It will be an innovation that eventually defeats the virus: a new vaccine, a new antiviral drug — or a new app to help us avoid contact with infected individuals.
So the one thing the world needs more than anything else is an incentive to innovate. Here’s an idea for how to do so.
The problem is that innovation is an uncertain, unpredictable process. I argue in my new book “How Innovation Works” that you can rarely summon an innovation to order when you need one.
We would love to have flying cars that run on water, or cheap ways to suck carbon dioxide out of the air, but necessity is not the mother of invention after all.
Take vaccines. Some viruses prove impossible to vaccinate against after decades, while others succumb quickly.
“Vaccine development is an expensive, slow and laborious process, costing billions of dollars, taking decades, with less than a 10 percent rate of success,” according to Wayne Koff, president of the Human Vaccines Project, writing just before the pandemic began.
There are lots of different teams working flat out on developing a vaccine for COVID-19. Some are using whole virus particles, killed or attenuated, some are using protein molecules manufactured in bacteria, some are using messenger RNA fragments that instruct human cells to make viral proteins to alert the immune system.
It is impossible to say which will work, if any.
So governments and venture capitalists have a problem: which horse to back? Giving grants and subsidies to those that shout loudest — or have the best connections — is regrettably, all too often the way innovation gets funded. But by trying to pick winners, governments all too often end up picking losers.
Luckily, there is a new idea out there for how to incentivize innovation without trying to pick winners. It’s called the Advance Market Commitment and it is the brainchild of the Nobel-winning economist Michael Kremer.
It is basically a prize, but not in the form of a lump sum, rather in the form of a contract at an attractive price to produce the innovative product once — if — it gets invented.
Earlier this month the global vaccine alliance, known as GAVI, launched an appeal to fund exactly this kind of reward for a vaccine for COVID-19. It aims to raise $2 billion through a financing instrument that would effectively guarantee sales of the new vaccine in developing countries where healthcare systems often cannot afford the costs of new vaccines.
Exactly such a venture, funded by various governments and the Bill and Melinda Gates Foundation, achieved a remarkable breakthrough a few years ago in the search for a vaccine for pneumococcus, a bacterium that kills large numbers of children in the poorer parts of the world.
Hundreds of thousands of lives have been saved. The same idea also helped the development of a vaccine for Ebola, though the epidemic ended before that vaccine could be fully tested.
These Advance Market Commitments are surely the way to go to fund innovation more generally. They have the advantage of being agnostic about the means by which an innovator achieves his or her end.
Indeed, the ancestor of all such schemes, the famous Longitude Prize in 18th century England, demonstrated neatly how solutions to problems can come from unexpected directions.
Mariners were unable to measure longitude while at sea, resulting in a disaster in 1707 when a naval squadron turned out to be farther east than its commander thought and was wrecked on the Scilly Isles. The government offered the huge sum of £20,000 (approximately $25,000 in today’s dollars) for the first person to solve the problem of measuring longitude.
To the consternation of the scientific establishment, it was eventually won not by an astronomer or mathematician, but by a clockmaker from Yorkshire, John Harrison, who pointed out that all you need to know is what time it is back in Greenwich and compare that with local time (by measuring when noon occurs) and you know how far west of Greenwich you are.
So good robust clocks that kept good time even on board ship were the solution, and so it proved.
Let’s solve lots of our problems in this way: not with grants and subsidies, but with prizes.