Warren Buffett warned the CEO of the Gates Foundation of the danger of “ABC”

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

Warren Buffett told Foundation CEO Bill & Melinda Gates that the biggest threats to the philanthropic giant were arrogance, bureaucracy and complacency. The billionaire investor and CEO of Berkshire Hathaway, who donated a total of $ 33 billion to the foundation and stepped down as a director in June, has warned of such forces in the past.

Mark Suzman took over the Gates Foundation early last year and quickly traveled to Buffett’s hometown, Omaha, Nebraska, to have lunch with the investor and seek his advice.

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

Buffett pledged in 2006 to donate over 99% of his fortune to the Gates Foundation and four other foundations, and hit halfway toward that goal in June. His advice to Suzman is not surprising; he wrote in his 2014 letter to Berkshire shareholders that when he retires, a large part of his replacement’s job will be to fend off those exact threats.

“My successor will need another special strength: the ability to fight the ABCs of corporate decadence, which are arrogance, bureaucracy and complacency,” Buffett said. “When these corporate cancers metastasize, even the strongest companies can falter.”

The Berkshire chief went on to point out General Motors, IBM, Sears Roebuck and US Steel as examples of corporate titans who once seemed to have an unassailable grip on their industries. “The destructive behavior that I lamented above ultimately led each of them to fall to depths their CEOs and directors had not long believed to be impossible,” he said.

Buffett noted in the letter that he had structured his business to minimize red tape. Berkshire’s decentralized network of autonomous branches, underpinned by a culture of trust, acts as “the ideal antidote to bureaucracy,” he said. Berkshire also saves money and improves efficiency by not having HR, PR, IR, legal, acquisitions and the like at its head office, he added.

The investor again singled out the “B” in ABC in its 2009 letter to shareholders.

“We would rather bear the visible costs of a few bad decisions rather than bear the many invisible costs resulting from decisions made too slowly – or not at all – because of a stifling bureaucracy,” said Buffett.

Given Buffett’s overt disregard for the ABC, it’s no surprise that he told Suzman that his primary focus should be to prevent the Gates Foundation from succumbing to them.

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