High impact philanthropy

1
High impact philanthropy

• Steve Kirsch
• www.kirschfoundation.org
• www.skirsch.com

2
MISTAKES HAPPEN
3
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

4
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

5
Agenda

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

6
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

7
My secret motivation

• To see my smiling faceon the cover of the
  Rolling Stone
• and buy 5 copiesfor my mothing

8
(No Transcript)
9
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

10
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

11
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

12
Agenda

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

13
Giving statistics in Silicon Valley

• One of the richest areas on the planet, but
• For high net worth households (assets gt1M not
  including their home)
• 45 give lt 2,000/yr
• 6 give 0
• Source Community Foundation Silicon Valley

14
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 gt1,000

15
I worked really hard to make it

• were talking REALLY hard
• nightsweekendsholidays
• 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?

16
Why dont 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 dont, 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 its
  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/afraidhit reply key if you support clean
  air

17
How it is supposed to work

• You start an Internet company
• At IPO, you are worth 2.5B, but you cant 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

18
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. Hes now
  worth lt10M.
• 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. Hes now one of richest
  people in the world

19
Giving strategy

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

20
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

21
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?

22
The best things in life arent 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?

23
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

24
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

• presbyopiahair losssleep apnealactose
  intolerancepsoriasisreceding gumsnear
  sightedtorn ACLtype I diabetes macular
  degenerationtinnitus

25
Example

• Ten years from now, you might be diagnosed with
• Heart disease/stroke
• Cancer
• ALS, Parkinsons 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?

26
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
• ?

27
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.

28
Giving can be pragmatic

• Doesnt 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?

29
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

30
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

31
Why give

• Your wealth gives you an opportunity to make a
  difference
• If you dont take advantage of it, who are you
  trusting to look out for your interests?
• We are the leaders weve been waiting for
• One person CAN make a difference

32
Agenda

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

33
Traditional philanthropy

• Donate to American Cancer Society, United Way,
  public TV, etc.
• s.o.b.s symphony, opera, ballet

34
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

35
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 Ohso 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

36
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

37
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 arent
  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.

38
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

39
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

40
To apply Some rules

• Dont bother us if you dont 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.
• Dont bombard us with information.

41
How to make me feel truly valued

• I dont 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!

42
Agenda

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

43
Selected charitable projects

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

44
NEOs

• NEOsNear 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.

45
NEOs

• What I dont 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!

46
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)

47
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.

48
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

49
Junk faxesso 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 cant make a decision.

50
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

51
Environment/Energy

• Cars are the 1 contributor to oil use,
  pollution, and GHG
• Washingtons plan Business as usual, but well
  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 FCVs.
• Gephardt and Lieberman were the first to get it.

52
Education

• TIMSS 42 countries. We did better than South
  Africa and Cyprus.
• Our top 10 kids Singapores worst 15 kids
• Urban HS dropout rates 50 typical
• So how do we get to international parity?
  Piecemeal changes?

53
Bush approach

• High standards, testing, accountability, and
  local control.
• If you do all of these things, does it work?
• Lets look at Texas

54
(No Transcript)
55
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 cant fire
  a bad teacher, you have no national standards,
  and insufficient resources to get the job done.
• You cannot hold anyone accountable who you
  havent given the resources, training,
  experience, and authority to succeed.
• This isnt rocket science. Why not just copy what
  works in other countries? DUH!!!

56
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 arent funding special ed as required by
  your own law (unfunded mandates)

57
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)

58
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?

59
Agenda

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

60
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

61
Agenda

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

62
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

63
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

64
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 isnt working, try something different
• Medicine/Catalyst for a Cure in glaucoma
• Keep an eye out for market opportunities
• NEOS
• Targesome

65
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
  elses 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

66
(No Transcript)
67
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 lets
  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,

68
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

69
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 gt5M in assets you can influence
  investments and donations

70
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 elses money!
• For any progressive community foundation

71
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)

72
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!

73
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

74
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

75
Education copy what works

• Spend 11 years studying what works in other
  countries. Create program that will work in
  America.
• Result NCEEs Americas 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.