Warren Buffett Outlines Plans for Giving Bulk of His Fortune Away Through Bill Gates's Foundation

The billionaire investor Warren Buffett said Monday he hopes the attention received by his record-breaking $37-billion gift to charity will inspire other donors.

Mr. Buffett announced that he will give

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away 85 percent of his wealth to philanthropic causes — with the largest chunk of the money going to the Bill & Melinda Gates Foundation. Mr. Buffett will become a trustee of the Gates fund.

The rest of Mr. Buffett's philanthropic dollars will be given to foundations run by his children and one that he created with his late wife, Susan. Mrs. Buffett left $2.4-billion to the couple's philanthropy when she died in 2004.

Mr. Buffett's commitment is the largest in philanthropic history, a record previously held by Bill and Melinda Gates, who have donated more than $29-billion. It far exceeds the sums given by Andrew Carnegie or John D. Rockefeller, or any contemporary donor, according to a Chronicle analysis.

Mr. Buffett officially signed the letters pledging to give his Berkshire Hathaway shares to the Gates Foundation and four family foundations in front of more than 200 nonprofit leaders, philanthropists, and scientists, as well as government officials and United Nations representatives.

The setting, in the Celeste Bartos Forum of the New York Public Library, was designed to underscore the role that philanthropy and government play in building major institutions that serve society.

The guest list also seemed to reinforce a theme that the Gateses and Mr. Buffett made in appearances throughout the day Monday: that even with all the new resources the nation's two wealthiest men have committed to philanthropy, change will not come about in the world of global health and American education unless private foundations and governments join forces.

"The scale of the problems we deal with is gigantic," said Mr. Gates. "We'll be a small part, working with government to steer philanthropy in ways that make a difference."

In addition, Patty Stonesifer, the foundation's chief executive, said the fund invited 100 students to the signing ceremony — including several who attend schools that are parts of the Gateses' effort to build a network of small high schools in New York City — to remind the audience of the people who will benefit from philanthropic gestures.

Seated in the audience was the philanthropist and financier David Rockefeller, whom both Mr. Gates and Mr. Buffett cited as helping them figure out how they wanted to proceed in giving away their money. The Gateses said they wanted to extend the work the Rockefeller Foundation did to spur the "green revolution" by spreading new agricultural techniques in developing countries.

At the event, Mr. Gates was asked whether other donors could do what Mr. Buffett had done by giving money to the Gates Foundation. "We're not set up to accept money from others," he said. "I encourage people to look at what is being done in the areas they care about and see who else is doing good work." But, he said "if there is enough interest" among wealthy people in directly joining forces with the Gates Foundation as Mr. Buffett did, "we'll look at what we can do to set things up."

Company Shares

Mr. Buffett assumed control of Berkshire Hathaway, a faltering textiles company, in 1965, and has turned it into a financial juggernaut that specializes in insurance and has major stakes in many publicly traded companies, including American Express and Coca-Cola. Over time, the Gates Foundation will receive 83 percent of Mr. Buffett's shares in Berkshire Hathaway.

Mr. Buffett said he will start transferring the money in July. Previously, Mr. Buffett had said he would not give away his fortune until his death. (Read The Chronicle's article on Mr. Buffett's giving philosophy and on his corporate philanthropy.)

The Gates Foundation is already the wealthiest foundation in the United States, according to The Chronicle's most-recent survey of foundations.

With an estimated $30-billion or more coming from Mr. Buffett, the Gates Foundation could be worth almost as much as the nine other richest grant makers in the United States combined.

In announcing the partnership, Melinda Gates said the foundation would continue along the path it has already carved out rather than take on new causes. "We're obviously going to have to expand that somewhat and grow the foundation a bit over time. But I think what you should expect from us is that we will really deepen the areas we are already into," she said. "We are not going to broaden the foundation into a whole lot of new areas but really deepen what our commitment is already to global health, and particularly to education."

Mrs. Gates said that the foundation will continue to focus on fighting AIDS and that she hoped that in the next 15 to 25 years an effective vaccine against the disease could be found.

She said the foundation was also looking at ways to go beyond simply making grants to accomplish its mission. For example, she said the foundation has been exploring the area of microfinance — giving small loans to help poor people build businesses — "as a way to help people lift themselves out of poverty."

Though Mr. Buffett's decision to give the bulk of his fortune to the Gates Foundation got most of the attention, he said that he had "doubled the reserves" of the foundations started by his children: the Howard G. Buffett Foundation, Susan A. Buffett Foundation, and the NoVo Foundation, which is overseen by his son Peter A. Buffett.

Mr. Buffett said each of the three foundations eventually would have about $1-billion in assets.

In the letters outlining his plans, Mr. Buffett urged his children "to consider working with your siblings on important projects," and to "expect to make mistakes; nothing important will be accomplished if you make only 'safe' decisions."

The gift to the Gates Foundation marks a major shift in how the billions accumulated by Mr. Buffett will be spent. Nine years ago, much of the investor's eventual philanthropy was expected to be used for population and reproductive-health programs (The Chronicle, Nov. 13, 1997). The Gates Foundation's biggest program, global health, has a very different focus: developing vaccines for diseases that kill millions of people in developing countries each year.

Mr. Buffett said what he tried to do in his philanthropy was support causes that don't have obvious benefactors and that were important, but not necessarily popular with other donors. "There's no alumni group," he said, to tackle the problems of the poor around the world.

Mr. Buffett has earmarked 10 million shares of Berkshire Hathaway stock for the Gates Foundation, and he will give away 5 percent of the remaining balance each year until his death. The gift requires that Gates spend the full amount of the gift each year, in addition to the roughly 5 percent of assets the foundation otherwise would give annually.

Mr. Buffett and Mr. Gates have been close friends since they met in 1991. In an interview with Fortune, Mr. Buffett said he has seen Bill and Melinda Gates give presentations about their foundation, and that he was impressed by the passion and energy they bring to the work.

"If you think about it — if your goal is to return the money to society by attacking truly major problems that don't have a commensurate funding base — what could you find that's better than turning to a couple of people who are young, who are ungodly bright, whose ideas have been proven, who already have shown an ability to scale it up and do it right?" Mr. Buffett said.

In drafting his giving plan, Mr. Buffett emphasized that he cares as much about who is in charge of giving his money away as the causes that he focuses on. He insisted in his agreement to sign over his money to the foundation that Bill or Melinda Gates must be actively involved in the institution or else his money will not keep flowing there.

Mr. Buffett said that one reason he decided to give the money to the Gates Foundation, rather than build up his own family's foundations, is that he felt he did not have the expertise to give away money wisely and he wanted to put it in the hands of people who had an established track record, who loved what they did and who, as he put it, had already made mistakes.

"In business," he said, "you look for the easy things to do. In philanthropy, you take on important problems and it is a tougher game."

He said he had spent the past 50 years thinking about how best to give his money away. "I never had any other plan. I don't believe in dynastic wealth."

However, he said he and his wife had agreed that it was better to build up his wealth so the maximum amount of money would be available to charity. He said he had hoped that people who weren't "major compounders" of their wealth would provide money for today's needs while he would build up vast stores of money to finance tomorrow's challenges.

Mr. Buffett said that view began to change in the time since his wife, Susan, died two years ago. He said he had assumed she would outlive him and make the decision about how to give away their money.

He said that he would apply the same approach to his role at the Gates Foundation that he did when he invested in companies: He would look for talented managers and let them do what they thought best, even if he sometimes disagreed with them. "As long as they have a good batting average," he said, "that's OK with me. Nobody's 100 percent all the time. That approach of letting managers do it their own way worked well for me in business and that's what I want to do in philanthropy."

Whitney Tilson, a founder of Teach For America who now manages hedge funds that have big holdings in Berkshire Hathaway, called Mr. Buffett's gift "the ultimate act of humility."

"Instead of setting up another philanthropic bureaucracy, which is how most private foundations end up, he's just going out and finding the exemplars of the foundation world and letting them give it away because they're good at it," Mr. Tilson says. "How many people have ever left large amounts of money to something and it doesn't have their name on it? Buffett is saying, 'I don't care about my ego.''

Mr. Tilson believes Berkshire Hathaway is undervalued and that it could nearly double over five years, which would sharply increase the funds available to the Gates Foundation.

Mrs. Gates said she and her husband feel "an incredible responsibility" to use the foundation's additional assets wisely: "When you give away your own wealth it's one thing, but to give away the body of someone else's life work is really quite something."

The Gateses and Mr. Buffett said they hoped their plans would inspire other donors. Mr. Gates noted that Ted Turner's outspoken criticism of billionaires who don't give much to society — criticism that was pointed at Mr. Gates before he turned over a significant chunk of his money to philanthropy — had made a difference. But he said while Mr. Turner had caught the attention of the wealthy by "shaming" people into giving, Mr. Gates said he and his wife wanted to show that philanthropy was "fun."

That feeling about philanthropy is part of what Mr. Buffett said he admired about Bill and Melinda Gates. "If people are in love with what they doing, they will do it well. You're turned on by philanthropy," he told them at the New York Public Library. "You can't buy that kind of enthusiasm with $10-billion."