DEMAND AND SUPPLY By Boo Chanco
The Philippine Star 06/30/2006
ANAHEIM, California – Just about everyone we talked to at the Brea Mall were quite agog about the news of the day… Warren Buffett, the chairman of Berkshire Hathaway Inc. and one of the world’s wealthiest men, plans to donate the bulk of his $44- billion fortune to the Bill & Melinda Gates Foundation and four other philanthropies starting in July. Experts in the social development field say it is just about the largest donation any individual has given to a foundation.
Mr. Buffett plans to give away 85 percent of his fortune, or about $37.4 billion, all in Berkshire stock. Of that amount, he will channel the greatest share, about $31 billion, into the Gates Foundation. Gene Tempel, executive director of the Center on Philanthropy at Indiana University, told The New York Times, "Most people with this sum of money would try to create their own foundation in their own image; he’s entrusting it to someone with whom he’s had a good close relationship but who is 25 years his junior, who might be around to make sure it is used properly."
The other amazing thing about the donation is, as Fred P. Hochberg, dean of the Milano School for Management and Urban Policy at the New School, which has a large non-profit management department, puts it, "It’s egoless. Warren’s name is not on the door."
True to his no nonsense approach to investments, Buffett explained that in putting his enormous donation in the hands of Bill and Melinda Gates, he is making use of the infrastructure and the systems already in place for handling such donations with the end of delivering the most good. The $31-billion gift to the Bill & Melinda Gates Foundation will help the foundation pursue its longstanding goal of curing the globe’s most fatal diseases, along with improving American education.
The Gates Foundation follows a pattern of spending generously to chase solutions like a malaria vaccine. It also buys supplies, like vaccines or mosquito nets, as it tries to get rich countries to match its donations and poor countries to get organized well enough to distribute the goods.
The interesting thing about the approach of Gates and Buffett is the kind of focus they impose on their giving. They do not believe on solving the world’s problems all by themselves but in making a difference in the areas they do get involved in. The foundation is spending heavily in finding a vaccine for AIDS. Mr. Gates said that while he might be "overly optimistic," he believed there was a real shot at finding cures for the 20 leading fatal diseases, as well as ensuring that every American has a chance at a decent education.
Like Bill Gates, Buffett does not believe in passing on his wealth to his family after his death. In fact, Mr. Buffett was scathing in describing his feelings about estate taxes, which the Bush administration is trying to kill. The ability of rich men to pass on "dynastic wealth" to their grandchildren is offensive to the American tradition of meritocracy, he said.
The other interesting strategy the two men employ in their giving is working through established or recognized social entrepreneurs who are already working on a particular problem. In fact, in explaining his large donation to the Gates Foundation, Buffet likened it to making a bet on Tiger Woods if the game is about golf. No ego considerations… just simple results orientation.
This reminds me of an article at The Financial Times a couple of months ago about Bill Drayton and his concept of the social entrepreneur, the phrase he coined to describe ideas that combine business acumen with social reform. The concept, The Financial Times reported, has attracted both interest and money from billionaire Þnanciers, including Warren Buffett. It has also reportedly become a standard option at many business schools.
"At some deep intuitive level a social entrepreneur knows they have to change the whole of society," The Financial Times quotes Mr. Drayton. "They are married to a vision." A social entrepreneur is someone who, when he sees an opportunity for change in society takes it. Mr. Drayton’s own vision was to understand that drivers of economic growth, such as innovation and productivity gains, could be applied to social problems. Faced with the inefÞciencies of government and the proÞt orientation of the private sector, he envisaged the rise of the non-proÞt, or "citizen" sector, as he calls it.
Mr. Drayton was 35 when he founded Ashoka, a global organization that invests in social entrepreneurs. Ashoka has funded people who worked to modernize education in India, helped bring cheap electricity to rural Brazil, eye care affordable to thousands of people in India, among many others. I have just read a book entitled "How to Change the World: Social Entrepreneurs and the Power of New Ideas" that discusses Ashoka and the people it works with.
Ashoka, named after an ancient emperor in India who was a social innovator, works as a social venture capital company. It supports entrepreneurs with a small Þnancial investment, access to its network of fellows, and marketing and business expertise from the likes of McKinsey. Mr. Drayton, is himself a former McKinsey management consultant. He was "always more turned on by social ideas" than business and believes that the "social sector" is just starting to catch up with business.
He started Ashoka with a budget of $50,000 and the aim of Þnding likeminded people. The organization now has a budget of $17 million and has funded 1,700 fellows across 60 countries, many of whom have helped bring about change in national policy in their countries. Mr. Drayton’s vision is to bring in business partners to create alliances with Ashoka fellows that span the globe. Some of the social entrepreneurs Ashoka has funded are already working on a scale to match that of big international businesses.
The Financial Times reports "the corporate world is waking up to the fast growth of the citizen sector, which in Organization for Economic Cooperation and Development countries has grown almost three times as fast as the rest of the economy since the early 1980s. Most important, says Mr. Drayton, the divide between the social sector and business is being bridged. "The citizen groups are talking to the men in suits and beginning to heal the communications bridge."
One of his aims now is to Þnd a way to incorporate the citizen sector in the global Þnancial system. Mr. Drayton has been visiting US and European Þnancial institutions with the aim of making social investment attractive to them.
The bottom line is how to make a real difference. The problem with many activities under the philanthropic category become ends in themselves… self perpetuating bureaucracies similar to what prevents government from being more effective in the same social development areas. They forget that their reason for being is precisely because government is tied down by old policies and a fossilized bureaucracy to act swiftly in addressing crying social needs.
Then, there is the matter of credit. Many philanthropies are so PR-driven to justify the general cynicism of the public. This is particularly true in the corporate sector where the public relations impact of so called Corporate Social Responsibility projects seem to drive the activities more than the desired social good it delivers.
In that book I mentioned earlier (How to Change the World) by David Bornstein, it was pointed out that "there is no limit to what you can achieve if you don’t care who gets the credit. For entrepreneurs, a willingness to share credit lies along the critical path to success simply because the more credit they share, the more people typically will want to help them. If an entrepreneur’s true intention is simply to make a change happen, then sharing credit will come naturally. However, if the true intention is to be recognized as having made the change happen, sharing credit may run against the grain." There shouldn’t be any planned or conscious courting of public relations brownie points with every peso spent for the social good.
That, I think, is the litmus test that Mr. Buffett passed when he made his large donation. As was pointed out by observers here, there was an absence of ego. He was ready to subsume himself to someone 25 years younger than he is and allow him to spend his money in a Foundation that carries the younger man’s name. The Oracle of Omaha was more interested in the results. And if the results would be easier to achieve by dealing with the social entrepreneurs already doing the work out in the world, so be it.
This is precisely what I had been driving at when I proposed that the Ayala Foundation "franchise" their Centex concept to other rich families and groups back home. They have done it, they have proven it, and are in a position to spread the benefits with the help of other groups. In the same way, if the interest of a local foundation is caring for distressed children, Bantay Bata is it. Why re-invent the wheel? But I wonder if our elite can think and work the way Buffett does.
It is the only way to go. In social development as in business, it pays to invest big money to gain big results. A few big and effective foundations are better than a thousand small ones that merely dissipate their funds in overhead costs. Indeed, there is much to learn and admire from the Gates-Buffett teamwork. I wonder how long we have to wait for our local elite to follow suit.
| Confident vs confidential |
Dr. Ernie E resurrects to share this Pinoy joke.
Anak: Itay, ano ang kaibahan ng confident sa confidential?
Itay: Anak kita, CONFIDENT ako dyan. Yung bespren mong si Tikboy, anak ko rin, CONFIDENTIAL yan.
Boo Chanco’s e-mail address is bchanco@gmail.com
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