Now that we’ve finished exploring the upper levels of our abundance pyramid, it should be clear that the rate of technology innovation has never been greater and the tools at our disposal have never been more powerful. But will this be enough? While abundance is a very real possibility, we’re also in a race against time. Can some version of today’s world handle a population of nine billion? Can we feed, shelter, and educate everyone without the radical changes discussed in this book? What happens if somewhere along the way, the prophets of peak oil or peak water or peak whatever turn out to be right before some breakthrough technology can prove them wrong? Until the innovations of abundance bear fruit, scarcity remains a real concern. And nearly as bad as scarcity is the threat of scarcity and the devastating violence it can often incite.
In many cases, we know where we want to go but not how to get there. In others, we know how to get there but want to get there faster. This chapter focuses on how we can steer innovation and step on the gas. When bottlenecks arise, when breakthroughs are needed, when acceleration is the core commandment, how can we win this race?
There are four major motivators that drive innovation. The first, and weakest of the bunch, is curiosity: the desire to find out why, to open the black box, to see around the next bend. Curiosity is a powerful jones. It fuels much of science, but it’s nothing compared to fear, our next motivator. Extraordinary fear enables extraordinary risk-taking. John F. Kennedy’s Apollo program was executed at significant peril and tremendous expense in response to the early Soviet space successes. (You can ballpark the ratio of fear to curiosity as a driver for human innovation: it’s the ratio of the defense budget to the science budget, which in 2011 was roughly $700 billion compared to $30 billion.) The desire to create wealth is the next major motivator, best exemplified by the venture capital industry’s backing of ten ideas, expecting nine to fail and hoping for one grand-slam winner. The fourth and final motivator is the desire for significance: the need for one’s life to matter, the need to make a difference in the world.
One tool that harnesses all four of these motivators is called the incentive prize. If you need to accelerate change in specific areas, especially when the goals are clear and measurable, incentive competitions have a biological advantage. Humans are wired to compete. We’re wired to hit hard targets. Incentive prizes are a proven way to entice the smartest people in the world, no matter where they live or where they’re employed, to work on your particular problem. As Raymond Orteig discovered in the early portion of the last century, such competitions can change the world.
Raymond Orteig grew up a shepherd in France, on the slopes of the Pyrenees. By age twelve, he’d followed in his uncle’s footsteps and immigrated to America. With little money, he took the only job he could find, working as a busboy at the Hotel Martin in Midtown Manhattan. Over the course of a decade, he rose to café manager, then hotel manager, and then, with monies saved, eventually purchased the establishment. He changed its name to the Hotel Lafayette, and a few months later bought the nearby Hotel Brevoort.
In the years after World War I, French airmen often stayed at these hotels. Orteig loved listening to their combat stories. He developed a serious passion for aviation, dreaming of the good that air travel could do and wanting to find a way to help progress along. Then two British pilots, John Alcock and Arthur Whitten Brown, made the first nonstop flight from Newfoundland to Ireland in 1919, and Orteig had an idea. On May 22, 1919, he laid out his plan in a short letter to Alan Hawley, president of the Aero Club of America in New York City:
“Gentlemen, as a stimulus to courageous aviators, I desire to offer, through the auspices and regulations of the Aero Club of America, a prize of $25,000 to the first aviator of any Allied country crossing the Atlantic in one flight from Paris to New York or New York to Paris, all other details in your care.”
The prize would be offered for a period of five years, but the 3,600 miles between Paris and New York was almost twice the previous record for nonstop flight, and those years passed without anyone claiming victory. Orteig was unfazed: he renewed the offer for another five. This next round of competition brought casualties. In the summer of 1926, Charles W. Clavier and Jacob Islamoff died when their plane, grossly overloaded, ripped apart on takeoff. In the spring of 1927, it was Commander Noel Davis and Lieutenant Stanton H. Wooster who perished during their final test flight. Weeks later, on May 8, 1927, French aviators Charles Nungesser and François Coli flew westward into the dawn over Le Bourget, France, and were never seen again. Then came Charles A. Lindbergh.
Out of everyone who entered Orteig’s competition, Lindbergh was, by far, the least experienced pilot. No aircraft manufacturer, in fact, even wanted to sell him an airframe or an engine, fearing that his death would give their product a bad reputation. The media dubbed him the “flying fool,” then promptly dismissed him. But this is an aspect of incentive competitions: they’re open to all comers—and all comers often show up, including the underdog. Sometimes the underdog wins. On May 20, 1927, eight years after the original challenge, Lindbergh did just that: departing Roosevelt Field in New York and flying solo and nonstop for thirty-three hours and thirty minutes before landing safely at Le Bourget Airdrome outside of Paris.
The impact of Lindbergh’s flight cannot be overemphasized. The Orteig Prize captured the world’s attention and ushered in an era of change. A landscape of daredevils and barnstormers was transformed into one of pilots and passengers. In eighteen months, the number of paying US passengers grew thirtyfold, from about 6,000 to 180,000. The number of pilots in the United States tripled. The number of airplanes quadrupled. Gregg Maryniak, a pilot and the aforementioned director of the McDonnell Planetarium, says, “Lindbergh’s flight was so dramatic that it changed how the world thought about flight. He made it popular with consumers and investors. We can draw a direct connection between his winning of the Orteig Prize and today’s three-hundred-billion-dollar aviation industry.”
In 1993 it was also Maryniak who gave me a copy of Lindbergh’s 1954 Pulitzer Prize–winning book The Spirit of St. Louis. He was hoping to inspire me to finish my pilot’s license—which he did, but the inspiration didn’t stop there. Before I read the book, I’d always believed that Lindbergh woke up one day and decided to head east, crossing the Atlantic as a stunt. I had no idea that he made the flight to win a prize. Nor did I know what extraordinary leverage such competitions could provide. Nine teams cumulatively spent $400,000 to try to win Orteig’s $25,000 purse. That’s sixteenfold leverage. And Orteig didn’t pay one cent to the losers: instead his incentive-based mechanism automatically backed the winner. Even better, the resulting media frenzy created so much public excitement that an industry was launched.
I wanted to launch another. Since early childhood, I’d been dreaming of the day when the public could routinely buy tickets to space. I waited patiently, expecting that NASA would eventually make this happen. But thirty years later, I realized this wasn’t the agency’s goal—and not even their responsibility. Getting the public into space was our job, possibly my job, and by the time I finished reading The Spirit of St. Louis, the concept of an incentive prize for the “demonstration of a suborbital, private, fully reusable spaceship” had formed in my mind.
Not knowing who my “Orteig” would be, I called it the X PRIZE. The letter X was a variable, a place holder, to be replaced with the name of the person or company who put up the $10 million purse. I thought raising the money would be easy. Over the course of the next five years, I pitched the project to over two hundred philanthropists and CEOs. Everyone said the same three things: “Can anyone really do this? Why isn’t NASA doing it? And isn’t someone going to die trying?” All of them turned me down. Finally, in 2001 I met our ultimate purse benefactors: Anousheh, Hamid, and Amir Ansari. They didn’t care about the risks involved and said yes on the spot. By then, the X had stuck around for so long that we’d grown attached. As a result, we ended up calling the competition the Ansari X PRIZE.
Orteig didn’t invent incentive prizes. Three centuries before Lindbergh crossed the Atlantic by plane, the British Parliament wanted some help crossing the Atlantic by ship. In 1714 it offered £20,000 to the first person to figure out how to accurately measure longitude at sea. This was called the Longitude Prize, and not only did it help Parliament solve its navigation problem, its success launched a long series of incentive competitions. In 1795 Napoléon I offered a 12,000-franc prize for a method of food preservation to help feed his army on its long march into Russia. The winner, Nicolas Appert, a French candy maker, established the basic method of canning, still in use today. In 1823 the French government once again offered a prize, this time 6,000 francs for the development of a large-scale commercial hydraulic turbine. The winning design helped to power the burgeoning textile industry. Other prizes have driven breakthroughs in transportation, chemistry, and health care. As a recent McKinsey & Company report on the subject said, “Prizes can be the spur that produces a revolutionary solution … For centuries, they were a core instrument of sovereigns, royal societies and private benefactors alike who sought to solve pressing societal problems and idiosyncratic technical challenges.”
The success of these competitions can be boiled down to a few underlying principles. First and foremost, large incentive prizes raise the visibility of a particular challenge while helping to create a mind-set that this challenge is solvable. Considering what we know about cognitive biases, that is no small detail. Before the Ansari X PRIZE, few investors seriously considered the market for commercial human spaceflight; it was assumed to be the sole province of governments. But after the prize was won, a half dozen companies were formed, nearly $1 billion has been invested, and hundreds of millions of dollars’ worth of tickets for carriage into space have been sold.
Secondly, in areas where market failures have hindered investment or entrenched incumbents have prevented progress, prizes break bottlenecks. In the spring of 2010, the failure of the BP Deepwater Horizon oil platform created a disaster in the Gulf of Mexico. A lot of people wanted to make sure nothing like this ever happened again, myself included. Through a sequence of conversations among Francis Béland, vice president of prize development at the X PRIZE Foundation, David Gallo of the Woods Hole Oceanographic Institution, and the foundation’s newest trustee, filmmaker James Cameron, it was decided that we should develop a “flash prize” to deal with the emergency.
The focus of the prize was clear. The technology used to clean up the BP spill in 2010 was the same technology used to clean up the Exxon Valdez spill in 1989. In fact, it was not only the same technology but also the same equipment. It was clearly time for an upgrade. A prize for a better way to clean oil off the surface of the ocean seemed like the way to go. Philanthropist Wendy Schmidt, head of the Schmidt Family Foundation and the 11th Hour Project, agreed. Within twenty-four hours of our announcement, she stepped forward to underwrite the competition. “When I watched what was happening last year in the Gulf,” she said, “I felt a sense of disbelief—a horror at the scale of the disaster and its impact on the lives of people, wildlife, and natural systems. I knew we could do something to lessen the impact of this kind of manmade disaster in the future. Incentive prizes seemed like the fastest path I could imagine to finding a solution.” And it worked. The results of the competition were spectacular. The winning team quadrupled the performance of the industry’s existing technology.
Besides being a way to raise the profile of key issues and rapidly address logjams, another key attribute of incentive prizes is their ability to cast a wide net. Everyone from novices to professionals, from sole proprietors to massive corporations, gets involved. Experts in one field jump to another, bringing with them an influx of nontraditional ideas. Outliers can become central players. At the time of England’s Longitude Prize, there was considerable certainty that the purse would go to an astronomer, but it was won by a self-educated clock maker, John Harrison, for his invention of the marine chronometer. Along similar lines, in the first two months of the Wendy Schmidt Oil Cleanup X CHALLENGE, some 350 potential teams from over twenty nations preregistered for the competition.
The benefits of incentive prizes don’t stop here. Because of the competitive framework, people’s appetite for risk increases, which—as we’ll explore in depth a little later—further drives innovation. Since many of these competitions require significant capital to field a team (in other words: no bucks, no Buck Rogers), it’s fortunate that the sporting atmosphere lures legacy-craving wealthy benefactors and corporations looking to distinguish themselves in a media-cluttered environment. Finally, competitions inspire hundreds of different technical approaches, which means that they don’t just give birth to a single-point solution but rather to an entire industry.
The American anthropologist Margaret Mead once said, “Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has.” There are, as it turns out, pretty good reasons for this. Large or even medium-sized groups—corporations, movements, whatever—aren’t built to be nimble; nor are they willing to take large risks. Such organizations are designed to make steady progress and have considerably too much to lose to place the big bets that certain breakthroughs require.
Fortunately, this is not the case with small groups. With no bureaucracy, little to lose, and a passion to prove themselves, small teams consistently outperform larger organizations when it comes to innovation. Incentive prizes are perfectly designed to harness this energy. A great example was the 2009 Northrop Grumman Lunar Lander X CHALLENGE. This was a $2 million purse put up by NASA and managed by the X PRIZE Foundation as part of the NASA Centennial Challenges program. The competition asked teams to build a rocket-powered vehicle capable of vertical takeoffs and landings, for going back to the Moon’s surface. Not since the Defense Department’s DC-X program fifteen years earlier had the government possessed this capability—and that vehicle, which ultimately crashed during testing, had cost taxpayers some $80 million.
Neither of the two teams that ultimately split this purse (meeting all of NASA’s requirements) looked anything like a traditional aerospace contractor. Both were small, started by software entrepreneurs, and staffed by a few part-time engineers with no experience in the space industry. Engineer John Carmack, creator of the video games Quake and Doom, who founded and funded Armadillo Aerospace (which placed second in the competition), summed up this point nicely: “I think the biggest benefit that NASA can possibly get out of this is to witness an operation like ours go from concept to (almost) successful flight in under six months with a team of eight part-time people for a total cost of only $200,000. That should shame some of their current contractors who are going to be spending tens of billions of dollars doing different things.”
A similar outcome was reached in 2007, when, in partnership with the Progressive Insurance Company, the X PRIZE Foundation launched a competition for the world’s first fast, affordable, production-ready car able to achieve over one hundred miles per gallon equivalent (MPGe). Over 130 teams from twenty nations entered the competition. Three winners split the $10 million purse (achieving mileage figures ranging from 102.5 to 187.5 MPGe), and none of them had more than a few dozen employees.
“Right now the foundation has two more active X PRIZEs,” says its president and vice chairman, Robert K. Weiss. “There’s the thirty-million-dollar Google Lunar X PRIZE and the ten-million-dollar Archon Genomics X PRIZE presented by Medco. To win the first, all you have to do is build a robot, land it on the surface of the Moon, send back photos and videos, then rove or hop five hundred meters, and send back more photos and videos. To win the second, teams have to sequence the genomes of one hundred healthy centenarians in ten days.” Not much more than a decade ago, both of these missions would have required billions of dollars and thousands of people. I don’t know who will win either competition, but whoever it turns out to be, I can all but guarantee that it’s going to be a small group of thoughtful, committed citizens—because, as Mead pointed out and incentive prizes validate, this is exactly what it takes to change the world.
Creativity, we are often told, is a kind of free-flowing, wide-ranging, “anything goes” kind of thinking. Ideas must be allowed to flourish unhindered. There’s an entire literature of “think-outside-the-box” business strategies to go along with these notions, but, if innovation is truly the goal, as brothers Dan and Chip Heath, the best-selling authors of Made to Stick: Why Some Ideas Survive and Others Die, point out in the pages of Fast Company, “[D]on’t think outside the box. Go box shopping. Keep trying on one after another until you find the one that catalyzes your thinking. A good box is like a lane marker on the highway. It’s a constraint that liberates.”
In a world without constraints, most people take their time on projects, assume fewer risks, spend money wastefully, and try to reach their goals in comfortable and traditional ways—which, of course, leads nowhere new. But this is another reason why incentive prizes are such effective change agents: by their very nature, they are nothing more than a focusing mechanism and a list of constraints.
For starters, the prize money defines spending parameters. The Ansari X PRIZE was $10 million. Most teams, perhaps optimistically (and who would pursue a space prize without being an optimist?), told their backers that they could win for less than purse value. In reality, teams go over budget, spending considerably more than the prize money in solving the problem (because, by design, there’s a back-end business model in place to help them recoup their investment). But this perceived upper limit tends to keep out risk-adverse traditional players. In the case of the X PRIZE, my goal was to dissuade the likes of Boeing, Lockheed Martin, and Airbus from entering the competition. Instead I wanted a new generation of entrepreneurs reinventing space flight for the masses—which is exactly what happened.
The time limit of a prize competition serves as another liberating constraint. In the pressure cooker of a race, with an ever-looming deadline, teams must quickly come to terms with the fact that “the same old way” won’t work. So they’re forced to try something new, pick a path, right or wrong, and see what happens. Most teams fail, but with dozens or hundreds competing, does it really matter? If one team succeeds, within the constraints, they’ve created a true breakthrough.
Having a clear, bold target for the competition is the next important restriction. After Venter sequenced the human genome, many companies started selling whole genome-sequencing services. But none of their products had sufficient fidelity to be medically relevant. So the Archon Genomic X PRIZE was created. It challenges teams to sequence one hundred human genomes accurately (one error in one million base pairs), completely (98 percent of the human genome), rapidly (within ten days) and cheaply (and a cost of less than $1,000 per genome)—a quadruple combination that’s a 365 millionfold price-time-performance improvement over Venter’s original 2001 work. Moreover, as the genomes to be sequenced belong to a hundred healthy centenarians, this competition’s results will further unlock the secrets of longevity and drive us to our goal of health care abundance.
Incentive prizes are not a panacea; they can’t fix all that ails us. But on the road toward abundance, when a key technology is missing, or a specific end goal has been identified but not yet achieved, incentive prizes can be an efficient and highly leveraged way to get from A to B. Of course, this is what we’re doing at the X PRIZE Foundation. We’ve launched six competitions, awarded four of them, and conceived of another eighty-plus that are awaiting funding. Ultimately, though, this chapter isn’t about the X PRIZE—that isn’t the point. The point is that incentive prizes have a three-hundred-year track record of driving progress and accelerating change. They are a great way to steer toward the future we really want. So start your own. Help with ours. Whatever.
In areas like chronic disease, where governments spend billions of dollars, the offer of a massive incentive prize seems like a no-brainer. AIDS costs the US government over $20 billion a year; that’s more than $100 billion during a five-year period. Imagine, for example, a $1 billion purse offered for the first team to demonstrate a cure or vaccine. Sure, the marketplace is vast and the corporation that develops this cure will reap huge rewards, but what if the government’s $1 billion was paid directly to the scientists who made the discovery? How many more brilliant minds might be turned on to this problem? How many graduate students might start daydreaming about solutions?
Now apply this thinking to Alzheimer’s, Parkinson’s, or your cancer of choice. Whatever you like. The advantage here is an army of brilliant people around the world thinking about your problem and working on their own nickel to solve it. Properly executed, this mechanism offers the potential for fixed-cost science, fixed-cost engineering, and fixed-cost solutions. I’ve always believed (to paraphrase computer scientist Alan Kay) that the best way to predict the future is to create it yourself, and in my five decades of experience, there is no better way to do just that than with incentive prizes.