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I've long felt that the true foundation of Buffettian value investing is not "value" (whatever that means) or "cheapness." The true foundation of Buffettian value investing is the search for handicapping certainty in equity investing—that's how Buffett built his fortune. But...
...when the time came for Buffett to gift his fortune to the Gates Foundation, he explicitly renounced the search for handicapping certainty as inappropriate for philanthropic bets. Philanthropy is supposed to be about tackling difficult problems, he reasoned, so you have to...
...make moonshot-type bets, i.e. bets that could easily fail. I was therefore surprised to read that in Gates' own judgement, the best investment his foundation has made to date has NOT been a moonshot that happened to pay off, but rather "the closest thing we have to...
...surefire bets..."—namely, investments to finance and distribute existing medicines and vaccines to the underserved developing world. In other words, something very close to the philanthropic version of a Buffettian value investment: wsj.com/articles/bill-…
And at the risk of being crass, I was equally surprised to note the similarities between a philanthropic "surefire bet" and a capitalist "surefire bet." It turns out that economies of scale in philanthropy, as in capitalism, tend to promote handicapping certainty. It turns out...
...that distribution matters a lot in philanthropy (perhaps even via mysterious middlemen!), and that distribution is best tackled by the scale player. It turns out that the best philanthropic bets tend to combine heritage (the lifesaving medicines in question had long since...
...been invented and successfully used) and novelty (they just needed to expand their distribution and efficiency—compare to See's Candy, a 50-year old proven success story when Buffett bought it, that under his control experienced a second youth of growth). It turns out that...
...egolessness matters a lot in philanthropy—much better to ride the coattails of and add heft to a proven winner like the Global Fund than to try to invent a new initiative on your own. And it turns out that the best bets in philanthropy are those in which the main...
...sticking point, the scarce commodity, is simply money itself. Just as Buffett recognized that GEICO circa 1976 had everything going for it except capital—which he provided—Gates observed how strong the correlation was between additional funding for health and declining...
...death rates. Taking all these together, it occurs to me that perhaps Buffett's intellectual influence on Gates and the Gates Foundation is perhaps greater than anyone realized, even Buffett and Gates themselves.
