Episode #398: Adam Nash, Daffy – Why This Prominent Silicon Valley Operator & Investor Wants To Make Charitable Giving A Habit
Guest: Adam Nash is the co-founder & CEO of Daffy.org, a not-for-profit community built around a new, modern platform for giving. Previously, he was the President & CEO of Wealthfront. He’s also held roles at DropBox, LinkedIn and eBay and is a serial angel investor.
Date Recorded: 3/2/2022 | Run-Time: 52:50
Summary: In today’s episode, Adam starts off by giving an overview of Daffy, which supports over 1.5 million charities, schools, and faith-based organizations. Then he explains why providing low-cost, donor advised funds through the app store may help spur people to donate and help causes they care about. Adam shares how working at or advising companies in the past has impacted how he’s built Daffy, whether it’s the social aspect of LinkedIn, the automation of Wealthfront, or growth strategy of Acorns.
As a special offer for listeners of the show, visit daffy.org/meb/invite and get $25 to give to your favorite charity.
Sponsor: MUD\WTR is a coffee alternative that supports your morning ritual without all the anxiety and jitters of coffee. Get your starter kit and free frother at mudwtr.com/meb and use code FABER for 15% off.
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Links from the Episode:
- 0:40 – Sponsor: MUD\WTR – Use code “FABER” for 15% off
- 2:52 – Welcome to our guest, Adam Nash
- 4:22 – Overview of Daffy and donor-advised funds
- 13:52 – Embracing automation and behavioral elements into the product
- 21:35 – Thoughts on typical pushback for donor-advised funds
- 25:23 – The process of choosing a charity to give the money to
- 27:54 – Insights and surprises from building and launching Daffy
- 31:08 – Overview of how Daffy invests in crypto
- 33:52 – Claim $25 to donate to a charity of your choice
35:32 – Ideas for Daffy’s future and what it could look like going forward - 38:12 – The interest and mindset around Personal Finance for Engineers
- 42:08 – Adam’s thoughts on improving personal finance education and the wealth/income gap in the country
- 46:33 – Adam’s most memorable investment
- 49:15 – Learn more about Adam; daffy.org; Twitter; Daffy Blog
Transcript of Episode 398:
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Sponsor Message: Today’s episode is sponsored by MUD\WTR. MUD\WTR is a coffee alternative with four adaptogenic mushrooms and ayurvedic herbs with one-seventh of caffeine as a cup of coffee. You get energy without the anxiety, jitters, or crash of coffee. Each ingredient was added for a purpose, cacao and chai for mood and a microdose of caffeine, lion’s mane for alertness, cordyceps to help support physical performance, chaga and reishi to support your immune system, toric for soreness, and cinnamon for antioxidants. If you’re a long time listener of the show, you may have heard me say I’m having a couple of MUD during an episode before. My current favorite is the new Rest Blend, a non-caffeinated tea, which has become part of my evening routine. And not only am I an avid customer, but I love the product so much I became an investor in the company. If you haven’t listened already, check out episode 259 when I spoke to MUD/WTR founder and CEO Shane Heath about why he started the company. MUD is Whole30 approved, 100% USDA organic, non-GMO, gluten-free, vegan and kosher certified. Go to mudwtr.com/meb to support the show and use the code MEBMUD for $5 off. That’s mudwtr.com/meb, and use the code MEBMUD for five bucks off. And now back to the show.
Meb: What’s up, everybody. We got a great episode for you today. Our guest is Adam Nash, a prominent Silicon Valley operator and investor who has turned his attention to philanthropy with his newest venture Daffy a non-for-profit community built around a new modern platform for giving. In today’s episode, Adam starts out by giving us an overview of Daffy, which supports over 1.5 million charities, schools and faith-based organizations, then he explains why providing low-cost donor-advised funds through the App Store may help spur people to donate and help causes they care about. Adam shares how working at/or advising companies in the past has impacted how he’s built Daffy, whether it’s the social aspect of LinkedIn, the automation of Wealthfront or the growth strategy of Acorns. There’s a special offer for listeners of the show. Visit daffy.org/meb/invite and get $25 to give to the charity of your choice. Again, that’s daffy.org/meb/invite or click the link in the show notes to get 25 bucks to give to the charity of your choice. Please enjoy this episode with Daffy’s Adam Nash. Adam, welcome to the show.
Adam: Yeah. Great to be here.
Meb: Where do we find you today?
Adam: Oh, I’m sitting at Daffy headquarters, Los Altos by Stanford.
Meb: We’re going to go deep on Daffy in a minute, but we got to ask a question that all the listeners I’m sure are most interested in, which is what is going in the garden this year. Has it started already?
Adam: Good question. No, I have little rhythms to life. These sorts of things. Different times. I tend to plant the garden after I get my taxes in, so mid-April.
Meb: Listeners, if you don’t follow Adam on Twitter, we’ll add his handle on the show note links. He’s got some great garden porn that he produces every year. My green thumb is really pathetic. I used to have a roof deck down here in Los Angeles and we had a big American Bulldog. The thing weighed 130 pounds. And I used to try to go a bunch of tomatoes and cherry tomatoes in the roof. For the life of me, the entire summer could not grow any cherry tomatoes. And one day I was sitting up there hanging out with some friends having a beer and watched this giant American Bulldog walk across the deck, grab with his mouth so gingerly, a cherry tomato, eat it and walk off. And I was like, “That’s what’s been going on for the last few months, why I’m the world’s worst gardener.” It turns out it’s just this giant mud. So, anyway,
Adam: No, it’s funny you say that. We got a new golden retriever a few years ago. So he’s about three and a half now. And I noticed last year he definitely, for some reason, gets in the garden. You know, he’s supposed to stay away from the green tomatoes, etc., but for some reason, he cannot stay away from grabbing those tomatoes if he can.
Meb: All right. Well, let’s talk about giving. You got a new…is it okay to call a startup? When did this puppy launch?
Adam: We founded the company in 2020, so right in the middle of the pandemic, which was interesting by itself. Raised our seed round at the end of 2020, but we were in stealth most of 2021. So we just launched Daffy a few months ago. Very excited. The reception has been fantastic, and it seems like people genuinely are excited about this idea of using a FinTech platform to help people give. It seems very timely, at least, in terms of where everyone is after this pandemic.
Meb: So give us the one-minute, two-minute overview of what Daffy is and we’ll kind of dig in from there.
Adam: Daffy at a high level is a not-for-profit community. It’s built around a new modern platform for giving with this basic idea that everyone on the platform makes a very simple commitment. It’s an old-fashioned one, which is like, yes, you should save your money for a rainy day but you should also be putting some money aside for those less fortunate than yourself. So by now you know I’ve been involved with Acorns the last five years on the board, etc. That company has been so successful helping people save a little bit of extra money so they don’t have nothing at the end of the month. We thought that we could use the same technology and features to help people give by letting them put money aside in an account. And, of course, given that it’s a charity account, we use a donor-advised fund as our back end. That’s actually what the name Daffy means. It’s the donor-advised fund for you.
Meb: I couldn’t guess the last two letters. I got the DAF part. I didn’t get the FY. All right. So a lot of listeners, I mean, we have a very high-level professional audience, but I feel like many still probably have an idea of what a donor-advised fund is, but many don’t have one. So tell me a little bit about what a donor-advised fund actually is and what does that mean to all the listeners?
Adam: It’s a good question. Actually, it’s a very common question because I think we’ve gotten to the point now where everyone knows what a 401(k) is and more and more people know what a 529 plan is for saving for college. But this idea of having an account dedicated to charity is still relatively new for most people, not at the high end. It’s very popular with high net worth clients, ultra-high net worth clients in the advisory business. Because actually, the donor-advised fund is a fantastic financial product. If you think about it, when you give money to charity, you have two problems you have to solve. One is how much can I afford to give to charity? And the second one is who do I give it to? And our tax system doesn’t make it easy to do each of those in phase because our tax system is annual. So if you get paid a big bonus or you have an equity event or some windfall, if you have that windfall in October or November, you have a very limited time to give money to charity if you want that tax deduction. The donor-advised fund just solves that problem. You can donate cash, you can donate stock, you can donate crypto. You get the tax benefit for a charitable deduction right away. And then you have this account that’s invested in any portfolio you choose where that money grows over time, and when you want to give to a cause or an organization that you believe in the money is right there. So it’s like having a separate wallet for charity, but most people come into it usually when they have an accountant or an advisor tell them, “Hey, given your windfall this year, you really should consider using a donor-advised fund.”
Meb: Historically speaking, the incumbents in this space are who? If I wanted to pre-Daffy, if I wanted to go sign up for a donor-advised fund, what are my choices?
Adam: Well, there are a couple of large choices. So almost all the national brokerages, retail brokerages offer a donor-advised fund. In fact, the biggest in the country I believe is still Fidelity Charitable. So Schwab Charitable has Schwab’s donor-advised fund. Vanguard has Vanguard Charitable. So almost every big bank and brokerage has a donor-advised fund at this point. The other option is that there are nonprofits, community foundations that offer specialized donor-advised funds, some of which are very large, some of which are local. There are actually about 1,000 providers across the U.S., but most of them are pretty small. The biggest are what you’d expect, the Fidelity, Schwab’s and Vanguards.
Meb: And traditionally, what is the incumbent model as far as charging? Is it AUM fee? Is it banks sort of set up? How do they run these?
Adam: Oh, we’re getting into the spicy topics right away. This is great. Most donor-advised funds that people have heard of are partnered with investment managers in terms of their organization. So Fidelity Charitable has partnered with Fidelity Investments, Schwab Charitable with Schwab, of course, and Vanguard, etc. Their model is actually barred from the investment world. They tend to charge a fee based on a percentage of assets under management. And because these accounts tend to not be as large as other types of accounts, those fees can be fairly high. So Fidelity, for example, has no account minimum, but they have a minimum annual fee of $100, which quickly turns into 60 basis points. So you can imagine how much that would cost for a $100,000 account. You’re talking about hundreds of dollars a year. Even Vanguard. I think Vanguard’s minimum for a donor-advised fund is $25,000, and then their fee up to half a million is 60 basis points as well.
Meb: Really. So very unVanguardian of them.
Adam: The truth is these organizations haven’t invested a lot in technology. Obviously, the FinTech revolution the last 10 years has been a lot about reinventing and rebuilding a number of financial services and platforms, but they haven’t hit this area yet. This is still a place where people are mailing around PDFs where you have teams of people manually verifying nonprofits. The costs are probably in line with what they have to do. But the truth is it isn’t a very big product for them. It’s not a big business for them. They support it because if you have a customer that wants to have all their money in one place, this is one of the types of accounts that you have to support. When we set up Daffy, we said, “Well, do we need to do things differently? Is that just the way these things run?” But one of the problems, of course, with AUM-based businesses, AUM business, of course, is great in a whole, but when it comes to this business around charity, it sets the firm at odds with the customer base in a couple of ways. The first way is the most obvious is who can afford to have a large account set aside for charity? You’re getting to a very rarefied customer base. So you’re not going to have that many customers so you tend to have to make a lot of revenue per customer.
And then the second thing, of course, is that the point of these accounts is to give the money away. I mean, there’s been a lot of political discussion about this, but the whole goal of a donor-advised fund is not to squirrel away money somehow tax-deferred. It’s actually to put money aside so that you can give it to organizations you believe in in an appropriate manner. And the problem with an AUM model was that if you have a $100,000 account with Fidelity and then you give $10,000 to an organization, well, Fidelity’s revenue just went down. When we looked at different business models for Daffy, we tried to really open up. I mean, this has been the great thing about FinTech. We’ve seen all different types of business model in the industry. And we decided that actually, an old-fashioned nonprofit business model was the right fit for a donor-advised fund, which is to have it be membership-based. Most churches and synagogues are membership-based. Most community centres are membership-based. When you join Daffy, you become a member. You pay $3 a month just like other nonprofits that you might join as a member. If you want to donate unlimited amounts of stock and crypto, we have a higher tier of membership, which is $20 a month. But the whole idea was to get the business model out of the way of the mission, which is to make sure people actually do give this money to organizations that need it.
Meb: Dumb question. I don’t know the answer to this having never had one. What happens if someone is like, “Oh, crap. Got divorced, life event, my house burned down.” You can’t take the money out, can you? Like once it’s there, it’s there.
Adam: That’s right. So part of the way donor-advised funds work is you’re making an irrevocable donation, basically, to the nonprofit to hold the money for you. You still have a lot of potential influence on the money. You make recommendations where to donate to. And every donor-advised fund has their own rules about what organizations they support, but Daffy supports basically every legal and registered charity in the U.S., over 1.5 million of them. But yeah, you can’t come back and ask for the money back. The IRS will not allow that.
Meb: What do you guys do? So let’s say I donate a bunch of Dogecoin or IBM stock. Is it an immediate sale on y’all’s point? Do you hold that per instructions? Like how does that work?
Adam: First of all, can I just say I’m loving that barbell strategy there between holding IBM and Dogecoin. It’s great.
Meb: I don’t know if that’s a barbell. Both those are probably going the way of the dodo bird. We’ll see, but yeah. All right. Keep going.
Adam: We liquidate immediately. So, for example, let’s take crypto like Dogecoin. We saw a lot of crypto contributions in December of last year, mainly because the tax benefit of donating appreciated assets is so phenomenally large. A lot of people think of it in November, December as the tax year is closing. But yes, if you had a successful investment in Dogecoin or IBM, it had appreciated, you basically use our app. You send the assets to us, we liquidate them and invest them in whichever portfolio you selected. So we have three standard ETF portfolios, classic low cost, diversified, different percentages of stocks and bonds, etc. We have three ESG portfolios for people who believe that they want their investments aligned more with their values using BlackRock funds. And then, of course, we have three crypto portfolios which have been increasingly popular the last couple of years in case you really want to take a shot at growing your assets there. But no matter what you contribute to the fund, whether you contribute cash, stock, or crypto, it gets invested in the portfolio of your choice.
Meb: So I signed up this morning, so now I’m a Daffy customer. I’ve funded it with a deposit, but I think the most impactful thing that you guys have set up which drives everything in, not just FinTech, but seemingly in life is aligning the incentives. You touched on this earlier. We said I think most people in America are super generous, but unless you set it up where it’s recurring, all the research around 401(k)s and target-date funds goes to show that, hey, you end up in a much better place if you just automate this or have it going. There is that spread between I’ll do it someday or I’ll donate eventually. But unless you have it worrying around, it feels like that ends up being a pretty big behavioral nudge that needs to be there. Is that kind of part of the design and building this out?
Adam: Yeah, absolutely. That was one of the big insights that led to the product. I’m old-fashioned when it comes to designing technology products. The best way to come up with features is to actually just talk to people. So when we started Daffy, even before we had the name Daffy, I spent a lot of time on calls, on Zooms with people all over the country talking to them about their giving. And it was really interesting. You know, I asked people three simple questions. The first question was, how much do you think people should give to charity every year? It was amazing. No one agrees, by the way. Some people use percentages. Some people use numbers. Some people, it depends on how well they did this year. Other people, it’s more of no, this is a way to live. Almost like meditation. You should give something every week, every day. So everyone has a different opinion. They do have an opinion, though. What I was very interested in was almost everyone I talked to believes that you are not living the right way if you’re not giving money periodically to those who need it. It’s that old-fashioned dinner table. No matter what’s going on in your life, there are people out there less fortunate than yourself and you should be putting some money aside for them. So the second question was, how much do you believe that you should give to charity every year? And I was looking for if there was anywhere people excluded themselves. The minor thing that people did was mainly they tried to benchmark themselves against other people they knew, which was actually hard because they don’t know what other people give, for the most part. It’s not something people really talk about. So you had a little bit of people saying, “Well, I make more than average so I should probably give more than average,” but very hand-wavy, nothing specific, but it was consistent with their first answer.
The amazing thing to me, though, was that third question. I said, “Well, how much did you actually give to charity last year?” That’s where you got a lot of people taking a pause. A lot of people thinking where they realized that they knew that they wanted to give. They believed they were the type of person, a generous person, the type of person who helps out whatever cause they believe in, but then they realize that they just didn’t get around to it. I mean, you and I both know like life is busy. We have work, family, social. I mean, let’s not forget we also had a pandemic. Look, I don’t think so. No one was really focused. But you’re 100% correct. It shouldn’t have been surprising. The behavioral research is all very clear. If you don’t make a commitment upfront to a number and automate it, how much would people save for the retirement if it wasn’t automated? Even income taxes.
Meb: This is why we say the example of housing and wealth in the United States for the past 100 years. Yes, housing, it’s a fine investment. It’s not amazing. It’s not awful. But the fact that it forces you to save money that you otherwise would spend, you know, is what drives it. Like the whole decision to save in the first place is what drives us. The same thing with the giving is like the decision to put it over here in this bucket I think is a great hack. Someone was talking about…they said one of their ways of doing something is they set up a fun design for…I forget what it was, travel or something, and they say, “You know what?” Because they were really bad at spending money because they were poor when they grew up and once they’re older, they have money, but they just can’t bring themselves to spend it so they put it in this bucket. They said, “Here’s the amount I’m going to spend each year on travel. If I don’t spend it, it has to all go to charity.” So it has a dual impact. One is it ends up making them, forcing them to spend on travel, but also, B, the rest ends up in charity. But at least that’s like a system. Not having the system is the big muscle movement that mucks all this up, it feels like.
Adam: You’re exactly on point. This is what we’re trying to do. So the big idea behind Daffy is just that everyone should have a goal, whatever your goal is. It could be a few $100. It could be thousands of dollars. Obviously, different people at different places in their life. But the idea is to just pick a number and then automate it. So when you use the Daffy app, you pick a goal, whatever number you want, and we even have a calculator to help you figure out what number might be appropriate for you. We even license data from some private sources to tell you, for example, based on the city you live in what the median household gives to charity every year, which is kind of interesting. But whatever number you pick, you automate it. And then our whole idea is that once you have that money going into account for charity, it frees you to then think about that second question, which is really the important one, which is who do you want to give it to? And because the money is already put aside, it’s easier to give. This is one of the benefits, the mental accounting you’ve mentioned, the behavioral elements, just having a wallet. I mean, we saw this, by the way, back in the day when I used to work at eBay. When people had money in their PayPal wallet, they just spent a little bit more easily. It’s one of the reasons PayPal was so good for eBay back in the day. A lot of the insight behind Daffy is saying, “Well, why can’t we do that for giving?” We’ve done it for shopping. We’ve made it very easy to spend money to buy stuff. We’ve made it increasingly easy with FinTech to save and invest. Those same techniques should work for giving. And so, when we did the research, we actually discovered there are a number of academics who found that same fact years ago. And I put out a piece. It looks like we could possibly improve giving for everyone on an average of about 32% if we just got people to pick a goal and automate.
Meb: We will be curious like in a year or two or three years how the statistics bear out on this. Will be fun to watch.
Adam: We’re spending a lot of time on this, but the goal with Daffy is we’re not trying to tell people how much they should give or how generous they should be. Everyone’s life is complicated and makes these all judgments. But, in some ways, Daffy is based on a very old-fashioned idea that it’s a better way to live, to have some system to put money aside for those less fortunate than yourself. And what we’re hoping for is that people who use Daffy will feel good about themselves, about their impact. I wrote a piece about this a few weeks ago on my blog about my first giving goal, but it turned out I didn’t have a giving goal until I opened my first donor-advised fund about a decade ago. And I got asked a simple question by my accountant, which is like, “Well, how much do you need to put in this? How much do you give every year?” And it just turns out no one had asked me that question before. I picked a number. My accountant then said, “Well, of course, it’s better to prefund this. It’s almost like college savings.” His advice was because I’d had a good year. LinkedIn was going public. His advice was to put 5 to 10 years’ worth of giving in this fund so I had time to grow, etc. But it was amazing what having a giving goal did for me. There’s a reason I’m in FinTech. I’m one of these guys who even in college started a Quicken file. I still have like 20-something years’ worth of transactions in Quicken, but I can see what happened is that when I had a giving goal, I actually gave more, and I feel good about it. I feel good about the organizations I support. I feel like I’m doing what I should be doing. I just didn’t have that peace of mind before I had a goal. And so, we tried to build that into Daffy because we’re hoping that we can make people feel good about being responsible members of society and about the generosity that they want to show.
Meb: Just reminding me when you were talking about the popup or the notification, whatever it is that here is what people around you are doing. I get down here in Los Angeles are utility bills. We get the here is what your neighbor’s are conserving energy or you’re using way more than your neighbor’s are, whatever, and that little smiley face. And I just love the behavioral AB ideas on that because I imagine most people are well-intentioned but they probably think they give more than they do if you were to do the actual math on it, but hard to know. One of the complaints, criticisms of donor-advised funds historically has been… We had a guest on the show, a billionaire investor, and he says, “The challenge between when you do donate and when it gets actually donated to the charity.” And this to me is like I’m neither here nor there. This is a philosophical idea. You have some people like Warren Buffett who spends most of his life compounding then gives it away, that sort of theory, then you have other people that want to put it to work now. I see both sides of it, but one of the challenges that donor-advised fund people who do complain about it, critics, they would say, “Well, the problem is it needs to go to work and it needs to be like a time horizon.” How do you think about that? Do you have a strong opinion on it? Do you carry either way? What’s sort of the general thought process surrounding that?
Adam: Actually, I love that you know the history. I remember the famous Warren Buffett-Bill Gates kind of debates. And eventually, of course, it looks like Warren convinced Bill that actually now was a better time to give than later and that had to balance things out. But I think you’ve described the tension well. Donor-advised funds, in many ways, don’t have a lot of requirements on them. It’s not surprising to me that you’re seeing some people, especially at the wealthy end of the spectrum doing the minimum. So if the regulations don’t force them to give the money, they don’t. They have other things to do. They’re building their businesses, they’re doing other things. So I’m probably in the camp and Daffy is certainly in the camp that the goal of a giving account, the goal of putting aside money for charity is to, in fact, give it to charity.
But like I said, there’s also a very reasonable position that says, well, picking the right charity to give money to in the right organization is not trivial. You don’t want to force people to do that on December 31st. You want to give people some time. And so, I think this ends up looking a lot like, in my view, retirement accounts where you have required minimum distributions after a certain age. I think that we decided that there is some percentage that these accounts should be giving out every year. We could debate what that percentage is, but I would say that Daffy is in the camp. Most rather that percentage should exist and it should be higher than it is today. The expectation we’ve built into our donor agreement is that we expect people to give to charity every year. We have a target of about 10% for each account in a given year, which we think is a reasonable balance in terms of taking the time to make sure that you’re donating to organizations that need it versus the reality that you got a tax benefit for putting this money aside. It’s fair for the government to have some expectations that come with that tax benefit.
Meb: You guys don’t take private holdings yet, do you? Can you even donate private holdings?
Adam: The short answer is no. Daffy only can handle right now donations of stocks and ETFs, basically any easily traded security. We don’t take private stock yet, although we have got a number of requests for it. There’s a very few funds that do that, and when they do it, they tend to only do it for very large accounts. Our spirit is a little bit the democratization spirit that I think is inherent in a lot of FinTech. If we get enough requests to be able to take private stock, we’d be happy to find a way to do it. It is certainly legal and there’s certainly our well-grounded requirements on how to do that. The hardest part for us, of course, is making sure that we can liquidate that stock so that when someone makes a donation to a church or a synagogue, etc., that we can actually send the money. Very few churches and synagogues, etc., are set up to take private stock as it turns out.
Meb: When most people who you’ve onboarded, and you may not have enough data to see yet but you could, do most people have an idea of the charities they want to donate to? Do you guys have any things on your side or do you say, “Hey, just you tell us. You figured out?” How does that process work once you actually want to send the money out the door?
Adam: Great question. We see both. One of the reasons, by the way, that we did all this work on the data side to make sure it launched, that we supported basically every legal charity in the U.S., over one and a half million was because people do have organizations they already support and they want to make sure that they can use their Daffy account to support them. It’s a very common question we get coming in. We’ve tried to make our search very fast and easy so that people get that confidence that if they’re giving regularly, once again, to a church, to a synagogue if they’re giving regularly to a community foundation or even to a national charity that it’s supported by Daffy. And so, our premise is basically to support all the legal charities in the country. I will also say, though, that this community aspect is a big deal. Unlike most FinTech applications, saving and investing, for the most part, is a single-player game. I shouldn’t say that we like to talk about it. It’s been a … but we tend to not share the data about it. It’s private information, for the most part, at least for a household. Maybe not within a household.
Philanthropy is different. Giving is different. People really get excited to support the organizations they support. They like bringing other people in. You see it on Facebook. People run birthday campaigns to give to an organization they care about. So there’s a social element to it. And so, we’re finding out a lot of members are joining Daffy because they like seeing what’s out there. When you donate to a charity on Daffy you have this option of leaving a note about why you give to that organization. It’s a really powerful thing to look at a nonprofit and see reasons why other people support it. And they’re usually very personal. There will be a story of maybe a family member who got sick and how they got involved with this organization a decade ago. It might be a very personal story about something that happened to them as a child, but that inspiration, that seeing each other at our best when we’re giving is something we’re trying to design into Daffy from the get-go. So it doesn’t just feel like a financial account. It actually feels like a place where you can get inspiration about organizations to give. And we have found in our user research that there’s a strong sentiment from a lot of people to support their friends, family members, even colleagues when something is meaningful to them. And we think that could be part of what makes this platform better for giving overall.
Meb: As you build out this product, are there any insights in the early days? Any time you build something you end up with user behavior or ways people adopt a product that have been surprising to you guys or that have guided the build-out and new features where you’re like, “Oh, man, I wasn’t really expecting everyone to ask for X or B participate in this way.” Any general thoughts on…? I mean, I know it’s a short runway so far, but anything that comes to mind?
Adam: There have been a number of surprises when we rolled out. One of the benefits of building a FinTech application now, of course, is not only that you can raise money to build a great new feature application like this these days, but also the platforms that exist to do it. I mean, we were able to build Daffy with support for both traditional and crypto portfolios, not because we are geniuses, but because platforms like Apex Clearing exist on the security side. Coinbase has opened up the crypto side. We really were able to build a full-featured donor-advised fund much faster than would have been possible even five years ago. But that being said, it’s always surprising when you’re launching to real customers what they tell you.
Two biggest surprises that came out of the bat when we launched Daffy is, one, we had expected people to want to donate and contribute crypto to the account. I think our second donation was actually from a user who wanted to donate to their synagogues, an Orthodox synagogue. Obviously, the synagogue was not set up to take crypto donations. And the guy was like, “No, this is perfect. I download this app off the App Store. I contribute crypto to it, and then you guys get the money to the synagogues. Fantastic.” We were a little surprised to see people using it that way, not for the fund itself but just to give stock and crypto to organizations that don’t support it. I think the second thing that surprises, though, is just how much demand there was about modern application. When we launched on September 30th we did not have support for transfers from other donor-advised funds, and within the first 24 hours, we were getting multiple requests from people who had fairly large donor-advised funds with the traditional institutions asking how they could move their money to us, mainly because they love this idea of having an app in their pocket. None of this get home or follow up with a phone call. If you’re at a charity event, if you’re at back-to-school, have kids, go to back-to-school. They always have a fund to help support arts and athletics at the school. The ability to pull out your phone and just make the donation right there and have it come out of your donor-advised fund was a big deal. That’s a great thing about having a small team and being able to move quickly. We were able to add donor-advised fund transfers in the first two weeks.
Now we’ve had a number of transfers from Vanguard, Schwab, Fidelity, all the ones that you would expect, mainly because people are just looking for that ease of use. Let’s be honest. I think the pricing helps a lot. If you have a $100,000 donor-advised fund at Vanguard, you’re paying $600 a year for that. So transferring that to us and paying $20 a month is significant savings. We built Daffy as a product for everyone. Very low minimums. You can start Daffy with just 10 bucks a week. Very inexpensive. But it turns out at the high end there was more demand than we expected there too, and so we’ve been trying to make sure that we have all the features people expect or that we’re honest with folks about things like private stock, etc., things that we don’t support yet.
Meb: I think just the simple act of making it frictionless is such a huge barrier. When we started, I remember we had to fax our trades in. This wasn’t 20 years ago. This was like 10 years ago. And I’m just like, “What do you mean fax? We don’t even have a fax machine. Why would we have to fax this? Are you kidding me?” This was the Bank of New York. So just even having the modern interface. I was laughing when you were talking about the synagogue because I said that couldn’t have been a Palo Alto synagogue because those have to accept crypto at this point. They have to be set up for that if they know what they’re doing in that area. How do you guys invest in crypto? Is it through partnerships, Spotfunds? What does that mean when you actually do the investment on that side?
Adam: Our crypto portfolios are actually pretty simple. So there’s three of them. We have one for Bitcoin maximalists. You might expect. There are people who have Bitcoin, believe in Bitcoin. They want to contribute Bitcoin and donate it but they want to keep it in Bitcoin. So we actually have a pure Bitcoin portfolio for people who want to just use that. We also have a market-cap-weighted portfolio between Bitcoin and Ethereum, roughly. So kind of a two-thirds one-third split of Bitcoin and Ethereum for people who just want high-level exposure and the highest quality crypto assets. And then for folks who want a more diversified portfolio, we actually offer a portfolio where it’s a standard mix of ETFs, domestic, global stocks and bonds but with a 5% allocation to a crypto index that we use Bitwise’s product for.
Meb: We got some of those alums who’ve been on the show. When you think about design of this company and offering, altruism is something you referenced earlier that has a very real social component that’s a feel-good on both sides or all three sides. When you think of trying to grow the product at Daffy, are there any viral components that you guys are thinking about? There’s obviously probably traditional ones of, hey, share this, share that. But how do you guys think about, particularly as the world reopens, growing this and getting the word out? Anything in particular?
Adam: In the short term, you’re right. We’re doing a lot of the standard things that you’d expect from a modern FinTech application. So when you join Daffy, everyone gets a URL. And, by the way, when you invite someone else to Daffy, what we decided to do as an incentive was to give people money to give to charity. So if I invite you, Meb, to join Daffy and you sign up with my link, you don’t open up an account that has nothing in it. You end up with $25 right away to give to your organization. And we’re already seeing people excited about this idea because you see organizations say, “Hey, if we get 10 of us to join Daffy, 20 of us to join Daffy, that would be hundreds of dollars that we can give to an organization that we care about.” So we’re starting to see groups around different organizations, etc. start joining together.
Meb: Listeners, you can go to daffy.org/meb/invite to claim your 25 bucks to donate to the charity of your choice.
Adam: So we started with the invitation referral similar to Acorns. And I mentioned that earlier. I mean, as you know, Wealthfront, Acorns, most of the modern FinTechs have done very well with referrals. You make customers happy, give them a service that they want to tell other people about, and actually, word of mouth works quite well. Like I said, Daffy is likely going to end up being very different than a traditional FinTech application. I think you know Meb, that I was the early product leader at LinkedIn for a number of years through the IPO. There are some elements in philanthropy that seem more like LinkedIn than they do like a typical financial app. We find that people are very excited to talk about the organizations that they volunteer for. They’re on the board that they get involved with in different ways and support for campaigns, etc. So, you’ll probably see us roll out through the year more and more features on Daffy to let people talk about the ways that they give.
A big element of the Daffy culture and the product we’re building is that it’s not all about money, that there’s a lot of ways to help. The entire business model is based on this idea that it’s not about the amount of assets. It’s about actually helping and giving to organizations that need it. We think that over time, it may start right now feeling a lot like a simple FinTech application, but over time, we’re expecting more and more people will gather around the organizations that they care about. You’re going to start seeing organizations want to advertise out to larger audiences. So we see Daffy growing into being more of a two-sided marketplace over time between nonprofits looking for people to contribute and volunteer and individuals who want to make a difference and have an impact.
Meb: You mentioned a few of the features, but as you look out 3, 5, 10 years, what’s staffing going to look like? Are there some things that you think behind the curtain or ideas where you’re like beyond this very specific approach we’re taking? Are there other ideas rumbling around in your head? What’s on the brain?
Adam: The biggest idea behind Daffy is the simplest one. Can we get thousands of people, tens of thousands, hundreds of thousands, millions of people actually putting money aside every week and every month for charity? We just think that would be a phenomenal platform if we could have any sort of FinTech internet-scale around people who actually are putting money aside, real money. We want to grow that pie. Individuals in the U.S. right now give about $300 billion, over $300 billion a year to charity, but we think it could be bigger with pre-commitment just like we’ve grown retirement savings by making that automated and easy. But if you ask me from a product perspective what I think it’ll look like in three to five years, I mean, I am one of the early folks who was lucky enough to be involved with LinkedIn, helping that build-out. It was very hard to explain to people who thought that a job site 20 years ago was a place where if you were looking for a job you would post a resume and maybe submit it to a bunch of applications. This idea of having a safe place to talk about professional skills and professional credentials, etc., that needed its own place. I mean, that’s what LinkedIn was based on. You’re not going to do this on Facebook. You’re not going to do this on Twitter. You’re not going to do this on Instagram or TikTok or any of these places. There deserve to be a place to talk about professional things, and that’s what LinkedIn was about.
I think that that same need exists around giving, around charity. I think it’s a different side of ourselves and, yes, people do add charities to their LinkedIn profiles, and yes, I do see people tweet from time to time about gifts they’re giving, etc., but you and I both know you can’t compete with the news and with shopping and dating and all these other things going through social networks. We certainly can’t compete with every new dancer team going through TikTok. So I think Daffy is going to become a place where when you’re looking to talk to folks about giving about organizations…I was actually shocked. One of the first features we had to add to the platform was just local discovery. We found so many people going into Daffy and saying, “Yes, I know that there’s a lot of big organizations around this cause, but what’s in my neighborhood? What’s in my area?” And maybe that’s the pandemic. Maybe everyone became more locally invested given the crisis that we just went through. If you ask three to five years out, I’m hoping that this platform feels a little bit more like LinkedIn, a place where people can show the organizations and causes that they believe in and that they support and feel like they can also get their friends and colleagues involved as well.
Meb: You’ve taught a course at Stanford, “Personal Finance for Engineers.”
Adam: That’s correct. Five years. I just finished this fall.
Meb: Investing for nerds. I was an engineer. I can say that. So what has sort of the interest in mindset in that crowd been thinking about? And also as I guide that question, what are people thinking about today, and your views on how you’re thinking about that topic as well in a greater context? That’s a big open question.
Adam: I think I started giving that talk, “Personal Finance for Engineers” internally at the companies I worked for. I gave the talk to about 800 people at LinkedIn before the IPO. And I think “Business Insider” or some other publication picked it up when I gave the talk at Twitter before their IPO. And so, it became this running thing that I did as a favor to companies to come in and just give a high-level overview of personal finance topics. The fact that the Stanford Computer Science Department is willing to subsidize that course and let me offer it for years is amazing to me because I wish that class existed when I was there. I think you know this, but money is not really about IQ. It’s not that everyone can’t learn the basics of how money works or the basics of budgeting or saving, investing, etc. It’s just not taught. You could have a 160 IQ. You could go to some of the best high schools and universities in the country, in the world, and still not get a basic personal finance education. Some things I will tell you haven’t changed. The fact is that the students have an amazing number of questions. My class this year was almost 250 students. It really has grown. One of the bigger classes.
For a lot of these kids, they might be the first in their family that’s going to college. They might be the first in their family to have a degree like engineering where they’re going to get wonderful job offers right out of school. And that’s all good news, but no one has really been helping them. They don’t have advisors. Their parents may not know what to do with money. And certainly, the schools and the career offices aren’t really prepared to talk to students much more than how to think about a job offer and how to compare things. And so, it’s been amazingly rewarding, a lot of great questions and the course, I mean, I hosted online. All the slides are available publicly. The reason I put it out there is because I really think that anyone who wants to benefit from it can. It’s not just for engineers. That basic idea, though. Some parts of the course are tailored to engineers. So, for example, the first class, first seminar was on behavioral finance, which we just talked a lot about with Daffy, etc. The second class I jump right into compensation. The compensation class, for example, is very detailed but also very specific to the types of jobs that engineers from Stanford might go out and see. Every time I post those slides, I get some negative flack on Twitter where people talk about whether they find those offers offensive or not. I don’t know what to tell you, the market is the market.
We can be angry about what big tech is paying for a college-educated engineer these days, but it doesn’t change the fact that it is, and students need to understand how to compare an offer from a startup like Daffy versus a big tech company versus a big bank or a consulting firm. But we go through all the topics. It is interesting to see how the zeitgeist, though, affects things on the investing side, obviously, in the last couple of years. Increased interest in real estate again. We all know real estate is a very cyclical area of the market, long-term cyclical. Tends to be up into the right for the last 50 years, but mostly cyclical underneath that. But I’ve noticed the students in the last few years have been more and more talking about whether they should invest in real estate. More flexibility, seeing more students talking about owning alternative investments. Surprisingly, not as many questions about crypto as you’d expect from a Stanford engineering audience. I don’t know if they’re getting it elsewhere or if they see it more as a technology platform than as a financial platform, but I was a little bit surprised to not see as much focus on crypto. It’s been fantastic to do it every year. It changes a little bit in terms of what the students have questions about or anxiety about. And so, it’s been interesting.
Meb: We talk a lot about the lack of personal finance education and just money and investing and all that on this podcast a lot and it’s a long-held frustration, but there’s a lot of people doing some really great work, and so kudos to you. If you could wave your wand, I’m giving you a wand, Harry Potter wand, whether it’s legislation, whether it’s initiatives, ideas, in that whole world of education, personal finance, what do you think is going to help on this? Is it government incentives and structures that you would come up with? Is it the private sector just coming up with companies that are going to solve it to fill that need? How do you think about how we could improve not just the personal finance education? But it also leads to me, in many ways, is the foundation for the big wealth and an income gap in our country too. We’re going to wind down the podcast on this very light topic and very easy softball question.
Adam: I actually love the question. It’s part of that passion that I have for the topic and teaching it. So, obviously, given my career since I went into technology, I’ve tried to use my platform to push that through as much as I can to help ordinary people who work for these firms. And now Stanford has given me the ability to do it at the college level, which is fantastic. But the goal was always…The reason I make the material public is I actually think college is very late. I mean, from my point of view, this is something that should be taught, not even in high school. It should be taught in junior high school. The data is very clear. Our economy starts pulling in children into making financial decisions relatively early, junior high, high school. People do get jobs. They do have to think about saving. Maybe they’re worried about their first car. There’s a lot of these decisions that come in and they all could be teachable moments to help people understand how money works, which I think is connected to understanding how the economy works. So I think there’s amazing value. And I do think it is part of the income and wealth gap, which is that kids who have access to parents, friends, communities where that information is around them have an advantage over folks who don’t. I mean, I never had a brokerage account or a stock account. I was fortunate enough in college my grandmother had retired and she was a junior high math teacher and science. Obviously, she was a retiree so she was the one who taught me a little bit about bonds and mutual funds and fees. And unfortunately, because I was still in school, I could actually take coursework to learn more, and that was part of my path. But most people don’t have that grandma. They don’t have that influence.
One of the nonprofits I have supported in past years is code.org, which has been very successful pounding this drum and saying, “Hey, understanding computers, understanding software, understanding logic is something that every student should have access to. Not just wealthy ones in wealthy communities.” I feel the same way about personal finance education, and I think it should be in the schools. I don’t see a good reason why that isn’t a topic that isn’t worked into sixth, seventh, eighth grade. I’m not talking about advanced understanding of the real estate market or asset allocation or any of these things. I’m talking about the basics about understanding what money looks like, how taxes work, this idea of spending less than you make and actually saving money, what it means for that money to compound over time. I mean, even just getting young people to understand that there’s this amazing power and this trade-off between the Yolo crowd of you only live once so you spend the money today versus no, actually, if you put some money aside, it can grow and help make your larger dreams come true down the road. I just think it’s a phenomenal game-changer. And I see it in the students that I teach. But the students I teach tend to be 19, 20, 21, 22, maybe some grad students. It should be earlier.
Meb: I think so much of what resonates with people, particularly young people is all about narrative and framing. I mean, calling it personal finance is like a gag for most people. They’re like, “Oh, geez, we’re going to talk about budgeting.” But if you frame it’s like look money and freedom, whatever ideas to frame it at to where it resonates, you know, the biggest which I think doesn’t hold any water complaint about personal finance education is people are always like, “It doesn’t work,” and I say, “Look, that’s either a failure of the curriculum or the teacher” because if you can teach frigging cursive writing and geometry and Latin to high school students I think you could do it as early as middle and elementary school, but just like very basic ideas about saving, investing, giving. Anyway, that’s a whole ‘nother podcast. Adam, we kept you long enough. You look back on your career, what’s been your most memorable investment? Good, bad, in between. Anything come to mind?
Adam: Turns out my very first job out of college was at Apple. This is Apple in the ’90s, so this is the Apple that “Businessweek” cover “Follow the American Icon.” People thought it was going bankrupt. Watching that turn into a multi-trillion dollar company definitely made me think at times so maybe I should have kept more of that ESPP stock that I got back in ’96, ’97. But, you know, the truth is that is also where I met my wife. So I could probably give an Apple answer to this, but the truth is I think I’m a big believer in skills. My parents are both doctors, mother is psychologist, dad is just a retired OB-GYN. But I was the first engineer in the family. So I remember my first internship where I actually made money. It was actually at Hewlett Packard, even before it split. And I made a few thousand dollars that summer and I ended up spending most of it in the fall on a new computer. I think it was a Quadra 800. I was really excited about it. It’s some ridiculously small amount of memory now, but at the time it seemed huge and maybe a 14-inch monitor to go with it. But I did it with my own money, which was probably the first major significant purchase I had done that way.
And it really taught me two lessons. Well, one, it was a big investment in my career. It was the first time I felt like, “No, no I’m spending money to help my future career. I just changed my major to computer science.” It was an investment in myself, and I’m a big believer in making those investments. I’ll also tell you it was the beginning of my personal finance journey because it turned out by that Thanksgiving I had spent money on the computer, a little bit of money going out, and I had made something like $6,000 that summer, which is more money. I mean, the previous job I had had before that had paid $6.25 an hour, and that was a step up from the $4.25 I’d been making before. And so, making $6,000 in summer was an unbelievable amount of money for me. And then to see that account by Thanksgiving almost empty really was a shock to me. It was like, “Wow, money can go fast.” And so, part of my own personal finance journey was ironically because I bought that computer and spent the money. I also had to come to terms with the fact that, wow, money can go pretty fast, and so I started learning more about it. And I didn’t know what I didn’t know, learning about saving, learning about investing, learning about compounding. And so, if I had to pick my best transaction, best investment, it probably would have been that computer.
Adam: Never even heard of that computer. I mean, I had a Commodore 64, but that one I think predates that. What was the name of it?
Adam: The Quadra 800 I think was the hot Mac to get in about ’92, ’93.
Meb: Oh, it was a Mac. Okay. Got you. I made some fake IDs in North Carolina on a Mac at that timeframe. Adam, this has been a delight. Where do people go? They want to find out what you all are up to, they can go to daffy.org/meb/invite for 25 bucks to give away to the charity you’re choosing. But best places to find you?
Adam: I think there’s a couple of ways. So, first of all, Daffy is the only full feature donor-advised fund right now that’s in the App Store. So if you just go on your iPhone, go search for Daffy, download the app. You can get started right there. You don’t need to do anything else. Daffy.org is great. I appreciate that you want your invite link to get the credit, Meb, so I’ll let you have it. You can use my invite link too if you need one. And then I write regularly on the Daffy blog, etc., and then, of course, you can follow me on Twitter, @adamnash or @DaffyGiving.
Meb: Define some giant zucchini and tomatoes and whatnot. Adam, thank you so much. It’s been a joy. Thanks for joining us today.
Adam: Thank you for having me.
Meb: Podcast listeners, we’ll post show notes to today’s conversation at mebfaber.com/podcast. If you love the show, if you hate it, shoot us feedback at feedback@themebfabershow.com. We love to read the reviews. Please review us on iTunes and subscribe to the show anywhere good podcasts are found. Thanks for listening, friends, and good investing.
