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.

 

         Veritas

Veritas is Latin for “Truth,” what universities strive to pass on to their students along with the habits of mind that allow students to question what they learn and, through research, perhaps add to what we know. Veritas is the motto of Harvard and several other universities.

When World War II ended, President Truman’s science advisor, MIT’s Vannevar Bush, issued a report, “Science, the Endless Frontier,” calling basic research “the pacemaker of technological progress.” Bush had seen what wartime government-academia collaboration could accomplish in nuclear energy, radar, and antibiotics. Universities had the research expertise but not the funds to tackle pressing national issues in healthcare, energy, and others, so Bush recommended the government provide competitive grants to universities through a National Science Foundation (NSF) and expanded National Institutes of Health (NIH). 

The NIH is the world’s premier biomedical research agency. Universities have used NIH grants to develop treatments and cures for heart disease, cancer, stroke, and other ills. Between 1971 and 2011, NIH funding developed 153 new FDA-approved drugs and vaccines. 

In 1988, the Department of Energy and the NIH invested $3 billion to launch the global Human Genome Project which has led to preventions and cures for a long list of diseases. In 2019, $3.3 billion in federal funds went to genomics research while in the same year genomics businesses employed 850,000 people in the U.S. who paid $5.2 billion in federal taxes. It’s been estimated that every $1 of NIH grants returns $2.46 in health and economic benefits. That’s a remarkable return on investment.

The NSF has funded about 25 percent of non-health university research in science and engineering. A local example is a 2024 grant of $26 million to KU as lead institution with partner universities Notre Dame and four others for research to develop climate-friendly refrigeration technology. Federal money pays for nuclear fusion research that could help power the future. Federal money made possible the internet and today’s trillion-dollar digital economy with its millions of jobs.

Now, however, the Trump Administration, desperate to reduce the federal budget to justify extending large tax cuts for the richest Americans, is canceling billions in research grants to Harvard and other universities across the country. The budget cutters claim to want an efficient government but haven’t done their homework. They seem not to know that university research is a powerful economic engine creating jobs, tax revenue, and countless public benefits. Last fall, The Economist called America’s economy “the envy of the world.” Our universities helped make it so, so why kill the goose that lays golden eggs?

Here's why: Since the 1930s, some conservatives have grown suspicious of universities as hotbeds of “radicalism.” But universities are marketplaces of ideas where students are free to choose from mankind’s accumulated knowledge. If students tend to adopt convictions that conservatives dislike, perhaps conservatives aren’t making their case persuasively or perhaps their convictions are simply unpopular. Or both.

          Mr. Trump is attempting to blackmail universities by demanding control over curricula, admissions, and faculty hiring in return for reinstating grants. When Harvard sued, Trump threatened to cancel its non-profit tax exemption (which he likely hasn’t the power to do). Now, dozens of our greatest universities, public and private, have agreed to develop a common strategy to resist government threats to academic freedom. The most reliable veritas comes from rigorous scholarship, not from the personal opinions of any government official. America’s universities are the jewel in the crown. Let’s preserve and protect them.