Prizes are powerful incentives.
In 1927, Charles Lindbergh flew across the Atlantic to win the $25,00 Orteig prize.
Tartan Racing, a collaboration between students at Carnegie Mellon and General Motors, won a $2 million prize in the 2007 DARPA Grand Challenge, a competition to develop an autonomous ground vehicle for the military.
And, of course, kids since 1912 have been tearing open Cracker Jack boxes to get at the prize inside.
Prizes are fun. The difference between a spelling test and a spelling bee is a prize.
These days, as never before, private companies, foundations and government are turning to prizes as a way to spur technological and environmental innovation. This proliferation of prizes tells us some interesting things about ourselves and about the limits markets, as I’ll argue in a moment.
Best known of the prize-givers is the X Prize Foundation, whose slogan is “revolution through competition.” It’s offering prizes of at least $10 million each for safely landing a robot on the moon (sponsored by Google), for building a super-efficient car (sponsored by Progressive Automotive) and for breakthroughs in genomics.
The U.S. Department of Energy has an L-Prize for high performance lighting and an H-Prize to “advance the research, development, demonstration, and commercial application of hydrogen energy technologies.”
On a more modest scale, the World Wildlife Fund runs the annual International Smart Gear Competition to reward practical, innovative fishing gear designs that reduce bycatch – the accidental catch of sea turtles, birds, marine mammals and other species.
“Prizes are becoming an industry, in many ways,” says Hillary Chen, a policy analyst with the White House Office and Technology Policy. The White House, she says, is looking at prizes to help solve a variety of problems, ranging from childhood obesity to high school graduation rates.
“There’s a lot of enthusiasm for prizes inside the administration,” she said.
Chen spoke today at Resources for the Future, the environmental think tank, which organized a panel on the role of prizes in innovation and entrepreneurship.
Why the plethora of prizes? Hard to say. If you believe everything you learned in Econ 101 and listen to free market acolytes, a functioning market economy should be able to deliver the things we need: autonomous ground vehicles to the military, efficient lighting systems or breakthroughs in genomics.
That’s why we have patents, which reward invention, and profits, which flow, at least in theory, to people who devise useful products and services.
But if that’s so, what’s with Progressive Automotive Prize? Its goal is
To inspire a new generation of viable, super-efficient vehicles that help break our addiction to oil and stem the effects of climate change.
Hmm. As Timothy Brennan of RFF, who moderated the panel, noted: Wouldn’t you think this is what the best brains at GM, Ford, Honda and Toyota do every day?
Prizes can play a role when entrenched industries are either holding back innovation–because their business model depends on selling the stuff they already make–or are stuck in their ways.
Prizes also tap into our emotions in a way the monetary rewards do not. Michele Gittleman, a project manager at Carnegie Mellon, said the idea of researching a self-directed vehicle that navigate a desert obstacle course was not all that exciting to her until a prize was attached to it by DARPA.
“I’m fairly competitive,” Gittleman said. “That had a lot of appeal.”
Prizes can be designed to promote long-term goals that markets can’t. As this video explains, Google’s Lunar X Prize is designed to promote a “revolution in space to benefit all humanity,” perhaps by enabling private companies to mine the silicon in the lunar soil to provide “clean, affordable, limitless energy” for solar satellites.
Prizes also drive collaboration in ways that markets don’t. A $1 million Netflix prize, designed to improve the accuracy of predictions about how much someone is going to enjoy a movie based on their movie preferences, was won by a team of engineers who work for, among others, Yahoo and AT&T. The winning team members worked in Israel, Montreal, Austria and New Jersey, according to Slate.
Deadlines are also a key feature of prizes. A research project inside a company or the government can always be delayed by scientists, pleading that they need more time. But a prize has an endpoint.
Ned Stetson of DOE told me that the agency expects to award first stage of the H-Prize in 2011. “If we make it, we will have accelerated the pace of research,” he said. The prize, he said, will also attract “a much larger pool of groups and organizations” than those that customarily seek government grants.
What’s more, prizes add pizzazz and drama to scientific research, which can otherwise be a bit dull.
There’s a danger here, of course. Prize fatigue could ensue. Government lawyers are already said to be studying what can be done with prizes and what can’t. Lawyers– especially government lawyers–just might squeeze some of the fun out of prizes.
But I don’t think they will. Just before he died, the comedian George Carlin won the Mark Twain Prize for American Humor. Carlin, a masterful student of language, was pleased, or so the story goes.
Awards are for adults, he said. Prizes are for kids.
The strange power of prizes just may be that they make us feel like kids again.