highImpactPhilanthro py

High impact philanthropy: 

High impact philanthropy Steve Kirsch www.kirschfoundation.org www.skirsch.com

Slide2: 

MISTAKES HAPPEN

Philanthropy is like Dragnet: 

Philanthropy is like Dragnet Lot of stuff going on in the world Sometimes, things go wrong When they do, I go to work I am a philanthropist

DISCLAIMER: 

DISCLAIMER I am not your typical donor Do not try these techniques at home If you are thinking of trying this, you should seek professional help

Agenda: 

Agenda About our foundation About giving Strategic philanthropy Non-traditional giving Mistakes Results

About Kirsch Foundation: 

About Kirsch Foundation 501(c)(3) Supporting organization; $50M endowment Give $4.5M to $8M/year, ~100 to 150 grants, 6 full time staff people; Medical advisory board Goals we could accomplish in our spare time Ensure world safety Cure all major diseases Restore the environment Improve politics Improve education Support the local community Encourage philanthropy Battle the forces of evil: government stupidity/arrogance

My secret motivation: 

My secret motivation To see my smiling face on the cover of the Rolling Stone … …and buy 5 copies for my mothing

Why give?: 

Why give? To benefit everyone (including ourselves) To achieve certain goals we think are important to make the world a better place Ideal investment is both High leverage (ROI) and High impact

Example of high impact giving: Carnegie Foundation: 

Example of high impact giving: Carnegie Foundation Donated $5.2M 100 years ago Built 65 public libraries Still in operation today Moral: A small one time donation can have a bit impact

Some things that make us different: 

Some things that make us different Invest in people, not projects Long term commitments People dedicated to environment, medical, politics Invest endowment in private for-profit companies Involved in politics when needed to achieve goals (e.g., ZEV program) Encouraging collaboration between foundations Look for “market opportunities” such as NEOS which have a great ROI but little visibility Fund “gaps” (e.g., experienced researchers, stem cells) Fund hair loss research

Agenda: 

Agenda About our foundation About giving: A personal perspective Strategic philanthropy Non-traditional giving Mistakes Results

Giving statistics in Silicon Valley: 

Giving statistics in Silicon Valley One of the richest areas on the planet, but… For high net worth households (assets >$1M not including their home) : 45% give < $2,000/yr 6% give $0 Source: Community Foundation Silicon Valley

United Way: 

United Way Sept 99: $11M shortfall Richest place on the planet (65,000 millionaires in Santa Clara County) We waited 2 weeks for something to “happen” We were the first to step up with a $1M donation Only 2 other individuals matched it: Gates and Moore Only 15 people gave >$1,000

“I worked really hard to make it”: 

“I worked really hard to make it” “… we’re talking REALLY hard …nights…weekends…holidays… gave up sex for 2 years… (not that I was getting any before the startup) “Now you are asking me to give it away?!?” “Are you nuts?”

Why don’t people give?: 

Why don’t people give? Just earned it/want to enjoy it Want to ensure have enough to have lavish lifestyle for rest of life, even if something goes wrong If I don’t, someone else will, so why should I? Lack of time Focus all cycles on business Greedy/ego Like writing your will or going to dentist; it’s good for you, but low on the priority list Lack of knowledge of how to do it Never really thought of a cause that resonated Lack of understanding of the benefits of enlightened self interest Lazy/afraid…”hit reply key if you support clean air”

How it is supposed to work: 

How it is supposed to work You start an Internet company At IPO, you are worth $2.5B, but you can’t sell any shares So you donate 10% ($250M) to a charitable fund You get a nice writeoff and you get to make donations to your favorite causes for the rest of your life without an additional investment

A tale of two Larrys(a true story): 

A tale of two Larrys (a true story) Larry #1 Worth $2B at IPO in 1999 Too focused on his business to make a gift to charity Stock has gone from 240 to 1.7 today. He’s now worth <$10M. Larry #2 Also a billionaire Gave $100M to endow a charitable fund. Asked top scientist in aging to donate over 5 years Largest private funder of aging research in the US Business doing fine. He’s now one of richest people in the world

Giving strategy: 

Giving strategy Make periodic small donations as your stock rises Many notable philanthropists regret not having taken advantage of this strategy. Don’t make the same mistake.

How to donate to charities when your stock is locked up: 

How to donate to charities when your stock is locked up Your stock seems to always peak when you are locked up… but... You donate the stock; the charity shorts other shares Allows you to give charity lots more money AND gives you a bigger writeoff Typically done through a community foundation so you can decide later where to give and how much to give

“Where do you want your estate to go tomorrow?”: 

“Where do you want your estate to go tomorrow?” CHOOSE ANY TWO: Family Taxes Philanthropy Who would you rather invest your dough? You? Or the government?

The best things in life aren’t all that expensive: 

The best things in life aren’t all that expensive House Car Vacations Subscription to Fortune Replay/Tivo box Private jet Assets for guaranteed income for rest of your life So now what?

So we had a choice...: 

So we had a choice... Sit on our assets or Put those assets to work in a way that will benefit: ourselves our kids future generations of our family our friends and community

Why give young: 

Why give young No tax advantages to giving after you are dead No personal satisfaction to giving after you are dead Giving can ultimately benefit you or your family Reduce current tax burden presbyopia hair loss sleep apnea lactose intolerance psoriasis receding gums near sighted torn ACL type I diabetes macular degeneration tinnitus

Example: 

Example Ten years from now, you might be diagnosed with: Heart disease/stroke Cancer ALS, Parkinson’s disease, … At that time, starting a giving plan will be too late to have an impact on your health In hindsight, would you think keeping your assets sitting in stocks was the right move?

Take an objective look at yourself: 

Take an objective look at yourself What kind of person do you want to be? In “A Christmas Carol,” did you like Scrooge better BEFORE or AFTER ?

Virtually all who try philanthropy stick with it: 

Virtually all who try philanthropy stick with it 100% donor satisfaction at CFSV: No donor advised endowment funds have closed (except if the donors move) Problem is that it takes them a while to “break the code” to figure out that giving early is good. Bill Gates is very smart and it took him years to figure this out.

Giving can be pragmatic: 

Giving can be pragmatic Doesn’t need to be altruistic; can be totally pragmatic Example We give because we get a higher return on our assets Our one-time $80M donation may cure cancer, diabetes, or arthritis; save the world; help reduce pollution; … Was that a good use of $80M? Or should I have invested it in stocks? For whose benefit?

Giving can be purely in your self-interest: 

Giving can be purely in your self-interest Or giving can be in your self-interest Example: donate to causes that affect or may affect you or your immediate family aging research heart disease asteroids

“Why Give?” Summary: 

“Why Give?” Summary We DO give to make a positive difference in our own lives and the lives of people we care about. We DO NOT give out of a sense of obligation payback civic duty because it is “the right thing to do” “to create a legacy” because it is fun because we have nothing else to do because we like to see our name in print to feed our ego to get our picture on the cover of Worth to win awards to win friends or social status (keep up w/Ken Lay) to atone for being wealthy to get invited to all the cool fundraisers to get preferred seating at fundraisers to avoid income tax

Why give: 

Why give Your wealth gives you an opportunity to make a difference If you don’t take advantage of it, who are you trusting to look out for your interests? We are the leaders we’ve been waiting for One person CAN make a difference

Agenda: 

Agenda About our foundation About giving: Why give? Strategic philanthropy: Where? Non-traditional giving Mistakes Results

Traditional philanthropy : 

Traditional philanthropy Donate to American Cancer Society, United Way, public TV, etc. “s.o.b.’s”: symphony, opera, ballet

Reactive approach: 

Reactive approach You wait for people to ask you for money You evaluate each one without a scoring system, a context, or a budget Semi-reactive: You say that you fund area X and evaluate proposals that are relevant to area X

Life changing advice: 

Life changing advice SK: “What is the secret? How do you separate rich people from their money?” LE: “You know, there are some people in this world who want to give money away.” SK: “Oh…so you are doing them a FAVOR!” I later came to the conclusion that it made more sense to be someone who knows what they want and gets it instead of being someone with a lot of cash and no purpose

Strategic approach: 

Strategic approach Figure out the areas important to you Create a vision and a set of annual goals Create a strategy/plan to achieve the goals Fund and/or initiate projects consistent with the strategy Create your own criteria for evaluating grants (I have 13 that total 100 points) Make a long term commitment Realize that results are often hard to quantify

How it works in real life(sometimes): 

How it works in real life (sometimes) I read in Time about how we just had a near miss from an asteroid Say to myself Wow! That is really brain dead that they aren’t spending $50M to save 6B lives. Someone should do something! Look in mirror Bottom line: I get pissed off and use philanthropy to combat the stupidity and/or arrogance.

3 top criteria: 

3 top criteria Fit with our goals? Will outcome be really useful or solve a problem that pissed me off? Are they likely to achieve their goal People Funding outlook Track record Approach

My history: 

My history Started with a donor advised fund at the local community foundation 10 years ago Added to it over the years Switched to a supporting organization so we could invest assets more aggressively, hire a staff, and lobby

To apply: Some rules: 

To apply: Some rules Don’t bother us if you don’t fit our criteria The spreadsheet we post is for your benefit Ignoring it wastes your time and ours Keep inquiries simple and short and compelling. Don’t bombard us with information.

How to make me feel truly valued: 

How to make me feel truly valued I don’t care about “Thank You” letters or recognition. I do it for results The best way to thank me for my contribution is achieve the goal you set out to achieve. Show me it worked!

Agenda: 

Agenda About our foundation About giving Strategic philanthropy Non-traditional giving Mistakes Results

Selected charitable projects: 

Selected charitable projects NEOs Catalyst for a Cure Curing cancer Junk faxes Terrorism Environment/Energy K-12 education Political reform

NEOs: 

NEOs NEOs=“Near Earth Object” Your chance of dying from asteroid hit is 1 in 20,000; ~ same as a plane crash Your chance of winning the California state lottery: 1 in 41 million. Therefore, asteroids are a certainty #1 most likely reason the earth could end tomorrow When a 6-mile-wide asteroid slammed into Earth 65 million years ago, it wiped out the dinosaurs, about 80 percent of the world's plant species, and all animals bigger than a cat.

NEOs: 

NEOs What I don’t understand is this: People buy lottery tickets... Our government spends BILLIONs on missile defense but virtually IGNORES the statistical certainty of an asteroid hit that is PREVENTABLE if we spend the $2M/yr for the next 10 years Someone should do something!

Catalyst for a Cure: 

Catalyst for a Cure Collaboration with Glaucoma Foundation Brings together scientists from different fields to collaborate on new approaches Pick areas where there is potential for a breakthrough Replicate in other areas (spinal cord)

Targesome: 

Targesome Large molecule technology for targeted delivery of drugs Chemo therapy can be delivered only to sites of angiogenesis resulting in a quick elimination of cancer without any side effects Same technique can be used to image cancers which are too small to detect Today have fantastic lab data, partnerships with leading drug companies, and NCI I provided initial funding. Unlikely to have received funding without a charitable investor The whole donation resulted from follow up from a chance meeting, not proactive research on my part.

Junk faxes: 

Junk faxes Fax.com sends out 4 million junk faxes a day, all in clear violation of state and federal law..wake you up… tie up your resources I got pissed off at getting 4 faxes for an illegal credit repair scheme from a company that keeps changing its name and location. “Now only $99!” Got pissed off and did a lot of research and phone calls and e-mails. I am responsible for: a comprehensive website on the topic getting the California state AG to sue fax.com getting ….. to file a class action against them filing 20+ lawsuits on behalf of my company getting their Sacramento lobbyist to drop them as a client getting key California Senators to change their vote to support the federal ban through arguments tailored to them

Junk faxes…so why should YOU care?: 

Junk faxes…so why should YOU care? Plan to sue them for $250B and… … donate the recovery to charity! We tried to get a hospital or university to be a plaintiff. Judge would award $50K participation fee. So I thought this is a nice way to be like Robin Hood… legally steal from the bad guys and give to the poor guys Result: Most can’t make a decision.

National security: 

National security How many terrorists are in the room today? Way too expensive and inconvenient to secure every resource Much cheaper to keep terrorists from entering the country A reliable “lie detector” that can give you an instant, unambiguous result can save billions of dollars

Environment/Energy: 

Environment/Energy Cars are the #1 contributor to oil use, pollution, and GHG Washington’s plan: “Business as usual, but we’ll invest in FCVs and provide incentives and try to keep secret who we met with.” Why so secretive about energy when Republicans said we MUSTNOT be secretive about national policies developed by a Democratic President? We need more. Can you imagine what would happen if there were no standards on electrical voltage or the shape of the plug? Why not apply the same strategic planning process you do for winning elections? We need a clear goal, some clear decisions, and all the wood behind one strategy and one plan: H2 direct FCV’s. Gephardt and Lieberman were the first to “get it.”

Education: 

Education TIMSS: 42 countries. We did better than South Africa and Cyprus. Our top 10% kids = Singapore’s worst 15% kids Urban HS dropout rates: 50% typical So how do we get to international parity? Piecemeal changes?

Bush approach: 

Bush approach High standards, testing, accountability, and local control. If you do all of these things, does it work? Let’s look at Texas…

K-12 education: 

K-12 education Washington: “Accountability is the answer.” My response: “You are insane. That has never proven to work in the past, so why should it work now?” US teachers are under paid and unqualified, there is no pay for performance, principals can’t fire a bad teacher, you have no national standards, and insufficient resources to get the job done. You cannot hold anyone accountable who you haven’t given the resources, training, experience, and authority to succeed. This isn’t rocket science. Why not just copy what works in other countries? DUH!!!

Financing the Bush plan: 

Financing the Bush plan What they say: “Education is the #1 most important problem in America today.” What they do: Spend $1.6 trillion on a tax cut to benefit the rich but only increase education spending by $4.6B which is too small to have any impact and still aren’t funding special ed as required by your own law (“unfunded mandates”)

Why we get involved in politics: 

Why we get involved in politics To accomplish our goals: Medicine: Stem cells Environment: CAFÉ, ANWR Political reform: McCain-Feingold/Shays-Meehan Asteroids: Funding for NEOS World safety: Nuclear arms control Education Energy Huge leverage To balance special interests I also have a 501(c)(4) for additional political advocacy beyond that allowed by (c)(3)

Political reform: 

Political reform Difficult to get some key legislation passed if there are special interests influencing votes Public financing is the best solution and is working in 4 states Our job: Put Clean Money on the ballot in 2004 in Calfornia Get rid of or increase term limits to eliminate the brain drain. All of this is not sufficient. We still seem to struggle with electing effective leaders. How is it possible that in 2002 America still does not have a long term energy plan?

Agenda: 

Agenda About our foundation About giving Strategic philanthropy Non-traditional giving Mistakes Results

Our biggest mistake: 

Our biggest mistake We were too aggressive. Our endowment went from $50M to $95M then to $30M New policies: Never put more than 5% of equity in any single stock and 25% in a sector. Always keep 12 to 18 months cash on hand

Agenda: 

Agenda About our foundation About giving Strategic philanthropy Non-traditional giving Mistakes Results

Did we make a difference?: 

Did we make a difference? Hard to measure Funding NEOS discovery Funding nuclear disarmament Funding medical researchers Funding campaign finance reform; now focused on California initiative Kirsch medical investigators

Did we make a difference?: 

Did we make a difference? Medical Cured cancer in rabbits Got CFC funded/started Swayed some votes on cloning Helped clean up the air Passed AB71 and designed the sticker Got CO2 bill passed Assembly Got key US Senators to think differently and strategically about energy Got 20 leading energy experts to develop an energy business plan Swayed votes on CAFÉ standards Got tow-away signs posted at SFO EV parking Free parking for EVs in San Jose Helped fund various charities Reduce junk faxes National security/Durbin bill new provisions Helped education; Funded buildings at MIT and DeAnza

My approaches: 

My approaches Promote responsible plans with goals and credible strategies Energy Encourage people to “copy what works” and make the obvious decisions Education If it isn’t working, try something different Medicine/Catalyst for a Cure in glaucoma Keep an eye out for market opportunities NEOS Targesome

Summary: 

Summary Start now, no good reason to wait Easiest way to start: DAF at a local CF Spend the rest of your life spending someone else’s money! Be strategic; set measurable goals Hold yourself accountable for results Pick a cause you are passionate about and get involved One person can make a difference

Reforming politics: 

Reforming politics Cranston: “Campaign finance reform” Powell: “The other systems are worse” Wyden: “They think this is on the level” No politician in Sacramento has said “let’s uphold the intent or letter of the law.” Politicians act in a way that their constituents perceive is in their best interest (or based on polls), not in their true best interests Key: Campaign finance reform Helping to elect candidates you believe in through $ contributions, independent expenditures, research, …

Giving options: 

Giving options Charitable Lead Trust (income to charity now, later assets pass to heirs) Charitable Remainder Trust (income to you now, later assets pass to charity) Donor advised fund Supporting organization to a community foundation Private foundation

Which option?: 

Which option? Smart estate uses a combination CRT: Secure income stream for you CLT: Pass money to your heirs Donor advised fund: Under $1M assets; minimizes tax bite and maximizes charitable giving Supporting org: >$5M in assets; you can influence investments and donations

Easiest way to donate: 

Easiest way to donate Gift appreciated stock to a donor advised fund at local Community Foundation (typically $25K minimum) E-mail* them whenever you want to make a grant After you make the donation, you spend the rest of your life giving away someone else’s money! * For any progressive community foundation

Charitable fund advantages: 

Charitable fund advantages You can add stock (and liquidate) when your stock is locked up Can donate to fund when stock peaks; decide on recipient later Gift to charities at anytime from the fund Less hassle (no personal recordkeeping, no periodic stock transfers, e-mail donations)

Advantages of charitable fund: 

Advantages of charitable fund Endowment compounds tax free forever You get to give away an infinite amount of OPM and your annual grants will typically increase each year All this from a ONE-TIME donation!

Kirsch Foundation: 

Kirsch Foundation Hired CEO Recruited world-class medical advisory board (including Gordon Gill from UCSD) Currently $80 M in assets Donate $6M per year Total staff of 5, including program officers in medical and environmental areas

My recommendation: 

My recommendation Start NOW with a small donor advised fund Add to it as you become comfortable with the results and as your estate grows 10% of your net worth after taxes is a good starting amount Supporting organizations beat private foundations on every single metric

Education: copy what works: 

Education: copy what works Spend 11 years studying what works in other countries. Create program that will work in America. Result: NCEE’s “America’s Choice” Systems solution; adapts to local school CPRE measured 50% to 100% test score improvement after just 12 months in 3 states (takes 5 years to implement) In use today at over 200 schools Trick to national adoption is in the packaging: large monetary incentives for adoption, implementation, performance for any qualifying educational program. We must de-politicize this.