In 1999 and 2000, Steve Kirsch outlined his thoughts on a variety of philanthropic and political reform topics. Please select from the list to find those of interest to you.
Excuses for not donating
There arent any good ones that Ive heard. Most people use the excuse, "I haven't gotten around to it yet" or "Im not ready."
Well, giving doesnt need to be painful. Do you like spending other peoples 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, youre done! From that point onward, for the rest of time, you get to spend someone elses money and you'll never run out of money (since youll be restricted to spending just the income so every year you get to spend money)!
I know a very famous guy, an MIT grad and successful venture capitalist who became CEO of a leading biotech company. Hes worth mega bucks. But now hes dying of cancer. He could give to cancer research now, but its too late to benefit him. Had he started his giving program ten 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 cant take it with you, and donating it later in life doesnt 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% out periodically as the stock rose, hed have a much larger endowment. He definitely regrets the mistake.
I know another guy who had some excess capital with which he could have easily parted to have established an endowment fund. In fact, at one point, he was almost a billionaire! He was even interested in philanthropy. But he hadnt taken the next step to get informed. He was under some false impressions that kept him from creating a fund.
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Here is the email exchange we had. Dont make the same mistake he did. You can donate stock at any time, even if you are locked up. He certainly regrets it. (Ive edited this message to protect the identity of the sender.)
This is my email to him: "What are you waiting for on the charitable front? You were worth almost a billion dollars recently. You could have easily squirreled away a few shares and established a nice little endowment for a fund. I dont get it. Why didnt you?? Just 5% of your holdings and youd have a $25M fund enabling you to give a few million a year. And what is keeping you from doing this now? Im really serious...I dont understand why more people are not doing this and your answers would really help me to understand. Why not take 10% now and set up a fund?"
Here is his reply to me. My responses to him are noted in the middle of his reply:
Good points and questions. The frank answers may be: ignorance and conservativeness. Heres my take -- Id appreciate any advice.
* To my knowledge, the only time I can transfer stock for any purpose is when my trading window is open, which was twice in the past 18 months.
Steve: Not true. You can donate at any time. Thats the beauty of it. The charity can short stock against the donation until you can actually sell the shares.
* Im surprised you were looking at my net worth ;), but all that happened was that our stock mysteriously spiked from about xxx to yyy and back to zzz or so, in a very short period of time when the window was closed.
Steve: Again, had you known the above, you could have taken advantage of this opportunity. I have personally done this in just such instances. In fact, there has NEVER been a time when Ive been unable to donate.
* I notice that the world watches any transfers of stock closely. Xxxx and I are trying to get on a selling program, 100-200K shares each quarter. Each time we sell, there are some nasty columns written (Cnet, Interactive WSJ, for example), pointing out that "the founders are bailing out." This is quite discouraging. Moving say 1M shares to a charitable may provoke some serious fallout. (?)
Steve: Ive never seen donations to charity as "bailing out." Have you?
* Im also worried about liability. As strange as it may sound, Id rather be selling stock when the price is low or on its way up, as I believe this makes it less likely to provoke stockholder suits. The problem for me is not paper net worth; its liquidity and liability.
Steve: You dont benefit since you are gifting to charity. The charity benefits. The charities typically sell when you gift the shares. But that is up to them. Ever heard of someone going to jail for "insider gifting"? Never happened.
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* When Ive looked into hedging strategies, they always involved some party on the other side shorting the stock, which has the equivalent effect on the stock price of selling it. I dont want to drive the stock down for my personal purposes.
Steve: Instruct the charity to liquidate in small chunks. I tell them to sell 10,000 shares at 50, 10,000 at 50.25, etc. That way, you are "noise" relative to other trades but if the market trades up, you win. Your actual amounts will vary, of course, depending on the volume of the stock.
* Id like to set up a charitable program when Ive got some time to really think this through. Ive consulted an estate planner at Big Valley Law Firm and hes supposed to be putting something together. As worthy as many causes are today, Im confident that this will be true for the foreseeable future. Please dont mistake this for not recognizing my responsibility to do so.
Steve: The nice part is you can establish a donor advised fund now, and figure out what to do with it later. In fact, if you later decide to set up a more customized solution, like a supporting organization, you can just transfer to the funds into this. Ive actually done it this way myself.
* Last but not least, Id hate to give away a bunch of stock/money only to find that whats left isnt worth much/anything. While I believe in the company, there are a lot of dangerous scenarios where bad things happen. (For example, look at Pointcast.) Id prefer to get enough liquidity so that my family wont have to worry before doing the Rockefeller thing.
Steve: These decisions are independent ones. Do both. Get your liquidity when you can (when you window is open). But you can make the charitable donation now. They are NOT mutually exclusive.
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