Many years ago, friends were visiting Warren Buffett in Laguna Beach, Calif., where the famed investor had a home. He asked them, “If you had to give money to one charity to do the most good, which would it be?”
“He seemed to be searching for the Coca-Cola of charities — a home run that would take society’s investments off the charts,” wrote Roger Lowenstein, recounting the anecdote in his 1995 biography of Buffett and referring to the beverage firm in which Buffett’s Berkshire Hathaway Inc. holds a large stake.
Buffett has found his “Coke” — in the grip of the only man wealthier than he, his friend Microsoft Inc. Chairman Bill Gates.
Rather than will his vast holdings in Omaha-based Berkshire to his own foundation, as had been planned, Buffett, 75, said Sunday that he would begin now to give away, in yearly doses, 85 percent of his Berkshire stock. The lion’s share, or more than $30 billion, is going to the Bill and Melinda Gates Foundation.
The record gift eventually will double the Gates Foundation’s assets, already the most of any foundation in the nation, and presumably bolster its efforts to eradicate the world’s more stubborn diseases and improve public education. Less attention has been paid to the other part of Buffett’s stock divestiture, which would significantly enlarge his own foundation and those of each his three children — including a philanthropy based in Decatur.
Buffett’s bold gesture could inspire more philanthropic giving, as some have suggested. Yet it comes as the White House and congressional Republicans continue their assault on the estate tax — perhaps the main motivator for the extremely wealthy to give to charity and not transfer all their estate to heirs — although the House’s latest move against the tax seems to have stalled in the Senate.
The amount of bequests to charities has dropped every year since the top estate tax rate was lowered in 2003, hitting $17.44 billion in 2005, according to the Giving USA Foundation.
Others say Buffett’s gift could spur the creation of more megafoundations. Certainly, bigger shoulders are needed to carry the social welfare burden that federal and state governments want to unload.
And although a $60 billion foundation with the Gateses at the controls may seem benign today, feelings could change in the future when the Gateses’ children, grandchildren or whoever are running a philanthropy that could be double or triple the original size.
Anti-dynastic wealth
Buffett has spoken out against “dynastic wealth,” and he decided long ago not to bequeath his estate to his children. So, as he would with a business investment, Buffett looked for a good, young management team and found one in Bill Gates, 50, and his wife, Melinda, 41.
“My dad has found a place where there is an incredible amount of intelligence and commitment and will likely be for years,” said Howard Buffett, who lives on a 840-acre farm in Decatur. “He’s got a lot of confidence [the Gateses] will be around awhile.”
His Howard G. Buffett Foundation will have about $1.2 billion in assets once more than $1 billion in Berkshire stock bequeathed by his late mother, Susan, who died in 2004, is transferred. Another $1.1 billion or so will be doled out, in annual installments of around $50 million, by his father.
Howard Buffett said he plans to use the extra assets primarily toward humanitarian relief and food sustainability in developing countries, especially Africa, as well as education programs in Decatur.
Howard Buffett said some of his five children might be interested in running the foundation in the future, “but beyond that it is too hard to project.” So he plans to adopt a “sunset” clause, setting some distant date when all his foundation’s assets will be distributed, and to spend his father’s gifts as they come in. But it’s hard giving out such sums responsibly, a chore, he said, that would frustrate his father.
“He’s not interested in doing it,” Howard Buffett said.
A student of history
Warren Buffett said this week that he studied histories of some of America’s great businessmen-philanthropists — Andrew Carnegie and John D. Rockefeller, among them. Both those industrialists gave vast sums for the benefit of mankind — though in their careers they had inflicted great misery and abhorred “handouts” to the poor. They did so in the name of religion and to burnish their reputations for posterity.
Carnegie wrote that a “man who dies rich dies disgraced.”
But until recently, Buffett seemed to want to accumulate the most before he died.
Lowenstein wrote that Buffett had been skeptical of philanthropy, his attitude shaped by an experience in the 1970s while serving on the board of Grinnell College in Iowa. His investment savvy had helped swell the college’s finances, but “Buffett was horrified that Grinnell actually spent some of this windfall — far too much to his liking,” he wrote.
Over the years, Buffett refused many requests for donations and funded his own Buffett Foundation (since renamed for his wife) with small sums in relation to his wealth. That foundation’s main interests have been population control and nuclear disarmament.
In his defense, Buffett has said that he is lousy at choosing among causes and that he assumed his wife would take care of that after he died.
“I don’t think he thought of it any other way than my mom would be around to handle it,” said Howard Buffett. Her death from a stroke “was one of those events in life you don’t plan for and make you rethink things.”
He said the gift to the Gates Foundation “is classic Warren Buffett. It’s creative, efficient and has no negative effect on Berkshire shareholders.”
He added that he shares his father’s enthusiasm for Bill Gates: “Bill is amazing the way he reads and absorbs things. He reminds me of my dad.”
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Generosity index
With his single gift valued at almost $31 billion to the Bill and Melinda Gates Foundation, Warren Buffett already has exceeded the lifetime giving and bequests of these noted U.S. philanthropists. (all figures are converted into 2006 dollars, expressed in billions).
$9.49 John D. Rockefeller Sr.
8.62 Andrew Carnegie
5.45 Henry and Edsel Ford
0.92 Margaret Sage
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cstorch@tribune.com
