The Gospel of Wealth According to Steve: Postings From the Kirsch Fund Web Site

Following are excerpts from essays by Steve Kirsch, a high-technology executive and philanthropist in Silicon Valley, that are posted on the Web site maintained by the foundation he created with his wife, Michele. The site can be reached at http://www.kirschfoundation.org.

Why not give all your money to charity?

In all my years as a philanthropist, I’ve never been asked this question.

But I’ve definitely thought about it a lot. I have more than I need myself. Why not give virtually all of it to charity today and keep maybe $20-million or so for my family to secure our financial future?

First and foremost, we (Michele and I) have more flexibility with funds before we make a donation than afterward, so keeping a certain amount of our net worth within our control maintains that flexibility.

If we were worth $2-billion, should we donate $1.8-billion to charity? Probably not, since not all causes fall within the I.R.S. charitable guidelines. We would likely settle on an asset ratio of 50/50 and use the noncharitable assets in the following ways:

• We would invest aggressively to achieve a higher rate of return than would be appropriate for a public charity, and then put the proceeds of our more aggressive investing to work in the charitable foundation.
• We would invest in, and support, causes that are not allowed within I.R.S. guidelines, such as lobbying and political campaigns, which may be the most effective and efficient means to accomplishing our philanthropic goals.

  So the bottom line is that it is a balancing act. Keeping some in reserve now can mean a lot more for charitable purposes later. But keeping it all in reserve now is foolish.

Excuses for not donating

There aren’t any good ones that I’ve heard. Most people use the excuse “I haven’t gotten around to it yet” or “I’m not ready.”

Well, giving doesn’t need to be painful. Do you like spending other people’s money? Of course! Everyone does! So once you get over the initial “pain” of making the grant to establish an endowment, say with a donor-advised fund, you’re done! From that point onward, for the rest of time, you get to spend someone else’s money and you’ll never run out of money (since you’ll be restricted to spending just the income so every year you get to spend money)!

I know a very famous guy, an M.I.T. grad and successful venture capitalist who became C.E.O. of a leading biotech company. He’s worth mega bucks. But now he’s dying of cancer. He could give to cancer research now, but it’s too late to benefit him. Had he started his giving program 10 years ago, who knows? He might have made a big difference in his life and the lives of millions of others. Giving to causes that might affect you in the future just makes a lot of sense. You can’t take it with you, and donating it later in life doesn’t help you or anyone else, for that matter, right now.

I know another well-known Silicon Valley philanthropist who saw his stock rise and rise. He created a modest fund, but delayed putting in more money since his stock was rising. Before he knew it, his net worth crashed to be a small fraction of what it was. Had he taken 5 percent out periodically as the stock rose, he’d have a much larger endowment. He definitely regrets the mistake.

Why there are few high-tech philanthropists and why I’m one of them

One of the reasons there are relatively few philanthropists in Silicon Valley is because it seems so illogical that — having worked so hard for so long to have finally “made it” — you’d turn around the next day and donate it all away to charity. What was the point in making it in the first place? Of course, the way to do this is to donate a portion of your net worth into a charitable fund or foundation. But many people are not educated on how to do this, including some of Silicon Valley’s most prominent and brilliant donors.

In talking with other C.E.O.’s, charitable giving ranks right up there on the list of “I want to do it someday,” along with writing a will. It’s on the priority list, but keeps getting pushed down by more urgent or immediately tangible matters, like spending time with family or solving business problems or working on that next big deal. People are so wrapped up in accumulating wealth that they haven’t made the time to start thinking about how to best leverage their wealth.

Another reason for the lack of interest is that wealth accumulation is how many people measure their self-worth. Recently I spoke with a wealthy and well-connected friend who told me that all the top venture capitalists in Silicon Valley are in a contest to see who can get to a $1-billion net worth first. He said it’s all about ego and self-worth.

So why am I different? Ten years ago, I volunteered to do fund raising for a Palo Alto charity. I had the good fortune to have Leonard Ely (who also kick-started the Community Foundation Silicon Valley) on my committee. When I asked him for advice on how to ask someone for a $30,000 donation, he told me, “You know, Steve, some people in this world want to give money away.”

That made no sense to me at first, but after thinking long and hard about what he said, it suddenly became clear to me that people who had the basics of life covered could help people they care about through strategic philanthropy. You could decide what you want to accomplish and use charitable giving to help you do that. So Leonard’s advice was a wake up call for me, just like Ebenezer Scrooge had an awakening in Dickens’s classic A Christmas Carol. I wanted to be one of those people who wanted to give money away.

Secrets to successful giving

1) Decide what type of person you are:

• Proactive: You have found value in giving and want to give. Most important, you are looking for opportunities to give in the areas that you have decided are important to you in order to achieve a set of goals.
• Reactive: You are not actively looking to give. You are either too busy (“it’s not a priority for me now”) or you spend time determining whether to give and how much to give as opportunities arise.

  If you are “reactive,” then you may be successful in giving your money away, but you are unlikely to be successful in reaching your charitable goals. Try to be a proactive philanthropist.

2) If you decide you are going to be proactive about giving, establish an endowed fund at a community foundation. You make one donation and then can donate from that fund for the rest of your life. It makes giving easy and painless and fun.

Pick causes you believe in and want to do something about. The best way to find a cause is simply to let it find you. You’ll experience, hear about, or read about something that you think is not right and that someone should fix. If you feel passionately about the cause, then make it your own. It could be something as simple as “someone should do something about the long wait times in the emergency room at the local hospital” or something as complicated as fixing our political system.

Anonymous giving

Is the “highest form of philanthropy” anonymous giving? I don’t think so.

I tend to focus on the result of the giving, not the recognition or the question of whether I get recognition.

If you have a charitable cause that is supported by “Anonymous” and a cause supported by all of your peers, which cause is more likely to attract your attention? If you look at what encourages so many people to give in Seattle, it is because they see other high-profile donors, including Jeff Bezos, Bill Gates, Scott Oki, and Paul Allen, engaged in giving. They also recruited other major donors, which is very hard to do if you give anonymously.

Here’s an e-mail I got on this topic:

“I think that because you gave and identified yourself, it prompted others to give who knew you and wanted to help out. Maybe in some situations it might be better to donate anonymously, but I’ve always thought it strange when I read anonymous on an invitation with a donor sponsor list. I interpret it like they’re ashamed to identify themselves, not that they seek to avoid publicity, because this is good publicity and it also sets an example. Go ahead and identify yourself, as long as it’s charitable giving.”

I recently received an e-mail that took me to task for being “showy” by allowing Worth magazine to profile the philanthropic efforts that Michele and I engage in. Here is part of my response:

“We are focused on results and I’ve never seen a superior outcome by giving anonymously. Had I been anonymous, you never would have seen the article in Worth magazine.

“On the Kirsch Foundation Web site, we list each organization we donate to, and we explain why the donation was important so that others might be inspired to donate to the same cause(s).

“Further, it would be impossible to support the medical researchers we’ve sponsored with an anonymous grant program. I know of no one who has been able to do that. More importantly, I know of no anonymous giver who gives more effectively than non-anonymous givers.”

And another:

“Having role models is important, particularly in a ‘young’ community of giving. As well, people need to specify the amount they give, since it gives others a ‘scale’ factor that they can relate to their own personal situation. I don’t see it as a matter of ‘bragging,’ but I know too many people who simply didn’t fathom what a ‘significant gift’ was due to their naïveté.”

New paradigm? Nah. Andrew Carnegie, the 19th-century prototype of the American tycoon philanthropist, believed in giving with a flourish of trumpets and blew his own incessantly to rouse the rich to righteousness.

While there may be some donor benefits from giving anonymously, I can’t think of any benefit to the cause that is being supported. Can you?

How to spend $1-billion over five years wisely for maximum good

I was recently asked how I would answer. “Maximum good” is of course subjective and each of us has our own value system. Therefore, there is no one correct answer, just lots of subjective answers.

As for me, I’d spend it first on self-preservation of the planet because what good is spending to benefit ourselves if we are all dead?

Even though there is only a small chance that our planet will be destroyed in the near future, the consequences are too devastating to think about. I’d rather “buy insurance” now to ensure that I’ve reduced those odds as much as possible. So first, I’d make sure we had sufficient funding to identify “killer” asteroids. That is money that is incredibly well leveraged because there is no doubt that we will get hit someday. Twenty-million dollars can save three billion lives. That’s what I call high leverage.

Next, I’d put some money toward supporting groups that are working to halt the spread of nuclear weapons, including Ploughshares Fund, Second Chance Foundation, and others. Maybe $10-million or so.

Third, I’d put money toward support of campaign-finance reform, for example, Public Campaign’s Clean Money initiatives. This is money that has incredible leverage. If we can clean up our political system and make our government work responsibly, rather than recklessly (as when the Senate didn’t ratify the Comprehensive Test Ban Treaty after only a few days of debate), it can save millions or billions of lives.

Fourth, I’d put some money toward improving our educational system. Educating future generations has incredible leverage.

Anything left I’d invest in medicine.

It’s not hard to invest $1-billion wisely.

Innovative ideas for corporate philanthropy

Here are a few of the most innovative ideas for corporate philanthropy that I’ve run across:

• Use funds that would have been dedicated to a company holiday party to purchase gifts for underprivileged youth. Each employee could have the opportunity to deliver a gift — in person — to the recipient at a local charitable organization.
• Instead of making a direct financial contribution to a nonprofit, hire people on your company payroll and assign them to work full-time at a nonprofit of their choosing. If you provide your employees with valuable stock options, you’ll be able to attract a high-caliber employee to a nonprofit that it might not be able to afford on its own.
• Before you go public, set aside 1 percent of your equity to donate to a corporate charitable foundation after the initial public offering. You get a nice tax deduction and help the community at the same time. Since investors would know about the carve-out before they invested, it won’t be perceived as “management using shareholders’ money to donate to charity.” The best time to do this is when you start the company. It can then be positioned as a carve-out that the founders decided upon when the company was established.
• Instead of paying out a cash dividend to shareholders, allow each shareholder to specify a charity to which the money will be donated.