Bill, Melissa, and Warren:  Many Opportunities for Failure, a Few for Success

Sam T. Harper

August 2006

There has been much written about the confluence of the Gates and Buffet fortunes into a significant tax shelter, er... foundation. Most of it has focused on the doing good all three say they plan to do with the money.

Daniel Henniger, an editorial write for the Wall Street Journal, wrote an excellent piece a few weeks ago summarizing the failure of most private foundations that focus on giving for causes. Extrapolating the past histories of many well intention foundations, the Gates Foundation has many opportunities for failure, few for success.

I do not pretend to fully grasp all that the Foundation is planning to do. The website has multi-layers of links upon links that define what they are doing for global disease control, education, internet access, and "being a good neighbor in the Pacific Northwest".

In the Gates' own words:
"We're dedicated to closing the tremendous gaps in health, education, and access to digital information; and in the Pacific Northwest, we work with a diverse mix of public and private partners to support struggling families and help young people become successful adults.

Whenever possible, the foundation acts as a catalyst. We work with a diverse mix of partners-governments, other foundations, the private sector, and nonprofits-to increase the momentum, scale, and sustainability of change. Our grantmaking matches our passion with pragmatism, aiming always to create long-term, systemic change and develop models that can be replicated. We want one success to lead to another."

They also plan to go into "product development (!): "... we invest heavily in research to help discover new and better products, particularly vaccines. The foundation also supports work to develop products that can be manufactured and distributed. Then, once a product is developed, we work to make sure that there are systems in place to adopt and sustain these new drugs as they become available."

Well, the Gates and Buffets have recently asked me for philanthropy advice as often as they have asked me for software development and investing advice over the years. Plus, so far, they have bested me in the financial results they have realized without ever having met or talked to me.

This will not deter me, however, from offering what I think is sound advice that will make or break the Gates Foundation.

Both the Gates and the Buffet fortunes are based on playing in competitive worlds. Bill and Warren understand how to manage in competition.

I suggest that that is what is missing at the Gates Foundation: competition. Competition breeds stress and yet creativity.

Due to the Foundation's asset size, it will rarely face competition of ideas from their "diverse mix of partners - governments, other foundations, private sectors, and non-profits." These partners will generally only see the money involved and thus "go along to get along".

So how does the Gates Foundation keep its focus sharp and find effective ways to improve mankind (whew, that is a big sentence)?

Divide the Foundation into two parts: the Gates Foundation; the Alternative Gates Foundation. The two parts will be in direct competition with each other.

To keep the disruption of splitting the Foundation to a minimum, the Gates Foundation should keep 95% of the assets. It is clearly geared to responding to "only if we had more money" grant requesters. I don't know much about this type of foundation, but Warren, Bill, and Melissa appear to so I will not expound any further on it.

The Alternative Gates Foundation (AGF) should be given 5% of the assets and be allowed to go find its own quarters away from the large Gates Foundation campus ( ) under construction in Seattle.  (I wonder why the modest living Buffet agreed to this.)

The AGF will not look for ways to spend money to develop or buy vaccines, build better schools, wire for internet connectivity, transport whatever to where ever to solve problems, .... Instead, it will address the changing the political and structural elements that cause problems in the first place.

AFRICA: Africa does not have a starvation and disease problem because of lack of money. It has the problems because of the political structures and the bureaucratic structures that hamper people from living their lives under the conditions they set for themselves.

AGF would expose these destructive structures and campaign for the political reform both locally and in world opinion necessary to eliminate them.

EDUCATION: "Public" (aka government) schools are not in trouble for lack of money or new modern buildings. They are in trouble because the political and school bureaucracies stifle creative chance taking.

AGF could do two things to make a difference:
1. Set up a scholarships/vouchers foundation (and allow voucher supporters to contribute) for kids in horrible school systems; the kids agree that once they become productive adults (and most of them will) they will contribute back to the scholarship fund to help those that follow;
2. Help consolidated schools districts break up into smaller schools. There are no studies that I can find that prove that consolidating several schools into one or two large schools saved the overhead costs proponents once claimed they would. Instead, they made students anonymous in a sea of thousands of faces.

DISEASE: Can the Gate Foundation find better drugs to battle diseases than Pfizer, Novartis, Bristol Myers, and GlaxoSmithKline? No, because they will face the same stifling government regulatory environments that slow the drug manufactures from responding to market requirements.

AGF will focus on developing the political will for creating a fast track drug development process that will clearly define risks and limit liability exposures.

GOVERNMENT: Margaret Thatcher said that government has a natural "temptation ... to concentrate power in its own hands." Many people still equate "government" with "public". Public transportation is not public; it is government transportation. Public housing is not public (ask the residents, I have); it is government housing. We need to turn government departments back into responsive public departments. Peter Drucker called it "reprivatization" according to a recent Wall Street Journal editorial.

AGF will market the research of the Cato Institute, the Reason Foundation, and many others that demonstrate the improve services and less cost of privatizing government functions. Typically governments gain power by passing laws that put it in charge of doing something. AGF's focus will be to promote laws that enable citizens to solve their own problems; a big change in perspective.

Can these two foundations compete for the same projects? You bet. Let's see which one is the most successful over the next 10 years and then the next twenty years. I predict that AGF's lobby in rented Class B office space will not have enough room for the accolades extolling its successes.

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