Leaving it behind

Leaving it behind

By Michael Tan
Inquirer
Last updated 11:48am (Mla time) 06/30/2006

Published on Page A15 of the June 30, 2006 issue of the Philippine Daily Inquirer

“YOU can’t take it with you.” No matter how wealthy we are, we will all leave the world as we entered it: penniless.

So we try to console ourselves that at least we can leave the fruits of our labor to our children. But last Wednesday, I wrote about a trend toward “mega-philanthropy” where very rich American businessmen are leaving the bulk of their wealth to charity rather than to their children, and they’re doing this even before they die.

In particular, stock market investor Warren Buffett has been making headlines with his announcement that over the next five years, he’ll be donating 85 percent of his wealth to five foundations, mainly the Bill and Melinda Gates Foundation. That’s estimated to be worth some $37 billion.

I thought I should write a bit more about what’s going on, partly with the hope of convincing Filipinos, especially those who have done well in the United States, to think of philanthropies as well.

Eclipsing WHO

First, let me describe the implications of Buffett’s multibillion-dollar donations. His donation to the Bill and Melinda Gates Foundation could eventually increase that foundation’s assets to $60 billion. That’s greater than the Gross Domestic Product (GDP) of most countries in the world, including the Philippines. It’s also larger than the total official development assistance (ODA) of the European Union.

Even before Buffett’s donation, the American foundations’ financial clout has already been quite formidable. The Ford Foundation, which will now be the world’s second largest, has assets of $11.6 billion. Following closely is The Robert Wood Johnson Foundation, with assets running to $9.1 billion.

These American foundations have the power to determine the thrusts of health and education programs throughout the world. It’s projected that the Gates’ foundation could give as much as $3 billion next year to various projects. That’s double the total annual budget of the World Health Organization.

Sure, there are fears that the health programs will cater to what the donors want, and that some governments might end up becoming too dependent on these US foundations. By and large though, I’m optimistic that these foundations’ funds can help to get public health moving forward more rapidly.

Hard knocks

Last Wednesday, I wrote about how this mega-philanthropy actually continues a trend that grew out of American capitalism even in the 19th century. Early magnates, like Andrew Carnegie, believed that personal wealth should be shared and returned to the society that helped generate it in the first place.

Much of the mega-philanthropy today isn’t coming from the old rich. Instead, it’s coming from stock market investors like Buffett, and from Silicon Valley computer entrepreneurs like Bill Gates. They didn’t exactly move from rags to riches, but they did earn their money the hard way and chose to live fairly simply even after becoming so wealthy. Fortune magazine notes that Buffett still lives in a home he bought many years back for $30,000, eats hamburgers and quotes Mae West.

Note that Hollywood celebrities, whose wealth can compare easily with some of the very wealthy business people, seem to be cut from a different cloth. With a few exceptions, they’re not known to be particularly generous, beyond occasional guest appearances in charity concerts, for example. Perhaps it’s because the celebrities make their money quickly, and too easily, with many spending the money as quickly as they earn it.

It’s sad that Hollywood’s celebrities become society’s idols and role models, rather than the philanthropists who earn money through the school of hard knocks, and are only too willing to share their wealth.

‘Bakya’ to ‘bakya’

Back in 1986, Fortune magazine interviewed Buffett for an article titled, “Should you leave it all to the children?” He summarized his views with wit: “... A very rich person should leave his kids enough to do anything but not enough to do nothing.”

He reiterates those views in a more recent Fortune interview: “When your kids have all the advantages anyway -- in terms of how they grow up and the opportunities they have for education, including what they learn at home -- I would say it’s neither right nor rational to be flooding them with money.”

It’s also heartening to see the notion of fairness operating when Buffett describes “dynastic mega-wealth” or large inheritances as going against the idea of a meritocracy.

In all cultures, there are folk sayings warning about how children tend to waste the wealth of their frugal and hard-working ancestors. My favorite is an English proverb: “From clogs to clogs is only three generations.” Grandpa and grandma start out wearing “bakya” [wooden shoes], work hard to make money, but the grandchildren squander it to end up in “bakya” as well!

The Americans offer some models for us to rethink money. Many believe that one shouldn’t wait till they die before giving out some money to their children, and to charities.

I know we have a very different situation in the Philippines, where many people will be happy not to leave this world at least without any debts. Even the upper classes have well-founded anxieties about old age, given how savings can be wiped out by one illness.

But I’d still argue that a strong family should discuss what “enough” means for a good life. There’s only so much we need for ourselves and for our children. All too often, Asian parents cling to their money, which then leads to vicious inheritance squabbles, sometimes even when the parents are in the deathbed.

Parents who trust their children enough to help handle the family’s resources might find their money growing more efficiently -- and equitably. People who are raised in a family that instills an appreciation of the virtues of filial piety, generosity and simple lifestyle will safeguard the family’s resources and care for the elderly, even while sharing the resources through philanthropy.

To put mega-philanthropy in perspective, let me point out that last year, the 60 largest charitable donors in the United States gave $4.2 billion, only a small fraction of a staggering $260 billion that Americans, many from the middle class, gave to charities. Guided by a new ethic on money and wealth, a few thousand caring Filipinos could easily generate millions of pesos that can make a huge difference for our country’s health and education.

(Visit money.cnn.com/magazines/fortune for more information on mega-philanthropy in the United States.)