The Power (and Tax Savings) of Charitable Giving

00:00:00.000 | But when you give money, and you feel that your money went somewhere, had real impact on real

00:00:05.120 | people, on something you care about, it's a different kind of reward. And so I actually

00:00:10.880 | agree with your advice. I think that you get started giving to a cause, to an organization

00:00:16.720 | you care about, right? Not just a checkbox on Windows, something that you actually meaningfully

00:00:21.600 | care about. And no matter how much the amount is, it can be just a few dollars. In general,

00:00:27.760 | when you do it, it's a good experience. And most people want to do it again.

00:00:32.240 | To join me for this conversation is my friend, Adam Nash. Adam is also a seasoned executive,

00:00:37.520 | investor, and advisor. He sits on the board at Acorns, teaches a personal finance for engineers

00:00:42.960 | course at Stanford, and was previously the president and CEO at Wealthfront, though that

00:00:47.200 | was before my time there. And currently, he's the co-founder and CEO of Daffy, a not-for-profit

00:00:53.120 | community built around a new modern way to give. It's a fantastic product that I love,

00:00:58.880 | and I'm not an advisor or an investor in the company, just a fan.

00:01:02.640 | In our conversation, we'll talk about all aspects of philanthropy, how much people give,

00:01:08.400 | the friction in giving, how to pick and vet charitable organizations, the tax benefits

00:01:13.280 | of being charitable, and ways to maximize those benefits. I also want to get into some

00:01:17.680 | of the lessons from his highly rated personal finance course at Stanford, which means we

00:01:22.000 | have a lot to cover. So let's jump in.

00:01:24.320 | Adam, thank you so much for being here.

00:01:32.640 | Oh, Chris, great to be here. Excited to talk about all of these topics.

00:01:37.200 | Awesome. So I just want to kick us off. What do you think is one of the biggest misconceptions

00:01:42.560 | people have today when it comes to philanthropy?

00:01:45.040 | There's a lot of things about philanthropy that people don't know, but the most common

00:01:49.680 | misperception in my book is that people think it's something just for billionaires. They get

00:01:54.800 | so obsessed with what billionaires are doing with their money and how much they're giving,

00:01:58.160 | it makes the news, it's in your feed. They don't realize that actually the research shows that

00:02:02.640 | almost everyone gives. Almost everyone was raised to believe that to be a good person,

00:02:07.440 | you remember that no matter what's going on in your life, there are people out there less

00:02:11.280 | fortunate than yourself, and that everyone can make a difference. And the data backs it up.

00:02:17.200 | In the US, somewhere between 60 to 70 million households every year give proportionally,

00:02:22.560 | people with less money actually give a higher percentage of their income and wealth than

00:02:26.560 | wealthier people. But the conversation tends to be dominated by a few billionaires when really,

00:02:32.560 | from my point of view, what's helpful for people is understanding what you can do and what you

00:02:39.040 | should do and what makes you feel good to do. And so that's probably the biggest misperception I

00:02:44.000 | see out there when I talk about giving.

00:02:46.240 | One of my favorite stats, I guess it's not a stat, but a piece of research on giving was

00:02:50.320 | from a book called Happy Money. And if you haven't read it, they try to break down things you can use

00:02:55.120 | your money for to be happy and giving is one of them and helping others. And so is there any kind

00:02:59.920 | of framework that's generic enough to apply to anyone about how to think about giving or how

00:03:04.560 | much to give?

00:03:05.360 | I don't know if there's one answer, but it's funny. I actually just wrote a post about this a few

00:03:08.880 | weeks ago about my own personal experience, which I actually have found that is shared with a number

00:03:13.840 | of people. It was about 10, 11 years ago that LinkedIn went public and I was the head of product

00:03:19.840 | there for a number of years. And so that was actually my first exposure to a donor advised

00:03:25.600 | fund, like an account dedicated for charity. And the minute you have to open one of these accounts,

00:03:30.960 | you face this question that you don't know, which is like, "Well, how much do I put in there? How

00:03:34.640 | much do I give to charity?" And it sounds like such a simple question. My accountant said it

00:03:40.080 | was simple, right? You've had a big year, LinkedIn's going public. Think about how much

00:03:45.040 | you give to charity every year and multiply it by 10 and that's a good place to start for funding

00:03:50.720 | your account. But that didn't make it any easier because I don't know how much I gave to charity

00:03:55.040 | every year. I could look at my Quicken. I'm like one of these old time people, like I have a Quicken

00:03:59.200 | file that goes back to 1994. So I actually can go back and look at these things and what my spending

00:04:04.080 | is. But it actually was a great moment for me and my wife to actually talk about what we wanted to

00:04:10.320 | give and how we thought about it. The biggest thing I advocate for people and recommend is

00:04:15.840 | just to have a goal. Just have a number, right? Like we have goals for all sorts of things,

00:04:20.480 | right? I mean, you and I both know, right? Like saving for retirement, saving for college,

00:04:25.680 | saving for a house. There's two things that you do to make that. One is you actually figure out

00:04:30.000 | what your goal is and second, you automate it, right? And giving can be the same way.

00:04:34.480 | And so that question of how much you should give, actually it was amazing doing user research for

00:04:40.880 | Daffy. I had the chance to ask dozens and dozens of people what they think they should give to

00:04:47.840 | charity every year. And the amazing thing is that almost no one agrees. Like some people use

00:04:52.800 | percentages, some people use numbers, big numbers, small numbers. For some people, it's about where

00:04:58.240 | they are in life and if they can afford to do it. But the thing that was universal is that

00:05:03.520 | actually almost everyone does have an opinion about it. And almost everyone I talked to

00:05:08.640 | thought it should be something, not nothing. And so I try not to be prescriptive to people

00:05:14.320 | on how much they should give as much as asking them how much they think they should give every

00:05:19.760 | year and actually spend a little bit of time setting that goal. And then of course, we all

00:05:23.760 | know great ways to stick to goals once we set them. Yeah. Automation is great. Are there benchmarks

00:05:29.360 | even for people who are not sure what's even normal? You know, the data actually exists,

00:05:33.840 | right? So the IRS, I mean, publishes data every year based on zip code and a number of different

00:05:39.600 | factors about how much giving happens. There are also private institutions. I'm actually an

00:05:44.080 | investor in one private company called Windfall Data, which actually assesses this for nonprofits,

00:05:48.960 | et cetera. So the data's out there, but almost no one accesses it. It's not easy to come by.

00:05:54.320 | In fact, one of the features we put into our initial release is that it's a mobile app, right?

00:05:58.640 | So based on the zip code, the city or state you're in, we tell you what the median household in your

00:06:04.080 | city gives to charity every year. Okay. It's a very natural question. I think most of us

00:06:09.200 | want to be good people. We want to do the right thing. I actually think one of the problems in

00:06:14.400 | philanthropy is that there isn't enough information available to people, right? Like, think about how

00:06:19.360 | many calculators there are out there that help people figure out how much they should save for

00:06:23.280 | retirement or save for college or how much they need to do to buy a house. I mean, there's probably

00:06:28.080 | too many of those calculators out there, too many articles. But when it comes to giving,

00:06:32.400 | it's all amorphous. The only data you see published tends to be about the largest gifts.

00:06:36.480 | I mean, maybe if you go to university, right? Like, and you get the alumni booklet,

00:06:40.480 | you can see the tiers of who's giving and how much, but we really don't have a lot of information

00:06:45.280 | about it. I think it makes us all a little uncomfortable. We feel a little guilty, I think,

00:06:50.800 | because we don't know if we're doing enough or doing the right amount. And I think that most

00:06:57.120 | of us want to do the right thing. Well, it sounds like the best bar is if you're just doing it,

00:07:02.080 | that's great. And similar to saving, when I give people advice for saving, I say, "Well, first off,

00:07:08.080 | just start saving. And then if you're not sure what to do, start small. And if it feels like

00:07:11.840 | you could do more, increase your savings rate." And I assume you could just apply a similar metric

00:07:16.880 | there if you're like, "I don't know how much I can afford to give, but I know I could give

00:07:19.680 | $100 a month." It's like, "Great, do that." At the end of the year or at the end of six months,

00:07:24.480 | does that feel low? Maybe try to increase the number if it does. If it feels like too much,

00:07:28.560 | you can dial it back. But just starting somewhere and tracking it might give you

00:07:33.520 | some place to compare and contrast what changes you'd make in the future.

00:07:38.000 | Yeah. I can't agree more. This is one of the things I love about this space is I think we've

00:07:43.360 | learned a lot in the last 10 or 20 years about how to help people save, how to help people invest,

00:07:48.000 | how to help people hit their financial goals. I'm really excited about this idea of applying

00:07:52.400 | all those lessons to philanthropy, to giving. And most of those lessons apply. So yeah,

00:07:56.960 | just get started. How should I get started saving for retirement? Well, the first thing to do is

00:08:02.720 | actually to start saving for retirement. And the rest comes pretty naturally. And I think with

00:08:07.760 | giving, it's even better than saving or investing in a number of ways. I mean, I love saving and

00:08:12.080 | investing, let's be clear. I do. But when you give money and you feel that your money went

00:08:18.320 | somewhere, had real impact on real people, on something you care about, it's a different kind

00:08:23.520 | of reward. And so I actually agree with your advice. I think that you get started giving

00:08:30.240 | to a cause, to an organization you care about, not just a checkbox on a window, something that

00:08:35.840 | you actually meaningfully care about. And no matter how much the amount is, it can be just

00:08:40.480 | a few dollars. In general, when you do it, it's a good experience. And most people want to do it

00:08:46.880 | again. And so yeah, getting started. Well, that's the right place to start. I remember I had given

00:08:55.600 | to a charity water birthday thing, which was all the rage maybe 5-10 years ago. It seemed like

00:09:01.840 | everyone was doing a birthday event for that. And then they tracked you and said, "Hey, here's that

00:09:05.760 | well that your money a year or two ago contributed to opening." And maybe it was even a shorter

00:09:11.520 | window. I can't remember. And I remember, "Oh, wow, that felt really good." And that level of

00:09:17.120 | follow-through from the organization was really cool. One of the questions I think a lot of people

00:09:21.680 | have is how do you even decide whether an organization you might want to give to is a

00:09:26.880 | responsible one, is going to follow through and use the money wisely? I know there's some sites

00:09:31.920 | with ratings, but is that the best way to do it? Is there a way you recommend people do diligence

00:09:37.840 | if they're thinking about where to give? Well, I think this is another problem that

00:09:41.440 | people have and talk about is while everyone wants to give, everyone has a little bit of an anxiety

00:09:46.720 | of, "Well, how do I know that this organization is legitimate? How do I know if this organization

00:09:52.000 | is good? And then, of course, is it where my money will be best spent?" And there are a lot of sites.

00:09:58.160 | There's a lot of information available. Once again, the IRS does publish a list of all the

00:10:04.000 | valid registered charities for the most part in the U.S. But this gets back to a problem we have

00:10:09.760 | in the U.S. in general, which is that we're not comfortable talking about money with each other.

00:10:14.720 | We don't talk about giving as well. I mean, the reason those birthday campaigns are so effective

00:10:19.840 | on Facebook and work is because actually it turns out it's not just social proof. It's that if you

00:10:25.360 | know the person and they think that that charity is a good one, well, you've outsourced a little

00:10:30.880 | bit of that validation, right? Their reputation, your relationship, you decide to say, "Well,

00:10:35.840 | this is clearly a good enough organization for them and it's meaningful to them, and I will

00:10:39.520 | support them, and it also feels good to give." And so I do think that that is part of the process.

00:10:45.600 | I think people should be less afraid to ask each other what organizations and causes they support.

00:10:51.440 | I think people should be less afraid to share the organizations that they personally

00:10:55.280 | support and why. I mean, last year in the fall on Twitter, I did campaigns for different events

00:11:00.320 | where I talked about some of the charities that I support. I even did matching campaigns where

00:11:04.800 | I said, "Hey, everyone, for this month, if you give to this charity, I'll match it," type of

00:11:10.160 | thing, which you've probably seen on Twitter from a lot of celebrities and other folks.

00:11:13.440 | And I think there's a lot of value to that and elevating these charities. If you talk to the

00:11:17.520 | folks who run these charities, they're desperate for people to talk more about what they do.

00:11:22.400 | There's no amount of marketing they can do that really has the same impact of actual validation

00:11:28.240 | and endorsement from people who believe in that charity, believe in that cause.

00:11:33.280 | But yes, for people who want to look at the data, there are a number of sites that do good jobs of

00:11:37.120 | ratings and percentages. We've built them into DAFI, for example, but there's a number of other

00:11:42.240 | sites that do this, Charity Navigator and other ones. And I think it's a perfectly reasonable

00:11:47.040 | thing to do. I'd also encourage people to consider giving locally. Some great organizations are

00:11:53.920 | within a mile of where you live, of where you work. And it's not that hard to find local

00:12:00.800 | organizations and certainly not that hard to check them out and validate them.

00:12:04.880 | But many people tend to just stick to the big names that they've heard of,

00:12:09.200 | names because they think that they're safer. They've heard of this organization,

00:12:14.000 | it's been around for decades. Once again, this gets back to whatever gives you comfort giving

00:12:18.640 | probably is a good thing. The odds of you giving money to a bad organization are much, much lower

00:12:26.720 | than the odds of you just not getting over the hump to give at all. And remember, that is the

00:12:32.080 | point. The point is to get resources to people and to causes that you believe in.

00:12:36.000 | We talked briefly about how to pick a number, so let's not try to go back there. But do you

00:12:45.040 | believe people could be giving more? It depends how you look at it. The U.S.

00:12:48.640 | is known in philanthropy circles as a very generous nation. And that's because if you

00:12:53.920 | look at the percent of our economy that we actually give, it's very high. So in 2020,

00:12:58.640 | it was $471 billion in the U.S. That roughly worked out to be about 2.3% of GDP. That's a

00:13:06.480 | big number. I mean, all of agriculture is less than 1% of GDP in the U.S., so that's a very big

00:13:11.280 | number. And so you could ask the question, why do other countries give less or give more? Is it

00:13:17.040 | about economics? Does it tie to economic inequality? There's all sorts of reasons. Is it because of

00:13:22.800 | religion? The most common donations that people make tend to be to religious institutions

00:13:27.440 | and academic institutions. But I think overall, Americans are generous. But when you ask the

00:13:33.120 | question, could we be more generous? I mean, absolutely. There's no question.

00:13:36.960 | One of the things that I was surprised to find out was that there's very good research.

00:13:43.200 | You mentioned behavioral finance earlier and automating things, etc. But there's actually

00:13:48.400 | very good research that suggests that the amount that we want to give as individuals

00:13:53.920 | is quite a bit higher than what we actually give. And actually, I validated this myself,

00:13:59.120 | just in user research, etc. If you ask someone how much they think they should give every year,

00:14:03.840 | they give you a number. You ask them how much they actually gave last year,

00:14:08.320 | you get a little bit of a pause, a little bit of guilt. Because the truth is we have busy lives.

00:14:16.160 | We don't get around to it. And so it turns out this research says that we would give about 32%

00:14:22.400 | more if we actually just gave the amount that we think we should. Not even stretching ourselves,

00:14:29.920 | not pushing us to give more than we think we should. If you're the type of person who thinks

00:14:34.240 | you should give a few hundred dollars to charity every year, or a few thousand dollars, or whatever

00:14:38.240 | your number is, it turns out for the most part, we don't stick to it. And I know you know this,

00:14:43.600 | but it's pretty obvious why. It's the exact same reason. How much would we save for retirement

00:14:48.160 | if you had to write a check or manually make the transaction? We all know that it's like,

00:14:53.200 | no, no, no. Have the 401(k) come out of your payroll, out of your paycheck. That actually

00:14:58.080 | helps people stick to a plan. And it hasn't been applied to giving. But yeah, definitely we could

00:15:05.200 | all give more, even though we do give a lot. And like I said, if you look at it, that 471 billion,

00:15:11.120 | over 330 billion of that is from individuals. These aren't foundations and corporations giving

00:15:17.360 | all sorts of money. I mean, they are. I mean, more than 100 billion a year. But individuals

00:15:22.640 | are generous. I think they would be more generous, though, if they came up with a system for giving.

00:15:27.440 | Are there other hurdles or barriers other than just the hassle of following through? Is it

00:15:34.080 | finding the right places? Or what do you think else holds people back?

00:15:38.160 | Well, I think that you bring up a good question. You actually brought up some of the issues

00:15:41.600 | earlier, which I agree with. I'm a product person at heart, so I think of product problems.

00:15:48.720 | And when I looked at giving, it was very clear to me that at minimum, giving is two very hard

00:15:54.080 | problems for people. There's the how much can I afford to give, which is a hard problem. I guess

00:16:01.120 | that's tied a little bit to how much you should give. But people are not very good at budgeting.

00:16:05.040 | They're not very good at allocating numbers, not even very good at understanding what their income

00:16:08.960 | is or their expenses are. So there's this hard problem of how much to give.

00:16:12.960 | And there's a second set of hard problems around who to give it to. And this is actually one of

00:16:18.880 | the reasons I actually really love the idea of separating those two problems. So to our earlier

00:16:24.320 | conversation, I think the best thing you could do for that first problem is just set a goal

00:16:28.080 | and put money aside for charity, just like you put money aside for a number of other things.

00:16:32.400 | Have it somewhere separate so that when people ask you to give or when you find an organization

00:16:38.320 | or cause you believe in, you're not struggling with that first question of how much you can

00:16:42.400 | afford. You already have it set aside. It's there for you. That second question, though,

00:16:47.600 | of who to give it to, I don't think there's any shortcut there. I think social information can

00:16:52.800 | help, knowing who your friends and colleagues give to. I think research can help. But I think

00:16:57.920 | the truth is most people build those relationships over time. And that's actually very good for

00:17:03.040 | nonprofits because the truth is they don't want a donation from you just once. Most of these

00:17:08.320 | organizations have budgets they have to run every year. Right. And so what they really want from

00:17:13.520 | someone who supports them is someone who's going to support them regularly. Right. They would

00:17:18.320 | probably much rather get money from you a smaller amount regularly every year than a one time

00:17:24.880 | birthday raise where they never see that money again. It's the reason that nonprofits actually

00:17:30.400 | spend a lot of money and time fundraising. It's a very heavy sales process for them

00:17:34.880 | because it's very transactional. They always have to convince someone to reach in their wallet,

00:17:39.840 | pull out some money, give it to them. It's a very hard process to get through.

00:17:43.840 | And so I tend to recommend people that not feel the pressure to give all the money away at once

00:17:50.480 | as much as build these relationships, find organizations that you support,

00:17:54.640 | be comfortable supporting them, give them your regular support.

00:17:57.920 | And over time, you'll add more and more organizations.

00:18:00.560 | One thing I learned when I was going through this process myself of just evaluating some

00:18:04.960 | organizations is there isn't a lot of information about every organization. Not only do they have

00:18:10.320 | to file. I'm going to maybe get it wrong. Is it a 990? Is that the right number with the IRS?

00:18:15.440 | So there's a document that's here's who we are. Here's how much we spend. Here's our expenses.

00:18:19.760 | Here's how much we pay our directors. But almost all of them also have annual reports

00:18:25.360 | summarizing the impact they had. So if there's an organization, I would say there might be

00:18:30.640 | charity scams. I'm sure there are. But there is a lot of validating places like IRS websites and

00:18:38.400 | validating the tax ID numbers to make sure that you're giving to somewhere good.

00:18:43.040 | And there's just a lot of content about who and what is happening within an organization. So

00:18:48.160 | as much as someone might say, I don't know about this organization. I feel like it's

00:18:53.200 | if you're thinking that in your head, I feel like it's not a great excuse because there is

00:18:56.560 | information out there. And with the advent of the Internet, it's never been easier to find it.

00:19:01.840 | Yeah, I agree with you. I think it's not hard to get to conviction about

00:19:06.320 | different organizations, given how much content is out there. That being said,

00:19:09.840 | I understand the anxiety. It's the same thing that happens with sensationalism in every industry.

00:19:14.720 | You only read the worst stories. And then there have been stories over the decades of non-profits

00:19:19.280 | where directors embezzled money or self-enriched themselves in private planes and that sort of

00:19:24.400 | thing. So that anxiety, I think, is real. But to your point, it's not hard to validate local

00:19:31.040 | charities if you're really interested. It is not hard to ask around of what charities other people

00:19:36.320 | support. And certainly for the national charities, it is not hard to find ample information about

00:19:40.960 | them. And so I think it's a solvable problem. I don't want to pretend it's not a problem.

00:19:45.280 | I think it's reasonable for people to have questions of where they're sending money.

00:19:48.880 | But yeah, you're right. I mean, it's very funny. The amount of research people want to do to send

00:19:52.880 | $100 donation somehow is a lot higher than the amount of research they do before grabbing that

00:19:59.040 | random ad on Instagram for $100. I mean, this is actually one of the opportunities, I think,

00:20:04.320 | in the industry is there's no real reason it has to be that way. For some reason,

00:20:08.240 | we've convinced people that buying that random item on Instagram,

00:20:11.360 | that they can just do that with tap, tap, tap. We should make giving that easy. There are reasons

00:20:18.560 | why you can't trust a random company on the internet. I mean, one of my first jobs on the

00:20:21.920 | internet was at eBay. And believe it or not, there was a time where it seemed crazy that you would

00:20:27.280 | buy something from a stranger that you'd never met and you would send them money and just you'd

00:20:32.720 | assume that the item would be good and not broken as represented. I mean, we take it for granted now,

00:20:38.640 | but that seemed ludicrous 20, 30 years ago. I think that some of that friction we got rid of,

00:20:46.160 | right? People now trust for the most part e-commerce. Now, sometimes bad things happen.

00:20:49.920 | There's no question. I've made a purchase or two online that turned out to be a mistake.

00:20:53.840 | But I think there's no reason why we can't use the same techniques to give people confidence

00:21:01.040 | that, "Hey, if you want to send a gift for a cause or to an organization, we've already filtered

00:21:05.440 | them. It's going to be fine." It's going to be a very rare situation where something goes wrong.

00:21:11.680 | And in the most common case, you will have helped real people with something that matters.

00:21:16.160 | One tactic I had, so in the past month, there's been a lot of giving support for Ukraine. And I

00:21:24.320 | was thinking, "Gosh, I had never done any research about nonprofits that support Ukraine." That was

00:21:30.720 | just not something that last year or any previous year had come across my radar. And one option was,

00:21:36.880 | "Okay, well, let's spend a lot of time to figure this out." And what I ended up doing was through

00:21:41.440 | both, I think some of your posts, other people's posts, I came up with a list of 10 organizations.

00:21:45.440 | I took how much I wanted to get. I divided it by 10. And I was like, "Look, if one of these

00:21:49.360 | organizations isn't as great as the other, well, I gave to all 10. So it's okay." I played the

00:21:56.320 | diversification game. I crowdsourced the information from friends, from people online, from

00:22:02.000 | articles, and gave to all of them. And I know that probably doesn't bode well for the recurring,

00:22:08.720 | ongoing relationship. Maybe it's better to build a few deeper than a bunch broader.

00:22:14.800 | But if you're out there thinking, "Gosh, I want to give to this cause, and I'm not sure how,"

00:22:18.880 | and you don't want to do the research, maybe pick five organizations that do it. And

00:22:24.560 | the risk that one is bad is now one-fifth as much. But I would guess if you look at the numbers,

00:22:30.480 | the risk is already very, very small. The risk is small. And more importantly,

00:22:34.400 | I think when you have a situation like Ukraine, more important for the bias just to be to help,

00:22:40.240 | to give, to do something rather than nothing. And so your process sounds good. We did a Daffy tweet

00:22:46.640 | out a list of nonprofits that we thought were well-researched and advocated by other institutions.

00:22:54.560 | This is one of these areas that, on the one hand, I say, "Listen, yeah, the most important thing is

00:22:58.480 | you find institutions." I actually like the idea of portfolios or several institutions in an area.

00:23:03.680 | I think that there's something very interesting there for people, I think, about not picking

00:23:08.080 | one organization to give to that actually might make it easier to give. But at the same time,

00:23:16.000 | it's still too hard, right? We're not all experts, right? What you did sounds like the right thing to

00:23:20.480 | do, right? There are reputable sources, crowdsource a list, come up with the amount you want to give.

00:23:25.680 | And whether you split it across different organizations or give it to one, the point is

00:23:29.680 | you've actually helped, right? And we can debate how much, but you've helped.

00:23:33.280 | And it made it easier. It was funny. I'd find another one. I decided an amount and split it

00:23:38.960 | amongst 10, and then an 11th popped up. And I was like, "Wow, I can't not give to the 11th.

00:23:43.200 | This one looks good too." So then I ended up giving 10% more to that 11th one than I had

00:23:48.480 | originally planned. And it felt great. So I want to take a little bit of a turn and talk about,

00:23:55.920 | you know, this is all the hacks. One of the things that's interesting for people who have W-2 income

00:24:02.240 | is that there aren't a lot of hacks, right? I get lots of questions. "I have a job. What are the

00:24:09.200 | hacks to save money on my taxes?" And I'm like, "Well, okay." So it's like retirement accounts,

00:24:13.600 | pre-tax accounts, like HSAs and FSAs and charitable donations. If I'm missing anything,

00:24:18.240 | let me know. I know there's some technical high-end trust stuff, but for the broad strokes.

00:24:23.280 | And I find that people often misunderstand some of these tax deductions, how they work.

00:24:32.080 | Could you just at a high level explain the tax benefits the government offers people for being

00:24:37.520 | charitable? Yeah. And I want to be careful. I'm obviously not an accountant as it turns out,

00:24:42.240 | so I'm sure they are. Me either. I have to make a disclosure here, but I will.

00:24:47.920 | Do not take what I'm giving you as financial advice, not a professional accountant, et cetera.

00:24:52.320 | But no, actually, it's well known that the charitable deduction in the U.S. is one of the

00:24:57.120 | most generous. And the reason it's generous is because it actually is a deduction against AGI,

00:25:03.840 | against your income, which tends to have the highest tax rates. And so it's a very useful

00:25:09.520 | deduction. You can deduct right now up to 50% of your AGI, actually, in some cases, 60%,

00:25:17.200 | which is a really high number. If you think about where most deductions tap up now,

00:25:21.360 | the one catch is you have to be someone who itemizes their deductions. And ever since the

00:25:26.640 | 2017 Tax Act, there are fewer people now. But for most people who live in high-tax states who have

00:25:32.800 | a mortgage, they probably itemize deductions or could very quickly if you make a charitable

00:25:39.040 | deduction. And so, yeah, so the great thing about charitable deductions is that they are an

00:25:44.480 | incredible benefit from taxes. The problem is, as you know, the tax year is one year.

00:25:49.280 | And because our tax rates go up, our system isn't very good for dealing with what happens when

00:25:56.080 | people have lumpy income, right? You have big years, you have down years, even though that's

00:26:00.400 | becoming more and more common across the United States. People's income isn't steady every year.

00:26:05.840 | There really are good years and bad years. The charitable deduction is most valuable in those

00:26:10.480 | good years, right? Because those are the years when you tend to be worried about taxes. But that

00:26:15.840 | stresses that other part of the problem, which is, wait, do you know who to give the money to?

00:26:22.000 | And that actually catches a lot of people. There's a lot of people in November, December,

00:26:25.760 | who realize that they had a good year, that their tax bill is going to be higher than expected and

00:26:30.560 | say, wow, this would really be a good time to give some money to charity. But unfortunately,

00:26:36.160 | they don't have enough time to pick a charity. And that's where donor advised funds come in.

00:26:40.320 | Donor advised funds are basically a special type of account. The way that an IRA is for retirement

00:26:45.520 | and a 529 is for college savings, a donor advised fund is for charity. And the great

00:26:51.200 | thing about donor advised funds is because they're offered by nonprofits, by charities,

00:26:56.640 | you get a tax deduction immediately when you put the money in the account.

00:27:01.760 | And so as a result, the best tax hack around charitable deductions is to make that commitment

00:27:08.800 | to give, put the money in a donor advised fund, get the tax deduction, and then you have time to

00:27:14.400 | figure out which organizations to give it to. And then for many of these donor advised funds,

00:27:18.400 | that money can be invested. So it's not sitting idle while you're figuring out who to give to.

00:27:23.760 | The money is still invested and growing, but now tax deferred, like a Roth IRA or another

00:27:28.640 | tax deferred account. My first experience with donor advised funds came in the scenario you

00:27:33.760 | described where I was like, "Oh, it's a higher tax year," which is always a good year. And I was

00:27:39.520 | like, "Gosh, we should just donate." And funny enough, you said earlier, your advice from your

00:27:43.840 | accountant was 10 years. My advice was also, it was like, "Well, I don't know how much to give,

00:27:47.920 | but this is a higher tax year. I'd rather give next year's donations this year. And I'd probably

00:27:52.720 | rather give the next year's donations this year." And I was like, "Well, let's just go 10 years out,

00:27:56.960 | take what we were going to give for the next 10 years," which we had to figure out also,

00:28:00.640 | because we didn't even have a number at the time. And we put that in a donor advised fund.

00:28:04.480 | And I learned a few things in the process. And I want to go get to one in a minute,

00:28:08.720 | which is about donating the most appreciated things in your portfolio, and we can talk about

00:28:13.360 | why. I also learned that even organizations that seemed like they had decent products,

00:28:20.880 | at the time when this happened, Vanguard, Fidelity, they had websites, you could log in,

00:28:26.400 | you could buy stocks. And then I logged into their donor advised portal. And I was like,

00:28:30.080 | "This is just a different company." And I think legally, it actually is a different company. But

00:28:34.480 | I was blown away that the innovation on donor advised funds, even for organizations that have

00:28:40.080 | innovated their investing products, was just completely absent. I assume that might be part

00:28:46.000 | of the founding story here. What about the industry did you find that made you say,

00:28:50.320 | "We should go build something," despite there being lots of organizations out there?

00:28:54.800 | Well, there's a lot of reasons. I think there's two things that lead to the effect that you saw

00:28:59.920 | with existing donor advised funds. One that's pretty simple, and one that's probably more

00:29:04.720 | nuanced. The simple reason why it is true is that the existing industry, to offer a donor advised

00:29:11.920 | fund, you have to be a nonprofit. But nonprofits have trouble investing in technology and operations

00:29:20.240 | and all the things that they need to do to run a donor advised fund. So they almost always partner

00:29:24.240 | with a for-profit company that helps them operate and fund the development of the firm.

00:29:30.480 | And so Fidelity Charitable partners with Fidelity Investments, Schwab Charitable with Schwab,

00:29:36.240 | of course, Vanguard Charitable partners with Vanguard. And so they're all partnered with

00:29:42.480 | investment firms, not technology firms. And so it is a little bit of the founding story with DAFI.

00:29:47.840 | DAFI, of course, stands for the Donor Advised Fund for You. But we said, "Well, what if instead

00:29:52.160 | of partnering with an investment firm, you partnered with a venture-backed technology

00:29:56.320 | company? Could you have the same type of engineers, the same type of quality design

00:30:00.960 | that we're used to seeing from Facebook and Google and Apple and the best kind of companies

00:30:06.000 | in the industry? Could we see that here?" And so that's a little bit of the founding story.

00:30:10.800 | The second reason, though, is more subtle, which is that because they've partnered with investment

00:30:14.800 | firms, almost every donor advised fund out there, their business model is charging you a percent of

00:30:20.080 | assets. And that sounds fine. That's a very normal thing in the investment industry, right? Even

00:30:25.360 | Vanguard does it, right? A percent of your fund. The problem there, though, is that because they

00:30:33.040 | are charging a percent of assets, they really are only interested in very large accounts,

00:30:38.480 | right? And so when you think about this, you might have a large account, say, for retirement.

00:30:43.680 | It's your whole retirement. College is expensive. You might save a lot for college.

00:30:49.120 | You have to be very wealthy to have six and seven figure or even bigger accounts

00:30:55.200 | allocated for charity. I mean, it's fantastic, but that's a very big number to put out there.

00:31:00.720 | And so as a result, those firms mostly optimize their services around the very wealthy,

00:31:06.880 | those biggest accounts. I mean, Vanguard, I love Vanguard. It's one of my favorite firms,

00:31:10.560 | changed the industry, idolized. But even their donor advised fund, you can't even open with

00:31:16.320 | less than 25,000. That's their minimum. And they charge 60 basis points all the way up to

00:31:22.160 | $500,000. And so I think that's the other problem that you see that the reason they don't invest in

00:31:27.840 | technology heavily there is they're not hitting a mass market audience. They're mostly hitting

00:31:32.640 | people who already have financial advisors and accountants who probably do it for them.

00:31:37.040 | That makes sense. And is the reason why a firm like Vanguard, which is known for low fees

00:31:43.680 | and for their consumer products, doesn't charge as high as 60 basis points, can they get away with

00:31:50.240 | it? Because it's already money that's been given away and there's just not as much scrutiny over

00:31:57.520 | the fees because it's like, "Look, I'm going to give away, in their case, $25,000. The fees are

00:32:02.320 | coming out of money that's not mine anymore. I'm not paying the fees. They're coming out of what

00:32:06.720 | would otherwise go to charity." Does that make people less frustrated with high fees? Or how

00:32:13.760 | are they, a firm like Vanguard, getting away with charging so much when I can't imagine there's a

00:32:19.360 | lot more overhead to operate this than a regular investment account? Well, let's be clear. I think

00:32:23.760 | Vanguard has such a great corporate culture and structurally set up. I don't think that

00:32:33.280 | those are their motivations. I think there are other real reasons where,

00:32:37.120 | because of their lack of investment in technology and because of the way they run their donor

00:32:41.680 | advice fund, it might actually be very expensive for them to operate. And so those fees actually

00:32:46.160 | reflect their costs. But I do think that some of the things you talked about are correct.

00:32:50.880 | I think there is a problem. We've all grown up through this industry. There was a time where

00:32:57.440 | people didn't know to look at how much their mutual funds were charging them. And we had

00:33:01.840 | to socialize this idea of actually looking at the expense ratios and all the fees tied

00:33:07.360 | with mutual funds. 401ks. We had to teach people to look at the fees around 401ks. Advisors. How

00:33:13.280 | much is your advisor charging? I've asked dozens of people how much they're paying for their donor

00:33:17.520 | advice fund. Most people don't even know. It's not on the account statement. There's no number there.

00:33:22.400 | I've talked to people who are paying literally hundreds of dollars, even thousands of dollars

00:33:29.120 | a year for their donor advice fund, but they don't even know it. So I do think that with most donor

00:33:33.840 | advice funds, the reason they charge what they do is because they can. The tax benefit is high

00:33:39.520 | enough that it usually is a net positive for wealthy people who open donor advice funds.

00:33:44.000 | If you were lucky enough to have stock in one of the companies that went public in the last

00:33:48.960 | couple of years, or you invested in crypto, so you have Bitcoin that you bought for a thousand

00:33:53.360 | dollars, that's now worth $41,000. There's so much tax benefit from donating those assets

00:34:00.000 | and not having to pay those capital gains taxes that it's true. Probably the high end market for

00:34:06.800 | donor advice funds just isn't that fee sensitive. But I think a lot of the problem has to do with

00:34:11.440 | structurally what the industry has done to date. And you're right. At Daffy, we're hoping to change

00:34:16.800 | that. And you mentioned donating those appreciated assets. Could you walk through maybe an

00:34:23.200 | example of the kind of impact donating something that's been appreciated would have on your financial

00:34:29.840 | situation and the impact it would have on the organizations that it would ultimately go to?

00:34:34.560 | The reason the benefit of donating assets is because you really win both ways. We already

00:34:38.240 | talked about the fact that the charitable deduction is a great deduction to have. So

00:34:42.400 | if you were going to donate a thousand dollars, getting a thousand dollars off your income on

00:34:47.760 | your taxes, I mean, especially if you're in a high tax state like California, New York,

00:34:51.760 | et cetera, that can be more than 50%. That's a huge number in the aggregate federal state,

00:34:57.360 | et cetera. But when you donate an appreciated asset, stock, crypto, you never have to pay the

00:35:04.800 | capital gain as well. And so it ends up being not only better for you, it ends up being better for

00:35:10.480 | the nonprofit. I wrote a recent post about this with real numbers kind of running through, but

00:35:15.440 | it's very, very clear. You can use that Bitcoin example that I gave. If you bought a Bitcoin for

00:35:21.360 | a thousand dollars and it's now worth $41,000, well, if you sold that Bitcoin, you'd owe quite

00:35:28.560 | a bit in taxes on it. State, federal, capital gains, et cetera. And if you donated the money

00:35:35.920 | left over, you would have money left over, but it would be minus the taxes. If you donate the

00:35:41.440 | Bitcoin to charity, you get the full charitable deduction for that $41,000 amount. You never pay

00:35:49.280 | the capital gain. So you have more money now to give to charity. Plus you are getting that

00:35:54.720 | $41,000 charitable deduction off the top. So you're winning both ways. So it's very clear

00:36:00.560 | how the numbers work out. If you are in the fortunate enough position to have appreciated

00:36:04.800 | assets and you can donate those, it is better for everyone involved. And then of course,

00:36:12.160 | the one problem with it is it turns out not every nonprofit is set up to actually accept

00:36:17.120 | stock or crypto. And this is actually one of the benefits of donor advised funds.

00:36:22.880 | One of the great things about Daffy, one of our first donations was actually to a local synagogue.

00:36:27.360 | One of the constituents wanted to donate Bitcoin to that synagogue. The synagogue wasn't set up to

00:36:33.040 | take Bitcoin, but they were able to download the Daffy app, contribute the Bitcoin to their donor

00:36:39.760 | advised fund, get the full tax deduction, of course. And then they let us take care of actually

00:36:44.080 | getting the money to the synagogue. But it's a fantastic benefit. I think most tax advisors,

00:36:49.520 | most financial advisors you talk to will recommend at the end of the tax year that if you have

00:36:54.160 | appreciated assets and you want to give money to charity, donating appreciated assets is clearly

00:36:59.840 | the best way to do it. And I love that you can disintermediate this question because one of my

00:37:04.160 | things at the end of the year is, okay, what in my portfolio has enough gains that it would make

00:37:10.320 | for a good donated asset? So the stock that you might've bought 12 years ago could almost be in

00:37:16.960 | anything if it was 12 years ago is probably appreciated quite a bit. And that's something

00:37:22.080 | that I've taken advantage of. Or if you happen to work at a company and you've been there a long

00:37:25.920 | time and you hold some stock from the early days, there are circumstances I've had friends where

00:37:31.040 | it's literally almost a hundred percent gains and you get the most maximum effect. So I love that.

00:37:38.000 | Yeah. And there's a fun hack there. It's actually one of the examples I use. So my first job out of

00:37:43.040 | school was actually at Apple. Clearly I should have held more of that stock because it turned

00:37:48.400 | out the run from the nineties to now is once in a lifetime. But fundamentally, yeah, for employees,

00:37:55.040 | people who hold company stock it doesn't have to be all or nothing either. Like to use your example,

00:38:00.320 | if you have 500 shares of Apple, for example, and a lot of it has a lot of gains, you can donate

00:38:07.200 | a hundred shares of Apple, get that great tax deduction, and that can actually help cover the

00:38:13.360 | taxes from selling some of the rest of your stake, those other 400 shares. And so a lot of people

00:38:19.280 | actually do that thinking at the end of the year, if they have an advisor, they help them with it.

00:38:23.200 | If they do it themselves, though, it's very much thinking about, okay, what's my tax bill going to

00:38:27.200 | be? Do I have some appreciated assets I could donate? Or if I want to liquidate something,

00:38:33.840 | do I have other appreciated assets I can use to help defray some of those taxes, right? And to

00:38:40.000 | your point, it doesn't have to be some go-go stock. It doesn't have to be Bitcoin. In some years,

00:38:44.880 | I've actually donated old ETF shares, a VTI that I've had for a long time because it has appreciated

00:38:51.840 | quite a bit and has a very low cost basis. So once you get that in your head, you realize it's

00:38:56.320 | something you probably should do every year, right? Sometime between Thanksgiving and the

00:39:01.040 | New Year's, you should probably think about what your taxes are going to be. If they're going to

00:39:05.440 | be higher than you expected, think about, is this a good time to give money to charity? And if it is,

00:39:10.240 | look for appreciated assets to do it, and then just put it in a donor advised fund.

00:39:13.440 | And now you have an account dedicated to charity. So anytime you want to give,

00:39:18.560 | you have money already set up to do so. It's almost like the opposite. You've got

00:39:23.120 | tax loss harvesting, and then you've got tax gain harvesting for the purpose of donating.

00:39:27.360 | Yeah, this is exactly right. And I know you're a Wealthfront, and I always will have a soft spot

00:39:33.360 | for Wealthfront, et cetera. One of the things we learned at Wealthfront is that people don't

00:39:36.960 | always think of the tax liability that's sitting in the shares they own, right? They remember what

00:39:41.440 | they bought the stock at or what they bought crypto at. They know where it is now. They don't

00:39:45.840 | think enough about what the taxes are going to be when they sell it, because it turns out you have

00:39:49.680 | to pay them. Once you have this idea that, oh, I can donate assets to charity, it doesn't have to

00:39:55.760 | just be cash, it really opens up your thinking of how to make sure that you invest for the long term,

00:40:02.240 | you have these assets with a low cost basis, and then you can do a lot of good with them

00:40:06.640 | by donating them to charity. If you have, like I did, a donor advised fund already at another

00:40:12.160 | institution, you can donate that to another donor advised fund. So Fidelity Charitable,

00:40:18.240 | if you're listening, sorry, I no longer have a donor advised fund with you. I moved it all to

00:40:22.240 | Daffy. So that was one thing that I didn't realize because it is also another charity,

00:40:27.920 | so you can move them around. So while you can never get the money out, you've donated it,

00:40:32.640 | it's irrevocable, you can move it to another donor advised fund. So you're not locked into

00:40:38.160 | whatever you're using today. Yeah, this is another thing. I remember one of the things

00:40:42.880 | that's kind of the bane of the industry a little bit is somehow rolling over 401ks is still

00:40:46.800 | incredibly difficult and always tortured. We've been talking about this for decades, but somehow

00:40:52.320 | the firms that hold 401ks just make it really, really hard to get your own money to another

00:40:56.720 | institution. Donor advised funds aren't quite as bad, but they really do not make it obvious

00:41:01.600 | that if you ever want to move any of the money, you can move all of it, you can move some of it,

00:41:06.880 | you can always move it to another donor advised fund. And yes, of course, I'm biased. With Daffy,

00:41:11.280 | I have a lot of friends, they have donor advised funds. Actually, it was a feature we missed in

00:41:15.200 | our launch. When we launched a few months ago, we didn't have support in the app for transfers. We

00:41:20.560 | now do, of course. And it was really surprising how many people wanted to move money over and

00:41:26.400 | they didn't know how. And it turns out it's really simple, right? If you have a donor advised fund,

00:41:29.920 | Daffy Charitable Fund has an EIN, it's another nonprofit, you just make a grant to us.

00:41:36.160 | And listen, Chris, totally appreciate moving the whole account over.

00:41:39.680 | That's fantastic. But the truth is, from our point of view, anything that makes you comfortable with

00:41:45.680 | is great. So if you want to move over $1,000 to test it out or a few hundred dollars, if you want

00:41:49.760 | to move over half the account, it's all easy. You just pick the amount, make the grant to Daffy

00:41:54.720 | Charitable Fund. They end up mailing us a check. A lot of the industry still runs on checks as it

00:41:59.360 | turns out. And we credit it to your account and it gets invested in your portfolio however you

00:42:04.240 | selected when you signed up. Behind the scenes, it sounds like it was less easy and that a check

00:42:08.480 | had to go in the mail. For me, it seemed pretty straightforward. Well, you probably saved a lot

00:42:13.360 | of money doing it because those AUM fees are actually quite high. Yeah. For me, it was save

00:42:21.040 | money. And it wasn't my money because I've already donated. So save money for other organizations.

00:42:26.320 | The other thing that I thought was interesting with the product you've built, I don't know how

00:42:31.760 | many other donor advised funds have apps, but I don't think Fidelity Charitable did.

00:42:37.760 | They actually do. Believe it or not, Fidelity Charitable, Fidelity is always well known

00:42:42.160 | actually for some of their investment in technology. I realize in the brokerage industry,

00:42:45.680 | it's hard to give anyone the gold medal, but Fidelity has a decent reputation for investing

00:42:50.640 | in technology. They have an app where you can make donations, but if you want to open an account,

00:42:56.080 | contribute, change your investments, you can't do any of that from the app.

00:43:00.480 | When we launched Daffy, that was actually one of the big differentiators up front and still is. We

00:43:04.800 | are the only fully functional donor advised fund in the app store, one where you can open an account,

00:43:10.240 | contribute cash stock, crypto. You can invest the money and of course, make donations to any legal

00:43:17.280 | charity in the US. So yeah, it's hard to believe that in 2022, that's a rare thing. But I think

00:43:23.440 | that's because most people don't know about donor advised funds. Like I said, historically,

00:43:28.160 | it's been this attach rate bespoke product that advisors use. Most of the energy at the institutions

00:43:34.800 | for it is just a way for them to make sure that the assets stay with them. Fidelity knows that

00:43:40.160 | if you're going to donate stock and you're going to put it into a donor advised fund, it's better

00:43:43.360 | to put it in the Fidelity donor advised fund. They optimize for that experience. As a result,

00:43:48.800 | they don't really think about the fact that a lot of people start their experience these days with

00:43:53.360 | an app. They started the app store. They don't necessarily start it with a search or by walking

00:44:00.240 | into a branch. I found that one of the great things about an app experience when it comes to

00:44:06.160 | donating was in this Ukraine example, we were like, "Oh, we found an organization." My wife's

00:44:10.400 | like, "Oh, I found this one." You didn't have to go to the website and type in all of your name and

00:44:15.760 | your billing information. It was almost too easy. And that's not a criticism, but it was like,

00:44:22.000 | "This organization, yes." I remember sharing a note that I assumed someone maybe that follows me

00:44:29.200 | could see, and it was like, "Done." It was like, "Okay, let's do another one." It made it easy

00:44:35.440 | enough that hopefully it will help remove some of the friction because I know it did for us.

00:44:40.080 | Oh, yeah, for sure. I love that. Our mission as an organization, as a company, is to help people

00:44:45.120 | be more generous more often. It's true. There's a lot of times we have the instinct, we have the

00:44:51.520 | urge to give, but all that friction gets in the way. "I'm going to go home. I'm going to get an

00:44:57.920 | email. I'm going to have to go to a website." There's all this extra work. How often do you

00:45:03.520 | end up... I have kids. I have four kids. I can't tell you how many back-to-school nights I've been

00:45:08.400 | at and sat through the presentation where they walk through and they have a fund. Maybe it's

00:45:12.720 | to support after-school sports or art supplies or something that supports the school. And you're

00:45:17.120 | like, "Okay, I'm going to give to support the kids." But you write a note to yourself. I'm old

00:45:24.240 | school, so I send myself an email so that when I get home at some point, I remember to go to the

00:45:28.880 | website and donate. But when you have the app, tap, tap, tap, you're done. In downtown Los Altos,

00:45:33.920 | a couple months ago, there was a minister doing a bake sale for his organization, which is actually

00:45:39.360 | in Oakland. I had a great conversation with him, found out more about the organization,

00:45:43.280 | wanted to support them, actually didn't want the bake sale because it turns out I shouldn't eat as

00:45:47.920 | many things for bake sales right now. But I wanted to give some money. And the fact that I could pull

00:45:52.400 | out my app, type in the name of his organization, put in $100, donate that money, have it go to him,

00:45:58.720 | it made it easier to give. And it actually felt great because I didn't have this thing also

00:46:06.080 | hanging over my head. There was no to-do item. There was no weird anxiety. I wasn't worried

00:46:13.120 | about keeping track of the donation. I knew it was all in my app. Actually, surprisingly,

00:46:16.640 | one of the features people seem to love a lot, we just went through our first tax season.

00:46:20.400 | And so just the fact that you don't have to chase down donation receipts at the end of the year

00:46:25.440 | for your account, it's amazing how many people hate whatever system they have. They print out

00:46:29.760 | receipts and keep them in a folder by their desk. They have like a Gmail search that they do.

00:46:34.480 | So it just turns out to be very convenient. I think the app is a game changer. I think

00:46:39.040 | it's fantastic. - Yeah, I'm a huge fan and I appreciate it. Anything we missed,

00:46:44.560 | other features or things that people need to know about?

00:46:47.600 | - You know, one of the things that turns out, you talked earlier about the different reasons people

00:46:51.600 | make to not give, but one of the things I've run into is that there are some people out there

00:46:56.720 | who like this idea of putting money aside for charity, like theoretically, and they like the

00:47:01.360 | tax benefit, but they don't like the idea of money sitting idle, right? In their head, they feel like

00:47:07.360 | there's this return that money should have. And so one of the things we designed into Daffy from

00:47:12.480 | the get-go was the ability that when you open your account, you can pick from one of nine portfolios

00:47:17.360 | to invest your money in. We have standard ETF portfolios, low cost, all Vanguard ETFs,

00:47:22.560 | only four basis points, right, for the entire portfolio. We have ESG portfolios, which are

00:47:27.760 | mostly BlackRock products. They're slightly more expensive, but for many people, they want to align

00:47:32.560 | their investing with their giving and their values. And then of course, because it's 2022,

00:47:39.040 | we have pure crypto portfolios. Coinbase is one of our investors. And so if you want to put your

00:47:44.160 | money into a diversified portfolio that includes crypto or even a pure crypto portfolio of Bitcoin

00:47:49.200 | and Ethereum, we do that for people. And that's been really popular. It turns out that that's a

00:47:54.640 | very hard feature to get. Most donor advised funds out there do not have crypto options,

00:47:59.200 | either for contribution or for investing. And a lot of the transfers we've been receiving

00:48:04.400 | for donor advised funds, existing ones, are because we actually have crypto as an option.

00:48:09.280 | If anyone's listening, we've talked about Daffy in the past, but if you go to allthehacks.com/daffy,

00:48:14.320 | you get, I believe if I'm correct, the current promo is $25 in your donor advised fund,

00:48:22.000 | in your Daffy account that you can give away. I also want to jump into the course you teach.

00:48:27.520 | So I looked up, you wrote a blog post and you shared some of the ratings.

00:48:30.880 | And it seemed like everyone loved your class. There was like 7 questions and no one said

00:48:36.000 | this was not well or extremely poor. And I'll send a link. You actually publish all the slides

00:48:42.000 | for the class, which is Personal Finance for Engineers. I'll put the link in the show notes,

00:48:46.320 | people can check it out. But outside of philanthropy, outside of giving,

00:48:51.200 | what do you think people are getting wrong about personal finance that's maybe not

00:48:55.680 | the most obvious answer? What I always see repeatedly is people looking for this secret

00:49:00.640 | to get wealthy. This one trick. I mean, I'm old enough to remember the infomercial age,

00:49:06.240 | late night and the guy on the boat telling you like you could be rich tomorrow and do whatever.

00:49:10.880 | But I know it sounds silly, but I feel like it's an evergreen market. Like I see every cycle,

00:49:16.240 | you see people looking for this kind of get rich quick. It could be get rich quick with crypto,

00:49:20.800 | it could be with real estate, it could be etc. With all these different options,

00:49:24.800 | if you have the right type of account, the right type of insurance, etc.

00:49:28.080 | And I think the biggest mistake that people make is not realizing that the most likely path to

00:49:35.360 | success is to focus on your career, which, by the way, has a high tie to your income. The top line

00:49:43.040 | is actually a big deal. For many people, it's easier for them to figure out how to make an

00:49:47.200 | extra $10,000 than it actually is for them to figure out how to save $10,000. It's one of these

00:49:51.360 | funny things about society. But focus on your income, your skills, your career, that top line.

00:49:58.800 | Spend less than you make. And by the way, to your point earlier about increasing things over time,

00:50:04.320 | increasing your savings rate over time. How many people actually save 10% of their income

00:50:09.440 | because they live off their salary and they don't spend the bonus? That's a very easy way in some

00:50:16.640 | ways to just not build up a lifestyle that assumes you're making that money.

00:50:21.360 | And so I think that a lot of people get the basics wrong. They want to jump to

00:50:25.440 | these special things and they focus so much on things that, if you actually do the financial

00:50:29.600 | work, will earn them basis points, right? One hundredth of a percent, 10 basis points,

00:50:34.320 | half a percent, 1%. And I'm not going to pretend that that doesn't matter.

00:50:38.240 | You compound an extra percent over 30 years, it's a lot of money.

00:50:42.240 | But it's not as big as just focusing on the basics. And by the way, this gets even worse

00:50:47.600 | with couples and with households, right? The amount of dysfunction with the way spouses

00:50:52.560 | treat money or the way people fail to plan together or even talk about money with each other

00:50:57.680 | probably has a lot more to do with financial problems people have than the fact that they

00:51:03.200 | didn't buy Tesla stock five years ago. So I think that tracks with some past

00:51:10.240 | conversations we've had. But one thing that keeps coming up, and I noticed it was interesting,

00:51:15.520 | your final course seems to be a grab bag of what do people want to talk about?

00:51:20.240 | That's right.

00:51:21.200 | It's probably no surprise to anyone listening that it was like, "Let's talk about venture

00:51:25.040 | capital and crypto." And I even saw a slide that talked about NFTs. Where do you think some of the

00:51:31.600 | more exciting things fit into place? And I'll use you as an example. Obviously, you've been fortunate

00:51:37.280 | with some of your career choices and the companies you've worked at, but eventually you got to a

00:51:42.320 | point that you're doing lots of angel investing. How do some of these alternative investments fit

00:51:47.360 | in? And not necessarily to the path to wealth, if you will, but to your investment portfolio?

00:51:54.080 | You've thought a lot about investing at Wealthfront, also at Davi,

00:51:58.400 | for your own life. How do you think things like investing in startups fits in?

00:52:02.320 | Yeah, that's a great question. And I don't want to pretend that I think that those things are

00:52:07.200 | irrational or not worth doing. If you do the math and you think about the system,

00:52:13.200 | a lot of these investments can make sense in some situations. The idea of having

00:52:18.000 | a small percentage of your portfolio in private equity isn't outlandish. Some of the best money

00:52:24.960 | managers in the world who run endowments, et cetera, allocate money to private equity and

00:52:28.800 | venture capital for good reason. Same thing is happening, by the way, with alternative asset

00:52:34.720 | classes. It's been more than 10 years, but the data is coming in. And I have to be honest,

00:52:39.360 | from my point of view, it seems like this argument on crypto, which you saw on the slides,

00:52:44.480 | that says, no, digital assets seem to be a different asset class. They behave differently.

00:52:49.360 | They have different basis. They are not completely correlated with other asset classes. And as a

00:52:54.800 | result, they might be an interesting addition to a diversified portfolio. It's a very rational

00:53:00.800 | question to ask. And actually, I cover a lot of this in my class. I don't have a problem with

00:53:04.960 | these assets. Like I said, the problem is less that people stay away from these things irrationally.

00:53:10.080 | It's usually the opposite. I got a question asked on Twitter just the other day where I was talking

00:53:15.760 | about crypto. Acorns actually added crypto as an option to their portfolio, similar to the way that

00:53:21.120 | Wealthfront did. And the question came in, well, if crypto is so good, why don't you put all your

00:53:25.680 | money into it? And it's like, whoa, that's actually never the answer, almost. Diversification turns

00:53:32.480 | out to be a pretty good deal from most perspectives. But I do like the education to it.

00:53:39.520 | So each of these topics are different. It's a Stanford class, right? So I'm not talking about

00:53:42.560 | venture capital and private equity in a Stanford class. Stanford, I mean, it would just read wrong.

00:53:49.040 | So it's not surprising to me that students always want to know. Many of them are going to end up

00:53:51.920 | going to work for startups or venture-backed startups, et cetera. Some of them will go into

00:53:55.680 | venture capital. Crypto is one of these interesting overlaps where, I mean, I will tell you as someone

00:54:00.960 | who came out of school as an engineer, computer science, et cetera, I've run into digital assets

00:54:06.640 | many times in my career. My first startup that I joined as the fifth engineer was on digital

00:54:12.400 | software distribution, encryption, and how do you do this? And this hard problem of what do you do

00:54:17.840 | with the fact that software can be perfectly copied for free is actually something that was

00:54:23.200 | endemic to the entire industry, the last 50 years. How can you make money on software

00:54:27.680 | if people can make a perfect copy for free? This has affected music and all forms of media.

00:54:33.600 | And even at eBay, I remember doing a strategy once on what eBay's digital asset strategy should be,

00:54:38.000 | digital goods strategy. And at the time, it was not solvable because if you didn't have a central

00:54:42.960 | authority, like what Apple did for iTunes, you couldn't build that platform. So for me,

00:54:47.200 | crypto is a very exciting technology area. There's a lot of interesting work being done.

00:54:51.680 | The energy is phenomenal. But from a financial point of view, the simple argument is like,

00:54:56.080 | let's go to first principles. Do you think digital assets are a thing that have unique value? Is it

00:55:02.960 | a different thing? Does it have value and will it have value long-term? And then what are the

00:55:07.920 | characteristics of that type of investment? To me, those are actually perfectly appropriate for

00:55:13.680 | a class. And I think a lot of the students enjoyed going through it. I was actually surprised. Crypto

00:55:19.280 | was not as popular a topic in any of the previous years as I would have expected. I expected every

00:55:23.680 | student to vote for it. It turns out the most popular topic with students that they asked for

00:55:28.800 | in the beginning continues to be real estate. I don't know what branding or marketing is going on

00:55:34.240 | that's pushing real estate, but maybe it's just that you're in Silicon Valley. It's one of those

00:55:38.000 | areas where no one can figure out how you could ever buy a house. And so real estate is just one

00:55:43.200 | of those options. But I actually dedicated a whole class to real estate because there were so many

00:55:48.960 | requests for it. Yeah. There was a slide you had that was interesting because I feel like every

00:55:54.400 | time I talk to people, there's people who are like, "The path to wealth is to own rental properties."

00:55:58.480 | And then there's everyone else. And that cohort of people believe that that is the best investment

00:56:06.320 | class. And I've met lots of them. Yeah. That's an area that I flipped around on. If you had talked

00:56:10.160 | to me 10 years ago, I probably mostly would have said there's some really unhealthy marketing push

00:56:16.000 | that's across society and the industry that keeps pushing people towards rental real estate as

00:56:21.440 | somehow the best path to financial freedom. That being said, the Federal Reserve, there was a paper

00:56:27.680 | that came out at the end of 2017, I shared in my class, et cetera, that kind of exposed the fact

00:56:34.240 | that most of the data that historically had been aggregated about real estate did not include rental

00:56:39.120 | income, right? So most of the data you saw about real estate as an asset class covered the idea of

00:56:45.040 | the capital gains from it and not the income from it. And so they did a very good job of looking

00:56:50.480 | across 20 different cities in the Europe and the US over a hundred years, all different timespans,

00:56:55.280 | et cetera. And it turns out there's actually a pretty fair argument that says that rental

00:56:59.600 | properties are actually a very interesting asset class. They have lower volatility than stocks.

00:57:05.360 | They don't quite have equity-like returns. But when you do that sharp ratio, when you look at

00:57:09.920 | the risk-adjusted return, rental income, rental properties are better than I think the industry

00:57:16.000 | gave them credit for. And I'm just saying this as a personal story of what we cover in the class.

00:57:20.640 | But I'm not totally surprised it has the draw anymore. I mean, the truth is a lot of people

00:57:26.320 | want control over their financial lives. I mean, I think, yeah, look, I'm a founder, right? You've

00:57:30.880 | been a founder. I think there's a natural instinct from a lot of people, a dream of running their own

00:57:35.280 | business. And in many ways, owning rental properties sounds like a financial investment,

00:57:40.560 | but really it's running a business, right? And I think there are a lot of people who like

00:57:44.640 | running a business, and they like the idea of learning how that business makes money,

00:57:47.840 | and they like learning how to be successful at it. And so it is an investment, but it's also

00:57:54.160 | an occupation in a way. It's a lifestyle. As much as owning a restaurant would be,

00:58:00.400 | or for you and me, it might be a venture-backed software company. But I think that I've grown to

00:58:05.280 | accept the fact that the reason it's so attractive is because people don't look at it purely as an

00:58:09.280 | investment option. They look at it also as a better way to live. Now, I think where people

00:58:14.400 | go astray is, you actually even mentioned this, I think, briefly, considering rental properties

00:58:18.880 | some form of passive income, I think it's too idealistic. It's a job, right? Owning a property,

00:58:26.240 | no matter how much you invest in property management or whatever, this idea that somehow

00:58:30.240 | you're going to be sitting on the beach somewhere and collecting checks does not match the reality

00:58:35.520 | that most people who get into rental properties have to think about. But I think the questions

00:58:40.240 | are reasonable. And especially, I think, by the way, I don't think those questions are going to

00:58:44.000 | weigh looking at what's going on with real estate prices, not just in California or the Bay Area,

00:58:48.000 | but nationwide. I mean, everyone got a crash course in real estate in the last 20 years.

00:58:53.680 | You had the incredible boom in the 2000s. You had the incredible blow up in 2008, 2009.

00:58:58.800 | And now we're seeing real estate across the country surge again. And now guess what? Inflation's back.

00:59:05.440 | So everyone has that topic. Something that seemed like one of those stories that your parents and

00:59:11.200 | grandparents told you, at least in the US, historically, seeing that come back has people

00:59:17.040 | looking at real assets again. So I think for better or worse, you're going to see a lot of

00:59:20.560 | interest in real estate, probably too much, given the realities of it as an asset class.

00:59:25.440 | But it is reasonable that people are interested. But like I said, most lawyers are not going to

00:59:32.320 | find financial success by investing in rental properties. They're going to find financial

00:59:36.800 | success by being great lawyers and actually spending less than they make and investing

00:59:41.120 | that capital prudently. That's just something that I see in the data. It's something that I

00:59:46.560 | believe in. It's what I teach in the class. I asked Morgan Housel for his best hack. And

00:59:51.760 | it was like, "Spend less than you earn and wait." Well, Warren Buffett may not be perfect, but I

01:00:00.000 | will tell you, sometimes he has just the right quotes. I forget which talk show host it was,

01:00:05.440 | that question of like, "You're very upfront with what you do. Why don't more people invest the way

01:00:10.400 | you do?" And he says, "Well, I found in my life that very few people want to get rich slowly."

01:00:17.280 | And it's true. And by the way, you look at his results, most of his money, over 90% of it was

01:00:24.800 | made after he was 70. I think some incredible amount of it was made in the last 10 years.

01:00:29.680 | That's how compounding works. But everyone has an urgency to it. And I understand why. When you're

01:00:35.600 | young, you're young. You want money now. You want success now. You want to build your life now. So,

01:00:40.800 | I think that tension is always going to be there. And so, that's why I'm so bullish on software and

01:00:46.320 | systems. I think that humans are never going to get their emotions out of the way when it comes

01:00:52.160 | to money. As much as you can tell people that this is the way they should reinvest their dividends,

01:00:57.120 | and this is what they should watch on their expenses, and this is how taxes work.

01:01:00.880 | We're busy. We have other priorities. Even if we were fully rational,

01:01:05.040 | we probably wouldn't get around to doing it. And the fact is, we're not fully rational.

01:01:09.440 | And so, this is why I like apps and services. I mean, I like what Wealthfront did for financial

01:01:14.320 | advice and for investing. I like what Acorns does for saving, getting millions of people have some

01:01:19.840 | money at the end of the month that they wouldn't have. And I'm hoping that's what Daffy ends up

01:01:23.440 | helping to do with giving, right? Just systems that make it easier for people to do the right

01:01:28.080 | thing with their money. This has been great. I want to jump last to the quick few questions.

01:01:33.120 | Outside of finance, outside of giving, I always like to ask people, and I prefaced you in advance.

01:01:40.800 | If someone's coming to your neck of the woods, where would you tell them to go for dinner,

01:01:46.480 | grab a drink, and something to do? When it comes to places, I mean,

01:01:49.360 | it depends. There's a little place in Los Altos called The Post, which I like to take people

01:01:54.480 | for lunch, like if they're meeting for lunch. I found that they have a broad enough menu,

01:01:58.080 | and it's nice enough that no matter where you're from, no matter what diet you're on,

01:02:02.320 | no matter what you're avoiding or doing or what, there's something for everyone. And so,

01:02:06.800 | it tends to work when I have people from out of town. Of course, if you're meeting me for coffee,

01:02:10.800 | I'm super boring. It's always going to be at the Starbucks in Los Altos. But for dinner, I mean,

01:02:16.160 | houses. I mean, I'm a huge fan of Alexander's Steakhouse. There's several of them. There's

01:02:21.920 | one in San Francisco, of course. There's actually one in Palo Alto called The Sea,

01:02:25.440 | and there's one down in Cupertino. The Cupertino one's the original one. But if you're looking for

01:02:29.920 | a really high quality steak with kind of a more Japanese elements to it, it's really hard to beat

01:02:37.600 | in my book. That's fantastic. Any suggestion to spend a weekend or an afternoon doing something

01:02:44.000 | outside of San Francisco in the Bay Area? Oh, I'm always a big fan of getting outdoors,

01:02:48.400 | right? So, walking them around Stanford. Stanford's still a beautiful place that I

01:02:52.880 | think actually captures a lot of both California and kind of the environment. It's almost always

01:02:57.520 | warm and full of life. But I like getting outside. Actually, hiking the Dish, walking,

01:03:04.720 | shorelines, beautiful. There's so many parks around that you can actually go to.

01:03:09.760 | But I'm also going to preface this by saying I'm super boring. There's a reason why most people

01:03:15.920 | don't plan their vacations around me. No, I think these are some good tips. I really appreciate it.

01:03:22.480 | Before we head out, where can people find the stuff you're working on,

01:03:25.280 | the stuff you're writing online? Oh, for sure. So, the best place to go,

01:03:29.040 | of course, for Daffy, of course, is go to daffy.org. All the content is there. A lot to read

01:03:35.200 | up on. The articles that I've written are on the Daffy blog. We have some evergreen resources there.

01:03:40.000 | So, if you're interested in philanthropy or giving or anything I talked about, the generosity gap,

01:03:45.520 | the tax savings on donating stock or crypto, you can find that all in the Daffy blog.

01:03:50.000 | I do blog personally still, although it turns out building a startup takes time,

01:03:53.520 | and so not as much as I used to. But yeah, my blog has been running. AdamNash.blog has most

01:03:59.200 | of the information I've published in the last 15 years. And then, of course, if you're interested

01:04:03.840 | in that Stanford class, it's really meaningful for me to push financial education out as broadly as

01:04:09.040 | possible. One of the reasons to do the Stanford class was to make it more normalized, that there

01:04:13.760 | would be personal finance education. And so, if you're interested in any of those decks that Chris

01:04:18.000 | went through, if you actually go to cs007.blog, all the slides for all the last five years are

01:04:24.880 | there. Yeah, I'll link to all that in the show notes. And we said it before, if you're going to

01:04:29.680 | sign up for Daffy and you want to get an extra $25 in your account, allthehacks.com/daffy.

01:04:35.520 | Adam, thank you so much for joining me. No, thank you for having me, Chris. It was great.

01:04:45.200 | [Music]

The Power (and Tax Savings) of Charitable Giving | All The Hacks #50

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