Warren Buffett’s Best Investment


Bill and Melinda Gates 2017 Annual Letter, February 14, 2017

“The Future Will Surprise The Pessimists” – Bill & Melinda Gates

2017 Annual Letter is addressed to Warren Buffett, who in 2006 donated the bulk of his fortune to Bill and Melinda Gates Foundation to fight disease and reduce inequity. Few months ago, Warren Buffett asked Bill and Melinda to reflect on what impact his gift has had on the world (letter below).buffett-letter

  • Buffett’s gift to the foundation was the biggest single gift anyone ever gave anybody for anything
  • Philanthropy isn’t like business and don’t have sales and profits to show but there are numbers closely followed to guide our work and measure our progress
  • Warren’s gift doubled the foundation’s resources and allowed it to expand work in US education, support smallholder farmers, and create financial services for the poor; in this letter, we will focus on global health because that is the majority of what we do

Our Favorite Number: 122 Million

  • 122 million – the number of children’s lives saved since 1990
  • More children survived in 2015 than in 2014; more in 2014 than in 2013, and so on
    • If you add it all up, 122 million children under age five have been saved over the past 25 years; these are children who would have died if mortality rates had stayed where they were in 1990
  • More than 20 years ago, it blew our minds that millions of children in Africa were dying from diarrhea, pneumonia, and malaria. Kids in rich countries don’t die from these things. Children in Africa were dying because they were poor. It was the most unjust thing in the world
  • When a mother can choose how many children to have, children are healthier, better nourished, mental capacities are higher, and parents have more money to spend on each child’s health and schooling – link between saving lives, lower birthrate, and ending poverty was the most important early lesson learned about global health
  • When Bill and Melinda traveled to Hong Kong with Warren many years ago, decided to go to McDonald’s and Warren offered to pay – he pulled out coupons from his pocket. This reminded them how much Warren values a “good deal” – saving children’s lives is the best deal in philanthropy

The Best Deal Is Vaccines

  • Coverage for the basic package of childhood vaccines is now the highest it’s ever been – 86%
  • Gap between the richest and the poorest countries is the lowest it’s ever been (96% vs 80% today relative to 90% vs 50% in 2000)
  • Vaccines are incredible investments – the pentavalent vaccine which protects against five deadly infections in a single shot now costs under a dollar
    • For every dollar spent on childhood immunization, you get $44 in economic benefits – this includes saving the money families lose when a child is sick and a parent can’t work
  • At the start, there were no market incentives to serve people – market wasn’t working for vaccines for poor kids because the families couldn’t afford them
    • This gave us an opening – if we could create a purchasing fund so pharmaceutical companies would have enough customers, they’d have market incentives to develop
    • This is the magic of philanthropy – it doesn’t need a financial return so it can do things a business can’t
  • We set up Gavi, the Vaccine Alliance, with the goal of getting vaccines to every child in the world – since 2000, Gavi helped immunize 580 million children around the world
  • There is more to do – 19 million children, many of them living in conflict zones or remote areas, are still not fully immunized

Reducing Newborn Mortality

  • Last year, about one million infants died on the day they were born; a total of more than 2.5 million died in their first month of life
    • As the total number of childhood deaths has dropped, the proportion that are newborn deaths has gone up (45% now vs. 40% in 1990)
  • It’s pretty uniform that health gets better as wealth rises but newborn death rates have huge variance and not just according to income – there are positive outliers: poor countries that are doing a better job than wealthier countries and far better than some of their peers
  • From 2008 through 2015, Rwanda cut its newborn mortality rate to 19 deaths per 1,000 births while Mali (comparable GDP) has a rate of 38 deaths per 1,000 (twice as high)
    • Few things so cheap that any government can support was being done in Rwanda: breastfeeding in the first hour and exclusively for the first six months, cutting the umbilical cord in a hygienic way, and kangaroo care to raise the baby’s body temperature
  • Research is crucial to saving more newborns, it’s not enough to know that a newborn died from asphyxia or sepsis or prematurity; we need to find out what causes these conditions so we can find the tools to prevent them

Ending Malnutrition

  • Malnutrition is partly responsible for 45% of childhood deaths – this is not starvation, it is not getting right nutrients
  • Nutrition is the biggest missed opportunity in global health – kids with malnutrition are not just below global peers in height, they are also behind in cognitive development
  • Nutrition gets better as a country gets richer but unlike newborn survival, there are no positive outliers – poor countries almost all have malnutrition issues
  • When researchers make big discoveries in nutrition, the rise in children who achieve their potential will change the world

The Power Of Family Planning

  • More than 300 million women in developing countries are using modern methods of contraception – it took decades to reach 200 million but only another 13 years to reach 300 million
  • When women space their births by at least three years, their babies are almost twice as likely to reach their first birthday – like vaccines, contraceptives are one of the greatest lifesaving innovations in history
  • Contraceptives are also one of the greatest antipoverty innovations in history
    • When a country sends a generation of healthy, well-educated young people into the workforce, it’s on its way out of poverty; no country in the last 50 years has emerged from poverty without expanding access to contraceptives
  • Right now, there are still more than 225 million women in the developing world who don’t want to get pregnant but don’t have access to contraceptives
  • We are focusing on South Asia, where contraceptives are used by only a third of the women and on Africa where they’re used by fewer than one in five
  • The support of men is crucial but the support of other women is equally crucial

Poverty Is Sexist

  • The poorer the society, the less power women have; male dominance in the poorest societies is mind-blowing
  • As society becomes better off, a woman’s position in that society improves – but what good is that for a young woman who doesn’t want to wait?
  • Magic of women’s group:
    • If you go out in the village, you’ll rarely find a men’s group where they all share information; you’ll find a big man and key aides to the big man – this hierarchy stifles conversation
    • Women’s group don’t get as caught up in that, so they’re better at spreading information and driving change
  • Approximately 75 million women are involved in self-help groups in India alone (might be to help women get loans or share health practices – these women take it in the direction they want to go; this is empowerment!)
  • For us, “All lives have equal value” is not just a principle, it’s a strategy
  • Gender equality unleashes women’s potential but it also unleashes men’s potential – frees them to work as partners with women and get the benefits of a woman’s intelligence, toughness, and creativity

More Optimistic Than Ever

  • Extreme poverty has been cut in half over the last 25 years; almost no one knows about this
    • In a recent survey, just 1% knew we had cut extreme poverty in half and 99% underestimated the progress
    • This isn’t just a testament of knowledge but of optimism – the world didn’t score so well
  • Optimism is a huge asset – we can always use more of it; it isn’t a belief that things will automatically get better, it is a conviction that we can make things better
  • In significant ways, the world is a better place to live than it has ever been – global poverty is going down, childhood deaths are dropping, literacy is rising, status of women and minorities around the world is improving
  • A lot of people feel the world is getting more fragmented – if you look along a timeline, periods of fragmentation often come when society is digesting its new diversity
    • Larger historical trends are toward greater inclusion and caring – we see it in global health: governments are prioritizing it, citizens are supporting it, and scientists are migrating to it

The Magic Number: 0

  • 0: this is the number we are striving toward every day at the foundation; moving toward zero is perhaps the biggest difference between our philanthropy and a business
    • In the private sector, goal is to stay in business; nothing would make us happier than going out of business because we’ve achieved our goals
  • Polio is closest to reaching this magic number: in 1998 when the global campaign was launched to end polio, there were 350,000 new cases each year – last year, there were 37
  • “Warren, you’re one of the most competitive people we know… But outside business… and bridge… and golf… you are the most generous person we know, donating your life’s earnings to others and counting on us to make good decisions. That responsibility weighs on us. To make sure your investment keeps paying higher returns, the world has to save more lives in the future than we’ve saved in the past. That’s why we have not used your money just to send a grant here and a grant there. We’ve been using it to build an ecosystem of partners that shares its genius to improve lives and end disease”
  • “This ecosystem includes our foundation, but goes far beyond it. It includes a global database on disease that helps countries spend their money where it matters most. It directs scientific capacity toward research that will make an impact in the lives of the poor. It recruits scientists to global health and gets experts in other fields to apply their findings to infectious disease. Building this ecosystem is one of the most important things we’ve done – because we’re going to need every bit of this capacity to solve the next challenges…Polio will soon be history. In our lifetimes, malaria will end. No one will die from AIDS. Few people will get TB. Children everywhere will be well nourished. And the death of a child in the developing world will be just as rare as the death of a child in the rich world. We can’t put a date on these events, and we don’t know the sequence, but we’re confident of one thing: The future will surprise the pessimists
Source: The Gates Notes
Image Source: One Coast

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