Buffett verses Katrina

Posted: Jul 03, 2006 12:00 AM
With the stroke of a pen last week, financial giant Warren Buffett donated $31 billion to the Bill and Melinda Gates Foundation and changed the philanthropic world as we know it. Buffett’s contribution makes the Gates Foundation the largest foundation in the world; indeed, it is now nearly six times the size of the Ford Foundation.

Big money makes for a big story, so Buffett’s donation has garnered a great deal of media coverage. And rightly so. But the public would be well-served to do more than gawk at Buffett’s mammoth gift. Instead, we should compare it to another “gift” – one given by the federal government to the victims of Hurricane Katrina a little less than a year ago.

To date, the federal government has spent $19 billion (approximately 60 percent of Buffett’s entire gift) to help Katrina victims.

The money has not been spent wisely.

In fact, the New York Times reports that “government investigators have found fraud and waste consuming more than one in every 10 dollars.” Cases in point: Ten thousand mobile homes manufactured for Katrina victims sit unused in Arkansas at a monthly storage cost of $250,000; numerous FEMA employees and general contractors have been or will be charged with fraud, price-gouging and phantom “expense” reimbursement claims; thousands of Katrina victims have filed false claims for food and hotel reimbursements and have found countless other ways to game the system. According to Times’ report Eric Lipton, as much as 21 percent of the $6.3 billion in aid sent to victims was improperly distributed.

Ah, yes, government inefficiency.

Now contrast that inefficiency with the Gates Foundation, whose goal—“to help reduce inequities in the United States and around the world”—is much more ambitious than simply helping out hurricane victims. Do you think Warren Buffett, a man who made an empire by making smart business decisions, would give $31 billion to an organization that would waste 10 percent (that would be over $3 billion!) of his donation?

No way!

Because of numerous safeguards and an overall culture of accountability, the Gates Foundation would never stand for the fraud and abuse that so often marks government intervention on behalf of the poor or “victimized.” Consider a few reasons why the foundation is so effective and able to earn the trust of someone as wealthy as Buffett:

Strict adherence to setting measurable goals and holding grantees accountable for results.

- Commitment to hiring experts who can oversee gifts and partner with charities to conduct effective problem solving.

- Minimal red tape and bureaucracy. Focus on results, not the process.

- Management style based on competence, trust, compassion and sacrifice.

- This is philanthropy at its best.

In the book Getting America Right, I offered example after example of how private philanthropy delivers services to the poor and needy (both in America and across the globe) more effectively than the government.

Warren Buffett and Bill Gates understand this important lesson.

But they also understand that they are in an incomprehensible financial minority in the world. They realize that 99.9 percent of the people on the planet couldn’t possibly give away 85 percent of their total worth. But the beauty of philanthropy is that you don’t need to be Warren Buffet.

Some of the best examples of Katrina relief come from churches and volunteer groups who gave millions of hours of time and millions of dollars to assist Gulf Coast victims. In one case, a group of volunteers came into an area for three weeks, rebuilt homes and schools, and also brought a “boatload of love and energy” to the task, as a Katrina victim attested.

In any disaster, it’s not just about money or time—it’s about the kindness and passion of the delivery. My wife and I devote annually a set amount of time and money to the Free Wheel Chair Mission which delivers unique all-terrain wheel- chairs to developing countries. Our donations are a drop in the bucket compared to Mr. Buffett’s, but the joy we share in changing lives with the delivery of a wheelchair is the most gratifying thing we do each year.

A government bureaucrat can’t possibly share that same joy. It’s not that he or she doesn’t care, it’s that what they are giving is not their own. When we give our own hard earned money or prized time to another, we demand a return. Not a material return, but a return that improves the life of another person.

In sum, private charity outperforms public charity. Our government must work harder to find ways in which government can partner with private charities to provide more effective help to the poor. But perhaps the most important thing our government can do is to insure that we keep alive the mechanisms that made Gates and Buffett so wealthy in the first place. After all, they had to earn all that money before they could give it away.