When Peter H. Diamandis needed the inspiration to finish earning his pilot’s license, a friend gave him a copy of The Spirit of St. Louis, Charles Lindbergh’s memoir about flying across the Atlantic Ocean. “I read it at my parents’ house,” says Diamandis, “and it gave me a great idea.”
Just a few pages into the book, a young Lindbergh describes going on a mail flight and thinking about what role he might play in the future of air travel: “Possibly—my mind is startled at the thought—I could fly nonstop between New York and Paris.”
The notion of flying between these two cities did not enter his head at random. It was not even his own idea. Instead, it was the idea of a philanthropist—a man who motivated not only Lindbergh in his time, but also Diamandis in ours. The result with respect to Lindbergh is well known: He became the most famous pilot in the history of aviation. Diamandis, by contrast, isn’t a household name. Yet he has become one of the most innovative and successful philanthropists at work today. As the co-founder, chairman, and president of the nonprofit X Prize Foundation, he is the mastermind behind one of the most thrilling aeronautical achievements of the last quarter century: the amazing flight of SpaceShipOne. When it soared 100 kilometers (nearly 70 miles) above the earth’s surface last fall, it became the first privately financed vehicle to enter suborbital space. The ship’s designers captured the X Prize, including its purse of $10 million.
Diamandis did not pay for this out of his own pocket. Instead, he created the conditions for SpaceShipOne’s accomplishment by organizing a group of donors who shared his vision—he was, in essence, a philanthropist with other people’s money. If Diamandis has his way, this new brand of philanthropy will generate many more X Prizes in the future. “Prizes are an extremely effective way to bring about radical breakthroughs,” he says. “But they have to be conceived and managed properly. A lot of prize attempts fail because philanthropists don’t understand the ins and outs of how to do this.” And so Diamandis, who will be a featured speaker at the Philanthropy Roundtable’s annual meeting this November, is transforming his X Prize Foundation into an organization that not only hands out its own awards but also helps other philanthropic organizations achieve their goals by using prizes productively. “We can change the world and have fun at the same time,” he exhorts.
The concept of the X Prize came to Diamandis as he was reading The Spirit of St. Louis: “I had not realized that a prize motivated Lindbergh.” Early in the book, Diamandis learned of Raymond Orteig, a French-born American hotelier who admired the pilots of the First World War so much that in 1919 he wrote to the Aero Club of America and offered to fund “a prize of $25,000 to the first aviator of any Allied country crossing the Atlantic in one flight, from Paris to New York or New York to Paris, all other details in your care.” Orteig merely stipulated that the aircraft had to be “heavier than air” (i.e., not a blimp) and that the mission be accomplished by 1924. When that deadline passed without a winner, the sponsor revised his conditions: Any pilot from any country could compete, and there was no time limit. As technology improved, aeronautical circles buzzed with talk about how the flight might be completed.
Just as George Mallory said he wanted to climb Mount Everest “because it’s there,” Lindbergh was an aviation enthusiast who would have been drawn to a daring flight simply for the sake of flying it. But he also admitted that the Orteig Prize inspired him to turn his dreams into a reality. The amount of money at stake was “more than enough to pay for a plane and all the expenses of the flight,” he wrote in The Spirit of St. Louis. When it occurred to him that a plane would keep its value rather than depreciate, he speculated that flying across the ocean “might even end up a profitable venture.” The prospect of success excited him: “ New York to Paris nonstop! If airplanes can do that, there’s no limit to aviation’s future.”
Even before Lindbergh embarked on his historic journey in 1927, the story of aviation was all about breaking limits. From the moment the Wright Brothers made the world’s first powered, sustained, and controlled flight at Kitty Hawk in 1903, there has been a constant drive to do what has never been done before. By the dawn of the twenty-first century, however, air travel was routine, and it seemed that much of what was worth doing had been done. Recent achievements have been idiosyncratic—less about gaining a practical benefit than satisfying a desire for personal adventure, such as Steve Fossett’s making the first solo flight around the world in a hot-air balloon in 2002.
For all of its accomplishments, aviation was experiencing frustrating limits. “I grew up watching the Apollo program and became fascinated with space travel,” says Diamandis, “but by the 1980s and 1990s, I thought we could be doing so much more.” When he learned about the Orteig Prize and its effect on Lindbergh, he wondered whether a similar kind of incentive might jump-start commercial space travel: “It came to me all at once while I was reading The Spirit of St. Louis—a big prize for getting a vehicle into space. We would call it the X Prize, because X is the Roman numeral for ten and we’d offer $10 million, and also because X stands for experimental.”
The 44-year-old Diamandis is a frenetic bundle of energy—full of ideas and feeling a constant need to keep busy with a variety of projects. The son of Greek immigrants and a native New Yorker, Diamandis spent his early years on Long Island hoping to become an astronaut. In the eighth grade, he showed the intellectual flair that would mark his professional life when he won a model-rocket competition that required him to build an automated launch system. As a student at MIT, he earned a bachelor’s degree in molecular biology and a master’s degree in aeronautics. By this point, however, it was becoming apparent that he would not walk the surface of Mars. “Our national space program was going nowhere,” he says. And so he enrolled in Harvard Medical School, in part because he wanted to gain a better understanding of how the rigors of space would affect the human body.
The man whose initials are PHD became a doctor, but he did not practice medicine. Instead, Diamandis turned his avocation for space into a profession. He started several companies, including Space Adventures, which helped arrange for Dennis Tito to become the world’s first space tourist by visiting the International Space Station for a fee of $20 million. Another enterprise, Zero Gravity Corporation, is the first FAA-approved parabolic flight company—i.e., it sells tickets for thrill rides aboard a Boeing 727 that dives toward the ground and gives passengers a feeling of weightlessness. Along the way, Diamandis developed a group of 20 rules he calls “the Creed of the Sociopathic Obsessive Compulsive.” Rule No. 3 states that “multiple projects lead to multiple successes.”
Among these multiple projects, the X Prize has been by far Diamandis’s most successful. The guidelines were simple enough: $10 million for the first team to build a ship with private funds and fly three people (or one pilot with equivalent deadweight) to an altitude of 100 kilometers—and to do it twice within a two-week period. Diamandis formally announced the prize in 1996. Just as Lindbergh had raised his funds from businessmen in St. Louis—hence the name of his famous plane—Diamandis also went knocking on doors in the Gateway City, where he sparked a sense of community pride and secured his initial funds. Local boosters formed the New Spirit of St. Louis Organization, a group whose members eventually grew to include former Washington University chancellor William H. Danforth, McDonnell-Douglas Foundation chairman John McDonnell, and Enterprise Rent-a-car CEO Andrew Taylor. The X Prize Foundation’s bond to Lindbergh tightened further when the famous pilot’s grandson, Erik R. Lindbergh, joined the board of trustees. As the public became more familiar with the X Prize, additional supporters stepped forward. FirstUSA and Champ Car World Series Racing emerged as corporate sponsors. Author Tom Clancy made a significant contribution, and science-fiction writer Arthur C. Clarke chipped in as well. Finally, last October, a group backed by Microsoft co-founder Paul Allen launched a craft designed by Burt Rutan and won the X Prize. Winning the $10 million purse cost Allen an estimated $20 million.
“The X Prize was a success by everyone’s measure,” says Diamandis. “It was an extremely effective way to achieve leverage. We attracted teams that spent 40 or 50 times the amount of prize money we were offering on research and development—and we didn’t have to pay a penny until we got the results we were looking for.”
The specific result, of course, was a flight that obtained a predetermined outcome. But Diamandis had a broader objective in mind as well: He wanted to promote the idea of commercial space travel. “Before the X Prize, nobody talked about space tourism,” he says. “Now the concept is attracting a lot of interest and money.” Richard Branson of Virgin Airlines has announced the formation of Virgin Galactica, a company that proposes to develop a fleet of aircraft based on SpaceShipOne and to sell tickets for $190,000 by as early as 2007. Another company pursuing sub-orbital flight, the Seattle-based Blue Origin, boasts Jeff Bezos of Amazon.com as one of its investors. The X Prize even encouraged Congress to create a set of appropriate regulations where none had existed before, on the rationale that commercial space travel won’t ever get off the ground if it must abide by the same safety rules that now apply to cross-country flights. “Without these new laws, this industry would develop in Canada or South America. But now it will grow in the United States,” says Diamandis. “Our objective was not simply to promote technology, but to shift a paradigm and create a new marketplace.” It remains to be seen whether space tourism becomes an actual industry. If it does, however, the X Prize will be seen as a crucial milestone.
Good sci-fi movies often spawn sequels, and the question now becomes whether the X Prize can experience a follow-up success. This fall, Diamandis plans to announce three new X Prizes in areas such as energy, the environment, and medicine. He refuses to discuss details, but each new prize will be based on incentives, such as designing a vehicle of a certain weight that can travel a certain distance on a single gallon of gas. Whereas the Nobel Prize and so many of its lesser-known kin have honored people and organizations retroactively, the X Prize Foundation aims to create a series of challenges that identify problems, refuse to prejudge solutions, and attract the mavericks who traditionally are behind so many innovations. “We want to find a way to pull in those pesky bicycle mechanics from Dayton,” says Diamandis, in a jocular reference to the Wright brothers’ original occupation.
The next great winner of a major incentive-based prize may come as early as this October, when the Defense Advanced Research Projects Agency (DARPA) sponsors its Grand Challenge 2005—a competition requiring autonomous ground vehicles to travel approximately 150 miles across a desert terrain in less than ten hours. The winner takes home $2 million, though there is no guarantee of victory. In an inaugural race last year, none of the entrants finished the course. “This is a tough technical test,” says Ron Kurjanowicz, who coordinates the race for DARPA. “But we felt it was important to accelerate development, and we didn’t want to get into the business of working with contractors and compiling project schedules. This is about getting a lot done in a short amount of time.” Kurjanowicz estimates that in 2004 the contest entrants probably spent about $55 million as they chased a $2 million prize. “That figure is going to go even higher this year,” he says. As it happens, the initial inspiration for the Grand Challenge came from DARPA employees who knew about Raymond Orteig.
Incentive prizes may in fact represent a new frontier in philanthropy. In one sense, there’s nothing especially pioneering about a device that Orteig employed to such good effect almost 80 years ago. (And which in fact was in use long before that: In the eighteenth century, the British government created prizes to help solve a riddle of navigation, a story told in Longitude, the best-selling book by Dava Sobel.) Yet for all the prizes that philanthropic organizations currently sponsor—there are something like 30,000 of them, including more than a hundred that carry six-figure financial rewards—relatively few demand solutions to specific problems. “We all want innovation, and so the fundamental question is: What makes innovation happen?” says Charles Harper, senior vice president of the Templeton Foundation, which plays a part in awarding the Templeton Prize, the world’s most lucrative prize given to an individual. (This year’s winner, physicist Charles H. Townes, pocketed $1.5 million.) “Has the Nobel Prize done any good for physics?” asks Harper. “I think you could make the case that scientific fields without their own Nobel Prizes are at least as dynamic in innovation.” The Nobel Prizes, of course, are more like lifetime achievement awards than the incentive-based X Prize. “If done the right way, incentive-based prizes can make a lot of sense,” Harper adds, “but ‘God is in the details,’ and in my view prizes generally should be approached with skepticism. They have to be very well strategized to work.”
The X Prize already has imitators. Last year, shortly before the X Prize was officially awarded, Nevada aerospace executive Robert Bigelow announced a $50 million prize for an occupied vehicle that orbits the earth twice at an altitude of 400 kilometers, and then repeats the trip within two months, all by 2010. And NASA—what SpaceShipOne designer Rutan jokingly refers to as “the other space agency”—is now offering a series of Centennial Challenges, all with monetary prizes, to develop new technologies. NASA has cited the X Prize as an inspiration for this program.
There is no guarantee any of this will be done the right way. In 1959, for example, the late physicist Richard Feynman gave what is often regarded to be the first lecture on nanotechnology, the science of manipulating extremely small objects. At its conclusion, he offered to pay $1,000 to anyone who could build a tiny motor no larger than 1/64th of an inch per side. The next year, a clever engineer figured out how to do it using jeweler’s tweezers and other conventional tools. He met the conditions of the prize, but failed to advance the science of nanotechnology, as Feynman had hoped. The famous physicist made good on his offer and paid up, though he realized that he had misconceived the challenge.
This is a mistake to avoid at all costs. “Well-written rules will deliver breakthroughs, diversity, and innovation,” said Diamandis in congressional testimony last year. “Poorly written rules will result in no entries or, worse yet, trivial solutions.” The key is to design a smart contest that arouses the public. “We can create a new set of heroes,” says Diamandis. One of the compelling aspects of the X Prize is that the Goliaths—i.e., the large government contractors that build everything from fighter jets to the Space Shuttle—chose to sit out the competition, ceding the field to a group of ingenious Davids. “We attracted radical innovators who don’t work well inside enormous bureaucracies,” says Diamandis. In doing so, the X Prize unleashed incredible powers of creativity to achieve a practical result. The miracle of the X Prize is not that it made possible a groundbreaking feat of imagination: The technology of SpaceShipOne was within the reach of American engineers in the late 1950s and early 1960s. Rather, it helped create the incentives for accomplishing a goal whose benefits government officials failed to appreciate.
Duplicating this success may be easier said than done. “The X Prize is not a model for everybody,” warns Harper. “It benefited from having a fully engaged visionary dynamo running it. Not everybody can be Peter Diamandis. He is an amazing entrepreneur.”
But perhaps Diamandis can serve as more than a model for others to copy—perhaps he can directly advise philanthropists who want to improve the prizes they already offer or establish new ones entirely. This, in fact, is what Diamandis now proposes to do with his organization. “At the X Prize Foundation, we’ve spent the last eight years learning how to do prizes,” he says. “We researched every major prize in the world, talked to their organizers and the people competing for them, and built our own core competency. Now we’re in a position to help groups develop their own prizes and achieve dramatic results.” Diamandis envisions his group running a dozen or more prize contests at once, many of them in collaboration with philanthropies that have goals utterly divorced from space travel. “We’ll help with conception and development, handle legal details and publicity, and basically take advantage of economies of scale,” he says.
Many of these prizes will be scientific or technical in nature—but not all of them. “We’re currently looking at how we might develop some social prizes, in areas such as improving education or reducing crime,” says Diamandis. Whatever the case, groups that work with the X Prize Foundation will benefit from the know-how that comes from running a successful contest. One ingenious idea, for instance, is the way the organization never actually stashed $10 million into a bank account. Instead, it took out a policy with an insurance company that in effect bet against the contest’s success. The premium was paid by Anousheh Ansari, an Iranian-born, Texas-based software entrepreneur whose love of spaceflight compelled her to become a major patron of the X Prize Foundation. Her contribution gave the endeavor its formal name: the Ansari X Prize. In recent months, Diamandis has lined up many more supporters. His board of trustees now includes some of the best-known names in science and industry, such as Google co-founder Larry Page and J. Craig Venter, who sequenced the human genome.
Over the course of eight years, Diamandis estimates that his group’s total cost for running the X Prize, including the payout, amounted to slightly less than $10 million. For their part, the designers of SpaceShipOne were just as creative in raising their own funds for competition. On its historic flight, their vehicle looked like the futuristic cousin of a NASCAR, sporting logos for M&Ms, 7-Up, and even Virgin Galactic.
“Our visions of the future now embrace rocket missiles and supersonic flights,” wrote Charles Lindbergh in the preface to The Spirit of St. Louis. “We speculate on traveling through space as we once discussed flying across oceans.” A generation after these words were written, in 1953, traveling through space had become a reality—though not nearly as common as flying across oceans. This brings to mind the twelfth rule in Diamandis’s Creed of the Sociopathic Obsessive Compulsive: “When faced without a challenge, make one.” That’s exactly what Peter Diamandis did with the X Prize, and what he aims to do again in the near future with new prizes based on shrewd incentives. As Lindbergh himself commented, with respect to the Orteig Prize: “I do not believe any such challenge, within reason, will ever go unanswered.”
Contributing John J. Miller is a writer for National Review and the author of A Gift of Freedom: How the John M. Olin Foundation Changed America, forthcoming from Encounter Books.