Buffett Pledges Billions to Gates
Business titan Warren E. Buffett, the world’s second-richest person, has pledged to begin giving away 85% of his $40-billion-plus fortune in July -- most of it to the Bill and Melinda Gates Foundation. Some experts are calling it the biggest philanthropic gift ever.
The donations, to be made over a period of years in the form of more than 12 million Class B shares of Berkshire Hathaway Inc. stock, will also benefit four foundations controlled by Buffett’s family. But the Gates Foundation will receive by far the biggest gift -- 10 million shares of the high-priced stock -- strengthening its mission to improve public health around the globe.
Buffett, who disclosed his plans Sunday on Fortune magazine’s website, deferred comment pending a news conference today in New York with the Gateses: Bill, the chairman of Microsoft Corp., and wife Melinda, who together lead the Gates Foundation. Gates, by virtue of his vast holdings of Microsoft stock, is the wealthiest person in the world.
But Buffett told Fortune that he hoped his gift would spur other wealthy people to consider funding existing foundations instead of starting their own.
“I don’t think I’m as well cut out to be a philanthropist as Bill and Melinda are,” he said. “What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it? Who wouldn’t select Tiger Woods to take his place in a high-stakes golf game? That’s how I feel about this decision about my money.”
At Friday’s closing price, Buffett’s gift to the Gates Foundation, which is already the nation’s best-funded philanthropic group, was worth about $31 billion. That approximates the current assets of the $30.6-billion Gates Foundation. The foundation gave out $1.35 billion last year in grants.
“We are awed by our friend Warren Buffett’s decision to use his fortune to address the world’s most challenging inequities, and we are humbled that he has chosen to direct a large portion of it to the Bill & Melinda Gates Foundation,” the couple said in a statement Sunday. “Working with Warren and with our partners around the world, we have a tremendous opportunity to make a positive difference in people’s lives.”
News of the gifts drew applause from international public health leaders, who have already seen the effect of the Gates Foundation’s $6 billion in gifts to combat polio, rotavirus, malaria and other infectious scourges of developing nations.
“What Gates did was insert new hope for people by stimulating new knowledge, new products or just new thinking,” said Dr. Anders Nordstrom, acting director general of the World Health Organization. He called Buffett’s commitment “an important next step.... To use the Gates Foundation as a mechanism, from a WHO perspective, is a very good sign.”
Oliver Phillips, a former UNICEF official who is now a communications consultant, agreed. “The Gates Foundation has a proven record of giving money away more quickly and in larger amounts than any other foundation out there,” he said.
Despite his unpretentious bearing and frugal habits, the 75-year-old Buffett has been considered one of the world’s great investors for decades. He built his wealth largely by betting early on American consumer companies that grew to massive scale and rich value, such as Coca-Cola Co. Berkshire Hathaway is the holding company that controls his assets, which include insurance and media investments.
The Nebraska native has long said that he planned to give the bulk of his money to charity instead of his three children. But Sunday’s announcement was a departure -- “an abrupt change,” as Buffett put it in Fortune -- from an earlier plan to “scale up” the Susan Thompson Buffett Foundation, a philanthropy named for his late wife.
Apparently Buffett’s friendship with the Gateses, which dates back to 1991 and has famously included many a spirited bridge game at his Omaha home, changed all that. As Bill Gates wrote in a review of one of Buffett’s books, the two share a love of business, mathematical puzzles and red meat.
“I think his jokes are all funny,” wrote Gates, who announced this month that in two years he will leave day-to-day management of Microsoft to devote himself fully to the work of the foundation. “I think his dietary practices -- lots of burgers and Cokes -- are excellent. In short, I’m a fan.”
Now their mutual admiration will have a formal expression: Buffett will soon become a trustee of the Gates Foundation, a representative of the organization confirmed Sunday.
“The biggest reason for my doing that is if [the Gateses] were ever to go down on an airplane together,” Buffett told Fortune. “Beyond that, I hope to have a constructive thought now and then.”
Buffett’s pledge requires that Bill or Melinda Gates be actively involved in the foundation.
Founded in 1994 as the William H. Gates Foundation (it changed its name in 1999), the philanthropy initially concentrated on education and charities in the Pacific Northwest. In 1999, for example, the foundation pledged $1 billion for minority student scholarships.
But since then, after Bill Gates realized that computers and Internet connections alone would not solve the problems of the poor, most of the foundation’s money has gone to promote global health. Last year, 62% of its grant funding was in this area.
Among the foundation’s priorities is a major childhood vaccination campaign that has included a $1.5-billion gift to the Global Alliance for Vaccines and Immunization, an umbrella group of private organizations and governments. The group buys and delivers vaccines for such diseases as malaria, which kills an average of 2,000 African children daily.
The foundation has also given substantial funds to fight AIDS and tuberculosis. Smaller grants have been invested in treating diarrhea and improving nutrition and maternal and newborn health in developing nations.
It has also funded basic research aimed at developing vaccines against diseases that the pharmaceutical industry has largely neglected because they are not commercially viable.
By way of comparison, the entire World Health Organization budget was $1.4 billion in 2005. That is $100 million less than the amount Buffett will donate to the Gates Foundation this year.
With news of Buffett’s gift just hours old, researchers were already assembling their wish lists.
Mike Klag, public health dean at Johns Hopkins University in Baltimore, which like many organizations active in public health research is a recipient of a Gates grant, said his top priority was clean drinking water to halt the epidemic of diarrheal disease.
“It’s not unusual to see children in Africa drinking out of a mud puddle. If I could fix one thing first, that’s what it would be,” said Klag, who described Buffett’s gift as “immense.”
Before Gates, global public health was starved for funds, Klag said. “I don’t know Warren Buffett, but he did a great job of investigating how his funds should be used.”
Health experts said Sunday that they hoped the infusion of funds from Buffett could spur new initiatives to address obesity and smoking-related illnesses and track emerging diseases.
“If anything, Buffett’s involvement brings a broader range of thinking,” said Dr. Mark Miller of the National Institutes of Health. He urged the Gates Foundation to emphasize social solutions to disease, such as helping mothers make better health choices for themselves and their children.
Dr. Michael Osterholm, an infectious disease expert at the University of Minnesota, said pandemic flu preparedness needed funding as well.
“Money by itself does not make for a solution. In some cases it doesn’t even address the problems,” he said, adding that what sets the Gates Foundation apart is its world-class expertise. “The staff has some of the best minds in public health.”
In letters posted on Berkshire Hathaway’s website Sunday, Buffett explained that his Gates Foundation gift would be distributed in annual installments of 5%. In 2006, 500,000 shares will be donated, with 5% of the remaining shares granted in successive years.
The Gates Foundation said in a statement that beginning in 2009, it would increase its grants to spend more than each annual gift from Buffett.
To be sure, stock pledged over a period of years comes with considerable risk.
When Ted Turner pledged $1 billion to the United Nations in 1997, he said his hands were shaking as he signed the papers. The gift amounted to a third of his assets at the time. His hands might have trembled even more had he known that Time Warner’s stock slump would make his gift cost much more than half of his holdings.
Katherine Fulton, president of the Monitor Institute, which studies the future of philanthropy, said that by opting not to expand his own foundation, Buffett might be blazing a trail.
Philanthropy is “fragmented and full of duplication. That someone would take that kind of money and double down on something that is already going on is an incredible thing,” she said.
Still, amid the elation sparked by Buffett’s gift, some may raise concerns about such a vast pool of tax-free wealth being controlled by just three trustees, said Stacy Palmer, editor of the Chronicle of Philanthropy.
“To have a really well-run foundation, you should have a diverse range of voices that are representative of the community,” she said.
“When you’ve got so much money being clustered, I think Congress is going to look closely at the rules governing foundations.”
(BEGIN TEXT OF INFOBOX)
Warren E. Buffett
Position: Chairman and CEO, Berkshire Hathaway Inc.
Born: Aug. 30, 1930, Omaha
Education: Bachelor’s degree, University of Nebraska; master’s, Columbia University in New York
Family: Widowed, three children
Party affiliation: Democrat
Major holdings: Coca-Cola Co., Geico Corp., General Re, Gillette Co., Washington Post Co. (all through Berkshire)