Thursday, August 5

Warren Buffett warned the Bill & Melinda Gates Foundation’s CEO about the’ABCs.’ The investor has flagged those threats before


Warren Buffett and Bill Gates.

  • Warren Buffett warned the Bill & Melinda Gates Foundation’s CEO about the “ABCs” last year.
  • The investor sees arrogance, bureaucracy, and complacency as major threats to large organizations.
  • Buffett, who has gifted $33 billion to the foundation, once called the ABCs “corporate cancers.”
  • See more stories on Insider’s business page.

Warren Buffett told the CEO of the Bill & Melinda Gates Foundation that the greatest threats to the philanthropic behemoth were cockiness, red tape, and self-satisfaction. The billionaire investor and Berkshire Hathaway CEO, who has gifted a total of $33 billion to the foundation and resigned as its trustee in June, has warned about those forces in the past.

Mark Suzman took charge of the Gates Foundation early last year, and promptly flew to Buffett’s hometown of Omaha, Nebraska to have lunch with the investor and seek his guidance.

“He told me then that my most important job was to guard against the’ABC’ risks of decay that all very large organizations face: arrogance, bureaucracy, and complacency,” Suzman wrote in a recent email to the foundation’s employees.

Buffett pledged in 2006 to donate over 99% of his wealth to the Gates Foundation and four other foundations, and reached the halfway mark towards that goal in June. His advice to Suzman isn’t surprising; he wrote in his 2014 letter to Berkshire shareholders that when he retires, a big part of his replacement’s job will be warding off those exact threats.

“My successor will need one other particular strength: the ability to fight off the ABCs of business decay, which are arrogance, bureaucracy and complacency,” Buffett said. “When these corporate cancers metastasize, even the strongest of companies can falter.”

The Berkshire chief went on to highlight General Motors, IBM, Sears Roebuck, and US Steel as examples of corporate titans that once appeared to have unassailable grips on their industries. “The destructive behavior I deplored above eventually led each of them to fall to depths that their CEOs and directors had not long before thought impossible,” he said.

Buffett noted in the letter that he structured his company to minimize red tape. Berkshire’s decentralized web of autonomous subsidiaries, underpinned by a culture of trust, acts as the “ideal antidote to bureaucracy,” he said. Berkshire also saves money and boosts efficiency by not having HR, PR, IR, legal, acquisitions, and other departments in its headquarters, he added.

The investor singled out the “B” in the ABCs again in his 2009 shareholder letter.

“We would rather suffer the visible costs of a few bad decisions than incur the many invisible costs that come from decisions made too slowly-or not at all-because of a stifling bureaucracy,” Buffett said.

Given Buffett’s clear disdain for the ABCs, it’s no surprise that he told Suzman that his primary focus should be preventing the Gates Foundation from succumbing to them.



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