Who is More Generous Bill Gates or Wal-Mart?

Jun 28

Blame Facebook. Actually it is really my fault as I was reading recent postings on Facebook and there it was: a shared post from a local television station positing that Bill and Melinda Gates (Bill, Melinda, or the Gates) are the most generous humans of all time (http://www.kgw.com/story/news/local/2015/06/05/bill-melinda-gates-biggest-philanthropists/28562631/).When such statements are made, context matters. History matters. Definitions matter. And, even if it were true, why do I care? Really, why do I care about how Bill Gates spends his money? So I asked my friend who posted this item to Facebook “why do you believe that?” And she replied by asking me a question of “not true? Below is the full set of Facebook comments:

‪Me to My Friend‪ why do you believe that? Like Reply · June 5 at 7:50pm ‪
‪My Friend to Me: Not true? Like Reply · June 5 at 7:51pm ‪
My Response to the Question:‪ Didn't say that. Just is spending $ the criteria. Carnegie invested in infrastructures that lead to great things. Difficult to compare generations. The gates' have certainly been generous but with very tax sheltered money. Warren Buffet talks about why rich pay less % of tax like him in dividends and capital gains while at the same time avoiding estate taxes of 40% by giving money to gates (likely because he believes gates will spend it wiser than the U.S. Congress and he is now fool. But possibly a slight hypocrite). How does one really define most generous? Thomas Jefferson created a university, as did the Stanford’s. Gates hasn't done that? It is easy to look at their money and even their time but comparing across generations is dangerous. We can look back in 100 years and decide. History is too short for them at this point Like Reply · June 5 at 7:57pm ‪
‪My Friend’s Friend Responds back to Me: Why do you have to disect generosity? Like Reply · 2 · June 5 at 8:47pm ‪
My Reply to the Friend: Why? Well because I believe that we should consider such questions. How should one define such subjective terms? Does a rich person who leverages tax deferred assets that are contributed to something he controls more generous then the union labor family that quietly tithes and donates countless hours to community services but without fanfare and media? Are we, as a society, to over value money relative to spirit? What value has come from there efforts? Can you prove it or feel it? I am sure the world is better with their contributions then without. This is not a slam. But why the need for such a label? True generosity is frequently done in quiet and not in public. It is too easy for a perplexed media to pander such easy opinions that get repeated (posted at 9:14 PM June 5th)

The above conversation got me thinking not only about the state of our collective critical thinking skills, but also about the bias of media outlets and others to view donating a fortune as the most important generosity.One of the lost skills of our current culture and society is the infrequent use of reflective critical analysis. I don’t mean political polarizations – the screaming from our political extremes – I mean an individual’s personal reflection and thoughts about the value of ideas and thoughts posited as facts. When such statements (like the Gates’ are the most generous in history”) are made in a factual framework, people frequently (and IMHO too quickly) jump onto the proverbial bandwagon and repeat the statement without confirming or understanding its validity or its limitations.We all played the old telephone game when we were kids. The game was a lesson in our inherent weaknesses in communications, even within a small group and with nearly homogenous members. Statements by media outlets are merely a small segment (albeit overly influential) of our society’s infatuation with others and their lives and choices. It is too easy to simply accept what is spammed around the internet (or worse yet reported via a Google Search) and pass it on like it is a demonstrable fact (one reason the website Snopes is so popular with some people is to merely have some level of a Bullshit Meter available to inform the uniformed that the 65 year old Russian Woman really didn’t just deliver 17 children) but Snopes isn’t any good in cases where simple logic, inductive and deductive reasoning, and inquiry via questioning are superior to just accepting the statement as true, complete, and supportable by some level of independent verification . I’ll return to this topic in future postings, however for now, I believe my point has been made and you, the faithful reader shouldn’t be bludgeoned about this topic at this time.Meanwhile, I decided to consider the value of the gifts of the Gate’s Foundation to that of Wal-Mart. Both enterprises benefit society: one (Gates) by endowing upon groups, institutions, and individual, grants, gifts, fellowships, and funding (frequently with controls, reports, strings, etc.). The other, (Wal-Mart) focuses on being the voice of the people. Wal-Mart is constantly reducing prices so that people (especially poor people) may receive the maximum value for their money.Note: Unlike many people, I am a fan of Wal-Mart. Although I do not regularly shop there out of choice; I recognize the value Wal-Mart has created for our national and global economy. There are certainly many criticisms available to cast upon Wal-Mart and its practices. Many of these criticisms are (IMHO) overly jaundiced and lack the intellectual curiosity about the truth that I seek. For example, people will compare Wal-Mart to Costco as it relates to pay and benefits. Costco earns $2B per year from its membership fees. Wal-Mart is free. Costco reports a profit of about $2B per year. Hence 100% of CostCo’s net profits are from membership fees and not from profits generated by sales of their products. Wal-Mart does not have a membership cash flow. Wal-Mart is profitable for sure. However if Wal-Mart had increased its average wages back in about 2007 from say $9/hour to $12/hour - 100% of all of Wal-Mart’s profits would vanish and that would have created less stores, higher prices, and less choice (all of these are bad outcomes for poor people) - I will return to Wal-Mart and its complexities in future posts. The key part is that Wal-Mart kept inflation low in the USA for over a decade (the Government can’t do that); Wal-Mart lowers prices for the poor (what do anti Wal-Mart people have against helping the poor); Wal-Mart helps poor and rich in its communities by fostering lower overall prices at stores that aren’t even Wal-Mart (e.g. Safeway has to be competitive so it must balance its value proposition with options like Wal-Mart); Wal-Mart helps the environment by taking waste out of the distribution system (like excess boxes, wraps, etc.); Wal-Mart shares the savings of its innovations with all three of its constituencies (example - when Wal-Mart found a way to save 5 cents on packaging - the supplier was able to keep 40% of the savings, the customers received 40% of the savings, and Wal-Mart kept 20% of the savings {note this is not a sign of a greedy company - this is one that understands that value and profits must be shared}. These are just some of the benefits of Wal-Mart that aren’t widely discussed.Lets now look at how the Gates Foundation and all of its PR stacks up against Wal-Mart (note - I will provide sources for statistics at the end of this posting for your individual reference):According to the Gates Foundation website, lifetime gifts equal $33.6B (which is a boatload of money {and Gates has more for sure}). So, I will agree that Gates has provided a generous amount of money. Way more than I have; however I would like to believe I am at least as charitable but on a different scale.Wal-Mart on the other hand as certainly provided community support, shareholder dividends, employment, and federal, state, and local taxes. I will ignore these societal contributions. I will focus on savings the customers have received by paying less at Wal-Mart then if Wal-Mart either didn’t exist or more likely wasn’t in their community.For Wal-Mart statistics, I will reference only the past decade. Hence any value Wal-Mart provided during its first 35 years of existence only adds to my analysis. It should be noted that the values below are through my own analysis as Wal-Mart doesn’t provide statistics as to its “savings” provided. There are plenty of price comparisons though and you can use the link I provide below or perform your own research.Some basic pricing savings for Wal-Mart as compared to its competitors averages 3.8% across the board. That means for every $1 spent a Wal-Mart, on average, a consumer would need to pay $1.038 in the general marketplace. More specific to say the North American market would be to compare Wal-Mart to Target. Target’s prices are (on average) 2% greater than Wal-Mart. This means a consumer is certainly better off shopping at Target as it relates to typical market-basket markets and stores and slightly worse off then shopping at Wal-Mart. In my analysis I will use a 1% across the board savings (which is likely at least ½ to 1/3rd of the actual savings - hence I wanted to be conservative with my values {e.g. less predictive savings value then to report more}.Wal-Mart reported a total gross sales of 3.716 Trillion Dollars over the most recent 10 year period. Wal-Mart reports 144 million customers per week. For scale that means slightly more than 1/3rd of all Americans shop at Wal-Mart each and every week. The average sale is $61.17 (I did that by math). Using the 1% value noted above as net savings - that means each customer saves 61.17 cents per visit. This equates to a 10 year savings of $45.671B (the math is: 144M*52 (this gets us visits per year)*10 (now we get visits per decade)*.61 (the savings per visit) = 45.677B {rounded}) (see high school algebra does come in handy).Comparing Wal-Mart benefits to the customer - freeing them up to spend their savings as they wish of 45.677B to Gates’ gifts 33.6B, we learn that Wal-Mart has provided 36% more benefit then Gates.So who is more generous? Bill and Melinda Gates or Wal-Mart? Ultimately that depends upon how you want to value generosity. I believe that Wal-Mart has provided tremendous real value and continues to provide that value each and every day and with each interaction with its customers, suppliers, communities, and shareholders. Gates provides value too - simply differently. Wal-Mart is likely more democratic about their contributions to society as they aren’t philosophically motivated to achieve any other objective then low prices and great value to its customers by constantly improving its supply chains, distribution, and watching any and all costs. Gates desires to have certain effects and outcomes. That is a value of spending one’s own money - you do get to choose where it goes (isn’t American great?).Essentially, distinctions such as most generous, best run, nicest, most labor friendly, and any other type of ranking always needs to be analyzed to ascertain how the conclusion(s) were reached, why the conclusions really matter, and how do we confirm we have a reasonable understanding of the analysis necessary to draw our own conclusions as to the veracity of the statement. Otherwise we fall victim to our own ignorance as we propagate false and/or inaccurate statements as fact and hence contribute to the mental pollution that is all too popular in our current leap to quick judgments and fast answers.Sources:http://www.fool.com/investing/general/2014/07/20/everyday-low-prices-vs-expect-more-pay-less.aspx http://www.gatesfoundation.org/Who-We-Are/General-Information/Foundation-Factsheet