Microsoft co-founder Bill Gates  (Mehdi Taamallah/Agence France-Presse via Getty Images) Microsoft co-founder Bill Gates  (Mehdi Taamallah/Agence France-Presse via Getty Images)

On Thursday, I had the great pleasure of hearing Bill Gates at the American Enterprise Institute speak about his global philanthropy, education reform and inequality. He has a granular knowledge on a huge range of subjects, but it is his puckish humor and optimism that really radiate (at least in person). I highly recommend you view the whole video, but here are the most important takeaways:

• Things are getting better! We get so used to hearing about government dysfunction that we forget there is huge human progress, largely the result of market capitalism and critical philanthropy. “[The] World Bank classified countries with over 1,200 per person per year as moving up into a middle-income bracket, so moving from low income to middle income. And we have today 45 countries that are still in that low-income category. And what I’m saying is that, by 2035, there should be less than 10, and they’ll mostly be either places like North Korea, where you have a political system that basically creates poverty, or landlocked African countries where the geography, the disease burden, the disparate ethnicities mean that they haven’t been able to bring together a government that in terms of education, infrastructure, health does even the most minimum things for them.”

• He’s had a huge impact on reducing children’s deaths from a few diseases, in large part because he works empirically. “We’re sort of maniacally focused in our health on those poor world conditions because we see that between research and getting things like vaccines and drugs out there, we can basically save a life for about $2,000. But everything we do should be benchmarked — if it’s not that effective, then we shouldn’t do it. So, you know, we’re pretty specialized in making breakthroughs in those areas.”

• Money and unionization as well as school size are utterly unrelated to educational outcomes; the Asian countries are beating us by a mile. “And, over the last 20 years, where government spending in this area and philanthropic spending, although it’s a tiny percentage, has gone up dramatically, the proof in achievement in terms of reading ability, math ability, dropout rates, you know, kids graduating college, there’s been hardly any improvement at all despite massive resource increases that have gone into the area. . . . Our education is very poor across the entire country, and it does not correlate to unionization. . . . We did a thing in education, which was changing the high school size to be more like 400 than 1,500. . . .  It actually raised completion rate about 15 percent. What it didn’t do on any meaningful level was raise the educational level of the kids who graduated.”

• The good news is that they are studying what makes a good teacher and trying to develop “best practices.” “We took 20,000 hours of video and looked at various measures, you know, what were they doing differently? And we created a lot of model districts where there are so-called peer evaluators who are in the classroom, observing, giving feedback. And, you know, it looks like the results on that are very good.”

• Philanthropy and government do different things, complementing one another. “Charity is small. I mean, the private sector’s like 90 percent, and government’s like 9 percent, and philanthropy is less than 1 percent. There are things in terms of trying out social programs in innovative ways that government is — just because of the way the job incentives work – they’re not going to try out new designs like philanthropy can and they’re not going to have volunteer hours coming in to leverage the resources like philanthropy can. So philanthropy plays a unique role. It is not a substitute for government at all. When you want to give every child in America a good education or make sure they’re not starving, that’s got to be government because philanthropy isn’t there day in and day out serving the entire population. It’s just not of the scale or the design to do that. It’s there to try out things, including funding disease research or, you know, academic studies to see if something is more effective.”

• Libertarians are kidding themselves that we can do everything in the private sector. “Now, markets are extremely good. They work — you know, they’re the best mechanism we have. The more you can use them, whenever you can use them, that is — you know, that’s one of the key mechanisms along with science and government that have led us to be so much better off than we are — than we were hundreds of years ago. But for the diseases that we work on, there is no — the R&D would not show up except for government aid and philanthropy.”

• He wants to lower the “tax on work,” which is especially important as technology makes it harder for people at the lower end of the economic scale. “I think economists would have said that a progressive consumption tax is a better construct, you know, at any point in history. What I’m saying is that it’s even more important as we go forward because it — the distortion — I want to distort in the favor of labor. And so not only will we not tax labor, things like the earned income tax credit, you know, when people say we should raise the minimum wage, I think, boy, you know, I know some economists disagree. But I think, boy, I worry about what that does to job creation. The idea that through the income tax credit you would end up with a certain minimum wage that you’d receive, that I understand better than potentially damping demand in the part of the labor spectrum that I’m most worried about.”

Gates has important messages for individuals — find one issue that engages your passion — as well as for government and charities. But the overwhelming takeaway is simple: Figure out what works. Politicians are driven by preconceptions (ideology, if you will), but they’d do a much better job of problem-solving if they measured what works and what doesn’t. “Well, public policy — we need more people examining effective ways to achieve public policy goals. And it’s unfortunate that, a little bit, the idea of making things more effective and getting rid of things, those are, you know, separate issues. . . . Left, right, center — show me your best ideas for bending the health cost curve. Just getting rid of something, okay, is that going to bend the health care cost curve? What is the, you know, supply-demand equation, the nature of the professional rules, the nature of the innovation pipeline and the incentives in the innovation pipeline?” Markets do work — but not always. That is where smart public policy construction comes in.

Friday, in an entirely unrelated conversation, a foreign diplomat marveled at the public spirit of the wealthy in the United States who do tremendous good, including building the world’s best universities. It’s something we take for granted in the United States. We shouldn’t.