Warren Buffet Proves There's No Such Thing as Giving Too Much

Warren Buffett with Melinda and Bill Gates.© Bill and Melinda Gates Foundation

In 2006 Warren Buffett announced he would donate 85% of his $44 billion fortune to charity, naming the Gates Foundation as the main recipients. Buffett had previously planned to make such a donation in his will, famously saying that he wanted to leave his children enough money so they could do something, but not so much that they could do nothing, and inviting comparisons to Andrew Carnegie, who liked to say that “the man who dies rich dies disgraced.”

Buffett said that watching Bill and Melinda Gates donate so much of their wealth during their lifetimes inspired him to kickstart the process of distributing his own wealth. Buffet is now a trustee of the Gates Foundation, whose major focus is addressing global health. Last year Bill and Melinda Gates, along with Buffett, who is now a Gates Foundation trustee, launched The Giving Pledge, an initiative to encourage the richest Americans to donate more than half of their wealth to philanthropic causes. Buffett led by example, upping his previous pledge and promising to give away a full 99% of his wealth during his lifetime or at the time of his death.

The politics of the last several months make it hard to have charitable feelings about billionaires, even when they’re being so charitable. Our national attention has turned to a different 99%. In a country where it’s become a national pastime for almost everyone to imagine themselves middle-class, this season has brought a surge of class consciousness, and with it anger and frustration with superrich and frustration with the systems that create them. In other words, it’s a hard time to pat billionaires on the back for their donations, no matter how large.
For those who can afford it, charitable giving is a moral obligation on par with the responsibility to save a life.

Philosopher and provocateur Peter Singer has written extensively on ethics, from why we shouldn’t eat animals to why we should give away our money. Though “should” isn’t strong enough for Singer—he is perhaps best known for arguing that for those who can afford it, charitable giving is a moral obligation on par with the responsibility to save a life.

Gates has said that he created his foundation because he believes that all lives have equal value—a tenet that’s also central to Singer’s philosophy. I remember reading Singer’s critique of Bill Gates’ charitable giving in a 2006 op-ed in the New York Times. “If he really believes that all lives have equal value, what is he doing living in such and expensive house and owning a Leonardo Codex?” (referring to a handwritten book by Leonardo da Vinci that Gates purchased for over $30 million in 1994). What I had forgotten was that even Singer, with his tremendous power to spin logic into guilt, ends up applauding Gates. Singer has proposed a giving scale that starts at 1% of annual income for those earning up to $105,000, and goes up to 33% for the top 0.01% of American earners. The Giving Pledge surpasses even this tough standard.

He also writes about the impulse to criticize the motivation of those who give: “This kind of sniping tells us more about the attackers than the attacked... When we read that someone has given away a lot of their money or time to help others, it challenges us to think about our own behavior. Should we be following their behavior in our own modest way?” Imagining that someone else’s charity is a PR tactic, or compensation for past misdeeds, conveniently lets us off the hook.

Singer often uses the following metaphor: You’re walking through the park when you see a child drowning in a shallow pond. You didn’t push the child in, but you can easily pull him out and can save his life. You will have to get into the pond yourself, and you will probably have to replace the nice new pair of shoes you’re wearing. When asked “What do you do?” you hardly need to think—you save the child, of course! Singer argues, however, that we all walk away from a morally equivalent situation every time we spend money on luxury goods instead of using it to support life-saving charities. There are differences, he admits: most importantly, we’re not face-to-face with the children who are dying of malnutrition and malaria as we are with the child in the pond. But this difference isn’t morally significant, says Singer. They’re dying, we know it, and we would be able to change their lives with a donation comparable in size to the cost of that nice new pair of shoes.

While Singer argues for the moral imperative to give more, economist William Easterly argues for the practical imperative to give well. Easterly is dedicated to improving the effectiveness of charitable giving, particularly official foreign aid. In an online conversation between the two, talking remotely from their offices at Princeton and NYU, Easterly challenged Singer’s pond metaphor on two grounds. In real life, he says “We’re not physically able to rush in and save the child, or even observe whether the child is saved or not.” Most donors write the check and never check in to find out how effectively their donations are being spent. Perhaps more importantly, saving people from malnutrition and disease requires an altogether different level of intervention. It is easier to pull a child out of a pond than out of cyclical ill health and poverty. “Making the problem sound easy can lead to a lot of disillusionment,” Easterly cautions Singer, “You have to motivate 45 different people involved in saving the child.” This is one of the reasons Buffet has given for donating his money to the Gates Foundation rather than starting his own. Why reinvent the wheel when someone else has already established the complex infrastructure necessary to deliver aid?
Even after making this donation, Buffet writes, “I will continue to live in a manner that gives me everything I could possibly want in life.”

It’s easy to rankle at both Easterly and Singer’s arguments—it’s unpleasant to be reminded that even well-intentioned charities are often ineffectual, and of course nobody likes to hear that they’re committing the moral equivalent of murder by keeping their hard-earned money. Still, it’s useful to remember the power of money to do good in the world, and to think about the obligations that wealth carries with it.

This obligation casts a long shadow over the extraordinarily wealthy donors who participate in Buffet’s and Gate’s Giving Pledge project. But a sense of obligation is the not their only motivation—the variety of approaches these donors take to philanthropy show up in the open letters that explain their commitments and the reasons they’ve decided to make them. Michael Bloomberg’s letter discusses the satisfactions of giving back to the community, though in bloodless language that sounds like it was churned out by a communications department. Barron Hilton conceives of philanthropy as a kind of tradition or legacy; his letter mostly praises his generous and prosperous forebears. Jim and Virginia Stowers are all business; their letter reads like a prospectus for the family’s biomedical institute. (In a wonderful irony, Mark Zuckerberg’s Giving Pledge page reads simply “full profile coming soon.”)

Charitable giving can be done in all of these modes, of course: in the spirit of duty, tradition, or pragmatism. It can also be done with joy. This is the spirit of Warren Buffett’s open letter, which is one of the best pieces of writing I’ve read about money and the way it works in our culture. It’s worthwhile for anyone to read in full, but the gist is this: Buffett knows his fortune is a product of work and talent, but also the luck of being born white and male and in the U.S. He calls it the result of “wildly capricious” fate that he worked in an economy that rewards detecting mispriced securities so highly, while other professionals like teachers and soldiers earn so much less. Through he acknowledges all this, his giving is not the result of guilt and obligation. He gives instead out of gratitude and a feeling of plenty. “Were [my family and me] to use more than 1% of my claim checks on ourselves, neither our happiness nor our well-being would be enhanced,” he writes, “In contrast, that remaining 99% can have a huge effect on the health and welfare of others.” Even after making this donation, he writes, “I will continue to live in a manner that gives me everything I could possibly want in life.”

What’s remarkable about this is the notion that there is such a thing as enough. Last year a study came out that pinpointed the number that constitutes “enough” for most Americans. At lower income levels, additional money does make people happier. It brings feelings of increased security, eases anxiety, provides opportunities for leisure and time spent with loved ones. But around the $75,000 annual income mark, this added value stops. To anyone who paid attention in their introductory economics class, this should come as little surprise: it’s the emotional application of the law of diminishing marginal returns. Or, as Buffett puts it: “Some material things make my life more enjoyable; many, however, would not. I like having an expensive private plane, but owning a half-dozen homes would be a burden. Too often, a vast collection of possessions ends up possessing its owner.” The idea that there is such a thing as enough money is not something we are used to hearing in our culture, certainly not from those at the top of the Forbes lists.

What’s most exciting about the idea that the concept of enough trickling up to the people who shape our economy. The members of the Giving Pledge have the influence not just to address social problems through philanthropy but to also in the way they do business. If there is such a thing as “enough,” then why not decide to invest only in companies who treat the members of their overseas supply chains ethically? Or that have outstanding environmental records? Or offer all of their own employees generous health insurance packages? The modern corporation’s obligations to increase shareholder value at any cost prevents this most of the time, but at least one member of the Giving Pledge is working to change this, by re-envisioning the way capital works and who it works for.
“Because social impact is our primary goal, we may take a more long-term view than a purely commercial investor, or fund a company with potential for massive social impact but significantly higher risk.”

In 2004 Pierre Omidyar, a Giving Pledge member and the founder of eBay, founded the Omidyar Network, an impact investing organization. It is one of a growing number of “philanthrocapitalist” firms that make their investment decisions based not just on financial returns but also on the success of their investees in addressing social problems. Amy Klement, VP of the Omidyar Network, explains how they differ from traditional investment firms: “Because social impact is our primary goal, we may take a more long-term view than a purely commercial investor, or fund a company with potential for massive social impact but significantly higher risk.” Impact investing pushes charitable giving even further toward sustainable than the “teach a man to fish” programs that have become popular; instead of investors first collecting as much profit as possible and then distributing it to charities, impact investing fuses the processes that create wealth and address social issues.

Accordingly to the 12th century Jewish scholar Maimonides, who created a “ladder of charity” ranking different modes of giving, this kind of venture represents the highest form of philanthropy. At the top of Maimonides’s ladder is charity as business partnership, giving someone a no-interest loan or a job, which helps the recipient become self-sufficient, and which doesn’t even look like charity and therefore preserves the recipient’s dignity. (The lowest form is giving only begrudgingly and after being asked.) The members of the Giving Pledge are in a unique position to do this. Perhaps the most exciting part of Buffett’s acknowledgement that more is not always more is it’s implications for the way that Giving Pledgers might approach their day jobs as captains of industry, integrating social responsibility into their everyday business practices.

The rest of Maimonides’s list is also useful:

8. Giving in a way that makes the recipient self-reliant
7. Giving when neither you nor the recipient know the other’s identity.
6. Giving to someone you do not know, but keeping your gift private.
5. Getting credit for your charity, but giving to someone you do not know.
4. Giving before being asked.
3. Giving cheerfully, adequately, and only after being asked.
2. Giving cheerfully but too little.
1. (the lowest) Giving begrudgingly and making the recipient feel disgraced.

While we don’t all have the ability to change the way investments work, we do all have the opportunity to give better. Whether we call it charity (from the Latin for love) or Tzedakah (from the Hebrew for justice), we can all do it more often, with less prompting, and with greater cheer.

—RACHEL RIEDERER is an essayist and environmental journalist living in Brooklyn. See more of her work at rachelriederer.com.

Warren Buffet Proves There's No Such Thing as Giving Too Much
And he’s donated 99% of his wealth to demonstrate it.

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