Gates Foundation 2.0: Soon to be Market Tested Near You

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It’s hard to imagine that enough hasn’t already been written about the merger of Bill Gates’s and Warren Buffett’s philanthropic billions and visions. Apparently not, as Patty Stonesifer, CEO of the Bill and Melinda Gates Foundation, quickly followed up the flurry of reactions to the big Buffett announcement on June 25th with an e-mail to the Foundation’s grantees, asking them “to do something for us.”

“As we grow, truth-tellers will become ever more important to us. So please: Let us know when things are going well, and even more importantly, when they aren’t. Everyone at the foundation understands that we need to learn from bad news as well as from good, but we can only do that if you help us.”

Stonesifer’s welcome invitation, she probably knows, runs against the grain of philanthropic grantor-grantee discourse. The power imbalance, the difference between running an organization that has to ask for money versus running an organization that gets to dispense billions based only on what the organization—its senior staff and its three or four trustees—determines to be right, makes candor a quality in short supply in the sector. But Stonesifer is right—if the Gates Foundation, or any foundation for that matter, can’t hear and absorb unflinching commentary from the nonprofit sector, the echo chamber characterizing much of institutional philanthropy will persist. Oh, how many nonprofits would love to tell foundations about some of the disastrous results of their best intentions, but refrain because they fear, in some instances with good reason, of being “iced” not only by the foundations in question, but also by their “circle the wagons” peers.

Sometimes raising questions for discussion and debate is just as important as giving foundations specific feedback on their superlative or disastrous grantmaking. And the questions are as relevant from non-grantees as they are from the nonprofits that have landed grants.

Raising questions about the Buffett/Gates announcement triggered comments akin to, “Who the hell are you to criticize these people? All you should be doing is praising and cheering their visionary benevolence and hoping that more rich captains of industry follow the Buffett/Gates lead!”

There’s no question among most knowledgeable observers that the Gates Foundation to date has been among the top echelon of foundations in terms of both substantive and procedural accountability. It puts its money out on the street, apparently reaching a grants-only payout (not including any of the Foundation’s other charitable or administrative expenditures) of 5.08 percent in 2004 and 5.37 percent in 2005,1 although reportedly it has been struggling to maintain its 5 percent payout. The Gates Foundation functions with a comparatively low overhead, with around 275 staff running the world’s largest foundation sitting on $30 billion in assets, and even with its plans to double its staffing in the wake of the Buffett announcement,2 it will still be administratively small in terms of staff-to-assets compared to many of the other top foundations.3

The Gates Foundation takes on critical and controversial issues (public schools, international health) that make most other foundations exceptionally skittish. Because the Foundation’s grantmaking is so gargantuan, the categorical grant totals get overlooked, but the Foundation’s grantmaking in some areas in 2005 alone adds up to huge parts of the entire foundation sector’s commitments to some issues: 4

    • $284.3m in education grants ($2.69b overall between 1994 and mid-2006)


  • $843.7m in grants for global health ($6.51b through mid-2006)



  • $25.1m for global libraries ($301.1m since 1994)



  • $75.1m for the Pacific Northwest ($584.6m since 1994)



  • $128.2m for other initiatives (apparently around $730m total between 1994 and 2006)


Despite handling grant numbers that most nonprofits cannot even fathom, some Gates Foundation program officers are known for a responsiveness and decency that contrasts sharply with interactions with some other high profile foundation program officers.

There’s no reason to take mindlessly critical potshots at Buffett’s donation of $1.5 billion annually from a $30 billion Berkshire Hathaway stock pool to the Gates Foundation. He had untold options available to him, ranging from creating yet one more mega-foundation from scratch to spending like George Steinbrenner to make his Omaha Royals into the Yankees of Triple A baseball. Rather than playing ego-oriented business and foundation games, he simply invested his philanthropic capital in a going concern, building on a track record of accomplishment on issues of concern to him and his family. Compared to the alternatives, Buffett hit a philanthropic home run.

The Gates Foundation’s clean living, the Buffett beneficence, Warren Buffett’s admirable position on the estate tax, and the two moguls’ self-effacing modesty notwithstanding, the Buffett commitment raises issues for their foundation and nonprofit colleagues and partners that cannot be summarily dismissed because, unlike them, we are not billionaire philanthropists or tycoons. Stonesifer’s e-mail appears to want something more from the sector than the over-the-top sycophancy that characterized most experts contacted by the press. It looked like a grantseeker’s scrum, except that the game was played on a pitch of quotable accolades, signaling to the Gates staff the experts’ availability for contracts and grants. Since then, the game has become more overt, with published commentary reading much like, “Hey Bill, hey Warren, hey Patty, fund this!”5 Or maybe, “Fund me!”

Without criticizing Bill or Melinda Gates or Warren Buffett, there are significant issues brought into relief for all of us to consider.

The press has had the numbers count wrong. Commentary that they’re blending $30 billion of Gates’s philanthropic wealth with $31 billion of Buffett’s fortune into a $61 billion philanthropic casserole is simply wrong. Buffett is going to give the Gates Foundation a sum annually, to be spent entirely in one year’s time, that will be added to the continuing underlying grantmaking of the Gates Foundation itself. Given that the Buffett billions will still be increasing in value in the market, it is entirely possible that if Buffett’s money is fully transferred to the Gates Foundation over a 20–year period, the value could be even substantially higher.

The Gates Foundation won’t double in assets, but it will roughly double its annual grantmaking, not to mention probably substantially increasing its overall spending as well.6 It is possible that the Gates Foundation, while not becoming a $60 billion foundation, will spend like one, accounting for as much as perhaps one out of every ten dollars in foundation spending or grantmaking in the near future. Pre-Buffett, the Gates Foundation had already left other grantmakers far behind in the numbers game, making grants of more than $1.26 billion in 2004 compared to Ford’s 522.9 million.7 In some grantmaking categories, the pre-Buffett Gates is its own ballgame. For example, the Foundation Center’s count of international grants for health in 2004 put the Gates Foundation’s total at $1.19 billion, again compared to Ford in second place with $29.4 million. Of the top 10 grantmakers in this category, the Gates Foundation accounted for more than 90 percent of the total.

Warren Buffett made his philanthropic investment in the Gates Foundation because he found Bill and Melinda—and, one must assume, implicitly, the staff like Stonesifer, Sylvia Mathews, and others—to be the best foundation management and grantmaking team on the market. The team certainly has cachet, well indicated by the enormous press coverage of the Gates’s statement in Toronto calling for the world to rachet up attention and accelerate research on anti-HIV microbicides to protect women from AIDS.8

The Foundation’s latent power is obvious not just in press attention, but in attracting the powerful. No slouch when it comes to leveraging access and power, former president Bill Clinton recently shared the spotlight with the Gateses at the international AIDS conference and traveled with Bill Gates to Lesotho, Uganda, and other parts of Africa in July.9 The Gates Foundation recently awarded Bill Clinton’s foundation three-quarters of a million dollars to investigate how to best deliver HIV/AIDS drugs—an indication of the increasing “collaboration” between Gates and Clinton, leading to what the Clinton Administration’s UN ambassador, Richard Holbrook, called the beginning of the world’s first “super NGO.”10

Holbrook’s comment is simultaneously exciting and unnerving. Our society is already one that celebrates gargantuan behemoths in the same breath as it extols the virtues of small groups, small business, and small towns. The Gates Foundation already dwarfs other philanthropic colossi, with assets nearly three times the size of the Ford Foundation’s, not including the new infusion of Buffett’s philanthropic muscle into the Gates Foundation. Is there a downside for charity and philanthropy in this concentration of grantmaking prowess in one organization?

The U.S. is now the third most unequal industrialized society, trailing only Russia and Mexico. As of 2001, the top percent of the U.S population owned around one-third of the nation’s wealth—compare this to the bottom 50 percent of the population, which owned a grand total of 2.8 percent, and the bottom 40 percent, which owned around 1 percent of the nation’s wealth. The top 1 percent owns 42 percent of the nation’s total control of stocks, mutual funds, and retirement accounts. These concentrations are all vast increases from statistics only a decade or two earlier. Most observers would suggest that ever-growing concentrations of wealth in our society are inimical to the health and well-being of democracy. Is institutional philanthropy somehow an exception to this?

The vibrancy of American philanthropy—in fact, the creativity of the entire nonprofit sector—is partly attributable to the diversity of its voices, the competition of ideas emanating from this third sector that would not typically rise to the surface in election-driven politics and government- or bottom line–focused industry. This is a challenge for the Gates Foundation and for philanthropy overall, to ensure that the inherent power of one funder doesn’t turn the bulk of philanthropy and other nonprofits into voiceless nonentities.

The concentration of foundation and grantmaking power in the Gates Foundation doesn’t escape the attention of government. For the Foundation, its capital amounts to vast potential influence over communities and entire nations, as some of the commentary about its health grantmaking in Africa indicates. The notion that the Gates Foundation is no more influential than smaller foundations that can also effectively use their moneys to shape government policy11 rings academically hollow; without becoming an acolyte of E.F. Schumacher and his “small is beautiful” movement, there is no question that at the size of the Gates Foundation, difference in size can and does mean a difference in kind.

For governments, the attraction of passing the proverbial buck—that is, the onus without the money—to philanthropy is difficult to withstand. The New York Times reported on the Bush Administration’s citation of money from Gates (and the Carnegie Corporation) as obviating the need for appropriations for small schools programs in the Department of Education’s FY2007 budget.12 Stonesifer’s e-mail to Gates grantees acknowledged this issue: “As large as our annual grantmaking will become, it will always be dwarfed by the money governments and markets can bring to the table. They will continue to be the key to solving these problems, and we will partner with them rather than replace them.”

But partnering with government without government ravenously eyeing the Foundation’s tax exempt billions is much easier said than done. For example, a London School of Economics study in 2005 counted 92 “public-private partnerships” throughout the world working on generating drugs for neglected diseases such as hookworm malaria, and others that don’t have the profit potentials of drugs for diseases (and non-diseases) in rich countries. The Gates Foundation accounted for an astounding 60 percent of the money behind these partnerships.13 The Los Angeles Times reported on a significant international NGO, Drugs for Neglected Diseases, that had been told by European Union (EU) government officials to “just ask Gates” for money because “he’s taking care of all that.”14 The Times noted that one of the high-profile partnerships, the Foundation for Innovative New Diagnostics, received $33 million from the Gates Foundation and was promised $10 million more, but had only raised $100,000 in government moneys.

Stonesifer is more than aware of this issue, pledging in her e-mail to maintain the Foundation’s commitment to leveraging rather than supplanting government. Easier said than done. As mammoth an institution as it is, the Gates money is small change compared to the health and education challenges it faces, not to mention the underlying problems of malnutrition, sanitation, poverty, and governmental capacity. How tough will the foundation be with governmental agencies? Will it stare down the Bush Administration on small schools funding? Will it demand that the EU governments close their “let Billy do it” escape hatch? One wants to take the Gates people at their word, but the troubling grant of $100,000 by the Gates Foundation to Tom DeLay’s eponymous foundation,15 for a purpose that is difficult to discern in the Foundation’s program priorities, or the fact that the first grant received by Rick Santorum’s Operation Good Neighbor Foundation emanating from Bill Gates’s Microsoft Corporation’s charitable grantmaking program16 suggest that there have been past surrenders to political pressure.

While the Microsoft Corporation and Gates Foundation grantmaking programs are indeed separate and distinct institutional structures, Bill Gates is the nexus between the two, and he has been one corporate leader not too shy to play politics, through significant political donations and lobbying. Most notably, Microsoft put the Christian Coalition’s Ralph Reed on a lobbying retainer, even as he ran George W. Bush’s 2000 and 2004 campaigns, to lobby the administration to drop the Clinton-era anti-trust litigation against Microsoft,17 and recruited Grover Norquist, recently famous for his own Indian tribe relationships with Reed, to do additional Microsoft-related lobbying.18

As a concentration of resources, remember that Bill Gates is more than a bridge partner of Warren Buffett’s; Gates joined the Berkshire Hathaway board a few years ago and owns a significant, though still single-digit, percentage of its stock. Buffett may be disarmingly normal in his lifestyle, living in the modest home he bought decades ago and taking pride in swigging five bottles of cherry Coke daily (he served on the Coca-Cola board for many years), but Berkshire Hathaway had a long history of resisting transparency and disclosure. The new mega-foundation will now be governed by four people (three Gateses and Buffett as a silent fourth) with pretty tough corporate track records that don’t comport well with the kind of openness that a behemoth philanthropy needs to have.

Fortunately, the staff managers of the Gates Foundation from Stonesifer on down have been to date as open and transparent as anyone might ever want, but that does not mean that the narrow, interconnected governing body of the Foundation does not imply potential problems, if not for this foundation, then for the foundations that would follow. It is important to remember that while the Gates Foundation is gargantuan compared to its nearest rivals, and may grow even bigger (Bill Gates himself has another $50 billion in pocket change to dispose of sometime in the future), others will someday follow suit. For example, key members of the Walton family are worth an estimated $90 billion, with Sam’s widow, Helen, likely to leave her roughly $20 billion to the Walton Family Foundation on her death, making the Waltons’ philanthropy one of the nation’s largest,19 certainly right behind Gates. Critics clearly link the grantmaking of the family foundation with the grantmaking of the Wal-Mart corporation, now the largest corporate grantmaker (in cash terms) in the U.S. Observers would be hard-pressed to raise questions about a huge future Walton Family Foundation and its interrelationship with the corporate philanthropy, because they don’t like the Waltons’ conservative politics, while giving a similarly large institution like the Gates Foundation a free ride for its more liberal grantmaking.

Bill and Melinda Gates were not likely to say no to Warren Buffett’s donation. They will put the money to good use addressing some of our planet’s most intractable problems. That does not mean that it isn’t legitimate to ask, conceptually if not pragmatically, how big might be too big, how such concentrated power and influence might be corralled, how to ensure that the growth of this giant philanthropy and others like it that will surely follow do not squelch the democratic value of multiple voices, multiple philanthropic vehicles, small and large, and a vibrant public dialogue about what works and how. The Foundation’s Patty Stonesifer has invited this give and take, and more power to her for doing so. Now the onus is on all of us. Adhering to the admonition of Psalm 146, “Put not your trust in princes,” the nonprofit sector has long challenged through advocacy and agitation the assumption of wisdom by powerful government plutocrats. It is equally important for nonprofits and the communities they represent to maintain a healthy critical posture toward the concentrated power of philanthropic princes as well. Let’s hope Stonesifer discovers her truth-tellers.

Rick Cohen writes about politics and philanthropy from Washington, D.C.



3. For comparison, the Ford Foundation, ranking second behind Gates, but with only $11.5 billion in assets, employs 600 people, including 200 overseas according to the Foundation’s Web site ( The number fifteen foundation by assets, the Rockefeller Foundation with $3.2 billion to administer, acknowledges 174 foundation staff worldwide (

4. Sources: and

5. For example, Chi-Dooh Li, “Gates Trust Should Seed World Leaders Here at Home,” Seattle Post-Intelligencer (July 30, 2006), Ralph Kaplan and Harvey Silverglate, “An Urgent Cause for Philanthropy,” Boston Globe (July 23, 2006), and Linda Borg, “Will Warren Buffett Come to the Rescue? Lombardi Pitches Plight of Schools to Philanthropist,” Providence Journal (July 12, 2006).

6. In addition to its doubling of staff, the Gates Foundation is building a new 12.3–acre, 1,000,000 s.f. headquarters campus in downtown Seattle, with no projection of the project’s cost identified in the FAQs posted on the Gates Web site ( The Foundation completed site acquisition in 2006, with construction to begin in 2007 and occupancy planned for 2010.

7. Foundation Center (




11. Stephanie Strom, “Gates Charities Races to Spend Buffett Billions,” New York Times (

12. “Gates’s Charities,” though this is hardly the first time the Bush Administration has tried this budget ploy, cf. Rick Cohen, “The Bush Budget Disaster,” in The Nonprofit Quarterly (Spring 2005),

13. Erika Check, “Quest for the Cure,” Foreign Policy (July/August 2006).

14. Evelyn Iritani, “Private Philanthropy Shifts Outlook of Governments,” Los Angeles Times (,0,7509084,full.story?coll=la-home-business).

15. Rick Anderson, “A Bug in Windows GOP,” Seattle Weekly (, June 5, 2005).

16. The Microsoft Playbook: A Report from Common Cause (

17. Sarah Kershaw, “Microsoft Weighs Reversal on Gay Rights,” New York Times (, April 27, 2005).

18. Norquist called himself an “advisor” to Microsoft rather than a lobbyist for his paid services, according to Ken Silverstein, “The Microsoft Network,” Mother Jones (, January/February 1998).

19. Bill Berkowitz, “Philanthropy the Wal-Mart Way,” (, October 12, 2005).