It's not about the money

By Paul

Easterly offers some advice to Bill Gates, Warren Buffet and other would be philanthropists;

“The misguided media reaction to the Gates-Buffett union was, quite predictably, all about numbers: Warren's $31 billion gift, which roughly doubles the size of Bill's foundation to about $60 billion. Welcome to foreign aid wonderland, where it's always about the spending, never about the impact. "Double" has a venerable history; whenever anyone starts worrying about the world's poor, they almost always call for exactly doubling foreign aid -- from John F. Kennedy to last year's Group of Eight (G-8) Summit agreeing to double aid to Africa.

Alas, aid flow reflects the cost of providing services for the poor, not the value of those services. Would Microsoft Corp. promote an executive who bragged about setting a record for costs? Would Berkshire Hathaway invest in a business that headlined its remarkably high spending on office supplies? Unfortunately, the foreign aid business has a sad history of bureaucrats under heavy pressure to spend money on foreign consultants and four-wheel-drive vehicles but with zero pressure to find out whether that spending translates into the forever elusive "technical assistance," "capacity building" and "civil service restructuring" that are supposed to help the poor. Your challenge -- much harder in foreign aid than in business -- is to find out if your final customers are satisfied.”

Related;

Conversation Bill and Melinda Gates and Warren Buffett had about philanthropy with Charlie Rose (via Official Google Blog)

‘World development report 1993 : investing in health’- which according to Bill Gates opened his eyes and gave his mission (see the above interview)

Being smart with Buffett’s billions

-- July 5, 2006 12:18 AM |

Comments

Per Kurowski wrote:

A humble suggestion to the Gates/Buffett Team

William Easterly offered his advice to what he calls “the new Bill and Melinda Gates/Warren Buffett Axis of Altruism” with his “4 Ways To Spend $60 Billion Wisely” Washington Post, July 4.

Three of Easterly’s suggestions, number 2. It's not about the money, 3. Beware of technological quick fixes and 4. Don't believe your own press, sounded extremely sensible to me, but, on number 1.The business world and the developing world are worlds apart, I choked, since given the track record of Bill Gates and Warren Buffett I had imagined the potential good they could do if, with that kind of financial resources, they tried to help some poor developing countries to break out from their aid dependency, by teaching them a little bit about what it takes doing business. Gates/Buffett should know! And learning to do business by doing business is an as-good-as-it-gets- approach to sustainability.

I am not too experienced in this aid-business, but having recently been one of those rare Executive Directors of the World Bank who got there with only a private sector background, I know exactly that the following is what I would tell team Gates/Buffet to do:

Take at least half of the money and set up an organization that copycats the International Finance Corporation (IFC), which is the entity the World Bank Group uses to promote sustainable private sector investment in developing countries, helping to reduce poverty and improving people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses.

Such an organization, with such Directors as Gates/Buffett could have a tremendous and sustainable impact on the poor developing countries helping them for instance to put up schools for certified bilingual nurses; construe retirement home for foreign senior citizens; do environment projects designed to compensate, against cash payments, for the developed world’s many environmental sins; and exploit all those great new opportunities that are out there to be taken, the moment poor countries learn not to focus exclusively on agriculture and textiles.

But besides helping the poor countries directly, hopefully in a self sustainable way too, they would also do so indirectly by putting some competitive pressure on the rest of all the development actors that are currently living sort of cozily in quite uncontested markets.

So Team Gates/Buffet, why don’t you follow that old advice of doing what you’re good at, pro-bono (not that Bono) instead of making a too a drastic career change that will just risk wasting your talents. By the way, if the would need a manager to start it up? Well Peter Woicke, the former managing director of IFC who had to retire because of age, at an unseemly young age, might be available to help out, the first steps.

-- July 6, 2006 12:12 AM ∞

John Henry wrote:

Re Buffett and the B-H gift:

Might it be fair to say that the net result of this will be that Buffett will wind up having made almost no money from about 40 years of investment in B-H?

Since he bought it, it has paid no dividends. That would mean an investor's gains would come soley from stock appreciation. Yet Buffett is giving the stock away which means he will not get the benefit of the gains.

He does not even make much, $100,000/yr as I understand it, in compensation for running B-H.

Not a complaint, I admire Buffett for this and a buch of other stuff. I just wish I had bought even 2-3 shares of B-H when I first heard about it. At $300/share then I thought it was overpriced. It's now around $90,000/share

John

PS-Love the blog and especially the podcast links.

-- July 8, 2006 1:55 PM ∞

paul wrote:

thanks,John. Some of the podcasts are online for limited time esp Radio National's, so best to download rightaway.

Becker and Posner have comments on Buffet.
http://www.becker-posner-blog.com/archives/2006/07/buffett_and_giv.html

-- July 9, 2006 11:52 AM ∞

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