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Article posted on wsj.com by Robert Frank 28 October 2011
When Warren Buffett was in his 20s, he studied biographies of America’s historical business titans, from J.P. Morgan to John D. Rockefeller to Andrew Carnegie.
He was primarily drawn, of course, by their ability to accumulate vast fortunes. But he was also intrigued by the way the tycoons became philanthropists. Rockefeller and his son, John Rockefeller Jr., used their millions to cure disease, launch the green revolution in global agriculture and fund countless arts and cultural programs. Carnegie founded the nation’s first library system and a famed concert hall, living true to his famous dictum that “the man who thus dies rich, dies disgraced.”
“One way or another, we form ideas about what we’re going to do if we turn out to be wealthy,” Buffett says. “For me it was in my 20s, reading what those other people had done.”
WSJ Magazine’s “Innovator of the Year Awards” gives this year’s philanthropy prize to The Giving Pledge, a campaign started by Warren Buffett and Bill Gates.
In the past year, Buffett has carried his philanthropy to a new extreme and, in the process, sparked a revolution in the world of giving. Through his launch of the Giving Pledge in June 2010, a joint venture with his partner-in-patronage Bill Gates, Buffett has unlocked billions of dollars for philanthropic causes. The Pledge has touched off a national debate about how much is “enough” when it comes to giving, and created the most powerful movement in American philanthropy since Andrew Carnegie released his famous “Gospel of Wealth” treatise in 1889.
The Pledge itself is radical in its simplicity. Its signers have to be billionaires. And they have to promise to give at least half of their fortune to charity during their lifetimes.
So far, 69 billionaires have signed the pledge, representing more than $150 billion in philanthropy. That number is “far more” than he and Gates expected, Buffett says. The signers are wildly diverse in their politics and causes—ranging from fighting cancer and funding Jewish schools to housing orphans in Africa and helping farmers in Appalachia. Still, they are united in their mission: to inspire the world’s wealthy to give a larger percentage of their wealth to charity. It is the world’s largest fund-raiser.
Buffett says that while many of the givers had already committed to give half of their fortune away, others were inspired for the first time to promise a specific number. And a few decided to make their first gifts ever. Facebook billionaire Mark Zuckerberg hadn’t announced any real philanthropic plans before signing the Pledge last December. He announced his signing with a gift of $100 million to the public school system in Newark, New Jersey, which plans to use the money to create innovative new programs and incentives for teachers. “People wait until late in their career to give back,” Zuckerberg said in a statement. “But why wait when there is so much to be done?”
Buffett says the true success of the Pledge will be revealed over time, when a future Warren Buffett reads the moving online letters from the Pledge signers and decides to follow in their footsteps. “What I’m hoping is that young people 20, 30, 50 years from now might be influenced by these letters,” he says. “The hope is that our larger population ends up giving a larger proportion of their income to fund philanthropy.”
Over time, Buffett and Gates want nothing less than to increase the overall giving rate in America. That won’t be easy. While it may be painless for a billionaire to give away half his fortune—as Buffett says, “I haven’t met anyone who can’t live on $500 million”—many are reluctant to promise a number in writing. What if their business declines? What if their kids object? What if they prefer to spend their time building their business rather than giving to charity?
In his discussions with fellow billionaires, Buffett tells them that that there is no benefit in postponing a charitable promise: “My argument to these guys who said they weren’t ready was, ‘You’re thinking more clearly at 70 years old then when you’re 95, with Anna Nicole Smith sitting on your lap.’ ”
One man who was convinced was Joe Mansueto. The 55-year-old billionaire founder of Morningstar, the Chicago-based investment-research company, was always planning to give away some of his fortune to charity. Yet he didn’t know how much he would give or when. “I’m so focused on building Morningstar that I figured philanthropy would come later in life,” he says. Then one afternoon, in August 2010, he received a phone call from Buffett. “He told me that if enough people sign the Pledge, we could really have an effect on giving in our society over time,” Mansueto recalls.
Mansueto was quickly convinced. But his wife, Rika, took more persuading. She felt that philanthropy was personal and not a matter of public display. They talked it over for a few months and eventually she agreed to sign. Buffett even gave Rika his ultraprivate 800 number in case she needed more convincing. “He told me she was the only woman who would have his 800 number,” Mansueto says (and Buffett confirms). “Both Buffett and Gates have inspired me and set this incredible example to the world of the responsible way to have wealth. The Giving Pledge sends a message to those with wealth to think beyond their own narrow interests to the greater needs of society.”
The Mansuetos haven’t decided exactly where the money will go, but some of it will be directed to causes they already support, like education, improved health care and handgun control. Mansueto also plans to research ways to support entrepreneurship in America. “Entrepreneurship is a big driver of job growth and can truly transform society,” he says.
The Giving Pledge has also created the aura of a club, perhaps the world’s most exclusive club at a time when outsize wealth has become more commonplace. There are now thousands of billionaires in the world, with more being minted every year in China, Brazil and other developing markets. Among those billionaires, the Giving Pledge signers remain special. It’s one thing to make a billion dollars; it’s another to give half of it away. Through dinners with billionaires in India, China and other countries, Gates and Buffett hope to make the club even more global.
“Hopefully, you get people who want to be part of this club or fraternity of people who have defined where they want to go with their philanthropy,” says Ronald Perelman, the New York billionaire, financier and Pledge signer. Perelman has already given away more than $400 million. His underwriting helped create Herceptin, the popular breast-cancer drug, and he’s given more than $25 million to the New York Presbyterian Hospital/Weill Cornell Medical Hospital. An avid drummer, he also supports Carnegie Hall and the Apollo Theater.
Perelman, however, had never committed to giving a certain amount during his lifetime until Buffett asked him to sign the Pledge. “I think a lot of people are coming out of the woodwork and saying, ‘Now we’re going to give,’ ” he says. “People are now talking about philanthropy like they never did before, and the Pledge had a lot to do with that.” As part of his commitment, Perelman is planning several new gifts in the areas of education and health care.
For some billionaires, the Pledge was as much a personal favor to Buffett and Gates as a social obligation. The two make constant phone calls and hold regular meetings with possible signers. They also hand out some of the most sought-after invitations on the planet, with their regular “Pledge dinners.” Their first, in May 2009, before the Pledge was launched, was co-hosted by David Rockefeller in New York and included Oprah Winfrey, Michael Bloomberg, Ted Turner and George Soros, among others. They have since held several more. At the dinners, billionaires can speak for up to 12 minutes about their giving and their views on philanthropy. Buffett says the talks are not designed to convince others of a specific cause, but “just to share their experiences and inspire others.”
One billionaire who was lured by the dinners was John Paul DeJoria, the “shampoo billionaire” who co-founded the Paul Mitchell hair-products empire. He and his wife (the former Playboy model Eloise Broady) went to a Pledge dinner in California last year. After hearing other people’s stories and meeting Buffett and Gates, they decided to join.
DeJoria acknowledges that he and Buffett are very different people—DeJoria grew up homeless on the streets of Los Angeles before becoming a hair-product tycoon as well as the man behind Patrón Tequila. He wears his hair in a ponytail, collects mansions and wears black. Yet he says they hit it off when it came to philanthropy. “Warren said, ‘Join our club,’ and I said, ‘Where do I sign?’ ” DeJoria recalls.
DeJoria says he plans to give his money to a wide variety of causes that he already supports—from funding agricultural projects in Appalachia to supporting orphans in Africa and rescuing women in Thailand from prostitution. He says the Giving Pledge will encourage him to do more, faster, and search out new causes.
“What makes this innovative is the power of a group to inspire so many others, in a way that individuals might not on their own. We have a choice. We can make our kids billionaires and it will ruin them. Or we can realize how blessed we are and try to spread those blessings around. My view has always been that success unshared is failure.”
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