Is Warren Buffett Making the Most of His Philanthropy?

Warren Buffett just broke his own philanthropy record by donating $2.1 billion to the Bill and Melinda Gates foundation (up from $2.0 billion last year). The foundation focuses on projects such as ending world poverty, eliminating malaria, improving access to birth control and education, and many others.

To put that in perspective, the Gates Foundation currently has a trust of $43.5 billion, and spends about $3.8 billion per year (on grants and operations).  Let us assume that all of this is really well spent.

Something to consider: at that current rate of spending (and assuming 5% growth per year via investments), the foundation would start putting Buffett’s money to use in about 2030--15 years from now. That’s assuming, of course, no other contributions.

Our initial reaction (as the authors) was that Buffett’s donation might be a case of diminishing marginal utility; put another way, that it might not be as good a use of his money as other places he could put it, whose missions are effective but not as thoroughly-funded. Could he have a more immediate and substantial impact by putting his money elsewhere and not waiting years for his capital to be employed?

One might argue in favor of Buffett’s choice, saying that extending the confident lifetime of the Gates Foundation’s money allows it to take on more ambitious, longer-term projects that might otherwise put it at risk.

Buffett is of course intelligent and well-informed. What’s driving his donations to the Gates foundation?  What are the reasons for and against his donations that make sense to you?

4 Comments

Erik Fogg

We do politics, but we don't do the thinking for you.