Warren Buffett gives away his fortune

[bishop]

article

NEW YORK (FORTUNE Magazine) - We were sitting in a Manhattan living room on a spring afternoon, and Warren Buffett had a Cherry Coke in his hand as usual. But this unremarkable scene was about to take a surprising turn. "Brace yourself," Buffett warned with a grin. He then described a momentous change in his thinking. Within months, he said, he would begin to give away his Berkshire Hathaway fortune, then and now worth well over $40 billion. This news was indeed stunning. Buffett, 75, has for decades said his wealth would go to philanthropy but has just as steadily indicated the handoff would be made at his death. Now he was revising the timetable. "I know what I want to do," he said, "and it makes sense to get going." On that spring day his plan was uncertain in some of its details; today it is essentially complete. And it is typical Buffett: rational, original, breaking the mold of how extremely rich people donate money. Buffett has pledged to gradually give 85% of his Berkshire stock to five foundations. A dominant five-sixths of the shares will go to the world's largest philanthropic organization, the $30 billion Bill & Melinda Gates Foundation, whose principals are close friends of Buffett's (a connection that began in 1991, when a mutual friend introduced Buffett and Bill Gates). The Gateses credit Buffett, says Bill, with having "inspired" their thinking about giving money back to society. Their foundation's activities, internationally famous, are focused on world health -- fighting such diseases as malaria, HIV/AIDS, and tuberculosis -- and on improving U.S. libraries and high schools. Up to now, the two Gateses have been the only trustees of their foundation. But as his plan gets underway, Buffett will be joining them. Bill Gates says he and his wife are "thrilled" by that and by knowing that Buffett's money will allow the foundation to "both deepen and accelerate" its work. "The generosity and trust Warren has shown," Gates adds, "is incredible." Beginning in July and continuing every year, Buffett will give a set, annually declining number of Berkshire B shares - starting with 602,500 in 2006 and then decreasing by 5% per year - to the five foundations. The gifts to the Gates foundation will be made either by Buffett or through his estate as long as at least one of the pair -- Bill, now 50, or Melinda, 41 -- is active in it. Berkshire's price on the date of each gift will determine its dollar value. Were B shares, for example, to be $3,071 in July - that was their close on June 23 - Buffett's 2006 gift to the foundation, 500,000 shares, would be worth about $1.5 billion. With so much new money to handle, the foundation will be given two years to resize its operations. But it will then be required by the terms of Buffett's gift to annually spend the dollar amount of his contributions as well as those it is already making from its existing assets. At the moment, $1.5 billion would roughly double the foundation's yearly benefactions. But the $1.5 billion has little relevance to the value of Buffett's future gifts, since their amount will depend on the price of Berkshire's stock when they are made. If the stock rises yearly, on average, by even a modest amount - say, 6% - the gain will more than offset the annual 5% decline in the number of shares given. Under those circumstances, the value of Buffett's contributions will rise. Buffett himself thinks that will happen. Or to state that proposition more directly: He believes the price of Berkshire, and with it the dollar size of the contributions, will trend upward - perhaps over time increasing substantially. The other foundation gifts that Buffett is making will also occur annually and start in July. At Berkshire's current price, the combined 2006 total of these gifts will be $315 million. The contributions will go to foundations headed by Buffett's three children, Susan, Howard, and Peter, and to the Susan Thompson Buffett Foundation. This last foundation was for 40 years known simply as the Buffett Foundation and was recently renamed in honor of Buffett's late wife, Susie, who died in 2004, at 72, after a stroke. Her will bestows about $2.5 billion on the foundation, to which her husband's gifts will be added. The foundation has mainly focused on reproductive health, family planning, and pro-choice causes, and on preventing the spread of nuclear weapons. Counting the gifts to all five foundations, Buffett will gradually but sharply reduce his holdings of Berkshire (Charts) stock. He now owns close to 31% of the company-worth nearly $44 billion in late June - and that proportion will ultimately be cut to around 5%. Sticking to his long-term intentions, Buffett says the residual 5%, worth about $6.8 billion today, will in time go for philanthropy also, perhaps in his lifetime and, if not, at his death.

another billionaire with a good conscience.. how rare these people are..

[Nono]

Admirable and far-sighted as they are, they can't replace -- or even serve as a bandaid for -- government policy that redistributes wealth throughout society.

[Rave7pt0]

This is my plan for my life, and I'm glad to see people starting before I get there.

[Jack]

Why don't they just buy the planet and set it up to run like Microsoft?
I can't imagine they'd run it any worse than it's been run up until now.

[Marilyn Monroe]

Quote by: bishop article another billionaire with a good conscience.. how rare these people are..

If he had a really good conscience he would have given it to the government cause he approves of government intervention, but instead he put it into charities where he will have control over how the money is spent, and can use it to avoid taxation, plus his kids will be on the boards of these charities, so will get a hefty salary for 30 minute meetings.

[tman_ndsu08]

Quote by: Nono Admirable and far-sighted as they are, they can't replace -- or even serve as a bandaid for -- government policy that redistributes wealth throughout society.

They're better, actually.

This way, the people who actually earn the money can decide what it gets spent on.


Rather than having it ripped away from their hands by the government who then decides to use it however they like (mostly lining the pockets of corrupt politicians).

[brien]

Quote by: Nono Admirable and far-sighted as they are, they can't replace -- or even serve as a bandaid for -- government policy that redistributes wealth throughout society.

Nono; Forced redistribution of wealth in society saps initiative, economic drive, and individualism.

Example. My son works for union wages in carton printing plant. He is forced to work overtime of which the majority of this overtime money get sucked up in taxes. He is loathe to be forced to work when the majority of this overtime money is confisgated by the government. Hence, his productivity is reduced, his attitude is negative, and his take home pay is less than it would be if he weren't so heavily taxed upon the "time and half" wages.

Warren Buffet and Bill Gates aside, the average worker in the US resents increased forced withholding when it reaches beyond their regular wages and digs into to their "extra efforts" in productivity known as "overtime". Time and time again, I hear workers say:

"Why should I work overtime when most of the money goes to the government"? I believe they have a valid point.

This type of redistribution of wealth is unfair to the worker whose pay is derived from a paycheck involved in withholding of taxes. Particularly when a worked is forced to work overtime when the majority of this remuneration is confisgated in taxes by the government.

[Nono]

I sympathize, brien. Sounds like your son is afflicted by a regressive tax system. When most of the overtime pay of a wage-earner is sucked up in taxes, something's far wrong.

By contrast, when most of the earnings of a true fatcat are sucked up in taxes, well what remains is to make sure that tax money isn't squandered.

In most cases at the fatcat level, it's gone beyond the point of earning more money. Instead, people are in it for The Game, The Status, whatever. Let them have those rewards (and a hefty chunk of their earnings as well), but the rest should go to wealth redistribution (useful public-sector jobs, etc. etc.), on which the consumer economy is dependent in any case.

Among other things, this takes the fiscal pressure off the guy in the carton-printing plant.

[tinybear]

So.....what's going on? Is Warren Buffet about to kick it?

[Osborn F Enready]

Isherwood said: Why don't they just buy the planet and set it up to run like Microsoft?

I say:
LOL. If that was $33,000,000,000.00 in GOLD, maybe. Instead, its fiat paper. That means even if you only distributed it to LEGAL AMERICANS, it would only amount to $110.00 per person.

One night at the hotel room with the jacuzzi tub, champagne extra?
One months car insurance?
One months electric bill?

When you see a house that was built in 1954 for $27,000.00, and in 2005 that same house sells for $1,400,000.00, what does that tell you about the value of your fiat dollar?

[brien]

Quote by: Nono I sympathize, brien. Sounds like your son is afflicted by a regressive tax system. When most of the overtime pay of a wage-earner is sucked up in taxes, something's far wrong. By contrast, when most of the earnings of a true fatcat are sucked up in taxes, well what remains is to make sure that tax money isn't squandered. In most cases at the fatcat level, it's gone beyond the point of earning more money. Instead, people are in it for The Game, The Status, whatever. Let them have those rewards (and a hefty chunk of their earnings as well), but the rest should go to wealth redistribution (useful public-sector jobs, etc. etc.), on which the consumer economy is dependent in any case. Among other things, this takes the fiscal pressure off the guy in the carton-printing plant.

And then on the other hand, a progressive tax system penalizes success. I tend to lean more along the lines of "point of sale" taxes. Taxing consumption seems more fair than taxing income.

This of course after the Government Diplodicus is reduced down to a manageable and logical level.

Hey, I have some crullars for you. Where is my St Emillion Gran Cru? Chateau Pontiff will do nicely. :)

[bishop]

people also make more in simple numerical terms than they used to make in 1954... it's all relative. and $33 billion in gold would have to be converted into dollars in order to be used because most people prefer cash, not gold.

heh, but this is a topic about buffett's philanthropy, not economics.

[brien]

Quote by: bishop people also make more in simple numerical terms than they used to make in 1954... it's all relative. and $33 billion in gold would have to be converted into dollars in order to be used because most people prefer cash, not gold. heh, but this is a topic about buffett's philanthropy, not economics.

Yeah, I know. Sorry didn't mean to hyjack the thread. Mr Buffett, and Mr Gates both have done the honorable thing for their legacy. I admire them for doing so and could never bash well meaning intentions that are directed towards charity.

[Nono]

Quote by: brien A progressive tax system penalizes success. I tend to lean more along the lines of "point of sale" taxes.

We sure view things differently. In your system, the guy buying a box of Kraft Dinner pays the same percentage in tax on it as the guy buying a Rolls Royce.

So what was the sales tax on them crullars anyway? And here's the deal: Since Hortons guarantees freshness you can just pop them in the mail. No such guarantees in Bordeaux, however, and I'd be mortified if the stuff were corky or anything. So I'll have to engage in some quality control of my own here. I'll be in touch.

[brien]

Quote by: Nono We sure view things differently. In your system, the guy buying a box of Kraft Dinner pays the same percentage in tax on it as the guy buying a Rolls Royce. So what was the sales tax on them crullars anyway? And here's the deal: Since Hortons guarantees freshness you can just pop them in the mail. No such guarantees in Bordeaux, however, and I'd be mortified if the stuff were corky or anything. So I'll have to engage in some quality control of my own here. I'll be in touch.

Ahh The sales tax is 6% in Connecticut. Doughnuts are taxed because they are a prepared food purchased ready to eat. No tax on supermarket purchased food meant for home prep. So the guy who buys the Kraft buys tax free but the guy who buys the Rolls pays a ton of taxes.

As far as my Bordeaux, freshness isn't high on my priority list. A well preserved Bordeaux is like an experienced woman. Er, well, you know what I mean. They only get better as they get older when they come from good stock.

The Chateau Pontiff, 1970, I yi yi.....I would risk a lot for that one.

The crullars, I would have to overnight them to you. No sales tax on international transportation at this end. Any duty on imported crullars? I will over night them FOB so you will have to pay the duty upon taking possession. Sorry, I pay enough taxes already.

[tman_ndsu08]

Quote by: Nono In your system, the guy buying a box of Kraft Dinner pays the same percentage in tax on it as the guy buying a Rolls Royce.

False logic.


If the guy who bought the Kraft paid 50 cents in taxes and the guy who bought the RR paid 10k dollars in taxes, obviously it's impossible to say that they're being taxed the same.

[Nono]

False logic. Obviously it depends on their respective resources -- the guy buying the Kraft Dinner is bound to be infinitely closer to the poorhouse than the guy buying the Rolls.

[Matt W]

Stay on-topic, people....

[Nono]

The "topic" is that a guy with countless bucks (I mean, just try imagining the numbers) has given away megabucks to charity. That's a topic quickly dispensed with unless we move this thread down to Philosophy in order to dwell at length on the moral aspect (which nobody so far has).

My take on it is that Buffett (like Gates) realizes deep down that all this money ultimately doesn't really belong to him, and has therefore returned it to its 'natural habitat'.

For me, that's on-topic.

[tman_ndsu08]

Quote by: Nono the guy buying the Kraft Dinner is bound to be infinitely closer to the poorhouse than the guy buying the Rolls.

Which has nothing to do with taxes...

How about addressing the point that the guy who bought the RR paid many times over the amount of taxes that the guy who bought the Kraft did?