Forte: Tradable Income-Based Securities (TIBS)

The biggest impediment to reskilling disadvantaged populations is not a lack of training options, but that we don't currently have a way to finance reskilling at the scale required.

Forte is a new, better way to finance retraining. It’s a way to finance reskilling at no cost to individuals or governments.

Forte utilizes a new financial product we have invented called Tradable Income-Based Securities (TIBS), which is based on the fact that the cost of training is often far less than the increase in government income tax revenue caused that training. In essence, 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".

With Forte, individuals get training for free, 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.

We solve the problem of how to finance reskilling to disadvantaged individuals at scale.

No existing approach works:

Savings? Most live paycheck to paycheck (40% of Americans cannot cover an unexpected $400 expense).

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

Government Funding? Often not possible for economic reasons (don't want to worsen budget in short-term) or political reasons (may be under pressure to not use taxpayer money on non-taxpayers).

Philanthropy? Too limited (covers <3% of needed education costs).

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? Have many intractable problems, including:

• 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: Repayments based on individuals’ reporting of income, so incomplete and inaccurate disclosures
• Long Repayment Durations: As % of income repaid can’t be large, duration has to be long

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

• Workers who are laid-off due to technological advances
• Aging populations who may want to learn new skills and keep working for several more years
• Individuals leaving incarceration
• Refugees across Europe (in Germany in particular)
• Workers in environmentally unfriendly industries (such as coal mining and logging) who may need to reskill as part of the effort to address climate change
• Unemployed youth (given declining retail jobs)
• Racial minorities who historically have not had the same educational opportunities
• Women who want to pursue STEM careers (which is important given the historical underrepresentation)

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.

While doing a PhD at Oxford on education finance, here’s something our Founder/CEO discovered: That the cost of reskilling 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 tax revenue attributable to the training recipients, for a set period of time.

This new financial mechanism is called Tradable Income-Base Securities, or TIBS.

By way of example, suppose Lydia lost her job 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 40% of the tax revenue attributable to them for 5 years.

This arrangement is mutually beneficial. Individuals receive training at no cost and with no risk. They just pay the usual tax rate. They’re effectively paying for their own training with their future tax.

Governments pay nothing upfront. They can increase the skilled modern workforce, overcome skill gaps, and help those in need, without worsening the budget! Importantly, there are mathematical ways of structuring the contract, so they only pass on in the future what they otherwise would not have had.

Investors get low-risk, high yield, short-term returns. They can do well while doing good. A true win-win.

This technology and financial solution - Forte - is how we scale self-sufficiency. This 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… To the 500,000 unemployed US veterans. To the 5 million refugees across Europe, who desperately want language training and other training. To the 50% of OECD workers who will be over 50 by 2030. To the half a billion who will become unemployed in the next decade due to technological advances, such as AI, robotics, and automation. Half a billion people! This is the only way to do it.

This TIBS financing approach is entirely new. It was invented by our Founder/CEO for his Oxford PhD. As part of this, he worked out that any way to finance retraining should have 16 key properties. He proved that no existing approach (including ISAs and SIBs) satisfy more than 8 of those. TIBS? All 16.

Forte is the only entity anywhere in the world using this approach to finance reskilling. 

This approach is truly innovative because:

- 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. No other approach can do this!

- We align social and financial returns at the systems level

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

- We are building a blockchain platform, complete with smart contracting, audit trails, and tradable tokenized securities, to be able to undertake TIBS financing at scale.

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

- We have developed eight different academically-proven ways to ensure governments never lose out and only ever pass on a portion of the increase in tax. One way is with a lump-sum initial payment from investors to governments via Forte (see below).

What is unique about Forte's model is that social and financial returns are perfectly aligned at the systems level, so every stakeholder benefits.

Investors: Make the most money by doing the most good - by ensuring 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. Importantly, the return to investors is based on the increase is incomes relative to the counterfactual, not absolute incomes. Investors do not profit any more by financing higher earning individuals than lower earning individuals.

Individuals: Learn skills for the future at no cost. This helps them get good jobs to support their families, live with dignity, and reach their full potential.

Governments: Can help disadvantaged groups at no risk and no cost. One way to do this is with a lump-sum payment from investors to governments equal to the counterfactual tax revenue. Suppose 1000 people get laid-off and in the absence of training the government expects $2M in tax over three years. Investors could pay the government that $2M via Forte and finance the training. If the government passes back 90% of tax to investors over 3 years, the government gets what it was expecting ($2M) upfront so actually improves the budget in the short-term, plus gets 10% (as transfers 90%), plus doesn't pay for training, plus gets the full benefit of higher taxes beyond three years. The value proposition could not be any stronger!

When individuals without a family get trained and can earn good incomes, everyone in the family benefits. However, for the purpose of this question we are only focused on the number of individuals whose training is financed via Forte.

2019-2020: This year we are serving 280 individuals. Given the early stages of the venture, we are focused on quality over quantity. 

In 1 Year From Now: At least 10,000 individuals (our target is 14,000)

In 5 Years From Now: At least 10 million individuals. This is possible because we are not doing the training ourselves. We are just facilitating financing on our Forte platform, so our model is almost infinitely scalable.

Our goal is to help 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 have developed a comprehensive 10 Year Masterplan, which can be found here: bit.ly/DWC_Forte. As shown, we will grow through three stages:

Stage 1: Pilots (2019-2021): We are running 3-6 pilots in 3-6 different geographies with 3-6 different use cases. This will help approximately 10,000 individuals. During this stage, individuals will file their taxes through a partner and we will get a copy of those returns (with individuals' consent). We will then simply invoice the government the agreed amount.

Stage 2: Growth (2022-2025): We will scale up via successive funds. Forte owns an LLC called Fortefy Fund. This is setup with different series of units, so 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, refugees, women) or geographies (e.g. Germany). In this stage, we aim to reskill 10 million individuals.

Stage 3: Marketplace (2026-2030): Whereas in Stages 1-2 Forte is the investor (deciding where to invest and what retraining to finance), in this stage Forte becomes intervention agnostic and simply facilitates TIBS financing on the Forte platform. Investors can 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 Dr Nat Ware's PhD, he identified 16 possible barriers to the success of TIBS, and undertook rigorous research on all 16 possible barriers. He 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 bit.ly/DWC_Forte.

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 TIBS 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), it is important that we are aware of the issue and are proactive in addressing it.

Government Buy-In: To get buy-in, we will:

• In the short-term, focus on small territories/countries with minimal layers of bureaucracy, that have strong tax/legal institutions. This includes Guam, Australia, Netherlands and New Zealand.
• Ensure the government bears no risk and only ever wins. This is possible with a lump-sum initial payment from investors to the government (via Forte) equal to the counterfactual tax revenue. 
• Then we will target medium/large countries, but countries that still have strong institutions. Such countries are mostly found in Europe, including France and Germany.

(Note that we can contract with specific departments/agencies, such as education, minority affairs or veteran affairs, and not only the Treasury.)

Migration: To address this challenge, we will:

• Focus on disadvantaged groups that have lower migration rates
• Have contracts with a short duration of 1-3 years, so migration rates are low
• If needed, have the arrangement/contract with individuals so that they 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 TIBS contract. However, if they leave the country, it converts into a loan or ISA that needs to be repaid. This may disincentivize migration and prevent brain drain - an added benefit!
• Even if a small percentage of individuals in a group 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 expected returns. Significant investor returns are still likely.

We're currently operating in three markets, and expanding into six more. Of these nine markets, seven overlap with ServiceNow's primary markets.

• Australia: We are working on two training financing projects. First, we are working to finance retraining for individuals whose livelihoods were destroyed by the recent catastrophic fires (such as those who lost shops and farms). Secondly, we are partnering with the Queensland Government to finance accreditation for skilled migrants whose skills are not recognized and who cannot afford accreditation. This will allow, for example, highly-qualified dentists to work as dentists rather than waiters.
• Slovakia: The VW Car Manufacturing Plant outside of Bratislava will be laying off 2000 workers during 2020. We have a signed letter of intent from the Slovak Government to finance reskilling for a subset of those workers, so they can work in digital jobs (there is a shortage of programmers in Bratislava).
• The USA: We are working in Guam (a US territory) to finance (a) the expansion of the Guam Registered Apprenticeship Program to agriculture and aquaculture, (b) reskilling in tourism and construction to help with the relocation of US troops from Okinawa to Guam, (c) eye surgery for a subset of the 13,104 individuals in Guam with avoidable blindness so they can get trained and employed), and (d) training so individuals can work in the planned GWA biosolid waste program and recycled glass refining center). We are also in discussions with the NYC Economic Development Corporation on expanding Forte financing to New York.

In addition to our current work in Australia, Slovakia and the US, we will be expanding to six other countries in the next year:

• Germany: Forte can be used to provide language and other vocational training to the million plus resettled refugees in the country (given it is not possible politically to use taxpayer money on non-taxpayers). Forte could also finance accreditation for skilled migrants whose skills are not recognized and who cannot afford the cost of accreditation.
• New Zealand: We are currently in discussions with the NZ Treasury, which is extremely supportive of Forte and wants to pioneer TIBS in NZ to help achieve the five goals outlined in the "wellbeing budget"
• France: In high-level discussions with the impact investing arm of the French Treasury
• UK: In discussions with 10 Downing St on how Forte can help make the UK the leader in social finance, given that the UK made impact investing a core priority when they hosted the G8 (establishing the Social Impact Investing Taskforce) and want to continue to be a leader.
• Netherlands: There is a need for retraining laid-off workers for new digital jobs, given significant areas of skills shortages.
• Canada: Forte can be used to reskill people from environmentally unsustainable industries for alternative jobs, and train people for the green jobs of the future. This is in line with Canada's climate change commitments. This would prove that it is possible to transition an economy without massive job losses.

We have:

- 3 Full-Time Staff Members (we will soon be adding 2-3 more full-time staff members, to bring the core team to 5-6)

- 5 Part-Time Support Staff (who help with the development of the technical platform, legal issues as they arise, and marketing/communications)

- 100+ Part-Time Volunteers (each working approximately 8-12 hours per week). These volunteers are split between Australia, France, UK, USA, Germany, Netherlands, and Canada.

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

1. Expertise: Our Founder/CEO, Dr Nat Ware, did his PhD at Oxford on a Rhodes Scholarship on this very topic. As part of his PhD, he invented TIBS (Tradable Income-Based Securities), which is the financing approach that Forte is based on. He did five years of rigorous research on the topic (including hundreds of interviews and hundreds of pages of economic/financial modeling). There is literally nobody in the world who knows more about this financing approach than him.

2. Track Record: Our Founder/CEO's previous social venture was a massive success. Prior to Forte, Dr Nat Ware founded the non-profit 180 Degrees Consulting (www.180dc.org) and over the course of a decade grew it from nothing into the world's largest consultancy for non-profits and social enterprises, with 150 branches across 35 countries and over 5 million hours of pro bono consulting services provided. As a result of his leadership with 180 Degrees, Nat was selected as a Forbes 30 Under 30.

3. Business Know-How: Nat Ware was the Top MBA Student at Oxford, so has the financial and business management expertise to enable Forte to have an impact on a world scale.

4. Diversity: Our team is very diverse, when it comes to gender, ethnicity and professional backgrounds.

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.

Our main partner is 180 Degrees Consulting (the world's largest volunteer consultancy), which our Founder/CEO previously founded. In every country we currently (or will soon) operate in (Australia, US, Slovakia, France, Germany, Canada, UK, and Netherlands), 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/TIBS.

We are also supported by:

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

- 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)

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

- Oxford University: Forte/TIBS 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 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 (in fact, improving the budget in the short-term)
• Training 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 training cost for cashflow purposes, and a small cut of the tax transfer to ensure long-term sustainability. As shown in the financial model at bit.ly/DWC_Forte, 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 this Challenge will enable this new, innovative financing approach to reach scale.

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 medium or long-term. Funding from this Challenge will enable us to reach the point of financial sustainability. 

In 1-2 years from now, we will be financially sustainable because we have a business model where social and financial returns are perfectly aligned.

The way our model works is that investors (via Forte) pay for the cost of reskilling for disadvantaged individuals. This training increases 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 (1-5%) at both stages to cover our costs.

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 will 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 bit.ly/DWC_Forte.

We are applying because we believe that the Forte financing approach can unleash literally tens of billions of dollars of private capital towards reskilling disadvantaged populations worldwide.

We believe this is possible because, unlike many financing alternatives, we do not rely on investors being willing to receive concessionary returns. With ISAs, high investor returns necessarily involve individuals paying more, which is bad from a social impact standpoint and makes it difficult for the public to support the model. In contrast, in the Forte model there is perfect alignment of social and financial returns, so even morally agnostic profit seekers do what is in the best interests of humanity and provide the highest-quality education. Our model is also cookie-cutter and scalable (unlike SIBS that require lots of time and cost to measure ad hoc outcomes).

However, in order to unleash huge quantities of private capital, we need to have the funding to (a) complete 3-6 TIBS projects and (b) build the Forte platform to facilitate this financing approach at scale. We are doing both of these things from 2019 to mid-2021. 

As such, the $100,000 could unleash over 1000x that in capital. It would be a very highly leveraged grant.

In addition to any prize funding, we would greatly appreciate three other forms of support:

• Introductions as we launch in the countries where ServiceNow operates
• IT mentorship as we build out the Forte platform
• Additional publicity for the TIBS financing approach

These three ways are explained in more detail below.

The three main ways that ServiceNow can assist Forte are:

1. Expansion 

We are about to launch in Germany, France, Netherlands, UK, Canada and New Zealand. Given that ServiceNow coincidentally works in all these places (except NZ), it would be great if Forte can tap into ServiceNow's networks. Any introductions that ServiceNow can make to key stakeholders in these countries would be appreciated.

2. IT Mentorship

We are in the process of building out the Forte platform to be able to finance reskilling via TIBS at scale.

On the back-end, this will be a blockchain-based platform with smart contracting, audit trails, and tradable tokenized securities. It will, in effect, automate the generation of hybrid corporate-government bonds, and be able to split income tax revenue (paid by individuals) between governments and investors in a transparent, secure and efficient manner. This will enable us to operate anywhere in the world, even in countries without strong institutions.

On the front-end, the Forte platform will include real-time dashboards for different key stakeholders (governments and investors), to give them visibility over each TIBS-financed project (including expected payments and returns).

We would love to receive mentorship from ServiceNow on how to build effective IT and customer workflows (which is one of ServiceNow's key capabilities).

3. Publicity

Finally, we want the TIBS approach to be adopted worldwide and become the main way we finance reskilling. Any publicity that can be obtained to get this idea out into the world would help us to achieve our mission.

The following organizations may be able to assist with publicity, funding, connections with high-profile government officials, and other forms of support:

• Rockefeller Inclusive Finance
• Case Foundation
• Stanford Social Innovation Review
• World Economic Forum
• European Bank for Reconstruction and Development (EBRD)