I think the use of prizes to spur innovation is underexploited. So it’s gratifying to read that one of the X Prize Foundation‘s latest challenges is to develop an energy-efficient vehicle. There are 111 entrants for the $10 million prize, but the qualifications are stiff:
Only production-capable, consumer-friendly cars [may] compete. Those that qualify will race their vehicles in rigorous cross-country stage races in 2009 and 2010 that combine speed, distance, urban driving and overall performance. The winners will be the vehicles that exceed 100 MPGe, meet strict emissions standards and finish in the fastest time.
Given the potential market for a car that could achieve that, $10 million seems rather petty. But if you’re a tinkerer or a little-known start-up, that $10 million provides a significant incentive to get a working invention out the door.
The most famous innovation prize was the award offered by the British Parliament in 1714 for anyone who could come up with a method to calculate longitude. Dava Sobel’s overrated, but best-selling Longitude popularized the story of John Harrison’s invention of the marine chronometer. More recently the X Prize Foundation awarded the Ansari X Prize to Bert Rutan’s Scaled Composites, when SpaceShipOne took its three passengers 100km above the Earth twice in two weeks. The aviator Charles Lindbergh’s New York to Paris flight was spurred by the Orteig Prize back in 1927.
Al Gore and bearded billionaire Richard Branson have also caught the prize bug. They’ve put up a $25 million award for any method that will remove at least one billion tons of carbon per year from the atmosphere.
In a less direct way, the Silicon Valley venture economy is about innovation prizes. The right invention or business idea wins millions in venture capital, and potentially billions in market capitalization. The advantage of pure prizes is they can concentrate activity of a solution to a specific problem. More important, they have the great advantage of transparency and fairness. There is a mythology in the Bay Area that great ideas will inevitably rise to the top, and that VCs will scour the Earth for winning idea. In practice, there are enormous hurdles to getting a hearing with most VCs, and plenty of institutional and political hurdles to actually inking a deal even if you managed to get in the door for a presentation. Prizes get rid of those barriers and create a far more democratic process. Let them multiply.