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Size Does Matter

Size Does Matter


It is a brilliantly warm and sunny day'the kind that erases all memory of Seattle's infamous cloudy gloom. Nestled at the edge of Lake Union just north of downtown is a former check-processing plant. The building's style typifies the striking chrome and tinted-glass architecture that overran this Pacific Northwest region when previously unimaginable wealth spread like wildfire during the 1980s and 1990s (thanks in no small part to a certain software company) and transformed a midsize city into an affluent metropolis. During a visit to my hometown, I take an afternoon to discover that the world's richest man has more important concerns than global domination of the software market. My memories of Bill Gates's stamp on Seattle are centered around the view I had from my bedroom window while growing up: Across Lake Washington from our house, Gates carried on the seemingly endless construction of his 45,000-square-foot waterfront estate, worth an estimated $50 million. A looming crane hovered over swirling dust for much of the seven-year spectacle. Though Microsoft's Redmond campus is as sprawling as Gates's fortune is immense, the site of his philanthropic efforts seems quaint in comparison. But its power and significance are equally as Herculean. The four-story building, which houses about 200 employees, is pleasant and well-decorated. On the walls hang reminders of the world far away that Gates seeks to benefit with his fortune: photos of impoverished Southeast Asians; an elaborate scroll given by Sri Pramod Mahajan, India's union minister for information technology; and a framed shirt from Nelson Mandela with an inscription that reads, 'Visiting the foundation headquarters has been an unforgettable experience.' Mandela's note of gratitude is in recognition of one of the Bill and Melinda Gates Foundation's core missions: to reduce the health inequities that plague those who have not benefited from the resources that wealthier nations possess and who otherwise would be forgotten. Gates wants others to be aware of those inequities too. 'The world at large looks at the United States and other rich countries,' Gates pointed out to attendees of the retrovirus conference in February 2002. 'Do we behave in a way where we're sharing our largesse, our good luck, in an appropriate way back with the entire world?' Wealth and Its Obligations Welcome to Big Philanthropy, 21st century'style. Not since the days of Carnegie and Rockefeller, who respectively gave away the equivalent of $3 billion and $6 billion before they died in 1919 and 1937, has a living donor distributed so much wealth to do so much good. A product of the January 2000 merger of Gates's two previously distinct foundations, the Gates Foundation is named after Gates and his wife, Melinda French Gates. The foundation has $24 billion in assets, making it the largest foundation in the United States. It distributed a cool $1.1 billion in 2001'twice as much as the second-place donor, the Lilly Endowment'and $1.157 billion in 2002. To date, it has given a cumulative $6.2 billion. While Gates has said he will leave only a relatively small amount of money to his children, giving the rest away in his lifetime (he is worth $40.7 billion, according to Forbes), his father, William H. Gates Sr., has written the book on the subject. In addition to cochairing his son's foundation, the elder Gates has published a treatise against repealing estate taxes titled Wealth and Our Commonwealth. The senior Gates's liberal position put him at odds with another major Seattle power broker: Frank Blethen, patriarch of the fourth- and fifth-generation family clan that collectively owns the majority of the Seattle Times Co. and spearheaded much of the successful grassroots opposition to estate taxes. This ideological split exemplifies the foundation philosophy: that the power and resources of the superrich are best redistributed to those in future generations who will not have had such advantages. Along with donations to groups in the Pacific Northwest as well as library and education initiatives in the United States, the foundation has settled on global health as its main focus, giving about half of all its grants to the cause. It was after having read the 1993 World Development Report that Bill Gates Jr. says he found his inspiration: 'Every page screamed out that human life was not being as valued in the world at large as it should be.' In this, Gates is a maverick, considering that 98% of all U.S. philanthropy stays at home. The foundation hopes to tip the scale on what Gates calls the '90'10 rule': Of the $70 billion spent annually on global health, 90% goes toward diseases that affect 10% of the world's population. 'In terms of philanthropy, I think they've lifted the entire bar to a new level,' says Jerome Radwin, chief executive officer of the American Foundation for AIDS Research. 'I think they have demonstrated in very concrete terms that with the creation of wealth there's an obligation that goes with it.' Taking On the Pandemic In addition to addressing the global vaccination push and diseases such as tuberculosis and malaria, the foundation has focused heavily on the international HIV pandemic. And with that attention the Gateses have both put the world's spenders to shame and encouraged them to give more. In 1999, with Gates contributing a relatively significant $12.5 million, U.S. AIDS charitable grants totaled $62.5 million, representing a 0.5% share of the overall national grant dollars, a percentage that had held steady for much of the previous decade. In 2000, with Gates giving $178 million primarily to international efforts, cumulative U.S. AIDS grants of $256 million leaped to 1.7% of the total. And in 2001 total AIDS donations accounted for 2.1% of all U.S. giving at $350.8 million. To date, the Gates Foundation has given a mammoth $639 million to fight HIV and tuberculosis. 'There was a sense that nobody could do anything about AIDS in developing countries, or only the countries could do it, or only international organizations could. The fact is, nobody was doing very much of anything,' says Barry Bloom, dean of the Harvard School of Public Health, about the time before Gates's entry into the field. 'By infusing some private capital and engaging some very energetic people outside the usual bureaucratic pathways'[the foundation] got things moving.' Dorothy Ridings, president of the Council on Foundations, figures that just about the only people unhappy with the Gates Foundation are grantees in cancer or other areas who wish Gates would broaden his focus and let them in on the cash. 'This is why they're so smart,' says Ridings of the foundation's team, 'because they have narrowed their focus so that they can spend big bucks in a very meaningful way.' Still, Kaiser Family Foundation president Drew Altman cautions against the impression that Gates's money makes his influence limitless. 'The thing to realize about foundations is that they are absolutely in no way the answer to anything,' he says. 'They are too small'even Gates. But if they play their cards right, they can play a very important role'a unique role, a leveraging role, a catalyst role'that no one else can play.' Recognizing this, the Gates Foundation integrates itself into the web of the HIV fight with a business savvy that turns philanthropic giving into venture capitalism. Insufficient finances hinder AIDS groups across the board. In particular, not-for-profits and nongovernmental organizations are restricted by lack of reach and influence. Politics can restrain governmental responses to AIDS, and profit concerns limit pharmaceutical and biotech firms. Gates's resources and freedom create the missing link in the chain, making up for limitations elsewhere. Of the foundation's contributions, 80% are through public-private partnerships. Pushing the Limits By pooling capital with biotech firms or pharmaceutical companies, the foundation is able to lower individual risk in the tenuous game of trial-and-error research. In turn there is a reduction of detrimental competition and ego clashing. Consequently, the foundation has great leveraging power to encourage more rapid scientific progress. Once a product becomes available, the foundation can ensure that distributors will provide it in poor countries at a reasonable cost. The foundation also sets an example for the rest of the world's spenders, ever prodding others to give more. The $100 million pledge in June 2001 to the United Nations Global Fund to Fight AIDS, Tuberculosis, and Malaria serves as the foundation's most public affront to global apathy toward AIDS spending. Tied with Canada for the ninth largest pledge, Gates has promised more money than Russia, Belgium, Denmark, Switzerland, Nigeria, and Saudi Arabia combined. And in July the foundation gave the full $100 million'instead of spreading it out over several years'in an attempt to encourage further donations. Many of the foundation's efforts have focused on the innovations that can potentially do the most good but are the least funded due to their high risk of failure and low promise of profitability. 'The public sector's role really is to fund large-scale programs that we know work. Foundations tend to be focused a lot more on new discoveries, innovations, looking at things that we don't know that work, either programmatically or scientifically, and develop those,' says Helene Gayle, MD, MPH, the former HIV, STD, and tuberculosis chief at the Centers for Disease Control and Prevention. She has headed the Gates Foundation's AIDS division since 2001. For its largest AIDS grant, the foundation has given a cumulative $126.5 million to the International AIDS Vaccine Initiative, a group that has numerous public-private partnerships worldwide involved in developing potential vaccines. In 2001, $100 million of this figure came in the form of a 'challenge grant' that Gates said he hoped would 'mobilize global support' for IAVI. The initiative's leaders have said it is noteworthy that since Gates's announcement some affluent countries such as Denmark, Norway, and Sweden have stepped up to the plate for the first time, and others have renewed or increased their funding commitments. Gates is also the global leader in funding microbicide research, doling out about $110 million to the effort, including $60 million to the International Partnership for Microbicides in the past year. Meanwhile, 1% of the U.S. federal HIV research budget, or $35 million, goes to microbicides. The pending research sponsored by IPM is to be conducted by small biotech companies, contract research organizations, and universities around the world'groups that heretofore have been too isolated and low in resources to move products onto the market quickly. IPM has set up contingency agreements that whoever distributes products resulting from research must do so at a reasonable cost in the developing world. Otherwise, the group has 'march-in rights' to acquire the authority to distribute the microbicides itself. Staying Open to Options Gates is also willing to take a look at prevention methods that are unpopular research subjects. Last year, University of California, San Francisco, researcher Nancy Padian, MD, ended her nine-year quest to obtain funds to study the efficacy of diaphragms in HIV prevention. With the help of $28 million in Gates grants, Padian began a three-year study in Zimbabwe and South Africa. Padian also has set up agreements, much as IPM has done with the pharmaceutical industry, stipulating that any product resulting from her research will be available to those in the most need. The Gates Foundation does its best to strike a balance between the scientific and social aspects of fighting AIDS globally. 'I think what we really want to do is to make sure that in the long run we in the world maintain a focus on prevention,' says Gayle, 'because in the end that's what we all want: to keep people from getting infected to begin with.' The Gates Foundation has teamed up with the Kaiser Family Foundation to create the Global HIV Prevention Working Group, a collection of HIV experts attempting to draw attention to the importance of HIV prevention. The group's May 2003 report was in the form of a blueprint on how the world can avert 28 million of the projected 45 million new infections by 2010 that The Lancet predicted in a 2002 article. The group also called for a scale-up in global financial support for AIDS from the current $1.9 billion to $5.7 billion by 2005 and $6.6 billion by 2007. Heeding the warnings of the U.S. National Intelligence Council, which has predicted India's current 4 million HIV infections could balloon to 25 million by the decade's end, Gates has pledged $100 million over the next five to 10 years in that country. This represents a touchy move for Gates, who has many business ties in India, but his professed philosophy appears able to overcome possible conflicts between business and philanthropy. At the 2002 retrovirus conference in Seattle, he questioned why assisting global health has 'to be justified on economic grounds or military grounds or any grounds other than humanitarian issues.' Building Alliances for Success Although many people have speculated about whether providing antiretroviral medications in Africa is feasible'given the continent's lack of medical infrastructure'Gayle says the moral imperative to save lives outweighs such skepticism. In Botswana the foundation is teaming up with Merck and the Harvard School of Public Health in a project to provide antiretrovirals to all who need them. Merck and Gates have each pledged $50 million to underwrite Botswana's AIDS program over the next five years. Gates has also given the same Harvard division its largest grant ever: $25 million to study and carry out HIV prevention programs in Nigeria. The university has established various labs throughout the country for research and has trained a team that is exclusively Nigerian to administer the project. A 20-year veteran of the fight against AIDS, Gayle is passionate and concerted in her efforts, earning her a kind of awe-inspired praise from her colleagues. And she is undaunted by the challenge before her. She says 'there's nothing magical' about what needs to be done: vigorous research into long-term solutions, a balance between prevention and treatment, developing gender equality and educating young women about HIV, and working to eliminate commercial sex work and drug use. Like Gates, she is optimistic about the future. 'The virus is winning'it has been winning,' Gayle says. 'But I don't think that's a static situation. We're seeing more and more countries that are demonstrating evidence of the slowing of HIV, particularly in young people who have grown up with this epidemic and are changing behavior. I think there's no question that we've not done all that we could have done in the past two decades. But I think if we look forward 10, 20 years, we could be in a very, very different situation. The answer is up to us.'

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