Prize Model for Social Problems?

Competitions can bring out the best in us. The result of the X Prize competition was the most efficient, low-cost method for transportation to space. Using the prize competition model to solve illiteracy through education is a creative example of how to find the best way to solve the problem.

After reading the article about Thomas Vander Ark and the X Prize Foundation, my first question was, why aren't there more global prize competitions to solve social problems?

The article poses several reasons to counter this question but one stuck out to me: the return of capital to investors has been weak. Finding a low-cost, efficient solution seems to be the problem with many social ventures. Funding these ventures is always an issue.

Safe drinking water is a problem for 2 billion people in the world. One example of the prize competition that might prove successful would be to provide safe drinking water to these people.

Why can’t we create an effective market system that allows individuals and corporations to donate money to these social ventures? As we discussed in class, when the U.S. government provided tax benefits for charitable contributions the floodgates of capital opened up. What if a website was created where individuals and corporations could donate capital to the winners of each social venture prize competition to expand relief for such programs? Companies could also sponsor a water purification device in a community, like “adopting a highway” currently exists in the U.S. We might even use the idea of paying for carbon credits to extend beyond just a company’s carbon footprint, but to where companies could pay for any overconsumption.

Although challenging, with the creation of an efficient capital market system to fuel products and ideas from prize competition winners in social innovations, what social problems couldn’t we solve? How can we best use that system to generate returns so investors are likely to contribute?