Sucheta Dalal :Transforming the art of giving productively
Sucheta Dalal

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Transforming the art of giving productively  

Jul 3, 2006

Consider the contrast. On one end of the spectrum you have a super-rich Indian industrial family, squabbling over the assets of a dead member, whose widow dared to leave their wealth to a close and trusted family retainer. At the other end of the spectrum, Americans are giving it away. Together they donated a thumping $260 billion to charity last year and now the world’s two richest men have stunned even the cynics.


Bill Gates, a ruthless competitor and reviled for monopolistic ambitions, has decided to dissociate from day to day work at Microsoft to devote more time to the Bill and Melinda Gates Foundation. Barely had news sunk in when investment guru Warren Buffett, the world’s second-richest man, decided to donate 85% of his wealth — around $31 billion — to the Gates Foundation, effective doubling its resources.


As Mark R Kramer, a co-founder of the Center for Effective Philanthropy writes: “With the stroke of a pen, Warren Buffett has committed more money to charity in a single transaction than anyone in history. In current dollars, his $31 billion gift is double the total lifetime philanthropic contributions of Andrew Carnegie and John D Rockefeller combined.”


The remarkable aspect to Buffett’s gift is not that he won’t leave all his money to his children (he always said he won’t leave it all to them), but that he does not even want his charity to go out through a foundation that immortalises his own name. Buffett’s action gives a permanent shine to his halo and shows that even in ‘giving,’ he has applied the same sharp acumen and deliberation that goes into his investment decisions.


Consider this. Buffet is fond of quoting his guru, Benjamin Graham, who said: “Investment is most intelligent when it is most businesslike,”; he calls them the “the nine most important words ever written about investing.” His charity seems to have been decided in a similarly businesslike manner.


A famous Buffet saying goes: Never invest in a business you cannot understand. When it came to charity, Buffett donated his money to a Foundation and ‘management’ that he knows well and understands. Bill Gates is a bridge partner and a director on the Berkshire Hathaway board. He is also richer than Buffett and does not need his money. So, Buffett is certain that his donation will be put to good use by the Foundation, which is committed to tackling humanitarian issues and curing “the world’s 20 deadliest diseases.” Like Buffet, who is proud of his frugal ways, Bill Gates, the world’s richest man is not known for large spending either. Microsoft executives know that its success is also because every penny is stretched to the maximum.


• Buffet has applied the same acumen to his donation as in making the money

• The riders which come with his gift are equally interesting

• Will these two manage to change the way aid is utilised for the better?


Buffet has said,‘risk can be greatly reduced by concentrating on only a few holdings.’ And, “Wide diversification is only required when investors do not understand what they are doing.” He seems to have applied these maxims to his charities as well — instead of burning up a lot of money trying to find charities and causes that are honest and will use the money effectively, he has saved himself a lot of trouble by donating the entire $31 billion to a single foundation that will do the work of identifying causes.


A couple of months before, I had a long conversation with the head of an IT company foundation who told me about the time and energy spent in identifying the right causes and deciding how much to donate. And the bigger frustration of being constantly badgered for donations and the knowledge that every refusal makes a new enemy. Think of how neatly Buffett has avoided that trap!


An investor should act as though he had a lifetime decision card with just 20 punches on it, said Buffet. This would mean that he does not take undue risks even while dealing with close friends. His decision to give away the bulk of his wealth to the Bill & Melinda Gates Foundation was announced only after Gates said he would reduce his routine involvement with Microsoft and spend more time working for the Foundation. There is a further caveat. Buffett will transfer $1.5 billion to the Gates Foundation every year with the condition that all the money has to be spent during that year. It can’t go into creating endowment funds.


If Bill Gates brings half the drive and energy that went into building Microsoft into his humanitarian work at the Foundation, it would transform the world of giving and, hopefully, the manner in which non-profits worldwide use their funds. After all, it is a moot question why there is no significant reduction in poverty, hunger and disease around the world, despite hundreds of billion dollars donated by individuals, companies and governments every year. The NGO sector around the world is notoriously non-transparent and some of the biggest donors in the world have withdrawn substantial funds committed to charity or education because of worries over utilisation of their money. Some recent examples are Oracle chief, Larry Ellison, dropping the $115 million pledge to Harvard after Larry Summers resigned. Or Jim Clerk’s (founder of Netscape) decision in 2001 to cut his donation for biomedical research at Stanford University from $150 million to $60 million in 2001.


Will the two richest men in the world manage to change the way aid is utilised by creating a system that yields measurable results? Time will tell.


-- Sucheta Dalal