My thoughts are evolving on these issues, so they may change, but here are some thoughts.
Of course, F1 is about innovative engineering, and that should not change. The problem is that the smaller teams are at a great financial disadvantage which ultimately makes the sport less competitive and less interesting to watch. My proposal is that there be prize money, (but not championship points) associated with meeting certain performance goals.
The bulk of prize money would still be associated with the final standings in the World Championship Points. However, by awarding prize money for performance in individual races would give the smaller teams the chance to win a little bit of budget.
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