There are a number of fellowship programs whose goal is to recognize extraordinarily gifted and creative people. Very few have etched themselves on the American imagination as powerfully as the MacArthur Fellows Program. Like the Pulitzer Prize or the Rhodes scholarship, the MacArthur is widely seen as one of the awards to win—remarkably, given that the fellowship, one of the first major programs of the John D. and Catherine T. MacArthur Foundation, is only in its 27th year.

The MacArthur is, to be sure, a generous prize: Recipients get half a million dollars with no strings attached. It’s not the money that gives the award its cachet, however; rather, it’s the validation—the recognition that the winner is an exceptionally creative person in his or her field, deserving of a “genius grant,” as the fellowship is popularly called. That can inspire a great deal of self-congratulation, and not a little envy on the part of colleagues and competitors who missed out. Although nobody can apply for a MacArthur, many can aspire to one. Recipients must reside in the United States or be American citizens; otherwise there are almost no restrictions on who can win (the IRS has ruled out senior-level government officeholders and employees). A record of achievement counts, but fellows need not be publicly acclaimed writers or scientists or mathematicians.

The success of the program suggests that it has worked out a pretty reliable way of picking winners. Although the MacArthur selectors have anointed many obscure people over the years, in relatively few cases have critics called the award unmerited. What’s more, unlike the Nobel Prize, to which it is sometimes compared, the MacArthur is more than an award for past achievement; winners are expected to use it to take their abilities to a new level, and in many cases they have done just that.

In the business world, “creativity” has become the latest buzzword. Corporations, no less than the MacArthur Fellows Program, are interested in identifying and attracting unusually creative talent—the kind that will come up with the next Lipitor, Walkman, or iPod. How to find, nurture, and direct these people is an enduring topic in business literature, particularly since commentators started talking about the knowledge economy and human capital. To find out more about the lessons the MacArthur program can offer to businesses, HBR senior editor Diane Coutu approached the program’s director, Daniel J. Socolow, for a contribution to the magazine.

Socolow, who has run the program since 1997, brings to the job the same richness of experience that characterizes many of the fellows. In the 1960s he lived in Argentina and worked for the Ford Foundation on its grant programs for Argentine universities, which were struggling to reestablish themselves after a series of political and economic crises. In the early 1970s he set up one of the first programs in Canadian studies at a U.S. university. In the late 1970s he was appointed a vice president of Spelman College, a black women’s college since 1881. Socolow has also served as president of the American University of Paris and as a senior adviser and the director of programs at the Carter Center, in Atlanta. Before joining the MacArthur Foundation, he helped start a number of companies, most notably Third Age Media, an early interactive site for linking older Americans and the Internet. In the following edited conversation, which took place at the MacArthur Foundation offices in Chicago, Socolow explains the stages of the selection process and what factors the selectors take into consideration when choosing fellows. He discusses the award’s impact on winners and suggests what business leaders might learn from the program.