March 12, 2015
I’d like to thank Headmaster Johnson for inviting me to speak today. As an investor, I typically get asked to share ideas about how to make money so it’s exciting to be able to share my thinking about how to give it away.
Almost 400 years ago, Thomas Hobbes wrote that the natural state of man is for life to be “solitary, poor, nasty, brutish and short.” (And no, he wasn’t talking about Game of Thrones.)
When you think about the causes that people give money to — from curing diseases or supporting educational institutions to fighting poverty or supporting the arts — successful philanthropy helps make life less solitary, less poor, less nasty, less brutish and less short. My wife Cheryl and I are the Trustees of the Einhorn Family Charitable Trust. EFCT started in 2002 with a staff of none and now employs seven people. Back then I knew a fair bit about investing but very little about philanthropy so in the early days we were mostly reactive. There were some organizations we already believed in — like Robin Hood, which fights poverty in New York City — but much of our giving was in response to people coming to us and asking. It wasn’t until we hired Jenn Hoos Rothberg to be our executive director in 2007 that we developed a more proactive approach: What do we want to accomplish? And how can we best use our resources to succeed? We started thinking less about giving, and more about finding ways to invest in the changes we want to see in the world.
The area that appeals to me is “helping people get along better” so that became our mission. It sounds simple, doesn’t it? Helping people get along better sounds like the kind of thing you’d see on a poster in a third-grade classroom. But as a mission, it starts to seem a little crazy.
Stop and think for a moment about what that might mean. “Helping people get along better.” Which people?
Do we mean whites and blacks?
Jews and Muslims?
Democrats and Republicans?
Yankees fans and Red Sox fans?
Katy Perry and Taylor Swift?
Kanye and… anyone?
The answer is yes. We mean all those people. (Okay, it’s fine for normal people to wish a pox on both the Yankees and Red Sox.)
We mean parents and children, employers and employees, seven-year-olds on the playground and my kids when they’re fighting over the remote.
Conflict is at the root of so many problems. In our day-to-day lives, it includes bullying, harassment and the large and small abuses that happen in our homes, schools and workplaces. All these things are stressful. When we’re surrounded by conflict, our environment doesn’t feel safe and the world doesn’t seem like a very nice place.
The global consequences of people not getting along are much worse: Oppression, violence and war. A friend likes to say that all wars are fought between the good guys and the good guys, which is a clever way of saying that no one thinks of himself as the bad guy. It’s all a matter of perspective. What’s difficult is to understand why the person on the other side is doing what he’s doing. Being able to consider the world through someone else’s eyes is the essence of empathy, and that’s what it’s going to take for us to really get along.
And while helping people get along better is our mission at EFCT, it’s just a means to an end — a more peaceful world. We aren’t about helping people get along better just because getting along is nice. Making sure people have the skills to engage and work well with one another is what’s necessary to solve our most difficult social problems. What does getting along better even look like? In practice:
It means exhibiting kindness.
It means helping others.
It means appreciating differences.
It means seeking common ground.
It means actively listening.
It means open-mindedness.
It means working harmoniously together.
It means engaging civilly.
And it means changing your world view from good guys vs. bad guys to good guys vs. good guys.
But before I get to how we hope to help people get along better, I want to say a little about my approach to philanthropy. Which brings us to the boring “when I was your age” part.
When I was your age, I didn’t have career plans. I had a vague idea that I’d like to be successful, but I didn’t give much thought to what “success” might mean. (I was already sure that I wouldn’t be playing shortstop for the Brewers.) At 16, I was busy being 16. I worked part-time work as a telemarketer, but my real job as I saw it was simply to have good friends, good grades and some extracurriculars that I both enjoyed and hoped would impress colleges.
I think I did fine. I was rejected by Harvard, Yale and Brown, and wait-listed at Penn. But Cornell was happy to have me so I moved to upstate New York. It was a good fit. Unlike those fast-thinking fast-talking New York City kids who seemed so intimidating at first, I was a kid from a Midwestern suburb who knew that two feet of snow was no reason to cancel classes. Cornell’s geography helped level the playing field.
At Cornell I had the same attitude I had in high school. I believed that good grades and good internships would lead to good things, but I was in no hurry to figure out what those things might be. What my parents probably saw as indecisiveness, I preferred to think of as strategic procrastination or — in terms that might go over better with your parents — incremental decision-making. I’m a big believer in not making decisions before they need to be made. Circumstances change, people change, facts change, and options change. Why commit early when you can have the benefit of deciding later with more information?
During my junior year, I spent a semester interning in the Office of Economic Analysis at the Securities and Exchange Commission in Washington, D.C. Sounds exciting, doesn’t it? The economists there seemed really smart and the work was interesting so I applied to a few doctoral programs with the intent of becoming an economist. Luckily, the Ph.D. programs I applied to were less enthusiastic about me than I was about them, and they all rejected me.
Then I learned that there were companies that came to Cornell to actively recruit seniors for jobs. Figuring I’d have better luck with people who were already stuck spending the day in Ithaca, I interviewed with banks, consulting companies and the CIA. (Not the Culinary Institute of America — the other CIA.) I ended up at an investment bank called DLJ, partly because I liked the people who interviewed me.
DLJ was a … shall we say … challenging work environment. Obviously, I wasn’t expecting Wall Street to be a laid-back place. I was prepared to work hard. Sadly, much of the work the new guys were asked to do and the insane hours we were expected to keep had little to do with making the bank more productive. It felt more like hazing. I did develop some finance skills at DLJ, but what I really learned was that I didn’t want to work in an environment like that again. I wanted to work for and with people who respected one another and valued being nice.
After two years at DLJ, I was thrilled to get a call from a recruiter looking to fill a job at a hedge fund. Back then, Hedge Funds weren’t a big deal. In fact, my first question was, “What’s a hedge fund?”
So I left DLJ to work for a hedge fund, and after a couple years, a colleague and I decided to start our own hedge fund. We moved into a tiny office with barely enough room for a desk, and opened a shared AOL, Inc. (AOL) email account. (You probably learned about AOL in history class.) We convinced four people to give us just under a million dollars to invest and Greenlight Capital was born.
Fast forward 19 years. Today, Greenlight and its affiliates employ 68 people in four countries. We now manage $12 billion. We have earned a reputation for hard work, integrity and a positive work environment — that last one is a direct result of my experience at DLJ, and it’s a big factor in Greenlight’s success.
My incremental decision-making has continued to serve me well, and it dovetails nicely with my feelings about incremental progress. Ask me how Greenlight grew from managing a $1 million to $12 billion, and I don’t have an answer. Unlike getting a college acceptance letter or taking a job, there were no clear defining events, no moments of big change. There were fits and starts, and periods where we took two steps forward and one step back, but for the most part, every day looked a lot like the day before it.
Greenlight’s progress was incremental, but the impact of small consistent progress over time was transformational. With the exception of the culture, which has remained unchanged, Greenlight today looks nothing like Greenlight in 1996. And it is this view — that steady, incremental, almost invisible progress adds up to significant transformation over time — that informs my philanthropy. Instead of compounding returns, we are trying to compound empathy.
Throughout history, the world has continued to get more civilized. Progress has been made, is being made, and will continue to be made, even as there is so much more to do. Here in the U.S., where EFCT operates, we see this incremental progress on many fronts. It took a hundred years to get from the abolition of slavery to the passage of the Civil Rights Act, and half as long again to elect a black president. The country was more than a hundred years old when the first state finally allowed women to vote. Just 27 years later, the 19th Amendment granted suffrage to all women. Biases against Catholics, Jews, Irish and Italians are much less pervasive than they were a generation ago. In the last 30 years, the number of marriages between people of different races or ethnicities has doubled. And gay marriage, unthinkable until recently, will soon be legal throughout the country.
But there is still a lot of work to be done and progress that needs to be made. The recent high-profile police shootings highlight a criminal justice system that remains heavily biased against blacks. There is an enormous difference in education based on economic class that sustains a large opportunity gap. Biases against Muslims and Latinos have supplanted previous biases against other religions and earlier immigrant groups. As I said, there’s a long way to go.
But the change over the next 50 years is practically certain to exceed the progress over the last fifty. As with Greenlight, on a day-to-day basis the progress is small, incremental, and hard to notice. But over longer stretches it’s transformational. Our goal is to be part of that. Time and momentum are on our side. We just want to give progress a push, and we believe that helping people get along better is the best way to do that.
I apply a lot of the same principles to grant-making as I do to investing. For example, at Greenlight we do our homework. We do rigorous research before we make our investments and continue to stay on top of them for as long as we hold the investment. When facts change, we re-evaluate. Is it still a good investment? Should we sell a little or all of it? Has it gotten better such that we might want to invest even more? EFCT asks many of the same questions about the organizations we fund.
When Greenlight considers a stock, we want to know that the interests of the people running the company are aligned with the interests of the shareholders. EFCT looks for grantees whose mission and philosophy align with ours. We look at the quality of the people running the organization. We look to see if it’s achieving its targets. We like leveraged upside. We’re opportunistic, and we’re also patient. And while we have defined metrics that might cause us to not renew a grant if things aren’t working, we look to continue investing when they are.
Most importantly, we don’t try to solve the most intractable problems. At Greenlight, when we look at investments, some opportunities are just too hard to assess. We pass on those, even though many may work out perfectly well. We prefer situations that play to our strengths, where we can develop a differentiated analytical edge. This enables us to make investments where we are confident that the reward exceeds the risk.
The same is true at EFCT. People often ask, “So if you want to help people get along better, why don’t you go after the people who aren’t getting along?” It’s a fair question, and the answer is, it’s too hard. It’s the difference between putting out fires and teaching fire safety. It’s easier to tell someone to take a deep breath before they start yelling than it is to get them to calm down once they’ve started shouting, or even shooting.
We’re in the fire prevention business. To take advantage of the momentum of society’s progress, we need to identify opportunities that are ripe for change, where our contributions can make a difference.
Empathy and compassion are fundamental human traits with deep evolutionary roots, but they aren’t inherent. We aren’t born with these skills. Almost all of us, though, are born with the potential to develop them.
Allow me to use a metaphor. Imagine getting your course schedule and your classes look like this:
First period: Kindness.
Second period: Helping others.
Third period: Listening.
Fourth period: Collaboration.
Fifth period… you get the idea.
(You’re probably wondering when lunch is.)
Like most metaphors, this one has its limitations, but it’s a useful way of describing how we develop different skills at different stages of life, how we build upon them, how the ones we practice most will become automatic, how the ones we don’t practice might be forgotten, and how some will come more easily than others.
The metaphor fails in that these things aren’t taught. Just as babies aren’t taught how to speak — they develop language skills by having adults talk to and with and around them — empathy and compassion develop environmentally and experientially. And this learning by doing or learning by immersion is true throughout our lives. We don’t learn kindness or patience from textbooks. We learn these things by being surrounded by people who value them, model them and encourage us to practice them ourselves. We learn those best when we are steeped in them, when they are so pervasive as to almost be invisible to us.
I have been very lucky to have some firsthand experience with this. My dad is one of the most patient and even-tempered people I know. When I was little, my brother and I teased each other or fought, and it rarely bothered him. He just kept playing with us. My mom is thoughtful and caring and seems to find the perfect balance between offering a solution and just offering empathy. My parents are nice people, and they also made it a point to have dinner as a family every night. This is why the experience at DLJ was such a shock to me. Often, the senior employees let the junior employees sit around all day with nothing to do, then at dinner time assigned a full day’s work that would keep us in the office late into the night and sometimes ‘til morning. The half-joke was, “If you aren’t coming in on Saturday, don’t even think about coming in on Sunday.” That gratuitous meanness was a stark contrast to the values I’d been raised with. (By the way, if your mom is an investment banker, I’m sure she is very nice.)
My parents’ values shaped my parenting, and they shaped Greenlight. For one thing, Greenlight only hires nice people. By that I don’t mean that we avoid hiring jerks. I mean we actively look to hire people who are nice. And if you walk into the Greenlight office at 6 P.M., you’ll find that most people have left for the day. In an industry that celebrates personal sacrifice as a symbol of commitment, you might not consider “making sure everyone gets to be home for dinner” to be a mark of success, but creating and maintaining that culture is one of the things I’m most proud of.
Kindness, empathy, compassion. EFCT’s strategy is to find ways to accelerate the development of these traits at every life stage starting with infancy. Adults play a crucial role in building babies’ brains. Parents can help young children by modeling positive social behaviors and by being responsive, warm and supportive. Encouragingly, the research shows that it’s a virtuous cycle: If you’re nurtured as a child, you’re more likely to nurture your own children.
Unfortunately, the opposite is also true. If children do not get what they need — or worse, the relationships in their lives are sources of stress — their development can be seriously delayed or impaired. EFCT supports several initiatives aimed at educating parents about the importance of these things.
Once children start school, teachers and peers enter the sphere of influence. Adults determine the environment — or, to continue with our metaphor, decide which courses are mandatory every year, which have less stringent requirements, and which are electives. But these lessons are best learned when students study and work on them together, and do so in supportive relationships in a supportive environment. Hackley, with its culture of courtesy, kindness, and forbearance, its intolerance of incivility, and its motto, “United, We Help One Another,” is an excellent example of just the sort of environment that EFCT is trying to promote.
There are some societal obstacles to our mission. In Headmaster Johnson’s letter on the school website, he says that he sent his own kids here hoping that they would be as “kind, accomplished and confident” as the Hackley students he’d met. Kindness comes first, and having watched my daughter develop here, it’s obvious that Hackley lives its values. As parents, we say we value this kindness as well, but unfortunately for Hackley and schools like it, normal human frailties can create a divide between our best intentions and what we actually do. EFCT has research that points to a rhetoric/reality gap between what parents and other adults say are our top priorities and the real messages that we convey in our daily behavior. In a recent survey, 80% of kids said their parents are more concerned with achievement or happiness than with caring for others. As parents we feel good when we read the headmaster’s letter, but I suspect that for many of us, it’s the school’s profile page — the one that lists SAT scores and AP course offerings — that carries more weight.
EFCT sees the same thing everywhere. I asked Jenn about sharing some hard statistics today, and she said that one that gets the most traction is this: A recent study of 213 school-based programs that integrate social and emotional development throughout their school design show significant improvement in students’ social and emotional skills, attitudes, and behaviors and an average 11% gain in academic test scores. It’s that last point that everyone wants repeated: The 11% gain in test scores.
In fairness, I think part of the appeal is that we like things we can measure. It’s hard to know what 5% more empathy looks like, or what it means to have a 7% increase in active listening. (Everyone, please nod if you can hear me.) But much of it still comes back to what society values, and social-emotional learning has a much better chance of adoption when it helps academic achievement in addition to its more direct, but hard-to-measure, cultural benefits. EFCT works with experts who are developing effective ways to quantify these harder-to-measure qualities with the hopes that hard numbers will nudge our society and our schools to be able to start valuing character every bit as much as test scores.
And not every measurement tells the whole story. I was on the debate team in high school. In fact, I loved debate, immersed myself in it, and learned that arguing both sides required me to understand both sides. The time I devoted to debate is reflected in Greenlight’s success. Even as debate conflicted with homework, and my grades fell accordingly, the skills it taught me were the most valuable part of my education by any metric you want to use.
The K-12 programs EFCT supports do a range of creative things. As an example, Playworks makes recess more fun, and uses rock-paper-scissors as a tool for teaching the arbitrariness of most conflicts. Facing History and Ourselves encourages kids to be up standers rather than bystanders by educating them about past atrocities, and teaching how
propaganda serves to normalize terrible behavior.
One I think might resonate with you is City Year.
Every 26 seconds a student gives up on school. City Year deploys teams of young idealists who are making a remarkable difference in schools with the highest dropout rates, and in the lives of the students they serve. Every morning these 17-to-24-year-olds, whose backgrounds range from neighborhood kids with a GED to Ivy League grads, put on their signature City Year Corps Member uniform of bright red bomber jackets, khakis and Timberland boots. They then line the entryway to the school, greeting students, parents, and teachers with energetic cheers and high-fives. Corps Members look for the most at-risk students — if they notice a student is missing during morning greeting, they will call them on the phone to say, “Where are you? I miss you. I was looking forward to seeing you today.” Getting this call from a near-peer is much more effective than getting it from the vice principal. This effort alone has improved attendance for the most chronically absent students.
Corps Members also help in the classroom, on the playground, and in after school activities, making school a place of warmth, security, and infectious fun. Our partnership is helping City Year grow its effort from the three hundred schools it now serves to over a thousand by 2025, which means City Year will need ten thousand Corps Members to serve every year. To get there, we’ll most definitely need some of you.
So what happens when we leave high school? As we move from high school to college, we’re no longer just students of the empathy curriculum; we’re practitioners as well.
College allows us to foster a sense of self-reflection and provides opportunities to build positive relationships with people within and beyond our school communities, often those from different backgrounds and upbringings. These pluralistic relationships necessitate showing empathy and respect for those with different perspectives and life experiences.
And while our foundational learning serves to nourish us, we really thrive when given the opportunity to engage with and serve communities unlike our own.
We see this in City Year. Just as Corps Members transform their students, serving a year in a needy school is transformative for the Corps Members themselves. City Year alumni have higher levels of civic engagement and political participation, and are more likely to have a close friend of another race or social class. And I can tell you as well that they are some of the nicest people I have ever met.
Interfaith Youth Core, or IFYC, is one of our longest-standing partners and an excellent example of prevention rather than intervention. When I said that all wars are fought between the good guys and the good guys, I’m guessing some of you had immediate counter-examples come to mind. Yes, there are obvious bad guys. It’s hard to come up with any explanation for Boko Haram that isn’t evil, though I suspect that even they misguidedly believe that they are good guys serving some higher purpose. But thinking in terms of good guys and good guys doesn’t mean we have to be moral relativists, or that we aren’t allowed to judge people. It only means that if we have any hope in making a dent in this stuff — and there are some places we probably can’t — it needs to start with perspective-taking.
IFYC is investing in young people by training college students to become interfaith leaders on their campuses. These leaders create service projects and other activities for peers of different faiths to develop positive relationships and build bridges of understanding.
IFYC’s work is vital. We live in one of the most religiously diverse places in the world. People of different faiths and strong convictions run into each other at PTA meetings, board meetings, and I-can’t-believe-you-think-the-dress-is-white-and-gold meetings. These encounters can be charged and hostile, or they can be productive and positive. IFYC works to ensure they’re the latter. At EFCT, we are investing in college programs like IFYC to create an alternative to the “us versus them” nastiness of religious fundamentalism.
The accumulating evidence showing the positive impact this kind of education has on students warrants making it part of standard academic practice across the hundred thousand K-12 schools in the United States and the nearly twenty-nine hundred 4-year colleges and universities.
This is why EFCT recently made its largest grant ever to Cornell University to fund a new initiative called Engaged Cornell. Engaged Cornell ensures that every academic department offers courses that enable students to become active citizens by participating in hands-on, practical learning experiences outside of the classroom. Public service will become a cornerstone of every Cornellian’s educational experience.
This grant, which took five years to plan, is especially meaningful to me because it’s a way of giving back to the place that holds a special spot for me and my family. While there, I got to have some great service experiences. In addition to my time at the SEC, I also served as a Big Brother in Ithaca. These and other experiences reinforced my belief that we all have the ability to do just a little bit more to make a difference in someone else’s life.
My hope is that Cornellians will enter the world as educated global citizens who practice respect and empathy, seek collaboration, and embrace differences in all aspects of their personal, professional and civic lives. And with other universities already asking questions about Engaged Cornell, perhaps its success will help trigger a broader movement in higher education.
So that’s a little bit about how we think about investing at EFCT, or maybe a lot. We seek to make incremental, positive change in places where change is ready to happen. In the short term, we have no ability to move the needle, but we expect that over time, a long series of small gains will lead to transformational change.
To circle back one last time to our curriculum metaphor, we are all stronger in some subjects than others. I developed my sense of justice from my father and I’m grateful for that, even if he and I don’t always agree on what the injustices are. But it was debate that taught me how to understand both sides of a position. While I’m able to help my daughter with her algebra, and she needs no help with kindness, I’m lucky she has Hackley to educate her in the parts of the curriculum where I’m not as strong, and that she in turn is able to help me. None of us are perfect, but thankfully perfection is not the goal or the standard. I’d like to think I’m improving, and consistent with my overall view of incremental progress, I think I have more progress to make.
If you are inspired by what we’re doing, there’s a lot you can do to help. Right now, you can continue to live the values you’ve learned here at Hackley and take them with you into the world. Every time you are part of a group, you can influence that group, whether it’s your social circle, a club or sports team, or even your family. If you have a year to have a life-changing experience, you can give it to City Year or one of our other partners. And if you someday find yourself running a company, if you make it a policy to only hire nice people then schools will be more incentivized to graduate students who are not only capable but are also kind.
Every time you act with kindness, empathy, respect and civility you are making our mission of helping people get along better a little bit easier, and we can use all the help we can get.
I hear that all great speeches end with this quote from William James: “Three things in human life are important. The first is to be kind. The second is to be kind. And the third is to be kind.”