Alfred Nobel bequeathed his fortune, which he acquired by inventing dynamite, to finance prizes for science, literature and peace.
The man behind these awards is Swedish business magnate and engineer Alfred Nobel, who donated his own fortune to fund them.
He is famous for inventing dynamite, and founded the peace prize despite owning a large arms company.
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How did he get rich?
Alfred Nobel was born in Stockholm in 1833, the son of engineer Immanuel Nobel and Andrietta Ahlsel.
Immanuel patented several inventions, such as rucksacks for soldiers, a flotation device, and a pillow.
However, his firm went bankrupt in 1833, and in 1837 he moved from Sweden to St. Petersburg, Russia, to escape his creditors.
For the next five years, Andrijeta - who came from an aristocratic family - stayed in Stockholm to take care of the family and made ends meet by running a grocery store.
In elementary school, Alfred (who would patent 355 inventions) was reportedly placed in a ward for children with learning disabilities, according to Nobel's biography written by Ingrid Karlberg.
Immanuel Nobel established a workshop in St. Petersburg to supply equipment to the Russian army and convince the Russian navy to use his naval mines.
(They were used during the Crimean War of 1853-1856 to protect St. Petersburg from shelling by British warships.)
The company flourished and in 1842 the rest of the family joined him in Russia.
Alfred and his brothers were taught science and languages by private tutors.
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In 1850, Immanuel sent Alfred to Paris to continue his chemistry studies.
There he met the inventor of nitroglycerin, the Italian scientist Ascanio Sobrero.
The substance developed by Sobrero was an extremely explosive liquid - many times more powerful than gunpowder and very unstable.
It explodes if it is exposed to changes in temperature or pressure.
Alfred Nobel realized that it would be extremely profitable if it could be made safe to handle.
In 1863, Immanuel Nobel's company in Russia went bankrupt (business there dried up after the end of the Crimean War) and he returned to Stockholm.
He and Alfred began experimenting with nitroglycerin.
In 1864, a workshop containing this chemical exploded, killing several people, including Alfred's brother Emil.
The Stockholm authorities banned experiments with explosives within the city limits, and the Nobels moved the workshop to Vinterviken, a bay close to Stockholm.
In 1866, Alfred Nobel perfected a way to stabilize nitroglycerin by mixing it with fine sand (known in Sweden as kieselguhr).
Thus, a mixture was created that can be shaped into sticks.
Placed in holes drilled in the rocks, they could explode and shatter the rocks.
He called this new explosive "dynamite" and patented it in 1867.
It began to be used all over the world in mining, quarries, demolition and construction of roads and railways.
It was also used in the "dynamite cannon" during the Spanish-American War of 1898.
How is the Nobel Prize established?
Just before his death in 1896, Alfred Nobel owned 90 factories in more than 20 countries around the world, among them the Swedish ironworks and the Bofors steelworks, which he turned into an arms manufacturing company.
He also got rich from investing in an oil company run by his brothers in Russia.
Nobel bequeathed almost all of his fortune (31,5 million Swedish kronor or three million dollars) to fund an annual prize for those who have done the most to help humanity in the fields of physics, chemistry, medicine or physiology, literature and peace.
He assigned the task of selecting prize winners (Nobel laureates) to the Royal Swedish Academy of Sciences, which accepted him as a member in 1884.
His family fiercely contested the will, fighting for four years in courts around the world against Nobel's assistant Ragnar Solman, who was trying to set up a fund.
Finally, the Swedish government decided that this issue should be resolved in court in the small town of Karlskog, where Nobel lived near the end of his life and where he kept horses.
The first Nobel Prizes were awarded in 1901, and each laureate received nine million crowns, just as they receive today.
Why is the Peace Prize awarded?
There is a story, which has not been confirmed, that a newspaper mistakenly published Nobel's death certificate in 1888 after hearing that he had died, and a French newspaper called him a "merchant of death".
It is said that Nobel decided to establish the peace prize to soothe his own conscience.
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A more likely explanation is Nobel's friendship with a woman named Bertha Kinski von Schinnick und Tetau (later Baroness Bertha von Sattner).
She was a famous Austrian pacifist and author of the best-selling novel "Lay down your arms", whom he hired as his secretary for a while.
After she left the firm to marry, Nobel corresponded with her for several years, and she is believed to have influenced him to establish a peace prize instead of donating money to the peace movement.
In 1905, she became the only woman to receive the Peace Prize, for "courage to confront the horrors of war".
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