ARC's 1st Law: As a "progressive" online discussion grows longer, the probability of a nefarious reference to Karl Rove approaches one

Thursday, January 24, 2008

Bill Gates is an Idiot

It turns out that Gates' lack of original thought is not only confined to software development and IT. Today's Wall Street Journal shows that Bill is also interested in re-hashing tired economic populism:

PAGE ONE
Bill Gates Issues Call For Kinder Capitalism
Famously Competitive, Billionaire Now Urges Business to Aid the Poor
By ROBERT A. GUTH
January 24, 2008; Page A1

Free enterprise has been good to Bill Gates. But later today, the Microsoft Corp. chairman will call for a revision of capitalism.

In a speech at the World Economic Forum in Davos, Switzerland, the software tycoon plans to call for a "creative capitalism" that uses market forces to address poor-country needs that he feels are being ignored.

"We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Mr. Gates will tell world leaders at the forum, according to a copy of the speech seen by The Wall Street Journal.

Mr. Gates isn't abandoning his belief in capitalism as the best economic system. But in an interview with the Journal last week at his Microsoft office in Redmond, Wash., Mr. Gates said that he has grown impatient with the shortcomings of capitalism. He said he has seen those failings first-hand on trips for Microsoft to places like the South African slum of Soweto, and discussed them with dozens of experts on disease and poverty. He has voraciously read about those failings in books that propose new approaches to narrowing the gap between rich and poor.
Bill - The problem with South Africa isn't a failure of capitalism. It's a failure of corruption and the lack of capitalism.

Take a look at the Index of Economic Freedom and you'll see that South Africa is ranked 57th, just below that economic powerhouse Albania - in the bottom of the Moderately Free tier. Here's a summary on South Africa specifically:
South Africa's economy is 63.2 percent free, according to our 2008 assessment, which makes it the world's 57th freest economy. Its overall score is slightly lower than last year, reflecting worsened scores in three of the 10 economic freedoms. South Africa is ranked 4th out of 40 countries in the sub-Saharan Africa region, and its overall score is much higher than the regional average.

South Africa scores above average in seven areas. The government has been working to increase the transparency of commercial regulations. Income tax rates are high, but corporate taxes are moderate, and overall tax revenue is moderate as a percentage of GDP. Inflation is moderate, and the government subsidizes the market prices of only a few staple goods. The financial system is Africa's most advanced.

South Africa scores slightly below the world average in fiscal freedom and labor freedom. The judicial system is slow, and race laws and unclear regulation hamper foreign investment, but the legal environment is free from political interference and the threat of expropriation.
So, the real issue isn't a lack of capitalism - it's high taxes, regulations, and a slow legal framework in which to have any issues resolved.

Back to the Gates' story:
In particular, he said, he's troubled that advances in technology, health care and education tend to help the rich and bypass the poor. "The rate of improvement for the third that is better off is pretty rapid," he said. "The part that's unsatisfactory is for the bottom third -- two billion of six billion."

Three weeks ago, on a flight home from a New Zealand vacation, Mr. Gates took out a yellow pad of paper and listed ideas about why capitalism, while so good for so many, is failing much of the world. He refined those thoughts into the speech he will give today at the annual Davos conference of world leaders in business, politics and nonprofit organizations.

Among the fixes he plans to call for: Companies should create businesses that focus on building products and services for the poor. "Such a system would have a twin mission: making profits and also improving lives for those who don't fully benefit from market forces," he plans to say.

And what will the poor use to purchase these new products that are targeted for them? Unless Gates is calling for employing the poor to make these products and provide these services, it's unlikely that this will be a success. And, again... the reason these countries have mind-numbing poverty is because of a lack of the rule of law, education, skills, etc, with the latter flowing from the former.
Mr. Gates's Davos speech offers some insight into his goals as he prepares to retire in June from full-time work at Microsoft -- where he will remain chairman -- and focus on his philanthropy, the Bill & Melinda Gates Foundation.

Mr. Gates sees a role for himself spurring companies into action, he said in the interview. "The idea that you encourage companies to take their innovative thinkers and think about the most needy -- even beyond the market opportunities -- that's something that appropriately ought to be done," he said.

His thoughts on philanthropy are closely heeded because of the business success that made Mr. Gates one of the world's richest men. His eight-year-old charity is expanding rapidly following the 2006 decision by Warren Buffett to leave his fortune to the foundation. That donation, at the time valued at about $31 billion, increases to some $70 billion the hoard Mr. Gates says will be given away within 50 years of the deaths of him and his wife.

Serving the Poor

But Mr. Gates's argument for the potential profitability of serving the poor is certain to raise skepticism. "There's a lot of people at the bottom of the pyramid but the size of the transactions is so small it is not worth it for private business most of the time," says William Easterly, a New York University professor and former World Bank economist.
The cruel realities of economics enter the discussion.
Others may point out that poverty became a priority for Mr. Gates only after he'd earned billions building Microsoft into a global giant.

Mr. Gates acknowledges that Microsoft early on was hardly a charity. "We weren't focused on the needs of the neediest," he said, "although low-cost personal computing certainly is a tool for drug discovery and things that have had this very pervasive effect, including the rise of the Internet," he said.
Yes, and that innovation has benefited millions over the years.

I suggest that similar efforts be made by entrepreneurs to continue elevating mankind out of the brutish natural state of humanity.
Although Microsoft has had an active philanthropic arm for two decades, only in 2006 did it start seriously experimenting with software in poorer counties in ways that would fit Mr. Gates's creative capitalism idea. Under that 2006 program, handled by about 180 Microsoft employees, the company offers stripped-down software and alternative ways of paying for PCs to poorer countries.

Sure, potable water is a primary concern, but Gates is focused on delivering crappy software to people without electricity. Booyah!
With today's speech, Mr. Gates adds his high-profile name to the ranks of those who argue that unfettered capitalism can't solve broad social problems. Muhammad Yunus, the Bangladeshi economist who won the 2006 Nobel Peace Prize for his work providing small loans to the poor, is traversing the U.S. this month promoting a new book that calls capitalism "half developed" because it focuses only on the profit-oriented side of human nature, not on the satisfaction derived from helping others.
Mr. Yunus' emotional appeal aside, the Grameen Bank certainly is more likely to have an impact on poverty than stripped-down software from Microsoft. Additional investment in the micro-loan entrepreneurship certainly would be helpful. The important facts about micro-loans are that they operate within and are supported by the freemarket system. People are able to make a return on the money the lend and the borrowers do have the obligation to pay the amount back. This benefits both the lender and the borrower (access to capital, understanding and building a credit history, etc).
Key to Mr. Gates's plan will be for businesses to dedicate their top people to poor issues -- an approach he feels is more powerful than traditional corporate donations and volunteer work. Governments should set policies and disburse funds to create financial incentives for businesses to improve the lives of the poor, he plans to say today. "If we can spend the early decades of the 21st century finding approaches that meet the needs of the poor in ways that generate profits for business, we will have found a sustainable way to reduce poverty in the world," Mr. Gates plans to say.
[...]
Uh-oh... I was with him up until he advocated the government involvement. Gates starts by saying that business leaders should focus on helping the poor (which is fine - nothing wrong with a little encouragement), but asking the government (aka taxpayers) to subsidize and perhaps regulate (or force) such activity is the point at which we diverge. Should the government start sending checks to Microsoft to subsidize their Crappy Software Initiative? It seems that Gates' pleading involves some degree of self-interest.

It's great that billionaires like Buffet and Gates always seem to turn against capitalism and the system which benefited them greatly.

The GOP is the party of the rich - except for all of the billionaires, the millionaires in Hollywood, The Hamptons, New York, DC, Atlanta, etc, etc.

*** UPDATE ***
Does Larry Kudlow read this blog? He provides this analysis of the same topic at National Review Online:
What Is Davos Drinking? [Larry Kudlow]

According to the front-page of today’s Wall Street Journal, Bill Gates is issuing a clarion call for a kinder capitalism to aid the world’s poor. Mr. Gates says he’s grown impatient with the shortcomings of capitalism. He thinks it’s failing much of the world, and he’s slated to say as much in a speech later today at the World Economic Forum in Davos, Switzerland.

This from a guy worth around $35 billion. (Give or take a billion.)

It appears Gates is ignoring the global spread of free-market capitalism that has successfully lifted hundreds of millions of people up from poverty and into the middle class over the last decade or so. Think China. Think India. Think Eastern Europe (and maybe even France under Sarkozy). Gates wants business leaders to dedicate more time to fighting poverty. But the reality is that economic freedom is the best path to prosperity. Period.

The Heritage/WSJ 2008 Index of Economic Freedom clearly shows that free-market countries are prospering mightily. Per capita GDP is closely related to, and positively correlated with, market economies. The fact is that free-market economics is spreading like wildfire. State socialism is on the decline. Unsurprisingly, the study also shows that the least-free economies are mired in poverty. We’re talking North Korea, Cuba, Zimbabwe, Iran, and others.

Also noteworthy is Venezuela’s plunge into poverty, orchestrated by the neo-socialist Hugo Chavez. His nation is sinking toward Cuba-type poverty as he attempts to adopt Fidel Castro’s failed economic model.

Check out the charts on economist Mark Perry’s Carpe Diem blog site. They show that the U.S. share of world GDP and its world stock market capitalization are shrinking. This is not a bad thing. It does not mean that America is heading downwards. On the contrary, it means that newly freed economies are heading up.

The reality here is that the rising tide of global capitalism is lifting all boats that employ it. It works. It’s a good thing. It’s the key to unlocking a nation’s prosperity.

So I just have to smile when a billionaire like Bill Gates turns a cold shoulder to the blessings capitalism bestows. Or when his buddy, Warren Buffett, broadcasts the importance of hiking tax rates on successful earners and investors. Look fellas, the command-and-control, state-run economics experiment was tried. It was called the Soviet Union. If you hadn’t noticed, it was a miserable failure.

What’s in the drinking water at this place called Davos?

01/24 12:13 PM

Mentions the Economic Freedom Index, Warren Buffet, etc... yikes!

Also, I would like to point out that the annual event at Davos seems to produce such flawed thinking. It seems that when you the wealthiest and most influential people land their private jets at the Swiss retreat, they all start to attempt to outdo each other on how much they "care" for this or that world problem.

Ridiculous. The solutions aren't going to be found at Davos. The solutions are in the human capital - the skills, dreams, and aspirations - of the billions of people that are struggling to achieve economic freedom. It's the corrupt, bureaucratic, and stupid regimes under which they live which are holding them back.

*** UPDATE 2 ***
Larry Kudlow expands on his NRO post with this column from Townhall.com. Read the whole thing, but Kudlow makes the same point that I make (although more clearly and in a single paragraph):
Gates says he has witnessed steep income and cultural inequities in his travels around the world, in particular to Africa. But for this he should blame the absence of capitalist principles, not capitalism itself. Even the most compassionate corporate executives are not going to bring prosperity to impoverished countries with statist economies. Until Africa's nations undertake the market-oriented reforms that have boosted China and the other Asian Tigers -- like South Korea and Taiwan -- they will continue to rank at the bottom of the world prosperity scale.

Good to be in such company...

Your Co-Conspirator,
ARC: St Wendeler

Comments (12)
rvr said...

YOU are obviously an idiot and have never heard of the tremendous work of the Bill & Melinda Gates Foundation. Do your research nextime you decide to slander someone.

Anonymous said...

It's libel, idiot. If your going to criticize someone, at least use the proper terminology.

St Wendeler said...

Good works through the foundation doesn't remove the possibility that something Bill says is idiotic?

Would be interesting to be sued for calling Bill an idiot. I wonder what the discovery process would be like.

And why is it that people who criticize members of this blog always seem to provide no factual analysis?

Did Gates (or Buffet for that matter) benefit from the capitalist system? Does the developed world and the poor need more or less capitalism and its requisite rule of law?

Capitalism isn't to blame for the current state of the poor in the world. The lack of capitalism is to blame.

Philip Brookes said...

Whenever I see someone's comments commence with a criticism of another as "an Idiot", I'm already anticipating less than rational debate.
In this case, I think you're 'pushing a barrow uphill' to refer to Gates as "an Idiot". Given that his operating system is pretty much ubiquitious world-wide, he's one of the richest men on the planets, his applications power most corporations, and he's devoting billions of dollars to poverty relief (the largest not-for-profit in the world!), even if he doesn't get everything 100% right I think you'd have to concede he's somewhat less than an idiot. His results, overall, are far greater than anybody else you or I have ever met.
Obviously I wasn't overly impressed with your arguments. Why? Because, aside from attacking the individual before the ideas, I feel you also grossly misjudged what Gates was saying.
For example, I don't believe he was saying that capitalism has failed (as you've assumed in your stance). Rather, he was pointing out that, to make the world a better place for the 2 billion in extreme poverty, there is an opportunity for leading business entities to play a greater role than they have done. If the largest, wealthiest and most powerful businesses in developed countries (who are best resourced to contribute in this way) were to acquire some compassion and genuinely innovate to the benefit of the poorest nations, this would bring additional resources to bear in areas which are otherwise financially deprived.
Likewise, he made no suggestion that Governments should ever force or regulate companies to become involved in this way - you've attributed a perspective to him that was not stated or implied in his interview. He was suggesting that Governments use carrots rather than sticks (and I'm guessing he was referring particularly to the wealthy nations).
I could point to a number of other similiarly poor criticisms that you made, however I think you catch my drift. If you take on board even just the two examples I've given above and revisit Bill Gates' suggestions with these in mind, I believe you'll draw some fairly different conclusions.
I might add that I don't necessarily agree in every detail with Bill Gates, and I think there's a number of other capitalist opportunities which he hasn't yet touched on, but I'm pleased to hear somebody starting to talk about the role that business can play in poverty alleviation.

St Wendeler said...

Phillip - Thanks for the rational response. The use of the term Idiot certainly is hyperbole - Gates certainly is a smart guy and (as I mentioned in my post) his innovations have "benefited millions over the years."

However, I object to the thought that the reason that the poor in the Third World are poor is because of the cruelty of capitalism - a point which Gates attempts to make, saying that he is impatient with the shortcoming of capitalism in addressing poverty. He attempts to frame his thoughts as a new and improved version of capitalism.

My point is that it is a lack of capitalism and economic freedom which is causing the current state of the poor in those countries, not the cruelty of capitalism.

In fact, as I mentioned in my post, I support Yunus Mohammed's Grameen Bank, in that it is a business focused on assisting the poor.

I don't have a problem with businesses - on their own volition or at the verbal prodding of Gates - targeting an under-served demographic and attempting to make money at it, thereby benefiting the poor and themselves. However, I doubt that many capitalists will choose to make those decisions if the environment in which those potential customers reside are as economically unfree as they are (see South Africa, Zimbabwe, etc, etc). It's not that businesses aren't interested in expanding their customer base - it's that the potential customers are in environments rife with corruption, unwieldy judicial systems, and ridiculous laws on the books..

And while certainly carrots are better than sticks, all things being equal, carrots for businesses will not eliminate the systemic and fundamental problems in these economies. Incentives to business (e.g. taxpayer money subsidizing billion-dollar corporations) is not the solution in the long-term. Working with another country's government to demonstrate to them that the road to prosperity is through liberalized systems and increased economic freedoms is a better idea in my opinion.

Anonymous said...

Gates certainly is a smart guy and (as I mentioned in my post) his innovations have "benefited millions over the years."

Why are people continually fooled into thinking that the computer and internet revolution, and the attendant benefits to society, wouldn't of existed without Bill Gates? Bill Gates' only truly major achievement in life has been to position himself as the one to most profit from all the innovation and hard work of others. Read some the history on computing platforms and those who actually created the internet and I believe you'll find that the computing world would have move forward quite nicely without Bill Gates. Further, the fact that Gates gives away what essentially is the interest on the horde of wealth he has amassed doesn't impress me one iota. He could give 98% of the principle and still live like a king the rest of his life.

St Wendeler said...

Anon - It certainly is the case that many of Gates' "innovations" were not "original thoughts." However, he was successful and shrewd in his business dealings.

And you are correct to say that the internet and the information revolution certainly would've occurred without Gates. But, he is one of the main contributors and should get some credit.

His statement about a "kinder, gentler" capitalism is still idiotic.

softwareNerd said...

Yes, it is truly sad to see someone like Gates slander Capitalism.

I don't grudge his misguided waste of his fortune, but I definitely do grudge him his soap-box when he talks hypocritically against capitalism.

You're right that he has no new solutions to offer anyway. As another blog put it: "... Gates' ... fundamental error, altruism. ... ... What's Gates solution? It's nothing new, just the good old mixed economy of course."

Philip Brookes said...

softwarenerd, do you truly see altruism as a fundamental error?

Sitting here at the comfort of my desk in Melbourne, Australia, it's easy for me to think "People should just take responsibility for themselves" and not feel the need to be altruistic.

But I can assure you that if you were born into an environment of slums, poverty, terminal illness, no education, and so on, even the strongest proponent of self-determination has got the odds stacked against them.

From a global population in excess of 6 billion people, only a minority enjoy the opportunities we do.

Please consider for a moment the anguish, heartache and incredible suffering these people go through, and then tell me whether you think altruism is an error...

softwareNerd said...

Philip,

Thanks for the comment.

As someone who was born in a third-world country, surrounded by slums, with neighbors who were considered middle-class while they use dried dung-cakes as fuel, I understand that there are millions who do not have the opportunities that are available in the west.

However, I also understand that this is not causeless. The real pity is that there is no huge and physically insurmountable task that needs to be done to remove poverty. The really critical requirement is a change in philosophy and a consequent change in politics.

China and India are in the process of demonstrating this eloquently. "All" that has changed in these countries are a few words on paper -- a few laws related to freedom to work and do business. Imagine that! change a few words on paper and you start to remove decades of poverty. No, it won;t happen overnight, but the change is evident for all to see.

Also, this comes after decades of trying other approaches: let's build schools in all the villages, let's provide water to all, let's electrify every hamlet. Multi-million dollar programs; and they all helped too. However, none of those huge altruist/socialist programs made anywhere near the difference that was made by changing a few simple words on paper.

This should give us pause, don't you think?

Anonymous said...

Bill Gates is turning or has always secretly been a communist which is just part of the New World Order agenda of the Bilderberg Group. Communist China and Communist Russia were both originally financed by Western and European banks. Creating a police state and One World Government is the real agenda of his 'generous' donation.

Anonymous said...

Gates has been good at capitalizing on publicity, for sure. As previously stated he was not responsible for any real innovation but managed to capitalize and some might even say steal the work of others to get where he is. After becoming the richest man in the world, he's gone around the world telling others that they should be MORE charitable while he only gives away a tiny fraction of his own wealth.

Then he argues that we need to bring better industry (read technology) to third world countries, where he will no doubt sell more copies of Windows. I would think a truly charitable man in his position would have given away a free version of Windows operating system to the poor so they could have access to the same resources that the wealthy enjoy. He hasn't even done that! It would have cost him almost nothing!

To the contrary, he's mercilessly gone after the phantom of piracy that's primarily a bunch of kids sharing copies of CD's that they can't afford. He's selecting out the poorest people and criminalizing them when he could be giving them something for free that they really do need.

One last point: I've given to charity many, many times. Never once have i asked for a receipt or written these donations off on my taxes. I simply did it because it was the right thing to do. How many times do you think Gates has given, and asked nothing in return?