January 31, 2002

10:51 AM

Bill & Melinda Gates' $24 Billion Charity"The Gates Foundation often makes grants only on condition that governments or other nonprofits match them, and requires that recipients meet regular goals for performance—or risk losing their funding. (That hardball approach has met with criticism from some members of the philanthropic community, who argue that holding people to ambitious standards may make sense in Redmond but not in places where millions can’t read.) And experts have calculated that improvements in health care themselves have a huge ripple effect in the poorest countries: if parents believe their children will live longer, they save more and reproduce less. That will help create capital for investment, which will spur more development and so on, in a "positive feedback loop," as the techies like to say in Redmond."
posted by owillis (41 comments total)

I was thinking of posting something about this when I saw this piece had been given a cover. I have a hard time believing this good pr is totally unrelated to all the bad pr that's been circling microsoft in recent weeks/months. Is Newsweek as dirty as Time? [NYTimes Link, Reg. Req'd]
posted by Sinner at 11:07 AM on January 31, 2002

I've seen several articles on the Foundation over the past several months. It seems to me that the B&MGF is a tremendous charitable organization, and regardless of the why, it is doing a whole realm of good, in intelligent, forward-thinking ways.
posted by Marquis at 11:18 AM on January 31, 2002

Here's an idea I keep hearing from my right wing buddies regarding the (now Bushwhacked) surplus:

Why not just refund the money to the people they stole it from, and let those people have the "free will" to invest and/or spend it as they choose? After all, it's not like the U.S. government or Bill and Melinda Gates really *earned* that money, whatever that means.

Free to choose, that's me and Milt Friedman's motto.
posted by fold_and_mutilate at 11:21 AM on January 31, 2002

With the foundation's vaccination campaigns, I believe that someday Bill Gates will be known as the person who saved more lives than anyone else in history.
posted by Holden at 11:28 AM on January 31, 2002

Microsoft pays no taxes; Bill Gates pays no taxes. And only because of loopholes in the tax laws that Enron used.

Yes they should give something back. Lots.
posted by panopticon at 11:31 AM on January 31, 2002

Nobody should be that rich. I propose a 99.99% income/property/capital gains tax on all wealth above and beyond 1 billion dollars (is that really such an outrageous proposal?). Let's start paying down the US debt!
posted by plaino at 11:31 AM on January 31, 2002

"Nobody should be that rich."

Why not? Seriously.
posted by mr_crash_davis at 11:35 AM on January 31, 2002

I'll admit, it is admirable what the foundation is doing, but I'm not going to put Bill on a pedastal because of it. At some point of wealth you have to realize that you owe something to the world.

He has to know that his wealth comes about as part of the social contract to which we are all committed. You cannot take so much out without putting something back in.

I don't want to say that Bill or MS owes ME anything, but they do owe!
posted by Jeffy at 11:41 AM on January 31, 2002

M_C_D: 1 billion dollars is an arbitrary cut-off of course. The point is that when someone is so wealthy they can afford to offer irresistable monetary influence to virtually anyone (ask yourself: what wouldn't you do for 1 billion dollars free and clear?) that person is inherently a danger to society, even if they never excercise such influence. Imagine an American 'Osama-Bin-Laden' with Bill Gates' resources. We (the poor masses) are simply lucky that BG, and his like, have been a little bit more reasonable than that, but are we sure about every billionaire out there in the world?
posted by plaino at 11:42 AM on January 31, 2002

I found the criticism part of the article a little odd. A 50-50 match requirement is really not all that unusual. Many foundations do not want to be the sole supporter for a project, and will look for cash or in-kind donations as a demonstration that the project has some form of other external support. Also, goal setting is nothing new. You can't write a grant without goals and objectives. I would suppose that the goals that are set should be reasonable, but I hardly feel qualified to judge what is reasonable in Haiti, etc. It would be nice if MSNBC had said who the critics were and then maybe gave a little bit more detail about the criticism.
posted by eckeric at 11:53 AM on January 31, 2002

You cannot take so much out without putting something back in

Who'd he "take" money from? Monopoly or no, Microsoft sells a product

As far as income tax goes, sure, its kind of smarmy that MS doesn't pay any - but if you were the head of MS and that big 'ole hole was there in the tax code, wouldn't you jump on through as well? Or is everyone here on Mefi that part of the population who doesn't try to find loopholes on their personal income tax?

You also have to differentiate between Microsoft's taxes and Bill Gates - is there any proof he hasn't paid his personal income tax? According to this, salary-wise he made $667,000 last year. Not to mention procceds from the sale of several several hundred million (drool) worth of MS stock.

Gates is also in favor of the estate tax.

[Dear Gates PR person, make that big fat check out to O-l-i-v-e-r... :)]
posted by owillis at 11:58 AM on January 31, 2002

The 50-50 match is a concept that the Federal Govt and plenty of States use when giving grant funds to local governments. Its there to make sure that the people at the local level, where the money will be spent and the benefit derived have some stake in making sure that it is spent well.

Its alot easier justify 'misappropriating' funds from some guy from Redmond who's "too rich for his own good" than it is local money that Sally from across the street donated.
posted by schlyer at 11:59 AM on January 31, 2002

That hardball approach has met with criticism from some members of the philanthropic community, who argue that holding people to ambitious standards may make sense in Redmond but not in places where millions can’t read.

There's a controversial school of thought in the nonprofit sector that argues that nonprofits should be held to the same performance standards as for-profit corporations. This view is especially popular with those who engage in "venture philanthropy." The problem, however, is that in the nonprofit world, the "bottom line" is intangible. The return on the investment is some form of social good that is often difficult to quantify.

The term "nonprofit" is actually a misnomer. Nonprofits *can* make a profit and most do. The difference between nonprofit and for-profit corporations lies in the ownership structure. When the corporation is dissolved, the assets can't be disbursed to the "owners" (non-inurement clause). As a result, you can't have equity in a nonprofit corp, but you can have debt. The origins of the nonprofit sector actually have very little do with altruism. The development of the 'Third Sector' - and the tax exemption that goes with it - was predicated upon the assumption that orgs that would qualify as nonprofits produce tangible economic value by reducing transaction costs and fulfilling needs more efficiently than the commercial or government sectors. Part of the reason, in my view, that nonprofits tend to be less efficient than for-profit corps is the mistaken assumption that nonprofits are and should be altruistic. Nonprofit professionals are paid much less than their private sector counterparts because there's an expectation that they should be working for the nonprofit
out of the goodness of their hearts. As a result, you have a lot of good-hearted, well-intentioned, but often incompetent nonprofit managers that run what are consequently unproductive organizations. Talents tends to flock elsewhere and the people that are truly capable of running efficient organizations that ultimately produce "more good" can't afford or won't sacrifice the opportunity costs associated with working in the nonprofit sector.

Given the above, I can't think of any logical reason why nonprofits shouldn't be held to certain performance standards. (In the interest of full disclosure, I founded a nonprofit in '98 and still serve a board member, so I'm not advocating something that i wouldn't subject myself or my org to...) The only real difficulty in doing it is that the performance outputs - being intangible - are not always easy to quantify. It can, however, be done. New Profit, for example, is a Boston-based grant-making org that funds 'startup" nonprofits. They're basically nonprofit venture capitalists, and they require nonprofit entrepreneurs to hit certain milestones before receiving additional funds, which analogous to "staged financing" in the commercial arena. They use a variation of Robert Kaplan's "Balanced Scorecard" system, which is used in many Fortune 500 companies to more holistically evaluate the health of the company apart from the bottom line. Everyone i know that has tried this approach says it works and the nonprofits that do it tend to be much more efficient and productive. I don't think the Gates are playing hardball; I think they're trying to get the most value for their money.
posted by lizs at 12:14 PM on January 31, 2002

Given the above, I can't think of any logical reason why nonprofits shouldn't be held to certain performance standards.

Definitely agreed, of course - I also think the government should be run this way. Yeah, I know: "Ahab, there's your whale"...
posted by owillis at 12:30 PM on January 31, 2002

Microsoft pays no taxes; Bill Gates pays no taxes. And only because of loopholes in the tax laws that Enron used.

Where are you getting this information? According to last year's 10k, MS had $4.85 billion allocated for taxes.
posted by lizs at 12:35 PM on January 31, 2002

The Option Not To Pay Taxes
"The new twist Microsoft (Nasdaq: MSFT) added several years ago was to deduct from its taxable corporate income the difference between the amount employees paid it to buy the shares and the amount the shares are worth on the open market. The company's employees do get taxed on this amount (when they exercise their options and buy the stock), so according to the IRS they received taxable income from their employer, and the company can deduct it as a salary expense. Even though it wasn't a cash expense, it's still deductible. Issue enough stock, and a company can shift its entire corporate tax burden to its employees and wind up paying no taxes on its own income.

Microsoft was the first company to achieve tax-free status. Cisco has recently followed suit. But dozens of other companies are copying this technique, tiny little firms like America Online , Yahoo! , and Seagate Technology (NYSE: SEG), presenting themselves to the IRS as if they're actually losing money instead of being profitable. And the IRS is currently buying it."

(But we're still cool, right Gates PR guy?)
posted by owillis at 12:51 PM on January 31, 2002

With the foundation's vaccination campaigns, I believe that someday Bill Gates will be known as the person who saved more lives than anyone else in history.

I've been of this opinion for years, that his lasting legacy (and, probably, rightfully so) for our children's generation will be of a great benefactor.

That's the thing I love about people who vilify Gates; they'll probably never change the world like he already has. Think different, indeed.
posted by anildash at 1:00 PM on January 31, 2002

gates will always be head of the evil empire of microsquish, as sort of an icon.

but i must admit i've been impressed with him lately.

this, [similar] is what did it for me...especially with the other lords of tech getting all flustered and trying to disagree with him that food and water are more important than technology.

call me sometime mr. gates, we'll do lunch. [you'll have to buy]
posted by th3ph17 at 1:07 PM on January 31, 2002

[and you should fly oliver up as well, we'll have a mini-think-tank meeting.]
posted by th3ph17 at 1:08 PM on January 31, 2002

I think its a good idea to hold non-profits to certain standards. Monitoring is never a bad thing. Non-Governmental Organizations -because of their 'sacred cow'status are not closely monitored and tend to grow either complaisant or corrupt and sometimes both. It has been my impression that this is specially true when you are dealing with health care in poorer countries. The level of corruption is far higher. Its never a bad idea to set the bar a little higher.

Incidentally, In 2000, NYT magazine did a great feature on them (unfortunately priced now). In that they talked more about the controversy that the Gates initiative generated in the staid world of big money philanthropy.

Nevertheless, I think independent of any motives that Gates may have had in setting up the foundation, it deserves to be lauded rather than criticized. From what I read in this article and elsewhere, Gates is as passionate about cracking healthcare as he were about owning the desktop! He has formidable money and a formidable mind. Hopefully, he'll be able to make a difference.


Re: adverse comments on this thread about Gate's wealth: I dont think its pertinent to the discussion here. However, I can not stop myself from adding my 2 pennies. I dont always approve of MS's tactics. But I have a lot of respect for successful entreprenurs like Gates. I have even more respect for entrepreneurs who manage to transform their startups into successful corporations like he managed to. I think irrespective of one's opinion of Gates and MS, the current penetration of PCs in everyday life is to a large measure a contribution of MS's desktop strategy. For that the world owes something to Bill Gates. If he made a great deal of money out of it, good for him.
posted by justlooking at 1:09 PM on January 31, 2002

Wouldn't it be funny if Gates went as over the top with charity as with the business of MS? "Screw the Red Cross! F the United Way! We'll crush them. When I'm done, all disease will be cured, and utopia will be mine!"
posted by owillis at 1:22 PM on January 31, 2002

Jeffy said "I'll admit, it is admirable what the foundation is doing, but I'm not going to put Bill on a pedastal because of it. At some point of wealth you have to realize that you owe something to the world" I think that he HAS realized that he has so much wealth that he owes something. That's why he does this! You don't see many people doing this... does Warren Buffet do this? Did Kenneth Lay do this? Does Larry Ellison do this? I think we owe Bill and Melinda Gates praise for their generosity and world-view, no matter how much you hate Microsoft.
posted by aacheson at 1:27 PM on January 31, 2002

Clink! The sound of my two cents landing. B&MG (do they own a record club too?) are praiseworthy but not saints, we seem to all agree.
THE PROBLEM is the US Gub'ment creating gaping tax loopholes for their Bubbas, like K. Lay. The PROBLEM is we need to have a Gub'ment which is actually FOR and BY the PEOPLE, instead of Big Bid'ness. Unfortunately, since the Democrats are as deeply in bed as the Republicans with companies like Enron, run by robber barons who don't think twice about silencing potential whistle blowers when it looks like the axe may fall (G'night Cliff B.) that we need a complete overhaul of the system. The second problem is that the only people with the legislative power to change the system are the SAME GUYS who are in bed with the same BUSINESSMEN (except when you are Dick Cheney, that means being alone since you are both). Gotta run, it's time to go file my taxes and pay my 28% for my pothole-filled roads and laughable health and educational systems.
posted by Corky at 1:35 PM on January 31, 2002

The new twist Microsoft (Nasdaq: MSFT) added several years ago was to deduct from its taxable corporate income the difference between the amount employees paid it to buy the shares and the amount the shares are worth on the open market. The company's employees do get taxed on this amount (when they exercise their options and buy the stock), so according to the IRS they received taxable income from their employer, and the company can deduct it as a salary expense.

Forgot about the Employee Stock Option rules. Thanks, owillis. They're not shifting the burden to the employees, though. Even if MS weren't allowed to deduct the difference between the market price and what their employees pay, the employees would still have to pay capital gains taxes. (The IRS is well aware that companies are taking deductions for ESOs, by the way - they're required to disclose it in notes to their financial statements.) I also think it's perfectly fair that companies take deductions for exercised ESOs. They dilute the value of the Company's own equity and even though FASB doesn't require companies to record the cost against earnings, they present a significant economic liability and opportunity cost. The problem is that this isn't reflected on the balance sheet and ESOs aren't recognized as liabilities.
posted by lizs at 1:48 PM on January 31, 2002

Nobody should be that rich. I propose a 99.99% income/property/capital gains tax on all wealth above and beyond 1 billion dollars (is that really such an outrageous proposal?). Let's start paying down the US debt!

Yes, it is outrageous and completely unworkable. If you did that, all the rich people would leave, taking their billions of dollars in capital with them, draining our economy substantially. Not to mention the notion that people have rights, including a right to their property. Of course if we lived in a socialist utopia, plaino, there would be no billionaires to begin with, in fact, there would be no wealth at all, except in the hands of those in power. As for the debt, yes, lets pay it down. Perhaps we should restrict government spending instead of taxing people more?
posted by insomnyuk at 1:49 PM on January 31, 2002

Does anybody have a problem with the fact that this piece was on MSNBC - co-owned by Bill Gates? And also in Newsweek, which is an MSFT partner?

Bill Gates can be Mother Theresa for all I care - you're not allowed to run puff pieces about yourself in media outlets you own or partner with. It's a conflict of interest.

Besides, he may have given $24 billion, but he's got billions more he's just sitting on. You want to be a saint, dedicate your life to charity; don't indulge in monopolistic practices, screw millions of people and then turn around and donate a *fraction* of your wealth to charity.

Ah, hell. It's a wonder we got anything left to believe in anymore.
posted by busbyism at 2:36 PM on January 31, 2002

Busbyism: The piece was published on Newsweek - owned by Washington Post. MSNBC and Washington Post/Newsweek seem to have some kind of alliance that allows MSNBC to post stuff from Newsweek/Washington Post on its website. If you have been following MSNBC you would know that they showcase ALL Newsweek cover stories, not just this one.

So far as my knowledge goes, MS/Bill Gates doesnt own any significant piece of WP. I am not aware of any NBC/GE cross holding in Washington Post either. However, I would be curious to know the exact relationship between WP/Newsweek and MSNBC (in case anyone here does).
posted by justlooking at 3:36 PM on January 31, 2002

"...don't indulge in monopolistic practices, screw millions of people and then turn around and donate a *fraction* of your wealth to charity."

1. It's called "competition" and MS is very good at it. Extremely good, in fact. I've argued (elsewhere) that MS is probably the single biggest reason for the economic expansion of the 90s; BG and MS competition has essentially created the modern tech industry landscape that we all live in. Not single-handedly, of course - but more than any other player.
2. Who, exactly, did MS "screw?" The millions of people who voluntarily paid for MS products and use them daily to conduct personal affairs & run businesses? MS hasn't "screwed" anybody.
3. He's donated a very healthy "fraction" of his (earned) wealth to charity. He may be extremely rich, but $24B is a sizable percentage compared to any amount of wealth.
posted by davidmsc at 4:29 PM on January 31, 2002

So Bill is all good now that he's giving away a fraction of his fortune, even if he made most of it due to monopolistic and unethical business practices? What's the difference between Bill Gates and Andrew Carnegie?
posted by gyc at 4:43 PM on January 31, 2002

i'm not sure if comparing tech lords to robber barons is fair.

carnegie.

great philanthropist, and also 'crushed unions' etc...back in the day when that really meant crushed, riots, lock-outs, Pinkertons shooting people....

i don't think any of the tech lords have blood on their hands like the robber barons.

other than that, and being Alive, i'd say gates is close. His wealth will do more good in the world for others than it ever did for him, maybe that is what he has realized.
posted by th3ph17 at 4:55 PM on January 31, 2002

he *ONLY* gave 24 billion? that cheap bastard!!
posted by aenemated at 4:56 PM on January 31, 2002

gyc - whats the difference between Bill Gates and Andrew Carnegie?

Not much, both men excelled at running their respective businesses. Both men also used what some would call 'questionable' tactics to achieve their success.

Long after they are/will be gone, they will be remembered more for their philanthropic contributions than anything else.

Larry Ellison, meanwhile, will be forgotten long before his house is.
posted by patrickje at 5:16 PM on January 31, 2002

I've made this point in the past here, and I'll make it again: Bill Gates has, in my mind, already vastly surpassed Mother Teresa for the good he has done in the world. What's sad is how controversial that statement is to people...

And patrickje just made the point I was going to, that while we nitpick Gates, guys like Ellison waste their money on buying the America's Cup or other ego-driven pursuits. Gates has grown up over the last few years into a husband, a father, a philanthropist; Ellison and his MS- bashing ilk still haven't, racing around in their ferraris trying to convince the rest of us that their wealth is solely the result of God's greater love for them than anyone else.

Not to mention that $24B is much of his fortune; a guy like Gates can't just liquidate his theoretical $60~ish billion dollars in stock; if he tried to sell it all off, it would not only be taxed like a mofo, the sheer panic of Wall Street- and their unwillingness to buy the stock if Gates himself decided to dump any large portion it- suggests that his fortune would be vastly reduced if he tried to liquidate it. In point of fact, most of that money is in stock he can never exercise; as such a huge owner of the stock, it just couldn't be liquidated. Even if MS was posting record profits, the stock would be trading at pennies a share by the time he finished selling it off if he tried to liquidate all of it. So far he's gotten the bulk of his actual cash by selling it off very slowly, in smaller chunks (for his house, or the Da Vinci codex)- often before the last couple of stock splits, so the value of his fortune would be even higher had he held on to nearly every share.
posted by hincandenza at 5:23 PM on January 31, 2002

Ditto on the Ellison rants. I've never forgotten how ridiculous and arrogant his presentation was at Internet World 2000. He was late and left thousands waiting for him. Then was so excited to tell us it was because he'd been meeting with President Clinton. Arrgh.

I'm just thrilled that this $24 billion is in the hands of this foundation rather than AOL or state goverments like my own (Connecticut).
posted by treywhit at 6:10 PM on January 31, 2002

hell...if i had the kinda money that sucker has, id be giving it away for tax right off's too :D
posted by doodlebug at 9:37 PM on January 31, 2002

i imagine many people would rather the business practices of a large company, such as microsoft ,showed respect for their peers and customers, rather than contempt. that would perhaps enamour them more than large bungs of charity giving after the profits are made.
as many people are aware, throwing money at a problem is not equivalent to solving it. throwing large amounts of money around for a limited amount of time can be less than helpful.
the gates foundation is responsible for most of the funding of the Global Alliance for Vaccines and Immunisation's (Gavi) immunisation fund, which seems to be a way for drugs companies to open new markets. so saving lives may be a by-product, but profit is the motivator for Gavi.
i resent the assumption that charities are not run as efficiently as profit making companies, most can demonstrate that this is not the case. the people who work for them are as professional as any, many taking a pay cut to get job satisfaction rather than the higher remuneration they could demand in the corporate sector. they have transparent accounting, which is alot more than can be said for some (most) corporations.
posted by asok at 9:30 AM on February 1, 2002

Bill Gates has, in my mind, already vastly surpassed Mother Teresa for the good he has done in the world. What's sad is how controversial that statement is to people...

No controversy on my part -- it's true in so many ways. Can we nominate him for sainthood? Seriously.
posted by davidmsc at 10:24 AM on February 1, 2002

as many people are aware, throwing money at a problem is not equivalent to solving it.
And not spending money on a problem is the equivalent of ignoring it.
posted by Holden at 2:05 PM on February 1, 2002

i resent the assumption that charities are not run as efficiently as profit making companies, most can demonstrate that this is not the case

Perhaps you haven't heard about the scams in the past 5 years or so, with the United Way's "administrative costs" and the debacle with the Red Cross post-9/11.
posted by owillis at 2:30 PM on February 1, 2002

Bill Gates has, in my mind, already vastly surpassed Mother Teresa for the good he has done in the world. What's sad is how controversial that statement is to people...

What's sad is that some people will make this statement without qualifying it. If you want to look at only one side of the ledger, I guess your statement is true. It's also true of Al Capone.

I've met them both. Mother Teresa made me want to be a better person. Her acts inspired me. Bill Gates made me want to scrub myself all over with harsh soap. His acts make me wonder what's in it for him.
posted by joaquim at 2:42 PM on February 1, 2002

Your personal interaction with Gates notwithstanding, or the projection of good qualities on MT that you wanted to believe, we're measuring the actual good done- the lives saved or improved. Mother Teresa was a self-promoting heartless bitch who collected millions to build convents for her own glory. Her work in Calcutta was less about saving lives than having beds for people to die in while her nuns snuck about secretly baptising mortally ill people without their knowledge. Independent review of her missions showed they lacked even basic medical treatment, with people dying who could have been saved by a few simple shots of penicillin et al. Teresa herself proclaimed that the best thing the poor could do was to die, because their suffering and death ennobled them. She got bribes from such saints as Charles Keating ($1.25M) to appear as a character witness in his S&L trial, illicit money that was bilked from countless families around the country. She never returned it to those people, nor would she answer questions about why she accepted it. She hung around with Haitian dictators, and campaigned in Ireland to prevent the legalisation of divorce at the same time she was publicly encouraging Princess Di to get a divorce herself. Upon her death, $50M was found in a new york bank account, probably only the tip of the iceberg in terms of her immense charitably raised cash reserves. In short, she was a sheer money-grubbing whore, willing to accept cash from the rich and powerful despite their immoral acts while condemning the poor to a miserable existence without lifting a finger to help them. In her only defense, she never claimed otherwise; however, a western media desperate for a saintly figure decided to prematurely canonize this disgusting woman. This may be evidenced by your own belief of the media creations; let's be honest, Bill Gates didn't really want to make you scrub yourself, the media creation of Bill Gates did. And that's about as true, accurate, or relevent as the media creation of Mother Teresa.

By comparison, actual children are getting vaccinated in the third world by the millions because of Gates' contributions; I heard a radio interview here in Seattle with the last Miss Afghanistan (before the Taliban took over) who ended her interview by taking a moment to publicly thank Gates for the work he has done to help bring some relief to the struggling people of that war-torn nation. Gates has spoken publicly- as linked above- about the need to take care of the basic human needs of these people while his fellow digerati were still trying to convince us all that starving people needed was a Dell computer and their own Oracle based webpage to start a cash-making e-commerce site (http://www.e-dysentary.com?). I'll leave the full research for you to do on the web; I've covered this topic in the past here at MeFi as well if you'd care to search my previous posts.
posted by hincandenza at 2:07 PM on February 3, 2002