Warren Buffett and Madonna: A Tale of Two Philanthropists

One moving ahead, one beset by troubles as each aims for good

Madonna in Malawi (AP Photo/George Ntonya) Madonna in Malawi (AP Photo/George Ntonya)

The world closely watches when public figures make big philanthropic gestures—whether or not their efforts to do good meet with success. Just this week, all eyes were on Warren Buffett and Bill and Melinda Gates as they strove to increase charitable giving in India, and they kept right on watching as Madonna’s star-crossed attempt to build a boarding school for girls in Malawi failed.

Efforts by Buffett and the Gateses, which have yet to bear fruit, are part of their plan to encourage billionaires to focus more of their wealth on charitable causes. Madonna’s effort, run by a foundation set up by the singer to ameliorate the lack of education for girls in the African nation, has been abandoned.

On Thursday, The New York Times reported that Buffett and the Gateses sat down with some 70 of India’s wealthiest people in what was billed as a “giving discussion” in the hope of stimulating a greater interest in philanthropy among them. This followed an earlier trip to China for the same purpose. And while these discussions have not yet shown to be successful, they look far likelier than Madonna’s school venture.

The foundation she began, Raising Malawi, together with the Kabbalah Centre International, which had joined with her on the project, has abandoned the attempt to build the planned $15 million school after $3.8 million has already been spent with nothing to show for it, according to another Times article on Thursday.

Inexperience with charity seems to be the byword in both instances. Large charitable donations in India make up only 0.6% of the nation’s GDP because many of the newest high-net-worth individuals are still fully engaged in running the businesses that have made them wealthy. In Madonna’s case in Malawi, a lack of management accountability for the money spent by her charity is what did it in.

Jayant Sinha, who is the head of the Indian office of Omidyar Network, a philanthropic investment firm founded by Pierre Omidyar, of eBay fame, said in the Times report on Buffett and the Gateses: “There are now some good examples of where people have put their money to very effective purposes, but they have had to work hard on the professionalization and the institutionalization of their philanthropic arms. There is no point giving it away if you can’t apply it well.”

The Global Philanthropy Group, which examined the disposition of funds from Raising Malawi at Madonna’s request when concerns developed last fall, criticized the foundation’s management. “Despite $3.8 million having been spent by the previous management team, the project has not broken ground, there was no title to the land and there was, over all, a startling lack of accountability on the part of the management team in Malawi and the management team in the United States,” the group reported.

Madonna intends to continue charitable work in Malawi through her foundation, although its form will change in the wake of the abandoned project.

Good intentions are obviously not enough when launching a charitable concern. However, criticism is not always leveled just at shortcomings. Buffett and Gates have both been criticized by their peers—fellow billionaires—for their philanthropic push.

Mexican telecommunications tycoon Carlos Slim Helú has been reported as saying that creating jobs is more important than playing Santa Claus. But on Thursday Buffett dismissed such criticism, laughing and saying, “You can create jobs and be Santa Claus at the same time. I mean, he employs 12 elves.”

Then Buffett (left) pointed out a salient point of philanthropy properly applied: “When I give away my Berkshire Hathaway shares, they have no utility to me and great utility to others, and Berkshire Hathaway has all the money to invest that it has had before.”

On a recent trip to India, Investment Advisor writer Savita Iyer-Ahrestani noted that the radical economic and social changes that India has been going through in the past years are also resulting in an increased Westernization of both the population and the financial landscape.

On her travels, she met with Abhay Aima, Mumbai-based head of the wealth management business at HDFC, one of India's largest private sector banks, who told her that anyone looking to achieve success in India “needs to understand that you are talking about five countries in one.”

"One has to understand the Indian psyche, Indian society,” Aima told Iyer-Ahrestani. “Things like the joint family structure; the dependence of parents on their children; the dowry system; that there is a group of people called the Jains who won't invest in pharmaceutical companies because they do animal testing. You have to be aware of these ethnic differences, you cannot just lift a financial planning model from another country and expect it to work here unless you understand these peculiarities."

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