How Incentive Prizes Can Spark Innovation

In 1927 Charles Lindbergh became the first solo pilot to fly nonstop across the Atlantic. The flight not only made Lindbergh famous; it also created the perception that flying was safe and available to the common man. And it was all sparked by a reward–specifically, hotel owner Raymond Orteig’s offer of $25,000 to anyone who could fly across the Atlantic.

This is what’s known as an incentive prize, and unlike trophies, ribbons or even Nobel Peace Prizes, it is not subjective. It’s given to anyone who can hit a set of measurable targets, and in recent history it has been used to spur on spectacular feats of human endeavor, solve intractable problems and jump-start industries.

Consider the birth of the private space industry. In 1996, entrepreneur Peter Diamandis announced he would give $10 million to the first privately funded team that could build and fly a manned rocket into space twice in two weeks. He had two goals: one, to reignite his childhood passion for space exploration, and two, to create private alternatives to NASA, which had once been a maker of magic but had become costly and flawed.

It took almost a decade, but he succeeded on both counts. In 2004, Diamandis awarded the $10 million Ansari XPRIZE to SpaceShipOne designer Burt Rutan and program backer Paul Allen. Allen, the Microsoft co-founder, later licensed the tech to Richard Branson, who created Virgin Galactic. Now private spaceflight is an industry worth billions–and it started with a $10 million bet.

Guthrie is the author of How to Make a Spaceship: A Band of Renegades, an Epic Race, and the Birth of Private Spaceflight