Thursday, June 29, 2006

Entrepreneurial Philanthropy - More on the Gates Foundation

I'm fascinated by the continuing developments with the Gates Foundation (GF). If you didn't hear, Warren Buffett, the second richest man in the world and good friend of Bill Gates, recently announced that he would be donating $37 billion dollars to the Gates Foundation.

The donation itself is interesting since it's not a lump sum. Buffett is splitting the donation over a number of years and requires that one of the Gates actually runs the foundation. The most interesting financial thing is that Buffett is also requiring that the full amount which he donates in a given year must be spent in that same year. This is different than how most foundations work in that they keep most of their money invested and only use a small portion of it in any given year. That's how they survive through the years. The IRS requires that foundations spend at least 5% of their worth every year and that's the percentage that the Gates Foundation has been spending up to now. Not any more - it will have to disburse the regular 5% plus the full amount which Buffett donates every year.

So now why does this foundation intrigue me so much? Well, in addition to what I wrote about in the last post regarding its goal to eradicate so many major diseases, let's start with this new Economist article: The new powers in giving

I suppose some of this analysis makes it seems like GF is simply making a business out of charity, but over the years I've come to realize that true progress can only come from a concerted effort that looks at all angles. Moreover, there is no need to start from scratch if someone else may already have the skills and the capability to accomplish great things. So leverage what's there and as they say so often, don't reinvent the wheel. The Economist analysis brings up some good thoughts on the challenges GF will face as it grows larger and larger, but they've done great work so far. Besides, The Sage of Omaha has been right on so many big bets...why should we think he's not perfectly on track with his biggest bet so far?

I could go on for quite some time about other examples of this viewpoint, but I'll just leave it with saying that I think Gandhi would be very proud of the ways in which GF is tackling some of our world's biggest problems.


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