Warren Buffett, the world's second-wealthiest man, handed over the vast majority of his riches on June 26 to the foundation run by Bill Gates, the world's wealthiest man. The gift, made in Berkshire Hathaway (BRK.B) stock, could ultimately double the size of the Bill & Melinda Gates Foundation, to $60 billion, creating a mega-philanthropy the likes of which the world has never seen.
With the new money, the foundation will hand out a staggering $3 billion a year in grants. It creates unprecedented resources that the Gateses will use to address such vexing problems as AIDS, tuberculosis, and malaria in developing nations, and the high school dropout rate in the U.S. (see BusinessWeek.com, 6/26/06, "Bill Gates Gets Schooled"). "The implications are that the Gates Foundation is going to be able to make a much more significant impact on the problems of the poorest of the poor, and they'll be able to achieve more quickly some of their goals in terms of treating and curing problems facing people now," Melissa Berman, president and chief executive of Rockefeller Philanthropy Advisors, a wealth advisory firm (see BusinessWeek.com, 6/27/06, "Great News for the World").
Buffett handed over the money, representing roughly 85% of his fortune, in a ceremony at the New York Public Library, attended by heads of charitable organizations and philanthropists such as David Rockefeller. There, Buffett signed documents making an "irrevocable commitment" of annual gifts, transferring funds to foundations run by his three children, a fourth foundation set up with his wife, who died in 2004, and the Gates Foundation. Buffett pledged 10 million Berkshire Class B shares, currently worth $30.7 billion, to the Gates Foundation. He pledged another 2.05 million Class B shares to his other family foundations.
Even as he amassed his great wealth, Buffett, 75, never imagined he'd be the one giving it away. He had always said it would go to charity, but he expected that his wife would survive him and manage the philanthropy. "I thought the odds were good that she would survive me," Buffett said. After her death, he began talking with Bill Gates, a close friend 25 years his junior, about shifting the funds to his foundation.
Buffett had very little structure in place to dispense his wealth. His foundation, Susan Thompson Buffett Foundation, named after his wife, has a staff of five. The Gates Foundation, which has grown in recent years with the Gateses' own philanthropy, employs nearly 300, and will grow as a result of this gift.
"I TAP-DANCE TO WORK."
Rather than trying to build that scale, potentially wasting time and money in the process, Buffett opted to give the money where he felt it would most wisely spent. "I've watched the Gates Foundation for a number of years," Buffett said. "I wouldn't be surprised if they actually became more efficient, more effective per dollar spent, in doubling the funds." One condition of Buffett's gift is that one of the two Gateses must remain active at the foundation for his money to continue flowing.
What's more, Buffett said he doesn't think he'd be particularly good at running a charitable foundation on his own. First, he continues to love his job. "I tap-dance to work," Buffett said. But more important, he says he would struggle with the failures that are endemic to philanthropy. He recognizes that the foundation will have its missteps along the way. "There's actual value in doing things that don't work," Buffett says. "You're saving society from repeating those mistakes in the future."
Buffett and Bill Gates have developed an extraordinarily close relationship over the years. The play bridge online and often vacation together. Gates, who announced plans on June 15 to focus the bulk of his time two years from now on his foundation instead of Microsoft (MSFT) (see BusinessWeek.com, 6/16/06, "Bill Gates's Long Goodbye"), describes his feelings toward Buffett with a reverence that's rare from him. And his elation to see his philanthropy grow comes with a bit of trepidation in the trust Buffett has placed in him. "Now that the money is going to be as much Warren's as it is going to be the money that my job helped create, it's almost scary," Gates said. "If I make a mistake with my own money, it doesn't feel the same."
THE JOY OF GIVING.
The foundation doesn't plan to change its focus with the new funds. But Melinda Gates says the money will allow it to better resolve inequities that plague the world. Already, the foundation is expanding its global health efforts to help people in developing nations become more self-sufficient. It has made some small grants in the area of micro-lending, and it's helping fund biotech efforts to improve agriculture in regions where crops don't grow well. "We will deepen the work, particularly in the health area," Melinda Gates says (see BusinessWeek.com, 6/16/06, "The Education of Bill and Melinda").
In giving away the money, Buffett was ebullient. As he signed the documents transferring his wealth to his children, he commented on how colloquial the documents were, like the one for his daughter, Susan, that started with the salutation: "Dear Sooz." He even joked that he needed to make sure that none of the documents began with "Dear Anna Nicole Smith."