On a recent Thursday morning at Casa Teresa, an emergency women’s shelter in Orange County, five spirited, young pregnant women and a new mother gathered around a conference table, waiting for for their class on budgeting to begin.
The teacher was late, so the women joked and laughed about how broke they were. At the center of the table, a newborn cooed in his carrier.
Before long, Joseph N. Sanberg, a Harvard graduate, Internet entrepreneur and investor, entered the room a little breathless from rushing. “Did you all do your homework?” he asked, getting straight to business.
Sanberg was dressed casually, in jeans and a lavender button-down, his strawberry blond hair windswept and wild. Twice a month, he teaches this financial class to Casa Teresa residents, who tend to have little experience with money management.
“Remember we talked about the key part of budgeting being the difference between spending that’s an expense and spending that’s an investment?” Sanberg said. “What would be an example of spending you did in the last couple of weeks that’s an expense, not an investment?”
“I bought red lipstick,” a woman in a flannel top said. The group laughed, nervous with recognition.
“Why did you do it?” Sanberg asked.
“Because it was a pretty color,” she said.
Sanberg paused, then looked directly at her: “Did you do it because you were trying to make yourself feel better?” he asked.
“In a way, yeah,” she admitted.
“How do you think you would have felt if you hadn’t bought it, and you’d had the confidence to resist that temptation?”
“I’d have more money than I have now,” she said, a little embarrassed. “And it would have been way better for me.”
Sanberg looked pleased. But his cool quickly faded when another woman confessed an addiction — to Starbucks.
“Starbucks?!” Sanberg said, flashing an incredulous smile. “Bad!”
He grabbed a marker and headed for the board.
“This is a really, really bad expense!” he continued, almost comically exasperated. He popped the top off a dry-erase marker.
“How many Starbucks do you get in a day, every day?” Sanberg asked.
“One,” she said. “Venti.”
“Five bucks?” he asked.
“Five twenty five.”
Sanberg did the math. “Roughly speaking, $5 times 365 days, that’s like 1,800 bucks,” he said. “That’s a lot of f—— money. You could literally buy a used car with that.”
He asked the woman if she had a job and how much she made per hour, in order to demonstrate that she had to work 45 minutes for every Venti coffee she ordered. He suggested she buy a thermos instead and fill up at Casa Teresa.
“I don’t even drink Starbucks,” Sanberg said. “Rip-off!”
This isn’t what you expect to hear from a guy who spent seven years working on Wall Street, and who, at 36, admits he has already made an amount of money that is “ridiculous,” and that he will “never be able to spend.” But Sanberg isn’t your typical tycoon — he doesn’t wear tailor-made suits or drive a fancy car or sport a fine watch. He doesn’t even own the Laguna Beach house he lives in. “I don’t value material things,” he told me. Instead, the thing that animates Sanberg most is his mission to “change the world,” a formidable goal he talks about with the kind of casual confidence someone else might have, say, for doing a load of laundry: “Everything I do, and the way I think and believe, is bound together by the notion of tikkun olam,” he said, using the Jewish expression for healing the world.
Sanberg could easily be the guy standing at the front of a boardroom talking about the derivatives market. Instead, he has spent the last five months traveling around California speaking to low-income working families about how to get their share of a $400 million tax credit. This year is the first in California history that a state Earned Income Tax Credit (EITC) has become available, over and above the federal one. Sanberg thinks this anti-poverty program is so important, he has invested $1.5 million of his own money to create an education and outreach campaign, CalEITC4Me, whose aim is to get every eligible Californian to file a tax return by April 15 and obtain their credit. It is estimated that the EITC could impact 600,000 California households and improve the lives of 2.2 million people.
But reaching everyone eligible won’t be easy: California already has the third-lowest utilization rate of the federal EITC, meaning nearly $2 billion dollars in available tax credits go unclaimed in the state each year. If Sanberg and other like-minded advocates can’t prove in this first year that the new program is indispensable, there is no guarantee it will be part of future state budgets.
“That’s why our work this tax season is so damn critical,” Sanberg told the community organizers and state leaders at a November United Way conference. “If people use California’s EITC and love it, it’s going to be very hard to take it away. The measure of [our] success is entirely about implementation.”
The idea behind the federal EITC first appeared in a welfare reform proposal put forth by the Nixon administration in 1971; it underwent various iterations before becoming permanent under Jimmy Carter. Designed to reward work, the amount of the credit is calculated based on a percentage of earned income and the size of the household — the more you earn and the more people you support, the higher your credit. Initially modest, the program ballooned in the 1990s in a national effort to reduce poverty, and today is considered the largest anti-poverty cash entitlement program in the United States. At a cost of $56 billion per year, the EITC is the third-largest welfare program in the country behind Medicaid and food stamps.
Last June, Gov. Jerry Brown made California the 26th state to offer a state version of the federal credit. “This was a big deal,” Chris Hoene, executive director of the nonprofit California Budget & Policy Center (CBPC) told a confab of community organizations at the United Way event. According to Hoene, in the 2012 tax year alone, the federal EITC helped lift 1.3 million Californians above the poverty line — 630,000 of them children. “It single-handedly reduced the child poverty rate in California by 6 percentage points,” he said, even with California’s low utilization rate.
A state supplement could do even more: Using the example of a single mother who works part time at minimum wage, earning about $5,600 per year, Hoene said the combined state and federal EITC could boost her total income by $4,000 — a life-changing 80 percent.
Sanberg’s task is basically to blow the shofar on this and wake up low-income households to the possibility of a better future. He points out that the main reason eligible people don’t claim the credit is they don’t know it exists. And low-income earners tend not to file tax returns, because they either don’t owe money or they’re wary of tax agencies. CalEITC4Me has therefore partnered with VITA, the Volunteer Income Tax Assistance program that provides IRS-certified volunteers to help qualified individuals file returns.
What this all adds up to for Sanberg is accomplishing his most ambitious goal: solving the problem of income inequality in America. When he talks about the lack of opportunity hindering the middle class and the marginalized, he does so with intense idealism and earnestness. As an entrepreneur, investor and philanthropist working in the public and private sectors, Sanberg’s mission is clear and unequivocal: “I always had this sense that I wanted to be a champion for people who are victims of unfairness or injustice,” he told me. “Whenever I observed that, it always really fired me up.”
I first met Sanberg last November at a Japanese restaurant in Manhattan Beach, where he confessed his only self-indulgent luxury: “I could give up every other thing that comes with being rich,” he said, “but the one thing I really enjoy is sushi.”
Sanberg is tight-lipped about his actual net worth; the website crunchbase.com lists his investments since 2012 at nearly $77 million. “What matters is what people do with their money, not how much money they have,” he said. Still, rather than spend his millions on the good life, the former managing director of Wall Street’s Tiger Global Management is spending his fortune, and his time, trying to improve the lives of others. Aspiration, the 2-year-old Internet bank he co-founded with Andrei Cherny, targets middle-income and young people with low-cost, high-quality investment opportunities that are normally available only to wealthy investors. And instead of charging a fixed percentage of profits, as most investment banks do, Aspiration takes the unique step of allowing customers to determine their own fees. So far, 15,000 people have signed up — with upward of 40,000 on a waitlist (Sanberg said that taking time for customer education is part of the “on-boarding process”). Sanberg also claims that Aspiration is doubling its customer base every five weeks. Aspiration’s business model, he says, is “based on trust,” a word not often associated these days with America’s financial institutions. “We are a business that makes the money our customers choose to pay us,” he said, adding that Aspiration also promises to donate 10 percent of its profits to charity. “Investing with a conscience” is the company’s tagline.
Sanberg applies this same principle to his personal philanthropy as well. Last fall, when UC Riverside launched its inaugural Master of Public Policy program, Sanberg donated enough money for half of the program’s students to attend tuition-free for two years, with additional funds left over to support more students with “significant” scholarships. In 2014, after an electrical fire caused $300,000 in damages at his childhood synagogue, Temple Beth Sholom in Santa Ana, Sanberg contributed $200,000 to the rebuilding effort. He is also a major donor to the Jewish Graduate Student Initiative (JGSI), an organization that fosters relationships between Jewish graduate students and Jewish business leaders, including at an annual conference. Rabbi Dave Sorani, 33, JGSI’s founder and CEO, described how Sanberg frequently speaks to the students, most recently at a Shabbat dinner at UCLA’s Anderson School of Management.
“He blew people away,” Sorani said. “When you hear him speak about how he gives philanthropy from his company, the students are like, ‘Who the heck is this guy?’ People are usually nervous to give to charity when they’re so young, but Joe’s different. He’s not saying ‘I’m gonna become wealthy and then give to philanthropy.’ He’s saying ‘I’m gonna become wealthy and give philanthropy.’ Joe is teaching students to think: ‘How can I make the most money, and how can I give the most money?’ We have so many speakers, and no one says that. No one talks about it. ”
Last year, Sanberg caught word that Sorani wanted to host a Passover seder for graduate students with nowhere else to go. Sanberg offered to help fund it, but only if the seder would also include low-income families. “As a nonprofit CEO trying to raise money, you almost … actually … never get anyone approaching you,” Sorani said. “After [that phone call], I was like, ‘Are you kidding me? Of course I’ll do that, that’s awesome.’ ” The seder was held at the Peninsula Hotel and more than 100 people — including Sanberg — turned out to celebrate the holiday.
Friends and colleagues describe Sanberg as “passionate,” “driven,” “full of big ideas” and value-oriented, someone who sees public service not as a weekend mitzvah project, but as a way of life. In 2012, he became chairman of the Jefferson Awards Foundation, a national organization co-founded in 1972 by Jacqueline Kennedy Onassis that’s devoted to honoring and facilitating public service. Widely considered the most prestigious prize in its field, past recipients include Michael Bloomberg, Walter Cronkite, Steve Jobs, Sonia Sotomayor and Elie Wiesel.
Before Sandberg took on the chairmanship, the foundation was struggling to reinvent itself to become an organization that not only recognizes public service, but powers it. Sam Beard, one of the foundation’s founders, personally asked Sanberg to take on the chair position and help rehabilitate their long legacy through better internal business practices.
“We knew we were on the cusp of becoming one of most impactful nonprofits in the country,” said Beard’s daughter, Hillary Schafer, the foundation’s executive director. “But we needed some work to get there; we needed to be structured like a world-class business, something that could have impact and create real scale.” Sanberg helped monetize contributed services, which increased the foundation’s revenue from $2.6 million to $13.5 million and helped Schafer turn around the place.
“Joe fundamentally believes in possibility — in everything he does,” Schafer said. “That really drives him, the concept that possibility should apply to everybody. He believes in big, wholesale change, and I think he feels quite blessed that he is in a position to take big ideas and do something about them.”
When Sanberg first decided to tackle income inequality full time, he assembled a team of policy experts to research effective programs, and it wasn’t long before they happened upon the EITC. The movement to create one in California had already been building, but it took Brown, and a balanced budget, to finally make it feasible. When Sanberg heard the governor was considering pushing through the EITC, he hired a team of lobbyists to reinforce its passage. And then, when it was clear that the state’s allotment for outreach wasn’t sufficient to reach the hundreds of thousands of eligible low-income households, Sanberg created CalEITC4Me. At the program’s launch in Sacramento last November, Nancy McFadden, Brown’s top aide, credited Sanberg as “the spark” for the entire effort.
“Now I want you to say it louder and together,” Sanberg commanded a room packed with journalists, state leaders and community organizers at the San Diego launch of CalEITC4Me in January, one of many stops on a statewide tour. In a video posted on Twitter, Sanberg stands at a podium at the front of the room conducting the crowd in a collective chant: “END. POVERTY…
“That’s why we’re here,” Sanberg says. “We shouldn’t have poverty. The problem isn’t a question of resources, it’s [that] the people who need the resources aren’t getting them.”
Sanberg and his younger brother, Rick, grew up in the middle-class suburb of Villa Park in Orange County. They were raised primarily by their mother, Soni, who worked as a book editor and substitute teacher. Their father struggled to support the family. “Before I was born, he was allegedly a successful real estate developer,” Sanberg said, “but then he hit a wall. He kept reinvesting in projects, and the savings he had for our family kept declining and declining.”
Sanberg doesn’t remember his father being around all that much when he was a child. “I don’t remember a single meaningful conversation with my father,” he said. But he does remember dealing with the impact of his father’s choices: Just before Joe’s high school graduation, the family home went into foreclosure. His parents divorced. Sanberg’s mother and brother were forced to move in with his grandparents, while Sanberg went off to an internship in Washington, D.C., with the Democratic National Committee.
He can’t really recall what happened to his father; they haven’t spoken in the 18 years since. When I ask him about this, he answers impassively: “[My father] experienced a number of personal and financial problems, and it was around that time that I last spoke with him. I’m not sure of his circumstances then or thereafter.”
For Sanberg, the trauma of losing his childhood home was irreparable. “That really conditioned how I saw the world, and how random bad luck and chance could impact how we lived,” he said.
Sanberg’s family story is also something of a selling point on the EITC trail. He talks to people in crowds as if he is one of them. At the United Way event, he said, “You may be asking, ‘Who the heck is Joe Sanberg?’ So let me tell you: By the time I was in high school, I was an EITC family, so the EITC is personal for me.”
Despite the family turmoil, Sanberg did well enough in high school to get into Harvard. He wrote his admissions essay about the Led Zeppelin song “Ramble On,” which he said got him through his grandfather’s death when he was in 10th grade. “I learned that Led Zeppelin songs were inspired by ‘The Odyssey’ and Tolstoy, so I wrote about how ‘Ramble On’ continued the journey tradition in literature.”
I ask Sanberg if he was that kid who was tagged “most likely to become president” someday, which made him blush. “Maybe,” he answered.
His track record of success, which he prefers to attribute to “luck and chance” rather than any innate aptitude, has sometimes come at a cost: In 2014, Sanberg learned that several websites bearing his name had racist and misogynistic posted messages on them, and that an anonymous extortionist was attempting to get him to hand over $750,000. He sued, and the court ordered the domain registrar to disclose the websites’ owner — the name revealed was Sanberg’s brother.
When I asked him about the fallout, he declined to talk about it, except to say that it tore apart his family. When it comes to personal matters, Sanberg is well guarded, sounding more cerebral than emotional, and he acts completely disinterested in the enigma of his own psyche. Describing when his family lost its home, Sanberg recalled feeling “stressed, anxious, uncertain and alone,” but stopped short of dwelling on his own pain. “I think it’s self-indulgent to reflect on those kinds of feelings,” he said, launching instead into a more universal assessment. “What I experienced was not a special experience; it’s common to probably a majority of Americans now. That’s why the shrinkage of the middle class isn’t some abstract mathematical phenomenon. It’s a moral crisis. Because when you don’t have the confidence of your basic needs being met, you don’t have the luxury of being fully human.”
For Sanberg, public assistance was not a crutch, but a crucial leg up.
“I wouldn’t have been able to go to Harvard without student loans,” Sanberg said, citing the importance of federal assistance. That support enabled, and perhaps also inspired, Sanberg to plunge into campus politics. In 2000, he even took a year off to work for Al Gore’s presidential campaign, later returning to Harvard to study government.
Ricki Seidman, former executive director of Rock the Vote, who also worked for both the Clinton and Obama administrations, was a fellow at the Institute of Politics at the John F. Kennedy School of Government when Sanberg was an undergraduate. She decided to mentor him, making Sanberg her intern.
“What stood out to me about Joe was that, some kids were interested in the process of politics,” Seidman recalled. “They wanted to work on campaigns, they liked the machinations of politics. … Joe was always interested in how you could use the political process to bring about change. He was very idealistic. And he had really strong values. He really stood out among the students that I encountered. I really liked him and got to know him.”
Today, Seidman is executive director of Sanberg’s Golden State Opportunity Foundation, which he created in 2015 with the mission to solve income inequality and create more equality of opportunity in America. CalEITC4Me is its first major initiative. “It’s not that often that you’re able to do something that is just so unquestionably good,” Seidman said. “Coming from Washington, where nothing gets done and the atmosphere is so negative, the opportunity to work on something so positive, so non-polarizing that brings people together, is really exciting. There aren’t very many things you can work on in politics where you’re able to make an immediate difference in someone’s life.”
According to several studies, recipients of the EITC tend to spend their refund on housing or household expenses, transportation, food and clothing. “We don’t screw around with indirect transmission,” Sanberg said. “Instead, we reach poor people; we give them money; they spend it on their kids; their kids have better outcomes in life. It’s a very linear relationship.”
While Sanberg spent most of his undergraduate career nurturing his affinity for political activism, the reality of needing to support his mother began to weigh on him as graduation approached. Wall Street and its allure of economic promise beckoned him.
He started as an analyst at Blackstone’s Private Equity Group in New York, where he paved the way for a younger friend from Harvard, Matt Salzberg, to join the firm. It would become an important relationship: A few years later, in 2012, when Salzberg decided to start his own business, Sanberg invested in the company that would become Blue Apron, a food delivery service providing fresh, healthy ingredients and original recipes to home cooks. Sanberg saved the company from a major headache when he bought out a disgruntled early investor unhappy with the company’s direction. “It was the kind of thing that only a really close friend and supportive, thoughtful investor would do,” Salzberg told me. “And it ended up working out really, really well for him, because Blue Apron did really well, too.”
In fact, Sanberg says his investment in Blue Apron has been more financially rewarding than his time on Wall Street. According to Forbes.com, Blue Apron now delivers 5 million meals per month and is valued at $2 billion.
After leaving Blackstone in 2004, Sanberg jumped to Tiger Global Management, where he served as managing director until 2009. He describes his time there as “a very prosperous period” but also a frustrating one, that reinforced his wariness of Wall Street.
“I don’t think a free market is at its best when so many financial rewards accrue to so many people who create so little economic value and solve so few problems,” he said. “I still struggle with the period of time I spent on Wall Street, when I wasn’t living my business life true to my tikkun olam values. I made my money in a way that really created no value for anybody, except for a small number of people at the investment firm where I worked. I struggle with that.”
Being in the center of the country’s economic engine during the 2008 financial crisis especially tested his conscience. “It was one of the most unfair things that has occurred in modern economic history,” Sanberg said of the Great Recession. “The American taxpayer got screwed by Wall Street, bailed Wall Street out, and then Wall Street complained about regulatory burdens imposed on it by the government to ensure a crisis wouldn’t recur. That whole dynamic astonishes me.”
So Sanberg did some soul searching. “Coming out of the financial crisis, I realized I had become unanchored from my core values,” he said.
When I asked him to talk about the source of those values, I expected Sanberg to cite a book, a treatise, an icon of history. But his answer was much simpler.
“The No. 1 influence on how I think and live is my belief in God,” he said. “It informs how I live my life entirely. I’ve always [felt] this way; since I was a kid.”
Sanberg’s spiritual philosophy is really an argument for a wholly integrated ethics. He doesn’t believe in compartmentalizing. “These distinctions we construct between how we make money and how we give money away are bulls— distinctions,” he said. “There are too many of us who say, ‘I can make my money however I want, as long as it’s legal. And then I’ll heal the world with my philanthropy.’ Those distinctions shouldn’t occur.”
Driven by these values, Sanberg thought about how to address inequality through the private sector. “There are two ways you can change the financial industry,” Sanberg said. “One is through regulation, the other is through competition.”
He teamed with political wunderkind Cherny, also a Harvard graduate, to create Aspiration, a web-based financial firm targeting people disenchanted with big investment banks; Cherny, a son of Czechoslovakian Jewish immigrants, had already made a name for himself as the youngest White House speechwriter in history, in the Clinton administration. Aspiration quickly attracted high-profile investors, including billionaire Jeff Skoll, former president of eBay and now CEO of Participant Media, which produces social-impact films (among them, this year’s multiple-Oscar-nominated “Spotlight” and Al Gore’s Oscar-winning climate change documentary, “An Inconvenient Truth”).
Publicly launched in November 2014, Aspiration now offers two investment funds — including a “sustainable” fund that invests in companies with progressive employee practices and environmental policies — as well as a fee-free checking account with a $10 minimum, free ATM access worldwide and a 1-percent yearly interest rate for balances more than $2,500 (“That is 100 times higher than most banks are offering,” Cherny, Aspiration’s CEO, said). Money magazine recently named it in a tie for best checking account in America.
Some remain skeptical as to whether the company’s premise can turn a profit, but Sanberg insists the foundational hypothesis that “people are fair-minded and will pay for a service they value” is bearing out. He and Cherny said 90 percent of customers are electing to pay a fee for Aspiration’s products. Though there are some like-minded competitors in the field, such as Ally and BofI (Bank of Internet) who also offer attractive banking options, Sanberg believes Aspiration will prevail by being “very, very pro-consumer” and acting as what Cherny described as a “countervailing force” within America’s financial establishment.
Sanberg thinks of Aspiration as a disruptor. “We’re changing the financial industry by stealing customers from existing firms that don’t treat people well. The failure of the financial industry to well serve middle-income people is one of the many factors that is driving the stagnation of the middle class. So, in my life as a business person, I am trying to solve that.”
When Sanberg declaims about inequality, his passion is persuasive. In the same sentence, you might feel inclined to vote for him — or give him a hug. “He is in fierce pursuit of justice when it comes to economic opportunity,” Cherny told me. “It makes his blood boil when things are wrong, and he really wears his heart on his sleeve. It’s easy to get his goat by [talking about] some of the terrible things people are doing — he’ll start bouncing off the walls in indignation.”
“I don’t have a problem with people having a lot of money,” Sanberg said. “I have a problem with people not having enough money to meet their basic needs.
“There’s an isolation that comes with that, and a loneliness, and I think that’s what’s overlooked by the dryness of economics or the aloofness of our politics — it reduces people into numbers.”
That last thought makes me wonder whether that was the worst part for him when he was young — to have his own identity tied to his income level — homeless, poor, on welfare or financial aid. Perhaps that’s why he’s not comfortable being rich, or at least, with playing the part. “I don’t do anything fun that has to do with being rich,” he told me.
For Sanberg, his wealth says no more about who he is, or what he does, than getting cast out of his childhood home defined the student he was in high school.
“My No. 1 belief is that the opportunities kids enjoy in their lives shouldn’t be based on luck and chance. We want to be a society where people can go as far as their skills and hard work can take them.”