Capital Business had a chance to chat with him before a book-signing event in partnership with the Capital Area Food Bank, where he announced a $190,000 grant. What follows is an edited transcript.
You say that the book could be challenging for people in philanthropy who are satisfied with the status quo. What is the status quo in philanthropy?
Not willing to take much risk. Not willing to try new ideas. We [in philanthropy] haven’t been as successful as we need to be, and that’s part of the reason, I think.
How is your philanthropy shaking things up?
The whole concept of the book is: Put yourself out of business in 40 years. Our foundation has a clause that we’ll be out of business in 40 years, in 2045. That drives us to think about how we’re going to spend all of our money. It drives us to think about how we do that best, intelligently and what problems we want to tackle. I could’ve just built a $1 billion endowment if I just wanted to spend the 5 percent each year [required by law], and my grandkids can be in philanthropy and their grandkids and so on.
Is that wrong?
I’m not knocking that. I’m just saying it’s not what I believe in. People earn their money and have a right to do with it what they want to do with it. But we’re trying to be a voice that says there are big problems today. Use all of your resources and attention and address them now. Why would you say let’s just keep worrying about problems for the next three or four generations when we have huge challenges today? Let’s try to fix as much as we can as fast as we can. The whole “40 Chances” mind-set is that you have 40 years to do the best job you can.
Philanthropy has become very business-minded, but there’s been some backlash to that. Does being business-minded make philanthropy more effective?
In business, it’s market driven. You know when you have a bad product. You know when you have a bad CEO. When shareholders aren’t happy, something happens. It’s not like that in philanthropy. You can keep doing stupid things as long as you have the money. There’s not a market test in philanthropy. You can do a lot of dumb things for a long time. We’ve done some of that. We’ve made big mistakes. We started out doing what I’m a bit critical of today. We spent a lot of money, tens of millions, on projects in Africa that today I would say are ineffective, can’t make change occur at scale, and don’t take on the fundamental issues of why we have the challenges we do have. Everyone learns. We learned the hard way.
What lessons have you learned the hard way?
One would be that our system has an inherent conflict. The process that most nongovernmental organizations or public charities engage in is driven by looking successful. What I mean by that is if you take a public charity, they have to show success because they have to have fundraisers and make donors happy. Everything has to look good. That’s not the real world. If you’re going to take on tough issues that people have been taking on for decades, and put in a lot of money and intellect, and they’ve continued not to make that progress, then you have to do it differently. The bottom line is you’ve got to take way more risk and be way more willing to fail and learn from that failure. Our system doesn’t encourage that. I didn’t understand that when I got into philanthropy, but I clearly understand it now. It drives a lot of our thinking. The Democratic Republic of the Congo is a great example. We’ve been working there for 15 years. We’re doing things there that no other person would fund. We’re doing it because we’ve built relationships. We want to see if development during conflict can help push for peace. That’s a different approach. Most people wait until there’s peace and stability, then they start thinking about spending money. We’re spending money before there’s peace. That’s a big risk, but it’s the kind of thing where if we have success at, it makes a big change.
It’s common now to talk about “return on investment” when it comes to making a charitable donation. Donors want to be able to know the impact of their dollars now more than ever. Your brother, Peter, wrote an op-ed in the New York Times calling into question the use of ROI in philanthropy. Is ROI going too far?
I don’t think about our philanthropy in terms of ROI. I think about our philanthropy in terms of the fact that if we’re going to try things and do things and risk things, there’s a lot of things we won’t be able to measure impact on. We don’t have metrics. We don’t have fast and hard rules about you have to do this. I was sitting in a meeting once at the World Economic Forum with Josette Sheeran, who used to run the World Food Programme. She was sitting there with someone from a different foundation. And they were telling her you have to show us that you’re going to increase every farmer’s income by $50 each year. I said to the person sitting across from me, whom I know very well, I said you’re asking her to lie. She can’t tell you with a straight face and be honest that she can guarantee you that the income will rise $50. She also doesn’t want to disappoint someone who’s going to invest in her program.
But do you feel it’s important to set metrics and track impact?
There’s a difference between tracking impact and setting up front goals that are unrealistic. For example, we’re going to spend $20 million to support building the largest infrastructure project happening in [Congo]. That could get built. It could not get built. It could get built and destroyed. We don’t know the outcome of any of that. If you want to say how do I measure impact going into it? I can’t tell you. If you ask what are my hopes to be able to measure the impact? I would say to bring electricity to 130,000 people who don’t have it in the middle of a conflict zone that will drive people to say they have a better life and they want peace. So can you measure the impact on 130,000? Yes. If you get power to 130,000 people, yes, you can measure it. How are we going to measure the impact if we help contribute to peace? It’s more difficult.
Do you have any thoughts about how the Washington region might do effective philanthropy?
You have a great food insecurity issue here in Washington. You’ve got a great food bank. You’ve got a great leader of a food bank. Why wouldn’t businesses here say they want to have a hunger-free Washington, D.C., area? Set a goal. That is something that if businesses pitched in, you could achieve it. It’s not like a lot of other things like creating good education. That’s so complex. How do you measure it? How long would it take? If you wanted to end hunger in D.C. tomorrow, if you had enough businesses that said we’re going to commit to this, and if you had [president and chief executive of Capital Area Food Bank] Nancy Roman’s leadership that said this is how I’m going to put you to work, you could do it. It might take you a year, but you could do it.
You believe businesses in the Washington region could end hunger here in one year?
I’m serious. What better place than in D.C., where people think about strategy all day long and how to end problems all day long and their job is to have policy that’s supposed to improve the world and help people? What better place than Washington to set an example and say we’re not going to have a hungry kid go to school? That’s not an impossible goal. So many things we look at in the world seem, feel and look impossible. But that’s not impossible. It’s about mobilization, commitment and organization.
Many businesses and philanthropists struggle to figure out the right nonprofit partner. How do you decide who to give to?
We’re going to give away at least $130 million this year between direct payments and program expenses and everything else. It could be more, depending on what happens. We do that with seven or eight primary partners, not including partnerships with universities. That’s not very much. It all comes down to people. We’ve had unbelievable relationships. For example, I’m at a Coca-Cola board meeting. They played one of their commercials. It’s about a guy who wants peace for one day. I thought who is this guy? Is he a hippie? It turns out Coca-Cola has been working with him for seven or eight years. I had dinner with the guy last year. His name is Jeremy Gillie. He spent the first hour and a half showing me all this stuff. I said, “Jeremy that’s great. I’ve already done all of the homework. Tell me what it’s going to take to bring peace to the Democratic Republic of the Congo?” He said it will take $10 million. I said, “We’ll give you $10 million if you can give us a proposal that we believe in.” He sent it and a month later, and we gave him $10 million. You won’t believe what he’s already done. So the beauty of what we get to do is to be flexible and fast. That’s because I believe in a person. We need a partner like that that can kick butt. We don’t need five. We need one. You don’t have 30 great friends. You have a few great friends. We’re looking for some great partners. Quality not quantity.
— Interview with Vanessa Small
“Forty Chances,” by Howard G. Buffett, written with his son, Howard W. Buffett, is published by Simon & Schuster (443 pages, $26).