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Peter DIAMANDIS: You know, since my childhood I wanted to fly into space. It was my mission, my passion, my drive, and it was something that I got stirred up in me during the Apollo program. 

Stephen J. DUBNER: What year were you born?

DIAMANDIS: I was born in ‘61 and Apollo was going on in the late 60s. We landed on the moon in ’69. And I was in fifth grade, sixth grade, getting interested in science at that time, started drawing rockets on every piece of paper I could find. And I was an early space cadet. It was different for me. I wasn’t just interested, but we have a calling in life, and that was my calling. 

DUBNER: You must have felt that you were born at just the right time initially, right? You’re a kid, this is starting up here, it’s only going to get bigger and better, and then what happened?

 DIAMANDIS: And then the bottom fell out. You know, we got to the moon and then it stopped. I was decimated by that. That old biblical saying, “the meek shall inherit the Earth,” I used to finish that by saying, “the rest of us are going to the stars.” And we didn’t.

Meet Peter Diamandis. He did get to launch a spaceship. But NASA didn’t have anything to do with it.

DIAMANDIS: You know, this space program fell away and I was like, how am I going to make this happen, how am I going to go, and how is everybody else going to with me? And, by chance a good friend of mine gave me a copy of Lindbergh’s book, Spirit of St. Louis. And I’m reading this book, and I find out that unbeknownst to me, Lindbergh made the trip across the Atlantic not just on a whim or to prove something to friends, he did it to win a 25-thousand-dollar prize And I’m making notes in the sides of the margins about how many teams competed, how much money they spent, and I was amazed. 25-thousand dollars drove 400-thousand-dollars’ worth of expenditures by nine teams. And the guy who put up the money only paid the winner. How cool was that?

DUBNER: 400-thousand-dollars’ worth of expenditures by those teams, what kind of value did that produce then in terms of innovation?

DIAMANDIS: So, what was incredible that when Lindbergh made this flight, he changed the paradigm of what was possible. The best measurement for that is the year before Lindbergh flew, there were six thousand passengers flying in the United States. Eighteen months after his flight, there was a 180 thousand, a 30-fold increase. You know, he changed the paradigm of, oh my God if this 25-year-old kid can do it, then I can fly too! And really it was the causative creation of a multi-hundred billion dollar aviation industry. Amazing!”

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The spacecraft that Peter Diamandis was responsible for launching — he didn’t design it, or build it, or even pay for it. All he did was create a competition. Diamandi runs the X-Prize Foundation, which offers cash prizes — big ones — to whoever does the best job of solving whatever challenge the Foundation dreams up. The first prize offered $10 million to anyone who could send a spacecraft, with three people aboard, more than 100 kilometers above the Earth’s surface, and then come back — and then do it again within two weeks of that first launch. It worked. When you hear people talking today about the future of commercial spaceflight, they’re talking about the movement Diamandis got started.

That was back in 2004. One sunny day this past September, in Washington, D.C., Diamandis handed out another 10 million dollars, this time to three teams of inventors, each of whom designed a car that is safe, reliable — and can travel more than 100 miles on a gallon of gasoline, or gas-equivalent energy.

X-PRIZE: Today we are living in a day and time when literally anything is possible . . . build a spaceship . . . educate, or how we feed the country . . .

That’s right. The X-Prize Foundation is looking at education and poverty — and a long list of other challenges too, from curing AIDS to predicting earthquakes. Another moon landing, too. As Diamandis would say: “How cool is that?”

But the coolest part is how the incentives work. The X-Prize Foundation gets someone else to put up the prize money — the spaceship sponsor was the Ansari Family; the 100-mile-per-gallon car was sponsored by Progressive Insurance — and then they only have to pay the winners. All the other ideas get thrown in for free.

It’s not surprising that this kind of competition is catching on. According to McKinsey, the consulting firm, more than $250 million has been handed out, for 60 new prizes, in the last 10 years, by all kinds of sponsors for all kinds of innovations.

In fact, on that same sunny day in September when the Progressive X-Prize was being announced, at the same time, also in Washington, D.C., there was another prize ceremony going on, with an even bigger handout: billions of dollars.

This ceremony was at the Department of Education. Secretary Arne Duncan was announcing the winners of the “Race to the Top” education-reform plan. Eleven states, and the District of Columbia, will share more than four billion dollars in prize money to invest in their school systems.

Wait a minute, wait a minute: a multi-billion-dollar government prize for states and their schools to compete for?

Arne DUNCAN: I’m Arne Duncan, the Secretary of Education.

DUBNER: So I want to know where the Race to the Top idea came from; who designed it? I know that you’re a big basketball dude, I picture you home on your couch watching Final Four and thinking, “Hey that’s what we need, a winners bracket for education.” But I’m guessing it didn’t really happen like that, right? 

DUNCAN: No, there’s a set of folks that just fundamentally believe that the status quo wasn’t good enough, and the only way to challenge the status quo is to give people rewards for success. So, there may be some sports analogies there, but one of the things that really influenced me, was in the Chicago public schools receiving a teacher incentive fund grant from the Department of Education, which was very important and helped us change our behavior in Chicago in ways that would never have happened without that incentive.

DUBNER: Now who did you have to sell the idea to of Race to the Top?

DUNCAN: It wasn’t a hard sell. Everybody knows that we have to get better, everybody shares the same sense of urgency, and political leaders, educators, folks from day one absolutely understood that this is the right thing to do.

DUBNER: That may be so, but forgive me for saying so, it doesn’t seem like a very governmental thing to do on some level, asking states to compete against each other for federal education funding. You do after all run the Department of Ed. for the United States of America government. So, why do you want to set these states against one another, why set up the competition?

DUNCAN: Because I fundamentally think that you’re not setting states against each other, this is really a test of each state’s courage, commitment, and most importantly their capacity to deliver dramatically better results for students, for their state’s children. So this wasn’t about this state versus that state, this is about states looking within themselves . . . And even the states that didn’t receive money, virtually every governor, every state school chief officer that I’ve talked to have all said we’re moving forward with or without the money. So what this has done, this has moved the entire country; this isn’t about a couple states that received money. This is about a national movement to get our country where we need to go educationally.

So it’s one thing to have states compete against one another. Or aerospace engineers. But how do you deliver on that, how do you make sure you get, like Arne Duncan wants, “dramatically better results?” How do you know you’re not just . . . flushing billions of dollars into space?

In just a minute, we’ll hear from one company that has made experimentation a routine part of its employees’ workdays. You’ve maybe heard of this company? It’s called Google.

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Sure, setting up a multi-million-dollar prize is going to get the attention of inventors, even educators. But what next? Yes, it was a cash prize that got Charles Lindbergh to fly across the Atlantic. But how do you get the Wright Brothers to invent the airplane in the first place?

Craig NEVILL-MANNING: My name is Craig Nevill-Manning, and I’m an engineering director here in Google New York.

Craig Nevill-Manning was one of Google’s first 250 employees. Which means that — yes, he’s worth a few bucks — but also that he’s been promoted a couple of times. So he no longer just sits in a cubicle writing code.

NEVILL-MANNING: I find that if I’m having a tough day with a bunch of meetings and emails, I can restore my sanity by actually writing some code. So I sort of force myself to do it from time to time.

DUBNER: Whereas for the average human being that would destroy what little sanity they had.

NEVILL-MANNING: We’re a weird group.

DUBNER: Yes you are, yes you are.

The engineers at Google have a particular incentive to experiment on the job. Given the success of the company, it’s surprising more firms haven’t copied it. It’s called “20 percent time.”

NEVILL-MANNING: So 20 percent time means that any Google engineer can take 20 percent of their time, say it’s one day a week, or one month in five, and do with that time something that they think is important for the company or for the world, regardless of whether their manager thinks it’s a good idea. And it’s really a way for our engineers to come up with a creative idea and then put that idea into practice, to build a small prototype. I feel like lots of ideas that people have, most of them are bad, and you never find that out until you actually try to put them into practice. And when you do, you probably think of a different idea that’s a much better idea. And so having that kind of freedom to experiment is important.

DUBNER: When did 20 percent time start to happen?

NEVILL-MANNING: Right from the beginning.

DUBNER: Why? How?

NEVILL-MANNING: I don’t know whose idea it was in the very first place, but I think Google came out of academia. Larry Page and Sergey Brin were Ph.D. students at Stanford, and I think that academic ethos of you should always be trying new stuff because you need to do that to figure out what works and what doesn’t. And they thought that was important, because I think they saw that Google would go beyond just a search engine, which it has. And even for the search engine itself you need to come up with different ideas, because the technology has changed over the last 12, 12 years. 

DUBNER: Tell me, what are the greatest hits then that have come out of 20 percent time at Google?

NEVILL-MANNING: Well Gmail was one of an engineer who worked on the main search engine and then accumulated a certain amount of time and decided, you know, what we really need to do is revolutionize email. That was Paul Buchheit.

DUBNER: Now, let me ask you this, had Paul not done that, had he not taken his 20 percent time and come up with that, would Google have gotten to Gmail?

NEVILLE-MANNING: It’s hard to know honestly. There’s strong possibility that we wouldn’t have.

DUBNER: So for all the world that’s out there, probably half our listeners are now Gmail users, they’re thinking “holy cow,” if Google didn’t have this arcane 20 percent policy, my life would be a little bit worse.


Think about it for a minute. At most institutions, you have a lot of meetings. You ask 20 people to mark their calendars, then put them in a conference room for an hour, and try to come up with an idea. That’s 20 person-hours — and one idea. Google’s 20-percent time flips that model. Instead of one idea out of those 20 person-hours, you get 20 ideas. Sure, most of them will fail. That’s what happens when you experiment. But some won’t fail. And now you’ve got something else: a culture of experimentation.

That’s what Google has built. That’s what the X-Prize Foundation is after, using competition as a lever. And that’s what the U.S. Department of Education is tapping into with Race to the Top.

During the application process, states had to show that they were already trying new things, whether it was modernizing their labor agreements or using more rigorous means to measure student data — and teacher data. Public education is a big machine; it won’t change overnight. But has Race to the Top produced any changes yet?

DUNCAN: I’ll give you four.

Here’s Education Secretary Arne Duncan again.

DUNCAN: One, is 36 states to date have adopted college- and career-ready standards. Secondly, we have 44 states who are now working together in two different groups to come up with the next wave of assessments that will be much better with students, much, much better for teachers, give them real-time information in terms of what students are actually learning, not just what’s being taught. Third, we saw a couple dozen states remove impediments to innovative schools, remove those barriers legislatively. And finally, I was fascinated; I learned a lot coming to Washington. One of the things I learned is that we actually had states that had laws on their books, actual laws that prohibited the linking of student achievement to teacher evaluation. Imagine that. Well, every single one of those laws are now gone. So, those four things have all happened already, and I think the country will never go back to where it was before.

Now Duncan gets to sit back and see what happens to the experiments he’s funding. He’s the Education Secretary-as-venture-capitalist, spreading the seed money around, placing big bets on the most promising startups he can identify. One state he’ll watch is Maryland. It’s getting $250 million in Race to the Top money.

Nancy GRASMICK: Nancy Grasmick, Maryland State Superintendent of Schools.

DUBNER: Grasmick says her state is making drastic changes to get the Race to the Top money. Math and English teachers are getting graded based on student success. And Maryland, by virtue of being a winning state, gets to join a broader group of elite experimenters.

GRASMICK: One of the excitements for us is the ability to work with other states, as they are grappling with this, so we can benefit from the knowledge base that we have in all of the winning states.

The fact is that Maryland is drafting off two earlier Race to the Top winners, Delaware and Tennessee. They both drew up plans to more closely link teacher pay to student performance.

In Delaware, that’s Peter Shulman’s job. He’s head of the Delaware Department of Education’s Teacher-Leader Effectiveness Unit — a name that only a government could love. He’s 35 years old but he came to education late, after working on a web startup and earning an MBA from Wharton. Giving a guy like him a job like this is, in itself, an experiment.

DUBNER: Now what are your Wharton MBA buddies doing, most of them?

Peter SHULMAN: Not this. You have as the traditional stereotypes would apply. You have Wall Street folks, you have real estate, you have a big strong health care factor. And you have those that chose to start their own businesses.

DUBNER: And when you tell them that you are running the Delaware Department of Education Teacher-Leader Effectiveness Unit, if you do tell them that, I assume you do, what do they say to you?

SHULMAN: So, I get a variety of responses. Some say that’s terrific work. That’s terrific to work in such a civic-minded arena that we really believe needs help in this country. Others roll their eyes and say, to summarize, they don’t think change can be made and they think I’m wasting my time.

DUBNER: What I’m guessing, some of them might also say you’re taking your skills and the way that you learned to think by getting an education like an MBA from a place like Wharton. And bringing that into a realm where those skills, and that way of thinking, traditionally, hasn’t been appreciated. So tell me, now that you’ve had a foot in each world, how much does what you are doing now in the Department of Ed, in Delaware, resemble the work you’ve done in the private sector?

SHULMAN: There are many parallels. I think that when you talk about using analytics, driving for efficiency, putting forth a continuous improvement model. These are aspects that work, I think, in any organization. Both private sector, as well as government. But what’s interesting about education is, to bring in an army of folks, like myself, would not work. It has to be a confluence of traditional educators and then potentially meet them with skills that have been obtained through the private sector, or some skills that have been obtained in other organizations.

So new ideas are coming to schools, driven by a kind of thinking — and even a kind of person — that isn’t usually found in a government bureaucracy. Not everyone’s going to like it

DIMANDIS: If you want to cause a true breakthrough the day before something is really a breakthrough it’s a crazy idea. 

Here’s Peter Diamandis again, from the X-Prize Foundation.

DIAMANDIS: If it weren’t a crazy idea it wouldn’t be a breakthrough, it would be an incremental improvement. And so the question is where in our government and large corporations do we allow for crazy, risky ideas to be tried? In a government situation, if you tried a bold, crazy idea and it blew up in your face, there’d be a congressional investigation. In a large corporation, if you did that, there’d be a stock price plummeting. So, really, crazy ideas are in the purview of small companies, entrepreneurs who are willing to risk everything to make their dream come true, literally their lives, their fortunes. And we’ve seen that in our X-Prizes where people have mortgaged their homes, or lost their marriages, or risked their lives.

DUBNER: That’s a little scary. But hey: In the real world, there are real risks. You want winners? There’ll be losers too. You want a new solution, a new technology, a new education system? There’s going to be a whole lot of people — noisy, well-funded, entrenched people — whose only goal is to defend the status quo.

So bring on the crazy, risky ideas. This cocktail of competition and experimentation, it has the potential to really change things, to fix things. Of course it’ll be messy. Of course there’ll be failures.

But maybe it’s worth thinking about carving out some 20-percent time in your own life — within your family, your company, your military unit, your school, even your government bureaucracy. It’s inspiring! Maybe we should start a Freakonomics Prize — right now. Just think of the problems we could solve:

Like, how do you get doctors to do a better job washing their hands in hospitals? How do you change the incentive structure for politicians so they’re looking out for the public’s long-term interests rather than their own short-term interests? How do I get my son to put the seat up when he pees? What would happen if you could could take a bunch of monkeys and teach them to use money, create a regular monkey economy, and then just sit back and see how they spent it? What would that tell us about how we spend money?

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