As an honored attendee of the Harvard Business School Summit in Boston this last week, I had the opportunity to hear Microsoft founder and chairman Bill Gates, who is also co-chair of the Bill & Melinda Gates Foundation, speak on the subject of creative capitalism which he described as “ensuring that the least of us has opportunity.”
First, the economy Gates spoke of his friend Warren Buffett, who spoke of the complexity of current financial instruments. Stating that “None of us are smart enough to understand this,” he commented that we as a nation had been livingon borrowed time for quite some time “building up embalances” in regard to the economy. He noted that financial leaders are sending a “very powerful signal” of distress to consumers, that he believes the country faces a deep recession, with the unemployment rate perhaps exceeding 9 %. He also noted that the $700 billion financial rescue package is, in this context, just a “downpayment. The press has put out pictures of the depression to send low consumer sentiment.
Transitioning to philanthropy
Leaving the subject of the economy, Gates talked about transitioning into philanthropy to let the younger people at Microsoft set the company’s technological direction. He wanted to give back to society in a timely, planned way, and did not want the huge wealth that Microsoft had afforded him to pass on to his children, because wealth is very “distortionary.” He and wife Melinda gave them “just enough to so that they are still motivated to work hard, but enough to be safe”. He did note that his children were too young when the legal drafts were set in stone so they could not object. Personally, I applaud his decision to grow children who will have the desire to succeed on their own.
He acknowledged that the most magical time is when you are creating something new. The foundation has only 700 staff people, and works by making grants to organizations, governments, and even supports the development of new vaccines. He wishes he “could write checks to get better governance.”
He was interested in areas where capitalism has fallen short. For instance, many people in the world are plagued by diseases, but too poor to buy medicines, so the market fails to provide incentives to develop cures for them. Nations spend 10 times more on male baldness than on malaria, which kills one million children and sickens 200 million people annually, undercutting their education and economic progress. Governments are not known for funding drug discovery either.
The Gates Foundation
The foundation spends $3.3 billion annually. Half is spent on global health including 20 infectious diseases. Five of these: TB, malaria, HIV/AIDS, diarrhea, and respiratory illnesses. account for the majority of diseases plaguing the world’s poor; a quarter on other aspects of global poverty; and a quarter on U.S. education including experimentation in high schools and community colleges. The foundations’ main goal is to rid the world of malaria in 15 years. “If we can’t do that, we’re stupid and we should be fired,” said Gates.
When asked if the foundation undercut government efforts, he said that better health contributes to stronger government, and vice versa - a virtuous circle. Many times large grants are distributed through governments. He cited success in cutting Zambia’s malaria mortality in half in three years. No one has figured out how to replace the truly horrible governments like Nigeria, but the foundation works well with some weak governments including Pakistan, and the northern states of India, Bangladesh. Ultimately, governments must to take over from the foundation by delivering vaccinations, providing primary healthcare, building roads, sustaining agriculture, and developing savings.
Gates said that evaluating success is hard work, not easily translated from the business realm, but essential, as “the scorecard is the key.” The grants themselves have concrete goals. One might be to reduce the number of deaths by malaria by a certain number by a certain target date. The foundation publishes these goals and its progress in meeting them over the years the project is in effect.
Education is the hardest program to measure, because the metrics simply are not the same across the board. He did mention that when teachers were successful, most of the time no one can know why because their techniques are not captured on video and then shared with other teachers. Even establishing minimal national math standards is tough because “Republicans don’t like ‘national’ and Democrats don’t like ‘standards.’”
He noted that of all the children in the 9th grade, a third will not graduate. Of black males, 60% will not graduate.
Gates challenged businesses to go beyond giving cash or matching employees’ charitable contributions. He suggested that companies should devote 5 percent of their creative people resources to solving the problems of the world’s poor who quite possibly could be their future customers. He said that drug companies, cell-phone suppliers, banks, and food companies could contribute by tapping their “innovation power.”
He ended with mentioning the fact that talented young people are attracted to companies that are socially-engaged with their community and the world. Creative capitalism is something from which everyone could gain. And finally, he suggested that everyone in attendance walk the talk, and develop leaders who make a difference.