Suppose you’re a granting agency, and you have $1 million to spend to help foster research in your area of interest. Would you be better off giving ten grants for $100,000 each, in hopes that one or more of the funded projects might produce results, or just announce a $1 million prize — to be awarded after a researcher achieves the desired goals. Instead of gambling on whether the discovery can be made, you let the researchers do the gambling — and you only have to pay if they produce the goods.
The Wall Street Journal’s David Wessel discusses the growing trend of offering prizes instead of outright grants:
“‘Prize philanthropy’ is useful for breaking a bottleneck where government bureaucracy and markets are stuck,” says Thomas Vander Ark, who recently left conventional philanthropy at the Bill & Melinda Gates Foundation to run the X-Prize Foundation. While Gates and similar foundations “push” money on people to solve problems or meet social needs, he says, prizes “pull” people to problems.
Such prizes, newly popular and possible in an age of instant, cheap global communication, have a venerable history. In 1714, Britain offered £20,000 (roughly equivalent to £2.5 million, or $5 million, today) for a way for mariners to determine their longitude. Sir Isaac Newton was convinced the solution lay in astronomy. He was wrong: John Harrison, a working-class joiner with little formal education, built a clock that did the job. In 1919, hotel owner Raymond Orteig offered $25,000 for the first nonstop flight between New York and Paris. Eight years later, Charles Lindbergh won.
Prizes prompt a lot of effort, far more than any sponsor could devote itself, but they generally pay only for success. That’s “an important piece of shifting risk from inside the walls of the company and moving it out to the solver community,” says Jill Panetta, InnoCentive’s chief scientific officer. Competitors for the $10 million prize for the space vehicle spent 10 times that amount trying to win it.
It seems to me that one problem with this logic is that the extra funding has to come from somewhere. If all research were rewarded with prizes instead of pre-funded with grants, then there would be no way for work to get started. Large prizes for research results depend on grants, and without the grants to begin with, nothing would get done.