Friday, November 03, 2006

Warren Buffett Redefines Payout

I had an interesting conversation with Buzz Schmidt of Guidestar UK. He claims that Warren Buffett did not give $30BB to the Gates Foundation, as was widely publicized. Schmidt's read of the Buffett announcement (as reported in Fortune Magazine) is that Buffett gave 5% of the value of a set amount of Berkshire Hathaway stock. Under certain likely circumstances, which Schmidt details in an upcoming piece in Alliance Magazine, Buffett figured out a way to give the Foundation an awful lot of money (as long as Bill and Melinda Gates remain actively involved), while holding onto even more of it. If he's giving 5% of the value of the shares, that means he's holding on to 95% of the value - thus getting credit for giving $30BB while actually retaining the majority of the pile and watching it grow.

On the face of it, its not too surprising that "America's greatest investor" would figure out a way to make a buck even while giving it away. And its not at all unlike what foundations themselves do, granting 5% of their assets to good causes while investing the other 95% to perpetuate themselves.

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