June 03, 2011

X-Prize director describes incentive prizes in an interview with Sander Olson

Incentives prizes have been successfully used for centuries in order to solve various technical and engineering problems. In the 20th century the Ortega prize resulted in the Lindbergh transatlantic flight. In 1995 the X-Prize foundation was founded with the express purpose of fostering a series of prizes to stimulate technological development. In an interview with Sander Olson, X-prize director Erika Wagner discusses the history of the X-prize, the enormous potential Return On Investment (ROI) that a prize can generate, and the technologies that she would like to see developed in the near future.

Erika Wagner

Question: Tell us a little about the history of awarding prizes for technological innovations. How far does this concept go back?

The concept of rewarding technical innovations with high profile prizes goes back at least to the 17th century, when the British Government offered the Longitude prize. And the basic concept is even older than that. In fact, there were actually longitude prizes offered in the 16th and 167th centuries by the Spanish and Dutch Governments. As opposed to traditional programs of grants, contracts and patronage, prizes work particularly well when there is a problem for which there are multiple potential solutions, but the optimal solution isn't known.

Question: A similar prize for the first plane to cross the Atlantic in the 1920s inspired the Lindbergh flight.

Yes, the Orteig Prize in the 1920s offered $25,000 for the first Trans-Atlantic flight, and contestants spent $400,000 trying to win it. In 1996, the Ansari X PRIZE offered $10 million for the first private spaceship to reach an altitude of 100 kilometers twice in two weeks. 26 teams spent over $100 million trying to win, and in 2004, Burt Rutan and his team at Scaled Composites won the prize. That innovation led directly to Virgin Galactic, which already has 400 paying customers waiting to go into space

Question: What is the return on investment for the prize?

The Ansari X PRIZE provides a good example. A $10 million initial investment led to $100 million in spending by teams, which in turn led to a $1.7 billion investment by private industry. Now the field of private space exploration of space is about to grow exponentially, as a direct result of that initial $10 million investment.

Question: Are there any prizes without any purse?

Sure, a perfect example is the North American Solar Challenge, which was oriented towards college teams. Despite the fact that there was no financial purse for that prize, the winning team still invested about $4 million dollars in equipment and labor, and an entire ecosystem of technologies and engineers emerged in pursuit of the bragging rights.

Question: What is the X PRIZE grand challenges course?

Through the X PRIZE Labs program, we teach courses at MIT, the University of Washington and University of Southern California. The classes are designed to teach the theory and practice of prize design. We hope to also be teaching in Bombay and Delhi next year, and a number of other Universities have expressed an interest in training their students how to ask good questions around the world’s biggest problems.

Question: Could you describe the process by which the foundation decides which prizes to offer?

We primarily use three sources for inspiration. In our X PRIZE Labs, we like to ask our students "if you had $10 million to invest in an X PRIZE, what would you ask the world to achieve?".

Second, we have an annual Visioneering event, in which we bring together 100 of the brightest minds that we know to help us understand what they see as the most pressing opportunities for innovative breakthroughs. Third, we have corporate clients suggest challenges to us. So for instance, we are now working with Qualcomm on a prize for an AI physician's assistant that can diagnose diseases as well as board-certified physicians.

Question: What X PRIZE excites you the most?

The X PRIZE Lab@MIT developed a competition several years ago in the field of global health. After deep dives into a number of pressing problems, our students identified tuberculosis diagnostics as an area that could benefit from an X PRIZE. The current method we have for identifying TB patients is 100 years old and only accurate about 50% of the time. A cheaper, more accurate TB test for use in the developing world could save hundreds of thousands of lives per year. I would love to see a competition that brought dozens of universities, biotech firms, and medical innovators to help address this challenge.

Question: What are the operational costs of running an X PRIZE?

The rough rule of thumb is that the operational costs are equal to the prize costs. So to have a $10 million prize costs us around $20 million total. This is because there are costs related to research, supporting infrastructure, judges, personnel, media attention, and so forth.

Question: Who decides the terms of the prize?

For each prize that we offer, we have a team of advisors. We are currently designing an X PRIZE for autonomous vehicles, and we have a team of experts from the auto industry, robotics, racing, and even public relations who are providing input. We don't want to create a prize that could be won tomorrow, but an impossible challenge won’t attract the world’s best innovators either. It’s finding that intersection of audacity and achievability that’s the key to a successful X PRIZE.

Question: How many x-prizes are currently active?

There are two X PRIZEs and one smaller X CHALLENGE that are active today. The Archon Genomics X PRIZE offers $10 million for sequencing 100 genomes in 10 days. The Google Lunar X PRIZE gives $30 million for the first private lunar rover broadcast back HD video from the surface of the moon. The Wendy Schmidt Oil Cleanup X CHALLENGE focuses on the next generation of oil spill cleanup technology.

Question: So the funding for prizes comes from corporate and philanthropic sources?

Funding comes from corporate, philanthropic, and Government sources. There are actually over $300 million in large prize purses up for grabs around the world. The Obama administration put out a policy directive last year stating that Federal agencies should consider prizes as part of their incentive portfolio. So federal agencies are now using prizes as well as grants and contracts.

Corporations are using prizes for incentivizing internal innovation, as in the Cisco iPrize; for crowdsourcing solutions to pressing corporate challenges, as in the Netflix Prize; and for raising awareness around industry issues, as in the Progressive Insurance Automotive X PRIZE.

Question: Is there any particular technology for which an —X PRIZE should be offered but isn't?

There are many worthy candidates that we are currently exploring. We are looking at autonomous cars, deep sea exploration platforms, clean cookstoves for the developing world, brain-computer interfaces, carbon capture and reuse technologies, energy storage, and many others. There is no shortage of promising areas that could directly benefit from incentivized competition.

Question: If you had a billion dollars to invest in any technology, how would you spend it?

Prizes aren't good for stimulating basic science, and we need to have a strong science infrastructure in this country. I am a passionate advocate of human space exploration, especially when we ask in what ways these capabilities can directly benefit humanity. So I would invest in a mix of basic R&D, social entrepreneurship, and high-risk technology programs that push our frontiers of knowledge and physical exploration. Prizes would definitely be part of that portfolio.

Question: Are there any foreign prizes offered?

Yes, a perfect example is the Saltier Prize in Scotland. Scotland wants to be a leader in the field of wave and tidal energy, so they offered a large prize for advancements in that area. Another example is the Ibrahim prize, which is offered by the Mo Ibrahim foundation. This prize offers a multimillion dollar reward for effective African leaders who peacefully step down from office when their term ends. The X PRIZE Foundation has just opened an office in India, and there are plans for new X PRIZE Labs at foreign universities as well.

Question: It seems as if the X PRIZE concept has grown exponentially over the last 10 years.

The X PRIZE has grown from a single prize, the Ansari X PRIZE, to over $65 million in prizes. That number continues to grow. Industry is becoming increasingly interested in the concept of using prizes to spur technological innovation and to solve specific problems.

Question: What do you see as the most disruptive technology to be developed during the next decade?

I personally think the field of energy storage is critically important, because it in turn affects so many other fields. Half the prizes that I've examined are energy limited. In everything from exoskeletons to deep sea exploration to electric cars and aircraft, energy storage is a serious limiter to numerous innovations. In order to make renewable energy feasible, we have to devise better ways to store energy. But the beauty of the X PRIZE is that we don't have to pick any particular technologies - we simply offer the prizes and let the competition begin.

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