June 30, 2006
by Bradley Center
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A complete, edited transcript is now available of the June 30, 2006 Bradley Center panel discussion entitled:
What Does the Buffett/Gates Gift Mean for Philanthropy?
June 30, 2006 • 12:00 – 2:00 p.m.
The Betsy and Walter Stern Conference Center
Program and Panel
Welcome by the Bradley Center’s WILLIAM SCHAMBRA
ELIZABETH BORIS, Urban Institute
RICK COHEN, National Committee for Responsive Philanthropy
JAMES ALLEN SMITH, Georgetown University
ADAM MEYERSON, Philanthropy Roundtable
prepared by Rita Koganzon
At this discussion on June 30, 2006, just days after Warren Buffett made the stunning announcement that he's giving away 85% of his $44 billion to philanthropic causes (the largest of which is the Bill & Melinda Gates Foundation, itself already a $30 billion enterprise), Hudson Institute's Bradley Center for Philanthropy and Civic Renewal hosted a panel of experts to discuss the gift, including Elizabeth Boris of the Urban Institute, the National Committee for Responsive Philanthropy's Rick Cohen, James Allen Smith of Georgetown University, and the Philanthropy Roundtable's Adam Meyerson. The Bradley Center's William Schambra served as the discussion's moderator.
James Allen Smith opened the panel by providing the historical context in which to understand this gift. In contrast to Carnegie’s and Rockefeller’s lifetime givings ($331 million, and $540 million, respectively), Buffett’s gift represents an increase not only in size, but a “transformation in scale.” Historically such transformations in scale have resulted in shifts in the approach to philanthropy as a whole, as with the shift to progressive approaches to social problems in the early twentieth century. Buffett also seemed to be calculating his own strengths and weaknesses by giving the money away to another organization rather than starting one himself. He also made his gift with a strong understanding of the history of this kind of wealth transfer—he had read Carnegie’s Gospel of Wealth and studied the Rockefeller Foundation’s history, and he absorbed their lessons about how to create and run successful programs.
Smith worried about the extent to which the Gates Foundation can be held accountable for its programs. He reasoned that it would self-regulate to some extent, insofar as, for example, foreign governments or private companies with whom it was trying to engage in partnerships like Merck could refuse to work with the foundation if they found them irresponsible or ineffective. However, he warned that, within the US, the mechanisms of government regulation were weak and underfunded, and in the Third World governments and civil society are frequently to weak to protest ineffective philanthropy.
Elizabeth Boris discussed what is and is not novel about Buffett’s move. She pointed out that while anonymous giving, rescinding of authority over spending, and the stance against hereditary wealth are not unprecedented, the installment structure of the gift is something unusual. Boris suggested that Buffett is counting on his strength as an investor in order to maximize the gift with the least damage to his stockholders. She also noted that Buffett’s donation went to a foundation which has learned, by trial and error, the virtues of collaboration with governments and other agencies in attacking some of these intractable global problems, indicating that he is aware that capitalism cannot address all social ills. However, she raised some concerns about whether the concentration of $60 billion in the hands of essentially three people is necessarily good for society. With the relative lack of government oversight or other forms of formal accountability, questions may be raised about the wisdom of relying on Buffett and Bill and Melinda Gates to appropriately dispose of a gift of this size. She agreed with James Allen Smith that this could especially lead to problems in the Third World, where the Gates programs could potentially undermine local government efforts and create political problems.
Rick Cohen criticized the media for almost universally praising what he called the Gates-Buffett “merger” on specious grounds such as, for example, that it will be inherently more accountable because of its bigness, or that Bill Gates and Warren Buffett seem like down-to-earth, trustworthy guys, or that the foundation has businessmen at its helm. However, Cohen worried that this constituted a dangerous concentration of wealth in the country and a disproportionate influence among foundations, and he drew attention to their previously questionable business practices—Microsoft’s anti-trust litigation, and Berkshire Hathaway’s lack of transparency, which is a necessity for foundations. He also pointed out that Bill Gates sits on Berkshire Hathaway’s board and owns a great deal of its stock. There is nothing more inherently effective about large foundations, as commentators have assumed. In fact, smaller foundations often have a greater “community accountability.” Moreover, Cohen warned that some of Buffett’s comments about the gift betrayed a distinctly anti-government orientation and a “philanthropy-can-do-it-all” approach, which is problematic because it leads the government to view foundations as replacements for its own funding responsibilities. He also worried that the Gates Foundation’s science and technology-based approach would overlook or fail to properly address the underlying global poverty issues that cannot be as effectively resolved with technology alone.
Adam Meyerson discussed the implications of the size of the new Gates Foundation. He pointed out that, while the foundation is immense, its $1 billion giving per year will only total 1 percent of annual giving in the U.S. He reiterated that smaller foundations were not necessarily less effective by virtue of their size, and that, while small foundations in fields like health and education may feel constrained by the influence of such a large agenda-setter, in fact all foundations have to grapple with this constraint because the federal government is larger than all of them in every field. In response to the question of accountability for such a large endowment, Meyerson suggested that the publicity Buffett’s gift has received will keep public attention trained on the Gates Foundation and its effectiveness. Beyond that, he felt that the Gates Foundation should be left alone by the government and any other regulatory agency to dispose of its funds as it thought best.
Meyerson also made several predictions for the future of philanthropy based on this gift. First, he suggested, twenty years from now, the Gates Foundation will no longer be the biggest in the country. The dynamic, entrepreneurial economy will both produce more billionaires, and more forms of philanthropy such as venture philanthropy. Second, he predicted that more donors would follow the Buffett example and donate to preexisting foundations, creating healthy competition between the big players. Third, the final impact of the Gates foundation will “depend more on the power of its ideas than the magnitude of its philanthropic resources.”
The panel was opened to audience questions, and Robert Woodson, of the Center for Neighborhood Enterprise, asked about how effectiveness could be gauged for Gates’ programs and whether there should be penalties for mistakes. Rick Cohen replied that he felt that the Gates money should be viewed as money held in public trust for the public interest. However, he felt that, as a foundation, it is the Gates Foundation’s responsibility to take risks, and be prepared to lose on some of them without facing penalties. Smith agreed, preferring to call foundation errors “good mistakes” because they allow other sectors to make safer, more proven decisions based on the nonprofit sector’s experience with what does and doesn’t work.
Other questions were also put to the panel, and can be found in the full transcript.
For Further Information
To request further information on this event, the transcript, or the Bradley Center, please contact Hudson Institute at (202) 974-2424 or e-mail Kristen at email@example.com.
Hudson Institute's Bradley Center for Philanthropy and Civic Renewal aims to explore the usually unexamined intellectual assumptions underlying the grantmaking practices of America’s foundations and provide practical advice and guidance to grantmakers who seek to support smaller, grassroots institutions in the name of civic renewal.
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