Buffett Announces Historic $31B Donation to Gates Foundation - Full Press Conference 2006

Buffett announces donation details: Has 14.25M Berkshire B shares, commits 12.05M. Annual distribution plan: 10M shares to Gates Foundation, 1M to Susan Thompson Buffett Foundation, 350K each to three children's foundations (Susan, Howard, Peter). Distribution continues throughout lifetime subject to condition that at least one of Bill/Melinda active in foundation. Will arrange continuation after death via will. Balance of B shares also goes to philanthropy. Gates couple 'absolutely honored and humbled' by unprecedented gift - 'giving away the body of somebody else's life work is really quite something.' Will deepen existing focus areas (global health, education) rather than broaden to new areas.

Bill Gates credits Buffett's philosophy as catalyst: 'We've known Warren since 1991 and it was his thought that wealth should go back to society that got us thinking about doing our foundation in the first place.' In 2001, Gates gave talk to Buffett and friends about global health excitement. Foundation focuses on two big causes: global health and 'education broadly defined including scholarships and libraries in the United States.' Will accelerate and deepen work around those areas, picking things that touch on 'dealing with poverty or dealing with opportunity for everyone.' Gates emphasizes responsibility: 'It's a big challenge for us to make sure that this money gets used well.'

Gates outlines global health priorities: Top 3 infectious disease killers are HIV/AIDS, malaria, tuberculosis - foundation heavily invested in all three. Also expanding to diseases with existing interventions ready to deploy. Example: Paramecidin drug partnership with Institute for One World Health, launching 2006 for kala-azar (black fever) in India/Bangladesh - can save 200K lives/year at much lower cost than existing drugs. Foundation's 'key role is where the market isn't going to come in and come up with a solution - diseases in developing countries not in rich countries.' That list is 'overwhelmingly infectious diseases' - foundation has activities in all top 20 scaled to problem size.

Buffett addresses Berkshire impact: 'I wouldn't have done this if I thought there was going to be a negative impact.' Berkshire 'trades less than most big cap stocks - may be the lowest turnover on the New York Stock Exchange as a percentage of shares outstanding.' Complaint from institutional investors is lack of liquidity. Current turnover about 15%/year - if all gifted stock sold annually, would move to 17% (many NYSE stocks over 100%). Sees no downside, possibly makes S&P 500 inclusion more likely (Berkshire is 4x size of next largest non-included company, lack of turnover is reason). 'I love the job of running Berkshire - I hate to tell you how much I love it because the shareholders can get me to pay to have the job.' 31% of Berkshire profits committed to charity will motivate him further.

Italian journalist asks about giving to children vs government. Buffett explains three choices: all to government, significant portion to government + some to others, or through philanthropy. 'In terms of the 40-odd billion that my Berkshire shares are worth now, I think that Bill and Melinda and also the people involved in the other four foundations will do a far better job.' On his children: 'They didn't do it well - they did fewer things wrong than I did at their age. I am enormously proud of them.' Each child getting 'equivalent of a billion dollar foundation each. I have seen what they have done in the philanthropic arena both in terms of what they've gotten involved in and how they've gotten involved in it and I couldn't be more proud.'

Melinda discusses mechanics of spending more: Foundation always has 'top 30 list' of deepening opportunities germinating. Already doing small grants in micro-lending for years, will expand. Looking at agriculture/biotechnology research following Rockefeller Foundation's work. Will deepen health areas around medicines - vaccines always going to need large scale trials requiring 'great deal of money.' Will figure out delivery systems for medicines and vaccines. Bill adds: 'Size of the problems we're taking on whether in global arena or education, we think we can wisely take and even more than double the impact... early successes now give us opportunity to scale up using the amazing resources Warren's made available.' Hard work but 'means doubling over the next three years up to over three billion a year of giving.'

Buffett encourages donation model: Just as 'we buy companies because we think we can provide better management - we look for management in place and join with them.' Same for investment and philanthropy. Hopes people 'unsure of what they want to do in the area of philanthropy but know they want to participate would look around - doesn't have to be Gates Foundation - whose activities they admire and join in with them. Why not?' Chance to join proven organization where 'people basically working for nothing and that have learned something along the way and putting up their own money.' Hopes example 'causes it to catch on.' Melinda adds foundations already collaborate extensively - working with Michael and Susan Dell on Texas high schools in math/science, with Eli Broad on education.

Buffett on why he delegates philanthropy: 'If Bill and I were in a contest in terms of learning about medicine, I would just give him the blue ribbon and go off and do something else. He'd win and that doesn't bother me - it just means he's better at it than I am.' Buffett better at managing money than most people - 'that's what I've done and people, it made sense for people to turn their money over to me to do that. It makes sense for me to turn the money over that's going to go into philanthropy to Bill and Melinda.' Also admits temperament difference: 'I would not want to listen to as many different people with as many different opinions as they enjoy listening to' [laughter]. Closes: 'I love questions from journalists though.'

Final question on mega-foundations trend. Gates responds: 'I think they'll continue to be foundations of all sizes because it's very appropriate - if you want to solve certain local problems then small scale foundation is a great way to go do that. If you want to deal with billions of people and really get out all over the world then you probably need more scale to do that.' References foundation's approach of grants as 'catalysts that hope will draw partners and funders and donor governments into the enterprise so programs will be scalable.' Vision is using increased resources to scale proven interventions globally.