Expert Sessions | Innovation Ecosystem Development with Tom Kalil

Earlier this year, we hosted a series of expert learning sessions to help shape a long-term strategy for Work on Climate—one that’s grounded in the realities of an ever-evolving political, social, and economic landscape. These sessions brought together practitioners who have driven real impact by building climate-focused ecosystems, communities, and workforces across a range of sectors and scales.

We’re excited to have Tom Kalil join us for this installment of Expert Sessions! Tom has played a pivotal role in countless initiatives in the US government and public sector, resulting in major progress in education, innovation, science, technology, and philanthropy. 

The interview with Tom will focus on his work on the DARPA Grand Challenges, which now lists over 1,000 prizes and has, among other things, catalyzed the self-driving car industry.

How did you zoom in on the idea of creating a prize system as your tool of choice for catalyzing innovation?

When I worked at the White House under President Clinton, I would pass a bookstore on my way back home. I liked to buy books, and I picked up a book called Longitude, which is how the British parliament had supported a 25,000 pound prize in the 18th century to accelerate the discovery of longitude.

After I read that book, I thought to myself, ‘Why doesn’t the US government do this?’ So it was an old idea whose time had come again.

This effort ended up giving DARPA and, later, every agency prize authority… How did you get the buy-in for this?

I did this in two time frames. One was when I worked for President Clinton and the other was when I worked for President Obama. Under President Clinton, I discovered that DARPA was interested in getting prize authority. They already thought it was a good idea and were overcoming resistance from the Office of Management and Budget.

Because I was fortunate to work for the president, I could talk to the Office of Management and Budget and explain why I thought prize authority was a good idea. Prizes have many features associated with them. One is that the sponsor of the prize only has to pay if someone is successful. Number two, it allows the government to establish a goal without picking which approach or which organization is most likely to win. It can increase the number of people who are working on a given problem. And it can recruit people who are not necessarily in that field to work on that problem.

Those were examples of the arguments that I’ve been making for the use of incentive prizes. Incentive prizes are different from a recognition prize like a Nobel Prize, which rewards you for doing something that you’ve already done. Here, we’re trying to encourage you to do something that no one has been able to accomplish. 

When I came back into government and worked for President Obama, I was able to work with the Senate to grant every agency the ability to host incentive prizes for up to $50 million.

What kind of design choices went into the design of the prize system to make sure it actually served agencies that have very different missions, cultures, and objectives?

The original proposal that a member of the Senate had put forth was that 1) the prize authority be limited to one agency, the National Institute of Standards and Technology, and 2) the authority be limited to supporting an incentive prize to advance the state of the art of nanotechnology. 

Now, I was a big fan of nanotechnology. I previously worked on the National Nanotechnology Initiative, which resulted in $43 billion in funding for nanoscale science and engineering. But the argument that I made was, “Hey, if you’re going through the bother of passing legislation, why don’t you give this authority to all agencies? And to not limit it to nanotechnology, because the whole point of an incentive prize is that you want the government to be in the business of setting a goal. But having a lot of flexibility as to which approach is most likely to be successful. 

The senator ultimately agreed that this approach made sense, and we were able to cover all agencies, and those agencies had the ability to support a prize in any area that was aligned with their mission.

The competition changed people’s views about what was possible… and played a very important role in the emergence of a community of innovators and entrepreneurs who were interested in working on that problem.

What kind of impressive or unusual outcomes have you seen this initiative produce in the long term? What were some of the choices you made that were most important in enabling that?

One of the first agencies that I worked with on this was DARPA, which eventually organized a series of competitions related to self-driving cars. The first time they ran this competition, nobody won, but DARPA had the grit to stick with it and organize a second one. The second time they ran it, a team from Stanford had won.

Someone told me that Larry Page, then CEO of Google, was at the finish line and promptly acquired the winning team, led by Sebastian Thrun, which is where Waymo and Google X, the moonshot division of Google, came from. It’s taken a long time between that first result and seeing a Waymo in San Francisco, the adage “Never mistake a clear view for a short distance” certainly applies here. 

But I think several things are noteworthy. One is that the competition changed people’s views about what was possible. Prior to someone winning, people thought that self-driving cars, you know, were not sufficiently mature. That competition definitely elicited a lot more private sector investment in this. Second is a lot of the people who eventually joined the industry got to know each other by participating in the competition. It played a very important role in the emergence of a community of innovators and entrepreneurs who were interested in working on that problem.

Also of note is that Google just did a study with an insurance company that showed self-driving cars result in roughly a 90% reduction in the number of accidents relative to human drivers. One of the goals of the self-driving community – to reduce the number of accidents – is something that we have growing evidence to support.

What are some of the other ideas related to incentive prizes that you’re excited about?

Currently, the US government has a widely utilized mechanism for making financial commitments that are contingent on failure. Those are loan guarantees. If you were to look at a balance sheet of the federal government, you would see trillions of dollars of loan guarantees. That is the government making a conditional financial commitment where the if-then statement is predicated on failure. If your firm goes bankrupt, then the US government will assume those debt obligations.

What I’m interested in is how do we increase the capacity of governments and society more broadly to make financial commitments that are contingent on success. 

I’ll give you two examples. Operation Warp Speed is what’s called an advance purchase commitment. The government said to Moderna and Pfizer, “if you get an emergency use authorization from the FDA, then we will buy 300 million doses.” That contingent financial commitment played an important role in accelerating the development of a safe and effective COVID vaccine. 

With the NASA-SpaceX collaboration, NASA said to SpaceX, “If you develop a rocket that can go to the International Space Station and deliver and retrieve cargo and crew, we will buy rides on the rocket. We’ll also provide you with intermediate milestone payments for progress towards that goal.” That reduced US dependence on the Russian Soyuz rocket.

In general, I think we should be doing more of that. We see that with organizations like Frontier Climate, which is a commitment from McKinsey, Stripe, Meta, Alphabet, and Shopify to collectively purchase a billion dollars worth of permanent carbon removal. My view is, in every instance where a sector is contributing a half a gigaton or more of CO₂ equivalent in terms of greenhouse gas emissions, we should look at whether there is a role for an advance market commitment, an incentive prize, or a stream of milestone payments to accelerate the development of innovations that we need to make the transition to a carbon neutral or negative economy.

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