The Importance of Bill Gates & Warren Buffett

It is hard to imagine that it was just two years ago that Bill Gates announced he would be stepping down from his full time role at Microsoft (at the tender age 52) to work on his foundation full time. Warren Buffett quickly followed with the announcement that he would be giving the bulk of his wealth to the Gates Foundation. I think that this dual announcement was the tipping point in the Second Great Wave of Philanthropy. Ted Turner’s $1 billion gift to the UN in 1997 that sparked the creation of the Slate 60 laid the groundwork, but the Buffett/Gates combo was the event that captured the public’s attention.

But the importance of Buffett/Gates is not simply the amount of assets in play. In the grand scheme of things, tens of billions of dollars doesn’t really amount to much. Instead, the Gates/Buffett announcement will come to be seen as the clarion call to action that spurred people of all walks of life to embrace “giving while living” and ended the traditionally dominate choice to give to charity at the end of one’s life. Buffett said at the time of the gift that he had always planned to give at this death, but that his wife’s passing and Gates’ philanthropy had inspired him to give now.

Now we get the news that Andrew Forrest, the richest person in Australia, is going to give away nearly all of his fortune before he dies. While Forrest did not directly cite Buffett’s example, you can read in this CNBC article that Forrest and Buffett share a lot in common.

Part of the trend can be attributed to the increasing global wealth and the natural tendency for people to give more as they find that they have more than they need. But separately from “doing good”, both Forrest and Buffett cited another growing trend, the desire to not harm their children by giving them too much wealth. Buffett’s mantra is to give your children “Enough so they can do anything they want, but not so much that they can do nothing.”

In my own practice as a wealth manager, I find that my clients (both those who are philanthropic and those who are not) are highly concerned with trying to avoid giving their children too much rather than figuring out ways to give them more. What’s so interesting to me is that plenty of evidence (such as that presented in the wonderful book Philanthropy: Heirs & Values) shows that the best way to pass assets on to your children in a way that preserves the wealth and does not spoil the children is to have the entire family engage in philanthropy together.

And so we see that philanthropy is not just an extra service for wealth managers to provide to their clients, it is a core element of wealth management in a post-Gates/Buffett world.