International Conference UAW – Lisbon23 April 2014

KEY NOTE SPEECH“Social Innovation: Motor for social and economic

development”Mr. Simon Willis

CEO – Young Foundation

Good evening. Unfortunately we have run out of time, so any questions? (laughter)

I was… I was very touched this morning session listening to Domingos, and Jaime, and Filipa paying tribute to my dear friend and former colleague Diogo Vasconcelos, and it reminded me of a time quite a few years ago when I was in Lisbon. And coming to Lisbon is a very bittersweet feeling because I always associated it with being here with Diogo, who is no longer with us, and I was speaking at a conference which Diogo had arranged and we were running a little bit behind schedule, it was the end of the morning session, and I thought I could catch us up to the right time, so I spoke very quickly and I spoke for 12 minutes and sat down again and we were back on time. And Diogo rushed up to me in the coffee break and said: “What the hell was that?” and I said: “well, I was getting us back on track and also showing respect to the audience by being brief, as we do in England”, and he said: “Okay look, listen to me, in Portugal the way you show respect to the audience is to speak for as long as possible” (laughter). So I’m just going to talk for two or three hours now, sorry about that, you might want to text your families that you are going to be late for dinner.

So, this is my plan, I’m going to talk about four things: the problem we face together, some of the traditional answers that have been provided to this problem, what role social innovation might play, particularly disrupted social innovation, and how to get started on this project.

So here’s the problem and I’m no expert on the situation… this is a very small shelf… and I am no expert on the situation in Portugal so I’m going to speak from the point of view of the UK. And some of these problems may be familiar to you, some might be different. But we’ve been through a period of increasing crisis and catastrophe, where effectively not only have the governments, that we looked to, to control the worst excesses of the markets, effectively become collaborators with those markets and in particular with the financial markets and participated in increasing

financialization of our economy so that a larger and larger proportion of GDP growth in the last two decades has been captured by the financial sector, hand-in-hand with the process which of course came to ahead of a few years ago, whereby we can see that we and our governments have had to take on the funding of all the risks, not only of the primary and fundamental research that underpins the innovation in the private sector but also taking on board the losses that they’ve made as a result of taking too many risks, while allowing the rewards to be not only privatized but captured by an ever smaller elite of the top of our companies or organizations and our banks.

This has been underpinned by what I’ve called here the de-legitimization of some collectives. What I mean by this is that the discourse has been about the importance of the individual, the freedom of the individual and the breaking down of our ability to organize ourselves socially, to organize labour, to organize collectives to counteract some of the powers which are damaging us. I say some collectives because while the discourse has been very much about the illegitimacy of organized labour and other collectives that are regarded as being old-fashioned and part of the past, the collective organization of capital and of financial services and the capture of many government decisions by organized capital has remained and indeed increased in strength. We’ve seen at the same time a strong set of arguments for privatization which have effectively allowed the penetration of many of the social and state services that we’ve built up in the post-war period to effectively also be captured by financial elites so that profit can be extracted at the expense of providing healthcare, education, social welfare and so on. This has been allied in recent times with the particularly unpleasant narrative of blaming the victim or sometimes blaming the outsider. What I mean by this is, when we drive people into debt and into unemployment and into poverty and into obesity and into un-wellness by the unbalanced nature of our economies to then turn around and blame those individuals for being undertrained, lazy, greedy, too much reliant on hand-outs and so on and so forth is a particularly violent way of justifying what has been a regrettable set of actions by our elites. It’s the common redoubt of the bully, starting in the playground and going up to the level of

the nation and then even the region to blame the victims for the punishment that you made out to them. It has always been the way of the violent and abusive to do this and I think particularly in the context of Europe, when I look at the discourse in recent years around the southern European countries - the idea that Portugal and Greece and Spain and others should be blamed for having participated in a system which enriched the banks and countries that now blame them for the situation they’re in - as extraordinary and should be rejected.

What I’m trying to draw here is a parallel between the way we talk about those people at the bottom of society and those who’ve been left behind, about the growing extraordinary damaging phenomenon of youth unemployment and the way which we talk about various countries, I think there are some interesting analogies between the two. And they are part of the same system. And underpinning much of it has been debt.

The problem we’ve had is that economic growth for the last two or three decades has created surpluses which have to a very large extend been captured by the top five or ten percent of society. Now this is an unsustainable way to run a national, regional or international economy because it suppresses economic demand which drives the motor, which is generating the wealth. And the only way out of it has been to lend more and more money to those people who have not benefited from economic growth so that they can continue to be economic participants and to drive for that growth. This is obviously a completely unsustainable system and led to a first taste of the catastrophe that ultimately must come from it in 2008. And the following extraordinary set of circumstances by which we all paid to bail out the financial institutions, that had created the unsustainable debt structures and now had to pay through austerity by cutting benefits to the poorest and the weakest to make back and reduce some of the debt that in many cases was largely created by bailing out the very financial institutions and banks that had created the problem in the first place.

This is an Alice in Wonderland situation. What underpins this economic phenomena, set of phenomena, has been as you all know rising inequality. And Portugal, as we can see here has chosen to be in the very elite company of the United Kingdom and United States - and congratulations on that - has been one of the most unequal societies in the developed world.

This is another illustration of the same problem, here in the US, which is of course running just a little bit ahead of Portugal and the United Kingdom, but it gives an absolutely striking illustration of what has been happening over the last 30 years, following a very slight decline in inequality following the second world war, we’ve seen effectively return to a situation which we last saw at the very beginning of the 20th century with the top 1% capturing here half of all capital gains in the US and the top 100 to 1% capturing around half of that. I put this picture up because I really like the expression on this woman’s face. I have absolutely no idea what her sign says and perhaps somebody could tell me afterwards because for the look of serenity and truth on her face I imagine that what it says on the sign is something true. What is the effect of this inequality? It’s corrosive at every level of society; I think we have to stop talking about the effect on the poor and alone and on the socially excluded or even using terms like “social exclusion” because this is a distortion of our economy which is corrosive in every way. It’s corrosive and damaging in terms of mental health, in terms of chronic illness, but most profoundly and particularly when we have high level of long and sustained youth unemployment, it creates a breakdown in social cohesion, a breaking apart of the trust that we have in each other and the profound undermining of the trust that we have in our companies, in our institutions, in the parliaments, in police forces, in our newspapers and TV stations. Trust levels certainly in the UK have never been so low as they are now. If you ask people about each of those sectors and each of the organizations which present them “Do you trust that these people are there to serve your interests” and in the United Kingdom at least it’s now down at around 30% of people who answer “yes” to the question that they trust these institutions. And that is an extremely dangerous situation for us all to be in. Because it opens people to the attractions of easy answers and in

particularly populism and what we are starting to see at least in the United Kingdom is increasing attraction to the idea of blaming firstly Europe, secondly foreigners, particularly immigrants, and finally the poor. Now, a situation where you start to blame immigrants and the poor for a situation that was created by anybody other than those people is a very dangerous social situation to be in and we’ve seen that story before.

So what are the traditional answers? Well, we have a group of people.. I’m going to do this really crudely in terms of the right - politically, the left and the kind of middle way, certainly in our country and the US called the third way for a while, and what they offer us. Well, very simplistically on the far right what they tell is that we need more market forces, we need more competition, with need more entrepreneurialism, if we can just get the state to reduce in size and get off the back of the natural entrepreneurial energy of the market then the problems would all be solved. That is getting to be a very hard story to maintain given the facts of the last 30 years but it’s still maintained. On the left and again I’m being incredibly simplistic we traditionally had an answer that what we need is more state, that we need a government that would provide for people and that we could solve everybody’s problems.

The third way approach, the kind of middling approach that was developed by Tony Blair and Bill Clinton amongst others, in a sense to my mind took the worse of both sides. It said, let’s have the market being relatively unbridled and let’s privatize as much as we possibly can and give particularly financial services as much freedom as possible to do more or less whatever they like and part their profits in the offshore sector. And at the same time let’s proceed to try and mop up the damage afterwards by having a social program that deals with the after effects of the aforementioned by providing a welfare system which encourages dependency amongst those that have been left behind - effectively capturing the worst elements of both sides of the previous political alternatives. Characteristic behind all traditional arguments which seek to end argument, to end political argument, is to claim that there is no

alternative, that it is scientifically, ineluctably, inevitably proven that certain things must be the way they are.

You know, when I was young there were still Marxists around who believed that it was scientifically inevitable that capitalism would destroy itself and this was certainly a big relief to young socially concerned people like me because all you really had to do apart from going on the occasional demonstrations and read some extremely difficult to understand French theory was just wait until capitalism destroyed itself. It was scientifically proven, it was kind of determined. No less ridiculous, damaging and toxic is the claim of the neoliberals that the market works the way it does because of some kind of God given scientific inevitability and that all we have to do is get out of the way let it do its magic. This tyranny of no alternatives, as the Brazilian philosopher Roberto Mangabeira Unger has called it, is really the greatest enemy that we have in my view. This idea that you have no alternative is the most profound, dangerous enemy that we face. It has always been the case that we had a choice and we have exercised a choice often through large-scale disruptive social innovation. We decided for example that we didn’t want children to work in factories at the age of six or eight, or ten. The arguments that were mounted against stopping children from working in factories at the time that those laws were introduced and lobbied for politically were exactly the same arguments that we will hear now when you hear people trying to argue for capping executive pay or capping bonuses in banking or introducing some kind of respectful minimum wage for workers. We decided we didn’t want slavery at a certain point and the same arguments were heard again. If we together decide that we want a particular social outcome from our markets, if we recall that they are our tool that they belong to us and they are ours in the same sense that their government of ours, then we can choose together any outcome that we collectively want. And the inequality and degradation and youth unemployment that we have found ourselves with at this point in time is not of our choosing. It is not what we collectively want. So we have to find strategies to together choose some alternative routes.

And this is where unexpectedly I’m going to swerve into the subject of innovation. I put a picture up here of a river delta because early cities and civilizations were all built around river deltas for all sorts of interesting reasons and became the crucibles of innovation as well as civilization, and I think part of the reason - there is some good agricultural and geographical reasons why you might see the growth of civilizations around river deltas, but it’s also because they were like an early Internet if you like. They were a form of physical network that allowed for exchange between diverse groups and when you have exchange of specialization and growing diversity, so innovation is based on networking together people of very diverse outlooks and abilities in creating new ways of solving our problems. One of the interesting side effects of growing inequality is almost certainly a fall-off in innovation because inequality leads to a lack of diversity at each strata of society, causes a kind of growing homogenization and also is driven by a very narrow sense of human possibility and of what thriving looks like rather than a multiplicity of interdependent flourishing which is what people naturally in communities would seek if they were given to freedom to do so.

So I’m interested in innovation because I think one of the interesting things that socially concerned people and amongst the people on the left did wrong was to turn their back on innovation and entrepreneurialism because they associated those things with the market and they assumed therefore there must be something wrong with them. And I think that one of the interesting things about the social innovation movement at its most radical is that it says “let us find a different third way, one that takes the tools of innovation and entrepreneurialism, which are so powerful in terms of driving change and productivity and the expansion of human possibility, let us take those tools and strategies from the market and let us apply them to the social ends which we’ve been trying to achieve largely through the state. So fundamentally this new third way says we will not solve our social problems in the traditional way, we will not solve them using large top-down hierarchical public-sector institutions that innovate at the pace of the snail - certainly the Labour government in the UK tried the project of seeing whether we could sort out our social problems by making everybody in the

country into a civil servant - I think you tried something similar here in Portugal and it doesn’t work, but nor does handing these problems over to the market work. The market is profoundly ill-equipped to deal with the complexity and subtlety of the social problems that we are wrestling with, and is not motivated to do so, and is not constructed to do so.

So, this is what the innovation movement is about, it is about a new attempt to solve some of these problems using what we see is the best of both sides and it doesn’t try to replace market, which has a role, or the state which also has a role but rather take the very best of those, route them in the third sector, in the social sector, the sector that’s made up of misfits, cranks, troublemakers, thinkers, academics, churches, political parties, community groups etc. etc. etc. you know, the big… the other sector, the sector in between. Route it in that sector and taking the best strategies from the other two, says maybe we can solve some of these social problems in a new way. So, I put up what is regarded in the private sector as some of the traditional innovation strategy areas that people look at - and there’s a huge literature on each of these and sometimes if you start researching you’ll find that there are 10 or 12 or 15 or whatever, it doesn't particularly matter - but the main point to make is that innovation is not just about product innovation. And much of the thinking that we have in our heads about what innovation is about, part of the reason we find it so hard to understand and think about what social innovation might look like, if we took it to radical scale is because we are somewhat captured by this idea of product innovation, things like, you know, the iPhone. But in fact, of course in the private sector as in all sectors most innovations happen in other areas and I have outlined some of them there. The other piece of pretty well thought through categorization of innovation in the private sector is the difference between strategies which are sustaining or disruptive. And there’s a lot of confusion about these terms. Really all that it means is that the sustaining innovation is one that happens inside an existing company or organization and it can be either incremental or it can be radical. So a company can come up with a completely radical innovation or it can slowly improve innovations it has made before, and that’s the difference between radical

and incremental. A disruptive innovation strategy is something completely different; it’s the strategy by which a small start-up company destroys a large incumbent, and the private sector, and the market, is driven forward by disruptive innovation, by what should better be called credit destruction, whereby very, very small companies constantly displace large companies under certain conditions. And we’ve got a problem at the moment in our economy because one of the conditions that you need is that the large incumbents have not captured the government and policymaking and regulation to the extent that they are able to effectively defend themselves against disruptive entry into the market, which is what all large incumbents attempt to do. The more you have a concentration of wealth in very small elites as if seen in my country and in yours the more at danger we are that that resource will be applied to corrupting government decision-making.

However, the reason I’m so interested in disruptive innovation strategies is not because they are at-risk in the private sector but because I think they are increasingly what we are going to need if we are going to find the full potential of social innovation. So, most social innovation today has been in the first category. It’s been sustaining and small incremental experiments inside existing organizations that slightly improve things and it’s good and it’s well worth doing and apart from anything else it equips a larger and larger group of people with the skills that they need in order to become disruptive innovators and disruptive social entrepreneurs. So, I’m not saying anything against sustaining incremental social innovation; what I’m saying is that if we’ve got a problem with incumbents and incumbent elites then the strategy we are going to need is a disruptive one, we’re going to need on occasions, to attack from outside and from below and what that means is setting up new organizations, and they will be small, and the very best of our social enterprises in the end should be able to solve our social problems more effectively and create more demand for their approach than the large institutions which they seek to replace.

This is a really optimistic strategy, I mean… I am despite all the really depressing, negative things I’ve said so far in this talk fundamentally an

optimist. But I think it’s going to take a lot of hard work, a lot of courage to pursue some of these disruptive strategies.

Placing it in historical context, what I’ve put here is very roughly the kind of historical development of innovation strategies in the private sector over the last 100 to 120 years and I’m not going to dwell on these approaches at all. The point I really wanted to make is that one of the other reasons we find it so hard to understand, and think about and talk about social innovation, is because it’s actually different in nature from those who have come before. It is based on and draws on a number of the previous approaches, particularly open innovation and design-based innovation, but the reason it’s so different is because not only does it have a particular outcome in mind - positive social impact rather than profits to the innovator - but it’s also social in its methodology. It rejects the idea that the way to solve our social problems is to get a couple of bright postgraduates and put them into room in the capital city to think of another strategy for the government to implement from the top down.

Social innovation, goes about its work in a completely different way by starting in communities, by starting with people who understand and are concerned about the problems they are trying to solve, whether they be in healthcare or education or childcare or obesity or unemployment or training or whatever it is, where practitioners or sufferers come together and start to design themselves new interventions and new solutions from the bottom up. So, social innovation is social in its objectives as well as in its methodologies. And typically at least the way that we’ve practiced it for over the last 60 years in the Young Foundation, it starts by using qualitative research and ethnography rather than quantitative research. The world is awash with people measuring stuff, you know we’ve got statisticians and macro economists and micro economists, and now we’ve got big data coming along; but if you really want to understand the nature and texture of the failure of a particular policy or service you have to sit down at length with the people that you are attempting to help and understand how their lives and their families actually work day-to-day, and no economist, no

matter how micro, can tell you the answer to that question. So you start in an embedded way in a community listening deeply and understanding what people’s problems are before proceeding into a process of iterative social collaborative co-design of new solutions. That’s the way that I believe social innovation at its most disruptive can and should be practiced.

Maria do Carmo made a very good point earlier today that one of the strengths of social innovation over the typical policy strategies that are used in the public sector is that it can be experimental, that it need not waste very vast sums of money implementing very vast projects, that, as the ambassador said, no longer answer the correct problem by the time they finally come to fruition, but rather proceed by iterative steps and experiments that mitigate to the greatest possible degree the risks of doing something new.

I’m not going to send you all to sleep by talking at length about this slide but I’m very happy to share it with anybody who wants it later, it’s kind of a very high level map of some of the many specific sets of tools that we and the people that we work with have developed to actually drive forward social innovation processes. And it goes through a process of evaluation and testing and iteration, so in effect this is a more elaborated version of the previous slide that gives you some sense of some of the rich texture of the actual practitioners working in the field of social innovation.

So, I’m going to finish by giving some practical examples. As I said, we’ve been working for 60 years in this field now and it’s interesting just to tell you how we started actually. Michael Young worked in a think tank called Political and Economic Planning, classic think tank in the middle of Whitehall, as a very, very clever young man and in 1945 he wrote, - he was one of the lead authors of the Labour Manifesto which designed the architecture of the welfare state in the UK, or a lot of it. Several years after that election he started to get this uneasy feeling that the policies which Labour was implementing were not having exactly the effects on those very people that they were trying to help, that they thought that they were

having. And so he moved out to the East End of London, where we still are in Bethnal Green, to a very poor community, and he started doing ethnography. He was trained as an ethnographer and sociologist and he started doing this sitting around, listening to people and he discovered some really interesting things. He discovered that these policies, enlightened policies of development, of predevelopment, of new towns, of tower blocks and so on and so forth had failed to spot one of the most fundamental ways in which people derive their ability to be resilient and to flourish even in the most difficult of circumstances and that is through their extended family and community networks, that were stopped to introduce policies, that tear apart families and communities; you do far more deep damage than you realize that you’re doing whatever the benefits of your policies may be, and this led to many changes in social policy in the UK, but not enough. And it was through that set of insights and that initial experiment that The Young Foundation began experimenting with this area of social innovation, disruptive social innovation ever since.

I’ll take just one set of examples, we’ve done Do Things, we’ve done Run Things, we’ve done Aspire To Run Things. We incubate organizations, companies, charities, public sector organizations and political movements - and when they are big enough to stand on their own two feet we kick them out the front door. And we’ve created about 80 so far. And I’ve given you some examples here, some of their work just from the area of education which of course, if you are obsessed with the damage that inequality does, then one of the first areas you’re going to look at is education. So in education we’ve created the things that I’ve put on this list, as well as many others and let me give you one example here, the first two, the national extension college was something which allowed people to study at a distance for school subject that weren’t available at their local school and it was a pilot for the Open University. What we did with the Open University was start to get the spare time of academics and use it to teach working age people, who never had the opportunity to go to higher education. At that time in the late 50s early 60s in the UK 4% of the population got to go to University and he thought that that was missing out on a huge

opportunity for fulfilment and flourishing that people had beyond the 4%. He got to the point where he had many, many, many people being taught by various academics from various universities, and some of them had got to the point, and when they were ready to graduate and he went first to Cambridge University and then to London University and said “I’d like you to give these people degrees. And they said “you must be joking, if you think that we are going to devalue the quality of our elite degrees by giving it to these working age people, who have been studying at night for these last years and years, then you are out of your mind.” So, he was forced to set up his own University, which now has something like half a million students. And of course that was part of the movement, which he was a part of, to drive up the idea that more than 4% of the population should go to University. It’s very strange when we go and visit the open University now, we’re an organization of only 50 people and the open University employs 11,000 academics and yet they still treat us a bit like a parent: a very, very, very small parent - it’s a strange relationship.

We also set up WHERE, which was an organization to help people work out where they could get education and also WHICH, the Consumer Association which at the time was a very radical idea that you should put more information into the hands of consumers to allow them to choose more intelligently products. It was a legally dangerous thing to do at the time but of course it has now become part of the landscape.

We’re looking now at how you might revisit consumer movements and ask this question: Why is it that we can’t use our consumer power to put pressure on organizations where the pay differential is five or six hundred to one between the senior executives and the frontline workers, rather than twenty to one, or thirty to one, as it was in a period of greatest economic growth in our country. Why is it that we couldn’t use the power of women consumers who are the principal purchases in many sectors to put pressure on those companies to pay equal pay to men and women? It’s a fascinating thing, I don’t know what’s happening here in Portugal, but certainly in the UK the gains that we made on gender equality, in particular on pay, has

started to go backward now, so it’s a kind of lagging indicator. So, long after we’ve started seeing pay inequality going backwards we started to see gender inequality going backwards in the last couple of years. So, we now started to see an increasing gap between what men and women are paid.

Michael Young often said the opposite of inequality is not equality, and people traditionally attack those who argue against inequality by saying, you know, if you want equality what you really arguing for some kind of, you know, Stalinism, where everybody has to wear grey overalls, which of course is ridiculous. The opposite of inequality is what we used to call fraternity. It’s an idea that people are interdependent and that there are a million different ways to flourish and be successful, and not the increasingly narrow and errant and consumerist ideas of success that we’ve started to impose on people in recent years based on this kind of individualism of the striving soul. Young wrote a book called “The Rise of Meritocracy” and he said, what he invented the term meritocracy, in fact, to criticize it. And watch out if you ever get to the situation where people who are rich and powerful think that they achieved that because of their own individual effort and intelligence, because there will be no holding them back, he said, at least with aristocrats they have some sense of embarrassment about the pure chance which had made them powerful and wealthy; that sense of embarrassment gave them often times a sense of obligation to the communities that they lived in. Meritocrats do not feel that, they are under the illusion that they themselves individually have created the wealth and the power that they have achieved, and they’ve been persuaded.. or persuaded themselves somehow to ignore the people that have worked for them, or where those people came from, and how they were educated, and how they got transported, and how their health was cared for, and how the intellectual property that they benefited from was protected and so on and so forth, and everything else that we as a society did to create the systems and infrastructures that made them rich.

So that’s a little bit of what we’ve done and I won’t go into some of these areas unless one of you is so desperate to stay here even later this evening

to hear about what we’re doing in financial services or gender or health, with cities or places and regions, or indeed with the Europe lab, where we’re looking and trying to disrupt the strategies to make Europe more accountable and transparent.

I’m going to finish with something that our Director of Places says whenever he’s talking to the political leadership of a city or region, and he says it on the basis of the authority that he worked on the strategy of the regeneration of the Basque region for the last 20 years, one of the most successful socioeconomic transformations of the last century. And he always starts by saying “the history of a place is a set of decisions you have to make, not a set of facts” and what he means by that, is that not that you should make up a fairy-tale about your past but that we are trapped in a story that we tell ourselves about our history and about our place and about our identity. And in the Basque case, what he said was “the story that we had was one of industrial decline, mass unemployment, the end of… no more steel industry, no more ship building industry, violence, terrorism, warfare, depression. And we decided to retell our history to ourselves using our culture and our music and our architecture and many other political and social strategies as one of resilience and determination, creativity and reconciliation. He’d come out a background of having cofounded the Basque peace movement and it was on the basis of that new story that they decided to reinvent the former manufacturing industry as a new advanced manufacturing industry, which has become the second largest centre of advanced manufacturing in the world.

When I wander around Lisbon in Portugal, which is a place that I truly love, I have these very mixed feelings because the extraordinary history of creativity and entrepreneurialism, of aspiration, of determination, of resilience and music and food, that was so eloquently talked about in the previous presentation, and how can a country that consumes that many pastéis de Belém possibly fail to meet the challenges which the new economy has presented it with.

So, I’m profoundly optimistic that this rising up of this growth, of this bubbling up, of social innovation and social entrepreneurialism which we see now in Portugal, which is so exciting, is a sign of great things to come. I don’t underestimate the complexity of the challenge, but really, I’d like to know what the alternative is.

I’m going to leave you with one final thought. Of course wandering around Lisbon and thinking about that extraordinary man Diogo Vasconcelos, I was thinking, he sort of summed up a lot of what I was trying to capture, he was of course an innovator, an entrepreneur, he was a strange political mix, I think, formally speaking, he came from the conservative end of the political spectrum and yet most of his friends seem to be from the Communist sector, you know, he was a very complex individual but above all he was completely and unstoppably optimistic. His favourite catchphrase was “Let’s put them out on the moon“. I never had a clue of what he actually had in mind specifically, but that’s the spirit that I try to carry with me.

Thanks very much for listening.