Tuesday, June 27, 2006

Buffeting Statism

Yesterday I got an unexpected e-mail from Ryan questioning why no one's posted on Warren Buffet's unprecedented donation to the Gates Foundation. He wondered why I didn't point out that successful businessmen contribute more to society than their donations, or that the lesson in this story is if people work hard they can support whatever cause they choose to.

This is all correct, but hardly the story I'd like to tell. I'd rather ask a different question: "Why the Gates Foundation?" or better yet, "Why all to the Gates Foundation?" Not too long ago Ted Turner gave billions to the UN and once in a while the news blares headlines about some milllion who left their fortune to help reduce the budget deficit. Why not give to a political organization which, almost by definition, is larger and thus more capable to handle the world's problems?

The short answer is that Warren Buffet is not so naive. He's one of the world's greatest investors and he didn't make his fortune by believing that bigger is better or trusting bureaucrats to handle his money. The Gates Foundation is actually quite focused, which Buffet rightly sees as an asset. In a letter to the Gates family, he wrote, "You have committed yourselves to a few extraordinarily important but underfunded issues, a policy that I believe offers the highest probability of your achieving goals of great consequence."

Buffet doesn't even completely trust long-life friend Bill Gates that the money will be used effectively (even though the Gates Foundation is one of the most effective in the world). Two of the three conditions the foundation must meet to get the installments of the Buffet gift are (a) remaining a legal charity and (b) minimum annual awards totalling the previous year's donation plus five percent of assets (creating an incentive to keep the overhead slim).

The last of Buffet's requirements speaks to trusting free and proven individuals instead of government agencies: Bill or Melinda Gates must be alive and active in the running of the Foundation. Sounds like a solid investment.

2 comments:

ryan said...

Well said. I might add that I also meant that not only do successful businessmen give more than their donations, but that they give more than most people do or even possibly can. It's hard to imagine ways of doing more good for the species as a whole than Warren Buffet has.

(Okay, I might give you Norman Borlaug. Still -- how far would he have gotten without funding from, ultimately, Rockefeller?)

David said...

Funny that you mentioned Borlaug; I just heard a report on NPR about the upcoming famine in Zimbabwe, the blame of which is put on the drastic land reformation a few years back. What the world really needs is a Borlaug for institutions. A Gold Revolution, perhaps?