Kjellquist Blog

As reported on Thursday in the Aiken Standard, once again this year Sen Lindsey Graham, D-SC, has filed a bill to established the H-Prize. The H-Prize is designed to provide millions of dollars of prizes to demonstrate advances in hydrogen fuel development. Sen Graham says “As a nation, we need to become less dependent on foreign oil.” {politicians seem to feel they must start by stating the obvious, maybe it gives them time to engage their limited grey matter, or maybe it just fills the space time continuum} He goes on to say“I completely support his call for energy independence, and the H-Prize can help lead the move away from fossil fuels and toward alternative sources of energy such as hydrogen.” While I don’t normally support Graham’s politics in this case I believe he has a pretty good idea. Specifically, The H-Prize is modeled on the Ansari X Prize which spurred the first privately funded suborbital human spaceflight.
Awards will be offered in the following categories:

• Technological Advancement: Four prizes of up to $1million will be awarded every two years for outstanding achievements in the production, storage, distribution, and utilization of hydrogen.

• Prototypes: One prize of up to $4 million will be awarded every two years for working hydrogen vehicle prototypes that meets performance goals.

• Transformational Technology: Over the next ten years, a single $10 million prize funded by the federal government or private donations for breakthrough hydrogen technologies.

Ok, let’s assume, unlike last year, some form of Sen Graham’s bill gets passed. The next question is whether innovation prizes really work. Well, it turns out that also Thursday there was a WSJ article confirming their effectiveness. The article makes interesting reading and cites many successes. For example:

“‘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.

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.

Contests also are a mechanism to tap scientific knowledge that’s widely dispersed geographically, and not always in obvious places. Since posting its algorithm bounty in October, Netflix has drawn 15,000 entrants from 126 countries. The leading team is from Budapest University of Technology and Economics.

After examining 166 problems posted by 26 research labs on the InnoCentive site over four years, Karim Lakhani, a Harvard Business School professor, found 240 people, on average, examined each problem, 10 offered answers and 29.5% of the problems were solved. (Read Mr. Lakhani’s blog.)

One surprise: The further the problem was from a solver’s expertise, the more likely he or she was to solve it. It turns out that outsiders look through a completely different lens. Toxicologists were stumped by the significance of pathology observed in a study; within weeks after broadcasting it, a Ph.D. in crystallography offered a solution that hadn’t occurred to them.

InnoCentive seekers and solvers are anonymous. “An undergrad from the University of Dallas solved a problem for a Fortune 500 company,” Ms. Panetta says. She sees that as an advantage: “They are really judging it on the sciences, not on who is standing behind it.”

Ok so the bottomline is Sen Graham maybe on to something and should be support. The upside, perhaps we see some real advances in hydrogen fuels. Downside, nobody comes up with any good ideas and the $$ just sit there.