Thursday, September 26, 2013

#CGI2013: Bill Gates on 'Rich Dogs' and Risk

The philanthropist Bill Gates, speaking on a panel at the Clinton Global Initiative, which ends today, urged nonprofit leaders to work harder and better at collaborating with business on social good projects. "It's interesting that nonprofits think the for-profit guys are evil," Gates told some of the world's most influential philanthropists and CEOs, NGO executives and government delegates to Bill Clinton's annual confab. "That attitude has blocked cooperation in many areas of the global food and drug sectors." And, Gates said, that attitude is blocking aid to the many of the world's hungry and dying.

The Microsoft co-founder and former CEO, in a candid assessment of philanthropy's role in global social innovation, also urged fellow philanthropists to start funding riskier projects "that nobody else wants to touch." Said Gates: "If you're a philanthropist, you don't want to go into an area that is already well-covered." Philanthropy, he said, "has more leeway to experiment. It should fund the higher-risk projects and let businesses and governments do the easier stuff."

What follows is an edited transcript of an interview with Gates that The Economist's Matthew Bishop moderated from the CGI stage this past week. Bishop is author of the book, Philanthrocapitalism, about the rise of for-profit/nonprofit partnerships for collaborative social impact.

Q/ BISHOP:  The world is having a discussion right now about what follows the Millennium Development Goals for 2015. How do we set targets (for global social good) for the next 15 years that are big bets—that are achievable bets but not too hard or too easy to achieve?

GATES: The Millennium Development goals are a phenomenal thing. They are the eight priorities that were adopted by the (UN) General Assembly (in 2000) as a report card for the world. They're very focused on  inequity—in health, in education, and in economics. It's quite amazing that several of them will be fully achieved, even though they were set quite ambitiously. The poverty goal [to halve the rate of extreme poverty by 2015] was achieved. And in fact, in the next round—the goals for 2030—we could get to extremely low levels of poverty around the world. In the health area, we had 12 million children dying every year from a starting point of 1990; we're now down to 6.6 million, so we'll be, by 2015, down to close to a 50 percent reduction. The Millennium Goals have been wonderful because they allow us to look at the countries that are doing it the best, and to go in and talk to the leaders of the countries that aren't and make it a priority. I think the world has come around to the idea that you really need amazing partnerships to make these big things happen. For child mortality, you have to break it down and say, okay there's malaria.  What can the drug companies do? What can UNICEF/World Health Organization do? What can the local governments do? There's diarrhea, there's pneumonia, there's the first 30 days. And so it's all become really quite concrete. And even philanthropy, which is a smaller percentage of the dollars here compared with, say, the private sector, rich world donations, and local governments, it can get involved in some of the riskier things. For example, the actual vaccine development teams (are funded) mostly by philanthropy. Philanthropy is the major player in that part of it. So it's amazing to see how all of that has come together.

Q: But when you think of the next set of goals, the next 15 years, how far should we stretch to accomplish even more?

GATES: The inequity today, that a child under 5 has 30 times chance of dying than a child in a middle income country, gives us a chance in the next 15 years to to largely eliminate inequity. We won't get it down to zero. There will still be a differential there.  But  we can make a very dramatic change. So the fact that these Millennium goals are unfinished goals, and that if we keep them as unique as they've been—and keep up these (for-profit/nonprofit) partnerships—we will be largely complete by 2030. To me, that says that these goals should be the centerpiece of what gets adopted as the world's next report card. Now, because Millennial Development Goals have been successful and every cause in the world would like to have an MDG, there will need to be some tough choices made in terms of measurability and prioritization.

Q: As you think about how to put your money and Warren Buffett's money to work to achieve social good, how do you determine how to get maximum bang for the buck?

GATES: Well, obviously, you don't want to go into an area that is already well covered. And because philanthropy is small, even compared to aid budgets, you have to pick something that is probably risky and therefore not likely to be taken up by aid budgets. Take inventing new vaccines. Governments other than U.S. really don't get into that kind of upstream R&D.  And that's a global public good. As Africa develops, it's not going to get organized to finance the malaria vaccine for itself any time soon. So philanthropy can be very complimentary. I totally agree with the private sector that we need those roads and electricity in a big way in Africa, but we need to realize that five or six magical new vaccines are needed, too, so that's a great place (for philanthropy) to specialize. Now, that kind of philanthropy is very risky. You need to have to have a lot of oars in the water. And you're going to need partnerships, working with universities and the NIH and the pharmaceutical companies, where there's a lot of expertise that only exists with them, so crafting exactly how you work with them is important. We do a report card called the Access to Medicine Index, that rates all the pharma companies on how much they do to help poor people. And it's been great because every year, the bar has gone up. The drug companies at the top want to do more and stay at the top; the ones on the bottom definitely see that, their employees see that, and so they push forward on it.

And further on risky philanthropy, consider polio eradication. It can only work if every country in the world manages to get  those polio drops out to over 90 percent of the kids that need them, around the world. And so now, we're down to northern Nigeria, northern Pakistan, and there's been a big outbreak in Somalia recently. In these places, getting access to those kids is very tough because of rumors that these are people from the West coming in with vaccines, they're from the U.S. and the rumors that the U.S. uses vaccination campaigns for bad things. And that has really overwhelmed the trust and knowledge you want to have on the ground to allow those vaccines to come in. We could fail.  We raised a little over $4 billion at a (polio) summit earlier this year and everyone endorsed a plan (for polio eradication) that runs through 2018. It's the kind of thing the world should take on because if you take it on, it will save millions of lives. But it's not an easy thing. It's not like building a wing of a museum, where probably it will get done. This one? Polio? It should get done.

"Polio eradication? It's not an easy thing. It's not like building a wing of a museum, where it probably will get done."

Q: Is it really worth the effort, to take the last few steps that could mean complete eradication?

GATES: That's sort of a math test. The only reason we have so few cases now is because we are spending so much money. If you stop spending the money before (the death rate from polio) gets to zero, then it goes back and hundreds of thousands of kids get sick or die every year, and the problem gets worse. But if you wait to stop spending the money until after you get to zero, it gets kind of nice because then, you can spend the money on other things—pneumonia, diarrhea, neo-natal, and whatever those other causes are. So you really have to judge, can it be done? The whole credibility of the global endeavor is very much tied up in this (the fight to eradicate polio). Will those hold-out countries allow us access to those kids? That's what this whole thing rests on. There are days I worry we won't get it. But overall, I'm quite optimistic.

Q:  Let's consider, for a moment, the "f word" of failure. In the business world, failures can often be taken as a badge of honor: you tried something, and you learned from it. But in the philanthropic world, failure really is a swear word. People don't talk about it and there is a sense that people don't take enough risks.

GATES: Well, people don't take enough risk, that's fair. And they try to do too many things. If you really want to take on big risk, you really have to be willing and able to develop deep technocratic understanding of the science, the tools, and the social science factors that weigh into the delivery (of the aid you're giving). Philanthropy should be taking much bigger risks than business. If these are easy problems, business and government can come in and solve them. Probably the most risky thing (the Bill&Melinda Gates Foundation) is doing involves the money we spend in the United States, where our top priority is changing the teacher personnel system in K-12 eduction so that teachers get feedback, so we learn from teachers who teach extremely well, and so we have a professional assessment system to really understand how to do things better and get the average teachers into the top quartile. But that has become subjected to all sorts of controversies—with the school board system, with some people who love the status quo and amid controversy over just how it would get done. This project has a very high high chance of failure, whereas our malaria work is just a question of when. I'll be disappointed if it takes too long. Malaria deaths will come down. We will discover drugs and vaccines and we'll get more bed nets out. Malaria is just (a matter of) impatience and cleverness. There is no mode of total and utter failure on that path, whereas K-12? All the money we spend on that could end up being wasted.

"Malaria deaths will come down. We will discover drugs and vaccines and we'll get more bed nets out. Malaria is just (a matter of) impatience and cleverness. There is no mode of total and utter failure on that path, whereas K-12 education? All the money we spend on that in the U.S. could end up being wasted."

Q: Throughout your philanthropy, you've been partnering with business. You just announced a partnership with JP Morgan on health innovation. Do you think the business world is finally escaping the Milton Freidman narrow view of a company's role in society and is now more willing to engage in some of these big bets to improve the world? 

GATES: The private sector is the biggest force in terms of dollars and innovation and often, that takes a form of trickle down, where, for example, a medicine will be invented for rich customers and then it's made available over time, as the patent expires and as manufacturing becomes more efficient. Now, that  has done an amazing amount of good. Unfortunately, that model doesn't work for everything because rich people don't get malaria. One truly ironic thing is that a drug was developed for rich dogs. These dogs had a real problem. They had worms and people wanted to pay to get rid of their dogs' worms, and so there was a great market for it. Ivermectin was developed for that. And then somebody said let's try it on humans in Africa. They have worms, too. And in fact it worked very well and the companies were extremely generous in donating all of that. But that's a strange form of trickle-down from rich dogs to poor people. A lot of things we can't do that way. I will say that in terms of some of these for-profit/nonprofit partnerships, it's sometimes interesting that the nonprofit guys think the for-profit guys are evil...and that's blocked cooperation between some of food companies and some of nonprofit actors in (various countries). ...Bridging the gap between the way the private sector thinks about things and what's reasonable to ask them to do—and the nonprofit people, who know how to deliver aid and are devoting their lives to it—trying to get the best of both worlds out of that often takes a middleman listening to both points.

 "It's sometimes interesting that the nonprofit guys think the for-profit guys are evil..."

Q: What could the private sector do better in these partnerships?

GATES: The most classic example is the Clinton Foundation. We went from suing the South African government for off-patent use of drugs to now getting all the poor countries to get their AIDs drugs at the lowest possible price and there's no intellectual property involved in that at all. That model has been very successful.

Q: We need to measure progress carefully, but when is measurement taken too far?

GATES: You need to do things that are hard to measure but there are some things you really can't measure very well. Consider the child mortality area. We are trying to ensure that kids survive malnutrition but many are damaged mentally by malnutrition, and there's a danger that if we don't understand that, we won't focus on the right interventions. There's a huge hidden cost in health care that goes beyond death. They do IQ studies in Africa, and the numbers in some parts are unbelievably low because kids that have gone through early malnutrition are never developed fully mentally. Anything you can measure is great but you want to make sure you're measuring the right things.

Q: And then there is, in much philanthropy today, a push for social innovation. You, for example, have decided to innovate the toilet. Why have you done that, how is your project going and are there similar, less-trodden areas where philanthropists might bring innovation?

GATES: It's a fantastic example where trickle-down doesn't work. (laughter). The rich world toilets are built on a Rube Goldberg kind of scheme, where you bring all sorts of water in, you make it dirty, you send it to very complex plant to clean it up. Just the piping system alone, if you were going to do this in the slums of India, you could never afford it. And so we need something with the smell- and disease-prevention characteristics that are as good as the gold standard, which is the flush toilet, but do not require a completely unaffordable infrastructure. And so you have to get the best people in smell, and in taking the disease out of the waste and getting rid of it. We had a big contest recently at Caltech, and gave out prizes, and now we're working on what does the engineering for those ideas look like.

It's easier at the community level to create a low-cost toilet. You want to go into the individual households so women don't have to go out at night, facing some insecurity or harassment. But that would not have happened without philanthropy coming in. Scientists will say, 'Oh, we know how to do smell, but nobody ever asked us to solve this problem with toilets.' So it's taking high IQ scientists who were not thinking much about toilets in the developing world, and drawing them into the partnership to try and help solve these very real and pervasive global challenges.

There are a lot of universities that have programs to come up with tools for poor countries, and you have crowd-sourcing, where someone will put out something and get back amazing results. There was this one thing, a call for a power light that someone suggested be made by pulling up a weight on a pulley to generate the power needed, and that got funded in, like, 10 days. So there's lot of neat things out there.

So, in you're a philanthropist, fund innovation. Pick what you're passionate about and think about what are the innovative tools. It will probably be risky. Are you willing to wait 5-10 years (for results)? Are you willing to figure which universities have the science to connect that area you want to fund? What you want to fund is often not something government does well, like education or even health. government can often miss some great opportunities. But philanthropy can help where others can't, and it's needed and a very important piece in these partnerships to make the world a better place.

-- Marcia Stepanek

[Photograph: Bill Gates on stage at CGI on Tuesday, September 24th]

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