcare should have 16 key properties. I proved that no existing approach (including ISAs and SIBs) satisfy more than 8 of those. FORTE? All 16.

We are the only group anywhere in the world using this approach.

This approach is truly innovative because:

-With FORTE, nobody is out of pocket. Nobody needs to pay for education/healthcare in a traditional sense. The cost is covered by the increase in a positive externality (tax revenue) due to the human capital investments, with risk borne by investors. 

-It is often wrongly assumed that education needs to be paid by individuals, governments or philanthropists. Often political debates are between "governments should pay for it" and "governments cannot afford it, so individuals should pay". Forte offers a third option: Education at no cost to individuals or governments.

-We align social and financial returns at the systems level.

-We utilize existing institutional structures (e.g. tax collection), which (unlike ISAs) avoids duplication, time and cost of payment enforcement, and income misreporting problems

-We are building a blockchain platform, with smart contracting and audit trails, to undertake FORTE financing at scale.

-We enable a new role for governments as a a conduit/facilitator of tax transfers.

-Forte provides a new viable business model for thousands of great training and healthcare providers worldwide. This business model is scalable for them, as they no longer have to rely on donations or force disadvantaged individuals to pay.

The Forte model combines the theory of change and logic model perspective in social finance (Garud,Hardy,&Maguire,2007), with the welfare/capabilities perspective in development economics (Kaldor,1939; Sen,1999).

In doing so, the Forte model is able to perfectly align social/financial returns at the systems level, so every stakeholder benefits.

Individuals: Receive training at no cost and no risk. They just pay the usual tax rate. They’re effectively paying for their own training with their future tax. The education helps them get good jobs to support their families, live with dignity, and reach their potential.

Investors: Can generate a double bottom-line. Forte offers investors a new better way of doing impact investing. Investors are incentivised to ensure that disadvantaged individuals receive the highest-quality training in areas that lead to future jobs, because this leads to higher employment, incomes, tax, and ultimately profit. (The return to investors is based on the increase in incomes relative to the counterfactual, not absolute incomes. Investors don't profit more by financing higher-earning individuals than lower-earning individuals.)

Governments: Can increase the skilled modern workforce, overcome skill gaps, and help those in need, without worsening the budget or bearing risk! Importantly, there are mathematical ways of structuring the contract, so they only pass on in the future what they otherwise would not have had. (One way is with a lump-sum payment from investors to governments equal to the counterfactual tax revenue. Suppose in the absence of training the government expects $2M in tax over three years from 1000 people. Investors could pay the government that $2M via Forte and finance training. If the government transfers 90% of tax to investors, the government gets what it was expecting ($2M) upfront so improves the budget, plus 10% (as transfers 90%), plus doesn't pay for training, plus gets the full benefit of higher taxes beyond three years.)

Training providers: Receive funding to provide their learning/training programs. As such, they now have a viable business model and can scale up to their services to help more people in need.

A true win-win.

For full rigorous theory of change analysis see: https://drive.google.com/drive...

When individuals get trained and earn good incomes, everyone in the family benefits. However, for this question we're focused on just individuals who receive training.

2020: We were originally planning to serve 280-400 individuals. However, in the past three month 14 different governments worldwide have approached us asking to use the Forte model to address the Coronavirus pandemic. These governments want to use Forte as the way to finance reskilling for laid-off workers. As such, that figure is growing rapidly and will likely reach 10,000-20,000 individuals by December 2020.

In 1 Year From Now: At least 20,000-35,000 individuals (target is 25,000).

In 5 Years From Now: At least 10 million individuals. This is possible because we are building a network of all the best training providers worldwide (we already have 20 training provider partners). Given this, our model is almost infinitely scalable.

Forte is the only way to finance reskilling at the insane scale required. 

Importantly, while our current focus is on financing retraining given the job losses due to COVID-19, the Forte model in the future will also be used to finance healthcare. There are over 200 million people with avoidable blindness in the world. Often they just need cataract eye surgery. Forte can finance eye surgery at scale, because if people can see they are more likely to work, earn income and pay taxes. Forte can also finance cochlear implants for the deaf, lifesaving drugs for those that need it, and many other healthcare interventions.

Our goal is to help over a billion people by 2030, and over 10 million by 2025. While ambitious, we believe this goal is achievable given our model is mutually beneficial, incredibly scalable, and superior to every other financing approach.

We've developed a comprehensive 10 Year Masterplan, found here: shorturl.at/etDE5. As shown, we will grow through three stages:

Stage 1: Pandemic Response (2020-2021): We're running 6 pilots in 6 different geographies with 6 different use cases. The FORTE projects will help 10,000-35,000 individuals. At this stage we are just focused on retraining individuals who are struggling financially due to the pandemic.

Stage 2: Growth (2022-2025): We will scale up via successive funds. We can call these Fortefy Funds. Investors (including pension funds, impact investors and foundation endowments) can pay into the fund and earmark their investments for specific causes (e.g. the environment, women, youth) or geographies (e.g. US, Australia, Portugal, Germany, etc). In this stage, we aim to reskill at least 10 million individuals, and provide healthcare services to at least 1 million individuals (including curing blindness for at least 250,000 people).

Stage 3: Platform/Marketplace (2026-2030): Whereas in Stages 1-2 we (Forte) decide where to invest and what education/healthcare services to finance, in Stage 3 we become intervention agnostic and simply facilitate FORTE financing on the Forte platform. Investors will be able to do their own due diligence and make investments in disadvantaged populations. This allows us to scale more quickly and tap into larger pools of capital.

In my PhD, I identified 16 possible barriers to the success of FORTE, and undertook rigorous research on all 16 possible barriers. I found that none of these barriers could be classified as both "problematic" and "likely". All were either highly unlikely or insignificant. Full research on these 16 possible barriers can be found in Chapter 7 of the PhD at shorturl.at/etDE5.

Nevertheless, two barriers are worth mentioning here.

The first is the perceived difficulty in getting government buy-in. This has not been a problem for us to date, and every single government representative we have met with has loved the FORTE model given how strong the value proposition is, and how it can help them address a range of priority challenges. Despite this, we are aware that working with governments poses unique challenges compared with working with other stakeholders.

The second challenge relates to migration. While there are easy ways around this issue (as discussed below), and while it will not be an issue in the short-term with COVID-19 travel restrictions, it is important that we are aware of the issue and are proactive in addressing it in the medium and long-term.

Government Buy-In: 

If anything the problem at the moment is too much demand from governments! We're struggling to increase our capacity fast enough to help all the governments that want our help. However if this ever becomes an issue (which we doubt), we will:

• Keep ensuring that governments bear no risk and only ever win. This is possible with a lump-sum initial payment from investors to the government (via Forte) equal to the counterfactual tax.
• Work not only at a national level (as we're doing in Australia, the UK and New Zealand), but also at a sub-national level (such as in Sweden where we can just work directly with municipalities given they charge a 28-32% tax rate).
• Work with specific departments/agencies, such as education, workforce development or minority affairs.

Migration: 

This is not currently an issue. But if it becomes an issue we will: 

• Focus on disadvantaged groups that have lower migration rates
• Have short contracts of 1-3 years, so migration rates are low
• If needed, make it so individuals get the training for free (that is, they just pay the usual tax rate) if they remain in the country for the few years of the FORTE contract. However, if they leave the country, it converts into a loan/ISA. This may help prevent brain drain - an added benefit!
• Even if a small percentage do migrate, the mechanism itself is still viable. The likelihood of migration is simply a risk that gets taken into account and marginally reduces investor returns.

Our main partner is 180 Degrees Consulting (the world's largest volunteer consultancy). In every country we currently (or will soon) operate in, we have teams of volunteer consultants working on-the-ground to (a) identify individuals in need of reskilling, (b) undertake first-hand research to work out what type of reskilling would be most beneficial, and (c) identify the best training providers to partner with. Worldwide, we have over 100 volunteers working on Forte.

We also have well over 20 confirmed training provider partners worldwide (including General Assembly, Oxford University, Kenzie, Generation, Princeton University, and Academy Xi).

In addition to education partners, we are also beginning to build a network of high-quality healthcare partners who in the future will be able to finance eye surgery for the blind, cochlear impacts for the deaf, and other interventions using the FORTE model.

We're also supported by:

- Forbes and Rybakov Foundation: Forte won the education entrepreneurship competition run by Forbes and Rybakov in Berlin in 2019 against 400 other education-related startups (we were also a Finalist for the $1M Global Rybakov Prize).

- St Gallen Symposium: Forte was judged as the single best social impact idea out of 1000 entries worldwide.

- Halycon House (Washington DC, USA): Forte was 1 of 8 social ventures selected from 400 applicants.

- Oxford University: Forte is backed by the Skoll Centre for Social Entrepreneurship and the Oxford Department of International Development.

- Human Ventures (New York, USA): Forte was selected to receive free legal and technical support.

We provide:

• Investors with a way to do good and do well without any tradeoff
• Individuals with a way to receive high-quality training/healthcare at no cost (they just pay the usual tax rate, so there is no possibility of exploitation)
• Governments with a way to help disadvantaged populations, overcome skills gaps and future-proof the workforce without worsening the budget and without bearing risk 
• Training and healthcare providers with a way that they can scale up their services (funding from investors via Forte is a form of growth capital)

Forte will be financially sustainable by taking a small cut of the tax transfer to ensure long-term sustainability. As shown in the financial model at shorturl.at/etDE5, even a 1% cut will enable Forte to generate significant revenue in the future to operate at a very large scale. We only need philanthropic support in the short-term to get us to the point of financial sustainability. Funding from Elevate Prize will enable this new, innovative financing approach to reach scale. A few hundred thousand in financial support will unleash billions in private capital to help the most disadvantaged individuals to be elevated and reach their full potential. A magnified social impact. 

Importantly, Forte is a "meta social venture" in that we will be the business model for many other non-profits and social enterprises! There are thousands of great education/healthcare providers helping disadvantaged individuals on a small scale. Investors via Forte can fund those entities, enabling them to reach far more individuals in need. 

Forte is one of the rare models that only needs philanthropic support in the short-term and will not be dependent on philanthropic support in the long-term. Funding from this Challenge will enable us to reach the point of financial sustainability. 

In 2-3 years, we will be financially sustainable because we have a business model where social/financial returns are perfectly aligned.

The way our model works is that investors (via Forte) pay for the cost of reskilling and healthcare for disadvantaged individuals. These services increase expected incomes, and the government passes back to investors (via Forte) a portion of the increased income tax revenue attributable to the service recipients.

We take a very small cut (1-3%) of the tax transfer to cover costs. If needed, we can also take a small cut of the service cost for cashflow purposes.

For example, if retraining 100 individuals costs $1M, investors will pay $1.01-$1.05M (with $10,000-$50,000 going to Forte). Furthermore, if the government passes back $3M in increased tax revenue, Forte would receive a small cut of $30,000-$150,000 (with $2.85-2.97M being passed back to investors).

In this way, we'll be fully financially sustainable and our sustainability will not come at the expense of social impact. In fact, the way Forte generates the most revenue is by having the greatest impact (as the better the training provided, the higher the expected employment, incomes and tax revenue, and therefore the greater the revenue coming back to Forte.) 

Our financial model can be found at shorturl.at/etDE5.

We have received some small grants to cover our costs in the short-term, including $10,000 from Halcyon, $10,000 from Shore Hatchery, and $15,000 from St Gallen Symposium Wings of Excellence Award.

We also have significant funding committed from family offices, impact investors and foundations (who want to invest their endowments in a way consistent with their giving arms) to finance the reskilling of workers laid-off due to COVID-19. This is investment via Forte rather than in Forte.

Given the massive increase in demand for the Forte approach in the past three months (we already have 14 governments wanting to use Forte), we need to quickly expand our capacity and accelerate our work. That's where the Elevate Prize could be so useful. The funding, publicity, and other forms of support, will enable us to expand rapidly, cover costs in the short-term, and contribute significantly to economic recovery efforts. We want to help as many individuals as possible who have lost their jobs and are struggling financially.

We are seeking US$1.2M over the next two years in philanthropic contributions so that we can facilitate FORTE financing at scale around the world. The Elevate Prize would go a long way to helping us reach this target.

In addition, we are aiming to raise an additional US$10-15M from impact investors, family offices, and high net worth individuals to finance the retraining of individuals at scale.

Whereas the first funding is for Forte as an organization, the second bucket of funding is for investment via Forte. In other words, we are aiming to raise $1.2M in philanthropic capital and $10-15M in return-seeking capital.

I am used to operating in an extremely lean way. For example, I managed to run 180 Degrees (with 168 branches across 38 countries and 10,000 volunteer consultants) on less than US$100k per year. (I never once took a salary from 180 Degrees despite 11 years of work.)

Compared with 180 Degrees, the expenses with Forte are slightly greater as there are more technical and legal needs. However, $1.2M would cover our costs until the second half of 2022, enabling us to become completely financially sustainable.

I genuinely believe that the Forte approach can transform the world for the better and elevate literally hundreds of millions of disadvantaged individuals by providing them with high-quality education and healthcare at no cost, so they can overcome adversity and reach their potential.

Importantly, Forte is many things:

- A way to help combat the devastating impacts of COVID-19

- A new better way of financing education and healthcare

- A new better way of doing impact investing where there is perfect alignment of social and financial returns

- A new type of public-private partnership (and a new role for government)

- A new business model for the thousands of great non-profits and social enterprises that are operating on a small scale at present due to financial constraints, but who the FORTE financing could scale and help far more people in need

However, in order for this new approach to have the scale and impact it is capable of, we need support. In particular we need support in three areas:

- Publicity/marketing so people are aware of this new way to finance education/healthcare and can roll this model out in their own countries

- Funding to reach the point of financial sustainability (and to respond to the increased demand for the Forte approach due to the pandemic)

- Access to key stakeholders that we need to bring together to make the Forte model work (government officials, investors and service providers)

The Elevate Prize can help us with these three areas.

Our goal is to connect with government representatives, investors (especially family offices, foundations and impact investors), and service providers. We then want to bring these stakeholders together to form mutually-beneficial arrangements using the FORTE approach.

While we already have an extensive network of training providers and other supporters, we would love to form partnerships with the following organizations:

- Rockefeller Inclusive Finance

- World Economic Forum

- World Bank

- Nexus

At Forte we belief in collaboration and in creating mutually-beneficial partnerships.