Summary: The broad concept that Hollis’ paper proposes (“outcome-based financing”) has already been applied to several other areas such as reducing homelessness, improving specific health outcomes, etc. Recently, McKinsey, Meta, and a few others agreed to spend $925m to fund a similar mechanism to incentivize carbon capture technology innovation. Seems like there’s lots of interest in expanding this type of financing model from big funders. Maybe something for the EA community to become more engaged with since there seems to be an appetite.
More details: As I understand it, Hollis’ paper’s proposal fits into a broader concept known as “outcome-based financing”. The space is much more developed than I had thought when I wrote this previous comment. Two primary outcome-based financing models exist—pay-for-success (“PFS”) contracts (also known as social impact bonds) and advanced market commitments (“AMCs”). Hollis’ paper (from 2004) describes an application of PFS contracts. Both, PFS contracts and AMCs, are already applied to several industries including health and clean energy.
Definitions:
PFS rewards innovators based on some per unit metric (e.g., QALYs per drug sold in Hollis’ example).
AMCs reward innovators in a pre-specified lump-sum fashion (e.g., the WHO, World Bank, a few countries, and the Bill and Melinda Gates Foundation funded a $1.5 billion AMC for entities that could create a vaccine for pneumococcal diseases).
Real-world Examples:
PFS
Here’s a link to Oxford’s PFS database (~200 projects//$500m since the concept was formalized in 2010). PFS contracts are used most commonly for reducing prison rates, improving health outcomes (in developed and developing countries), reducing homelessness, and upskilling labor. Check out the database for more details.
Hollis’ org is trying to set up a clean energy PFS fund—seems promising, but I think doing this in cleantech is an extra tricky.
I’ve been engaged with a group that’s trying to get funding to do this for a specific pharmaceutical application (see Crowd Funded Cures).
Seems like there’s a lot of momentum for outcome-based financing. Perhaps, the EA community should become more directly engaged in promoting this since it seems tractable.
Thank you!! It’d be great if you want to write it as a top-level post, to get more visibility and to be more easily indexable, or maybe add something to this wiki page.
Crowd Funded Cures seems like an amazing initiative, wish you all the best!
Hey schethik, did you make progess with this?
@EdoArad
Summary: The broad concept that Hollis’ paper proposes (“outcome-based financing”) has already been applied to several other areas such as reducing homelessness, improving specific health outcomes, etc. Recently, McKinsey, Meta, and a few others agreed to spend $925m to fund a similar mechanism to incentivize carbon capture technology innovation. Seems like there’s lots of interest in expanding this type of financing model from big funders. Maybe something for the EA community to become more engaged with since there seems to be an appetite.
More details: As I understand it, Hollis’ paper’s proposal fits into a broader concept known as “outcome-based financing”. The space is much more developed than I had thought when I wrote this previous comment. Two primary outcome-based financing models exist—pay-for-success (“PFS”) contracts (also known as social impact bonds) and advanced market commitments (“AMCs”). Hollis’ paper (from 2004) describes an application of PFS contracts. Both, PFS contracts and AMCs, are already applied to several industries including health and clean energy.
Definitions:
PFS rewards innovators based on some per unit metric (e.g., QALYs per drug sold in Hollis’ example).
AMCs reward innovators in a pre-specified lump-sum fashion (e.g., the WHO, World Bank, a few countries, and the Bill and Melinda Gates Foundation funded a $1.5 billion AMC for entities that could create a vaccine for pneumococcal diseases).
Real-world Examples:
PFS
Here’s a link to Oxford’s PFS database (~200 projects//$500m since the concept was formalized in 2010). PFS contracts are used most commonly for reducing prison rates, improving health outcomes (in developed and developing countries), reducing homelessness, and upskilling labor. Check out the database for more details.
Hollis’ org is trying to set up a clean energy PFS fund—seems promising, but I think doing this in cleantech is an extra tricky.
I’ve been engaged with a group that’s trying to get funding to do this for a specific pharmaceutical application (see Crowd Funded Cures).
AMCs are less common. However, last week McKinsey, Stripe, Meta, and a few others decided to finance a $925m carbon capture utilization and sequestration AMC.
Seems like there’s a lot of momentum for outcome-based financing. Perhaps, the EA community should become more directly engaged in promoting this since it seems tractable.
Thank you!! It’d be great if you want to write it as a top-level post, to get more visibility and to be more easily indexable, or maybe add something to this wiki page.
Crowd Funded Cures seems like an amazing initiative, wish you all the best!