Transfer of Wealth Begins With Hand-off From Buffett to Gates
By: Susan Carey Dempsey and Tom Watson, 06/26/06 

If you were looking for the starting line in the super-hyped “transfer of wealth” between one generation and the next and its direct implications for American philanthropy all you had to do was  listen to Warren Buffett today.

In a packed New York City hotel ballroom, the famed billionaire investor took the wealth transfer starter’s gun firmly in his hand and in one shot:

- Made the largest single commitment in U.S. philanthropic history valued today at $37 billion.
- Doubled the size of the largest private foundation in the world.
- Doubled the annual giving of the world’s largest foundation.
- Created a massive precedent for the transfer of wealth from private individuals to philanthropy.
- Created another important precedent for spending huge sums of money in the year they are given.
- Decried the preservation of private fortunes through generations.
- Reaffirmed his belief in the ability of the philanthropic world to take risks better than corporations, and returns better than government.
- Symbolically passed the baton from his generation to the next.

The announcement that Buffett would commit more than $30 billion of his fortune into the hands of Bill and Melinda Gates to be disbursed through their foundation was met with as many questions about its future impact as expressions of approval and, let’s face it, awe.

What Do You Think?   Question - Not Required - Warren Buffett's gift to the Bill and Melinda Gates Foundation is the largest philanthropic commitment in history. What will be its greatest effect? Spurring a new "age of charity" where philanthropy comes to the fore in public and private life. Encouraging more wealthy people to "give it away" during their lifetimes and spurn dynastic wealth. Focus resources and attention on solvable problems in the developing world, with real results in our lifetimes. All of the above. None of the above: it makes for a great headline today, it's one-time only and its effects will be sadly limited. Spam Control Text:   Please leave this field empty

One issue that surfaced repeatedly, as the Gates and Buffett appeared first before a Town Meeting of nonprofit leaders, then a press conference in midtown Manhattan, was how the decision was received by Buffett’s children. While they would all have small fortunes to dispense and were generously provided for, Buffett made clear his aversion to “creating dynastic wealth: It’s not in keeping with my view of how the world should operate.”

As the mega-philanthropists discussed what they hoped would be a growing trend, Bill Gates credited Ted Turner with beginning the challenge “by scolding people” that more of the world’s “super-lucky” should think about giving back.

Bill and Melinda Gates with Warren Buffett

Speaking from his experience both in business and philanthropy, Buffett pointed to the importance of taking risks and, indeed, making mistakes. “In business, you look for the easy things. Philanthropy is just the opposite. In my letters to my three children, I advised them not to go for safe [philanthropic] projects. You can bat 1.000 if you take on easy projects, if you have a total nontolerance for mistakes. But there’s a value in doing things that don’t work; you might try five models, and four don’t work, but it’s through the fifth that you will learn something.”

Melinda Gates concurred, citing the experience they’d had in 1998, when they first assembled an advisory group of scientists and asked them what scientific initiative would be worth a “Big Bet.” The scientists were quite taken aback, she said, but the Gates felt they had to take on risky projects for the chance to make major breakthroughs.

“You can’t tell when any of these things will work,” Bill Gates said, “but it will generally take longer than any politician’s term in office,” meaning philanthropy, not governments, can afford to take the risks and wait for answers to be discovered.

Although he is joining the Gates Foundation as its third trustee, Buffett indicated that, from what he knew of Bill and Melinda Gates’ approach to philanthropy, he was happy to continue running Berkshire Hathaway and leave the decisions about giving to them: “I have so much fun in what I do, I’m not going to invest the time trying to match their knowledge on health issues and philanthropy. I have no problem accepting their mistakes.”

Melinda Gates said in previous conversations with Warren Buffett, he’d expressed approval to their approach to major philanthropic challenges, which they’d handled with “both rationality and world empathy.” She indicated their philanthropy would continue along the same veins as before, especially in global health and education, but have the capacity to deepen considerably. And despite their foundation having become, at a stroke of Buffett’s pen, the 500-pound gorilla of modern philanthropy, she asserted her belief in the value that partner organizations, large and small, would continue to bring to their initiatives.

For further information, visit the Gates Foundation website: http://www.gatesfoundation.org/

|

About the Authors

Tom Watson and Susan Carey Dempsey are Editors for onPhilanthropy.com, a leading online resource for the nonprofit sector. They can be reached at twatson@changingourworld.com; sdempsey@changingourworld.com.