Warren Buffett’s decision to route 85% of his gigantic fortune into good works via Bill Gates’ Foundation is easily explained. The last thing Buffett wants is the burden of distributing charity himself. Far better to let his friend Gates, armed with 241 employees, do the dirty work, or the work, while Buffet and his family of billionaires relax in the glow of their munificence. According to one report, however, Buffet wants all his benevolence spent in a single year. This seems perverse, if true.
Getting rid of that much money would be an enormous strain on the Foundation – and using up the capital is silly when its investment would yield further great sums for good works. The Rockefeller charities, for example, are still living on off the wonderful funding provided by the first John D Rockefeller. I love the story of his first visit to the Rockefeller Institute, forced on the reluctant philanthropist by his right-hand man. The old boy enormously enjoyed the tour, thanked the doctors and scientists profusely – and first became last. He never went near the Institute again.
Rockefeller’s modesty didn’t extend to his personal estate, on which he lavished much care and attention – and, of course, money. His rolling acres housed rich buildings and a private golf course. But once a fortune passes a certain size, lavish spending becomes essential to keep the quantum under some kind of control. That’s the great virtue of art, in which the Rockefellers also indulged mightily: because art has no intrinsic value, it’s worth whatever somebody is prepared to pay – irrespective of anything else.
In such situations, ‘worth’ becomes meaningless. The Gustav Klimt just purchased by a cosmetic tycoon at the highest price ever recorded for an art-work is not ‘worth’ $136 million intrinsically; nor is Klimt, even judged by this masterpiece, in the same class artistically as Picasso, or Matisse, or Van Gogh – etc., etc. Still, these considerations hardly matter. The world economy won’t be affected by millionaires and billionaires exchanging their dollars for painted canvases.
That isn’t necessarily true of lavish purchases of assets where benchmarks do exist – for main example, corporations. Overpayment for companies, quoted or unquoted, invariably brings nemesis in its wake. Looking at the unjustifiable prices paid in the recent M&A boom easily explains the skittish behaviour of the stock markets. And by the way, what happens to the latter when Buffett’s holding gets liquidated to finance Gates’s giving?
read all 70 gurus with one feed read all Read all media
