Prize Insurance Puts A Price On Conventional Wisdom

from the what-a-deal dept

Since the first X-Prize competition, we’ve seen more and more interest in this model as a way to spur innovation. However, there are still a lot of questions about the competition model, in terms of efficacy and utility for private industry. While businesses are interested in the concept, the exact model remains unclear. Economist Alex Tarbarrok relates an interesting point about how the X-Prize was funded. Apparently, the group behind it didn’t actually raise the prize money, but rather it bought an insurance contract that would pay off in the event that someone actually won. And who wrote the insurance contract? None other than the established experts in the field: Boeing and McDonnell-Douglas. It just so happened that these companies thought the prospect of a successful launch was basically nil, so they gave the organization a very generous price on this insurance contract. The fact that the prize was ultimately claimed is a good indication that even the established leaders in a field don’t always have the best grasp of what advances are just around the corner. It also suggests a possible business model, whereby middlemen attempt to arbitrage the disparity between what the establishment deems possible and what individual inventors think they can accomplish.

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Comments on “Prize Insurance Puts A Price On Conventional Wisdom”

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17 Comments
dorpus says:

The list of mediocre inventions

How often have we seen multi-purpose broom-dustpan assemblies? Dubious “engineers” claiming to have discovered free energy devices? Boats of “revolutionary design” made out of soda cans? Or the science fair projects of high school students who calculated some mathematical constant to whatever, riddled with errors, but the judges were too ignorant to notice?

dorpus_is_a_troll says:

Re: The list of mediocre inventions

This troll really brings down the tone and quality of this site.

Mike, I can understand your reluctance to censor comments but how about implementing a comments section similar to that use on slashdot where we can mod comments up/down or even choose not to see comments from certain user?

You can make this an optional service so casual surfers can still post comments without signing up but for us regular readers, it would be a very helpful service.

Thanks!

Ajax 4Hire (profile) says:

It is the underdog, little man that generates

the new inventions, ideas and technological advances.

Big Corporation/Companies are not built for innovation, they are built to take advantage of new ideas/new technologies/new patents. It is extremely difficult to get truly new and revolutionary ideas to fruition in a corporate structure. New is unsafe and unsafe is not good for business.

Look at the greatest inventions/ideas/technologies of mankind and you will find a single person behind them.

Galileo, Newton, Einstein, Bell, Gutenberg, Ford, Edison all are recognized simply by their last names and their accomplishments.

Imagine Einstein trying to develop Theory of Relativity with a corporate sponsor, timelines and oversight committees.

Ford and Edison built corporation on the ideas and inventions they created, not vice-versa.

Yes, today many new ideas/inventions are coming out of corporations but that is because we are entering a new age:
People will align themselves with corporations not countries. But that is a topic for another day.

Joe Smith says:

Re: It is the underdog, little man that generates

It is extremely difficult to get truly new and revolutionary ideas to fruition in a corporate structure. New is unsafe and unsafe is not good for business.

Ultimately everything is done by individuals but corporations have provided the environment for many extremely important inventions, some of which could never have come from a garage inventor: a practical light bulb; the alternating current electric engine; the transistor and the integrated circuit were all products of industrial research, only the alternating current electric engine could conceivably have been invented by a lone individual working in his garage.

Ajax 4Hire (profile) says:

Re: Re: It is the underdog, little man that genera

I agree, there are some technologies and advances that could/will only come from corporate/government endeavors.

Nuclear power, Space Exploration, Transportation, Structural Engineering (to name a few) are all to expensive or too large a scope to be managed by one.

And so true, it ultimately boils down to 1 individual with a good idea to start the up-hill battle.

But where all of your examples listed, a major corporation took an existing budding “new” idea and turned it into a real business, a real “practical light bulb”.

Even the transistor and integrated circuit were based on theories set forth by lone individuals. Again, corporate sponsorship allowed the Bell Labs folks the time and resources to put to practical use the theories.

JS Beckerist (profile) says:

re: Gambling

Exactly, it’s all about probability. “If you pay me 50,000 now AND every year you want this to run, we’ll shell out a million if someone can actually do this!”

Considering it was BOEING who was financing this, I assume they did a LOT of research on their own end. It was probably cheaper for them to finance this for a million then spend a hundred times that in R&D, design, implementation…etc…

P.S. I concur with the comment rating if nothing else, dorpus is commonly an off-topic troll and it’s QUITE annoying!

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