Gates' historical legacy may focus more on philanthropy than on Microsoft

Charitable work seen as breaking new ground, both in its scale and his methods

With the impending retirement of Bill Gates from Microsoft Corp. comes an obvious question: How will history view him? As a founder of the world's most influential software vendor and one of the biggest creators of wealth ever? Or as a monopolist and digital robber baron?

In fact, Gates may be remembered less for any of that than he is for his philanthropic work — perhaps even as the greatest philanthropist the world has yet to see. Just like Andrew Carnegie, who today is remembered more for his charitable largess than his exploits in the steel industry, Gates' business legacy may fade over time in comparison to his work with the namesake foundation that he set up with his wife Melinda (see more coverage on our "Bill Gates Moves On" page).

During the age of the industrial robber barons, Carnegie was an immensely controversial figure. In the 1870s, he founded Carnegie Steel Co., which became the world's largest and most profitable corporation. He became successful at least in part by paying very low wages, and by union-busting. For example, the infamous Homestead Strike of 1892 was set off when Carnegie cut the pay of his employees. The company hired replacement workers, and a small militia of Pinkerton detectives sent in to protect them killed and wounded numerous strikers.

After that incident, Carnegie was widely reviled. But in 1901, he sold Carnegie Steel to J.P Morgan (who then turned the company into U.S. Steel) and embarked on a massive philanthropic binge, giving away millions of dollars to libraries and educational institutions, and also funding scientific research and efforts to promote world peace. Ultimately, Carnegie gave away almost all of his money.

Gates likewise has said that over time, he will donate nearly his entire fortune to the Bill & Melinda Gates Foundation, which focuses primarily on improving health care, particularly in Africa and other parts of the developing world, and on reducing poverty.

Gates initially gave $126 million to the foundation in 2000, and by 2006 he and his wife had given it more than $26 billion. That made it the world's largest charitable foundation; as of this March, it had $37.3 billion in assets, thanks also to donations by investor Warren Buffett, a friend of Gates who has said he plans to give a total of almost $31 billion to the foundation.

Peter Krass, the author of a biography of Carnegie, thinks that the steel magnate's example likely made a significant impression on Gates' decision to devote most of his time to philanthropy after retiring from his day-to-day role at Microsoft at the age of 52.

"Gates said that he studied Carnegie, and so he has to have read Carnegie's famous essay on wealth," Krass said. In that essay, Carnegie concludes: "The man who dies thus rich dies disgraced."

"It looks as if Gates is following that Carnegie philosophy closely," Krass noted, while adding that the Microsoft co-founder is also hewing to Carnegie's model in another way, by being directly involved with the work done by the Gates Foundation. "Carnegie felt that he had to be hands-on with his philanthropy, because he believed that if you knew the best how to make money, you knew the best how to spend it," Krass said. "Gates apparently feels the same way."

Even so, Krass isn't sure whether Gates will be remembered more as a philanthropist than as the driving force behind Microsoft's success. "There are no businesses with Carnegie's name on them, but his name is on libraries all across the country," Krass said. "That's why he's remembered for his philanthropy. But 50 years from now, you'll most likely still be seeing Microsoft products. And the way Gates gives away his money, his name won't be on many buildings, so it won't be out in the public as much."

A legacy of creating social value?

Peter Frumkin, a professor of public affairs and director of the RGK Center for Philanthropy and Community Service at the University of Texas at Austin, said that the sheer size of the endowment of the Bill & Melinda Gates Foundation, combined with the unique approach being taken by Gates, ensures that he will be regarded as one of the preeminent philanthropists ever.

"The scope of what he's doing is so enormous that it sent out shock waves in the philanthropic world," Frumkin said. As a result, he added, "the social value created by the Gates Foundation will be enormous, and could dwarf the value creation of Microsoft."

Gates differs from other philanthropists not just in the amount of his giving but also in the methods he's using, according to Frumkin. "What he does is efficient and grounded in data," Frumkin said. "And he only tackles problems that he believes are solvable with his resources. For example, when he saw mortality charts in a government report, he recognized that by spending a great deal of money in disease prevention, he could make a difference."

Stacy Palmer, editor of The Chronicle of Philanthropy, a newspaper that covers nonprofit organizations, thinks that history will view Gates both as a philanthropist and a businessman. "The technological changes he fueled transformed society, so unless he can do something like wipe out all the diseases in Africa, he will be remembered for both," she said.

Nonetheless, Palmer said his contributions to philanthropy — both financial and otherwise — will be enormous.

"The amount of money he is giving away is unprecedented," she said. And like Frumkin, she thinks that the hands-on, results-oriented approach being taken by Gates may help change the way that others give away their money.

Furthermore, Gates is taking on philanthropic challenges that others have ignored, such as the way that vaccines and health care services are delivered, Palmer said. She added that unlike most American philanthropists, he has chosen to focus his efforts on Third World countries. His giving is unusual in yet another way: he and his wife set up their foundation so that it has to give away all of its money within 50 years of their deaths.

"A lot of people have found that foundations that have been in existence for a very long time lose their effectiveness over time," Palmer said. "Gates wanted to make sure that didn't happen."

A great monopolist, in more ways than one?

George Colony, CEO of Forrester Research Inc., isn't convinced that Gates' work at Microsoft will be shunted into the background historically. "The jury is still out on whether he chose the right causes and places to put his money," Colony said of Gates' philanthropic efforts. "We won't know that for at least 10 to 15 years."

From a business legacy standpoint, Colony takes the largest criticism of Gates and stands it on its ear.

Gates will be seen as "one of the greatest monopolists in American history," Colony said. But he doesn't mean that in a negative way. By establishing Windows and Office as dominant technologies, Gates "created tremendous value in the standardization of systems," Colony said. "Because of him, we take it for granted that you can easily share word processing files, spreadsheets and other documents."

Colony doesn't view Gates as an IT visionary. "His technology was derivative, not original," Colony said. "His products were always pretty good, but not terrific, and the pricing was never onerous." But in Colony's eyes, he was visionary businessman — one whose market exploits were good for technology users as well as Microsoft and its vast ecosystem of business partners.

"We all benefited from that monopoly," Colony said. "And that will be his biggest legacy."

See more coverage: Bill Gates Moves On.

Copyright © 2008 IDG Communications, Inc.

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