In 2006, Warren Buffett pledged most of his wealth to the Bill and Melinda Gates Foundation. He told Fortune that he had always planned to give the money away, but “I came to realize that there was a terrific foundation that was already scaled-up—that wouldn’t have to go through the real grind of getting to a megasize like the Buffett Foundation would—and that could productively use my money now.”
Almost two decades later, Buffett is rethinking his decision. A recent New York Times article suggests that the two billionaires have had a falling out. That revelation came on the heels of Buffett’s announcement that he would not give the remainder of his fortune to the Gates Foundation upon his death, but to several other foundations linked to members of his immediate family.
It’s worth understanding Buffett’s original justification for pledging his wealth to the Gates Foundation—and what may have made him change his mind. Buffett initially claimed that the Gates Foundation’s philanthropic expertise motivated him. “I’m getting two people enormously successful at something, where I’ve had a chance to see what they’ve done,” he said. “What can be more logical, in whatever you want done, than finding someone better equipped than you are to do it? Who wouldn’t select Tiger Woods to take his place in a high-stakes golf game?”
The Gates Foundation has certainly been able to hire many experts—most of the PGA Tour, in this analogy. With assets of roughly $70 billion (according to its 2022 tax return) and annual expenditures of around $7 billion, the foundation has amassed a talented staff. But having so many experts in one place has produced underwhelming results, stale ideas, and lackluster innovation.
In his book, The Bill Gates Problem, Tim Schwab chronicles the effects of the Gates Foundation’s philanthropic monopoly. The foundation’s leadership, he says, believes that its in-house experts have the “unique ability to know what products will work and what won’t.” This belief has inspired the organization to make “extreme interventions in the marketplace” in the name of delivering “new lifesaving pharmaceuticals to the global poor.” But, Schwab claims, “across most of the diseases the Gates Foundation works on, its track record of innovation is quite weak.” Similarly, Gates Foundation investments have shaped K–12 education for decades—often for the worse, as with its pushing of Common Core state educational standards. The foundation, Schwab notes, “operates in very much the same way at home as it does abroad in poor nations—orchestrating controversial, undemocratic, top-down policy changes by working behind the scenes.” Researchers complain that once the Gates Foundation gets involved in a field or decides on a strategy, everyone flocks to that idea.
It’s not entirely clear why Buffett pulled his support from the foundation. The Times reports that “certain aspects of [Gates’s] behavior, including his stewardship of his foundation, have upset Mr. Buffett, according to four people with insight into their relationship.” Specifically, Buffett “had been bothered by what he saw as the bloat and inflated operating costs of the Bill & Melinda Gates Foundation.” This is no surprise, given Buffett’s well-known preference for “lean and mean” firms that operate at peak efficiency.
The bureaucratic bloat that Buffett decried is a sign that an institution does not feel threatened by competition. The Gates Foundation has few rivals. Gates’s organization dwarfs most other large American philanthropic groups, and none of its peers, including the Ford, Rockefeller, and MacArthur foundations, shares Gates’s focus on education and medical research.
In fact, Buffett might have added some needed competition had he started his own pharmaceutical-development, education-reform, and poverty-reduction nonprofit. That organization might have competed with Gates for experts, discovered novel problem-solving strategies, and helped guard various research fields against groupthink.
Many marveled at the humility of Buffett’s decision to leave his money to the Gates Foundation back in 2006. “Most people with this sum of money would try to create their own foundation in their own image,” said Gene Tempel, then-executive director of the Center on Philanthropy at Indiana University. Fred Hochberg, then-dean of the Milano School for Management and Urban Policy at the New School, said Buffett’s contribution was “egoless . . . Warren’s name is not on the door.” But maybe that’s not such a good thing: a healthy sense of ego often makes for successful businesses, and it can also improve philanthropy. Even Tiger Woods needs competition.
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