Mark Zuckerberg and Dr. Priscilla Chan | Learning to Give

Authored by Brackman Rowland

Biographical Highlights

A whopping 78% of Americans have participated in social media and have created their own page (Statista 2016). When evaluating existing social media, one name seems to come to mind as the staple for longevity and relevance; Facebook. Facebook even claims popular applications Instagram and WhatsApp under its ever widening umbrella, generating billions of dollars for stakeholders. Stakeholders including founder and CEO Mark Zuckerberg. You might be familiar with a thin version of Mark Zuckerberg and his cutthroat business tactics thanks to the 2010 film “The Social Network” starring Jesse Eisenberg and Justin Timberlake, however what is largely unknown is his passion for philanthropy and supporting notable causes centered on public health. It appears that only in the last few years his altruistic desires and ambitions have become public knowledge, thanks in part to an open letter he posted on Facebook, co-written with his wife, that announced their shared desire to use his wealth to make the world a better place for their newborn daughter. With the birth of Mark and Pricilla’s first child Max, the two titans known to the tech world are pledging to actively engage the world in philanthropic activities so noteworthy, they stand to change the way we research and treat the deadliest diseases known to man altogether.  

This long-term thinking stands to benefit the generation that follows, and could lead to medical facilities saving billions of dollars on an inexpensive cure or treatment rather than a costly and often ineffective care. To achieve the goal that Chan and Zuckerberg have set forth is to eradicate or manage a disease that would otherwise prove fatal. Mark and Pricilla seek to contribute to research so that the average lifespan for a child born at the time of their daughter, Max, would increase to a 100 year average (Benner 2016). This would allow for more experiences and an overall richer experience for the average individual, allowing them to focus less on health concerns and more on fulfilling their own desires and benefiting others through innovation. Zuckerberg and Dr. Chan have recently pledged to donate 45 billion dollars, or roughly 99% of their current fortune in investments and Facebook stock, in their lifetimes (Benner 2016). This money will go towards whatever the couple feels necessitates their support in regards to their mission to “advance human potential and promote equality” (Zuckerberg 2015). Over the next decade, Dr. Chan and Zuckerberg will donate 3 billion dollars into initiatives mostly research based and focused on understanding the human body better so that treatments and mutations that could cause disease can be erased or better managed.  

Historic Roots

Mark Zuckerberg was born on May 14th, 1984 in the town of White Plains, New York. Mark’s father Edward was a dentist, and ran his practice attached to their home. His mother was a psychiatrist, yet gave up work to raise her four children; Randi, Mark, Donna and Arielle. Mark took an interest in computers at an early age, creating a messaging program through Atari BASIC he dubbed “Zucknet”. Zucknet had practical applications early on, being adopted by his father and utilized in the dental office allowing the receptionist to communicate important information without yelling or traveling across the room (The Famous People 2016). Shortly after this invention, Mark’s parents hired a computer programmer named David Newman to help develop their son’s passion. Mark spent his informative years at an exclusive preparatory school where he excelled in everything from literature to becoming the captain of the school’s fencing team. Although Zuckerberg was a well-rounded student, the majority of his time was spent creating computer programs. Mark even had companies as profound as AOL and Microsoft inquire about hiring him before he graduated high school (The Famous People 2016).

After scoring a perfect score on his SAT testing, Mark gained admittance to Harvard University, and developed a reputation as the campus “guru” when it came to all things related to software development. Mark spent time building a program called CourseMatch which had the basic structure to help students plan their next classes based on the decisions of others. This project gave Mark the idea for a program called Facemash, which allowed Harvard students to rank one another based on how attractive they found their peers. This early precursor for Facebook, and one of the first social media pages, created enough buzz for twins named Cameron and Tyler Winklevoss to seek Mark’s help in beginning a social media platform named the Harvard Connection. The Harvard Connection was designed to create a social online dating site for Harvard students, yet Mark quickly dropped the project to begin his own social networking site. Zuckerberg, with the help from friends, created the earliest form of Facebook allowing a user to connect with others and create for themselves a profile page with information and photographs representing their life. The group ran Facebook out of a dorm room until 2004 when Mark dropped out of college, just after his sophomore year, to pursue the project fulltime (The Famous People 2016). From there, Facebook soared and was first mainly adopted on college campuses, before spreading to the rest of the world.

Pricilla Chan was born in Braintree, Massachusetts and was the daughter of two Chinese refugees from Vietnam. Chan was also intellectually gifted from an early age, graduating as high school valedictorian and gaining admission to Harvard University (CNN Money 2013). Unlike the tech savvy Mark, Chan had an interest in chemistry and biology, and molded her coursework in a way that allowed her to become a pediatrician. Chan finished her pediatric residency in 2015, having already been married to mark for three years. Her first public philanthropic endeavor was to create a school in East Palo Alto California for poverty stricken families and their children. The school combines education with basic healthcare needs, a precursor for her work to come (CNN Money 2013). Zuckerberg’s business savvy combined with Dr. Chan’s ability to run a medical practice and a school for underprivileged children show they are qualified to actively engage with both the for-profit and non-profit sectors. The duo developed a passion for philanthropy and for the betterment of children and for future generations, and in early 2015 they both pledged to donate 99% of their amassed fortune of Facebook stock, around $46 billion dollars, to charity. This announcement was delivered via Facebook post on December 1st, 2015, and was crafted in an open letter to their newborn daughter (Zuckerberg 2015).

Through Facebook’s meteoric rise, Mark perfected advertising based social media, wherein it was possible to make significant ad revenue through targeted campaigns based on user data. His approach to data collection and specifying demographics was especially appealing to advertisers (Seetharaman 2016). Facebook’s ability to produce advertisement revenue for the company kept the organization alive and healthier than most other social media platforms. Zuckerberg looked to diversify his portfolio by using the power and capital generated by Facebook to acquire Instagram in April of 2012, further growing the tech giant’s empire. On May 18th, 2012, Facebook officially held its initial public offering, and the event was actually one of the biggest recorded in the tech world of over $104 billion (CNN Money 2013). This solidified Facebook as an incredibly powerful entity, helping it to absorb smaller cutting edge tech companies. The following day, May 19th 2012, Mark married Priscilla Chan, a student Mark met back at Harvard.

One standard practice for wealthy individuals wishing to become philanthropists is to establish foundations in their name. Mark Zuckerberg has instead made the decision to run his philanthropic dollars through a for-profit business entity known as a limited liability company (LLC) (Wood 2016). It makes sense for Zuckerberg and Chan to value a business approach to the philanthropic world, considering their career paths and the knowledge gained while attending school at Harvard University. Later in December of 2015, Chan and Zuckerberg created the Chan Zuckerberg Initiative (CZI), or the entity that would be their philanthropic arm in bettering the world. This was a historical pivot away from a foundation based philanthropic approach such as the “Bill and Melinda Gates Foundation” and what those with enormous fortunes would normally do in order to invest their earnings. Instead the Chan Zuckerberg Initiative is a registered Limited Liability Company or LLC, and can be classified more closely as a for-profit organization rather than a charitable trust or 501(c) 3 organization (Entrepreneur 2004). Mark also notes that the LLC standing will allow the organization to participate in political lobbying if necessary, a privilege that non-profit organizations or foundations would not normally have (Wood 2016).

Shortly after the new Initiative was created, Zuckerberg and Chan pledged an initial 3 billion dollars to be spent over the next decade in order to help reach the goal to “cure disease” through biomedical research. The first step for Dr. Chan and Zuckerberg was to allocate 600 million dollars to the University of California Berkley to begin a research arm called Biohub (UCSF 2016).    

Importance

Most individuals die from five main health related issues including; heart disease, cancer, stroke, neurodegenerative disease and infectious diseases (Chan 2016). The hope is that rather than using the limited research dollars currently available to fund research based on our current understanding of the human body, we could fund initiatives to create new technology to map and better understand the body which would allow researchers to conceive of dramatically different ways to treat the disease. The first project through the Chan Zuckerberg Initiative will be an investment in a Biohub laboratory, aimed at creating an atlas of the human body and the cells within, breaking down each molecular component. By understanding the core components of the body, and how cells behave at the smallest level when faced with disease, Zuckerberg and Chan believe researchers will be able to find different ways to then treat the illness (UCSF 2016). A recent patient suffering from ovarian cancer at the IU Simon Cancer Center was faced with a medical team unsure of how to treat her cancer. Traditionally speaking the cancer had progressed to an irreversible state in the patient’s intestines. However thanks to the latest technology, they were able to genetically analyze the mutation that caused her cancer cells to react, and discovered the tumors had more in common with lung cancer than ovarian. The physicians used medication normally only reserved for lung cancer patients, and her cancer subsided placing her into remission. Technology combined with our ever-changing understanding of the human body has a bright future.

This 3 billion dollar initial to create a “cell atlas” will essentially serve as a map for researchers to reference when targeting specific areas in the body that breakdown or malfunction as related to the given disease (Chan 2016). This approach to medicine has been historically underfunded, with pharmaceutical companies and universities being more interested in funding projects that aim for immediate results, or ways in which a disease can be treated and managed as quickly as possible. Lives are at stake, and a long-term investment is rarely seen as providing a substantial benefit. This first “research centric” emphasis of the Chan Zuckerberg Initiative can set a powerful precedent in the way medical researchers look to understand the body and disease.

Zuckerberg and Dr. Chan make it clear that the goal is not to completely eradicate the major forms of disease entirely from human existence in the lifespan of their child, rather to either eradicate entirely or create manageable treatment methods that would alter a terminal illness such as cancer or a degenerative disease such as Alzheimer’s into a more chronic yet manageable illness. This would increase the average lifespan and the quality of life for nearly every individual who would otherwise grapple with disease.

The second Biohub action plan, Infectious Disease Initiative, will concern itself with new way to make treatments and diagnostic tests against infectious diseases that are rampant throughout the world such as HIV, Zika and other viral diseases. The goal would to also have a team in place to handle a sudden viral outbreak, having containment and treatment procedures in place (Chan 2016).

Ties to the Philanthropic Sector

Dr. Pricilla Chan and Mark Zuckerberg have extensive knowledge of the for-profit sector, and like many other philanthropists have amassed their fortune through their business success. The Chan Zuckerberg Initiative is such an important arm for their philanthropic endeavors because it is an LLC and is therefore allows for more control in the investments and programming the Initiative is responsible for (Entrepreneur 2004). Limited Liability Companies are an increasingly more utilized tool in modern philanthropy, differing from the traditional use of nonprofits and foundations. In addition to enhanced privacy and avoiding the federal regulation to give away roughly 5% of amassed endowment wealth annually, as is the requirement of foundations in the US, the LLC standing gives Dr. Chan and Zuckerberg more control to invest in for-profit organizations and political causes as they see fit (Wood 2016). This LLC designation molds the Initiative into more of a private investment arm rather than a tax deductible way for the duo to fund existing organizations and causes.

In addition to the enhanced control the LLC standing will give Dr. Chan and Zuckerberg in investing in causes that may have support in the for-profit world, the standing will also provide some legal and tax benefits. If an LLC is sued, personal assets are not eligible to be collected. Also any profits the LLC might see will be taxed through Zuckerberg and Chan as individuals (Entrepreneur 2004). This will allow the couple to operate their initiative in an aggressive and meaningful way similar to how a for-profit business operates. This will allow the investment in technology to be easier as most technology entities operate as for-profit institutions. If for example they wanted to invest in a new startup company that had technologically advanced medical tools, their LLC standing would allow for investing into this for-profit venture. Zuckerberg and Chan place a high value on innovation and all the tech community can contribute to society, and this LLC standing will allow them a more fluid method of interacting with for-profit tech companies. Although their cause and initiative is geared towards being philanthropic and providing for the non-profit sector, the for-profit business standing will allow the couple to bridge the space in-between the two worlds, investing in whatever seems most effective towards the cause they are investing in. A necessary stance to take considering their primary objective to eradicate disease entirely will take some innovative planning and support.

In the case of another young philanthropy union, Bill and Melinda Gates operate a foundation that seeks to benefit humanity through global health initiatives (Wealth Management 2016). The Bill and Melinda Gates Foundation is the largest private foundation in existence and is a registered 501(c)(3) nonprofit organization. The foundation’s goal, like the Chan Zuckerberg Initiative is to provide enhanced healthcare, yet is constrained to the roles of a nonprofit philanthropy. Bill Gates has a similar background in the technology world as Mr. Zuckerberg, and has been noted as saying he wishes for his foundation to engage in venture philanthropy, or philanthropy that pulls techniques from venture capitalism and private sector business tactics, yet is unfortunately limited in the scope of investments legally available to the foundation (Wealth Management 2016).

Key Related Ideas

Limited Liability Company: A corporate structure where the company members are not personally held responsible for the company’s debts or liabilities. LLC’s combine the characteristics of a sole proprietorship and a corporation and it is not subject to rules governing a foundation since it operates as a for-profit.

Venture Philanthropy: Redirecting of traditional venture capital financing for philanthropic purposes. Whichever organizations Chan and Zuckerberg believe will benefit their mission, for-profit or otherwise, they are allowed to support their endeavors.

Social Entrepreneurship: Technique used by entrepreneurs to create, fund and implement solutions to societal issues.

While there are many positive benefits to the LLC holding in regards to the operation of the entity as a more venture philanthropy organization, there are also several downsides. The income the Initiative may earn is taxed at the rate of the individual. A private foundation would see a much more sheltered tax rate of around 1% to 2% taxable on the investment income. LLCs offer no advantages in avoiding taxes, ad gifts are only tax deductible if they are donated to a 501(c)(3) nonprofit (Entrepreneur 2004). This differs significantly from a private foundation wherein all donations made are tax deductible to the donor, even is the funds contribute towards administrative causes. Chan and Zuckerberg know and accept this idea because they have enough funds to not worry about soliciting help from other individuals, however if their resource pool dwindles or was smaller, this would be a major concern in attempting to convince donors to contribute to their cause.

Important People Related to the Topic

• Bill Gates, born October 28, 1955, Arguably the most generous philanthropist and creator of Microsoft.

• Melinda Gates, August 15, 1964, Wife to Bill Gates and confidant on philanthropic endeavors.
• Bill Drayton, born 1943 New York City, NY , Considered founder of Social Entrepreneurship idea.

Related Nonprofit Organizations

Bill and Melinda Gates Foundation: Foundation in existence that is incredibly similar to the CZI as is founded by a tech mogul and his spouse, and the organization has a primary focus to eradicated health related issues in humanity.
https://www.gatesfoundation.org/

University of California Berkeley: Main campus where the Biohub facility will be originally located, however the research will flow openly through UC San Francisco and Stanford University. This University will also be the primary institution recruiting scientists and engineers to participate in latest findings and bolstering the program from the beginning (UCSF 2016). The Biohub will be a separate nonprofit organization that will allow for the commercialization of any discovery it finds.
https://www.berkeley.edu/

World Health Organization: The United Nation’s initiative to benefit health issued globally. More interested in present moment human suffering rather than a long term research guided interest, but still a relevant mission that relates to the goals of Chan and Zuckerberg.   
https://www.who.int/en/

Venture Philanthropy Partners: To benefit community-based nonprofits, VPP seeks to help nonprofits invest strategically, increasing their revenue and impact they can have on the lives of  those their mission serves. Another group that is looking to invest in alternative methods to increase the benefits seen by a traditional nonprofit organization.
http://www.vppartners.org/

Reflection Question Are “Philanthropic LLCs” likely to become more popular? Why or why not?

Bibliography

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This paper was developed by students taking a Philanthropic Studies course taught at the Lilly Family School of Philanthropy at Indiana University in 2017. It is offered by Learning To Give and the Center on Philanthropy at Indiana University.