Problem
Read the following article and answer the four questions:
Bill Gates is the wealthiest person in the world. According to Forbes magazine, his net worth is $50 billion. Microsoft's 2008 earnings were over $60 billion. But at the age 50, Bill Gates earned respect in a new way. Along with his wife Melinda, the chairman of Microsoft became the greatest philanthropist in history. Melinda, a former Microsoft colleague, has a bachelor's degree in computer science and economics and a master's degree in business from Duke University. (Bill dropped out of Harvard at the end of his sophomore year to run Microsoft.)
In its short existence, the Bill and Melinda Gates Foundation has already helped save at least 700,000 lives in poor countries through its investments in vaccinations. In the U.S., its library project has brought computers and Internet access to 11,000 libraries. The fund sponsored the biggest privately-funded scholarship program in history, sending over 9,000 high-achieving minority students to college. It is the largest foundation in the world, with an endowment of about $35 billion. Each year the Gates Foundation spends almost the same amount as the World Health Organization (WHO). In 2006, the Foundation made grants of over $1.5 billion.
In 1993, advisers gave Bill Gates a copy of the 1993 World Bank Development report. The document explained how many millions of people in poor countries die from diseases that already have cures. Then it listed the most cost-effective methods of preventing those deaths, from immunization to AIDS prevention to nutrition. The document reads like a blueprint for the
Gates foundation.
In June 2006, Bill Gates announced that he was stepping down from full-time duties at Microsoft, giving up his role as chief software architect, to devote more attention to the Gates Foundation.
The Gateses run the Seattle-based foundation like a business. They are fluent in the science of public health, and both use the language of business to describe their philanthropic work. "There is no better return on investment than saving the life of a newborn," said Melinda.
The foundation has been able to instill a rare level of accountability from its grantees. In India, the Foundation runs an HIV AIDS-prevention program, headed by Ashok Alexander. Alexander calls the program's clinics "franchises." In 2005, Alexander cut off funding to three non-governmental organizations because they did not meet agreed-upon milestones. "People are not used to being terminated for non-performance," says Alexander.
Gates did not keep his title of top philanthropist for long. In that same month that Gates left Microsoft, Warren Buffett announced that he planned to give away his stake in Berkshire-Hathaway, the company he founded, worth more than $44 billion. Buffett will divide the gift over five foundations, but the largest amount will go to the Gates Foundation. Buffett's donation exceeds the amounts given by the great philanthropists of the past. Andrew Carnegie's giving totaled about $380 million-$7.6 billion in today's dollars. Based on the Berkshire stock price on the day the gift was announced, Buffett's gifts would be worth $37 billion. Because the donation is in the form of Berkshire stock shares given over time, the total donation could grow in value as the company grows.
According to Buffett, he always intended to have his wife oversee his charitable giving when he died. But after she died in 2004, he saw an opportunity to invest in "an existing well-respected foundation run buy two ungodly bright people." He changed plans and started giving away his fortune in 2006. Buffett credits his late wife Susan for his change in priority. "We agreed with Andrew Carnegie, who said that huge fortunes that flow in large part from society should in large part be returned to society," said Buffett.
The gift more than doubled the size of the Gates Foundation. "We are awed by our friend Warren Buffett's decision to use his fortune to address the world's most challenging inequities," Bill and Melinda Gates said in a statement. "As we move forward with the work, we do so with a profound sense of responsibility. Working with Warren and with our partners around the world, we have a tremendous opportunity to make a positive difference in people's lives.
Sources: Amanda Ripley, "Time Persons of the Year: From Riches to Rags," Time, 26 December 2005-2 January 2006, 72-88; Liv Grossman, "Bill Gates: Giving it Away in Style," Time, 18 April 2005; Steven Levy, "Bill Gates Goes Part Time at Microsoft," Newsweek, 17 June 2006; Yuki Noguchi, "Gates Foundation to Get Bulk of Buffett's Fortune," The Washington Post, 26 June 2006; Carol J. Loomis, "Warren Buffett Gives Away his Fortune," Fortune, 25 June 2006; and information from www.gatesfoundation.org.
Task
• How do Bill and Melinda Gates use basic business principles to run the Gates Foundation?
• Since the foundation does not earn a profit, how should the success of the Foundation be judged?
• Most philanthropists are wealthy individuals who begin their charitable work late in life after years of building an enterprise. Why do you think Gates started so early in his life?
• Why do you think Buffett chose the Gates Foundation for his record-breaking donation?