It was recently
announced that one of Elon Musk’s social investments, the funding for the XPRIZE
in Global Learning, had selected its finalists for its grand prize of $10
million, which is to be awarded to the endeavor that shows the greatest gains
in basic academic skills after a field-testing component in Tanzania.[1]
Amongst those finalists is a machine learning group from here at Carnegie Mellon
who have created a RoboTutor focused on reading and math. While the readings
this week focus on creating innovation ecosystems that are amenable to social
ventures, the overarching question seems to be whether or not the way forward
lies in public-private partnerships, governmental interventions, or perhaps the
kind of competitive model represented by the XPRIZE.
The future has
deeper roots in the past than what we might realize. An article from The Wall
Street Journal in 2010, specifically highlighting the (at the time) fifteen year
history of the XPRIZE, noted that the practice of awarding funding as a reward
for innovation could be traced back to the Longitude Act, when the British
Parliament offered financial rewards to anyone who could figure out how to
calculate longitude while at sea.[2]
The same sort of incentive was on offer for the first transatlantic flight (thanks
to funding from a New York hotelier). What the article seems to conclude is
that the prize model spurs innovation, precisely because it takes much of the
financial risk of innovation off of society: “With an inducement prize,
the sponsor pays only for ideas that actually meet the prize criteria.
In other words, technology contests shift the risk of innovation from the
patrons to the solver community.”[3]
In economic terms, this model increases the total value to society because it
anticipates that a producer would never act irresponsibly with respect to its
own surplus.
One of the
questions that I find myself grappling with, though, is whether the prize model
has the potential to exploit participants, or at least to create a scenario ripe
for financial ruin on the part of aspiring innovators who are so determined in
their pursuit of a prize that they put too much on the line in the process. All
of the risks of innovation are borne by the individuals or teams, or their
sponsors; not everyone has major institutional affiliation, such as the aforementioned
CMU folks, or generous research funding. Even with the potential ethical
drawbacks, though, the prize model is one that seems ideal for leveraging the
vast wealth of forward-thinking philanthropists with a particular interest in a
specific field (such as Musk’s in education). It creates momentum, generates
positive publicity for both supporters and beneficiaries, and focuses
significant intellectual resources on a single problem until a viable solution
is found. With so many complementary ways to support innovation, the prize
model may be a truly effective way to continue to diversify the funding
portfolio.
