Livelihood
How to be popular on the web
It's a deceptive title -- but in part that's marketing. Seth Godin, master marketer, sums up the best way to drive traffic to your website (or store, or organization, etc.).
Three words: be useful, unique and updated.
Yep, that's about it. If you can be useful to others (offer value), be unique (by positioning and branding, and being memorable and distinctive), keep showing up, and be current, you've got it made.
It's also a good recipe for life.
This free PDF sermon is short, breezy and right on.
-- KK
Money for Nothing
By Seth Godin
2007, 13 pages
Free
Available via Squidoo
Sample excerpt:
No one cares if your lens is good. They care if it's great. Irresistible. The one and only best spot online. Not in your opinion of course, but in their opinion.
Related items previously reviewed in Cool Tools:
Consensus Web Filters
Community Building on the Web
Life Balance
Business self-education
I once dabbled with the idea of getting an MBA. After a life avoiding any work in a business, I wanted to start one of my own and knew zero about it. Like many folks, I thought a heavy-duty school program would cure my ignorance and inexperience. But an official MBA degree can easily cost $100,000. I figured out I would learn more spending $500 in self-education. So I devoted $200 for books and the other $300 actually starting a small mail-order business (the fee went for an ad). In two years I learned more about how business really worked than any MBA graduate I had met. No matter what they tell you, an MBA is not essential for landing or handling a good business job. The chief "skill" you'll come away by your degree is a diploma, and a network of indebted friends in business. The latter is actually useful.
There is another option to an overpriced degree, which is the self-education path outlined above. Pursue your own Personal MBA in tandem with actual experience doing some kind of business. Josh Kaufman has put together an excellent and very hefty reading list which forms the core of his PMBA course. It is downloadable as a free PDF. The recommended readings are wide, deep, holistic, and very good. You could purchase all of these easily available books for $500, and if you combine study of them with actually trying stuff, you'll be far ahead in the business game.
If you go this route, you need to supplement your self-education with a network of live humans engaged in business (the only part of a certified MBA you'll miss).
Kaufman has recently updated his annotated recommended reading list. No PDF yet, but his website is chock full of the new material.
-- KK
The Personal MBA: Mastering Business Through Self-Education
By Josh Kaufman
2005, 33 pages
Free PDF
Available from ChangeThis
Updated version available from Josh Kaufman's website
Sample excerpts:
The Personal MBA is not:
A credential. If you read these books, you won't have corporate recruiters beating down your door, and you won't have a pretty certificate to hang on your wall when you're done. You will, however, have an understanding of business that's comparable to completing a traditional business school curriculum, along with the pleasures of not having to mortgage your life for that understanding. You do not need a certificate to be able to understand, use, and hold an intelligent conversation about advanced business topics. (Employers do, however, respond well to portfolios. If you build a portfolio of notes to capture what you learn through the Personal MBA, you'll have a tangible asset to prove your hard work and dedication during the interview process.)
A stand-alone venture. You can't learn about business solely from books (or sitting in a classroom); you have to be willing to go out and learn by doing. Whether you're working full-time for a company or building your own business, a great deal of your knowledge will develop as a direct result of your day-to-day work experiences, which provide the necessary context for understanding what you read. Reading books is not enough; application of what you read is essential.
Related items previously reviewed in Cool Tools:
Serious Play
Five Rituals of Wealth
Hiring Smart!
Amazon rank trackers
Amazon sales ranks have become a surrogate for measuring actual sales online. When Amazon says a book ranks 2,000 it means it is the 2,000 besting selling book that hour; it doesn't tell you how many were sold. In fact often a few copies sold can move a book's rank, depending on time of day, week, or the rest of the world of books. (Use this chart to make a rough correlation between rank and copies sold if you really need to know.) Nonetheless, because these ranks are public (unlike bookstore sales) and easy to grab, they have become a great way to anyone monitor how a book is selling. In the past it might take 6 months before sales of books were reported. Now authors and publishers with new books will check hourly to see if their rankings have been improved by a radio interview, or book review.
But you don't need to be the author or publisher to have an interest in how a book is selling. Trendspotters long ago discovered that books are good canaries of ideas, and that monitoring clusters of books give you a zeitgeist reading, very similar to Google's Hot Trends, which monitors search terms over time. Also keep in mind you can track other things on Amazon besides books: CDs, games, software. You just need Amazon's ID for each item.
While you can just check the Amazon page to see what a product's ranking is, what you really want is something that constantly tracks an item and compiles the data into graphs, charts, and spreadsheets. There are several websites that do this. I previously recommended JungleScan, the original Amazon tracker, for a free way to track Amazon rankings. The site was abandoned last year (although its owner says he will revive up "someday.")
TitleZ is a new free site (for now), It's been in beta for years. You can track many books for free, and get some handsome graphs of their ranking. The good thing is that TitleZ will instantly give you the back history of a book's ranking back to 2004. The downside of TitleZ is that you can't export the data, or do much else.
A TitleZ track of my 1994 book, above. Below is a comparison chart of my two books in print.
RankForest has many more features, and friendlier interface. Unfortunately, you can track only one book for free. And you don't get historical info; you have to register a book to track it. For more books, and more features you need to pay a monthly subscription, beginning at $3/month and up. Other goodies in the paid version include the option to add other online bookstore rankings, like Barnes and Noble, complex graphing options such as racing two books, alerts, and so on.
There are other trackers out there, some catering to publishers, but these two are the best for non-publisher types.
-- KK
TitleZ
RankForest
Google's Hot Trends
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Related items previously reviewed in Cool Tools:
The Self Publishing Manual
How to Sell Your Book on Amazon
BookCrossing
One-click high leverage giving
This year the father of micro-finance and founder of the Grameen Bank won a Nobel Peace Prize for his work in inventing and promoting micro-loans in the developing world. A micro-loan is as little as a few hundred dollars invested into a one-person business with minimal qualifications. That tiny borrowed amount can launch a vegetable stand, repair shop, or bicycle taxi -- a living in other words. As each micro-loan is repaid (and most are), the effects of that small goodness are amplified and leveraged by being loaned out and invested again and again. Micro-loans are the world's only perpetual motion machines.
Previously I've recommended the micro-finance cool tools of Trickle Up, Opportunity International, and my favorite, Heifer International, as three ways to leverage small amounts of money for maximum global good. (Micro-finance programs are not a panacea. For a critique start with this article in Forbes.)
The news now is that it is there are many other outfits that offer individuals (like us) ways to leverage as little as fifty dollars via micro-finance programs online. Unleashing compounding good is only a few clicks away. Make a loan, or outright grant, using your credit card, or even PayPal.
Grameen Foundation
Inspried by the original Grameen Bank in Bangladesh. Minimum contribution, $100. One of their projects is Village Phone -- cell phones that women buy on loans and then can rent to others for income. "The Village Phone program in Uganda, the first of GF's efforts to replicate the pay phone program outside Bangladesh, continued exceeding expectations in 2005. More than 3,500 microfinance clients have bought and now operate a Village Phone as "Village Phone operators." Besides the boost to operators' incomes, the program is creating a national telecommunications network. Of Uganda's 56 districts, 53 now have at least one Village Phone operator. Often, Village Phone is the first local telephone that villagers have. Having a quick means to communicate has contributed to higher levels of productivity, savings, and safety for entire communities."
http://www.grameenfoundation.org/get_involved/
Namaste Direct
This is one of the most direct person-to-person micro-lending programs. When you give to Namaste Direct, you are informed of the person who receives your loan, how they used the money, and their progress. ND can also arrange a visit to the lendee -- this will turn your loan into a life-changing experience for you as well. But because of this directness the giving area is limited -- currently to Mexico and Guatemala. No minimum contribution.
http://namaste-direct.org/
FINCA Village Banking
FINCA makes loans directly to the poorest villages. They aim their lending to 10-50 neighbors who come together to form a village banking group, and who in turn decide who should get what and how much. FINCA specializes in small loan amounts ($50-$500) for the very poorest. The minimum contribution to their program is $50. While a few hundred dollars is powerful, with only $5,000 you can start a whole village bank for micro-loans, thereby compounding the power of micro-finance to an entire small community.
http://www.villagebanking.org/donate-vbsponsor.htm
Unitus
Minimum contribution, $100. Since they accept PayPal, I found this program really easy to contribute to. (Get with it, others!) Unitus, like Accion below, funds other local micro-finance programs, rather than direct loans to individuals. "Unitus seeks to identify highest-potential emerging MFIs (Micro-Finance Institutions) and help them to achieve exponential growth."
http://www.unitus.com/sections/involved/involved_cu_main.asp
Accion
Accion is an umbrella institution providing technical assistant to local micro-lending institutions. Minimum contribution, $50."ACCION is leading the effort to make micro-lending financially self-sustaining. Micro-lending programs have the potential to cover their own costs. The interest each borrower pays helps to finance the cost of lending to another. In most poverty alleviation efforts, every person helped brings the program closer to its financial limits. Successful micro-lending programs, on the other hand, generate more resources with each individual they help. As a result, well-managed micro-lending programs generate more income than they spend. Once they become economically viable financial institutions, they have the ability to access a virtually unlimited source of lending capital - the billions of dollars invested in the world's financial markets. Several of ACCION's partners have already made the transition from nonprofit, charity-dependent organizations to banks or other regulated financial institutions."
https://www.accion.org/involve_make_a_donation_form.asp
My suspicion is that over time the inherent self-sustaining qualities of micro-lending will mean it won't need charitable support to keep expanding. But the idea is still in its infancy; billions of people are still out of its reach. That means that every dollar given today will not only cascade its blessings on many others, but funding micro-lending now will also greatly accelerate the time when anyone in the world will have access to a small loan.
God bless us all, everyone.
-- KK
Effective small gifts
Has someone ever helped you get you out of a hard place with an act of kindness? If so, you should consider passing that gift onto someone else. You can dispense a few $10 bills from your ATM to the homeless in your area; or you can employ this amazing website which does something similar with greater effectiveness.
Modest Needs, a minuscule non-profit, grants modest (under $200) one-time cash gifts to those who require just a little help to get them through a tough time. A need, if honored, is granted within 72 hours, with no strings attached. Modest Needs does this with commendable efficiency via the web (it's not hard to be broke and still get online), heart-warming sympathy (every request is read by a volunteer), and impressive reach (220 requests granted this year, or 7% of the million dollars sought for). Modest Needs' entire finances are completely transparent on their website. Since their inception they have spent $0 on fundraising and $0 on advertising. They are astoundingly thrifty (total annual cost to run this charitable operation: $24,000). The rest of the small change they collect goes to those to whom small change can make a big difference. They accept contributions from folks like you. It runs fast all year, not just at Christmas.
The founder Keith Taylor began Modest Needs by giving 10% of his $350 a month earnings as a way to return a no-strings kindness paid to him when he most needed it. He told me, "Those who need help can always ask for it at Modest Needs, absolutely for free. How much money we raise matters less - to me, anyway - than simply providing a vehicle for human kindness."
It's quite brilliant. Release a few bucks from your PayPal account. Return a random kindness. Maximize a small gift.
-- KK
Modest Needs
Guidelines for entrepreneurs
You have a brilliant idea. But for a high tech company to make that idea real is an incredibly complex machine to launch. What you really want is someone who has done this before, someone who can tell you how the bankers really make their money, what dilution means, how to quit your current job ethically, and what you should expect at each stage of “capital development.” What you need is John Nesheim, the guru of high tech startups. He’s been involved with Silicon Valley entrepreneurs for decades and has seen everything. Despite being an engineer, he correctly places great emphasis on the emotional costs (to you) at every stage. This book is the best; it doesn’t hide the nasty side, and it is explicit in an engineer’s way about what you have to do. It’s worth its weight in stocks.
-- KK
High Tech Start Up
The Complete Handbook for Creating Successful New High Tech Companies
John L. Nesheim
2000, 342 pages
$32
Available from Amazon
Exerpts:
The entrepreneur must realize that the process of raising venture capital never ends. From the first to the last of the fourteen stages of the venture capital formation process.. the CEO is continuously occupied with problems of how to raise the needed capital. Experienced start-up staff members of both successful and unsuccessful companies said the same thing: “You never have enough money, things always take twice as long to do as you think, and there is never enough time to stop raising capital while you focus on running the company.”
*
Founder CEOs seldom last as employees for more than three years. This is universally lamented by all parties, including the VCs. We will discuss the reasons and cures later in this book. Silicon Valley psychologists report that few founders make it to the IPO without personal emotional trauma.
*
Get in touch with yourself. That was repeated by many of the people we spoke with. Decide what motivates you: joy of work, love of wealth, the satisfaction of getting further than anyone expected, and so on. And decide what failure means to you, as a person, as a company leader.
Patents are useless for most
I’m convinced by Don Lancaster’s (and others’) arguments that patents makes no sense for a small-time inventor or technical genius. Patents guarantee you nothing but the right to fight for your idea. Fighting takes a full apparatus, lots of time, negotiating assets, lawyer fees, and emotional surplus. The same results from fighting (ineffectually 99% of the time) can be had by moving fast and staying nimble. Patents are a corporate game and should be avoided by anyone trying to work outside of that framework. Here’s a lot of encouragement and support from a master non-patent inventor.
-- KK
Case Against Patents (PDF)
Don Lancaster
Exploring the weirdness of shared ideas
This is the book most often recommended to me in the past year. It is very important because Lessig articulates the central reason the web has succeeded - its root as a commons - and proceeds to dissect the problems threatening this commons, and suggests remedies and laws that would protect and nourish it. It is brilliant work, long overdue.
-- KK
The Future of Ideas: the Fate of the Commons in a Connected World
Lawrence Lessig
2001, 352 pages, $11
Random House
Amazon
Excerpt:
As I will argue, in the digital world, all the stuff protected by copyright law is in one sense the same: It all depends fundamentally upon a rich and diverse public domain. Free content, in other words, is crucial to building and supporting new content. The free content among the "wired" is just a particular example of a more general point.
*
This is a hard fact for lawyers to understand (protected as they are by exclusionary rules such as the bar exam), but most of production in our society occurs without any guarantee of government protection. Starbucks didn't get a government monopoly before it risked a great deal of capital to open coffee shops around the world. All it was assured was that people would have to pay for the coffee they sold; the idea of a high-quality coffee shop was free for others to take. Similarly, chip fabricators around the world invest billions in chip production plants, with no assurance from the government that another competitor won't open a competing plant right next door.
*
Commons may be rare. They may evoke tragedies. They may be hard to sustain. And at times, they certainly may interfere with the efficient use of important resources.
But commons also produce something of value. They are a resource for decentralized innovation. They create the opportunity for individuals to draw upon resources without connections, permission, or access granted by others. They are environments that commit themselves to being open. Individuals and corporations draw upon the value created by this openness. They transform that value into other value, which they then consume privately.
*
Contrast this with computer networks. The most striking feature of the early history of the Internet is the repeated assertion by those at its founding that they simply didn't know what the network would be used for. Here they were building this large-scale computer network, with a large number of resources devoted to it, but none of them had a clear idea of the uses to which this network would be put. Many in the 1980s believed the Internet would be a fair substitute for telephones (they of course were wrong); none had any idea of the potential for many-to-many publishing that the World Wide Web would produce.
Where we have little understanding about how a resource will be used, we have more reason to keep that resource in the commons.
*
To the extent you view Napster as nothing more than a device for facilitating the theft of content, there is little usefulness in the new mode of distribution. But the extraordinary feature of Napster was not so much the ability to steal content as it is the range of content that Napster makes available. The important fact is not that a user can get Madonna's latest songs for free; it is that one can find a recording of new Orleans jazz drummer Jason Marsalis's band playing "There's a Thing Called Rhythm."
*
But in light of the emerging technologies for sharing, even the spectrum sold as property would be subject to an important qualification: Other users would be free to "share" that spectrum if they followed a "listen first" protocol - the technology would listen to see whether a certain chunk of the spectrum were being used at a particular time, and if it weren't, it would be free for the taking.
I recognize that idea is jarring - that "my property" would be free for the taking just because I was not using it. But do you recognize why the idea is jarring? The assumption that fuels the dissonance about property "free for the taking" is that the taken property is exhaustible. I may not be using my car at the moment, but that doesn't mean you should have the right to take it since your use of my care will, to some degree, deplete the property I have. Cars are exhaustible resources. Spectrum is not. When I use a bit of spectrum at a particular moment in time, that spectrum is just as good after I'm finished as it was before. My use in no way exhausts the resource. And more important, when spectrum is not used, its value as a resource is not saved. Unused spectrum, like an empty seat on an airplane, is a resource that is lost forever.
And pollution is precisely the way we should think about old uses of spectrum: large and stupid towers billow overly powerful broadcasts into the ether, making it impossible for smaller, quieter, more efficient uses of spectrum to flourish. Why should these smokestack technologies get protection, when the steel mills did not? Why not force them to improve their technology - to reduce the pollution they spew forth into the ether - so that others could innovate in yet unimagined ways?
How to get rich slow
Wealth seems to grow out of a discipline, a habit, a practice that is applied daily and harvested decades later. Not everyone wants to accumulate a pile of money; but most people would like true wealth. This guide addresses that desire. I’ve gone through the entire New York Times bestseller list of how-to-get-rich books, and beyond. This is the book that most matches my own experience, and what I observe of the rich around me. It’s wise where there is often little wisdom, and yet practical, but not so practical it goes out of date. (For that kind of advice see Andrew Tobias’s The Only Investment…)
–KK
Five Rituals of Wealth
Tod Barnhart
1995, 189 pages
$13
Harper Business
Amazon
The biggest lie people tell themselves about wealth is that if you make more money, you’ll be rich.
•
Here’s the problem: Most of us have been taught little or nothing about wealth. Most people grow up believing they should pay all their bills first and then play with what’s left. There’s some sense to that strategy. Certainly, it teaches us responsibility as debtors. The thing is, we’ve never been told that we count as much as our creditors. No one has ever said it’s okay to save and pay ourselves first.
•
All the time I hear people say, “If I just earned more money, then I could feel wealthy or pay my bills or use money as a tool to do good things, or save for my future.” The lists seem to go on forever, but believe me when I say: Before significant wealth will come your way and stay, you have to master the money you already control.
•
When it comes to saving and investing for your future, the historical rule of thumb is 10 percent. Save 10 percent of your income every single month and you’ll grow wealthier than you dreamed possible.
•
In some circles, budgeting is a plan for the future – not a record of the past. I prefer to keep track of my expenses as I spend, rather than plan a budget out to the year 2010. That just feels too constraining. I call my as-you-spend record keeping “take-control budgeting” and recommend it over forward-planning your expenses. I think there are just too many variables in our spending patterns to plan our future expenditures to the dollar. Furthermore, I think that most people find the money to buy the things they really want or need, so the goal here is to be aware enough of your cash flow to spend money only on things you really want. This awareness is accomplished by prioritizing your expenditures, which will be explained shortly. I think you’ll find, as I did, that if you just keep a record of your prioritized expenses and balance them every month against your income, you’ll instinctively know what to do next.
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So successful investing is not a matter of which new theory is hot lately, or when to buy low and when to sell high. It’s a matter of getting invested, staying invested, and reinvesting the dividends over time. The accumulation of wealth is virtually that simple if you side with time.
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To many people approach being a giver from the wrong perspective. They look at the resources they possess and invariably fail to see any “extra” they can part with. That’s wrongheaded thinking. Remember: If you don’t feel secure enough to give, you’ll never feel wealthy at the deepest level.
•
You can’t give just a tiny bit and sit back, waiting for your ship to come in. You have to give with selflessness. And, if you don’t feel like you can, then you must. It’s the only way you can break free. We’ve already established how wealthy you really are, regardless of your situation. You know that you’re wealthier than the majority of the world. You have to ask yourself: How rich is rich? How much is enough? How wealthy will I have to be before I become a good steward?
You know the answer: It all starts in the belief that you’re wealthy right now.
Where we give
There's no shortage of opportunities to support important causes. Lots of charities are local and community based. Some are more internationally and future-oriented such as Amnesty International, EFF, Long Now Fondation, World Vision, the ACLU, and Oxfam to name just a few. Everyone can add their favorite.
But let's say you were interested in a "tool" to leverage the least amount of money into the largest measurable effect over time. For that I'd like to recommend a type of giving that multiplies itself. Over the years, these are the criteria I've adopted for this challenge:
1) The help is aimed at the lowest, those with the least, where small makes a huge difference.
2) The gift expands itself, gaining amplitude with each cycle.
3) The range is global.
Think of it as enabling philanthropy: take a minimum of money and aim it at the precise point where it can do the maximum good, multiplied by many generations. Maximum good is measured simply: when you enable someone to enable someone else. That is a virtuous circle.
I've found the following three do-good organizations to meet these criteria. They fund the neediest in the world. They are highly-evolved programs that produce amazing results. And one tangential result is that when we give to these three, we feel optimistic.
--KK
Gifting breeding animal pairs globally
For fifty years the Heifer Project has been providing families in developing countries (and parts of the US) with breeding pairs of animals: cows, goats, pigs, rabbits, water buffalo, ducks, and so on. Even in the world's poorest regions the cost of a cow or goat can exceed a year's income, preventing many families from acquiring animals. When a family receives a breeding pair they get meat, milk or eggs, but more importantly, they now have a source of income as the offspring are sold.
The deal with Heifer Project is that the recipient must agree to give one breeding pair of offspring away to another family, thus paying the gift forward. Therefore a small amount of money contributed now will multiply manyfold as families gain food, pride, a source of income, and the means to help someone else. It's hard to imagine a better gift, or a more practical, proven lever in making a difference in communities of need.
Heifer International
Micro-credit loans globally
Micro-financing is quite the rage in international circles for one very amazing fact. The payback rate on tiny loans to the workers in developing countries is greater than the payback rate for large loans to their home countries. In other words, from an outright profit perspective, you are better off loaning money to a Bolivian peasant than to the Bolivian government. Furthermore, there is now no doubt that Bolivia itself, and any other country, is much better off if investment goes directly to their poorest citizens than to the government. Several non-profits, starting with the Grameen Bank in Bangladesh, have pioneered micro-credit loans on a large scale and for large investors. I've found the easiest way for a helpful citizen to contribute funds to a wide variety of micro-loan programs in different parts of the world is through Opportunity International. Opportunity International has been providing micro loans for 30 years, even before the term microcredit was coined. They work through Trust Banks, groups of 20-30 (mostly women) borrowers who meet weekly for encouragement and to cross-guarantee the loans.
Opportunity International
Global micro seed funding
Rather than dispense loans, Trickle Up issues outright grants, but with strings attached. They provide seed capital and training for micro-enterprise hopefuls. Maybe someone with ambitions for a food stall, or a repair shop. A typical deal is a $100 conditional grant. Unlike in a micro-loan program, grantees don't have to pay the money back, but they do have to get trained. Grantees must commit a minimum of 250 hours in the first 3 months to their venture, reinvest at least 20% back into it, and keep an account ledger, among other conditions. Last year 10,000 business started via Trickle Up donations, and 30,000 budding entreprenuers benefited from this global program. There is huge emphasis on training for very basic business skills. And follow up expansion grants are offered, too. About 70% of grantees are women.
Trickle Up
 Sampa rebuilt her life after rebel attacks by starting a restaurant
Why to give now
God punishes one generation when it accepts the undiminished wealth of the previous generation. The way to escape perpetuating generational richity is to die broke. But what about college for my kids, or when I'm sick, old, or retired? This book has answers for you and very specific tactics for the liberation of all from the myth of inheritance.
--KK
Die Broke
A Radical Four-Part Financial Plan
Stephen M. Pollan and Mark Levine
1997, 305 pages
$14
Amazon
Excerpt:
You are not a corporation - you are a human being. Your money shouldn't outlive you. You should exit life as you came into it: penniless. Your assets are resources to be used, for your own benefit and for the benefit of those you love. Every dollar that's left in your bank account after you die is a dollar you wasted. Use your resources to help people now when you know they need it, when it will do the most good, rather than hoping they'll be helped when you're dead. The last check you write should be to your undertaker… and it should bounce.
*
Inheritance is a terribly inefficient way to pass wealth to others.
*
You need to shift to a more flexible view of work and career, one that abandons the ultimatum of retirement - a false choice between full-time and no time…. Similarly you need to shift to a less rigid approach to earned income. No longer can you look at your earned income as continually increasing up until age sixty-five, at which pint it will stop entirely. From now on you need to approach earned income as you do unearned income. It may grow, it may be stagnant, or it may decrease, all depending on market conditions and your own choices.
*
The best metaphor I can think of for today's pursuit of retirement is of a mass of lemmings busily struggling up a steep cliff and then jumping off the cliff into the abyss.
*
Dying broke means living well.
Your own personal foundation
The only sane antidote to massive wealth is massive philanthropy. But giving is a habit that is best begun before you are loaded; the great philanthropist Carneige began when he was making a few dollars per week. Indeed, some of the most influential funding in history has been small, but creative, grants.
You can write a check any time the spirit moves you, but like all things in life, they are tools that can improve your aim. One tool of philanthropy is a personal foundation. A foundation gives you flexibility and can increase the amount you can give. However you can spend half your fortune -- no matter its size -- creating and maintaining a foundation, or you can do it the easy way, a way that is suitable to middle class assets.
The Fidelity Charitable Gift Fund provides most of the functions you, a non-tycoon, might want from a personal foundation. Best of all, it requires a minimum of "only" $10,000. Here's how it works.
You deposit your contribution in Fidelity Charitable Gift Fund which in turn invests the amount in one of their mutual fund pools. You get to choose the level of risk/payback you want for your money, but Fidelity chooses and runs the fund. Whenever you want to make a donation, you tell Fidelity, and as long as it is a tax-deductible outfit (it can't be an individual), they send 'em a check. You can do this online with a very graceful and easy interface; it even remembers all the details of your frequent grantees, so you just need to click.
The main advantages are four:
1) The money grows. Like a real foundation, your money is invested, and the returns on those investments are reinvested and further enlarge your fund for giving. Depending on what percentage you disperse each year, the total can accumulate significantly. (Fidelity suggests you give at least 5% of your fund each year.)
2) You can gift stock (or securities) directly to the fund. When highly appreciated stock (as in a boom), is cashed out it triggers huge capital gains tax for the owners. With a personal foundation you can donate the stock without cashing it. The Fidelity Gift Fund account is credited with the high value of the stock at market value, but the giver (you) doesn't have to pay for the huge gains, because those gains are now the gains of a non-profit fund. You receive the normal charitable giving tax deduction for the market value of the stock. You can do the same with ordinary stock investments. Say you were lucky enough to buy 20 shares of Amazon when it was at $20 per share. Say when Amazon hit $200 per share, you decided you wanted to do something creative and meaningful with your small fortune of $4,000. You bestow the Gift Fund with the 20 shares of Amazon, which then credits your philanthropic account with $4,000. But instead of having to pay a capital gains tax on $3,600 ($4,000 minus $400, your cost), you get a tax deduction on $4,000. That $4,000 can then amplify further (see point 1). A common tactic for Gift Fund users is to donate their highest flying, most inflated stocks for maximum philanthropic joy and smallest capital gains pain.
3) It's free. Well, almost free. Fidelity charges the usual industry standard of any mutual fund (less than 1%), but this is far less than hiring a personal fund manager, or even setting up a private foundation yourself.
4) You get to name your foundation anything you want. Having a foundation of your own focuses attention on keeping it full, and encourages discipline in giving it away.
Because accounts within the Gift Fund are so easy to set up they are often used for giving circles. A giving circle is a group of friends or advocates who decide to combine their resources to fund a cause. They create a virtual foundation without the usual expense and work of setting up a bona-fide non-profit (which is needed to receive funds, but not give them) and collectively research and debate who/where/how to fund their mission.
The Gift Fund is so useful for givers of more modest means that is has drawn in about $2.5 billion dollars, making the collective Fidelity Charitable Gift Fund the third largest public foundation in the US, and the number one foundation in total amount of money dispensed last year. Of course it is not really one foundation, but 27,000 small foundations, many of them pioneering creative philanthropy. You don't have to fund the opera and hospitals. As an example, here are some donations clients of the Gift Fund recently made:
* Support for a historic preservation speaking tour
* Rebuilding a scout camp destroyed by fire
* Support for an archeological dig in a national park
* Support for Native American students majoring in science
* Supplying an animal shelter with an examination table and equipment
* Support for a summer theater
My experience with the Gift Fund has been great. It was simple to set up, with a minimum of paperwork, and when it comes time to make a donation, the effort is pretty painless. Having a convenient do-it-yourself vehicle, with tax breaks, and investment upside, has encouraged our giving.
--KK
Giving Account
Fidelity Investments
Charitable Gift Fund
82 Devonshire Street
Boston, MA 02109
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