My father is a university professor who runs a number of “service learning” initiatives. Recently I’ve been helping him on his application to win a Fidelity Charitable Gift Fund grant to launch a philanthropy class at his school. Last week he told me that even if he doesn’t get the grant, he wants to find a way to launch the class. I’m sure that many of the other schools that apply for the grant will decide that since they now have a fully designed program that they’ll launch the project with or without the Fidelity grant.
Incentive prizes are a time-honored mechanism for driving breakthroughs. One of the most famous prizes in history — the Longitude Prize of 1714 — led to the development of accurate nautical navigation. In 1919, Raymond Orteig offered a $25,000 prize for the first nonstop flight between New York and Paris. The competing teams spent $400,000 in pursuit of the purse, multiplying Orteig’s investment 16x. Charles Lindbergh won the prize in 1927. His victory captured global attention and launched a new aviation industry that revolutionized the way people travel.
Large incentive prizes break through market and government bottlenecks. They reach across national and disciplinary boundaries and attract the intellectual and financial capital required to achieve breakthroughs through innovation. Public competitions shape public attitudes and spur innovation adoption.
An incentive prize for achieving a specific goal stimulates entrepreneurial investment that produces a 10x – 50x return on the prize purse, and at least 100x in follow-on investment and social benefit. It offers foundations and philanthropists the opportunity to complement conventional giving strategies with low-risk, highly efficient, highly leveraged approaches. Best of all, purses are only paid on success.
Prizes are also incredibly liberating for the competitors. Unlike a grant, a prize does not impose budgets, reporting requirements or overhead. It frees entrepreneurs from the constraints they find most limiting. It says, "I don’t care where you’re from, where you went to school, if you have ever gotten a government grant… If you achieve the goal, you win and get the cash."
You can read the whole thing here.
Go back to the philanthropy course now. Fidelity is offering a relatively small grant, but it will spur the creation of a number of philanthropy courses around the country. Prize philanthropy is not the answer to many philanthropic problems, but it is probably a good approach to spurring philanthropic innovation. Think about the difficulties we’ve discussed in measuring social return on investment. What if the major foundations came together and offered a “Nobel Prize” in philanthropy that would honor the person with the most important innovation of the year. They could back it with a $1 million prize (not grant, I’m talking a cash prize to the winner). Think about the legions of grad students, program officers, nonprofit employees, consultants, and every day people that would begin thinking about the problem. Since philanthropy has the unique advantage that social returns benefit everyone, the problems that were solved through this process would lift up the entire field. It would not just be the winning solutions that would benefit the field, just the process of taking up the challenge would lead to many other breakthroughs.
I’ve talked about the need for mainstream media coverage to “honor” people in philanthropy and about the idea that the Slate 60 (list of largest donors) needs to be replicated in the foundation field to honor the most innovative foundations or the ones creating the most impact. Instead of asking “outsiders” to support this process, maybe foundations themselves can begin the process. While “lifetime achievement” awards or recognition for big grants are already in existence, I think that a prize or award for impact and/or innovation is what we need right now.