Stem Cells the Best Stocks to Invest In

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					High impact
      Steve Kirsch
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

• 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

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

• 501(c)(3) Supporting organization; $50M
• 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
•   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

• 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
• 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
          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
• 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
• 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
• 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?”

 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
• Put those assets to work in a way that will
  - ourselves
  - our kids
  - future generations of our family
  - our friends and community
           Why give young

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

• Ten years from now, you might be diagnosed
  - 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
 What kind of person do you want to be?
 In “A Christmas Carol,” did you like Scrooge

  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
    - 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
• Example
  - We give because we get a higher return on our
  - 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
  “Why Give?” Summary

• We DO give     • We DO NOT give
                       -out of a sense of obligation
 to make a
                       -civic duty
 difference in
                       -because it is “the right thing to do”
 our own
                       -“to create a legacy”
 lives and the
                       -because it is fun
 lives of
                       -because we have nothing else to do
 people we
                       -because we like to see our name in print
 care about.
                       -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

• 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

• 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
            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
     -Funding outlook
     -Track record
              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
     -Don’t bombard us with information.
    How to make me feel
       truly valued
• I don’t care about “Thank You” letters or
• 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!

• About our foundation
• About giving
• Strategic philanthropy
• Non-traditional giving
• Mistakes
• Results
     Selected charitable
• NEOs
• Catalyst for a Cure
• Curing cancer
• Junk faxes
• Terrorism
• Environment/Energy
• K-12 education
• Political reform

• 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.

• 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
• Replicate in other areas (spinal cord)

• Large molecule technology for targeted delivery of
•   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

• 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
      - 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

• 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.”

• TIMSS: 42 countries. We did better than
 South Africa and Cyprus.
• Our top 10% kids = Singapore’s worst 15%
• 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
     -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
• 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
• 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?

• 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

• About our foundation
• About giving
• Strategic philanthropy
• Non-traditional giving
• Mistakes
• Results
            Did we make a
• 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
•   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
      - 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

• 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
• 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
• 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
• After you make the donation, you spend the
 rest of your life giving away someone else’s
 * For any progressive community foundation
         Charitable fund
• 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
• 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
• 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.

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