Stephen Speicher

First Gates -- Now Buffett is giving away his fortune

72 posts in this topic

CNNMoney.com is reporting that billionaire Warren Buffett, the second richest man in the world after Bill Gates, will shortly start giving away 85% of his personal fortune. The largest share of the money will go to the Bill & Melinda Gates Foundation!

"Brace yourself," Buffett warned with a grin. He then described a momentous change in his thinking. Within months, he said, he would begin to give away his Berkshire Hathaway fortune, then and now worth well over $40 billion.

This news was indeed stunning. Buffett, 75, has for decades said his wealth would go to philanthropy but has just as steadily indicated the handoff would be made at his death. Now he was revising the timetable.

"I know what I want to do," he said, "and it makes sense to get going." On that spring day his plan was uncertain in some of its details; today it is essentially complete. And it is typical Buffett: rational, original, breaking the mold of how extremely rich people donate money.

Buffett has pledged to gradually give 85% of his Berkshire stock to five foundations. A dominant five-sixths of the shares will go to the world's largest philanthropic organization, the $30 billion Bill & Melinda Gates Foundation, whose principals are close friends of Buffett's (a connection that began in 1991, when a mutual friend introduced Buffett and Bill Gates).

The Gateses credit Buffett, says Bill, with having "inspired" their thinking about giving money back to society. Their foundation's activities, internationally famous, are focused on world health -- fighting such diseases as malaria, HIV/AIDS, and tuberculosis -- and on improving U.S. libraries and high schools.

I don't know ... maybe it's something in the air or water. :unsure:

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I just read about that not 10 minutes ago.

My greatest curiosity is what "changed his mind".

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My greatest curiosity is what "changed his mind".

Buffett answers that in an interview linked to the article I mentioned. In part:

NEW YORK (FORTUNE Magazine) - Coming from you, this plan is pretty startling. Up to now you haven't been famous for giving away money. In fact, you've been roundly criticized now and then for not giving it away. So let's cut to the obvious question: Are you ill?

No, absolutely not. I feel terrific, and when I had my last physical, in October, my doctor gave me a clean bill of health.

Then what's going on here? Does your change in plans have something to do with Susie's death?

Yes, it does. Susie was two years younger than I, and women usually live longer than men. She and I always assumed that she would inherit my Berkshire stock and be the one who oversaw the distribution of our wealth to society, where both of us had always said it would go.

And Susie would have enjoyed overseeing the process. She was a little afraid of it, in terms of scaling up. But she would have liked doing it, and would have been very good at it. And she would really have stepped on the gas.

By that you mean that she always wanted to give away more money, faster, than you did?

Yes, she said that many times. As for me, I always had the idea that philanthropy was important today, but would be equally important in one year, ten years, 20 years, and the future generally.

And someone who was compounding money at a high rate, I thought, was the better party to be taking care of the philanthropy that was to be done 20 years out, while the people compounding at a lower rate should logically take care of the current philanthropy.

[...]

From the fact that you've given your kids money before to set up foundations and are planning to give them more now, I gather you don't think that kind of flooding them with money is wrong.

No, I don't. What they're doing with their foundations is giving money back to society - just where Susie and I thought it should go. And they aren't just writing checks: They've put enormous thought and effort into the process.

I'm very proud of them for the way they've handled it all, and I have no doubt they're going to keep on the right track.

If he really wants to be "giving back to society," just imagine how society might benefit from a teeny fraction of that money, say a mere $100 million to help develop Objectivist intellectuals who could really have an effect on society in the long-term. Heck, for maybe 1/2 percent of that teeny fraction we could change the entire future of physics!

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When are these people going to realize that giving away this fortune will not change anything. It's not to poor people that this wealth will go, but to a buraucrat here and a bureaucrat there. A starving child in Africa will receive only a half-eaten piece of bread and proceed blame the West for making him this way.

A tiny fraction of this fortune going as an endownment to the Founder's College, to ARI, for Elementary Waves experiments, to college scholarships for Objectivists, would truly change things in the world. Though this kind of change would not, I suspect, be what Buffet himself was looking for.

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Thank you very much for posting this, Stephen. As a shareholder (at the moment!) I certainly want to know if the CEO is going to be getting rid of his shares, especially when he owns so many of them. His notion of giving away more than $1Billion in a year (and decreasing by 5%/year thereafter) certainly won't help the stock price go up. Yet, the company is worth $140 billion, so it is about 1%. That may not make a huge difference in the long run.

It's sad that his notion of "giving back to society" doesn't include the many years of generating wealth for his shareholders.

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Thank you very much for posting this, Stephen. As a shareholder (at the moment!) I certainly want to know if the CEO is going to be getting rid of his shares, especially when he owns so many of them. His notion of giving away more than $1Billion in a year (and decreasing by 5%/year thereafter) certainly won't help the stock price go up. Yet, the company is worth $140 billion, so it is about 1%. That may not make a huge difference in the long run.

In the interview I referenced, Buffett says not.

So it could be that all the shares you give annually will be sold in the market?

Yes, that may well happen. And naturally people are going to be interested in whether that selling could weigh down Berkshire's price. I don't think so in the least - and that's true even though the annual turnover ratio for Berkshire has been running only about 15% a year, which is extremely low for large-cap stocks.

Let's say the five foundations sell all the stock they get this year. If trading volume continues as it has, their selling will raise turnover to less than 17%. It would be ridiculous to think that much new selling could affect the price of the stock.

In fact, the added supply could even be beneficial in increasing the stock's liquidity and should make it more likely that Berkshire would eventually be included in the S&P 500.

I'd say this: I would not be making the gifts if they would in any way harm Berkshire's shareholders. And they won't.

So Buffett sounds quite definite about this.

It's sad that his notion of "giving back to society" doesn't include the many years of generating wealth for his shareholders.

That is really sad; a man of such accomplishment does not recognize his full worth. It's probably not coincidental that the same interview quotes him as saying: "Ted Turner, whose philanthropic activities I admire enormously ..." If he admires $1 billion going to the United Nations, it is no wonder that he sells himself short.

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What saddens me is the fact that almost all of the great wealth creators have done the exact same thing with almost no benefit. After billions and billions have been given away, and yes I mean billions, there are still starving people. These type of people will still be starving once the money stops without the philosophical foundation it takes to make a real change.

Buffet, Gates, Turner and many more just like them should look at history and learn. The idea did not work for Rockefeller nor Carnagie and it will not work for them.

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What I can't fathom is why someone would want to work so diligently to build a fortune that they just give away. All or most all of Gates, Buffet, and Turner's business decisions were made with the intent of making money, in the end, for themselves. But once they make all that money, we see that their motivation is to give it away? To me, it is less understandable than becoming a priest, because at least a priest is being consistent with what he holds as true. But these "philanthropists" spend their whole lives being rational and productive for the purpose of in the end using it for irrational and unproductive ends.

The worst thing about it is I don't think they serioulsy care or value the individuals there money is going to help (how could they, they don't know who they are), they just feel some mindless guilt about having so much of all the money they earned while others have so little of all the money that they didn't earn.

After their actions, one would have to ask Gates or Buffet, "well, what was the point of it all, for you?"

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What saddens me is the fact that almost all of the great wealth creators have done the exact same thing with almost no benefit.

By what standard?

By altruistic standards, they are doing great: they give much and get little.

What the world needs is a better moral standard and for that I don't fault the wealth-producers. They are doing their job extremely well. Now it is time for the Objectivist philosophers to do THEIR job.

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By what standard?

By altruistic standards, they are doing great: they give much and get little.

What the world needs is a better moral standard and for that I don't fault the wealth-producers. They are doing their job extremely well. Now it is time for the Objectivist philosophers to do THEIR job.

Betsy, it seems to me that you have taken my statement out of context. I meant that their altruistic standard of giving has almost never produced a positive benefit toward their stated goals. Giving a person a piece of food or a shot will keep them alive a little longer, it will not change their philosophy. If the wealth creators want to change the world, stop giving to the irrational, stop giving the unearned.

I also applaud the wealth creators for what they have produced, but dispise their lack of moral courage to stand up for their right to their wealth.

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That’s extraordinarily disappointing. They might as well throw their money into a blast furnace to stay warm for a few days.

I guess it's up to us, then.

RayK,

I meant that their altruistic standard of giving has almost never produced a positive benefit toward their stated goals. Giving a person a piece of food or a shot will keep them alive a little longer, it will not change their philosophy. If the wealth creators want to change the world, stop giving to the irrational, stop giving the unearned.

Yes, my point exactly. But, then, that's what altruism is about. After all, if they were interested in helping people they'd be promoting freedom and capitalism around the world, or spending on research and development for a cancer cure and the like. Altruism is not first and foremost about helping anyone, but about suffering. Sometimes it's hard to relate to the motivations of altruists.

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Buffett recently auctioned off a one-on-one lunch with the proceeds going to charity. Too bad there's not a Francisco or John Galt who could buy that and convince him to throw at least a few million toward ARI. This guy could amplify the annual budget of ARI 10-fold and not blink an eye. And he's throwing his money away anyway! :unsure:

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I would like to know just what Buffet, et al, think they have taken from society, that they must give back? Does anyone know where that disgusting bit of rhetoric came from in the first place?

.

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I would like to know just what Buffet, et al, think they have taken from society, that they must give back? Does anyone know where that disgusting bit of rhetoric came from in the first place?

As with many of the worst ideas, it has its root in religion. Before Judaism and Christianity the issue was mostly generosity towards man, but with religion charity became a duty. With the growth of more integrated societies in the 17th and 18th centuries, religious duty towards a man morphed into personal responsibility towards society. Some of the better motivation was that which existed for a time in the United States, to elevate the poor by assisting in making them more self-sufficient. But by the 19th century men like Andrew Carnegie institutionalzed the obligation of the rich; not explicitly due to religiosity but thoroughly atruistic nonetheless. Ever since then it has become expected, and the only surpise with men like Gates and Buffett is the extent to which they are desirous and willing to give of their wealth. Giving back to society has become a mantra that replaces pride in the earned, with the altruism of sacrifice for the unearned.

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I think Warren Buffett has been promoting confiscatory death taxes for a long time, so this development isn't surprising.

Part of the danger is the squandering and destructive use of his wealth along with the loss of the actual good he could do, and part of it is the inevitable PR on behalf of the moral sanction of the victim which will encourage more destructive sacrifice and the outright looting of those who refuse.

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I think Warren Buffett has been promoting confiscatory death taxes for a long time, so this development isn't surprising.

Part of the danger is the squandering and destructive use of his wealth along with the loss of the actual good he could do, and part of it is the inevitable PR on behalf of the moral sanction of the victim which will encourage more destructive sacrifice and the outright looting of those who refuse.

True. The last part of your statement is what I was just thinking---that the looters will feel will feel more justified to loot even more brazenly.

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I would like to know just what Buffet, et al, think they have taken from society, that they must give back? Does anyone know where that disgusting bit of rhetoric came from in the first place?

.

Here's an interesting link: The Collectivist Notion of "Giving Back to Society"

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I would like to know just what Buffet, et al, think they have taken from society, that they must give back? Does anyone know where that disgusting bit of rhetoric came from in the first place?

I have never seen a source for that exact phrase or how far back it goes, but the way it used it all the time clearly has to come from collectivism. To give something "back" means that it belongs to someone else, in this context "society", or the "collective", which is presumed to own it, with the reasons for that left unspecified let alone defended. Moreover, you have a duty to give it "back" as penance for some kind of guilt for having it.

The viros use it in an even nastier way. Their collective is nature, specifically nature other than man. They assert all the time that because of our production using natural resources we owe something "back to the earth". This almost always turns out to be in the form of government control of the land enforcing its non-use.

  • We see legal requirements for "mitigation" when someone develops land -- he is legally required to buy and donate "wetlands" or some other "habitat" in penance for his sins.
  • Much of the money paid to the government by Exxon as punishment for the Valdez oil-spill accident was used not to clean up oil but for the government to buy land.
  • The viro pressure groups argue that because we drill oil from the earth, there must be a perpetual, annual Federal entitlement for government land acquisition nation-wide, with the money (currently demanded at $3 billion/year) going to both government land acquisition and to subsidize the planning and other political operations of viro pressure groups and "private" land trusts.
  • One viro woman who started out as a hippy back-to-the-lander who moved from San Francisco to the Maine woods, and who then made a fortune by packaging bees wax in small containers and selling it at outrageously high prices to the "natural products" crowd (Burt's Bees), has announced she wants to help the government create a 3 million acre National Park out of private property in the Maine woods to "give something back to the earth".

These assertions are always made with moral overtones and without justification. The obvious implication is that you give something back in penance for guilt, and we are guilty for tampering with nature, i.e., for living as human beings, i.e., you are inherently guilty by nature and must sacrifice to anything and everything that is non-human.

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Mr. Buffet, if you want to give some money back to people, you ought to start with those you and your fellow altruists have taken the most from: THE TAXPAYERS.

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The obvious implication is that you give something back in penance for guilt, and [...]

"Giving back" does not always imply guilt. In many cases that I have heard personally from liberals and conservatives locally, "giving back" is simply paying back what was "given" to you by society. Further, "giving back," they say, is a "celebration" of having been a successful "recipient" of the benefits of a generous community.

Conservatives use this approach in saying that parents owe support to their children (which is true), and therefore the children owe support to the parents when the parents are too old to be independent (which is false).

I have not worked this idea out completely, but "giving back" (as children are supposed to do in a family, according to these people) is another manifestation of what I see as an emerging consensus among statists: familial fascism. The age of grandiose statist ideologies is over. Statism has shrunk to a Hobbit level. Politicians and bureaucrats are parents in "the family of man." We all need to have family discussions (democracy) and then the parents will guide us in the right direction. Both liberals and conservatives subscribe to this approach, though they use different terms and emphasize different issues sometimes.

My unabridged dictionary notes that familism, as a sociological term, means: "subordination of the personal interests ... of an individual to values and demands of the family."

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"Giving back" does not always imply guilt. In many cases that I have heard personally from liberals and conservatives locally, "giving back" is simply paying back what was "given" to you by society. Further, "giving back," they say, is a "celebration" of having been a successful "recipient" of the benefits of a generous community.

It's sure considered to be guilt if you don't give it "back". Many people try to have their altruistic premises and eat them too, trying to excuse having some success. But not the viros. Touching nature is evil. To some of them it may be a "necessary evil", but still inherently evil, sullying nature.

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"Giving back" does not always imply guilt. In many cases that I have heard personally from liberals and conservatives locally, "giving back" is simply paying back what was "given" to you by society. Further, "giving back," they say, is a "celebration" of having been a successful "recipient" of the benefits of a generous community.

--------

But to whom is the wealthy person supposed to "give back" his wealth? Invariably, it is not to "society" but to those in need, i.e., those who have not achieved wealth. Altruism is the context of "giving back." The idea of "giving back" is different than charity, which is voluntary and is aimed at those who are in need and represent a value to the charitable person. How is a community being generous when it buys a product that a businessman offers for sale? Perhaps Bill Gates and all businessmen should figure out that they should have charged for their products so that when they die, they only have enough in the bank for funeral expenses. This way they didn't take anything from society and they don't owe anything back. Windows XP for $1.50 sounds good to me!!

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Mr. Buffet, if you want to give some money back to people, you ought to start with those you and your fellow altruists have taken the most from: THE TAXPAYERS.

This is one of those "I wish I had said that" times. Thanks!

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Correction

-------

figure out that they should have charged------

should be "figure out what they should have charged ..."

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If he really wants to be "giving back to society," just imagine how society might benefit from a teeny fraction of that money, say a mere $100 million to help develop Objectivist intellectuals who could really have an effect on society in the long-term. Heck, for maybe 1/2 percent of that teeny fraction we could change the entire future of physics!

Has anyone contacted him with a decent plan? The reason why he's giving his money to the Gates Foundation is that he has no interest in overseeing how the money is spent (but he wants it well spent and I take it he trusts Gates). Like many super rich people, he's more interested in making money than spending it. There's a need for very accountable foundations to which people can entrust their money. Right now, super-rich people who want to keep making money have very few outlets.

Has ARI or some other Objectivist organization or individual submitted a project and asked for a grant? There's a thread running about Gary Hull starting a college, and I can imagine that a few hundred millions would be really handy... :unsure:

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