Redeeming Prize-Based Philanthropy

After a string of bad news about Chase's and Pepsi's faux pas in the prize-philanthropy sphere, which Nathaniel's done a great job of documenting here on the blog, I'm ready for some good news about prize-based philanthropy.

And this week, I think I found some.

Recently, I had a conversation with Jaison Morgan, a down-to-earth genius who believes the world can be changed through incentives and prize-based philanthropy. Actually, he's already proven that the universe can be changed. Jaison is the founder of the Common Pool and was the former director of Prize Development at the X PRIZE Foundation, where he worked on prizes with awards of $10 million or more to radically shift breakthroughs in space and deep sea exploration, clean energy, life sciences and education.  He's lectured on incentive driven innovation and prizes at MIT and the World Economic Forum.  And -- did I mention?  He also spent the last year working in Abu Dhabi, helping Masdar build a zero-carbon footprint City through prizes and incentive models.

Jaison wants people to re-think the world of prize-based philanthropy. Take the Ansari X PRIZE, which the X PRIZE Foundation awarded. It was modeled after a $25,000 prize awarded to Charles Lindbergh for his trans-Atlantic flight in 1927. Lindbergh was awarded the prize because he was the first to make that flight. He proved it was possible. He disrupted the status quo. Jaison believes the same principles can and should be applied to finding solutions to social problems. Instead of just managing a problem with money from donors who always give a check in December, a prize would reward successful experimentation and give lots of public attention and funding to proven models that change things. Big things, like homelessness.

Imagine if a prize was awarded not to an organization that got the most votes -- but to the one that demonstrated it could get the most people off the streets for good. With such a competition, plenty of ideas would be presented, some of which might not yet be fully established. Key to the prize would be letting the world know about them. Crazy ideas like Beyond Shelter's attempt to place the homeless in homes might even be in the running. And if Beyond Shelter's experiment could prove it got people successfully off the street (it does, by the way), it could win and become the new model for everyone. Still, Jaison reminds us, "Prizes typically don't presume the answer; they get more people experimenting." (Wait, that sounds like capitalism to me.) It'd be a radically different approach than the Chase and Pepsi awards, which go to the nonprofit that gets the most public votes -- and it'd actually recognize nonprofits that have innovative solutions, not just a huge fan base.

Prize-based philanthropy, by nature, is fiercely competitive, but it can also inspire innovative collaboration.  When Netflix ran a prize for the first team to deliver an algorithm that could successfully predict our movie preferences (based on previous rentals), the prize was intended to replace the millions of dollars that would otherwise be spent on internal research and development.  Only this way, Netflix would only pay after the algorithm was proven and would gain an entire field of possibilities.  After the Netflix prize was announced, the competition was palpable.  But, as the problem solvers inched closer to the correct answer, we learned that the teams learned to collaborate.  And, in the end, the winning group was a team of former competitors who had learned that cooperation was essential to success.

Jaison assures us that prize-philanthropy is not necessarily a substitute for philanthropy in general. But it can be an extremely effective catalyst to prove what is possible, find what works, and let the field adjust itself to follow the leader.  And, as the field of knowledge around "incentive engineering" (as he calls it) matures, we might find other novel ways that philanthropy can harness the power of competition and self-interest for the public good (or the Common Pool).  If a new solution to homelessness is found and widely publicized, those who don't adopt the new model won't get funded for long.

Finally, Jaison's advice to any prize-based philanthropists is not to underestimate the logistics of running the program. After all, fairness and transparency are the first things to go out the window when you aren't quite sure what you've gotten yourself into or you can't exactly present your criteria or process clearly (sounds familiar...Chase...Obama's Nobel Prize).

With all this in mind, prize-based philanthropy at its best can prove that something that was seen as impossible is actually possible. It makes a lot of sense and brings me back to Gary Slutkin's success in "re-understanding the problem." When there's a prize incentive for that, people will try new things and the world will change for the better, faster. That's really good news.

Photo Credit: bclark