A new era for supercharged philanthropy

In 2001, the Bill & Melinda Gates Foundation launched an ambitious program to remake high school education, and help more kids go to college, in their home state of Washington.

After pouring $134 million into the effort, the foundation has achieved results but also learned hard lessons. Twelve test-bed high schools have redesigned themselves into "small learning communities." About 2,500 low-income students are in college on foundation-provided scholarships.

But as so many education reformers before them have found, efforts to remake the US education system generated a measure of controversy that the Gateses and their foundation weren't prepared for.

"We went into it a little bit naively," Melinda Gates told an interviewer on PBS this week.

But that learning process is part of what makes the Gates Foundation symbolic of what may be the dawn of a new, and extraordinarily dynamic, era in philanthropy.

Of course, it's also sheer scale. As of last month, this was already the world's biggest philanthropic foundation. As of this week, its giving in the fields of global healthcare and US education is poised to double, thanks to a move by billionaire Warren Buffett to donate much of his fortune to the foundation.

Yet what's most remarkable is not just how much the world's two richest men are giving to charity, it's how they hope to do it. To the degree that they can tap contemporary information technology, rigorous managerial techniques, and a determination to partner broadly with other institutions, they could push worldwide philanthropy in new directions – and have a major impact in their own right.

"They're doing something that will be marked ... as the beginning of the new golden age in philanthropy," predicts Paul Schervish, director of the Center on Wealth and Philanthropy at Boston College. "What is new is the way in which these foundations are themselves hands-on," not just funding others but implementing their own agendas on a global scale.

But Dr. Schervish expects that the publicity it has spawned will inspire innovative giving by other wealthy Americans. Some 7,000 households have wealth surpassing $100 million, he says, and about 500,000 have $10 million or more.

Such moves would tap into a long tradition of philanthropy in America.

In many ways, they are not that different from the model pioneered by Andrew Carnegie and John D. Rockefeller a century or more ago. Since 1913, for instance, the Rockefeller Foundation has pursued a Gates-like agenda including a global focus on public health.

Where the Rockefeller Foundation focused on vaccines for yellow fever, the Gates Foundation is supporting the quest for a malaria vaccine. America's 19th- century magnates didn't spawn foundations as large as the Gateses', even after adjusting for inflation. Yet their efforts have had a lasting impact, leaving behind such landmarks as Carnegie libraries in many American towns. The Ford Foundation, founded in the 1930s by Henry and Edsel Ford, still has billions in assets and spent $572 million on program activities in 2005.

With the infusion of cash from Mr. Buffett, the renowned investor who heads Berkshire Hathaway, the Gates Foundation expects to be spending more than $3 billion annually in the years ahead.

The estimated $30.7 billion gift by Buffett doubles the Bill & Melinda Gates Foundation's size to $60 billion, about five times the assets of the No. 2 Ford Foundation.

Buffett's gesture was an extraordinary departure from the tradition of the super-rich establishing foundations in their own names. He will also give sizable sums to foundations run by his children and one in his wife's name. But he said he trusts the Gates, longtime friends, to do more good with his money than he can do. His gifts will be spread out over many years, so the value of the gift in the end will depend on the path of Berkshire Hathaway stock.

Mr. Gates, for his part, recently announced his intention to focus more of his time on the foundation, while stepping aside from his role as chairman of Microsoft Corp. in 2008.

Whether the foundation will succeed in leveraging new tools and techniques in philanthropy remains to be seen.

Schervish is an optimist. He points to the quality of scientific endeavor and the speed of communication. Humanity's needs are more quickly known, as are the successes or failures of do-good efforts.

Meanwhile, he sees the Gates Foundation as part of a larger trend toward a more entrepreneurial style of philanthropy. Since the days of Rockefeller, philanthropy has sought to use research to get to the root of problems. But "venture philanthropy" involves partnering with government and other charitable groups. Money is contingent on hitting bench marks.

"I would say that the Gates Foundation and the Global Fund [to Fight AIDS, Tuberculosis and Malaria] are the two best examples of trying to be philanthropists for the 21st century," says Bernard Rivers of Aidspan in New York, which tracks the progress of the Global Fund. The Gates Foundation has joined with governments and other donors to support the Global Fund.

What these two groups have in common, he says, is the intense desire to not waste money and to use partnership rather than paternalism. [Editor's note: The original version mischaracterized Mr. Rivers' views on the common desires of the Gates Foundation and the Global Fund.]

Others are skeptical of the Gateses' track record.

"I would give Gates sort of a B+ so far," says Stanley Katz, a Princeton University historian who has studied giving in America. "On the education side ... they've spent huge amounts of money, in my judgment not very well."

Indeed, the very scale of the Gates Foundation exposes it to longstanding pitfalls. Bill Gates has said it's as hard to give money away effectively as it is to make money in the first place.

Moreover, some experts see risks in private foundations gaining too much influence through their money and partnerships. The reason: They are not accountable to voters or shareholders.

"We ought to be quite worried about that," Dr. Katz says.

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