The Application and Administration of Inducement Prizes in Technology

by Alex Schroeder

IP-11-2004 December 2004

13952 Denver West Parkway • Suite 400 • Golden, Colorado 80401-3141 www.IndependenceInstitute.org • 303-279-6536 • 303-279-4176 fax Acknowledgements 3. Founded in 1985, the Independence Institute is a non-partisan, non-profit public I would like to thank Dennis Polhill for his advice, policy research organization dedicated to vision, and helpful critique of my research. I would providing timely information to concerned also like to express gratitude towards Rick Grice for citizens, government officials, and public allowing me this opportunity and taking initiative to opinion leaders. Through a variety of publi- implement a prize system in the state of Colorado. cations and public forums, the Institute pro- Thank you Dag Nummedal for being instrumental vides citizens of Colorado and the nation in much of my work; your open-mind, continued with specific recommendations to help support, and endless list of helpful contacts made a resolve important issues facing our com- lot of this possible. I would also like to thank all of munities. The Institute addresses a broad those that met with me throughout the course of the variety of public policy issues from a free- summer for their helpful feedback on various ideas. market, pro-freedom perspective. Preface

The following research was done at the behest and cooperation of the following three entities:

1. The Colorado Governor’s Office of Energy Management and Conservation was found- ed in response to the 1970’s energy crisis. The Office is federally funded and headed by Rick Grice, Executive Director. The office seeks to leverage local partnerships in the energy community, support innovative and grassroots energy programs, proliferate energy technology through education, and create prosperity through energy manage- ment and conservation programs.

2. The Colorado School of Mines opened its doors in 1874 and exists presently as the oldest state-funded public institution in Colorado. The School of Mines maintains the highest admissions standards in the state of Colorado and among the high- est nationally at public institutions. The esteemed engineering school has the unique mission of promoting research and study in the earth sciences, namely: energy, mineral and materials science and mineral engineer- ing degrees. Table of Contents

1. Introduction ...... 1 1.1 Research Goals 1.2 CERI 1.3 Types of Prizes

2. The Prize Model and its Economics ...... 2 2.1 The Technological Implications of Prizes 2.2 The Economic Implications of Prizes 2.3 Traditional Research Methods 2.4 Advantages and Disadvantages of Inducement Prizes with Traditional Research Methods

3. The History of Prizes ...... 5 3.1 The Widespread Application of Prizes 3.2 The Longitude Prize 3.3 Aviation Prizes in the Early 20th Century 3.4 The Orteig Prize 3.5 The CATS Prize 3.6 The Ansari X Prize 3.7 DARPA Grand Challenge 3.8 Federal and Professional Recognition of Prizes 3.9 NASA Centennial Challenges

4. Components of Administering a Prize ...... 12 4.1 The Scope of Prizes 4.2 Prize Objectives 4.3 Setting a Deadline 4.4 Prize Administrators 4.5 Prize Financing 4.6 Competitor Selection 4.7 Judging Procedures 4.8 Intellectual Property 4.9 Liability 4.10 Public Relations

5. CERI Energy Prize Recommendation ...... 19 5.1 Scale of Operation 5.2 Prize Scope 5.3 Prize Financing 5.4 Prize Suggestions

6. Conclusions ...... 21

7. References ...... 23

Appendix ...... 23 A.1 National Academy of Engineers Recommendations A.2 Aldridge Report Recommendations A.3 National Academy of Engineers Prize Summaries A.4 Prize Organization Considerations 1. Introduction • Reactivate CSM’s Energy and Minerals Field Institute for federal, state, and local 1.1 Research Goals government officials, with a focus on both One of the eight goals outlined in the re-chartering traditional and alternative energy; of the Colorado Energy Research Institute is to cre- • Work with Colorado universities to develop ate an “energy prize” that will stimulate technologi- continuing and distance education programs cal growth and promote conservation. This report for all Colorado residents; is aimed at addressing this goal and providing infor- • Create an “Energy Prize” to stimulate inno- mation on the administration and design of such a vative technical solutions encompassing prize. A comprehensive list of questions was drafted both conservation and new energy technolo- and revised in order to identify the key areas of gies; forming a prize. The questions were then answered • Participate in “support groups” (such as through the research of previous prizes, attendance new trade groups) for new energy industry at the NASA Centennial Challenges sectors; Conference, and meetings with local • Encourage Colorado universities to develop One of the eight energy representatives and public academic courses and degree programs that goals outlined in officials. The answers to these ques- will prepare students to work in emerging the re-chartering tions will ideally give a clearer picture energy fields; of the Colorado of the general overlay of the proce- • Create an information resource base, Energy Research dure and timeline involved in imple- including data, reports, and lists of experts Institute is to cre- menting an energy prize at CERI. for the use of state and local government ate an “energy officials to inform decision making on ener- prize” that will gy-related legislation and regulations; and stimulate tech- 1.2 CERI • Participate in, and coordinate, an informa- nological growth The Colorado Energy Research tion exchange between state and local gov- and promote con- Institute (CERI) was established ernmental entities, industry groups, private servation. by the Colorado legislature in 1974 think tanks, and universities. under the umbrella of the Colorado School of Mines. CERI had a contributing role in attracting the federal Solar Energy Research 1.3 Types of Prizes Institute (SERI) to Golden. SERI has since Prizes have traditionally been offered as a reward been renamed the National Renewable Energy or honor for an individual or team’s body of work Laboratory (NREL). After years of inactivity, CERI in a particular field. Prizes of this nature are called was rejuvenated in 2003 through the leadership of recognition prizes. Recognition prizes generally the Governor’s Office of Energy Management and require an application process and submission of Conservation, the Colorado School of Mines, and previous work(s). The applicant’s accomplishment the Gas Technology Institute. Dag Nummedal was or body of work is then comparatively reviewed and appointed as the Executive Director of CERI in weighted by a panel of selected judges. The crite- February 2004. The CERI charter outlines the fol- rion that judges use in awarding this type of prize lowing eight goals for the institute. varies greatly. Familiar examples of this genre of prizes include the Nobel Prize, The Presidential • Coordinate with other universities, state Medal of Honor, and The Department of Energy’s agencies, and NREL to organize a series Fermi Award. of symposia and conferences on alternative energy, conservation, energy policy, energy An alternative to the traditional recognition prize is security, and economic development; the inducement method. Inducement prizes work

Page 1 backwards of recognition prizes. Instead of reward- exposure. These new ideas often spark public inter- ing an entity for a past accomplishment, inducement est and media attention creating yet another benefit prizes seek to reward and inspire entities to accom- of prizes. plish a specified objective. Twenty-five percent of all Americans had personally Inducement prizes can be further categorized into viewed the Spirit of St. Louis in the year immediately two groups: objective-specific prizes and competition following Charles Lindbergh’s Trans-Atlantic flight. prizes. An objective-specific prize lays out a con- Given the state of personal transportation in 1927 as cise technological breakthrough and awards a prize compared to now, this is a staggering only on its completion. Competition-based prizes number. Prizes in technology have Prizes in tech- set a specific goal and award the prize to the team shown to inspire the public much in nology have that comes up with the best entry. Consequently, the same way the NCAA Tournament shown to inspire competition prizes leave room for subjectivity. does for college basketball. As of the public much 1 July 2004, the X Prize had regis- in the same Historically, an inducement prize is announced to a tered 3 billion print impressions of way the NCAA specified or unspecified group of contestants. These its name in newspapers, journals, Tournament does 2 contestants engage in competition with the intention and web sites. This number has for college basket- of accomplishing the set goal. The prize is awarded undoubtedly increased significantly ball. only to a team or individual meeting the criteria set after Burt Rutan claimed the X Prize out in the initial prize offering. An appointed judg- in October. Prizes have historically ing panel often oversees the adherence to the prize been very effective at drawing public sentiment to a criteria. technology. An increase in public sentiment means a sequential increase in technology visibility and 2. The Prize Model and its proliferation. This is evidenced by the way that the Economics country latched on to information technology in the development of Silicon Valley. 2.1 The Technological Implications of Prizes Both recognition and inducement prizes seek to reward an individual or team for a breakthrough 2.2 The Economic Implications of Prizes in a given field. These prizes have the option of Recognition and inducement prizes both have last- rewarding advances in traditional ing economic effects that can be attributed to the thinking or the development of non- direct or indirect incentives that they supply. Often ... inducement traditional thinking. This freedom a recognition prize serves as an afterthought to a prizes sidestep plays a major advantage when weigh- particular project or body of work, but nevertheless the bureaucratic ing the potential methods employed has some effect on the motivation of intellectuals. It approval often to attain a prize. is a somewhat subjective and difficult task to quan- necessary to gain titatively measure the effects that recognition prizes grant and project The vast audience that a prize compe- have on the economy because they are an after- funding. tition allows for increases the possibil- effect of an accomplishment. ity of non-traditional ideas to be prov- en more effective. Specifically, inducement prizes The economic effects of inducement prizes are more sidestep the bureaucratic approval often necessary clearly defined and measurable than their previously to gain grant and project funding. Since prizes do mentioned counterpart. Beyond the simple fact of not discriminate against the ideas that are involved a prize being won or not, the easiest way to measure in achieving a certain technological breakthrough a prize effectiveness is by examining the financial new methodology is free to gain otherwise unlikely leveraging of participation. When a prize is won,

Page 2 the aggregate investment in research by contestants federal funnel that existed in the Apollo program. is an indicator of the prize leverage. Although a Similarly, unlike the Apollo program prizes distrib- portion of this figure represents failed research on ute the initial investment among an often diverse ideas that are did not work, often as much is learned pool of competitors. from a mistake as a success. Regardless, many teams competing for the Ansari X Prize, win or lose, The fundamental rule of risk aversion in finance plan to extend their business ventures beyond the is having a diversified investment portfolio. duration of the official competition. Similarly, many Inducement prizes offer diversifica- of the component systems developed by the various tion in that the sponsor, without Inducement X Prize teams may prove to be instrumental in the having to make an early judgment, prizes offer unified vision of privatized space travel. While it is automatically backs a winning solu- diversification in not possible to make these measurements now, it is tion irrespective of whether it is a tra- that the sponsor, possible to compare aggregate competitor invest- ditional or nontraditional approach. without having ment with the prize purse offered. A chart of these to make an early results is shown in figure 1. Additionally a prize is not awarded judgment, auto- unless a defined objective is met. matically backs This makes the risk of a prize near a winning solu- X Prize 40:1 zero, with the only exception being tion irrespective administrative costs. This provides of whether it is for a perfectly efficient use of capital DARPA 50:1 a traditional or so long as the prize value is correctly Estimate nontraditional determined. approach. Orteig 18:1 An alternative method to quantify the success of a prize is to analyze the economic Figure 1 – Relative Prize Leveraging3 growth of an industry at three points in time: before the prize was offered, during the prize competition, The figures indicate a tremendous return on invest- and after the prize competition was won. The rapid ment with both the Orteig and X Prizes having growth exhibited by the aviation industry following documented returns of 1600 and 4000%. Charles Lindbergh’s flight across the Atlantic Ocean is staggering. The figures echo the New Growth Theory, which was made popular by Paul Romer of Stanford. The The profound effect that the Orteig Prize and X theory indicates that technology advances are not Prize have had on their respective industries is easily random, but rather a direct result of the money that noted. While the economic data following the com- is invested in them.4 This philosophy is exempli- pletion of the X Prize will not be available for some fied in the success of the Apollo program. At one time, the number of companies and investment that point the program had over a 10 percent stake in the has been spawned as a result of the prize makes one entire Federal budget.5 While this number seems take note. astounding, the fact that Americans put a man on the moon in such a short period must be placed in 2.3 Traditional Research Methods perspective. The leveraging ratios shown in Figure In 2002, the federal government financed approxi- 1 provide an estimate of the effect that an invest- mately 28% of all R&D done in the United States ment in sponsoring a prize will have on an industry. making it the single largest sponsor of the indus- If these numbers hold true, prizes prove to be a try.6 The federal government also provides close more efficient way of inspiring research than the to 59% of all University R&D funding. In 1999,

Page 3 the National Economic Council requested that This process of peer-review has been around for the National Academy of Engineering study the over a hundred years and has been employed in potential effectiveness of implementing inducement the publication of some of the most influential prizes as part of the federal research program. The papers. Interestingly, two of the most important Academy of Engineering concluded that induce- scientific works of the century managed to bypass ment prizes are not, on their own, a replacement peer-review. The 1951 paper of Watson and Crick for the traditional research methods that are cur- on DNA structure and five of Einstein’s papers that rently employed. Inducement prizes introduced his theories of relativity and the photo- would complement existing R&D electric effect both went straight to press.7 Inducement financing systems by providing a dif- prizes would ferent means of addressing problems Federal procurement contracts are awarded in a complement or challenges. Currently, the most variety of ways and mainly negotiated on an indi- existing R&D common method of securing federal vidual basis between government and industry agen- financing systems research grants is through the peer- cies. The process of distributing these contracts by providing a review process and agency-issued pro- differs between agencies, but often incorporates an different means curement contracts. executive review process similar to the peer review of addressing method described above. problems or chal- The peer-review process has evolved lenges. into several different methods since 2.4 Advantages and Disadvantages of its inception. The heart of the pro- Inducement Prizes with Traditional Research cess consists of an author’s submis- Methods sion of a work or proposal in order to receive publi- While the peer review process and The bureaucratic cation or funding. The submission is then reviewed procurement contracts have been the process involved by what is commonly referred to as a “referee”. The standard of securing research funding in securing referee is chosen by the sponsoring agency and is and publishing for some time there grants and pub- often widely considered an expert in the particular are still fundamental flaws in the sys- lishing privileges field of interest. The referees serve as intermediary tem. The most common complaint is susceptible to advisors and do not make any binding decisions or with peer-review is that it is a slow inefficiencies in recommendations. Typically several referees will process. It can often take several evaluating ideas. typically review a proposal or paper in order to get a months for a paper to make it to consensus and variety of opinion. The board of ref- print. The abrupt change of pace can erees make their recommendations on an individual be frustrating to any scholar that has basis, not in a “trial by jury” sense. Traditionally, spent the past several months working at a rigorous the identities of the referees have been kept anony- pace. mous, but this practice is slowly changing in some fields. Procurement contracts and peer-review also lend themselves to partiality. The bureaucratic process Thus, the peer-review process has adapted new involved in securing grants and publishing privileges methods of soliciting referees and revealing identi- is susceptible to inefficiencies in evaluating ideas. ties in order to obtain a more unbiased opinion. In Some sociologists argue that the peer-review system a single-blind review, the reviewer has knowledge of allows the “elitist referees” control over the progress the author’s identity, but the author is unaware of and direction of industry.8 Generally, these experts the reviewer’s credentials. A double-blind review have an established perception of what technol- consists of both parties remaining anonymous to one ogy will work and what will not. The methods of another. single and double blind judging seek to narrow these biases, but often fail due to a prior knowledge of a

Page 4 certain party’s work. to pool assets into a startup venture; this can be seen in the funding of Scaled Composites in the X Prize. Inducement prizes offer solutions to both problems In the same way, a prize-sponsoring agency may be listed above. If an inducement prize’s goal is prop- funded through a grant program. erly defined a winner will identify itself while being subject to little review; this will in turn speed up the Another problem for prize-sponsoring agencies may process of creating visibility for an idea. More note- be the control of overhead costs required to admin- worthy is the theory that inducement prizes encour- ister the prize. DARPA has spent nearly $11 million age non-traditional ideas that may be in organizing all of the details involved in its 142-mile If an induce- weeded out in either the peer-review Grand Challenge Race.9 In defense of DARPA, most ment prize’s or procurement contract process. of the expenses were due to safety concerns and are goal is properly only applicable due to the nature of the prize. defined a win- Going back to the point about risk- ner will identify aversion, a prize-sponsoring body The last problem encountered is intrinsically woven itself while being does not have to worry about a “far- into a benefit of prizes. Duplication of work efforts subject to little fetched” idea costing them money has long been debated as wasteful.10 The same review; this will because they only have to fund the advantage of producing several competing teams in turn speed up winner. Consequently, a prize com- may also duplicate the work done and make fund- the process of petitor may snag on to an idea that ing redundant. Prize competition can turn into what creating visibility would be tossed out of a boardroom one expert calls a “patent race.”11 The for an idea. or government agency. effects of the duplication of work will ... it can be con- have to be judged with respect to the cluded that prizes A case in point is the Longitude Prize value of the work done as compared offer distinct that was won by John Harrison in to the prize. Given the extremely high advantages that the 18th century. Harrison was an English peasant leveraging ratios of the X Prize, it is are not present who was underestimated by many London academ- hard to imagine that the work done by in traditional ics. The majority of the academics supported using teams is redundant by a factor of forty. research funding astronomical references to determine longitude mechanisms. at sea, while Harrison favored using time and dis- Given these key differences, it can be tance calculations with a clock. At the time, clocks concluded that prizes offer distinct were relatively unrefined and inaccurate causing advantages that are not present in many “experts” to write off his efforts. What John traditional research funding mechanisms. At the Harrison ended up with was a clock that did not same time, prizes alone may not, as a 1999 National only win the prize, but was also the most accurate Academy of Engineers report suggests, be sufficient timepiece to exist for a number of years afterwards. to replace completely these methods. Prizes do offer In the midst of Harrison’s clock construction he pio- potential to increase the marketplace of a technol- neered some now common practices in fields such as ogy as well as test demand. Inducement prizes have solid-state physics and material science. historically reduced the amount of capital required to establish a technology and also foster non-traditional Inducement prizes do not come without several innovation such as those of John Harrison. potential disadvantages and modes for failure. The most notable disadvantage to both prize-sponsoring 3. The History of Prizes agencies and competitors is the lack of an initial cash flow. Research grants and contracts generally pro- 3.1 The Widespread Application of Prizes vide resources and funding to help get a program off Modern chemists may not be aware of it, but the of the ground. However, prizes do allow competitors foundation of their modern industry was laid in part

Page 5 by a prize offered over 200 years ago. The French brought forth the efforts of the world’s leading Academy offered 100,000 francs to the individual astronomers. These men were all engaged in a com- that could produce a soda alkali from sea salt. The petition for the handsome reward and recognition prize was of course won and shined light down a that would go to the winner. The feat of determin- new hallway in chemistry. ing longitude was commonly seen as an analog to creating a perpetual motion machine. Isaac Newton In the 21st century, prizes are still in abundance, is quoted as saying that the longitude problem is either in the traditional form or as an evolved ver- “the only problem that ever made my head ache.”14 sion. Prizes have dominated the topics of television While astronomers were working away at optical shows ranging from Star Search in the 1980’s to the devices to determine relative star positions, John wildly popular American Idol today. American Idol Harrison was toiling way in rural England to create has used some of the most basic advantages of prizes a clock that would turn these traditional thinkers on to produce a media powerhouse. Contestants apply their heads. to the contest through an audition. The contestants that pass the audition compete on national televi- His final invention went against the popular belief, sion for a recording contract. The Fox Television backed by Edmund Halley and Newton among Network wins in two ways: the ratings for American others, that longitude could only be accurately Idol dominate primetime television and the winner determined through astronomical measurement. has, without an exception yet, produced at least a Clocks were seen as inaccurate in keeping time and platinum album. Meanwhile, many adversely affected by the rough conditions imposed of the runners-up have used the by sea travel. John Harrison’s H-4 timepiece defied Prizes have also exposure given by Fox to advance all logic when presented to the Board of Longitude. existed in the their careers; one runner-up secured A clock had never before been cre- more traditional a recording contract and has already ated of such small size and stunning sense and led to John Harrison sold over 2 million albums. accuracy. The clock passed the some significant was not awarded requirements set forth by the Board breakthroughs in the full Longitude Prizes have also existed in the more of Longitude with flying colors. This the past several Prize until 1773 traditional sense and led to some is not to say that Harrison’s invention hundred years... after a long battle significant breakthroughs in the past was immediately heralded. with the Board of several hundred years; some of these Longitude. prizes are described in the following John Harrison was not awarded sections in greater detail. the full Longitude Prize until 1773 after a long battle with the Board 3.2 The Longitude Prize of Longitude. Politics and public stature played a The British Parliament offered, through a legisla- key role in the hesitation to award John Harrison tive act in 1714, 20,000 pounds to the creator of a the entire prize. He gave little heed to the popu- device or invention that determined geographical lar opinion of respected scientists and was treated longitude.12 One difficulty was that the device “shall much in the same manner. Harrison was a peas- have been tried and found practicable and useful at ant and noted by some as a man of short temper. Sea.”13 The creation of the prize was in response to The Longitude Board went as far as changing the the recent rash of casualties suffered by shipwrecks rules during the competition to make it harder that were the result of inaccurate longitude mea- for Harrison to prove his device. The Board also surement. required Harrison to personally tend to the clock on its dangerous trip west across the Atlantic. Word of the prize soon spread across Europe and John Harrison complied with all of these changes, reached as far as the colonies of America. The prize cementing his reputation as a determined man; he

Page 6 was not interested in the money, but rather fought 3.4 The Orteig Prize for the respect that he had worked at getting for so Raymond Orteig immigrated to the United States long.15 in 1912 and began at the bottom in hotels. Orteig quickly moved through the ranks and became a busi- 3.3 Aviation Prizes in the Early 20th Century nessman by acquiring several hotels in New York The advent of the Wright Flyer at the turn of the City. In 1919, Orteig reasoned that if there was a 20th century led to a great increase of experimenta- way to utilize aviation for international tourism, tion in aviation. The government was slow to catch New York hotels would benefit. He approached on to the trend and did not join the effort until the National Aeronautic Association (NAA) with a World War I. As a result many of the early advances check for $25,000. The check was to in aviation were made through the aggressive use be awarded to any team that could The check was of prizes offered by the private sector. These successfully complete a non-stop to be awarded prizes were already being used in Europe to make flight between New York City and to any team that great strides in the aviation industry. The U.S. was Paris; Orteig specified an expiration could success- quickly falling behind the Europeans in research. of the prize in five years, the rest of fully complete a The growing gap in aviation sparked the head of the the administrative details were left to non-stop flight Smithsonian aeronautical laboratory the NAA. between New York to take note. Advisory committees City and Paris... The feats of the were assembled to assess the state of The prize hung in limbo for the first prizes offered aviation in the United States. These five years and Orteig decided to may seem trivial committees determined that prizes extend his offer for another five. Still, by today’s stan- were essential in keeping pace with little progress was made until the 1926 invention of dards, but were Europe. the Wright radial engine. Soon after, aviation big considered daunt- shots and daredevils lined up at the prospect of the ing and nearly At this time, aviation was still a dan- challenge. The popular approach among pilots was impossible in gerous field, dominated by “fliers to utilize a three-engine aircraft with multiple crew- the early days of willing to risk their lives in such crazy, members. This was thought of as a way to circum- human flight. but crowd-pleasing, stunts.”16 As a vent the doom of an engine failure or pilot fatigue. result, prizes were used, most likely, The first attempt was made using a Sikorsky S-35 to shift the inherent risk of flying plane. The plane had a crew of four and was piloted away from the aeronautical companies. The feats by esteemed WWI ace, Rene Fonck. The plane was of the prizes offered may seem trivial by today’s put together hastily and had part of its landing gear standards, but were considered daunting and nearly detach on takeoff. The disaster cause two deaths impossible in the early days of human flight. and minor injuries to Fonck and another crewmem- Prizes soon became abundant, as did the amount ber. Despite the failure, several other teams pur- of money available to daring pilots and airplane sued the prize with the same aircraft configuration. manufacturers.17 It is estimated that $1,000,000 was offered through prizes in 1911.18 These prizes were, As an air mail carrier and part-time flying daredevil, for the most part, sponsored by aeronautical societ- Charles Lindbergh had a different plan to get to ies, newspapers, mail companies, and interested Paris. He wanted a single-engine plane that would individuals. The prizes addressed everything from be stripped down to only the essentials in order to speed trials, distance competitions, and technologi- maximize fuel capacity. Lindbergh’s credentials cal advances. The capstone of these prizes was the were frequently swiped at and most people wrote Orteig Prize issued for a Trans-Atlantic flight. him off from the start.

Shortly after the construction of Lindbergh’s

Page 7 plane was completed, one competing French team • US Air Mail increased form 97,000 lbs. in departed successfully from Paris for New York City. April to 146,000 lbs. in September of 1927; Despite the disheartening news, Lindbergh headed • There was a 300 percent increase in applica- from San Diego to St. Louis in an unprecedented tions for pilot’s licenses in US in 1927; non-stop test flight; only then did Lindbergh gain • An increase of more than 400 percent in the the notoriety that he deserved. Lindbergh sat number of licensed aircraft in America in patiently in New York City awaiting good weather 1927; and word of the French pilots’ location. Meanwhile • The number of airports in the United Sates the competing teams that gathered in New York doubled within three years of Lindbergh’s City rallied around each other’s efforts by sharing flight;20 information. Lindbergh set off for Paris on May 20, 1927, in his single-engine Spirit of St. Louis. The impetus of this movement in the aviation The French pilots had reportedly been spotted at industry may have been even more staggering had Newfoundland, but never were seen again. it not been for the onset of The Great Depression. It is hard to evaluate the exact implications that Lindbergh landed in Paris on May 21 to an enor- Lindbergh’s flight had on the current state of avia- mous audience which was there to congratulate him tion, given the wide variety of applications that on his record-breaking feat. Lindbergh navigated Lindbergh’s flight ended up serving. International the flight with no radio, minimal army flight is now an integral part of the tourism industry, Lindbergh landed food rations, no jacket, and emergen- mail service, and business travel. in Paris on May cy equipment consisting of little more 21 to an enor- than a flare and an inflatable raft. 3.5 The CATS Prize mous audience, A sealed barograph that showed In cooperation with the International Non-govern- which was there a positive altitude throughout mental Development of Space (FINDS), the Space congratulate him Lindbergh’s flight validated that his Frontier Foundation announced the CATS Prize on his record- flight was non-stop. The accomplish- in November of 1997. These two ment was signed off on by both the groups sought to demonstrate that breaking feat. A prize of National Aeronautic Association and space is not solely the realm of the $250,000 was the Procès-verbal and Lindbergh was government. A prize of $250,000 was offered to the first given the world record for a non-stop offered to the first team/individual team/individual flight of 5,809 kilometers. that can design a spacecraft to pro- that can design a pel a 2kg (4.41 lbs) payload to an spacecraft to pro- Possibly the most amazing part of Lindbergh’s altitude greater than or equal to 200 pel a 2kg (4.41 accomplishment was the effect that it had on the avi- km (124.3 mi.). A secondary prize lbs) payload to ation industry; this period is known as the Lindbergh of $50,000 was offered to the team/ an altitude great- Boom. As Lindbergh appropriately commented, “It individual that can launch the same er than or equal was like a match lighting a bonfire.”19 payload 120 km (74.6 mi.) into space. to 200 km (124.3 A deadline of November 8, 2000, was mi.). • The Spirit of St. Louis was personally set for the prize. The spacecraft did viewed by a quarter of all Americans within not need to be reusable or recover- a year of Lindbergh’s 1927 flight; able so long as it could be sufficiently • The number of U.S. airline passengers proven that the goals of the prize were reached. increased nearly from 5,782 in 1926 to The payload, which could also be non-recoverable, 173,405 in 1929; was provided by the judging committee in the shape • US air cargo flown went from 45,859 lbs. in of a right cylinder with a minimum 100mm diam- 1927 to 257,000 lbs. in 1929 eter and 200mm length. The deadline approached

Page 8 before any of the many teams competing were able Foundation. As a protection against a quick-win to claim the prize. Their efforts “added to the success before the $10 million purse was fully fund- advancement of private space enterprise” and can ed, it was backed with a “hole-in-one” be thought of as “free” R&D. 21 insurance policy until January 5, 2005. The X Prize has 3.6 The Ansari X Prize The X Prize has led to the creation led to the creation The X Prize was established May 18, 1996, in St. or proliferation of more than twenty- or proliferation of Louis by a group of investors/space enthusiasts. The four private companies in the space more than twen- goal set out by the X Prize founders industry. These companies are all in ty-four private was to “promote the development pursuit of the mission set out by the companies in the The goal set out and flight of spaceships able to pro- X Prize and many have similar side space industry. by the X Prize vide low-cost commercial transport projects that branch off of their core founders was of humans into space.” Ten million X Prize concepts. It is estimated that to “promote dollars was offered to the team that these companies have collectively spent close to the develop- constructed a reusable spacecraft to $400 million in pursuit of the $10 million X Prize. ment and flight carry three passengers to an altitude of spaceships of 100 km (62.5 mi.), return safely, Burt Rutan, who has designed more aircraft than able to provide and repeat the endeavor within two Lockheed and Boeing combined, and Microsoft’s low-cost com- weeks. The prize shows promise of Larry Allen have teamed up to head the effort of mercial transport reducing the cost of sending humans Scaled Composites.24 On June 21, 2004, Scaled of humans into into space; it is estimated that Composite’s Spaceship One reached the altitude space.” prices may fall to $100,000 by 2020.22 requirement set forth by the X Prize with a single Currently NASA shells out approxi- passenger. The company announced its intentions mately $60 million for each astronaut to launch its first flight for the formal X Prize bid who is sent into space.23 with three passengers at the end of September. On August 5, 2004, Canada’s DaVinci Project The idea was founded on the idea of reestablish- announced plans to launch its rocket in competition ing St. Louis as a center for aviation activities. for the X Prize October 2. Charles Lindbergh’s Atlantic Crossing had built up St. Louis’s reputation previously, but the city’s The formal X Prize competition is just a springboard foothold had slipped away. Several space enthusi- for the general movement occurring in privatized asts and Lindbergh family members formed the X space access. The X Prize Foundation recently Prize Foundation as a result. The movement gained announced a $9 million deal with the state of New momentum among St. Louis businessmen and Mexico to host the X Prize Cup. The X Prize Cup resulted in the framing of the X Prize. will be a more traditional competition than the X Prize because teams will be competing at the same The X Prize was announced and established with site. The Cup offers cash prizes for each of the fol- the support of an influential group of support- lowing five categories: ers. The respective heads of the FAA and NASA, seventeen astronauts, and members of Charles 1. Fastest turn-around time between launches Lindbergh’s family were all present at the press con- 2. Maximum number of passengers in one ference announcing the prize’s inception. The prize flight is endorsed and partly administered by the New 3. Total passengers carried during the X Prize Spirit of St. Louis Foundation. The competition Cup was renamed the Ansari X Prize after the Ansari 4. Maximum altitude family made a large contribution to the X Prize 5. Fastest flight between take-off and landing.

Page 9 change of the world. These categories are awarded individually and also combined into an aggregate score that will deter- 3.7 DARPA Grand Challenge mine the overall winner of the X Prize Cup. The Defense Advanced Research Projects Agency (DARPA) blazed the trail in creating a govern- Further rumored plans by the X Prize foundation ment-funded prize with its Grand Challenge. The include Dr. Diamandis’ expressed interest in creat- Challenge was sparked by DARPA’s interest in ing a space race from New York to Sydney. This developing ground vehicles that will operate autono- event would have a more comparable framework to mously in a combat environment. the original Orteig Prize and also likely draw a huge interest from shipping companies The DARPA Grand Challenge requires entrants to Further rumored looking to implement global same-day build an autonomous vehicle that can successfully plans by the X delivery. navigate a course of obstacles and varying terrain in Prize founda- less than ten hours. In addition to constructing the tion include The X Prize has been successful from vehicle, each team must turn in a technical paper Dr. Diamandis’ many standpoints. The prize leverag- prior to entry detailing the method expressed inter- ing is confidently estimated at ranging that will be employed in the competi- est in creating a from 35 to 40 times the amount of the tion. An initial prize of $1 million The DARPA space race from actual prize. 25 This figure is made up was offered to the team that could Grand Challenge New York to of a number of companies that were complete such a vehicle28. requires entrants Sydney. formed for or have the direct goal of to build an competing for the X Prize’s mission. The first DARPA Grand Challenge autonomous Beyond that, the X Prize has laid a was held March 13, 2004, and vehicle that can foundation for the privatized space industry to grow stretched a course from California to successfully navi- in the X Prize Cup. The success of the X Prize has Nevada. Teams were unsuccessful in gate a course of been publicly and federally lauded26. Members of completing the course and no prize obstacles and the X Prize Foundation have been called upon sev- was awarded. varying terrain eral times to give testimony before both Congress in less than ten and NASA27. DARPA has already begun a con- hours. tinuation of the first Challenge by Beyond the scope of the X Prize foundation a fol- announcing a $2 million follow-up low-on prize has already been offered by a Las contest to be conducted in the fall of 2005. The Vegas billionaire offering $50 million to the team program as a whole is authorized by Congress to run that can successfully send five humans into orbit. until September 30, 2007. The X Prize has also caught the eye of mogul Richard Branson. Branson unfurled his plans to DARPA was left to define many rules and regula- enter his Virgin Airlines into the space tourism tions on its own. Entrants were limited to U.S. business. He has contracted with Rutan’s Scaled citizens, but with some loose stipulations. A team’s Composites in the amount of $100 million to build nationality is defined only by its leader, meaning five replicas of SpaceShipOne, each carrying seven that in theory an international team could be orga- passengers starting in 2007. The price per flight nized under a U.S. team leader. Federal employees is expected to be in the $200,000 range and will were allowed to enter the competition provided that take passengers to an altitude of 70 miles. Early they competed “on their own time” and used “only estimates are that the first five years of the venture non-Federal equipment and supplies.”29 Federally will attract 3,000 people and generate $600 million. Funded Research and Development Centers Indeed, the X Prize ripples are just beginning their (FFRDC) were allowed participation as long as “no

Page 10 Federal funding is specifically used to prepare for or ed by such a program. The NAE Report also often participate in the Challenge.”30 has served as a point of reference for future govern- ment discussions and arguments regarding the orga- Another noteworthy tactic employed by DARPA nization of a program of federal inducement prizes. in its rules definition disqualifies entries “that can- One such report that was inspired by the 1999 not demonstrate intelligent autonomous behavior,” study is the 2004 Aldridge Report. The President’s leaving the qualification of teams somewhat open to Commission on Implementation of United States subjectivity. At the same time, this saves DARPA Space Exploration Policy delivers the Aldridge from allowing frivolous or embarrassing entries into Report annually to the President. The 2004 Report the competition. A chief judge whose decisions are dedicated several pages to encourage the use of final and binding makes all of these rulings. prizes to build a more “robust” space industry. The The chief judge is responsible for clarifying exist- Report cited given testimony by various parties ing rules, defining new rules, and has a broad scope including organizers of the X Prize to deduce the of authority in otherwise modifying the Challenge. value that prizes have in commercializing the indus- Entrants are encouraged to communicate ideas with try. The Commission suggested future prizes of var- DARPA since the winning team is required to prove ious values up to a proposed $1 billion program to rules compliance to the U.S. Government before the the company that can send humans to the moon and prize is awarded. sustain their inhabitance for a set period of time. Funding for such an effort was assumed to be a joint 3.8 Federal and Professional Recognition of venture between NASA and Congress. Prizes On a more immediately relevant note, the In 1999, the National Economic Council asked the Commission “strongly supports the NASA National Academy of Engineering (NAE) to “asses Centennial Challenges Program” and encourages an the potential value of federally sponsored prizes expansion of the realm of the developing program to and contests in advancing science and technology “encourage entrepreneurs and risk-takers to under- in the public interest.”31 Forty-one members of take major space missions.”32 government agencies, academic institutions, and industry gathered to deduce the 3.9 NASA Centennial Challenges The report was potential for prizes; the end result of As an indirect result of the NAE recommenda- presented to this conference produced the paper, tions and the success that the X Prize was having, Congress con- “Concerning Federally Sponsored NASA, through the leadership of Brant Sponberg, cluding that the Inducement Prizes in Engineering sought to create a program that federal govern- and Science.” The report was pre- would offer and administer prizes ...NASA, through ment should sented to Congress concluding that addressing various NASA objectives. the leadership of experiment with the federal government should exper- The 1999 NAE paper along with a Brant Sponberg, the use of induce- iment with the use of inducement 2003 Space Architect Study led to sought to create ment prizes to prizes to complement the existing the development of the Centennial a program that complement peer-review and procurement con- Challenges Program. The program would offer and the existing tract system, (A full summary of the was established in the NASA Office administer prizes peer-review and conclusions reached in the report is of Exploration Systems. This being addressing vari- procurement con- included in the appendix.) said, the goals of the program address ous NASA objec- tract system... the “NASA vision with an emphasis tives. The 1999 NAE report has served as on exploration.” 33 a roadmap for much of the research done in this project and also validated opinions on Congress initially authorized Centennial Challenges prizes through the expertise of those directly affect- to cap prize values at $250,000 for the 2004 fiscal

Page 11 year. Subsequent prizes would include larger purses nology developed by the Centennial Challenges that must be approved by the NASA Administrator. Program. In some situations, NASA will give the The program was established with loose prize objec- winning team/individual free reign with intellectual tives to be more clearly defined at an annual work- property. In most cases, however, the rules will shop (first held June 15-16, 2004) and a collection require the issuance of a license for NASA to utilize of prize suggestions submitted via the Centennial the technology. Challenges website. Participation in Centennial Challenges competitions The first workshop was held in downtown is currently open to U.S. citizens who are not federal Washington D.C, at the Hilton hotel. Attendees employees (unless particularly specified in specific included an array of NASA officials and scientists prize rules) with some potential to expand to inter- as well as representatives from the X Prize and national participation. Judging will mostly be done aeronautical/astronautical organizations. The con- by NASA, but may be opened up to include outside ference featured keynote speeches from the govern- members of academia and industry. ment and private sectors, followed by brainstorming and rules definition sessions. NASA has previously 4. The Components of divided the topics of prizes into six categories, which Administering a Prize served as the topics of the brainstorming sessions: 4.1 The Scope of Prizes • Astronautics Traditionally, prizes have not speci- • Astrophysics fied the exact technology involved in Traditionally, • Bioastronautics achieving a goal. Prize administrators prizes have not • Earth Observation have been careful not to narrow the specified the • Exploration systems scope of the technology allowed in exact technol- • Planetary Systems prize competitions in order to avoid ogy involved in trumping the inherent advantage of achieving a goal. In these sessions, potential topics for prizes were encouraging non-traditional ideas. discussed in order to determine the state of the art Given the nature of the energy field, in each area and determine a useful threshold for determining the scope of a prize may not be as cut the advance required by the prize. Ideas from the and dry as it would be in an area like space explora- brainstorming sessions were then reviewed by NASA tion. The X Prize can specify relatively little regard- and incorporated into rules definition sessions along ing the technology employed and still be efficient, so with pre-established NASA ideas for long as three people reach sub-orbital altitude. prizes. The rules-definition sessions Ideas from the included defining a particular prize The same cannot necessarily be said of the energy brainstorming goal, establishing a judging metric, industry, due to existing infrastructure and invest- sessions were projecting potential rules discrepan- ment. A challenge issued to create a low energy then reviewed by cies, and suggesting an appropriate home is a prime example of a potentially ineffec- NASA and incor- prize purse. NASA will again review tive situation. An energy-efficient home supported porated into rules these suggestions with selected entries mainly by solar panels can be built in Colorado to definition ses- expected to be implemented by take advantage of the abundant sunlight. These sions along with January 2005. panels will hardly be efficient if the same home were pre-established to be constructed in Seattle. NASA ideas for As a general policy, NASA does not prizes. intend to require possession of the When possible, it is advantageous to maximize intellectual property rights for tech- the scope of technological methods that can be

Page 12 employed in a prize competition. This allows for 4.3 Setting a Deadline technologies to compete against each other and The threat of a looming deadline has been essential reduces the possibility of a redundant technologi- in the efficient development of technology. This is cal breakthrough. Restated, a more general prize no different in prize competitions. Some may argue scope helps to create multiple alternatives for the that competition itself will keep teams on pace with marketplace. Many companies involved in the each other, but this has not been previously shown. Ansari X Prize competition had their own patented David Anderman, a previous prize administrator, method to reach sub-orbital alti- gave two pieces of advice for setting up a prize. One ...a more general tude. Just because one team is more of the two was to make sure that the money is there; prize scope helps likely to win does not mean that their the other is to make sure that the prize has a dead- to create multiple method will prove to be more mar- line. He indicated that a deadline is essential in alternatives for ketable or cost-efficient. For the X forcing teams complacent with their work to switch the marketplace. Prize, Scaled Composites has spent into a higher, sometimes necessary, gear. The NAE an estimated $25 million in R&D, study performed in 1999 reached the same conclu- while the da Vinci team that planned sion that Anderman did by stating that a deadline on launching only a few days later has only spent $5 must be set for a prize competition to be effective. million. Scaled Composites may win the X Prize, Many teams in the X Prize competition are cur- but da Vinci may end up with the edge in the mar- rently rushing to get their vehicles to launch before ket. the January 2005 insurance policy expiration date. The certainty that prize funding is in place serves to Discrepancies, such as the house efficiency scenario accelerate the competitive pace. If the accelerated described above, will require an in-depth analysis rate could be quantified, future prize efforts could to determine the approach that is most efficient in weigh the value of exercising insurance as a supple- providing a prize and the scope of its corresponding mental tool. solution. Deadlines must also be set with care and in a rea- 4.2 Prize Objectives sonable manner. A short deadline may discourage Prize objectives need to be determined simultane- a team from entering a competition altogether. A ously with the scope of the prize; one is likely to premature deadline in the case of a limit the other. high-risk prize may also lead to safety It is accordingly concerns by prompting a team to essential to set The National Academy of Engineers suggested, compete without completing safety a prize deadline in its 1999 report, the following four subgroups of tests. Risk is unavoidable due to the that is in step inducement prize objectives: nature of a competition with teams with the changing vying to reach the same goal first. cost of the tech- 1. New or Best Invention Several pilots met their fate during nology required 2. New Application the rush to send a plane across the and allowing for 3. Performance Improvement Atlantic Ocean. the necessary 4. Technology Diffusion safety precau- It is accordingly essential to set a tions. These four categories of development are fairly prize deadline that is in step with encompassing and should give the framers of a prize the changing cost of the technol- a general idea of the options for setting up a prize. ogy required and allowing for the necessary safety These four objectives are not discrete by nature and precautions. A deadline can be extended, as it was may have a tendency to overlap each other, which in in the Orteig and CATS prizes, so long as competi- theory will produce a more desirable result. tors are not planning for an extension. The setting

Page 13 of such a time limit of a prize has often been the value of the prize the degree of the techno- responsibility of a prize’s administrative body. logical advance made. This may include a trophy or plaque presentation, arranging for 4.4 Prize Administrators keynote speakers, a public or private assem- Historically, prizes have always had an administrator bly, a formal banquet, or any combination or board that has been responsible for overseeing of the aforementioned. the management of the prize. A general overview of the tasks of this administrative agency (AA) 2. Prize entry screening – The AA will be includes, but may not be limited to, the following responsible for screening out frivolous functions: entries in order to increase the credibility and efficiency of a prize program. Potential • Communication – The prize AA must coor- ways of accomplishing this are entry fees, dinate communication efforts between: auctioning entry slots, and technical paper submissions. 1. Sponsors – The AA must ensure that the prize objectives are being met and that 3. Judge selection procedure – The AA will there is a guaranteed source of funding. need to ensure that qualified experts are chosen as judges and that they are able to 2. Competitors – The AA is responsible for work together. The AA must ensure that recruiting qualified competitors, communi- there is no partiality among the judges and cating the rules, clarifying rules interpreta- that prizes are awarded on a fair basis. tions, determining the effectiveness of and arranging an online forum, and maintaining 4. Rules collaboration – The AA will need to an image of impartiality. determine what body will be in charge of making the rules for a prize. Possibilities 3. Media – The AA must maximize media include: the AA, judges, qualified experts, exposure, coordinate press releases, and be industry leaders, sponsoring bodies, or any able to direct inquiries to the proper par- combination of these. The AA will then be ties. in charge of delegating rules clarification procedures. 4. General public – The AA is responsible for captivating the general public through 5. Prize idea solicitation – The AA will be a multitude of mediums. The AA will be responsible for judging submitted prize responsible for maintaining a fair and pro- suggestions as well as soliciting new ideas. ductive image of the prize program. The Possibilities include a type of prize to AA will also be responsible for the imple- reward larger prize suggestions or technical mentation of a website to increase exposure paper submissions to judge the merits of an and accessibility. idea.

• Organization – The prize AA must arrange 6. Funding – The AA will be in charge of lin- for the following activities or processes: ing up and ensuring that funding is present for each particular prize purse. The AA 1. Prize award ceremony – The AA must will also be responsible for specifying how determine what kind of public recognition the prize will be awarded and determining shall be given to the winner of a prize. This the range of control allowed by sponsoring most likely will be commensurate with the bodies.

Page 14 using federal funding must be critically analyzed. • Other – The responsibilities of the AA may Problems, not the least of which is politicization of extend to more general aspects of the pro- the process, may arise by using government money. gram or specific prize, potentially including: Government participation may involve an added layer of bureaucracy in administer- Legal issues – The AA may be in charge ing a prize. The effects of this may Problems, not of ensuring legal compliance. This would damper the non-discriminatory the least of which include, but is not limited to determin- approach encouraged by induce- is politicization ing intellectual property possession issues, ment prizes in areas such as judging, of the process, licensing rights, competitor risk manage- scope of competition, and conceptual may arise by ment, and competitor compliance with diversity. One of the most obvious using government local, state, and federal restrictions. restrictions may be the limit on com- money. petition entry. Since no precedent 4.5 Prize Financing has been set with an outside agency Dr. Peter Diamandis, the CEO of the X Prize using government money to administer a prize it is Foundation said that arranging funding for the X difficult to predict the flexibility in regional competi- Prize was the greatest obstacle his organization had tion. The DARPA Grand Challenge and Centennial to overcome. Many interested funding sources were Challenges Program both prohibit international concerned with the risk involved in placing their competition, with some room for flexibility. On the logo on a rocket that has the potential to explode other side of the argument, a state entity that seeks in front of a national audience. This to promote an industry in their state exclusively may Many interested example pertains particularly to prizes have difficulty in limiting competitors to companies funding sources involving volatile technology, like and/or residents located in the state. were concerned the X Prize, and illustrates a general with the risk apprehension in recruiting funding State governments could be a potential source for involved in plac- from private corporations. prize funding. The question arises for state support ing their logo on The interests of funding sources must of a national prize because the prize may or may not a rocket that has be taken into account in order to have direct benefits to the state. Thus, state deci- the potential to ensure a smooth running prize pro- sions are likely to be on a case-by-case basis depend- explode in front gram. Different entities have differ- ing on the perception of benefits. of a national ent considerations, all of which must audience. be accounted for when arranging One problem inherit in government funding is risk- financing for a prize. aversion. While prizes provide for some protection from liability and direct financial loss, they introduce Most people would agree that the federal govern- a safety risk indirectly in the form of a poor public ment might prove to be an abundant source for image. The Orteig Prize claimed several lives on prize funding. Government funding can make sense the path to crossing the Atlantic Ocean; the X Prize in that the massive amount spent on research and on the other hand has not. The X Prize did have development might more expeditiously achieve trouble recruiting sponsors due to safety concerns. its goal by occasionally utilizing the prize notion. Dr. Diamandis also pointed out at the Centennial The federal government has already done studies Challenges Conference that the average Formula involving the implementation of prizes and often 1 Racing team gets over $100 million a year from has resources that are greater than those of state sponsors. These same sponsors that declined to or private entities. NASA has already indicated a participation in the X Prize generally see their logo willingness to co-sponsor a prize with a non-govern- in flames or crunched up on the wall on an annual ment entity. The advantages and disadvantages of basis. One can conclude that the risk factor is based

Page 15 more on the public perception of the technology and order to award the prize amount should it happen to will thus be specific to each prize offered. The fed- be won before it was fully funded by sponsor dona- eral government has made its stance clear on safety tions. This mechanism of funding is only effective in issues by shelving the space program after both the the case that the prize is won before full funding is Challenger and Columbia incidents. in place. An alternative to government funding is to seek sup- port from either for-profit or not-for-profit organi- Organizers of a prize must be selective when zations. The advantage to these two groups is that approaching funding sources. Some sponsoring they do not always have a geographic constituency. bodies are likely to request conditions that may help A drawback, in the case of for-profit or not-for- or may get in the way of the effective operation of profit corporations, is that they may be interested the prize program. only in a prize that will be in tune with their goals. Not-for-profit organizations including foundations 4.6 Competitor Selection do not have drawbacks that would interfere with National security concerns and funding sources their potential interest in funding prizes. The main may play a role in limiting competitors allowed shortfall of some of these organizations would be to participate in a prize competi- budgetary funding limitations or non-conformance tion. The ideal model is an inter- National secu- with their stated mission. national prize competition without rity concerns and limits on either source of funding or funding sources Another scenario is a joint effort between any com- contestants. This would attract the may play a role bination of the above players. The government best minds from all over the globe in limiting com- could offer tax incentives to contestants or sponsors and would be the most successful petitors allowed of a prize. These tax benefits would be supple- at motivating competition. But the to participate in a mented with a monetary prize award from other universe of competitors may become prize competition. organizations. This model could prove very effec- relevant with regard to technologies tive in promoting robust business growth in a par- that contain a national security risk. ticular technical field. Tax relief might be a means This is the reason that DARPA limits contestants to of addressing the concern about regional-specific American citizens. benefits. Tax relief would also bring a new dimen- sion to the prospect of funding the required prize With a prize, such as the X Prize, international purse. In theory the prize might be smaller, but the competition makes sense because interest is nearly prize sponsor might otherwise benefit by cultivating universal and the sponsoring body is promoting a new businesses within its geographic area of interest. broad agenda. However, in a situation such as the This approach diverges from the ideal prize because DARPA Grand Challenge, military sensitivity may it offers some financial benefit for exist in the technology. Funding the research of a A unique funding many competitors rather than just the technology that may end up in the hand of another alternative intro- winner. country obviously defeats its purpose in this case. duced by the X The limiting of funding sponsors and/or competitors Prize is an insur- A unique funding alternative intro- may be used as a way to regionalize an agenda. If ance policy to pay duced by the X Prize is an insurance an entity would like to promote research and growth the winner. policy to pay the winner. The X in the state of Colorado, it might make sense to only Prize Foundation and an insurance offer the prize to individuals or teams that reside company commissioned a consultant or have interests in Colorado. Efforts to impose to identify the odds of a team winning the X Prize regional limitations will likely lead to trade-off deci- by January 2005. This number was used to set the sions that injure the region because Coloradans do insurance premium that the X Prize would pay in not always have the best or only solution.

Page 16 In order to attract a variety of entrants, the prize es were given the freedom to create rule judgments contest must be construed as an equal-opportunity as problems arose during the contest. While this program. For this reason, limitations are often may seem unfair to some, the X Prize Foundation put on some government employee allowed any team to withdraw with a full refund of participation. The goal of many the entry fee after the final rules were published. In order to recent prizes, including the X Prize, The X Prize also informed competitors of the rules attract a variety DARPA, and Centennial Challenges changes at the same time eliminating any potentially of entrants, the is to promote private efforts in certain unfair advantage. prize contest must industries. These contests often do be construed as not allow the use of government facil- 4.8 Intellectual Property an equal-oppor- ities that are not “fair-use” or equally The topic of intellectual property (IP) was briefly tunity program. accessible to anyone. Additional mentioned earlier in organizing a prize. The stipulations indicate that government Longitude Prize demanded that John Harrison employees may participate as long as turn over detailed drawings of his clock along with it is on their own time (not on time paid by the gov- all working prototypes. The X Prize, on the other ernment) and does not use proprietary government hand, has no right or say in the intellectual property resources. of any of the technology developed by the win- ning team or any of the other competitors. These 4.7 Judging Procedures two prizes facilitate comparison because they offer It is of the utmost importance to maintain impartial- approximately the same modern equivalent prize ity and integrity in the judging of prizes. Most com- dollar amount. The key difference is the amount petitions access recognized experts in the particular of money invested to win the two prizes. The X field of the prize who do not have a conflict of inter- Prize requires an investment that is, in many teams est in working with other teams. Government issued case, around or greater than the prize itself. Scaled prizes, e.g., the Longitude Prize, DARPA, etc., gen- Composites has reportedly put nearly $25 million erally appoint members of government as judges. towards it efforts. The Longitude Prize was won Unless government members have direct knowledge with minimal investment and proved to be a labor of in the field as the prize, the risk of politicizing judg- time and thought more than one of money. John ing is elevated. Harrison gave up all rights to his invention, yet he received a handsome reward relative This brings to mind the question of judging by indi- to the money that he himself invested The X Prize vidual versus judging by committee. Most prizes (he funded much of his research with purse served as a have been historically judged by committee. All private and government grants). This catalyst or pump- of the prizes detailed earlier had a committee that comparison shows that intellectual priming incentive convenes to reach a conclusion on the validity of property rights are a major factor for innovation, competitor achievements. The committee often has when determining the amount of a potentially offset- an appointed head that has the tie-breaking vote prize. Harrison gave up his invention ting a portion of (the chief judge in the DARPA competition is an rights for a larger reward. Scaled the expenses in example). Composites spent more money the venture. than the X Prize offers, but has the The next question is the realm of judging author- opportunity to recoup by taking their ity. In the case of the X Prize and Longitude Prize, product to market. The X Prize purse served as a judges collaborated with administrators to deter- catalyst or pump-priming incentive for innovation, mine the rules. This method preserves technical potentially offsetting a portion of the expenses in integrity as well as the economic and underlying the venture. goals of a prize. In the case of the X Prize, the judg-

Page 17 A second approach to intellectual property rights blocked the inherent risks from their thinking in will be taken by NASA in its Centennial Challenges order to compete. Program. NASA will leave the IP rights to the prize contestants, but 4.10 Public Relations The advantage will request a license to use the With over three billion press printings, the X Prize of requesting a technology if it is aligned with one has attracted significant attention to its efforts. license from all of NASA’s projects. NASA has not Dr. Diamandis stated that the public perception teams would be made it clear whether it will ask for a and knowledge of the prize is utterly important in that NASA could license from only the winning team or maximizing the effectiveness of the contest. The utilize individual all teams that enter the competition. buzz created by the X Prize has done a great deal components from The potential licensing rights could to motivate teams, inspire the public, and create a teams instead of even serve as a fee for teams if NASA visibility of the technology. More importantly, the the whole design. decides to request licenses from X Prize has proven that there is a market for priva- everyone. The advantage of request- tized space travel. Companies will produce it and ing a license from all teams would be people will watch and buy it. The same can be said that NASA could utilize individual components from of the Orteig Prize. Thousands of French citizens teams instead of the whole design. were in Paris to greet Lindbergh, and 25 percent of all Americans saw the Spirit of St. Louis on tour 4.9 Safety and Liability after its return. The audiences that these two prizes In any competition there is always concern for drew illustrate both a cultural shift in acceptance both safety and liability. Both should be carefully and demand for technological growth. addressed in the prize competition’s rules. Most prizes have both a disclaimer and a waiver that Each of these prizes put forth an idea that was releases all sponsoring and administrative parties “sexy.” Americans can identify with the space pro- from potential liability. Prize contestants need to gram after the Apollo days in the same way that the comply with all relevant federal, state, and local reg- world identified with the courage and significance ulations. This consideration will have to be handled of Charles Lindbergh’s flight. As the X Prize has on a case-by-case basis as different technologies gained momentum sponsors became more willing to present their own share of hazards in development attach their name to the contest. and testing. It is important to note that waivers and disclaimers do not absolutely guarantee immunity In this sense, public relations are important to any against lawsuits. Prize-sponsoring bodies must con- prize contest. The cultural shift in attitudes is as struct their rules with the intention of minimizing significant a change as the techno- the potential for lawsuits. logical achievement itself. A prize is most successful when it touches a A prize is most The implications of safety extend beyond legal con- large and diverse audience. Modern successful when cerns. As mentioned earlier, sponsor participation prizes have used a range of media it touches a large in the X Prize was often refused due to safety con- to reach the public and promote the and diverse audi- cerns. Sponsors tend to avoid attaching their names prize. The Internet has played a large ence. to something that may result in public embarrass- role in informing the public of the ments. This is a factor in determining the best way status of the prizes and also providing to market prize sponsorships. a central location for the media to request or view information. Other press is often gained through Unlike the X Prize, many competitors for early avia- newspaper, journal, website, and television publicity. tion prizes knowingly risked their lives. They had either an excessive confidence in their invention or

Page 18 5. CERI Prize Recommendations 5.2 Prize Scope The following section is a result of the feedback It was widely agreed that the possibilities for energy that the author received during meetings with area prizes may extend beyond the simple propositions energy experts, local officials, and participants in the such as flying across the Atlantic Ocean. Some Centennial Challenges Program. The opinions do technologies may need to be developed individu- not necessarily represent those of the author. ally while other prizes could offer a goal such as efficiency improvement or storage capability. It is 5.1 Scale of Operation important to determine what the broader general A key issue for CERI is the startup effort involved goal of a prize is and to keep that in mind, while not in garnering a solid reputation. This means deciding permitting preconceptions to exclude out-of-the-box whether a “larger prize” with greater approaches. An easy error for the X Prize would A key issue for implications would be desirable or have been to make the prize for a reusable “rocket” CERI is the rather a series of “small” prizes to going into space. The “rocket” stipulation could startup effort ramp up the reputation of CERI. have precluded development of Spaceship One, involved in gar- The terms large and small assume inadvertently delaying the breakthrough and elevat- nering a solid that the amount of the prize offered ing costs. reputation. This is directly related and proportional to means deciding the technological advance. The conversation consensus is that the prize needs whether a “larger to be as large as possible. This would attract more prize” with great- Starting with a large prize may harm entries, including more non-traditional entries into a er implications CERI if the prize is never won, if the competition increasing the probability that one may would be desir- prize is won after an extended period turn out to be the unconventional innovator (the able or rather a of time thus postponing CERI’s John Harrison type) of the energy field. series of “small” growth and reputation, or if the prize prizes to ramp up is widely considered unobtainable and 5.3 Prize Financing the reputation of garners limited interest. By the same One of the conclusions reached in addressing financ- CERI. token, a large prize can have the ing of the prize is that it would be opposite effect if it offers a significant better to approach corporations and Forward-think- breakthrough in a timely manner. industries for funding on the basis ing companies in of their self interest. Forward-think- an area touched Smaller prizes offer less risk and increase the chanc- ing companies in an area touched by by a prize break- es for rapid success. A small prize might not gain a prize breakthrough will be most through will be the notoriety of an X Prize, but may advance the interested in funding specific ideas. most interested in agenda of CERI to the point that such a larger prize It would be best for CERI to first funding specific soon becomes more feasible. Small prizes could decide a prize scope and establish a ideas. also prove to be ineffective and have a diminished reputation on its own in order to have appreciation for CERI’s broader agenda. more “pull” before contacting these entities. Given these advantages and disadvantages, most people agreed that smaller prizes would be more The most abundant source to get a large prize fund- appropriate in the initial stages of the program at ed could be the Department of Energy (DOE) of CERI. The prizes should also approach a broad the federal government. In order to get the DOE’s audience and promote growth in areas ranging from attention for funding it may be necessary to rally schools to industry. political support of several reputable entities.

Smaller prizes to get the program going could be

Page 19 funded by a combination of state or local govern- • Power Storage – This is a broad category, ments as well as for-profit and non-profit groups. but has many applications. Possibilities These entities would have an interest include residential units to store power in funding a prize, particularly if it that is generated onsite and can be tapped Too large of a benefited their constituencies. at peak times. An industrial application prize purse may An interesting side-note to funding could involve storage units at power plants make funding is determining the amount of a prize. in order to decrease wasted energy and difficult and There were few people that had a eliminate the need for off-site peak plants. draw in corpora- particular insight into determining a Commercial applications could involve bat- tions that could formula for the most efficient prize tery technology. NASA has expressed inter- “overpower” purse; most reached the conclusion est in this area in its Centennial challenges competition with that it will vary across a range. Too Program. It is possible that a single prize their superior large of a prize purse may make fund- could be offered that would allow for an resources. ing difficult and draw in corporations application in all areas; in this case it would that could “overpower” competition just be a matter of scaling the technology. with their superior resources. Too small of a prize may not create the needed incentive or be effective • Alternative Energy Vehicle Challenge – An to induce wide and aggressive participation. Several electric vehicle challenge was brought up representatives of major aerospace companies indi- several times to capitalize on the excitement cated at the NASA Centennial Challenges Program and attention that a same-site competition that it may take prizes as large as eight figures for a brings. Possibilities include a race across company like Lockheed or Boeing to enter a prize Colorado utilizing a variety of non-tradi- competition. At the same conference, Jim Benson, tional energy technologies. The contest an entrepreneur and founder of SpaceDev Corp., could also draw an auto-manufacturing indicated that a prize should be approximately 1/5 of market to Colorado in the same way that the cost that the project would require if pursued in Saturn has shifted some of the manufactur- the more traditional sense. ing to Tennessee.

5.4 Prize Suggestions • Wind Energy Storage – The possibility of The following is a preliminary list of prize sugges- using depleted, underground oil “pockets” tions that were gathered through various sources. to store off-peak wind-generated energy, The ideas are preliminary, giving more of a prelimi- possibly in the form of compressed air, nary direction than a developed idea. for use during times of high demand, was mentioned as an application that would be • Net-Zero Home – An idea brought up particularly viable in Colorado. The prize several times involves the construction of a would require the development of a method home that has a “net-zero” rating for pol- and mechanism to convert wind energy into lution and/or external energy needs. The a storable form and then be able to draw on project is already being pursued by several it from the underground storage site. Other companies in the state and is the subject wind technologies mentioned include low- of a major Department of Energy funding. speed turbines that would allow for wind Sources indicated that the DOE may be energy to become feasible in non-traditional willing to put some money up for a prize for regions. net-zero housing. The contest is appropri- ate for Colorado due to its abundance of • E-85 Proliferation – One source estimated natural resource options. that one-third of all new cars are (manufac-

Page 20 tures are motivated by tax-breaks) retrofit- John Harrison and his clock, Lindbergh ted for compatibility with E-85 fuel (85% and his single-engine plane, and Rutan and ethanol and 15% petroleum). This change Spaceship One are just several examples is due to a Congressionally-issued tax incen- of how the unthinkable has become a real- tive to auto-manufacturers to produce such ity. Prizes solicit an audience that is not vehicles. The problem is that gas stations reached by traditional methods of grants lack the incentive to install equipment and contracting. for distribution of E-85. A prize could be issued for the design of inexpensive, retro- fitting equipment to make the market more 2. Prizes have economic benefits that exceed attractive for these companies. A possible those of traditional grants and contracts. source of funding for such a prize could come from farmers and farmer unions. Prizes have had a documented success at leveraging the initial investment by as much • Truck Idling Energy Reduction – This tech- as 40 times. The New Growth Theory of nology would reduce the energy waste and economics relates a higher investment to pollution caused by semi-trucks when they a higher pace of technological advance. are parked. In order to operate the air-con- Whether on subscribes to this theory or not, ditioning and other amenities in the cabs of most individuals would jump at the chance trucks, drivers leave the engine idling over- to have as much as 40 times the work done night. A prize could be offered to come as the amount personally invested. up with an alternative, possibly renew- able, way of powering such a system. One Besides leveraging advantages, prizes are study found that the average truck spends perfectly efficient minus overhead costs. A $2,200 per year in such practices. The prize is not awarded unless a competitor Department of Energy has currently fund- can prove that the goal that was set out has ing a $500,000 to study of ways to reduce been achieved. truck idling.

• Solar Cell Advance – Currently, commer- 3. Due to inexperience in prizes, consideration cially ready solar cells are only about 15% must be given to all administrative details efficient. One of the key factors in their associated with their implementation. inefficiency is that they are not able to con- vert the full spectrum of light. A potential The CATS Prize is an example of efforts prize could be offered either to increase the that have for the most part faded into spectral conversion range or to otherwise obscurity. Few at the NASA Centennial advance their overall efficiency by a speci- Challenges Conference had even heard of fied percentage. This prize is attractive the prize, much less given serious thought in that results are easily measurable. The to competing. This can largely be attributed input and output of a solar cell can be mea- to administrative fumbling. Prizes must sured by current methods. be administered with great consideration for all of the aspects that such a competi- 6. Conclusions tion encompasses. Much of this research 1. Historically prizes have brought non-tradi- has shown that there is a strong relation- tional technology into the mainstream. ship between prize variables that must be maximized in order to achieve efficiency

Page 21 and avoid potentially costly complications. The success of the X Prize makes it an ideal model to use a guideline for developing a modern prize.

4. The use of high visibility prize competitions is increasing and gaining public recognition.

The X Prize has done a lot to bring the prospect of prizes back into public light. Since the prize’s incep- tion, the federal government has done extensive sev- eral studies to determine the effectiveness of such prizes. DARPA was the first government agency to implement such a system, and one is currently being constructed at NASA through the Centennial Challenges Program. These programs, with the addition of the Aldridge Report recommendations, cite prizes as an effective way to create a more robust market for their particular technology and encourage their implementation.

Page 22 7. References • Villard, H.S., Contact! The Story of the Early • “Concerning Federally Sponsored Birds. Thomas Crowell. New York, 1968. Inducement Prizes in Engineering and Science.” National Academy of Engineers. • Information regarding the Orteig Prize, November 1999. Ansari X Prize, DARPA Grand Challenge, and NASA Centennial Challenges Program • Dash, Joan. The Longitude Prize. Frances was in part gathered, respectively, at the fol- Foster Books. New York City, 2000. lowing websites:

• “A Journey to Inspire, Innovate, and http://www.charleslindbergh.com Discover.” The President’s Commission on Implementation of United States Space http:// www.xprize.org Exploration Policy. June, 2004. http://www.darpa.mil/grandchallenge • Lindbergh, Charles. The Spirit of St. Louis. Scribner Publications. New York City, 1953. http://centennialchallenges.nasa.gov

• Macauley, Molly K. “Advantages and Appendix Disadvantages of Prizes in a Portfolio of Financial Incentives for Space Activities.” A.1 National Academy of Engineers 1999 Report Testimony Given Before the U.S. Congress Recommendations House of Representatives House Committee 1. The steering committee recommends limited on Science: “NASA Prizes.” July 15, 2004 experiments in the use of federally spon- sored inducement prize contests to stimulate • Maryniak, Gregg. “When Will We See the private-sector research, innovation, and tech- Golden Age of Spaceflight?” Space: The nology deployment in service of agency and Free-Market Frontier. The CATO Institute. societal goals. Washington D.C., 2002. http://www.catostore. org/index Specifically, the committee recommends that Congress encourage federal agencies to • National Science Board Home Page. Last study further the feasibility of inducement visited August 4, 2004. http://www.nsf.gov/ prize contests as a potential complement sbe/srs/seind04/c4/c4s1.htm#c4s1l2 to their existing portfolio of science and technology policy instruments. In addition, • Pae, Peter. “In Capital Venture, Rocket Congress should consider providing explicit Reaches the Edge of Space.” Los Angeles statutory authority and, where appropriate, Times. May 14, 2004. credible funding mechanisms for agencies to sponsor and/or fund such contests. • Prendergrast, Curtis. The First Aviators. Time-Life Books. Virginia, 1980. It is important to note that the purpose of • Robinson, Peter. “Romer’s Radical these experiments would be to test the effec- Approach to Economics.” Forbes Magazine: tiveness of prizes and contests as comple- July 3, 1995. John Fairfax Publications Pty ments to—not replacements for—traditional Ltd. R&D grants and procurement contracts. 2. Both Congress and federal agencies are

Page 23 encouraged to take a flexible approach to and Mars. In our hearings, the Commission the design and administration of induce- also heard from state governments that ment prize contests. are prepared to invest in America’s space infrastructure, if those investments can be Prize contests can be agency funded and appropriately tied to their own economic administered; agency administered and pri- growth. vately funded; agency initiated and privately funded and administered; or joint agency- • The Commission heard testimony from a private sector funded and administered. variety of sources commenting on the value Prize contest rules must be seen as trans- of prizes for the achievement of technology parent, simple, fair, and unbiased. Prize breakthroughs. Examples of the success of rewards must be commensurate with the such an approach include the Orteig Prize, effort required and goals sought. Moreover, collected by Charles Lindbergh for his solo prize contest designs should include mecha- flight to Europe, and the current X-Prize nisms for appropriating prize money, for for human suborbital flight. It is estimated flexibly distributing intellectual property that over $400 million has been invested in rights, and for reducing political influence. developing technology by the X-Prize com- petitors that will vie for a $10 million prize 3. Given its experimental nature, the use of – a 40-to-1 payoff for technology. prizes and contests should be accompanied by a mechanism for evaluation and a time • The Commission strongly supports the limit. Centennial Challenge program recently established by NASA. This program pro- The use of inducement prize contests vides up to $50 million in any given fiscal should be evaluated at specified intervals year for the payment of cash prizes for by the agencies involved to determine their advancement of space or aeronautical effectiveness and impact. technologies, with no single prize in excess of $10 million without the approval of the A.2 Aldridge Report Recommendations NASA Administrator. The focus of cash • Congress increase the potential for com- prizes should be on maturing the enabling mercial opportunities related to the nation- technologies associated with the vision. al space exploration vision by providing NASA should expand its Centennial prize incentives for entrepreneurial investment program to encourage entrepreneurs and in space, by creating significant monetary risk-takers to undertake major space mis- prizes for the accomplishment of space mis- sions. sions and/or technology developments and by assuring appropriate property rights for Given the complexity and challenges of the those who seek to develop space resources new vision, the Commission suggests that a and infrastructure. more substantial prize might be appropriate to accelerate the development of enabling For example, we are persuaded that the technologies. As an example of a particu- award of significant monetary “prizes” larly challenging prize concept, $100 million tied directly to the vision plan will spark to $1 billion could be offered to the first entrepreneurial investment globally and organization to place humans on the Moon accelerate the development of technologies and sustain them for a fixed period before and systems that enable travel to the Moon they return to Earth. The Commission sug-

Page 24 gests that more substantial prize programs government revenue and authorized the FCC to be considered and, if found appropriate, hold auctions of telecommunications frequencies. NASA should work with the Congress to A market quickly developed for those parts of the develop how the funding for such a prize spectrum subject to auctions. That market, in turn, would be provided. raised serious questions for the preference program. Was it still necessary or fair to give preferences in • The Commission recommends that an era when other companies, including innova- Congress increase the potential for com- tive companies, would pay for their licenses? Even mercial opportunities related to the nation- before the auctions, companies denied pioneer’s al space exploration vision by providing preferences complained that the program gave incentives for entrepreneurial investment unfair economic advantage to a few. Those com- in space, by creating significant monetary plaints grew after the auctions began. The FCC prizes for the accomplishment of space mis- planned to terminate the program in September sions and/or technology developments and 1998, but a new act of Congress led to its termina- by assuring appropriate property rights for tion in September 1997. those who seek to develop space resources and infrastructure. Energy-efficient Appliances In 1992, 24 major American utility firms created A.3 Additional Prize Descriptions taken from the a new nonprofit corporation, the Super Efficient 1999 National Academy of Engineers Report Refrigerator Program (SERP). The utilities pooled together $30 million as a reward to the manufac- FCC Pioneer’s Preference Program turer that could develop and successfully market In 1991, the U.S. Federal Communications a refrigerator which used at least 25 percent less Commission (FCC) offered what amounted to a energy than required by existing regulations. An technology prize. It offered guaranteed slices of interesting feature of this contest was the stipulation the telecommunications spectrum to companies that part of the prize money would be awarded for that committed to developing and implementing each refrigerator sold—an inducement not only to innovative communications services and technolo- develop but also to market the new product. gies—particularly in the areas of wireless personal Whirlpool Corporation won the contest and did communications services (PCS) and low-earth-orbit indeed manufacture and market a super-efficient (LEO) communications. In October 1992, the FCC refrigerator. However, as energy prices fell during tentatively granted pioneer’s preferences to three the 1990s, no large market developed for this prod- companies. uct. Whirlpool eventually discontinued the refrigera- tor—although it continues to market products with The program made a certain sense in an era when moderate energy efficiency. This case illustrates spectrum allocations were based on either adminis- three points: (1) a sizable prize can indeed induce trative decisions or lotteries. The FCC recognized innovation, (2) tying prize money to sales can that companies would not develop expensive new encourage the production of an innovative product, technologies unless they had some assurance that and (3) even the most well-designed program will they would receive licenses and thus be able to encounter problems if the marketplace changes and recoup their investments. The pioneer’s preference demand for a product falls. program sought to give those assured licenses in return for credible commitments to develop and Malcolm Baldrige Quality Awards deploy the innovative technologies. Congress established the Baldrige Awards pro- gram in 1987 to recognize U.S. companies for their However, in 1993 Congress sought new sources of achievements in quality and business performance

Page 25 and to raise awareness about the importance of On March 31, 1999, the Electronic Frontier quality and performance excellence as a competitive Foundation (EFF) announced prizes up to $250,000 edge. There is no cash prize, but there is prestige. for the discovery of large new prime numbers. While this is a primarily a recognition prize, it According to EFF’s press release: also serves as an inducement for firms to adopt The first million-digit prime found will be worth the techniques of total quality management. Many $50,000; a ten-million-digit prime will claim companies have upgraded their quality programs in $100,000; a hundred-million-digit prime garners the hope of being considered for the awards. The $150,000; and the finder of the first billion-digit program is a public-private partnership: applicant prime will receive $250,000. The largest known fees and a privately funded foundation pay for the prime number has 909,526 digits. reviews, but the Commerce Department is involved in the final judgments and the President tradition- The prizes are designed to encourage coopera- ally makes the awards. The Baldrige program shows tive computing. No single supercomputer is likely that monetary awards are not necessary to have a to solve this problem soon, but large numbers of successful contest, provided that the awards are personal computers linked through the Internet prestigious and make good economic sense for the could tackle the problem. “In the process,” accord- applicants. ing to the EFF press release, “EFF hopes to inspire experts to apply collaborative computing to large International Computer Go Championship problems, and thereby foster new technologies and This prize offers 40,000,000 Taiwanese dollars opportunities for everyone.” (about $1.6 million in U.S. currency) for any com- puter program that can beat a professional player at Feynman Prizes the oriental game of Go. The sponsors are the com- The Foresight Institute, a nonprofit educational puter company Acer and the Ing Chang-Ki Wei-Ch’i foundation in Palo Alto, California, offers a set Education Foundation of Taipei. They also spon- of prizes named for the late physicist Richard sor annual contests that award NT$200,000 (about Feynman. These prizes encourage and reward scien- U.S. $8,000) for the best computer program for Go tific and technical progress in the field of nanotech- entered that year. nology, which the Institute defines as “the coming ability to build materials and products with atomic Loebner Prize precision.” In 1990 Dr. Hugh Loebner pledged a grand prize of $100,000 and a gold medal for the first computer The grand prize will be at least $250,000 and will be whose responses were indistinguishable from a awarded for the demonstration of a 50-nanometer human’s. Every year an annual prize of $2,000 and 8-bit adder and a 100-nanometer robot arm. Starting a bronze medal are awarded to the “most human” in 1997, the Institute awards two $5,000 prizes each computer. The winner of the annual contest is the year—one for the best work published in recent best entry relative to other entries that year, regard- years on experimental aspects of nanotechnology, less of how good it is in an absolute sense. The and one for the best theoretical work of recent contest was inspired by mathematician Alan Turing, years. The Institute will award annual prizes until who asked, “Can a machine think?” Turing’s sugges- someone wins the grand prize, at which point the tion was this: If the responses from a computer were series of annual prizes will end. indistinguishable from those of a human, then the computer could be said to be thinking. No one has EU Information Technology Prize won the grand prize to date. The annual European Information Society Technology (IST) Prize is organized jointly by the EFF Cooperative Computing Challenge IST program of the European Commission ‘s DG

Page 26 XIII and Euro-CASE, the European Council of $50,000. Applied Sciences and Engineering. The contest is open to companies, laboratories, universities, and A.4 Prize Organization Considerations others in Europe and Israel. Each year, three grand prizes are awarded (200,000 euros and a trophy) Prize Concept and 25 winner prizes are awarded (5,000 euros and 1. What is the success rate of prizes? a certificate). Unlike most of the contests described 2. Who has been involved in prize competi- above, this one does not have a precise technical tions before? objective. The prize’s Web page states that awards 3. Are prizes more successful in certain fields? “are made for outstanding contributions to gen- 4. Are there any precedents in the energy field erating and converting innovative ideas and R&D to derive a model from? results into marketable products. ” 5. Is there active competition amongst prizes offered by different conglomerates? The IST Prize can be labeled a combination induce- 6. Should there be a deadline? ment/recognition award. Along with the recogni- 7. Would the prize still be offered after the tion of past efforts, this contest also encourages deadline in a lesser amount? European researchers to develop new technologies. 8. Should there be incremental prizes for The program then tries to help winning research- accomplishing different steps involved in ers refine and market their products by publicizing the main prize? the results and providing what the Web page calls a 9. Who should the prize target? “blue-chip reference for all stakeholders, whether • University faculty upstream financiers or downstream customers.” • Field researchers • Hobbyists Wolfskehl Prize for Proving Fermat’s Last Theorem • General public Inducement prizes can be offered to encourage 10. Is the prize announced before or after fund- advances in science and mathematics as well as ing has been raised? technology. The prize was created in 1908 to reward 11. Are the final rules announced before or whomsoever could prove Fermat’s Last Theorem. after funding has been raised? The 17th century French mathematician Pierre de 12. Will the prize be annual or a one-shot deal? Fermat argued, in what became known as his Last 13. Does CERI want to offer one prize at a Theorem, that the equation xn+ yn=zn has no time or have several going on simultane- whole number solutions for n greater than 2. Paul ously? Wolfskehl, a German industrialist, had an interest 14. Who will hold on to the intellectual prop- in mathematics, and upon his death in 1908 his will erty rights of the designs? bequeathed a large portion of his fortune for the • 2% agreement? prize.14 15. Will interested competitors be required to pay an entry fee? Initially, the prize attracted few ideas from seri- • How much? ous mathematicians, since the problem has longed • Possibly screen out the less serious appli- seemed difficult, even a lost cause. However, the cants to maximize efficiency of materials/ prize did attract a whole new audience of eager funds? amateurs, none of whom succeeded. In the early 16. Is it possible to implement prize with anoth- 1990s, British-born Princeton professor Andrew er already established prize? Wiles began an eight-year intensive effort to prove 17. Who solicits prize ideas? the theorem. He finally succeeded, and on June 17, 18. Who determines what prize ideas are 1997, Wiles collected the Wolfskehl Prize, worth acceptable?

Page 27 • CERI? 8. If judges interact with competitors will they • Sponsors? be required to sign a confidentiality agree- • Colorado School of Mines? ment? • Appointed Board? 9. Must competitors be informed of the judges 19. Could there be much smaller prizes for identity and qualifications? prize suggestions? 10. How will judges be compensated for their • e.g, modestly reward those with innova- work and efforts? tive prize ideas 20. What additional legal issues are involved Competitors beyond liability and IP rights? 1. Do competitors generally suffer a capital loss in financing the project? Financing of the Prize 2. How do competitors raise funding for their 1. Where does the money for the governing efforts? program come from? 3. Is the public sector generally supportive of 2. Is the amount of a prize commensurate with such efforts? technological innovation? 4. How effective is a web board in communi- 3. How does the value of a prize compare with cating ideas? administrative fees? • Should there be password protection? 4. Who retains tax responsibility for the prize? • Should there be a separate forum for the 5. Are competitors able to use industrial media and the public? bonds in financing their projects? (see X- 5. What motivates competitors to seek prize? Prize) 6. What is the liability of the competitors? 6. Will a certain business sector be targeted in • Is there a way to get group coverage for raising funding? all competitors? 7. Will the state or federal government be • Whose responsibility is that? allowed or willing to provide funding? 7. What are the requirements for competitors 8. Is the prize system comparable to the lot- to register? tery system in financing? 8. Will the competition be international or 9. Will the prize be paid as a lump sum? domestic? 10. How will the prize money be retained? 9. What are the limitations on the usage • Invested? Who gets interest/return? of government-funded ideas, products, • Sponsor makes payout? designs, etc.? 10. How will government designs be restricted Judging and monitored from being a part of the 1. Who composes the judging committee? competition? 2. Will the judges be constant or selected for 11. How do competitors register for the prize each prize? competition? 3. What are the qualifications of the judges? 12. Will there need to be notification prior to 4. Is the judges committee ruling subject to final testing? appeal? 13. Are progress reports required from the 5. Does the judging committee also dictate the competitors? rules for competition? • How will this be monitored? 6. How active are the judges in the design/idea process? Public Relations 7. What are the limitations of contact between 1. Should CERI hold workshops as a forum judges and competitors? for competitors?

Page 28 2. What is the involvement of the media? Conference, Washington D.C., June 2004. • What form of media is the most efficient? 6http://www.nsf.gov/sbe/srs/seind04/c4/c4s1. • What form of media is the most advanta- htm#c4s1l2 geous? 7 http://en.wikipedia.org/wiki/Peer_review 3. How do you get the public excited about 8 http://en.wikipedia.org/wiki/Peer_review energy development? 9 Macauley, Moll K. “Advantages and Disadvantages 4. What is the role of public attention in of Prizes in a Portfolio of Financial Incentives for accomplishing the goal of the prize? Space Activities” 8. 5. Is there a way to place volunteers/enthusi- 10 Id. asts with the competitors? 11 Id. 6. Merchandising or no? 12 The prize is roughly the equivalent to $12 million 7. What should the role of a CERI website today after being adjusted for inflation and exchange be? rates. 8. Will logo be required on prototypes? 13 Dash, Joan, The Longitude Prize, 9. 9. Will promotions seek to boost CERI or the 14 Dash, Joan, “The Longitude Prize, 84. prize being offered? 15 Harrison was not awarded the full prize until three 10. Will the public be able to witness any test- years before his death in 1776 ing of designs? 16 Prendergrast, Curtis, The First Aviators, 85 11. Will the prize program seek endorsements 17 In the article, “When Will We See the Golden Age from outside agencies? of Spaceflight”, Gregg Maryniak provides a listing 12. How will the importance of the prize be that shows at least 52 prizes offered in aeronautics portrayed? between 1901 and 1913. Forty-four of these prizes 13. Possibility for celebrity endorsements? were offered between 1909 and 1913. 14. Seek developmental program in schools to 18 Villard, H.S. “Contact! The Story of the Early promote prize (see X-Prize EGGS competi- Birds,” 127. tion)? 19 http://www.charleslindbergh.com 15. Is there a possibility for a public competi- 20 Maryniak, Gregg. “When Will We See the Golden tion such as the X-Prize Cup? Age of Spaceflight.” 24. 16. Should there be an awards banquet for the 21 “Concerning Federally Sponsored Inducement prize? Prizes in Engineering and Science.” 7. 17. Should there be a trophy or plaque for the 22 Pae, Peter. “In Capital Venture, Rocket Reaches prize? the Edge of Space.” 1. 23 Id. Endnotes 24 http://www.xprize.org 1 The X Prize is defined in Section 3.6 on p. 10. 25The President's Commission on Implementation of 2Diamandis, Peter. Centennial Challenges United States Space Exploration Policy, June, 2004. Conference, Washington D.C., June 2004. 32. 3 The figure for DARPA’s leveraging ratio was esti- 26Pae, Peter, “In Capital Venture, Rocket Reaches mated using the DARPA’s statement that $5 mil- the Edge of Space.” 1. lion is needed to develop the technology to win the 27 www.xprize.org challenge. The figure was reduced to $2 million for 28 DARPA was the only modern prize to specify tax estimation purposes with the knowledge that more responsibility of the prize purse by placing it on the of the 25 teams had spent under this amount. winning team. 4 Robinson, Peter, “Romer’s Radical Approach to 29 http://www.darpa.mil/grandchallenge Economics,” 70. 30 Id. 5 Diamandis, Peter. Centennial Challenges 31 “Concerning Federally Sponsored Inducement

Page 29 Prizes in Engineering and Science.” 1. 32The President's Commission on Implementation of United States Space Exploration Policy. June, 2004. 33. 33 http://centennialchallenges.nasa.gov

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