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The power of philanthropy

The second richest person on the planet closing a deal with the wealthiest is an event the world must take note of. When the `deal' is about the former's plans to pledge the bulk of his $44 billion fortune to a philanthropy foundation run by the latter, the world must applaud. Warren Buffet's commitment to transfer as much as 85 per cent of his assets to the Bill & Melinda Gates Foundation — the largest charitable donation in history — sends a powerful signal to the rest of world. The sheer size of the pledge has set a new benchmark for socially focussed generosity. Astonished observers are probably correct in thinking the commitment made by the "Oracle of Omaha" — known so on account of his uncanny ability to pick undervalued stocks — will energise the non-profit sector and create a new wave of philanthropy. In turning his personal wealth into something of great value to society, Mr. Buffet has resisted the temptation to start a foundation in his own name. This is an unusually wise move. It costs money to give away money and setting up a foundation is an expensive business; a recent survey conducted by the Chronicle of Philanthropy found that some major foundations consume almost 30 per cent of the money they disburse in administrative costs.

By pledging to channel the bulk of his fortunes to an existing foundation, the head of the conglomerate Berkshire Hathaway has signalled that in philanthropy, as in business, it is not necessary to reinvent the wheel. It would have been hard to find a better choice for philanthropic investment than the Bill & Melinda Gates Foundation, which runs innovative programmes on health care and education for the global community and which has proved it can put its money to consistently beneficial use. Already the largest philanthropic foundation in the world, it will find the Buffet pledge enhancing its profile and giving it more power to bring about social change. In a way, the Buffet pledge is a gesture of confidence in his friend, Mr. Gates, who will step down his role in Microsoft in two years and work full-time for the Foundation. Mr. Buffet is in tune with the culture of `meritocracy', which values initiative and hard work; and is deeply opposed to an aristocracy created on the basis of inherited wealth. He is a strong opponent of efforts in the United States administration to repeal the estate tax. It is a culture that has encouraged many Americans to earmark substantial portions of their wealth for social purposes rather than passing it wholly to their children. It has created some of America's best-known philanthropists such as the oil tycoon John D. Rockefeller, the steel magnate Andrew Carnegie, and others such as Irene Diamond and Joan Croc (who inherited business empires from their spouses). Much may be wrong with American business, but there is something to be learnt from its most successful businesspersons about the art of giving.

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