The big news in the world of philanthropy – as everybody by now must have heard ad nauseam – is Warren Buffett’s decision to give the bulk of his reputed $44 billion fortune to the Bill and Melinda Gates Foundation. What do the people who advise donors think about it and its likely effects on donor behaviour? Alliance asked three of them whether they thought it was the beginning of a new trend, part – in spite of its prodigious size – of an existing trend, or simply an isolated act of startling generosity.

Continuity or radical change?

Salvatore LaSpada of the UK-based Institute for Philanthropy, which now houses The Philanthropy Workshop and works with individual donors in a number of other programmes, feels that the Buffett gift ‘exemplifies a lot of the principles of the new approach to philanthropy that has emerged in recent years’. For one thing, he suggests, ‘there’s a strand in the new philanthropy in which people are less interested in having their name attached to a gift – not necessarily operating anonymously but not having the kind of ego identification. Maybe a tilt more towards identification with the causes they’re funding or the way they’re funding.’ He also sees part of what he calls the new approach to philanthropy as using business principles. ‘Actually his gift to the Gates Foundation mirrors the investing approach that he pioneered at Berkshire Hathaway – which is to make big bets on sure winners.’

Melissa Berman of New York-based Rockefeller Philanthropy Advisors also sees precedents for the approach, if not for the scale, which was ‘stunning’. ‘If you step back a little from it,’ she suggests, ‘in some ways it is not that different from a donor giving money to a community foundation or using an intermediary organization like an Acumen Fund.’

Felicitas von Peter of the Forum for Active Philanthropy in Germany was particularly struck by the manner of the gift, and the way Buffett ‘turned from someone who up until weeks and months ago had shown no interest in philanthropy, to handing over 85 per cent of his wealth’. She too discerns a parallel with the commercial world: ‘To take a step like that … I think is very new and very innovative, because it’s linked to performance.’ It’s essentially a hard-headed decision because ‘he didn’t want to set up his own organization but he wanted to invest in someone he felt would be better at giving out the money’.

Another reason for this, thinks Berman, is that ‘he really wanted to start getting involved with his philanthropy now. And if you think of starting from a blank piece of paper with billions and billions of dollars, it would take quite a bit of time to build up a programme.’

Will other donors give to existing foundations?

But if the donor advisers we spoke to felt that Buffett’s decision was hard-headed as much as quixotic, did they also think it might set a precedent? Did they expect more people to give to existing foundations as a means of achieving their philanthropic goals?

‘Honestly, I don’t think so,’ says Sal LaSpada. ‘I think in that sense the Warren Buffett gift was pretty much a one-off.’ Most living donors, he argues, will want more active involvement (Buffett’s announcement that he will leave most of the work, as well as the money, to the Gates has also received its share of publicity and will be discussed below) in the spending of their philanthropic money, bringing what he calls ‘their experiential and intellectual capital’ as well as their financial capital to bear on the challenges of grantmaking.

He also believes that age plays a part: ‘Typically when we’re talking about new philanthropists, we’re talking about younger people, who’ve been successful and have sold businesses and are now looking to stay actively involved. Warren Buffett is 75 so he’s at a different stage in his life and has therefore … made a different kind of decision.’

Melissa Berman feels that, while few will follow Buffett’s example, it might well cause would-be donors to consider their options more carefully. ‘I don’t think many people are going to follow the model of giving to existing private foundations. They may, however, look at using lots of different kinds of models besides what is often presented to donors as the only available option, which is either, in the US and sometimes also in the UK, a donor-advised fund or a private foundation.’ There is also a practical reason, she points out, why US donors would be unlikely to follow directly in his footsteps: ‘Many US donors are interested in the higher level of tax deductibility that comes with giving to a public charity or a supporting organization.’

The topic has come up in ‘pretty well every conversation I’ve been having with donors’, says Felicitas von Peter, but she too feels that few will follow suit. ‘In Europe,’ says von Peter, ‘we have a very different landscape in terms of foundations being far less public about what they do, and far less approachable in terms of equal partnerships with new and emerging donors.’ While some of the larger European foundations would be very amenable to donors approaching them with big money, ‘number one, they haven’t been transparent enough in terms of what they do, how they would use the money, how they would be accountable to the donor and what their impact has been, and number two, a lot of philanthropists here are still more interested in doing something on their own, either because they want to build a legacy for themselves or because they want to start a second career.’

Other long-term effects?

But the structure of the donation – that it is to be spent in the donor’s lifetime – might well be part of a growing tendency, feels LaSpada, who says the ‘spend-down trend’ is something he is seeing increasingly. ‘I think it’s connected to the desire to have impact. In the new thinking which is emerging around philanthropy, which is so impact-focused, many donors are coming to the conclusion that having it sitting in an endowment, even if you are using a social investing approach, isn’t really going to get you to where you want to go in terms of achieving your goals.’

‘I think it might make people give earlier,’ says von Peter. Otherwise, she feels, it’s too early to say what the longer-term effects of the Buffett gift will be. His feeling that he didn’t want to give his money to the state resonated with a lot of European entrepreneurs, she feels, and she also adds that one or two have commented favourably on the fact that the money will find its way into international grantmaking: ‘Recognition that we need to solve problems on the international scale was seen as important.’

Melissa Berman sees it as an ‘inspiration’ to donors, particularly because, as noted, it sprang from a complete change of mind. ‘Warren Buffett was so publicly identified so long with the point of view that his philanthropic resources would only be made available upon his death. He’s very publicly changed his mind and changed his thinking, and that’s having a big influence.’

The ego question

Since Buffett’s act has already attracted so much attention, any talk of anonymity is scarcely appropriate, but the apparent lack of egotism in the gift is another of its striking features – even if, as our donor advisers suggest, there are good practical reasons for making it. As Melissa Berman points out, Warren Buffett is someone who doesn’t need to worry unduly over what his legacy will be, but ‘there are very few people that one can imagine who would be willing to make a gift of this size and type and have no expectation that their name was going to be attached to anything to do with it.’

Von Peter, too, highlights the humility of the action, which she sees as saying, in effect, that he has achieved his life’s work in another sphere and that when it comes to philanthropy, he will defer to those better fitted to give money away. She also points out the securely established basis of trust in the relationship, which was clearly another factor in Buffett’s decision. ‘I think that it’s helped that he’s known Bill and Melinda Gates for years, so he knew what their work was and he had built a relationship of trust. He knew that Gates would take it very seriously in terms of realizing that he had to be even more careful in a way because it wasn’t his own money, it was Warren Buffett’s money.’

How involved will he be?

Though he will become a board member of the Gates Foundation, Buffett has publicly said that he does not plan to do much, and certainly has no interest in wading through the 900-page reports that Bill Gates has given him to read. And there’s the now famous Tiger Woods analogy: if you’ve got Tiger to play for you, why bother to play yourself? How seriously should we take this?

Melissa Berman is sceptical. Her experience at RPA is that many donors start with a hands-off attitude but get drawn in. She adds: ‘No one would argue with having Tiger Woods play for you in a golf tournament, but most people would also like to be part of the foursome, not just keep score and walk alongside. And I think there’s a very good chance that over time Warren Buffett is going to become increasingly involved.’

She points out that the same thing happened with Bill Gates. Initially, his engagement was limited, but it has now got to the point that he is giving up his active role at Microsoft to devote himself to the Foundation.

Sal LaSpada, too, feels that this professed inactive approach will change. ‘I think once they [Bill and Melinda Gates] take him out to the field and he gets to see the amazing people in communities all over the world who are creating such innovation, I think he’s going to get fired up.’

‘I think it probably wouldn’t be bad if he did,’ says Felicitas von Peter. ‘He has been incredibly innovative in his way of investing and I think one of the reasons he’s been so successful is that he has retained the curiosity and the constant attitude of challenging his own assumptions. If you have that, you’re bound to have a greater impact in philanthropy than if you’re just following the tried and tested.’

A lot of foundations, she feels, are not good at reacting to a changing problem or set of problems because their thinking has become static. ‘It takes a long time,’ she adds, ‘to redesign what they actually do, and if you have someone who’s such an outspoken entrepreneur as Buffett is, it will be interesting to see what he comes up with in terms of thinking or solutions.’

All in all, while the Buffett donation appears selfless on a scale seldom seen, it is nevertheless informed, believe our donor advisers, by the shrewdness and calculation that have characterized Buffett the businessman. If it seems unlikely to inspire much direct imitation, it may well cause donors and would-be donors to think again about how they dispose of their wealth. And if Warren Buffett, in spite of what he says, can’t resist the temptation of active involvement in philanthropy, it may well turn out that the effect on the Gates Foundation does not stop with the injection of his millions.

Alliance would like to thank the following for contributing to this article

Melissa Berman Rockefeller Philanthropy Advisors, USA. Email MBerman@rockpa.org
Salvatore LaSpada Institute for Philanthropy, UK. Email sl@instituteforphilanthropy.org.uk
Felicitas von Peter Forum for Active Philanthropy, Germany. Email vonpeter@philanthropy.de