Warren Buffett’s Change(s?) of Mind

It is perfectly permissible—logically, morally, ethically—to change one’s mind, of course, and no explanation is owed anybody about the reasoning behind one’s doing so. It’s also legitimate, though, to be curious, isn’t it?, and maybe for another to just gently float an occasional inquiry or two about that reasoning—perhaps especially as exercised by the publicly prominent, many of whom are comfortable drawing attention to themselves.

As we noted two weeks ago, 93-year-old Berkshire Hathaway chairman and chief executive officer Warren Buffett publicly announced late last month that almost all of his massive fortune will be put into a new charitable trust upon his death. The June announcement adds details to a statement Buffett made last November about his plans.

He currently owns Berkshire Hathaway stock reportedly worth nearly $130 billion. The trust would about double the Gates Foundation’s current endowment, Inside Philanthropy’s Philip Rojc pointed out.

According to Buffett’s November statement, “The testamentary trust will be self-liquidating after a decade or so and operate with a lean staff.” Last month’s announcement did not repeat or reference any time limitation on the trust.

As Rojc recalled, Buffett also wrote in his (also-)public “Giving Pledge letter” around a decade and a half ago—that “at the latest, the proceeds from all of my Berkshire shares will be expended for philanthropic purposes by 10 years after my estate is settled. Nothing will go to endowments; I want the money spent on current needs.”

His one daughter Susie and two sons Howard and Peter will oversee the trust and must unanimously agree on how to distribute its funds “It’s uncertain whether Susie, Howard and Peter will abide by any kind of 10-year spend-down timeline,“ Rojc properly notes. “As of these most recent revelations, Warren may not require them to.“

One must thus at least minimally wonder whether the new Buffett trust might exist in perpetuity or if not, when it might “sunset,” meaning distribute or spend all of its assets within a certain specified amount of time.

Unchecked Three

There are at least two other, related questions about what sure seem to at least be tensions between some of Buffett’s past and present thinking—perhaps outright changes in his mind, at least if taken at his word. First, he told The Wall Street Journal last month,

I feel very, very good about the values of my three children, and I have 100% trust in how they will carry things out. … I like to think I can think outside the box, but I’m not sure if I can think outside the box when it’s 6 feet below the surface and do a better job than three people who are on the surface who I trust completely.

But in 2006, when Buffett announced that he was giving $31 billion to what was then called the Bill and Melinda Gates Foundation and reserving a billion each for the separate foundations run by his children, he denigrated dynasticism. For example, he told PBS’s Charlie Rose, “I don’t believe in dynastic wealth,” typically folksily calling those who grow up in wealthy circumstances “members of the lucky-sperm club.”

It hardly seems as if Buffett meant to limit application of the humorous epithet only to luck in the personal-wealth or corporate stock-ownership contexts. Seems like it would apply to philanthropy, too, no?—dynastic philanthropy, one might say, like that which will be exercised by Buffett’s new charitable trust and those who control it.

The three Buffett kids in command of the trust will exercise, and derive personal benefit from being able to exercise, a degree of power and influence almost unmatched in human history. It will, as our progressive friends would accurately point out, basically be unchecked by any democratic expression of approval or not—really subject only to the easily obtainable unanimity, especially if and when they “horse trade” causes if even necessary, of a body of three.

Three. They’re quite lucky. What changed, and why?

Enemy of Meritocracy

Second, there will be no estate tax assessed on the billions Buffett has made and is going to transfer to the charitable trust. Not only is the Gates Foundation not going to get any more of Buffett’s money, in other words, but neither is the government; just the three members of the lucky-sperm club, exercising essentially unchecked power. Sure seems like it was legally and financially structured that way on purpose, moreover—in large part to avoid any estate tax, in other words.

But testifying before the U.S. Senate Finance Committee about the estate tax in 2007, Buffett said, “We need to raise about 20% of GDP to fund the programs the American people want from the national government. Further shifting of this requirement away from the super-rich is not the way to go.”

Earlier in his remarks, Buffett told the committee, “Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward a plutocracy.”

What changed? Why?

This article first appeared in the Giving Review on July 24, 2024.