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On June 25, Warren Buffett, CEO of Berkshire Hathaway (BRK.A
), made the surprise announcement that over the next five years he will donate 85% of his fortune to five foundations, most notably the Bill & Melinda Gates Foundation, run by the Microsoft (MSFT
) founder and his wife (see BusinessWeek.com, 6/27/06, "Buffett's Mega-Gift").
On June 26, Page Snow, senior vice-president of foundation services for Foundation Source, spoke with Danna Cook of BusinessWeek.com about Warren Buffett's $31 billion gift to the Gates Foundation and the implications of the extraordinary gift. Foundation Source describes itself as the silent partner behind America's foundations. The for-profit company is the leading provider of support services and administrative help to private foundations, currently serving more than 450 individual private foundations.
Edited excerpts of Snow and Cook's conversation follow:
What in history equals or even compares with this kind of donation?
There's nothing that I know of. At least in terms of private giving, this is pretty unprecedented, that one of the wealthiest people in the world would give their money to one of the other wealthiest people in the world. But it actually makes a lot of sense to me.
Why does this make more sense than Buffett starting his own foundation?
It will allow Buffett to see the results of his giving more than if he were to start up his own foundation now. For Warren Buffett to set up his own foundation now would take a huge amount of startup time. It took the Gates Foundation many, many years to get to the point they are now. It makes a lot of sense, not only that he would give it to a foundation with experience, but to a foundation with experience in giving out a lot of money each year.
Is this kind of gift to an already-wealthy foundation cumbersome or helpful?
Much more helpful. Bill and Melinda Gates are involved in problems that need huge resources (see BusinessWeek.com, 6/26/06, "Bill Gates Gets Schooled"). They're working on the entire educational system in this country and world health issues. Those are issues that need additional funding.
The Gates Foundation is primed with staff trained to think in terms of additional funding coming in. It's a brilliant choice because I can't think of another foundation in the country that could absorb that size funding at that level.
Could this money have been more helpful donated elsewhere?
I think that it's a logical foundation because they're used to giving that kind of money away. Bill Gates is a living donor, and living donors have a very different relationship to their money. They want to make sure every dollar has an impact. Buffett would be very aware of Bill Gates' relationship with his money. From an investment point of view he knows his money would be well spent.
What impact will this have on the Gates Foundation?
It's going to have a huge impact, a very good one. I doubt whether it will have a huge impact on the way it does funding. It will just have more resources.
What does Buffett's gift mean for foundations overall?
What's interesting about this is the amount of dollars going into another foundation is unprecedented. It used to be people would start their foundation via a bequest and their family or advisors would take over. The whole concept of "Don't start from scratch" and "Why reinvent the wheel?" being put into play encourage people to [have greater control over] their resources rather than just setting up a foundation after their death.
As far as foundations go, will they be happy if major donors who agree with their mission and philosophy donate to them? I think they will be. But I doubt they will go looking for more private donors.
What impact do you envision this having on philanthropists?
In terms of philanthropy it'll put a new idea into play. More people who do not choose to set up their own foundation may now be thinking "Are there private foundations that align with my own preferences and values that I can give to where that money can have a lasting value?" Foundations give a lot of flexibility in philanthropy.