Wednesday, September 8, 2010

Warren Buffett leads by example

Dr. Jason White
Director of Investments
Family Investment Center

I was thinking back on my utter amazement when I first heard about and attempted to digest the scope and meaning of the largest philanthropic pledge in the history of mankind.

In 2006, Warren Buffett decided to give away the vast majority of his fortune, to the tune of over $40 billion. His plan was to donate 5% of his shares in Berkshire Hathaway annually, or about $1.5 billion based on 2006 share prices, to five charitable organizations, with the lion’s share flowing to the Bill and Melinda Gates Foundation.

Wow – talk about role models!

Of course, the story made huge news at the time with coverage all over the print and broadcast media for several weeks. Our local papers, The Associated Press, The Wall Street Journal, CNBC-TV, and my favorite rich-guy illustrated magazine, Fortune, all weighed in on the details of the plan and speculated on what this gift meant for Berkshire Hathaway, the Buffett family, and the future of philanthropy in society.

Let me try to put the magnitude of this gift into some historical perspective, if it is even possible to do so. The July 10, 2006 issue of Fortune carried a tremendous article on the Buffett gift that I encourage you to look up and read if you are interested in the details of the arrangement. The three most charitable philanthropists in history, Andrew Carnegie, John D. Rockefeller and John D. Rockefeller, Jr. gave a combined estimated $19.8 billion dollars to charitable causes over the years spanning 1889-1960, measured in 2006 dollars. Buffett alone is personally giving away more than double that amount with a much shorter time table. Amazing!

With hindsight, it was probably not a coincidental event when Bill Gates also announced in 2006 that he would be stepping down as Chief Executive Officer of the Microsoft Corporation in order to focus more time and attention to the work of the Bill and Melinda Gates Foundation. Of the estimated $5 billion annual gift from Buffett, 83% goes directly to the Gates Foundation with specific instructions that the funds should be used immediately in support of the Gates Foundation mission. Bill and Melinda have focused their charitable work on three distinct global scourges: HIV/AIDS, tuberculosis, malaria, and some assorted other human health threats.

Half of the remaining 17% of Buffett’s annual gift goes to the Susan Thompson Buffett foundation, formerly known as the Buffett foundation, but renamed after Warren’s wife Susie died many years ago. The remaining 8.5% is donated to three separate charitable foundations, each run by one of Buffett’s children.

So there is the plan. Five billion a year split among five separate charities. Even with the unprecedented size of this gift, it will still take decades for Buffett to give it all away at a $5-billion per year pace. However, don’t assume that Buffett is planning on shutting out his family entirely from inheriting a piece of his wealth. I researched Buffett’s comments from the past on inherited wealth. Going all the way back to a September 29, 1986 Fortune article, Buffett was quoted as saying “…a very rich person should leave his kids enough to do anything, but not enough to do nothing.” I am certain his heirs will be well provided for, and I really respect his personal values regarding monetary success.

What a legendary, wise, generous and beautiful man Warren Buffett is. The world will miss his living example terribly when God decides to call him home.

1 comment:

  1. Buffett fascinates me! Not a perfect man in his private life, but a visionary for the most part in business and now in philanthropy. I think I read today that Buffett is going to approach wealthy Chinese about philanthropic opportunities. He'd be the best example I can think of to encourage others to give. Thanks for putting his giving in perspective for us all.

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