You’re reading Age of Invention, my newsletter on the causes of the British Industrial Revolution and the history of innovation. This edition went out to over 7,500 people. You can sign up here: Yesterday I had a piece in Works in Progress magazine, on the best ways to design modern innovation prizes — and why
I enjoyed reading this and the article in Works in Progress.
Another contemporary prize that I’ve observed up close, and where the benefits are debatable, was the L-prize for the LED bulb, awarded by the US Department of Energy to Philips in 2011. The lightbulb that was created and met the technical specifications was arguably over-engineered and quite expensive, and not too long after winning the prize, was no longer manufactured. Most LED bulbs that were made in the years that followed had a different design, and market adoption of energy-efficient LEDs were far more driven by steady cost declines in fundamental components, not bulb design per se. The critical take therefore is that the prize induced Philips (a very large bulb manufacturer, hardly all that motivated by the prize money) to put together a product that met the technical requirements, but which didn’t relax the binding constraints to adoption.
An alternative view is that this was the US government providing advertising, stimulating a segment of early adopters, who for any new product are so important. When dealing with a consumer product, rather than a navigation device or a narrow scientific accomplishment, I wonder if prizes can slightly, but critically, redirect both demand and supply on an emerging market for innovation. The theory about the compact fluorescent bulb and its limited adoption was that cost reduction efforts made these bulbs produce bad lighting (that pale blueish light). To induce an early supply of good quality lighting LED bulbs, maybe the L-prize made that happen sooner and early adopters pulled manufacturers in that direction in the years that followed. No idea how to test that counterfactual.
In short, how prizes might impact the demand-side of the market for innovation is an interesting angle. As you note, the cash compensation isn’t the main point, other than attracting headlines.
I enjoyed reading this and the article in Works in Progress.
Another contemporary prize that I’ve observed up close, and where the benefits are debatable, was the L-prize for the LED bulb, awarded by the US Department of Energy to Philips in 2011. The lightbulb that was created and met the technical specifications was arguably over-engineered and quite expensive, and not too long after winning the prize, was no longer manufactured. Most LED bulbs that were made in the years that followed had a different design, and market adoption of energy-efficient LEDs were far more driven by steady cost declines in fundamental components, not bulb design per se. The critical take therefore is that the prize induced Philips (a very large bulb manufacturer, hardly all that motivated by the prize money) to put together a product that met the technical requirements, but which didn’t relax the binding constraints to adoption.
An alternative view is that this was the US government providing advertising, stimulating a segment of early adopters, who for any new product are so important. When dealing with a consumer product, rather than a navigation device or a narrow scientific accomplishment, I wonder if prizes can slightly, but critically, redirect both demand and supply on an emerging market for innovation. The theory about the compact fluorescent bulb and its limited adoption was that cost reduction efforts made these bulbs produce bad lighting (that pale blueish light). To induce an early supply of good quality lighting LED bulbs, maybe the L-prize made that happen sooner and early adopters pulled manufacturers in that direction in the years that followed. No idea how to test that counterfactual.
In short, how prizes might impact the demand-side of the market for innovation is an interesting angle. As you note, the cash compensation isn’t the main point, other than attracting headlines.