Family Office Insights #1: Giving
This is the first in a series of short pieces for Family Office Insights. If you are part of a family office that hasn’t joined, I hope you will subscribe to their newsletter.
The lack of money is the root of all evil.
— Mark Twain
My name is David Siegel. I’m a lifetime serial entrepreneur from Silicon Valley, New York, and Europe. I’ve started more than a dozen companies, written five books, given hundreds of speeches about technology and business, and among other things I was a candidate to be the dean of Stanford business school. I am research and evidence-based. For those interested in a deep dive, I have uploaded my epistemology to Medium.com.
2020 has been an absolute nightmare of a year for almost everyone except wealthy families, who have seen dramatic increases in their net worth. I have written about their Covid Dividend — many families have come into unusually large gains this year they hadn’t planned on before. Now I want to give some concrete examples of how they can think differently about giving this year.
The Platinum Rule
I once visited some WaterAid people in Kampala, Uganda. We toured a neighborhood where they had installed toilets, sinks, a sewer line, and soap. I asked to speak with the residents alone, without the WaterAid people (many people in Kampala speak very good English, as it was a former British colony). The residents told me they don’t need toilets, they need jobs. If they had jobs, they could easily get toilets and much more. Without income, people will just take the soap (and the toilets!) and try to sell them.
Research on gift-giving shows that it’s very difficult to give exactly the right gift, but there is a solution. Tyler and Alex break it down:
I think there are a few versions of the platinum rule, but mine is:
Do unto others as they would have you do unto them.
Give them either what they need or something they would never get for themselves but they really would like to. Don’t give them what makes you feel good. One of the best ways to do that is to give them “free money.” Free money is like found money — the brain puts it in a different compartment than money you already have. The recipient will spend gift money on something he/she really wants. That’s why my first recommendation is to give money.
One way to do that is to give to charities that give money. The charity Tyler and Alex mentioned is Give Directly. Another is TisBest — a gift card that lets the recipient re-give that money to a charity. Another approach is to find small, local charities on the ground in places you care about and give them cash. This avoids middleman-charities and gives almost all the money to the local community. Another approach is to give Amazon gift certificates or other forms of fungible credits the recipient can spend as he/she likes.
Thinking Outside the Box
That may account for a small percentage of your Covid dividend. How about the rest? How about making some impact investments? Most impact investments underperform the market. But to compensate for their poor performance, they don’t have much impact. They mostly make investors feel good. If you’re already doing that, try something else.
I will talk more about startups in future posts, but consider funding one or more new companies that don’t fit your normal criteria. It’s very difficult for entrepreneurs to raise money. It’s great that there are pitch platforms like Arthur’s Roundtable, but the vast “dark matter” of startups consist of entrepreneurs who don’t have access, aren’t very good at pitching, yet they care seriously about their markets and could potentially build valuable companies.
For example, TechStars usually takes 40 companies into each new cohort they accelerate. Contact them and ask for the next 2–3 companies they didn’t accept. Fresh off their disappointment, those entrepreneurs would be delighted to get a bit of start-up capital and would do everything in their power to make good on a small investment. It’s not so bad to make some dumb mistakes angel investing — it gives teams a chance to try, and you never know what may come of it later. Even better if you can help open doors for them in an industry where you have some pull.
Do it in groups, so you contribute capital to a larger pool and then allocate to a dozen or more “unfundable” startups.
Or go micro. Back a micro-VC fund that has raised less than $25 million. Expect to lose that money. Tyler Cowen has set up Emergent Ventures, a fund to provide small amounts of capital to struggling idealists. This kind of micro-venture fund (with or without equity) is great at helping find people who are otherwise left out of the pitch parade.
Think of it this way — you can help more people by simply giving money to people who will spend it. That increases the velocity of money and increases the money supply, which benefits everyone. Don’t give too much to one group, and don’t give to anyone who will hoard it.
Moon Shots
I recommend taking some of your Covid dividend and dedicating it to moon shots. If it isn’t a crazy idea, it isn’t a moon shot. The question is — what is the payoff? While most moon shots fail (cold fusion, small schools, jet packs, flying cars, Google Glass), and some take a lot longer than anyone thought (AI, fusion, efficient batteries), the few that pan out help everyone on the planet. Collectively, betting on moon shots has a positive expected value.
What if a group of family offices sat down together and decided to focus on a big nasty problem and offer challenges and prizes to people who can solve it in a new way? You can draw up your own X-Prize competition, and (for the right price) they will administer it. Innocentive will help you design a challenge and broadcast it to their network of innovators. Most challenges don’t deliver, but Skild helps sponsors create innovation challenges that work.
Invest in fringe tech. Put a group together to find ideas, technologies, and companies that can’t get funded now because they are like quantum computing or electric vehicles were 15 years ago. Put enough into it so you can nurture a few projects.
A great moon-shot example is thorium molten salt reactors:
I believe thorium molten salt reactors are the future of energy until we have fusion. Not only do the innovators need money, but also thorium lobbyists need money to change the rules in favor of thorium, and we need outreach to inform the public about thorium. If a group of family offices could collectively put $50 million into thorium, that could have a much much larger impact on society than putting the same amount into any other energy or climate “solution.”
If anyone is interested in exploring Thorium or other moon shots, I am happy to host a Zoom call for a group that wants to exchange ideas. I can’t speak for Arthur, but you can have a few hours of my time to see how we could put a team and the right incentives in place to get something started.
Product Porn Series
When you’re done with all that giving, you may want to give yourself or someone in your family a high-quality gift they will cherish for years. You’ve come to the right place. I have assembled a list of “product porn” pages for you to browse, learn, and possibly buy a “platinum rule” gift for yourself or a loved one. I only have a few categories covered so far, but you’ll probably find some stocking-stuffers here:
David Siegel’s Knife Porn — a carefully curated list of Japanese knives.
David Siegel’s Chocolate Porn — a free class in dark chocolate (where/what to buy, store, taste, etc.).
Winter clothing and gear — for outdoor sports enthusiasts
Kitchenware — high-end kitchen necessities for cooks
Skillets
Ovenware
Summary
You have unexpected returns this year. Do something unexpected with some of it. Happy holidays.
David Siegel is a serial entrepreneur in Washington, DC. He is the founder of the Pillar Project. He is the author of The Token Handbook, Open Stanford, The Culture Deck, Climate Curious, and The Nine Act Structure. He gives speeches to audiences around the world and online. He is starting the Giordano Bruno Institute for Science. His full body of work is at dsiegel.com.
