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Much has been written about Warren Buffett's decision to give Berkshire Hathaway stock currently valued at over $30 billion to the Bill and Melinda Gates Foundation. Mr. Buffett has long indicated his intent to use the bulk of his fortune for philanthropy, but the timing of his decision, and the method, have taken almost everyone by surprise.
Donating much of his Berkshire Hathaway stock through the Gates Foundation is a relatively simple and innovative way for Mr. Buffett to consummate multibillion-dollar philanthropy. Will this cause other super-wealthy people to seek out existing foundations rather than starting their own? Some will, perhaps, and that's a potential trend. Others may take another look at community foundations previously eschewed as “too small” for the bulk of their fortunes. The National Philanthropic Trust (NPT), for example, should see this as a key marketing opportunity. Naturally, many are asking, “What does this mean for philanthropy? How will a $60 billion foundation influence charity and, indeed, the world?”
One result of this scrutiny will be to demonstrate how little $60 billion really is. First, the bad news/good news. It will take up to 20 years to complete the gift. However, the gift will appreciate in value during that 20 years, so the total may well be higher than $60 billion. The actuaries & financial forecasters can project the Foundation's future asset value by balancing investment returns of Berkshire Hathaway and the Gates Foundation against projected inflation.
With $60 billion in assets and a 5% annual distribution (the current limit to avoid taxation), the Foundation would give approximately $3 billion a year in 2026, or slightly more than one percent of all current (2005) annual gifts to charity, according to the American Association of Fund Raising Counsel (AAFRC)'s Giving USA Foundation. The $3 billion approaches, but does not exceed, current (2005) annual gifts made through United Way chapters in the US. [It is reasonable to assume that both total US donations to charity and the collections of United Way chapters will increase significantly over the next 20 years. Therefore, the relative impact of the Gates Foundation's $3 billion in annual gifts made in 2026 will be less than the percentages based on data available in 2006.]
However, one specific area where the Gates Foundation has significant influence on US philanthropy statistics is in international giving. Only about 1.5% of US charitable gifts, or about $3.5 billion a year in 2005, is dedicated to international causes, so each Gates initiative makes a big splash in that small pond. Assuming the Gates Foundation's continued focus on international issues and the increase in Foundation asset value, this splash will continue, if not increase.
A continuing challenge for both the Gates Foundation and its recipients is the issue of organizational sustainability of its grant recipients. Focus the light too tightly by giving large sums to few recipient organizations, and the recipients may become overly dependent, neglecting community responsiveness, good governance, and sustainability when Gates Foundation support ends. The metaphorical light could become a laser beam that burns up the recipients. Diffusing the light too much by diffusing the funds too much will harm the Foundation's ability to monitor results, will increase overhead costs, and cause the Foundation to lose focus on its own mission. The Gates Foundation has a difficult balancing act to achieve to meet its own priorities and help recipient organizations meet theirs.
Some problems transcend money. Money is a valuable, adaptable tool, but it's only one tool in the toolbox. Not only are other tools needed, but sometimes one needs a different toolbox. This is especially true when one can't achieve a consensus definition of the problem, much less the preferred approach(es) to solving it.
The Annenberg Foundation attempted to use $500 million of its own funds and funds committed from other foundations, to effect US education reform & improvement in the 1990s. The initiative's goal of $500 million was not achieved, but the amount spent was well into nine figures. Despite its small, targeted successes in some communities, Annenberg was ultimately disappointed in the (lack of) impact that their significant investment had on overall US education policy and practice.
Two examples relating to the Gates Foundation's efforts to address health and education in Africa. First, immunization is a big Gates initiative, and has been accomplished successfully on a massive scale using resources supplied by the Gates Foundation. Immunization, however beneficial in itself, is but one component of health, which, in turn, is but one component of human sustainability and growth. Second, early on, Gates believed that worldwide universal access to technology would lead to human improvement. Millions were spent in and for Africa by the Gates Foundation on computers and software, training and personnel. The problem? Many places in Africa have no electricity to power computers, much less the infrastructure to foster the widespread Internet access that we are still struggling to achieve in the US (see discussions of the “digital divide”).
Sixty billion dollars is a lot of money, and it's also not nearly enough to meet all the philanthropic missions we can think of. It poses risks as well as opportunities for recipients as well as for the Gates Foundation. It will likely help address some significant philanthropic/societal challenges while being unable to effect change on others. There is a phrase gauging the appropriateness of philanthropic efforts: "size, scope and quality to be effective." Whether the amount is $60 or $60 billion, there are limits to how much good one can do with money. Regardless of the budget, there is always the responsibility to scale available resources to realistic assessment of potential results. And, while $60 billion is a lot of money, there's room in philanthropy for many more donors and a lot more money.
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