The Right Way to Spend Billions
Imagine you’re a billionaire (one billion = a thousand million). You can spend money on yourself by buying lavish mansions and a high-rise apartment. You can even equip your quarters with gold-plated toilets. Or you can use your money to make a better world.
Warren Buffett and Bill Gates chose the latter. Buffett (pictured), now 94 and known as the “Oracle of Omaha” for his legendary investing expertise, is chairman and CEO of $1.1 trillion holding company Berkshire-Hathaway, which he founded more than sixty years ago. Berkshire owns such diverse properties as BNSF Railway and Dairy Queen. With a net worth around $164 billion, Buffett is the world’s sixth richest person. What’s he doing with all that money?
He’s not spending it on housing. Buffett still lives in the modest Omaha house he and his wife bought in 1958 for $31,500 (about $352,000 in today’s money). He once owned a vacation home in California but sold it for a hefty profit. He’s not spending it on his three children either, saying that they will inherit “just enough so that they could do anything, but not so much that they would feel like doing nothing.”
Mostly, Buffett is giving his money to worthy causes—more than $50 billion by last year. In 2006, he pledged 83 percent of his fortune (more than $30 billion at the time and the largest charitable donation in history) to the Bill and Melinda Gates Foundation. He has also made large donations to various other foundations including those of his children. In 2010, the Gates-Buffett Giving Pledge was established which invites other wealthy people to promise at least half their wealth to charity. So far, at least 240 mostly-billionaires from 28 countries have signed up.
Bill Gates made his fortune developing computer software. He wrote his first program at age 13 in 1968 while a student at a Seattle prep school. A National Merit Scholar, Gates attended Harvard for two years before leaving to found Microsoft where he served as CEO for 25 years. In 1980, IBM hired Microsoft to develop its computer operating system, and the prestige of its association with IBM helped make Microsoft the world’s leading software company.
Gates, age 69, is currently the sixteenth richest person in the world with a net worth of about $109 billion. Unlike Buffett, he and his former wife built a modern energy-efficient mansion overlooking a lake in Washington state. Even with extensive business travel, Gates flew commercial coach for years until buying an aviation service company. An avid reader, he owns an important collection of da Vinci’s scientific writings. But what is he doing with the rest of his billions?
Like Buffett, he gives it to worthy causes. In 2000, he and his wife founded the Bill and Melinda Gates Foundation (now in his name only), which became the world’s largest charitable foundation. The Foundation works on vital issues that many governments fail to deal with effectively: public health, climate change, agriculture, water quality, family planning, and many others. Gates also makes large donations to universities to support scientific research. Eventually, he plans to donate 99+ percent of his wealth while leaving $10 million to each of his three children.
At Berkshire’s annual meeting this month, Mr. Buffett announced he will retire as CEO at the end of the year but remain chairman. He also had some choice words about tariffs, saying, “Trade should not be a weapon. I don’t think it’s right and I don’t think it’s wise.” When Warren Buffett speaks about money, it’s smart to believe him.