In the tradition of philanthropist Andrew Carnegie, who famously said, “The man who dies rich, dies disgraced,” under the dome of the Celeste Bartos Forum in the New York Public Library Warren Buffett recently signed five commitment letters.
These letters were addressed, one each to the foundations run by his three children, one to the foundation in his late wife's name and perhaps most significantly one to the foundation run by Bill Gates, and his wife, Melinda. With a stroke of his pen, the world’s second-wealthiest man, Warren Buffett, gave away the bulk of his $44 billion fortune in an extraordinary charity deal with Bill Gates, the founder of Microsoft.
This is the largest philanthropic gift in history. And if Buffett is right in thinking that Berkshire's price will trend upward, the eventual amount given could far exceed estimations. Even in inflation-adjusted dollars, Buffett gave more money than John D. Rockefeller or Andrew Carnegie in what must count as one of the most momentous days in philanthropy.
Known as “The Sage of Omaha”, Buffet’s first job was writing up stock prices on a chalkboard at his father’s brokerage. Today he is considered the most successful investor of all time. He lives a famously unpretentious life and still lives in the $31,000 house he brought in Nebraska in 1958.
Buffett, has for decades said his wealth would go to philanthropy but has just as consistently indicated the bequest would be made at his death. Typical of Buffett’ original thinking, he broke the mould and pledged to gradually give 85 per cent of his Berkshire stock to five foundations in his lifetime.
A dominant five-sixths of the shares will go to the world's largest philanthropic organisation, the $30 billion Bill & Melinda Gates Foundation. Between Buffet and Gates they have given new meaning to the word philanthropy, and not only by virtue of the magnitude of the funds they are jointly dispensing, but also because Buffett has given huge impetus to what is being called "venture philanthropy" or "philanthro-capitalism".
Philanthropy on this scale dwarfs the investments made by the big philanthropists of old, and rivals the funds that governments and international organisations spend on addressing global ills. The US Agency for International Development (USAID) spent $1.5 billion last year on health programs, approximately the amount spent that year by the Bill and Melinda Gates Foundation.
A bit of competition from a private philanthropist who knows how to get value for money might just provide a yardstick of efficiency. Stanley Katz, say that “the sheer size of the foundation allows it to take risks and suffer losses, and the Gateses’ management skills allow the charity to be flexible enough to correct its giving patterns as experience dictates. By becoming more efficient and businesslike, private foundations can achieve what official aid cannot; innovativeness. It would in deed be a new era in philanthropy if the Gates-Buffett merger triggered a business of creative global “giving”.
Another advantage of the Gates-Buffett arrangement is that it has sent a signal to other potential donors that it is no shame in admitting that knowing how to make money involves a different skill set, from knowing how to give it away. “You need to seek out people with a talent to distribute money in the same way as you do for those to accumulate it,” Buffett told the press corps.
“What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it?” Mr Buffett said. In fact he makes no secret of the fact that he is better making money than dispersing it. So he sought out what he says is, "the talent to distribute the money" in an "effective manner".
Gates on the other hand has a polymath's mind that revels in the complexity of the challenge of solving global health issues. Gates has the mental agility to piece together the necessary components in order to create low-cost delivery systems for vaccines, as if he were designing Microsoft software.
The creative aspect of this merger is that it is not trying to reinvent the wheel, but rather channel funds through avenues which are already established, tried and proven. Buffett’s joining the Gates as a trustee, with this injection of funds will allow the Foundation to “both deepen and accelerate” its work. Now it will be Buffett and the Gateses building up the foundation together.
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