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Gates on Giving

June 14, 2013

The San Francisco Business Journal reports that the Bill and Melinda Gates Foundation was one of the top donors to UC Berkeley in 2012, having given nearly $20 million to the campus in support of research. It wasn’t the first time the Microsoft founder had given to the University. In 2009, for example, the Gates Foundation gave Berkeley researchers a five-year $10.9 miliion grant “to evaluate several interventions to combat diarrheal disease in developing countries.”

Some current Berkeley students may remember Bill Gates’s visit to Cal in April 2010 as part of a three-campus college tour (other schools he visited included the University of Chicago, MIT, and Harvard). After his speech, the topic of which was “Giving Back: Finding the best way to make a difference,” Mr. Gates fielded questions from the audience–almost exclusively students– and spoke on stage with Executive Vice Chancellor and Provost George Breslauer.

The billionaire software mogul was also kind enough to sit down with California afterward for a brief Q&A. We asked Gates about the allocation of resources in capitalist societies, the virtues of so-called “venture philanthropy,” and the decision not to leave the fortune to the kids. (We also asked for a ride in the helicopter he arrived in, but nothing doin’.) Here’s what he had to say:

California: One of the main concerns of your lecture today was the mis-allocation of resources, that all these societal problems go wanting for talent and brainpower and resources. Before we get into the Foundation’s role in addressing that, let me ask you, does this seem to you like a failure of capitalism or a failure of markets?

Bill Gates: Well capitalism is an incredible system, but nobody ever claimed that it alone would do well. Now, when you try and work without capitalism — you know that experiment, the sort of the North Korea vs. South Korea, China before 1979/China after 1979 comparison — some really nice little experiments were done to see [what would happen] if you tried to completely get rid of capitalism. I’ll take capitalism despite its deep imperfections any day, over those other systems. But, it definitely says that in its purest form, you will not innovate for the needs of the poor people, because they don’t speak in the market. You’ll under-invest in long-term research because the benefits of, say, preventing C02 emissions, don’t accrue enough to take the gigantic risks of all those things that need to get done. And governments funding universities offset that to some degree, if they pick the right people and the right topics. But yeah, if the marketplace alone solved all these problems I wouldn’t need to give this speech.

California: So is it the role of philanthropists to address these things? Are we going to have to depend upon people with excess resources to channel some of it into these areas?

Gates: That’s not the primary thing. The primary thing is, you know, first you have government, and in terms of funding education and a funding resource, it plays a very big role. And then you have individuals who choose to go into teaching when they could go into some other profession, or work on malaria instead of working on a more popular rich-world type disease. That’s a gigantic thing. I guess you can call that philanthropy, … but it doesn’t fit the normal foundation model and it’s a very hard thing to measure. … And then foundations play a role, but I wouldn’t overstate that role.

California: One term that has been applied to the kind of work the Gates Foundation does is “venture philanthropy” or “philanthro-capitalism.” I guess what’s meant by that is that you’re taking the culture and techniques of venture capitalism and technology start-ups and applying it to the foundation world. I’m wondering, first, if you accept that characterization? And if so, does the model work and why?

Gates: I don’t know exactly what the particular terms mean, so I don’t sign up to those exactly. If you go back in history, the Rockefeller Foundation was incredibly enlightened in terms of disease research, de-worming, schools for black kids in the South, you know, Rockefeller University and University of Chicago. That is a phenomenal foundation. And what Carnegie did in terms of quality of education, libraries, phenomenal. So, I wouldn’t say that this generation of foundations has some magical monopoly on wisdom, but the idea that there’s more measuring going on, more sense of, “Ok, I said this would happen, but it didn’t,” yeah, that’s a good thing. It needs to be a disciplined field because the U.S. has the most generosity, thank goodness, and we should get as much out of that as we can, and we should ideally even up the level beyond what it is today.

California: You mentioned in your lecture that you and Melinda decided you weren’t going to leave the whole shebang to your kids, and I wonder why not? What was the logic there?

Gates: Well, when we pick our Olympic team, we don’t pick the grandchildren of the 1910 track stars. Society probably shouldn’t allocate its resources on a legacy basis. And for a kid to be known as, “Oh that’s the kid who’s going to be worth ridiculous sums of money,” it’s probably not all that helpful. It’s a natural experiment that has been run, and its probably distortionary in terms of how they think about what they can do for themselves and all that. … I think in every way it’s better for society for the money to go back, it’s better for the kids. … Our children haven’t complained too much.

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