by Daniel Akst

Some nonprofits use the Internet as an adjunct to their work; some use it as their office, fundraising agency and mission central, combined.

It was the shot heard ‘round the philanthropy world.

In June 2006, Warren E. Buffett, the world’s second-richest man, took the unprecedented step of donating most of his fortune not to a new eponymous entity, but to the gargantuan Bill & Melinda Gates Foundation. The gift’s sheer size—at least $30 billion—and the concentration of power it creates shook a philanthropic world already rumbling, sometimes uneasily, with change.

In the past few years, the Gates Foundation, just a decade old but flush with some $30 billion of its own assets, has taken a leadership role in grant areas like global health, poverty alleviation and education. It has also become a pacesetter in foundation governance, recently announcing, for example, that it would spend its money and go out of business within 50 years of the death of its last trustee, rather than become a permanent institution, and that it would separate its investment management from its grantmaking to avoid conflicts.

Meantime, wealthy young entrepreneurs like eBay founder Pierre Omidyar, impatient with traditional foundations that address social problems with research and trial-and-error experimentation, have instead launched “for-profit” philanthropic ventures intent on seeking fast solutions and measurable results. Google’s founders have started Google.org, a hybrid combining a traditional foundation with a for-profit arm to broaden its range of social-change tools. And world-renowned figures like former President Bill Clinton and songmeister Bono have created a celebrity philanthropic model: pick a problem, propose a solution, publicize both, work connections, raise money, and channel it to the cause. Repeat, if necessary, or move on to a new problem.

All the activity and the ensuing media attention are drawing even more dollars, including numerous $100-million-plus mega-gifts, to philanthropic causes and new foundations. At last count, in 2004, the Foundation Center pegged the number of reporting foundations at 68,000 and their assets at $510 billion—double the number of a decade ago, with more than double the assets—and still growing fast. The Buffett gift, experts predicted, would likely attract more donations and more scrutiny. It already has.

Small wonder, then, that the foundation world has entered an era of soul-searching and adaptation. “It’s a time of creativity,” says Adam J. Abramson, director of the Aspen Institute’s philanthropy programs. “There are lots of new models and it’s useful to have this innovation. It shakes things up and it makes people think about what they’re doing.”
As Sara L. Engelhardt, the president of the Foundation Center, sees it, “the field is growing more diverse, more entrepreneurial, more collaborative and more global.”

And James Allen Smith, a historian who holds the Waldemar A. Nielsen Chair in Philanthropy at Georgetown University, believes foundations are now bound to take a larger role in society. “The Gates Foundation and the Buffett donation,” he says, “raise our sights and alter the level of our ambition.”

Twice in the past, Smith points out, similar increases in scale transformed the aspirations of philanthropy.

Before the 1910s, charity—as philanthropy was most commonly called then—focused on aiding needy people, often on a local basis. Then Andrew Carnegie and John D. Rockefeller changed the game, each creating foundations with more than $100 million in assets (more than $2 billion in today’s dollars). With those resources, they were able to spend large amounts on lofty educational efforts, including Carnegie’s famed libraries and Rockefeller’s schools of public health, on combating diseases like yellow fever and hookworm, on scientific research, and on other broad social goals. Both philanthropists, for example, were supporters of Booker T. Washington and Tuskeegee Institute in Alabama at a time when educating black Americans was not a national priority.

Then, in the 1950s, the Ford Foundation became the first billion-dollar foundation, upping the ante. After establishing a study commission to chart its future, Ford elected to pursue efforts to promote world peace, freedom and democracy, as well as to push for change in science, education and the arts.

Now, given their growth in number and financial firepower, many experts say that foundations again seem poised to take on more and larger social problems and, this time, on a truly global basis. Those trends dovetail at the Gates Foundation, which, like its predecessors, Carnegie Corporation of New York, and the Rockefeller and Ford foundations, among others, is seeking to lead the way. With foundation assets that are triple those of the next largest, the Lilly Endowment and the Ford Foundation, Bill and Melinda Gates decided to focus on the vast task of reducing inequities among people around the world.

In a November 2006 speech, Bill Gates described how, once the overarching goal was set, he and his wife began choosing program areas, which so far number three: “We look for strategic entry points—where the inequality is the greatest, has the worst consequences, and offers the best chance for improvement. Internationally, we believe our greatest opportunity is in reducing extreme poverty and fighting disease. Here in America, we believe we can do the most to promote equity by improving education.”

To date, the Gates Foundation has made grants worth $13 billion to recipients in more than 100 countries around the world; in 2005, about 70 percent of its grants went to global efforts.

The Gates Foundation’s enormous resources have enabled it to take on immense causes like the reduction of malaria, which is believed to infect 300 million to 500 million people annually and to cause one million to three million deaths each year, largely among African children. Through December 2006, the Gates Foundation had committed $765.8 million directly to the fight against malaria; it had also committed another $650 million to a global fund against AIDS, tuberculosis and malaria, some of which supports national malaria control programs.

All told, the Gates Foundation “Global Health Program” has granted nearly $8 billion to the reduction of various diseases, health technology, research and similar issues.

The foundation’s “Global De-vel-op-ment Program” was launched more recently, officially in April 2006. Aiming to help the poor in the developing world avoid hunger and create a sustainable living, it has committed just over $630 million, mostly for public access to computers in libraries and other special initiatives. Going forward, it will disburse about 25 percent of the foundation’s annual grant money. There will be money for efforts to improve agricultural production, to help small farmers get their products to market, and to provide access to loans and other financial services that will help poor people build assets and weather financial setbacks.

With the additional funds from Buffett, who said he chose the Gates Foundation because he believed in the wisdom of its programs and administration, spending will rise. By 2009, the Gates Foundation plans to give grants worth about $3.5 billion a year, up from about $1.75 billion last year in 2006.

At the 2009 level, annual grants from Gates would outstrip the total assets of all but a dozen or so American foundations; they’ll also place the Gates Foundation squarely in the ranks of governments and nongovernmental organizations that deal with the same issues.

Next page: The wealth of the Gates Foundation has created something of an inferiority complex among some long-standing pillars of the foundation community.

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