Is the America Competes Reauthorization Act the most important piece of legislation for inventors in more than a decade? And if so, why hasn’t anybody noticed?
By Patrick Raymond
One can be forgiven for not having noticed all that passed in Congress’ lame duck session late last year.
But amid all the political vitriol and inertia, it approved the America Competes Reauthorization Act, granting federal agencies broad authority to host contests to spur innovation.
President Obama issued the clarion for such legislation in his 2009 Strategy for American Innovation.
So why this Act? Why now? And why does it matter to inventors?
In short, invention contests and prizes work. In fact, when applied to big problems, contests can deliver big solutions with big economic impact.
But until now only a few government agencies were allowed to hosts contests. According to Robynn Sturm at the White House’s Office of Science and Technology: “Congress granted three agencies (NASA, the Department of Defense, and the Department of Energy) direct prize authority over the past decade. The success of DARPA’s Urban Challenge and NASA’s Centennial Challenges only underscored the need for all agencies to have prize competitions. …”
The Act provides a “clear and simple legal path” for Uncle Sam to run invention contests, much like the private sector. The U.S. public sector, it should be noted, accounts for approximately 25% of our $15 trillion economy.
Of course, private companies such as Edison Nation, Quirky.com and GE’s ecomagination challenge come to mind, among many others, as recent and reliable places where inventors can safely submit ideas for potential prize money and future product development.
According to a 2009 study by McKinsey & Company, more than 60 prizes have debuted since 2000, representing almost $250 million in new money. The total funds available from large prizes have more than tripled over the last decade to surpass $375 million. The total prize sector could already be worth as much as $2 billion.
This should be music to every inventor’s Bluetooth headset. Although inventing and creativity confer their own rewards and personal satisfactions, the profit motive does loom large for most of us. And inventing for prize money needn’t make you feel like a dirty mercenary. In fact, it has a long and storied history.
It was prize money that motivated Archimedes (287-212 BC) and his original “eureka” moment. He exclaimed, “I have found it” in ancient Greek while in his bath. No, he was not referring to his rubber ducky.
In his bath he had just solved a challenge posed by the King of Sicily: Was the royal crown made of pure gold or did it have impurities?
Archimedes demonstrated that when submerged, different metals have different densities and therefore displace different quantities of water.
Alas, the king’s crown was shown to not be made of pure gold. But in an exemplary display of good governance, the king gave Archimedes the prize money anyway.
Buoyancy, which Archimedes had just discovered and demonstrated, would be instrumental in many other fluid dynamics innovations – floating rubber duckies, for instance.
The moral of the story is that even though the answer to the challenge was not what the government, in this case the king, wanted to hear, it nevertheless solved a mystery. The government rewarded the inventor and the contest led to unexpected ancillary innovations that would benefit all mankind.
Another historically significant invention prize was the Longitude Act of 1714. The United Kingdom offered £20,000 ($4.75 million today) to the person who could develop a way to accurately measure longitude at sea.
The UK was a naval superpower projecting economic and military might worldwide. But navigation was still notoriously imprecise. While determining latitude was relatively easy, to find longitude one needed a portable and precise clock.
A pendulum clock becomes highly inaccurate on a wobbly ship at sea. The problem was considered intractable. Many leading scientists, including Sir Isaac Newton, doubted that a maritime chronometer could ever be built.
Over many iterations and submissions, John Harrison (1693–1776), a self-educated English clockmaker, invented one. It was a compact, wobble-proof, corrosion-resistant maritime chronometer and sufficiently precise to establish longitude.
This revolutionized navigation, extending the possibility of safe long-distance sea travel and arguably extended the life of the British Empire by 100 years … except for a pesky set of rebellious and innovative colonies.
This story is instructive in terms of government policy. Harrison submitted his first design in 1730. He was 37. It showed promise. So the Longitude Board funded further research with £4,315, in increments … over the next 30 years.
By 1773, when he was 80, Harrison had received in total £23,065. The Board’s criteria were so unnecessarily rigid, they were never actually fully “met.” This would become a case study in how not to run an invention contest. Even King George III threatened to berate Parliament for failing to declare Harrison a winner and giving the inventor his due reward.
Government competitions can be the solution, but also the problem. Prize money can spur innovation, ensuring a country’s competitive dominance. Yet in Harrison’s case, unnecessary delays in awarding a prize harmed the inventor and hindered innovation. The Longitude Board’s members continued to fund celestial observation as a solution, eschewing Harrison’s chronometer.
They were totally wrong. You can’t navigate by star-gazing. They only managed to delay declaring Harrison the winner, thus preventing the marine chronometer from wider and earlier commercialization.
Government again missed the boat entirely at the turn of the 20th century.
“Commercial aviation” was considered a contradiction in terms by most governments. Aircraft were deemed too expensive, too dangerous and too limited in range to be anything other than tactical bombing platforms for the military.
It took a private citizen – not surprisingly in the hospitality business – to prove them all wrong.
Hotel magnate Raymond Orteig offered $25,000 in 1919 to any aviator who could fly nonstop on the most lucrative commercial route at the time: New York to Paris.
As Tom Walker recently summarized in the Oklahoman newspaper, Charles “Lucky” Lindbergh won “with an innovative single engine, solo pilot strategy that flew in the face, so to speak, of the expected aviation approach.”
Furthermore, eight other teams entered the race. So with a $25,000 prize, Orteig managed to spur nine teams to create $400,000 in innovative solutions.
According to Walker: “Investment from these nine accelerated an industry … captured the public’s attention and imagination. Pilot’s license applications increased by 300%, the number of licensed aircraft increased by 400%, the 5,700 airline passengers in 1927 grew to 173,000 by 1929 and today aviation is a $250 billion industry in Oklahoma alone.”
The moral here is governments can’t know everything and that private prizes offered by private citizens for private commerce can initiate revolutionary change on a grand scale.
Fueled by press coverage, the crowds that made Lindberg a popular hero also were instrumental in encouraging and applauding what would have otherwise been a lonely inventive journey. Rising to the challenge at the time were many non-inventors: just private citizens swept up in the euphoria of the moment and pledging help in any way they could. Donations and support poured in. Conclusion? Crowds matter.
Our final example is the Netflix Prize, by the online DVD-rental service. It offered $1 million in an open competition for the best collaborative filtering algorithm to predict user ratings for films based on previous ratings. The idea was to better predict – and recommend – what movies consumers would rent.
The challenge opened Oct. 2, 2006. Six days later, a team called WXYZConsulting had already beaten Netflix’ own system performance by 1%. Cost to Netflix? Zero so far.
By Oct. 15, three teams had beaten it. By June 2007, more than 20,000 teams had registered from more than 150 countries. One psychologist with the screen name “just a guy in a garage” cracked the top 10.
On Sept. 21, 2009, the BellKor’s Pragmatic Chaos team won the grand prize. It was a team of AT&T Research engineers that bested Netflix’s own algorithm for 30 billion daily rating predictions by a whopping 10%.
The Netflix contest showed that in the Internet Age, invention competitions quickly go global, attracting the best ideas and talent. The only people excluded were Netflix employees and residents of Cuba, Iran, Syria, North Korea, Myanmar and Sudan).
Secondly, online invention competitions can be opened and closed quickly. Compared to Harrison’s time, it is now possible to innovate 1,000 times faster.
And third, real-time global competition encourages teams to form and cross-collaborate during and beyond the original competition.
Many engineers may not have won, but they earned the respect of their peers and major bragging rights. That’s good for resumes and job hunting!
And fourth, outsourced R&D can still mean that America attracts the best minds and ideas. All that for $1 million? Not a bad bang for the buck.
It is against this backdrop that the America Competes Reauthorization Act passed on Dec. 21, 2010. Though the administration would not comment on the legislation’s history (making laws is always a little messy, apparently) the most tangible incarnation of the Act is the website www.Challenge.gov, one central place where all government departments and agencies post their challenges.
As we went to print, there were 63 challenges from 27 organizations. Many more are expected now that the Act has passed.
Run by the U.S. General Services Administration, Challenge.gov, “taps into the power of ‘crowdsourcing’ so that individuals and groups can help solve some of the government’s most pressing challenges,” says Sheila Campbell, director at the Office of Citizen Services and Innovative Technologies. One of the main benefits, she notes, is it allows “people to support challenges they care about.”
The story of the Web platform itself in an inspiring tale of innovation. Challenge.gov is powered by a small, 18-month-old startup led by Brandon Kessler, an entrepreneur who used to be a music producer for the Dave Matthews Band. Go figure.
He founded ChallengePost.com as a private site for invention competitions. After a competitive bidding process, he won the bid to run New York City’s Mayor Challenge NYC Big Apps, a contest for iPhone apps.
According to Kessler, that one challenge cost the mayor’s office $20,000, but generated $4.5 million in private software.
In other words, to develop a similar application, the mayor could have spent more than $4 million on consultants, who might still have gotten it wrong, or he could pick the winner of a $20,000 competition and offer the winner a lucrative commercialization deal.
Everybody wins. Even the contest’s non-winners attracted feedback, got exposure and some even landed venture capital deals.
First Lady Michelle Obama also used the ChallengePost platform to power one of her cherished initiatives: combating child obesity. Her AppsForHealthyKids Challenge created more than $5 million in new software for only $60,000 in prize money.
Kessler has observed two important social phenomena. Non-inventor supporters contribute donations, encouragement, referrals, etc. to a challenge they liked or feel inspired by. Secondly, and this is the key strategic benefit, network effects act as a dollar multiplier.
Look at it from the government’s perspective – painful as it might be – for a moment. Tax revenues are down. Tax increases are wildly unpopular. Expenditures for retirees are way up. How do you invest in the future?
A government (as investor) can run a lottery, offer a $50,000 prize for one lucky winner, and it will likely sell 60,000+ tickets at $1. Net profit: $10,000.
But all it has done from an economic standpoint it transferred wealth from one set of hands to the other. In this case, one person is $49,999 richer than before, and 59,999 people are $1 poorer, and the state has a $10,000 profit, a 20% return on investment or ROI.
But as we have seen in invention contests, the economic multiplier is orders of magnitude larger. Prize money is peanuts compared to the broader economic impact.
Kessler estimates it at 200, whereby a $50,000 prize generates $4 million in economic value. So instead of 20% ROI in dumb-luck lotteries, the ROI is 20,000% for smart invention contests. With its immense purchasing power, the federal government’s initiative at Challenge.gov looks as close to invention competition heaven as one would hope for.
Could it be that government – with the “wisdom of crowds” – has its act together?
The trick now will be for all government agencies and departments to shed bureaucratic turf wars and not-invented-here mindsets and instead embrace crowdsourcing with intelligent challenges, not just publicity stunts.
On a final note, the last time independent inventors were so specifically affected by a piece of federal legislation was the 1999 American Inventor Protection Act (AIPA).
After 11 years and tireless efforts by nonprofit inventors associations, volunteers and well-intentioned sages to spread the “scam alert” message, it is time to declare the obvious: AIPA has failed.
Scams are still in business, bigger, badder and more prosperous than ever. The state of inventor education is still appallingly low. Inventors (or naïve amateurs) continue to fall prey to high-priced, low-value service providers and invention-promotion profiteers who exploit inventors’ hopes and dreams, as well as their laziness and ignorance.
The Federal Trade Commission and the U.S. Patent and Trademark Office record complaints after the fact. They are empowered to do little else. The nonprofit inventor education model does not work because it does not effectively help inventors achieve what they really want: commercialization, not abstract “education” or sales pitches form service providers.
The wide-scale embrace by government and corporations of prize-based competitions can be a game changer.
The America Competes Reauthorization Act and Challenge.gov might very well achieve what the AIPA and nonprofits could not over the past decade: offer a viable, non-predatory commercial alternative for inventors.
It also seems like a uniquely American solution to the global problem of competitiveness.
While many other countries’ leaders and despots have trouble listening to their own citizens, it’s heartening to see our government cuing up a public chorus and inviting inventors to help solve the planet’s most pressing problems.
In 1839 the Royal Agricultural Society of England began “to encourage men of science to exert themselves in the improvement of agricultural implements” through prizes and awards that would be worth more than $1 million today.
Scholars at Harvard and the Norwegian Business School compared nearly 2,000 awards presented between 1839 and 1939 with inventions registered with the British Patent Office, using the latter as a proxy for innovation.
The analysis showed award winners were more likely to receive and renew patents. And those who entered but didn’t win sought patents for more than 13,000 inventions.
“Evidence suggests that the prizes led to significant improvements in the quality of technological invention,” the study reported.
Interestingly, a medal’s prestige seems to be a stronger motivator than cash.
“People are much more induced by winning a medal award than by winning a monetary award,” says Tom Nicholas, one of the Harvard authors. “It’s much easier to market a product having won a medal.”
Editor’s note: This article appears in the March 2011 print edition.
Tags: America Competes Reauthorization Act, Centennial Challenges, DARPA, ecomagination, Edison, GE, Innovation, innovators, inventors, McKinsey & Company, Obama, Strategy for American Innovation, Urban Challenge, X Prize