Why you should care

Prizes offer the chance to get outstanding results for a fraction of the usual cost. But as the model trickles down, is it a boon for everyday people or a threat?

Over the course of five days in 2004, a manned rocket named SpaceShipOne flew to the edge of space, coasted home and repeated the feat. The details of this particular feat were dictated not by the needs of science but by the desire to claim a specific prize. In 1996 entrepreneur Peter Diamandis had put $1 million on the table for the first team that could master that task. With backing from Microsoft billionaire Paul Allen, Burt Rutan’s Scaled Composites took the prize, and then turned around to use its technology for something bigger: the first regular commercial flights to the edge of space.

The genius of a well-placed prize is that it will attract multiple teams to work on solving a problem.

Diamadis created the Ansari XPrize as a modern-day equivalent to the great exploration prizes of previous centuries: the $25,000 Ortieg Prize, claimed by Charles Lindburgh’s 1927 transatlantic solo flight; and the Longitude Prize, created by the British Parliament in 1714 and partially claimed a half century later.

Since the success of SpaceShipOne, the XPrize Foundation has overseen challenges for innovation in environmental cleanup ($1 million for a device that skims oil spills three times faster than previous techniques), transportation ($10 million shared by three cars achieving the equivalent of 100 miles per gallon) and exploration ($2 million for an improved rocket landing system for future lunar flights).

(L-R) Ansari-X Prize President Peter Diamandis, principal investor Paul Allen, aircraft designer Burt Rutan, pilot Brian Binnie and Sir Richard Branson wave and hold the American flag at the end of SpaceShipOne's second flight where it won the $10 million

© Gene Blevins/Corbis

The genius of a well-placed prize is that it will attract multiple teams to work on solving a problem. For the Ansari XPrize, entrants spent a total of $100 million on developing their entries — 10 times the final award. This sort of more-for-less leverage has spawned a bevy of other prizes and not just for big-ticket items like the XPrizes. The DARPA Grand Challenge awarded millions for advances in self-driving car technology, and the oft-unclaimed Mo Ibrahim prize rewards good governance among African leaders.

Competition clearinghouses like ChallengePost and InnoCentive have sprung up, offering smaller bounties for innovation: $50,000 for a detailed description of a portable system for neutralizing chemical weapons, or $20,000 for a food-grade foam stabilizing system for confectionary applications. Yum! Even governments have gotten into the game: ChallengePost runs federally sponsored prizes, as well as competitions for the World Bank and New York City’s Department of Education.

Using the contest model to outsource small projects offers a greater variety of choices for a fraction of hiring someone local.

Businesses love prizes, too. Some are run primarily as ad campaigns. Doritos famously crowdsourced an ad to play during the 2007 Super Bowl, and the company will repeat the contest in 2014. Others have a technical goal in mind. In 2006 Netflix announced a $1 million award for a movie recommendation algorithm that was at least 10 percent more effective than its in-house software. A collaboration of programmers won the prize in 2009, though in the end Netflix decide that solution was too costly to implement.


But at some point “Enter my contest” starts to feel like “Do the work and then I’ll decide if I want to pay you.”

But there’s a new kind of business prize economy developing at the low end of the price spectrum, where sites like 99Designs, GeniusRocket, DesignContest and Freelancer use the contest model for outsourcing small projects. Need a new logo or a website widget? Rather than finding and hiring a designer to create one, you can set a bounty and let designers all over the world create designs for you to choose from.

It seems like a great solution: a greater variety of choices for a fraction of hiring someone local. For an upstart designer in the Philippines with a copy of CorelDraw, it’s likely a boon. However, for established designers trying to scrape out a living and maintain respect for their craft, the end result can often look like a race to the bottom, with lower-quality work and questionable payment habits. At some point, “Enter my contest” starts to feel like “Do the work and then I’ll decide if I want to pay you.”

At their best, prizes can kick-start work on a problem in a way that fits the goals of both the ones offering it and of all the participants — even the ones who may not share in the final reward. But they’re not going to be a one-model-fits-all solution, and to work their best, they need quite a bit of finesse to come out right. Hence the XPrize Foundation’s panels of expert rule-writers and $50 million annual operating budget. But when they work well, they can help us overcome perceived barriers and literally shoot for the moon

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