The end of prison

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Go directly to jail. Do not pass Go. Do not collect £200.

This has been the basic approach of the criminal justice system for centuries. Whether prison is run as a public or private institution – there’s always someone making a profit. Everyone from manufacturers of uniforms to garages servicing prisoner transport vehicles has got their fingers in the incarceration pie. It’s a significant sector of the global economy.

However, this is all about to change. This is likely the last generation that will use imprisonment as its primary corrective intervention. And I’m going to show you the technology firms that will replace the whole expensive, ineffective edifice.

Let’s look first at why this is going to happen. First some underlying trends – with the US as an example. The US is the world’s jailer, and what happens there is indicative of global penal expenditure. Currently, the US prison population is falling. These numbers are absolute – the downturn isn’t corrected for rising population. It’s a long-term slide.

So, what’s causing this change? One word: lead. A huge section of the population in the 20th century suffered serious brain damage from leaded petrol. This was concentrated in poor, urban communities – exactly the ones that are so frequently scapegoated for crime. But it was the chemicals, not the communities, that were responsible for this impulsive, impaired group of men. Now the lead has gone, the age of incarcerated men is changing. The same group is getting jailed, even as they age. This can’t go on forever; incarceration numbers are falling as the effects of age naturally take its toll on recidivism. The younger guys growing up to replace the older lags aren’t falling into crime as commonly – because they’ve not had the brain damage that tips them from being angry, foolish youths into being dangerous criminals.

But what about crime type?

Although we’ve seen a fall in violent crime, it’s not as big as the fall in property crime rate. While the lack of restraint resulting from lead-induced brain damage is a potential factor in crimes like opportunistic burglaries, the fall in property crime has other causes. It’s much more to do with increased security (note the recent trend towards key theft, for example); and the falling value of electronic goods. People just don’t own as much physical, nickable stuff these days.

But that’s not the whole story. There’s much more to this trend than a simple fall in the prisoner/offender population.

The simple fact – and one that’s deeply uncomfortable for most of the criminal justice industry – is that prison doesn’t work. There is of course a protective effect on innocent members of society while “bad guys” (or lead-poisoned guys) are in jail. However, the “protection” effect of many types of sentence is more than compensated for by the shockingly high recidivism rates on release.

Historic US data shows the effect clearly. With the exception of the more recent drug offences, more than half of all released prisoners are rearrested across every category of offending. Assuming that detection rates are far from perfect, the actual recidivism rate is likely to be far higher. Prison is no more than a temporary reprieve for society – and voters ultimately want solutions that protect them from crime.

Short sentences are by far the biggest problem. Paradoxically, it’s exactly the more minor offences with the highest reoffending rate. These are, of course, the sentences that can most easily be replaced with other interventions. And this is why there’s such a huge profit opportunity. Because not only is prison generally ineffective (when a community sentence can reasonably be compared), it’s also absurdly expensive – £40,000 per year. This would make a degree of sense if it delivered value for money, but of course it doesn’t. One study shows a cost benefit ratio of 3:1 for prison (at best worthwhile as a deterrent to would-be criminals), and an astounding 1:1.7 for community sentences. That’s nearly 5x better financial performance. This is presumably because community sentences are not only cheaper, but they allow offenders to keep their vital job and family ties – and also prevent them from building criminal networks and skills on the inside.

So what’s this got to do with technology? And more importantly, how can you invest?

Again, one word: tagging. Tags are going to change everything. A small number of criminals really can’t be left to their own devices. They’re so incredibly dangerous, or mentally ill, that they cannot be let out. But for most, the prospect of an immediate recall to prison is enough to keep them in line.

I know what you’re going to say: “But we have tags already! And they don’t work!”

Yes – that’s all true, but tags are getting much smarter.

Most existing tags fulfil a requirement for offenders to meet terms of a kind of house arrest. Old-school tags are fine for this use, but “locking up” someone at home for 12hrs a day does not, in isolation, solve the problem – and that’s why these next generation tags are crucial.

The new tags stop offenders doing one of three things – all of which address the vital “public protection” element of incarceration. This perceived need for public protection is important, as it’s often the killer argument for keeping prisons open (or rather closed).

Firstly, being in a particular place. Some offenders are, for good reason, barred from particular places: pubs, their ex-partner’s home, or children’s playgrounds. Modern GPS-enabled tags can now “geo-fence” offenders, ensuring they stay out of their personal trouble spots.

Second, doing a particular thing. Many of the most socially-dangerous criminals are perfectly respectable – until they’re drunk (or high). Tags, such as those from SCRAM Systems, force offenders to stay sober.

Thirdly, committing offences. This may sound obvious, but tracking is (in many cases) enough to tie an offender to a crime. It takes a special kind of idiot to commit burglary or carjacking when they can be quickly and conclusively linked to that crime. This, technologically, is very similar to the first case – but the reasoning is very different. Because of this, it’s a lot less intrusive for offenders in the later stages of rehabilitation. As long as they’re not linked to crimes, they can pretty much do what they like.

In all of the above cases, the impact on a compliant offender is rather trivial – at least when compared to prison. This means that sentences may become much more benign. Before the right-wingers squeal, remember there’s a huge benefit to this: sentences can be much, much longer. It may not be long before we see serial offenders tagged for decades, or even for life. I don’t think many liberals would shed a tear for a serially-violent alcoholic who is banned from drinking for 20 years. However, many reasonable people who would be shocked at even a five-year sentence for a few punch-ups.

So, how can you profit from this coming change? There a two fundamental ways to ride this “crime wave”.

Firstly, you can invest in the tagging supplying companies. Where there’s some patentable intellectual property (IP), it’s likely to be a good investment angle to take. Furthermore, where the technology firms are able to “own the customer”, such as providing software contracts alongside the hardware, that really helps protect against me-too manufacturers. There’s a good chance that the additional value that’s generated by this direct traction with the customer (ie, the justice system) will resist the “race to the bottom” resulting from commodification of the tag hardware itself. Firms in this supply chain include buddi, GEO group, Steatite, Astrium and Telefonica. Only the first of these has really high exposure – as it is a hardware manufacturer, with a tight focus.

Secondly, you can invest in the big services firms who will run the tagging and monitoring contracts. In the UK, companies like G4S (formerly Group 4 Securicor), Capita and Serco are good at tying up government orders. But the problem with this approach is that they’re often spread across wider security contracts – which could take a battering as the prison sector contracts. Only very specialist firms will likely end up laughing all the way to the bank. For an example of one that might do just that: Sentinel Offender Services.

So, if you’re keen to get your investment under lock and key, I’d look to play only the most specialist service providers. I think you should focus on technology firms with either protectable IP; or customer access and real value add. SCRAM systems and buddi are well worth a look, with Sentinel offering a different approach to the market.

Category: Technology

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