Tuesday, June 27, 2006

Warren Buffett and Bill Gates stood side by side today as the new face of philanthropy, promising a charitable foundation unlike any the world has seen and one that will test the limits of what a single group can do against global problems of health, poverty and education.

Buffett's decision to sign over nearly $31 billion of his company's stock to the Bill & Melinda Gates Foundation creates a Microsoft of the charity world, a colossus that by law and under Buffett's conditions will have to give away $3 billion a year by 2009.

The relative virtues of philanthropy: "On the other hand, larger and well-run philanthropic foundations can be wonderful things: They are at least as sophisticated as government programs but are untrammeled by the oversight and second-guessing that necessarily come with taxpayers' money. This frees them to concentrate their resources on a few big challenges without regard to political considerations and to make long-term commitments that governments have trouble sustaining."

And the challenge: "Spending an extra $1.5 billion a year sounds like a problem any institution would love to have, but think about it. The Gates Foundation, already the biggest philanthropy in the country by far, has to double its annual spending. That means finding productive ways to disburse an extra $4 million a day, including Saturdays and Sundays -- and Bill and Melinda won't be allowed to just take the money out into the back yard and burn it. Buffett will be watching, and he joked to Gates that 'I won't grade you more often than daily' on how the money is being used."

With so much money, there is a real opportunity for progress on important issues, but there should also be a real concern about waste, fraud, and abuse. As sophisticated a foundation it is, with such a large influx from Buffet, the Bill & Melinda Gates Foundation will certainly need to enhance its internal controls, as well as grantee oversight, to ensure all the money goes where it should.