December 29, 2022
Amid the holiday season, I am excited to share this “Fireside Chat” I had with Mark Gerson at our inaugural Ideas & Networking Conference in New York City on September 22nd, 2022.
Mark has been incredibly successful in business, most notably as the co-founder of Gerson Lehrman Group, the leading expert network business. He is also a prolific author and podcaster. I have known Mark for over two decades and am proud to be an investor in Gerson Lehrman Group.
Mark’s true passion in recent years has been his philanthropic efforts, including his role as co-founder and Chairman of two innovative and important efforts, United Hatzalah of Israel and African Mission Healthcare.
In our discussion, Mark shares his business-minded approach to philanthropy, discusses why return on investment metrics are so important even with charity, and walks us through his current projects. All of us at the Conference found Mark’s insights to be both enlightening and inspiring. I know you will enjoy this interview.
Thanks again. Happy New Year!
William C. Martin
Topics in this Issue of An Entrepreneur’s Perspective:
Interview with Mark Gerson – A Business-Minded Approach to Philanthropy
Mark, you have been incredibly successful in business over the years. Equally, or perhaps even more impressively, you’ve also become a remarkable philanthropist. Would you help us better understand how you approach philanthropy. How do you select the causes that you back? How do you make sure your money is being spent efficiently? How do you “size your bets”?
Well, I think it’s important for people to develop both a commitment to philanthropy as well as, exactly as you say, a strategy and methodology for doing so, very much the same way one would do in business. I was fortunate to be exposed to some incredible philanthropic opportunities many years ago, back in the early 2000s.
In terms of a portfolio approach, it’s very much the same thing as in business. You identify the opportunities, stick with them, develop them, grow them, but really have that strategy and have the execution early. If you believe that money compounds over time, which of course it does, Senator Moynihan used to call it the “magic of compound interest”, well, problems compound even faster. If you can arrest a problem in its infancy, or when it’s just starting, and do it through a philanthropic commitment, you will get a better result than you would in business only because problems compound faster than money.
Do you have a set budget and a set amount of time you spend on this? Is it a portfolio?
No, it’s not a portfolio. Well, first the budget. The budget is set in Deuteronomy 15 when it says quite specifically that, the more you give, the more blessed you’ll be. Blessing is always, a material sense. In terms of a budget, one should set one, after having identified the causes and the organizations and the initiatives that one thinks are important, like in business. You could say, I think this industry is poised for growth, or is important, and then you must pick the specific company in the industry. If you pick the right industry and the wrong company, you’re not going to do very well. It’s the exact same thing. You must pick the industry, pick the problem set, and then pick the specific organization with as much care as you would when picking a business and then invest accordingly. Now, in terms of a portfolio approach, portfolio approaches are fine, but the portfolio is going to be relatively small.
I would think a better analogy than a broad-based hedge fund would be, let’s say someone is running a sector-focused venture fund. Eight to ten stocks, at max. I would think philanthropically eight to ten would be probably too much. I would say, in terms of core commitments, which is distinct from if a friend asked you to do them a favor and you want to write a relatively small check. That’s not really philanthropy, that’s business or friendship, but it’s not really philanthropy. You might get a tax deduction for it, but it’s not really philanthropy. Real philanthropy are commitments that someone has.
I think a very small portfolio where one concentrates his giving is important. Once you construct the portfolio and its size, it’s how do I think about it? I think where a lot of people fall short is they don’t realize a simple truth, which is when you think about giving money away, think about it in entirely the same way as you think about making money. There’s absolutely no difference in the methodology that leads to successful money making and successful money distribution in a philanthropic way. It’s the same thing.
The watch word for both is return on investment (“ROI”). Every businessperson, whether an investor or an operator, whether they know it or they don’t, thinks about ROI all day, every day, that’s all we think about. If I put my money into this cause and/or this organization in a cause, what’s my return on that investment going to be? Now the return won’t be financial, but it’ll be measurable. It’ll be measurable perhaps in terms of lives saved, pain ameliorated, or opportunities created. When people say it can’t be measured, they don’t want to ask the question. But it can be, everything in philanthropy can and should be measured, very much same way as in business. There’s really no difference.
Can you talk about a project you’re involved with?
I chair two charities right now that I co-founded. One is United Hatzalah of Israel. It’s the world’s first crowdsourced system of volunteer first response. Right now, we have 7,000 trained and equipped first responders all throughout Israel. We know, through a GPS-based system that we set up 15 years ago, where every first responder is at all times. When a call comes in from a victim, we can immediately locate the closest first responder who will obviously be trained, and he will always have a full medical bag with him or her. He or she can get to the victim within 90 seconds in cities and three minutes outside the city. When someone is choking or bleeding or having a heart attack or a stroke, they only have about three minutes before they’re dead. Because we have a crowdsourced distributed system, we can get to victims in those precious moments to separate life and death.
That’s an amazing cause, an amazing idea. When you funded that, did it exist?
No, it was my partner Eli Beer’s idea. He pitched the idea because he had worked two years on an ambulance as a very young man and said he had never saved anyone’s life, although he came to a lot of dead bodies. He realized that’s because the average response time in New York for an ambulance is the same everywhere in the developed world, 10 minutes. Ambulances are too big to be fast and too expensive to be ubiquitous. 10 minutes is about the worst. It’s not a first response time because the victim or someone who needs help immediately is going to be dead. If you have a broken arm, you can wait another 10 minutes, nothing’s really going to change. 10 minutes is really neither here nor there. The insight was that in someone following a real trauma, if they’re choking on food or they’re in a serious accident, they’re bleeding out, or they’ve suffered a stroke and have oxygen deprivation to the brain, or having a heart attack, you know, the four big ones, and it could be a woman going through an emergency birth. You need help immediately. An ambulance is not an immediate thing.
You’ve created this directory that locates where these first responders are. Are you also buying them the motorcycles and the equipment?
We’re buying everything, yes. We now have a little over a thousand motorcycles in cities. Every piece of equipment that you would need, including drugs to save someone’s life is carried around by the medic all day. Including the transportation vehicle. Now, if they’re in the Negev desert, their car is as fast as a motorcycle, so we don’t provide a motorcycle as they don’t need it. In the cities, absolutely. In the sea areas, all kinds of boats, in the mountain areas, all kinds of mountainous equipment. Everything needed to get to a victim immediately. Now getting back to ROI. I think this concept applies to whatever anyone’s charity is. How many calls do we get a day? Around 1,900 this week and last week and it grows all time, right now it’s around 1,900 a week.
How many of those are pure lifesaving? Well, certainly not all of them, sometimes people die, sometimes someone broke their arm or has Covid and they would have lived anyway. Many calls aren’t lifesaving. Let’s say 10% are lifesaving, 10% are heart attacks, strokes, choking, or bleeding. 10% are lifesaving. That’s probably accurate, maybe a little conservative, but probably accurate. That doesn’t count the people that we prevented from getting brain damage or the women that we helped in their most vulnerable moment, giving birth, doesn’t count that. If one said, I don’t care about anything you do, I don’t care about stopping people from brain damage. I don’t care about helping women giving birth. I don’t care about all the positive social aspects. All I care about is saving lives. It’s a little less than $500 a life. At the 10% assumption, given a $40 million budget, 1,900 calls a day, 10% being lifesaving. We know that even valuing everything else at zero, and of course it’s not valued at zero, but just assuming it is, we’re saving a life for a little under $500 bucks a life. Is that a good ROI? I think it’s a great ROI.
Wow! So, you provided the seed capital to start this. Is that the right way to think about it?
Yes, the seed capital and I’m still the largest donor.
How do you think about, with a for-profit business, there’s a market signal whether it works or not. But sometimes with non-profits you have a big donor and there’s overhead that gets built up and people like their jobs and the urgency goes away.
Yes, exactly. That’s the whole problem right there. I mean, that’s one of the problems.
Is there ever a scenario where you stop, you’ve obviously diversified the funding base, but is there a point where you say there’s a better ROI over here, or I’m better off doing seed projects, I’m not going to fund you at all?
Well, you have a few interesting points there. One at under $500 a life, it’s a great ROI. Right? That is continuing and some things get better with scale and some things get worse with scale. This gets better with scale because the more volunteers we have in this case, the more volunteers we have, the greater the odds are that they’ll be a volunteer close to a victim, and that means the response time collapses. You make a great point, though, shareholders and boards discipline companies.
Non-profit boards and donors also need to get down to the data and assess the ROI. That is the responsibility of every donor. It is irresponsible or lazy to do otherwise.
Can the idea behind United Hatzalah be scaled to other markets?
It absolutely could.
Why isn’t this in New York City and other places?
Oh, I’ve been trying for 10 years. The amount of people who die waiting for an ambulance in New York is presumably the exact same as who would die waiting for an ambulance in Israel. The population of New York City, not New York state, the population of New York City and Israel is the same. People have heart attacks here and there and choke here and there, there is no difference.
Is it a regulatory challenge?
Yes. Well, it’s entirely political. It’s not just New York. We’ve talked to the leadership by this point in many cities around the country. The problems are, it’s not a volunteer problem. America has an incredible volunteer spirit. Funding is clearly not the problem. If we could raise $40 million a year in Israel, we could raise it in New York. It’s not the money. It’s certainly not the technology. It’s not the volunteers. It’s all politics. That’s it, it’s a political problem. I mean, one could calculate how many people have died while this political problem has remained unsolved.
Would you share some details on African Mission Healthcare? It was publicly disclosed last year that you and your wife donated $18 million to them.
Yes, the African Mission Healthcare was the charitable organization that my wife and I founded in 2010 along with my partner who works in Africa, Dr. Jon Fielder, who went over to Africa in 2000 when he finished the Hopkins Residency program. He said, I could be doctor #700,000 in the U.S. Or, as he said to me, I’m a Christian and I feel called as a Christian to go to Africa and to serve the poor who were then being ravaged by AIDS. It’s not happening anymore with AIDS, due to the astonishing success of the PEPFAR program (President’s Emergency Plan for AIDS Relief), which has been the greatest American humanitarian intervention since the Marshall Plan. It was created by George Bush and subsequently continued. It was an astonishing success, both from a humanitarian and from a soft power perspective.
John was an AIDS and HIV doctor on the ground in Africa. John observed, in traveling and saving so many people from AIDS, that the biggest problem in the world is a lack of access to care for almost everybody in Africa. Most African countries have one doctor for every 10 to 50,000 people. Which means that you can’t get care for almost anything. When there’s so few doctors, medicine is an apprenticeship profession. There’s really no scenario where there can be a large area with a few good doctors because you need training, on the job training.
You need a whole system that has excellent care and is training more and more people. John said the place where this exists in Africa is the Christian missionary sector. The Christian missionary doctors are typically from the U.S., Australia, or England, usually the U.S. They often go to Africa to serve for their entire lives. In so doing, they train African providers, doctors, nurses, and all manner of African providers at Christian mission hospitals.
The problem that we saw is that these mission hospitals, which are providing most of the decent and excellent care to Africans, there are very few of them, compared to how many there could be. They’ve been effectively abandoned in the field because they used to be supported by large Protestant denominations. Those denominations in the last 30 or 40 years have become smaller and weaker as Protestant Christianity moved to non-denominational Evangelical. Wherein, when the Protestant denominations were strong, a denomination could effectively tax their churches and fund missionaries. In contrast, many evangelical churches do not have the relationships, or they may not have the funding base. Consequently, these missionary doctors were left in the field. We said, all right, we’re going to be their partner.
We are focused on providing direct care to the African poor and training new doctors, including a vibrant apprenticeship program. A lot of what we to do is ask what’s needed on the ground. A missionary doctor might say, I have these two terrific people who want to be trained to be pediatric surgeons. I use that example because a pediatric surgeon is perhaps the most valuable person in Africa. There’s so few of them.
What is the budget for this organization and how many doctors or mission doctors do you have? How many people do you touch every year?
The budget for the organization now is between $12 and $15 million a year. Our gift last year made it more, but typically it’s $12 to $15 million. The ROI is spectacular.
Let me provide an example, and this is really replicated throughout everything we do in Africa. Dr. Tom Catena was visiting New York a few months ago and we had lots of meetings with him around the country. Tom was an offensive lineman at Brown in the 80’s, and has been a mission doctor in Africa since the late 90’s. He moved to the poorest and most deprived place in the world, which is the Nuba Mountains between North and South Sudan in 2008 to set up a first-rate hospital in the poorest place in the world.
Tom’s annual budget for his hospital is $1.3 million, excluding food. He saw 180,000 outpatients, did 6,000 surgeries, did 2,600 births, handles TB, malaria, leprosy, and immunizations. All that for $1.3 million. You have outpatients, inpatients, surgery, and difficult births. One difficult patient case in the U.S. could represent this whole budget. Instead, we’re helping hundreds and thousands of people. How is he able to do it? He’s able to train other people who can serve more patients. That’s the kind of ROI that we’re able to get.
In 2015, Nick Kristof did a piece in the New York Times in case you want to look it up. It’s called, “He’s Jesus Christ.” It’s a profile of Tom. Nick went to the Nuba Mountains and God bless him for going, because it is a very difficult trip. Nick went and visited Tom and wrote this piece, “He’s Jesus Christ.” We reached out to Nick Kristof, who was then a columnist for the New York Times and said, we will match all donations up to a $100,000. Then we did it two or three more times and it kept getting hit. Then, we said, let’s create an annual prize.
We created the Rabbi Erica and Mark Gerson L’Chaim Prize for Christian Medical Missionary Service every year to fund the project with $500,000 for the winning medical missionary. The dinner for last year’s winner is tonight. From Uganda, she’s a nun and a surgeon. She was born on the floor of a mud hut, became the most valuable hands in all of Africa and is bringing maternal care and particularly birth injury care to hundreds of thousands of African women. We are having the dinner tonight. I think it’s her first trip to New York.
That’s amazing, Mark. That’s just amazing.
That’s the kind of ROI. The one thing I would encourage anyone thinking about giving is, it’s all ROI. For example, let’s say you have a 25-year-old mother come in with a difficult birth, she needs a C-section. In Africa right now, if you need a C-section, there’s a 20% chance of getting it. Meaning if you don’t get it, you’re either going to die or develop a fistula, which is about the worst kind of injury anyone can have. But it happens all the time in Africa.
The solution for this problem is a very easy fix, though, like $300. For this small amount of money, you can save the life of this 25-year-old woman or prevent a fistula, and she’s alive and well, her baby’s alive and well, and maybe she has another kid or two at home and they’re alive and well.
I was looking at another case that shows what happens when care is delayed. This is a case from Angola. We were not involved and instead, and this is more typical, the care was delayed. The woman, the mother, had no place to go. She finds the mission clinic, three days later, she gets to the clinic, her uterus is destroyed, she dies on the operating table of a heart attack. She had many kids at home. For a small financial intervention, that woman would have been saved. These children would not have been orphaned. It’s like a few hundred dollars. It’s all about ROI. When people say, everything can’t be measured. Yes, it can. It’s not all about money.
Awesome. Thank you, Mark. Really fantastic.
A Selection of Recent Tweets from @RagingVentures:
TAX LOSS "JANUARY EFFECT" (SMALL CAP) STOCK IDEAS
2022 has been a bear, with many stocks down -80%, -90%, -95% or more. At YE, holders are often eager to lock-in tax losses & clean-up their books. So we could see some nice bounces once the selling abates.
Here are a few ideas:
— Raging Capital Ventures (@RagingVentures) December 17, 2022
Hard to pick on a fast-growing, 20%+ ROE specialty insurer in a hard market, but at ~10x book, $KNSL is truly in rarified air! How could a short seller get lucky? A lot of their exposures are in construction-related markets, which are clearly slowing…
— Raging Capital Ventures (@RagingVentures) November 2, 2022
I can’t stop listening to @FoundersPodcast. It is fantastic, easy listening, and like reading a great biography every day!
Often, I put the podcast on while I drive my kids to school. We’ve learned about Jobs, Hershey, Edison, Franklin, and many others. Hopefully it sinks in!
— Raging Capital Ventures (@RagingVentures) December 13, 2022
$ALLY has $140 billion in auto-centric loans w/just $8 b in tangible equity. I know auto loans performed admirably during the GFC, but this cycle is very different with sharply higher interest rates, collapsing residual values, and aggressive actors like $CVNA. Caveat Emptor.
— Raging Capital Ventures (@RagingVentures) December 8, 2022
Adding some long-dated OTM $VZ calls with stock in the dog house. Bear case is well known and stock is now yielding 7%. With C-Band build-out coming to an end in ‘23, FCF is poised to ramp. Maybe I get lucky and we see some kind of activism or strategic activity?
— Raging Capital Ventures (@RagingVentures) December 8, 2022
Dinner w/a reinsurance broker tonight. While a handful of insurance categories are softer, most of P&C remains “hard” due to limited capacity thanks to inflation and depreciated balance sheets. Select P&C lines are up 50% or more. Good for $FRFHF, which remains a favorite idea.
— Raging Capital Ventures (@RagingVentures) December 8, 2022
$ESTC is flat since I made the below post. I think $ESTC has one of the best franchises in enterprise software, w/opps to grow both in their core search biz as well as in new areas like security. Although mgmt has mismanaged the street ST, I still like accumulating a LT position. https://t.co/ZuBby6xbhA
— Raging Capital Ventures (@RagingVentures) December 2, 2022
$TBLA, an investment idea shared at our September conference, is up more than +50% pre-market after announcing a strategic ad partnership with Yahoo! See our recent newsletter link below for additional investment ideas. https://t.co/6XIbirFjoe
— Raging Capital Ventures (@RagingVentures) November 28, 2022
$EFX.TO / $EFXT continues to tick higher since Exterran merger closed last month, feels like it is under accumulation as volumes build. Valuation, at sub 4x pro-forma FCF, still very cheap versus peers. Balance sheet should be at leverage targets by end of ‘23.
— Raging Capital Ventures (@RagingVentures) November 18, 2022
Big recent run in $MAC (part of general short squeeze), still has 10x turns of leverage and plenty of ongoing maturities which will pressure FFO. Mall-based retailing still mixed. Doesn’t feel like a bad place on the charts to start getting involved on short side…
— Raging Capital Ventures (@RagingVentures) November 11, 2022
Have spoken positively about $WE in the past, as I view it as well-positioned for remote work / commercial office consolidation trends. However, with deteriorating macro and a poor balance sheet, I struggle to see the path forward for the equity…
— Raging Capital Ventures (@RagingVentures) November 10, 2022
Raging Capital’s Fall 2019 $CVNA short thesis: a “subprime auto originator masquerading as a platform for used auto sales.”
Obviously, this was not a good short at the time but we closely managed our (small) position size and closed out the position before things got too wild. pic.twitter.com/zmfO79SWQB
— Raging Capital Ventures (@RagingVentures) November 5, 2022
Need to refresh on $ROG, but this was always an impressive biz with lots of exposure to 5G wireless, ADAS / EVs / Hybrid Autos, and clean energy. Wipeout after $DD deal break could provide opp similar to when $NXPI crashed after $QCOM deal broke
— Raging Capital Ventures (@RagingVentures) November 2, 2022
Fortuna Audaces Iuvat – Fortune Favors the Bold!