The power of prizes to encourage innovation
9 October, 2015 / Articles
In 1906, Lord Northcliffe, the proprietor of Britain’s Daily Mail newspaper, offered a £10,000 prize to the first aviators to cross the Atlantic Ocean, just three years after the Wright Brothers ascended into the sky at Kitty Hawk. The notion that anyone could get across a 2,000-mile stretch of water was so preposterous that it prompted the satirical magazine Punch to offer prizes of its own: £10,000 apiece to anyone who could swim the Atlantic, travel to Mars and back, or journey to the centre of the earth.
Lord Northcliffe got the last laugh, of course. With his money and his mouthpiece at the Daily Mail, and his political connections, few people were able to champion the possibilities of air travel — for scientific progress, for business and for warfare — so effectively. His newspaper offered a string of smaller prizes for smaller aeronautical feats before the big one was finally won on June 15, 1919, when John Alcock and Arthur Brown inelegantly landed their modified Vickers Vimy nose first in an Irish bog after a 16-hour flight from Newfoundland.
A century later, the power of prizes to spur innovation has been rediscovered by a new generation of wealthy individuals. Exploring space or finding extraterrestrial life? Cleaning the oceans or clearing the atmosphere? Curing disease or looking for the key to immortality? For anyone with ambitious goals, offering a prize can get you a bigger bang for your buck than traditional giving. Think of it like leveraging your investment portfolio: a carefully crafted challenge spurs spending by competing teams that can add up to many times the value of the prize purse.
“It is something like the opposite of the traditional model of philanthropy,” says Paul Jacobs, who is executive chairman of Qualcomm, the semiconductor giant founded by his father in 1985, and whose charitable arm is going to give $10m to anyone who can make the Tricorder from Star Trek a reality (of which more in a moment).
“People are always sceptical about charitable organisations and about how many of their dollars actually get to the cause that needs funding,” Jacobs says. “In the traditional model, you put in money and somewhat less of it than you put in gets there. In prizes, somehow more money gets there than gets put in.”
Today’s prizologists take their inspiration from another figure in aviation history, Raymond Orteig, a Franco-American hotelier who, just weeks before Alcock and Brown’s voyage, offered $25,000 for the first person from any Allied country to fly between New York and Paris. By the time an obscure air mail pilot from St Louis, Missouri, called Charles Lindbergh pipped better-funded and better-known teams to the prize in 1927, the nation had become obsessed with the feats of engineering and design, and daring, of the competitors.
Peter Diamandis, a young scientist and entrepreneur who had been trying to build companies launching satellites into space, read Lindbergh’s account of his transatlantic flight in 1994 and resolved to bring the spirit of the Orteig prize to the commercial space race. Two years later, he travelled to St Louis to launch a competition to build a reusable craft for suborbital space travel. The XPrize was born.
The ship that won that first prize, a $10m cheque from the Ansari family, whose wealth was built in the telecoms equipment industry, is now part of Sir Richard Branson’s Virgin Galactic venture.
XPrize is the biggest and best known of the private organisations running such challenges, with some $100m of prizes either awarded or still up for grabs, seeking a dizzyingly diverse range of breakthroughs including stamping out adult illiteracy, radically improving the clean-up of oil spills and landing robots on the moon. The organisation is closely allied with Google — or Alphabet as we shall soon have to start calling it — to reflect its ambitions to move beyond search engines into technologies such as drones, self-driving cars and internet-enabled thermostats.
A $30m lunar lander prize is sponsored by Google. Larry Page, the company’s founder, is a trustee and Wendy Schmidt, wife of Google chairman Eric Schmidt, has twice dipped into her family’s fortune to fund environmental challenges through XPrize — something she says she would love to do again.
“When Eric and I do anything, we are trying to look at transformational change and trying to look at systems change,” Schmidt says.
“This is an urgent problem. We are looking at the outcome of a century of maladaptive behaviour, when it comes to the human interface with the natural world. We’re depleting things, we’re using reckless technologies in the oceans, we’re doing things that maybe create a better standard of living for people in the short term, but in the long term they’re simply not sustainable.”
Schmidt’s first foray into prizology came after the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, when it became painfully clear that clean-up technology had not advanced in the two decades since the Exxon Valdez tanker spilled gallons of crude oil in the Gulf of Alaska in 1989. The winning design, using spinning plastic disks that attract the oil, proved it could skim oil from the surface of the water at more than four times the industry standard rate.
In July, Schmidt awarded her second XPrize to a company called Sunburst Sensors, which won a competition to develop a device to accurately track the acidification of the world’s oceans, a problem with potential dire consequences for marine life.
Prizes allow for the possibility that innovation could spring from somewhere unexpected, anywhere in the world, she says, citing the Las Vegas tattoo artist who sketched his oil clean-up idea on the back of a casino napkin and ended up among the semi-finalists.
The list of illustrious prizologists grows longer seemingly by the week. Elon Musk, the PayPal co-founder who now runs both SpaceX, the rocket company, and Tesla, the electric car manufacturer, is funding a Global Learning XPrize for software that can teach children anywhere in the world the basics of reading, writing and arithmetic.
Barbara Bush, the former US first lady, is sponsoring an adult literacy prize. The Methuselah Foundation, whose backers include Peter Thiel, the billionaire libertarian, and Larry Ellison, founder of Oracle, will reward breakthroughs in growing new human tissue and new organs.
A Bill and Melinda Gates Foundation challenge prize spurred the university Caltech to invent a self-cleaning, solar-powered toilet that turns human waste into hydrogen and fertiliser.
Following the examples of these modern-day Northcliffes and Orteigs, governments are also again getting back into the prizes game.
In the US, the website Challenge.gov has centralised and encouraged prize competitions across 75 government agencies, from Nasa to the US Mint, awarding more than 400 payouts totalling more than $120m in four years, and Darpa, the US Defence department’s research arm, has launched multimillion-dollar prizes for self-driving tanks and maintenance droids.
Things have come full circle. As early as the 16th century, the Spanish royal family was offering money to anyone who could solve the accursed problem of accurately pinpointing a ship’s longitude while at sea. The British government’s Longitude Act of 1714 offered rewards for improvements in naval navigation and gave the world the marine chronometer.
Last year, the independent UK charity Nesta — originally funded by an endowment from the National Lottery as the National Endowment for Science, Technology and the Arts — established a new Longitude Prize, which will hand out £10m for a “cost-effective, accurate, rapid and easy-to-use test for bacterial infections” to help combat the rise of drug-resistant bacteria.
Designing a good prize is an art and a science. The challenge must be sufficiently ambitious but conceivably attainable. The prize money has to be the right amount to attract the broadest range of participants and it has to be calculated to capture the public’s imagination, too. PR is part of the game. Hence all the Star Trek.
