August 03, 2004

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It's not fair and you'd better get used it

My Da, a wise man with a terrible sense of humour (sorry Da, but it's true), always told me that "money makes money". He also used to say that one day the Jade Monkey of Zandar would be his and he would use it to rule the world, but that story is for another time.

So Bill Gates is worth, on last count, about $1,432 squizzillion dollars. Yet he has realised there is a limit to the amount of wealth any one family needs. He decided to setup the world's biggest charity, modestly named after himself. This is something I have talked about before and this week's Economist looks at the issue of philanthropy too.

Then you read something like this. I don't quite understand why Bill's charity has decided to invest in equities instead of giving its money away. But this little Chinese company's shares jumped 50% just on the news Gates invested. Nothing else has changed at all. Just they have a new shareholder and it's Bill's charity.

What I want to know is why Gates doesn't employ this tactic more often? If he can make share prices jump like this imagine how much greater the endowment at his charity could be if he just took the trouble to invest a little instead of giving it way.

posted by Simon on 08.03.04 at 09:58 AM in the




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Comments:

as for example the afflication of the M family curse on you and you bro. One day I'll tell you the real curse.

posted by: da on 08.03.04 at 02:10 PM [permalink]

What Gates really needs to do is give back some of that money to his investors in Microsoft.

Dividends, Bill, dividends.

posted by: hk on 08.03.04 at 02:32 PM [permalink]

Simon:

Gates can't possible give that much away effectively at one time. Trying to do so would just result in enormous waste and misallocation. The point to creating an effective foundation is to give it an endowment sufficient that it can continue on into the future.

HK:

Microsoft just declared (last week I think) that it is going to start paying out a substantial dividend.

posted by: Conrad on 08.03.04 at 03:04 PM [permalink]

Conrad: I agree he can't give it away all at once and his foundation is an effective way of disbursing such a huge amount. What I don't understand is why they are investing in shares.

posted by: Simon on 08.03.04 at 03:17 PM [permalink]

Simon

The need is to have an endowment with a steady income that can be meted out. So, the foundation invests in stocks, bonds, and property and continually gives away the income.

posted by: Anne on 08.04.04 at 04:03 AM [permalink]




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