This is an excerpt from the draft of my upcoming book on great founder theory. Learn more here.

It is a cherished dream for many people to win a Nobel Prize, or an Oscar, or a knighthood, or whatever honor is most respected in the field they dedicate themselves to. These ritualized honors are very important to us, but do we fully understand them?

We usually think honors are about the recipient, but the giver of honors also gains. The giver and recipient collaborate to publicly assert that the recipient is worthy of prestige, and that the giver has the authority to grant it. Honors are thus acts of an alliance to mutually boost prestige.

This meaning is even codified in diplomatic protocol; representatives of countries often exchange honors for the explicit purpose of signalling alliance.

The audience also participates in this transaction of prestige. They either accept the whole affair and the implied claims of the giver and the recipient, or reject or ignore them. The honors only have meaning—and thus the primary parties only gain—if the onlookers take them seriously. The performance of honor-giving is a bid for that audience’s assent, both the literal immediate audience, as well as the broader public who will hear about the honors bestowed or see them televised.

The audience accepts the frame because they recognize the preexisting prestige of someone involved. Honors can be prestigious because prestigious people receive them, because prestigious people give them, or both.

Consider the Nobel Prize in science. Its purpose is to tell the public who the most notable experts in a field are. In other words, it makes the recipient’s standing within a given scientific community more visible to the rest of society, fortifying their standing within that particular scientific community in the process. This is a useful service to the scientific community and the public.

The Nobel Prize has different functions depending on the field in which it is awarded. In the case of the Literature and Peace Prizes, its function is at least partially to advance the political goals of the overseeing organization. Rather than making the existing distribution of prestige more legible, these prizes alter it by granting prestige to the proponents of preferred causes. Looking at a list of Nobel Peace Prize winners leaves an impression of a particular political orientation, but the public story of the prize, from which it gets much of its prestige, is much more neutral. These more political Nobel prizes also derive much of their prestige from the scientific Nobel prizes.

The Nobel’s initial prestige came from the reputation of Alfred Nobel and of the institutions named to oversee the prize (the Swedish Academy, the Royal Swedish Academy of Sciences, the Karolinska Institutet, and the Norwegian Parliament), as well as some money attached to it, which came from the fortune Nobel made by inventing dynamite. Money, however, is a limited source of prestige. The negative connotations of the term “nouveau riche” reflect this. This begs the question: what, then, are sources of prestige?

The ruler is the fount of honor

A ruler is a source of prestige and, moreover, usually the primary source of prestige in a society. This follows naturally from their status as the society’s leader, that is, the person who has the highest authority in decision-making, who is deferred to above all. This authority extends to the domain of prestige. For example, Queen Elizabeth I granted minor titles to former pirates, like Sir Francis Drake and Sir John Hawkins, who helped harass the Spanish and set the course for later English naval domination. King Charles II granted a charter creating the Royal Society, which would play a crucial role in the scientific revolution. By conferring the highest honor in the land on naval warfare and scientific exploration, later mainstays of British power, these may have been the most important decisions these rulers ever made.

Sometimes the ruler is also the recipient of honor. Comrade Stalin is a genius of literature. And biology. And architecture. Because if he isn’t, you go to the gulag. He has a monopoly on violence. He uses this monopoly to monopolize prestige. He can then quite effectively award it, pushing nearly any status system in the direction he chooses to. If he has a good understanding of experts and isn’t too afraid of being deposed from his monopoly, he can use his standing to reward excellent generals, scientists, and poets.

Comrade Stalin, however, has a problem. His authority, the legitimacy of his monopoly on violence, formally rests on him being the Genius of Socialism, and thus on the quality of all those papers. The insecurity of this legitimacy requires him to aggressively prop it up by hoarding prestige.

Things don’t have to be this way. If the legitimacy of Stalin’s monopoly on violence was officially grounded in something more secure and more true, he could dispense with biology and geology papers being written in his name. He could dispense with the papers being enshrined as obligatory reading in the relevant fields. He would be not just the monopolist of violence, but the monopolist of legitimacy much more directly. People feel the need to prove themselves where they are insecure. A secure ruler does not need to prove his legitimacy. In turn, a more direct claim of legitimacy is less falsifiable, and thus requires less upkeep and less distortion.

So while power can be used to create prestige, some ways to do this are more functional, in terms of costing less and having fewer negative side effects, than others. Stalin’s elevation of Trofim Lysenko and that biologists rejection of mendelian genetics, was perhaps useful for politically bolstering Stalin’s preferred agricultural politics, but set back Soviet genetics by decades as well as contributed to the Great Ukrainian Famine of 1932-1933 and the Great Chinese Famine of  1959-1961. 

A ruler trying to gain standing by playing football is silly, because if he truly is the ruler, people will feel obliged to lose, ruining the game. Of course there are the unwise, like the Roman Emperor Commodus, who fancied himself a gladiator. Commodus always won his fights in the arena, and his subjects viewed his predilection for gladiatorial combat as a disgrace. For rulers trying to gain standing, what remains is the role of the status referee, the one who confers honor across domains. Distortions introduced by having to praise his work are thus reduced. This is one of the most important roles of the ruler: the ruler uses his fount of prestige to regulate overall status and prestige competition, so that the right people and the right behaviors win, solving coordination problems and tragedies of the commons.

There are brilliant rulers who really might have something to contribute to a field, and some who aren’t particularly brilliant but wish to engage in hobbies for personal fulfillment. A common practice for both of these kinds of rulers is to be active under assumed identities or proxies, sometimes convincingly, sometimes not. Frederick the Great of Prussia, for example, anonymously published a political treatise shortly after assuming the throne. The anonymity prevents the prestige distortions that might come from the ruler visibly competing in one of the domains that he rules over.

The prestige of rulers and, more generally, the prestige landscape created by power, is the fount from which most other prestige flows. If someone tries to grant prestige out of line with this source, it may not be taken seriously, or may find itself undermined by power. If something is not being taken seriously, power can be applied behind the scenes to promote it until it is.

For example, after World War II, American officials in the State Department and the CIA wanted to undermine the dominance of pro-Soviet communists in the Western highbrow cultural scene. To do this, they planned to promote artists and intellectuals who were either anti-Soviet or at least not especially sympathetic to the Soviets — at the time this was often the best you could do in highbrow circles. They considered abstract expressionist painting, which was then a new and obscure movement, a promising candidate. Though no one would call it patriotic, it was American and it wasn’t especially communist.

In 1946, the State Department organized an international exhibition of abstract painting called “Advancing American Art”. It was so poorly received that the tour was cancelled and the paintings sold off for next to nothing. Undeterred, the CIA, under a front organization called the Congress for Cultural Freedom, continued to arrange international exhibitions for abstract expressionists. Eventually, the movement caught on. It would be an oversimplification to say that the CIA made abstract expressionism famous—there were other influential promoters, like the critic Clement Greenberg—but their support was not irrelevant.

If one looks closely at any society, one will observe that its rulers—and their prestige—subsidize all other sources of prestige. Thus, when the landscape of power shifts, the landscape of prestige shifts accordingly. It is then critical that rulers are incentivized to allocate prestige well—that is, in accordance with the actual distribution of excellence. If they aren’t, as in the case of Stalin, the resulting distortions in the allocation of prestige produce distortions in their society’s understanding of what is good and what is true. Lysenkoism was an epistemic and moral disaster. This kind of corruption can ultimately have catastrophic effects on the society’s health, because the ability to ascertain the truth is fundamental to the functionality of a society’s people and its institutions.

Awards are better than prizes

Among the many different kinds of honors, we can pick out two especially common ones: those meant to incentivize a particular achievement with a financial reward, which I call prizes, and those meant to afford prestige on the basis of past achievement, which I call awards. Prizes aim to get some specific thing done, whereas awards aim to affect the distribution of prestige, incentivizing achievement in a more indirect way. With a prize, money is fundamental. With an award, it is incidental. The Millennium Prizes are a prime example of the former, the Academy Awards of the latter.

This distinction is often muddled, leading honors to be less effective than they could be. I have to clarify what I mean by each term, because in practice they aren’t used in a reliable way. There are awards that are called prizes and prizes that are called awards. Despite its name, the Nobel Prize is a hybrid case that is more of an award. Though it comes with a financial reward, it is primarily about affording prestige, and this is what those who try to win it are after. The money is nice, but the glory is better.

It’s for this reason that I think that awards are more effective than prizes in incentivizing the production of knowledge. Glory is a greater motivator than money. Furthermore, the money attached to prizes is often insufficient for justifying the investment of money, time, energy, social capital, and so on required to achieve the relevant goal.

A better use of prize money is to directly fund projects aimed at the desired achievement. The venture capitalists of Silicon Valley and grantmakers like the Mercatus Center’s Emergent Ventures program are good examples. Before any project begins, it’s possible to determine which individuals or teams have the best chance of success. Giving them the money beforehand solves the financing problem, and even if success won’t make them a fortune, the glory of the achievement — perhaps augmented by an award — should be incentive enough.

A prize also provides less return on its creator’s investment of social capital than an award. Once the goal is achieved and the prize won, there is no longer a reason for it to exist. It is self-abolishing. An award, on the other hand, can continue to be given out year after year, compounding the investment of prestige. Recognizing this fact, prize-giving organizations often convert their prizes into awards, contributing to confusion about the distinction.

The X Prize illustrates some of these flaws. Created by entrepreneur and space enthusiast Peter Diamandis in the 1990s, the prizes are meant to incentivize breakthroughs in solving the world’s biggest problems. Their website says, “Rather than throw money at a problem, we incentivize the solution and challenge the world to solve it.” Perhaps the most well-known past prize is the Ansari X Prize, which promised a $10 million reward for the creation of a reusable spacecraft. Many of the other X Prizes are also about breakthroughs in space technology. Since their founding, the X Prize has directly collaborated with firms as well-known as Google, IBM’s Watson, and Northrop Grumman, and today counts Google co-founder Larry Page on its board of trustees.

And yet, the great advancements towards space exploration in the past twenty years have had little to do with the X Prize. $10 million is a paltry sum compared to the money required to finance serious efforts in the area, and even less compared to the rewards of success, as SpaceX and Blue Origin have demonstrated. It’s safe to say that an X Prize and $10 million played no part in Musk and Bezos’ motivations. Even the project that won the Ansari Prize had $100 million in financing. Either the prize money wasn’t much of an incentive, or the winning team was very confused.

If it’s not really incentivizing breakthroughs, then what is the real use of the X Prize money? It’s to garner publicity. The idea of monetary prizes excites our imagination and so lends them virality, and for this narrow purpose the X Prize money has worked. Its creators may understand this, and hope that the publicity brings attention to the relevant problems and so itself incentivizes breakthroughs. The evidence doesn’t bear this out, however. The X Prize has garnered its fair share of media coverage, but it has failed to lend massive prestige to the sector of technological innovation, and thus has not institutionalized newly-legible professional communities of practice in the manner that the Nobel prize did. After all, we forget that much of what we think of as the immutably prestigious “scientific community,” and even the field of professional economics, is a result downstream of such shifts in the landscape of prestige. Imagine how different society would be today if we had a Nobel Prize for technology!

While publicity is good, it’s even better to be able to affect the distribution of prestige throughout society. The more closely social status corresponds to activity that’s ultimately beneficial for society, the more such activity is incentivized, much more strongly than by even a large financial reward. Wisely distributing status makes the difference between a world where most kids dream of becoming YouTubers and one where they dream of taking us to space.