Warren Buffett's Fortune
BELIEVING THAT billionaires should leave their kids enough to do anything but not enough to do nothing, Warren E. Buffett always planned to devote most of his fortune to philanthropy. But he did not plan to do it while still living, and he did not plan to endow somebody else's foundation. On Sunday, Mr. Buffett, who is 75 and in good health, announced a change of mind. The world's second-richest man will start giving his wealth away next month, and most of it will go to the charity founded by the world's richest couple: the Bill & Melinda Gates Foundation. (Mr. Buffett and Ms. Gates are directors of The Washington Post Co.)
Andrew Carnegie gave away $7.2 billion, measured in today's dollars. John D. Rockefeller and his eponymous son gave away a combined $12.6 billion. Mr. Buffett's donation to the Gates Foundation of 10 million shares in his investment company, Berkshire Hathaway Inc., is worth $30.7 billion at today's share price and may be worth substantially more by the time all the stock is handed over. But the scale of Mr. Buffett's philanthropy is matched by its good sense. Rather than insisting that his name be engraved on libraries and concert halls built with his money, Mr. Buffett has chosen to give through fellow billionaires who have already figured out how to use philanthropic money effectively. Like the master investor that he is, Mr. Buffett has identified star managers and taken a stake in their enterprise.
It would be nice if this example inspired others. Smallish private foundations often achieve less than might be hoped: Some have large overheads relative to grants; others hold down staff costs but compromise on professional standards. On the other hand, larger and well-run philanthropic foundations can be wonderful things: They are at least as sophisticated as government programs but are untrammeled by the oversight and second-guessing that necessarily come with taxpayers' money. This frees them to concentrate their resources on a few big challenges without regard to political considerations and to make long-term commitments that governments have trouble sustaining. Before the Gates Foundation became involved in global health, vaccine makers had all but withdrawn from the developing world because they couldn't predict when public money would be available to finance vaccine purchases. By endowing a vaccine purchase fund with $1.5 billion, the Gates Foundation transformed incentives for the vaccine industry. The increased inoculation rate in poor countries has already saved more than a million lives.
The Gates Foundation had already been expanding: It expects to give away $1.5 billion this year, up from about $1.2 billion two years ago. Mr. Buffett wants his money used at a rate of about $1.5 billion per year, meaning that the pace of grants will double. This is bound to present challenges for an outfit that employs just over 200 people. But the Gates Foundation's mix of scientists and business types has already proved its creativity. "What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it?" Mr. Buffett told Fortune magazine as he explained his decision to go with the Gates team. "Who wouldn't select Tiger Woods to take his place in a high-stakes golf game?"