Buffett Children Forge Their Own Philanthropic Paths

After Warren Buffett gave the majority of his $44-billion fortune to the Bill & Melinda Gates Foundation

last month, calls rolled in to the famous investor’s three children — Susie, Howard, and Peter — to offer condolences. Not only was the 75-year-old Mr. Buffett giving the family fortune to charity, but his middle-aged children would not even have much say in how the more than $30-billion donation was to be carried out.

But Mr. Buffett did not overlook his children. All three have their own foundations, and Mr. Buffett pledged more than $1-billion worth of Berkshire Hathaway stock, the company he has headed since 1965, to each foundation. What may seem like chump change in Mr. Buffett’s brokerage account is still a hefty sum in the charity world.

During an interview here last month — on the same floor of the Kiewit Plaza building where Mr. Buffett works — Susie Buffett’s smile was as bright as the chartreuse and pink colors that dominate her office décor.

“Some people have actually said to me, ‘Wow, aren’t you disappointed?’” says Ms. Buffett. “I keep saying to people, ‘Disappointed? I just got a billion dollars. What could be better than that?’”

‘Leveling the Playing Field’

The gifts are good news for charities that focus on the causes that the Buffett children support. Through their foundations, Susie and Peter Buffett have already committed more than $15-million each to early-childhood education, and that number may now go much higher.

Susie also plans to focus on elementary and secondary education and foster care, while Peter wants to empower women and girls in developing countries.

Howard intends to spend 85 percent of his money on humanitarian causes, such as providing clean drinking water, in developing countries.

“One of the core values in the family is fairness — what Peter calls ‘leveling the playing field,’” says Dan Pedersen, the president of both Susie’s foundation and a separate foundation that Susie and Peter established that focuses on early-childhood education. “That is a very important value inside our philanthropy. And the notion that the fairest competition produces the strongest winner is a good old capital idea.”

The three Buffett children have all charted their own paths — nudged along by their father, who, in order to avoid spoiling them, provided very little financial support in their early adult years.

Susie Buffett, 52, raised two children — the younger heads to college this fall — and serves on several charity boards here. Howard Buffett, 51, farms on 820 acres in Decatur, Ill., and is working on a book about immigration. Peter Buffett, 48, is a composer of New Age music in New York.

But the three now share a title: big-time philanthropist. The gifts from Mr. Buffett mean an eightfold increase in the assets of the three foundations, each of which was started in 1999 and is currently worth $118-million to $130-million. (That money, too, was seeded by Mr. Buffett and his wife, Susan, who died of a stroke in July 2004.)

None of the three seem to seek the recognition that comes with a large foundation.

Only Howard will have the Buffett name associated with his foundation after Susie finishes changing the name of her foundation from the Susan A. Buffett Foundation to the Sherwood Foundation. (The name refers to the Robin Hood legend — taking from the rich to give to the poor — and was first used by Warren E. Buffett in 1990 to establish a small foundation, since closed, through which his children and others could make grants.) “I hate having my name on this thing,” Ms. Buffett says.

All three children say Mr. Buffett has rarely offered much unsolicited advice on philanthropy. “He runs the business like that — he has these managers that he absolutely loves, and he leaves them alone,” Ms. Buffett says.

But Mr. Buffett broke from form in letters to each child pledging the Berkshire stock. He urged his children to concentrate their resources on their best ideas, and be willing to take risks even if some don’t pan out.

The children found the latter message particularly meaningful. Their father has largely built his fortune by doing exactly the opposite: buying steady, profitable businesses at opportune times, and avoiding risky and unproven companies.

“Without that reassurance, I would be a little worried about blowing his money,” Howard Buffett says. “A bigger foundation offers more opportunities, but there are also more opportunities to make mistakes.”

Little Change Expected

Calls have rolled in to the offices of the foundations since the announcement, but most grant requests are likely to go nowhere. All three children intend to spend more on the causes they now support — and all expect the number of grants they make to stay the same or go down.

That doesn’t mean the Buffett children will be sitting on the new funds. Both Susie and Howard say they intend to pay out the entire sum they receive from their father each year under the unusual gift arrangement he set up.

Instead of giving the $1-billion in stock directly to each foundation, Mr. Buffett will start out this month with a gift of 5 percent of the pledge — about $50-million. Each year thereafter, the foundations will receive another 5 percent of the remaining pledged stock. If Berkshire Hathaway appreciates at more than 5 percent per year, the value of the annual gift will rise over time.

That means both Susie’s foundation and the Howard A. Buffett Foundation will be making grants worth about $55-million to $60-million per year, although both say they may have trouble meeting that mark as they expand their focus in this first year of Mr. Buffett’s pledge.

Howard intends to put a sunset provision on his foundation that will require all funds to be paid out within 50 years — which will probably be after his death, but before his children pass away. He fears that people outside the family would someday take the foundation in a different direction.

“You don’t know who will be spending the money, or how they’re going to do it,” Howard says.

Not Rushing to Spend

Mr. Buffett required the Gates Foundation to distribute the full amount of the annual gift in the year it is received, but he did not saddle his children with the same requirement. He invited the children to allow the resources to build while they gain experience. That’s the approach that Peter Buffett intends to take with his fund, the NoVo Foundation. “We’re hunkering down and really focusing on where we want to put the resources, and not feeling like we have to rush into anything,” Peter says.

Each of the children plans to add a few staff members to their foundations, but none anticipate having more than five full-time positions. That is in keeping with Mr. Buffett’s corporate philosophy — Berkshire Hathaway, a $140-billion company, has fewer than two dozen people working at its headquarters here.

But it is a sharp contrast to the way most foundations operate. According to the Council on Foundations, the average number of staff members for a foundation with $1-billion or more in assets is 45 people.

Although Warren Buffett isn’t as parsimonious with his children as he once was, he has made it clear that he does not intend to leave them much of his estate when he dies. And that’s just fine with all three. “I’m thrilled that I have my own life to lead,” Peter Buffett says. “I’d like to think my character is stronger, but if I had a whole bunch of checks to cash from him, I’d probably sit around cashing those checks.”

Howard says he’d rather have $50-million per year for his foundation than for his own bank account. “What would you do with $50-million a year?” he asks. “I’d do the same thing I’m doing right now — look for the best way to improve lives in the world.”