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Pitch

Multiply prizes for breakthrough technologies by betting against them.


Description

Summary

In the absence of political breakthroughs, solving climate change may require technological breakthroughs. For example, reliable carbon-free energy sources cheaper than fossil fuels would remove the need for a price on carbon.

Unfortunately, funding those breakthroughs is sometimes difficult. High-risk, high-reward technology development is often poorly funded by governments and private investors. 

Historically, prizes have worked much better. One was the Ortieg Prize, which was won by Charles Lindbergh on his famous flight. An even earlier example was the Longitude Prize, offered by the British government in 1714 for a practical means of determining a ship's longitude. Present-day prizes include the Methuselah Mouse Prize and the NASA Centennial Challenges.

http://en.wikipedia.org/wiki/Orteig_Prize

http://en.wikipedia.org/wiki/Longitude_prize

http://en.wikipedia.org/wiki/Ansari_X_Prize

But the most famous in modern times was the Ansari X-Prize, which awarded $10 million for the first private company to put a human in space.

The prize was funded by an insurance plan, which would pay if the prize were won. The X-Prize Foundation had to pay premiums, which were lost whether the prize was won or not. However, by doing this they were able to fund a much larger prize.

On top of that, the total amount of R&D money spent by contestants was several times greater than the prize itself. The winning team spent more money than the prize amount all by itself, calculating that it could use the technology and notoriety it developed as the foundation of a new business.

Taking these multipliers together, contestants spent about a hundred times more money on R&D than the foundation spent financing the prize.


What actions do you propose?


Who will take these actions?

If a goal is considered easy to achieve, there won't be much of a bet multiplier.

If there is a straightforward, known path to success, there's little advantage to having lots of companies working in parallel on different approaches. It may be more efficient just to fund one project directly.

If a successful project can bring immediate commercial profit, a prize is probably unnecessary. Commercial incentives alone will be sufficient.

Therefore, ideal goals are those which are difficult to achieve, with many possible paths to success, and which will require further development after the prize is won to bring to full commercialization.

An example of this sort of goal is breakeven nuclear fusion. Most people think it's unlikely to be achieved in the near future (except perhaps by ITER). There are many different approaches to achieve it, currently being developed in parallel. After net energy is achieved, further development will be required to engineer a production-ready power plant. 


Where will these actions be taken?

In the United States, anti-gambling laws may prevent a service like this from being created. However, online gambling is legal in many countries.

Intrade was sued in the U.S. by commodity futures regulators, and no longer allows U.S. customers to trade with real money.

http://en.wikipedia.org/wiki/Intrade

So the system would have to be run from another country besides the United States, probably best if a technologically-advanced nation with an entrepreneurial culture. 

It's possible that supporters and project contestants could be U.S. based.

If the system is based on Ethereum (see the Costs section), then administration would be completely distributed.


How will these actions have a high impact in addressing climate change?


What are other key benefits?

There wouldn't have to be restrictions on the types of projects. The system could assist technological development in fields unrelated to climate.

The odds generated by aggregated bets would be the crowd's estimate of the chance that each prize will be won. Sites like Intrade have turned out to be good predictors of election results, so if this holds true for technology, the estimated odds could be useful for policymakers and investors.

Whoever builds the system could profit from service fees.


What are the proposal’s costs?

Initial costs would be similar to other web startups. There'd need to be sufficient marketing to get over the "chicken-and-egg" problem. Aside from infrastructure and marketing, it may be necessary to pay subject-matter experts to evaluate prize claims.

For easier implementation, an option is to build the system on Ethereum, a scriptable cryptocurrency planned for release in Q4 2014. Crowdfunding scripts for Ethereum have already been devised, and amount to about a page of code. To determine whether a prize has been achieved, either a trusted judge (and associated cryptographic key) can be designated for each contest, or in some cases the Schelling mechanism may be sufficient.

The amount of donations to prizes would be up to the general public, which seems to be somewhat willing to donate. In mid-2014, a nuclear fusion experiment raised $180,000 on Indiegogo, and the "solar roadways" project raised $2 million.


Time line


Related proposals

The 2013 proposal "It's the 21st Century. Where's My Fusion Reactor?" mentioned technology prizes in the context of fusion, though without the crowdsourcing component described here.


References