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NY Times: Do Good! Win a Prize!

Published by Robin on Sat Oct 16, 2004 9:27 pm
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Do Good! Win a Prize!
By DANIEL AKST, The New York Times, October 17, 2004

IT’S the season of prizes. Around the time the 2004 Nobels were announced, Burt Rutan and his compatriots won the $10 million Ansari X Prize by twice sending a privately financed spacecraft into space.

The Nobels are mostly a reward for past performance; sometimes, they are given decades after the achievements. But the Ansari X is a very different kind of prize. It was intended to stimulate action – the development of commercial spacecraft – and it succeeded. Not only did it lead to the completion of two nongovernmental space flights (the contest rules required that the spacecraft climb to 100 kilometers and return safely) but Sir Richard Branson, the British entrepreneur, licensed the winning design for future commercial flights.

Inducement prizes like this one have many virtues for those who offer them; a payout is necessary only if someone accomplishes the stated goal, and the losers work for nothing. While offering a prize may seem generous, it is probably much cheaper than directly financing a needle-in-a-haystack search for a solution to a given problem, or even identifying possible solvers and then financing their efforts.

The Rutan team spent more than $20 million to win the $10 million Ansari X Prize, with no guarantee of success – though, of course, there is the prospect of other revenue streams. Aviation, always a fertile area for inspirational derring-do, has been especially prize-prone. Charles Lindbergh’s trans-Atlantic flight, for instance, won him a $25,000 prize offered by a French hotelier for just such an adventure. But the potential for prizes has yielded more mundane breakthroughs as well. Recognizing that armies travel on their stomachs, Napoleon offered a prize that led to the invention of food canning.

Given all that, people with a clear goal and some money to burn may want to consider setting up a prize instead of starting a business or even a foundation. A prize offers many advantages. It attracts attention, and considerable effort from contestants. That effort may involve irrational amounts of time and cash, increasing the chances that someone will win quickly. And if there is a winner, a donor with foresight can avoid paying out of pocket by buying “hole in one” insurance for a small fraction of the prize’s cost. The X Prize Foundation bought just such insurance; a foundation board member said the premium exceeded $1 million – a tidy sum, but a lot less than $10 million.

Unfortunately, a successful prize may result in considerable social cost, even if it focuses attention on a worthy problem. Like aspiring novelists or basketball players, a great majority of contest entrants cannot succeed, which means that they may be wasting their own time and society’s resources. And despite the success of the X Prize, inducement prizes in many fields aren’t likely to spur useful innovation. The breakthroughs of today, unlike those of a century ago, are more likely to come from collective efforts than from a lone inventor.

Despite the spectacular success of some prizes, the overall record is spotty at best. “Apart from the chronometer and food canning – both over 200 years old – what’s impressive is how few momentous inventions have resulted from inducement prizes,” said Edward Tenner, a historian of technology, in an e-mail message. “Even in flying, the Wright Brothers themselves certainly didn’t need one, and neither did the other great pioneers.”

Maybe such prizes today should take the form of more modest bounties – in contests that are likely to produce multiple winners whose very numbers contribute to solving a problem. Such prizes are already working for government and businesses alike. For years, the Internal Revenue Service has offered rewards for help in catching tax cheats. Microsoft has set up a bounty fund to help track down writers of malicious computer code. The Mozilla Foundation, which makes the increasingly popular Firefox Internet browser, is offering $500 to anyone who discovers a significant security bug in its software. A similarly effective idea may be a bounty to find people who engage in Internet “phishing” – sending e-mail to trick users into disclosing credit card numbers and the like.

IN some arenas, an inducement prize with a single winner may be worthwhile. A contest offering a modest prize – say, $100,000 – for a way to rein in outlandish compensation for chief executives could pay for itself many times over, simply because excessive pay (and the whole C.E.O.-as-savior syndrome) seems so costly to companies and their investors.

Of course, many people who aim for such prizes will fail, but even that can have social benefits. Merely having many contestants may help mitigate a problem – by scaring spammers, for instance. And entering a contest may cause the losers to think in new ways or to stumble across some unrelated but worthwhile discovery. “Perhaps eccentric prizes should even be encouraged,” Mr. Tenner said, “for injecting salutary randomness into science and technology.”

Daniel Akst is a journalist and novelist who writes often about business. E-mail: culmoney@nytimes.com.
Do Good! Win a Prize!
By DANIEL AKST, The New York Times, October 17, 2004

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