High impact
philanthropy
Steve Kirsch
www.kirschfoundation.org
www.skirsch.com
MISTAKES HAPPEN
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
• 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
• About our foundation
• About giving
• Strategic philanthropy
• Non-traditional giving
• Mistakes
• Results
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
• To see my smiling face
on the cover of the
Rolling Stone …
• …and buy 5 copies
for my mothing
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
• 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
• 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
• About our foundation
• About giving: A personal perspective
• Strategic philanthropy
• Non-traditional giving
• Mistakes
• Results
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
• 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”
“… 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?
• 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
• 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)
• 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
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
• 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?”
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
• 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...
• 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
• 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
• 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
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
• 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
• 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
• 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
• 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
• 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
• About our foundation
• About giving: Why give?
• Strategic philanthropy: Where?
• Non-traditional giving
• Mistakes
• Results
Traditional philanthropy
• Donate to American Cancer Society, United
Way, public TV, etc.
• “s.o.b.’s”: symphony, opera, ballet
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
• 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
• 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)
• 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
• 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
• 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
• 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
• 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
• About our foundation
• About giving
• Strategic philanthropy
• Non-traditional giving
• Mistakes
• Results
Selected charitable
projects
• NEOs
• Catalyst for a Cure
• Curing cancer
• Junk faxes
• Terrorism
• Environment/Energy
• K-12 education
• Political reform
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
• 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
• 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
• 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
• 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?
• 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
• 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
• 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
• 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
• 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
• 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
• 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
• 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
• 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
• About our foundation
• About giving
• Strategic philanthropy
• Non-traditional giving
• Mistakes
• Results
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
• About our foundation
• About giving
• Strategic philanthropy
• Non-traditional giving
• Mistakes
• Results
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?
•
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
• 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
• 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
• 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
• 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?
• 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
• 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
• 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
• 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
• 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
• 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
• 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.