October 05, 2004
X Prize Shows Prizes Can Speed Technological Advances

The $10 million Ansari X Prize has been won by another successful SpaceShipOne flight.

SpaceShipOne, the sleek combination of rocket and glider designed by Burt Rutan and financed by the billionaire Paul G. Allen, reached a record altitude of 368,000 feet, or 69.7 miles, blasting past the 337,600-foot altitude reached by the same ship last week.

The prize will actually be paid by an insurance company.

The prize, which required two flights in two weeks, will be paid by a special "hole-in-one" insurance policy, a common method of financing prize contests in which an insurance company essentially bets against success. The premium for the policy was paid by Anousheh Ansari, a telecommunications entrepreneur in Texas and a board member of the X Prize Foundation; she said that it cost "in excess of a million" dollars.

A Bermuda insurance company has just lost millions of dollars on their bet against an X Prize winner.

And so Diamandis and his backers found a Bermuda insurance company that was willing to underwrite the prize as, essentially, a bet it expected never to be collected. Even then, it took a major contribution from Anousheh Ansari, a young engineer who made $180 million in the telecom boom, to get the premiums paid up.

My guess is that it will be a lot harder in the future to find insurance companies willing to insure against the achievement of aerospace prize goals.

The prize money will be shared by Paul Allen, Burt Rutan, and Scaled Composites employees.

Allen put up all the cash for developing the spacecraft, but said he'll share the prize with Rutan's company, Scaled Composites, which built it. Rutan, in turn, said the company will distribute its share of the winnings among employees.

But the more important story here is not about space flight or human exploration. The more important story is that prize money can very efficiently speed the rate of technological advance in targetted areas. If NASA's entire budget was shifted over into prize money it would do far more to accelerate the development of space technology than the current set of programs that NASA funds.

The success of the X Prize is spawning imitators. A $50 million dollar prize may be offered for an orbital vehicle.

Bigelow Aerospace is reportedly on the verge of offering a $50 million American Space Prize to any private American company that can develop a reliable orbital vehicle. There's a good reason for that. Bigelow has been working on orbiting space habitats - and needs an orbital rocket for people to get to them.

The offering of prize money for flight achievements represents a return to a practice that has produced at least one great historical success.

Raymond Orteig emigrated to New York from France in 1912. He worked as a bus boy and café manager and eventually acquired two New York Hotels which were popular with French airmen assigned to duty in the United States during the Great War In 1919 Raymond Orteig offered a prize of $25,000 for the first nonstop aircraft flight between New York and Paris. By the mid 1920’s, airplanes had finally developed enough to make such a flight possible.

The Orteig Prize in the 1920s spurred many teams to develop better aircraft.

. The Orteig Prize stimulated not one, but nine separate attempts to cross the Atlantic. To initiate the flights, competitors raised and spent some $400,000, or 16 times the amount of the prize. As a result of these early aviation prizes, the world’s $250 Billion aviation industry was created. The ANSARI X PRIZE hopes to spur the creation of a vibrant commercial space industry through the $10M competition.

Some critics claim the X Prize only achieved a repeat of what the X-15 did over 45 years ago. But SpaceShipOne incorporates many technological advances that were unavailable when the X-15 was built.

Designer Burt Rutan said what makes his SpaceShipOne so robust is its lightweight materials of graphite and epoxy (it weighs about 6,000 pounds and can be towed by a pickup), its safer propulsion system fuel of rubber-nitrous oxide fuel, and its ability to fold and open its wings, which stabilizes the craft. With the exception of refueling its rocket motors, 97 percent of the spaceship was reused for the two X Prize flights.

But what is amazing in this story is the low cost for SpaceShipOne's development. Estimates for the cost of development range between $20 million and $30 million. What prizes for cutting edge technological achievements do is they give America's and the world's many multimillionaires and billionaires entertaining and ego gratifying ways to use their their cash to push the envelope on what is technologically possible. Putting up technological goal posts and declaring contests with large money prizes is a great way to spur incredibly cost-effective competition. We need more prizes for more more technological goals.

The research and development area most in need of funding for prizes is aging rejuvenation therapies known as Strategies for Engineered Negligible Senescence (SENS). There is now one prize aimed at this topic which is called the Methuselah Mouse Prize. The goal of this prize is to provide researchers an incentive to develop biotechnologies that will double the life expectancies of lab rats from 3 years to 6 years. Currently the prize has a half million dollars in funding.

Note that academic researchers already have large funding agencies to which to apply for grants and the agencies are to some extent led in directions based on which topics researchers decide to apply for to get funding. If top researchers in many fields started applying for research grants to explore the development of various SENS therapies then some of those grants would get funded and more SENS research would get done. Financial incentives in the form of prize money could sway a lot of existing research money in the direction of rejuvenation research. So prize money for the achievement of SENS research goals could potentially sway the allocation of literally orders of magnitude more money than was used to win the X Prize.

For more on the topic of SENS research and prize money the Fight Aging! blog has 3 posts on the X Prize, the Methuselah Mouse Prize and how the fight against aging can be accelerated with prize money. See here and here and here for more.

Update: The X Prize's multiplier effect on money spent is going to be much lower than was the case with the Orteig prize.

How much investment the X Prize has spurred won't be known until next year, after all the various teams have wrapped up their work on prototype space taxis for tourists. Most contenders have been scrimping along on shoestring budgets, so the X Prize isn't likely to reach the 16-to-1 payback ratio of the Orteig Prize. Rutan's Mojave (Calif.) company, Scaled Composites, chewed through some $25 million of the fortune Allen earned as a founder of Microsoft.

However, there is a positive spin that can be put on that news: The Orteig Prize was there for 8 years before its goal was achieved. That gave plenty of time for a succession of teams to come along, spend money, and fail. The X Prize was announced in 1996. But it didn't become fully funded until some time in 2001 when an insurance policy was negotiated to fund the prize for a limited period of time.

Bermuda-based insurer XL Capital took the wager. The firm required regular payments of $50,000 to $100,000 from Diamandis and a deadline in 2003 for someone to make it to space, a date that later was extended to Jan. 1, 2005.

It was a risky move. The contract with XL stipulated that if Diamandis missed even one premium payment, the deal was off and the firm got to keep whatever had been paid in."

Prizes with more certain funding and funding for much longer periods of time could produce much larger multiplier effects in terms of dollars spent. Also, prizes aimed at researchers who can write grant applications to get money to pursue prize goals could produce even larger multiplier effects.

Share |      Randall Parker, 2004 October 05 03:06 PM  Airplanes and Spacecraft

Kurt said at October 5, 2004 8:13 PM:

The fact that the Ansari X prize was actually financed by an insurance company that was betting AGIANST its achievement is very interesting and enlighting. Since most people consider the kind of rejuventation that SENS promises to do impossible, it should be relatively easy to get an insurance company to bet against SENS. I think an Ansari X-prize scheme is the best way to go about this.

Once SENS is accomplished in a mouse, it should be relatively easy to do the human version of it in various Asian biotech labs. The word is that that IGF-1 muscle enhancement gene therapy that the Olympics committee is freaked out about will soon be available in Asian clinics.

Brock said at October 6, 2004 12:57 PM:

I'm going to take the opposite position of Kurt. I believe the insurance industry has just learned a very hard lesson in betting against human ingenuity. Prize-offerors may find one or two more suckers, but eventually that tap will run dry. This is true for two main reasons.

One, insurers insure against measurable phenomena with fixed probabilities. Creativity is neither measurable nor fixed. That creativity is not measurable should be obvious. That creativity is not fixed requires you to realize that you cannot accurately guess how many people will turn their efforts to winning your prize, and you cannot accurately guess how many of them will cooperate. Three creative people together are much more creative than three alone.

Two, inventors will always have better access to information than insurers. If two years ago you wanted to accurately guess when the X Prize would be won, there were only a handful of people in the world who could give you an informed answer. Burt Rutan was one of them. The insurers in Bermuda were not. From now on when someone who wants to offer a prize approached Lloyds of London (or whoever), the insurer is going to have to wonder "What does this guy know that I don't?" Insurers insure because they think they know enough about hurricanes, fire, sports injuries, etc. to accurately predict the odds. In the realm of scientific advancement the odds don't just exist that the insurer doesn't know enough, they're quite high.

All this means though is that the future of Prize offerings will be from organizations that want to lose. NASA and Bigelow Aerospace want to lose. They want their prizes to be won. Another good candidate would be the Gates Foundation, which should offer a prize for advances in vacine technology. If Blacklight Power or Cold Fusion ever works the Big Oil Cos. would have to offer prizes for new uses for Oil.

aboriginal hebrew said at October 9, 2004 9:33 AM:

IMHO, the whole x-prize goal is a waste of precious effort, and, ultimately, a diversion of limited industrial potential. It is the human equivalent of climbing Everest; yet the economics are rather irrational. The real McCoy, blatantly, is the rapid development of the Space Elevator; that is, the carbon nano-tube harnessed to lift 50 cents on the dollar from earth to LEO. Apropos to your latter post on the energy dilemma, hoisting solar collectors via the space lift would be a most synergistic of projects. Add Microwaves and/or superconductors to the mix and you'd have a recipe for seamless power transfer from orbit to terrestrial distribution grid. Add dark-side of moon solar plantations, down-the-road, you'd get ready stability and ease of maintenance potential as well.

Now, we eagerly await for the right chemistry to: mass manufacture, efficiently sort, and properly bind ( for maximum tensile) bucky-tube rope. I understand there have been developments (even here in Israel, i.e., Technion) in the former two technical challenges, but no one is quite able to bind the tubes for promissed endurance yet.

Randall Parker said at October 9, 2004 1:18 PM:

Aboriginal Hebrew.

I do not see the X Prize as a waste. The Scaled Composite effort cost about $30 million (give or take $5 million). In an $11 trillion US economy that is like a speck of dust on the flea on the tail of the dog. This is what is so amazing about it. Such a small amount of money was able to build a spacecraft.

What we need is an X Prize for a private spacecraft that can deliver solar panels into orbit.

aboriginal hebrew said at October 10, 2004 10:28 AM:


I certainly agree, for money spent, SpaceShipOne was a great accomplishment. But, at the end of the day, I cannot see how it gets the private sector any closer to space-based commerce. And I do think the private sector, rather than any sovereignty, will open the gates to the solar system, urgently and efficiently.

You are no doubt aware that there are paradigm defining technologies, the sort that bring industrial revolutions to bare. Steam power (and flat bottom hulls ala Clipper), had to be invented to allow for efficient & fast traversal of the Atlantic, despite the predominance, continued evolution, and cheap (economy of scales) availability of galleons. Thomas Savery notwithstanding, a steam power machine was available to the ancient Greeks (as was petroleum)! but only in the 18th century was it put to industrial task, which revolutionized the world. Rail, as a principle in lieu of roads, was available to the Roman Empire; but only in the 19th century has the technology allowed mass tonnage brisk transit across Eurasia, well beyond the capabilities of both sea shipping and beasts of burden. The Boeing 777 is not a nominal improvement on the Hydrogen packed, propeller driven Zeppelin, but a derivative of Leonardo's (et al) flying machines conceptualized in the Renaissance. They do the sky hauling we need for a bustling world economy. Air ships, no matter if substantially improved, would not do the job. Thats obvious to me. In the same vein, burning tonnes of hydrogen, or making scram-jets that much more efficient, is an exercise in futility. If, indeed, the goal is to bring ready, cheap, and relatively safe access to resources beyond the atmosphere.

My point is thus simple, beyond the gee-whiz factor and nebulous notions about space tourism, this effort is at best quite useless (like climbing Everest), but thrilling, and at worst diverts [private, industrial] attention from doing it right: http://www.zadar.net/space-elevator/. The problem of funding is important, but the problem of focus and, perhaps, limited (captured) mass imagination is more of an issue here.

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