2009 Annual Letter from Bill Gates, Page 2
Progress on AIDS
On the AIDS front, you have probably read articles talking about failed trials of vaccines and microbicides. (A microbicide is a gel that a woman can use to protect herself from getting infected.) Although these results are setbacks, in each case we are learning and moving ahead with improved approaches. I am quite hopeful that in the next four to six years we will have either a pill or a microbicide that people can use to protect themselves temporarily from getting HIV. When used on a large scale they will dramatically reduce the annual rate of infection, which is currently 2.7 million. I feel a huge sense of urgency to make sure a pill or microbicide is developed as soon as possible. There are some great scientists working on this, and I am spending lots of time asking them what the bottlenecks are and understanding how we can make faster progress. The intensity reminds me of my time at Microsoft, when we were competing with other companies to make the best database or word processor. However, in this case the competitor is a virus and all of humanity is on the same team, wanting to work together to defeat the virus.
When we get a vaccine it will be even more impactful than a pill or a microbicide, because a vaccine will protect people for much longer. But given the complexities involved, even with the great work being done, it is very likely to be more than 10 years before we have one in widespread use.
To stay alive, people with HIV need to start using anti-retroviral drugs before their immune systems become weakened, usually within five years of becoming infected. In 2003, only 400,000 people were being treated, and now some 3 million are. That is a phenomenal increase. The biggest reason for it is that the United States funded the President’s Emergency Plan for AIDS Relief and managed the effort very well. In addition the United States, along with a number of other countries, has funded the Global Fund for AIDS, Tuberculosis, and Malaria. This is a good example of how scientific innovations, in this case the invention of anti-retroviral drugs, can reach the poorest with help from governments, foundations, and drug companies. Although less than 5 percent of people with HIV/AIDS live in rich countries, it was the market demand from these wealthier patients that drove the large R&D investment in these drugs.
Progress on Malaria
Malaria kills nearly 1 million children per year, but companies and governments have invested very little in new drugs and vaccines because the disease has been eliminated from rich countries. Malaria has a fascinating history. Several Nobel prizes were given to scientists who helped us understand key facts about it—in 1902, 1907, 1927, and 1948. Malaria used to be a serious problem in large parts of the United States, but it was eliminated here by 1951 by large-scale campaigns to kill the mosquitoes that transmit the disease.
Fortunately, the past five years have seen a huge increase in the level of interest and investment in malaria. The foundation can probably take some credit for the increased level of interest in global health in general and malaria in particular. Bono also deserves a lot of credit for his work through ONE. I remember talking with him in 2004 about whether we could ever hope to have candidates discussing these issues during a political campaign. So during the recent U.S. presidential campaign it was fantastic that both Barack Obama and John McCain spoke out on how they would increase funding for global health, including specific commitments on malaria. It is also very exciting that donations from individuals to buy life-saving bed nets have soared.
Malaria is a very tricky disease. The world hoped in the 1950s and 1960s that it could be eliminated by killing mosquitoes with DDT, but that tactic failed when the mosquitoes evolved to be resistant to the chemical. Today a number of new tools are being developed—better bed nets, better drugs, better insecticides, and a number of vaccine candidates. One of the vaccines will go into the last phase of human trials this year and could be ready for wide use by 2014. None of these tools is perfect. To understand how we should combine them, we brought in an expert in mathematical modeling who is applying a technique called Monte Carlo Simulations. This modeling work, which will show where we can eliminate malaria and where we can just reduce the disease burden, is a wonderful use of advanced mathematics to save lives, and if it goes as well as I expect, we will apply it to other diseases. The malaria community has a goal to reduce deaths by over half by 2015, which is aggressive, but it is in line with the results in communities where bed nets and other tools have been rolled out.
The Role of Foundations
A key question for Melinda and me is, Where are foundations uniquely suited to causing positive change? Foundations are not needed in areas where capitalistic market signals work well and the poorest aren’t left out. If someone told you there was a foundation looking into what kind of restaurants should be started and helping them get started, you would rightly wonder why nonprofit dollars were being spent in that way. Foundations provide something unique when they work on behalf of the poor, who have no market power, or when they work in areas like health or education, where the market doesn’t naturally work toward the right goals and where the innovation requires long-term investments. These investments are high-risk and high-reward. But the reward isn’t measured by financial gain, it’s measured by the number of lives saved or people lifted out of poverty.
To stay alive, people with HIV need to start using anti-retroviral drugs before their immune systems become weakened, usually within five years of becoming infected. In 2003, only 400,000 people were being treated, and now some 3 million are. That is a phenomenal increase. The biggest reason for it is that the United States funded the President’s Emergency Plan for AIDS Relief and managed the effort very well. In addition the United States, along with a number of other countries, has funded the Global Fund for AIDS, Tuberculosis, and Malaria. This is a good example of how scientific innovations, in this case the invention of anti-retroviral drugs, can reach the poorest with help from governments, foundations, and drug companies. Although less than 5 percent of people with HIV/AIDS live in rich countries, it was the market demand from these wealthier patients that drove the large R&D investment in these drugs.
Progress on Malaria
Malaria kills nearly 1 million children per year, but companies and governments have invested very little in new drugs and vaccines because the disease has been eliminated from rich countries. Malaria has a fascinating history. Several Nobel prizes were given to scientists who helped us understand key facts about it—in 1902, 1907, 1927, and 1948. Malaria used to be a serious problem in large parts of the United States, but it was eliminated here by 1951 by large-scale campaigns to kill the mosquitoes that transmit the disease.
Fortunately, the past five years have seen a huge increase in the level of interest and investment in malaria. The foundation can probably take some credit for the increased level of interest in global health in general and malaria in particular. Bono also deserves a lot of credit for his work through ONE. I remember talking with him in 2004 about whether we could ever hope to have candidates discussing these issues during a political campaign. So during the recent U.S. presidential campaign it was fantastic that both Barack Obama and John McCain spoke out on how they would increase funding for global health, including specific commitments on malaria. It is also very exciting that donations from individuals to buy life-saving bed nets have soared.
Malaria is a very tricky disease. The world hoped in the 1950s and 1960s that it could be eliminated by killing mosquitoes with DDT, but that tactic failed when the mosquitoes evolved to be resistant to the chemical. Today a number of new tools are being developed—better bed nets, better drugs, better insecticides, and a number of vaccine candidates. One of the vaccines will go into the last phase of human trials this year and could be ready for wide use by 2014. None of these tools is perfect. To understand how we should combine them, we brought in an expert in mathematical modeling who is applying a technique called Monte Carlo Simulations. This modeling work, which will show where we can eliminate malaria and where we can just reduce the disease burden, is a wonderful use of advanced mathematics to save lives, and if it goes as well as I expect, we will apply it to other diseases. The malaria community has a goal to reduce deaths by over half by 2015, which is aggressive, but it is in line with the results in communities where bed nets and other tools have been rolled out.
The Role of Foundations
A key question for Melinda and me is, Where are foundations uniquely suited to causing positive change? Foundations are not needed in areas where capitalistic market signals work well and the poorest aren’t left out. If someone told you there was a foundation looking into what kind of restaurants should be started and helping them get started, you would rightly wonder why nonprofit dollars were being spent in that way. Foundations provide something unique when they work on behalf of the poor, who have no market power, or when they work in areas like health or education, where the market doesn’t naturally work toward the right goals and where the innovation requires long-term investments. These investments are high-risk and high-reward. But the reward isn’t measured by financial gain, it’s measured by the number of lives saved or people lifted out of poverty.
Foundations are unusual because they don’t have to worry about being voted out at the next election or board meeting. But I do not hold them out as a panacea. Another way that running a foundation is not like running a business is that you don’t have customers who beat you up when you get things wrong or competitors who work to take those customers away from you. You don’t have a stock price that goes up and down to tell you how you’re doing. This lack of a natural feedback loop means that we as a foundation have to be even more careful in picking our goals and being honest with ourselves when we are not achieving them.
We work hard to get lots of feedback. Each of our three divisions has gotten great people to participate in an advisory panel that reviews their strategies. In addition, every significant grant is reviewed by a number of outside experts. And as we execute our strategies, we need to share what we learn, because the biggest leverage is in getting many others to adopt best practices. Since we are in this for the long run, we need to develop credibility by the strength of our evidence, and by not claiming to know more than we do.
Every year, Melinda and I want to make sure we are taking a hard look at where the foundation should get involved and where it should stay out. In the areas we work in, we want to make sure the foundation is drawing in other players in the best way we can. Given the business sector’s broad expertise and resources, we particularly need to get more of its innovation power focused on our issues. I have spoken a lot in the past year about “creative capitalism,” which outlines the incentives and benefits to make this happen. Next year I hope to have some examples of how this has made a difference.
The Economic Crisis
The financial market and economic conditions that have developed this past year are truly unprecedented. I hope two years from now when I write this letter I can look at this section as a reflection of something that was short-term and that has passed, but I think the effects of the crisis will last beyond that.
Warren recently sent me an excerpt from John Maynard Keynes’ essay “The Great Slump of 1930,” which applies to this crisis as well:
"This is a nightmare, which will pass away with the morning. For the resources of nature and men’s devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life—high, I mean, compared with, say, twenty years ago—and will soon learn to afford a standard higher still. We were not previously deceived. But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time—perhaps for a long time."
If you take a longer timeframe, such as five to 10 years, I am very optimistic that these problems will be behind us. A key reason for this is that innovation in every field—from software and materials science to genetics and energy generation—is moving forward at a pace that can bring real progress in solving big problems. These innovations will help improve the world and reinvigorate the world economy.
Looking specifically at the foundation, our assets decreased in value by about 20 percent in 2008. I never thought I would say losing 20 percent is a reasonable result, but it is better than most endowments because so many asset classes went down by more than 20 percent in 2008. The team led by Michael Larson that handles the investments has always done a great job. During the past five years, as the foundation was growing, we spent a bit over 5 percent of its assets each year in addition to the gift from Warren. There is nothing magic about the 5 percent figure, except that it is the minimum required by the IRS. Our spending in 2008 was $3.3 billion. In 2009, instead of reducing this amount, we are choosing to increase it to $3.8 billion, which is about 7 percent of our assets.
Although spending at this level will reduce the assets more quickly, the goal of our foundation is to make investments whose payback to society is very high rather than to pay out the minimum to make the endowment last as long as possible.
We work hard to get lots of feedback. Each of our three divisions has gotten great people to participate in an advisory panel that reviews their strategies. In addition, every significant grant is reviewed by a number of outside experts. And as we execute our strategies, we need to share what we learn, because the biggest leverage is in getting many others to adopt best practices. Since we are in this for the long run, we need to develop credibility by the strength of our evidence, and by not claiming to know more than we do.
Every year, Melinda and I want to make sure we are taking a hard look at where the foundation should get involved and where it should stay out. In the areas we work in, we want to make sure the foundation is drawing in other players in the best way we can. Given the business sector’s broad expertise and resources, we particularly need to get more of its innovation power focused on our issues. I have spoken a lot in the past year about “creative capitalism,” which outlines the incentives and benefits to make this happen. Next year I hope to have some examples of how this has made a difference.
The Economic Crisis
The financial market and economic conditions that have developed this past year are truly unprecedented. I hope two years from now when I write this letter I can look at this section as a reflection of something that was short-term and that has passed, but I think the effects of the crisis will last beyond that.
Warren recently sent me an excerpt from John Maynard Keynes’ essay “The Great Slump of 1930,” which applies to this crisis as well:
"This is a nightmare, which will pass away with the morning. For the resources of nature and men’s devices are just as fertile and productive as they were. The rate of our progress towards solving the material problems of life is not less rapid. We are as capable as before of affording for everyone a high standard of life—high, I mean, compared with, say, twenty years ago—and will soon learn to afford a standard higher still. We were not previously deceived. But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time—perhaps for a long time."
If you take a longer timeframe, such as five to 10 years, I am very optimistic that these problems will be behind us. A key reason for this is that innovation in every field—from software and materials science to genetics and energy generation—is moving forward at a pace that can bring real progress in solving big problems. These innovations will help improve the world and reinvigorate the world economy.
Looking specifically at the foundation, our assets decreased in value by about 20 percent in 2008. I never thought I would say losing 20 percent is a reasonable result, but it is better than most endowments because so many asset classes went down by more than 20 percent in 2008. The team led by Michael Larson that handles the investments has always done a great job. During the past five years, as the foundation was growing, we spent a bit over 5 percent of its assets each year in addition to the gift from Warren. There is nothing magic about the 5 percent figure, except that it is the minimum required by the IRS. Our spending in 2008 was $3.3 billion. In 2009, instead of reducing this amount, we are choosing to increase it to $3.8 billion, which is about 7 percent of our assets.
Although spending at this level will reduce the assets more quickly, the goal of our foundation is to make investments whose payback to society is very high rather than to pay out the minimum to make the endowment last as long as possible.
The global recession and market turmoil are forcing everyone to take a hard look at their plans. Businesses and consumers are cutting back on spending. The 50-year-long credit expansion that fueled high spending levels, particularly in the United States, has turned into a credit contraction. Governments face revenue shortfalls at the same time their citizens need government services more than ever. A great example of this is education. Recent improvements taking place in K-12 education could be reversed because of budget cuts. State-funded two-year and four-year colleges will see record demand but may also face spending cuts. As governments respond to the crisis, they need to protect these investments even as they spend to stimulate the economy. In the United States only the federal government can do deficit spending and increase its investment in long-term goals like education. I am impressed with the way President Obama has talked about the need to do both and has his team looking at investments that fulfill both goals.
Like education funding, I see foreign aid that is spent wisely as being a smart thing even during these tough times. I hope the United States and other rich countries will continue to increase their aid, and when I meet with political leaders I encourage them to do so. The British prime ministers Tony Blair and Gordon Brown have been great about this. The most generous aid givers in proportion to the size of their economy are Norway, Sweden, Denmark, and the Netherlands. By this measure the big European countries are quite a bit more generous than the United States. Most of those that were not already large donors have increased significantly since the European Union and G-8 made new commitments in 2005. The current Italian government stands out because it is not only falling short on the increases but is actually cutting its aid budget. I don’t think this is because Italians care less about the issues, so I’m hopeful the government will find a way to restore this funding as part of its policy proposals when it hosts a G-8 summit this year.
Like education funding, I see foreign aid that is spent wisely as being a smart thing even during these tough times. I hope the United States and other rich countries will continue to increase their aid, and when I meet with political leaders I encourage them to do so. The British prime ministers Tony Blair and Gordon Brown have been great about this. The most generous aid givers in proportion to the size of their economy are Norway, Sweden, Denmark, and the Netherlands. By this measure the big European countries are quite a bit more generous than the United States. Most of those that were not already large donors have increased significantly since the European Union and G-8 made new commitments in 2005. The current Italian government stands out because it is not only falling short on the increases but is actually cutting its aid budget. I don’t think this is because Italians care less about the issues, so I’m hopeful the government will find a way to restore this funding as part of its policy proposals when it hosts a G-8 summit this year.
Although it will be difficult to keep aid-related issues on the front page during this crisis, we need to meet the challenge by making sure the success stories are told and making sure that inequity that is out of sight is not out of mind. Only with broad public awareness and voter interest will we keep aid on the positive track it needs to stay on.
I am impressed by individuals who continue to give generously even in these difficult times. I believe that the wealthy have a responsibility to invest in addressing inequity. This is especially true when the constraints on others are so great. Otherwise, we will come out of the economic downturn in a world that is even more unequal, with greater inequities in health and education, and fewer opportunities for people to improve their lives. There is no reason to accept that, when we know how to make huge gains over the long term.
In Closing
The commitment that Melinda and I have made to this work is not dependent on it being easy or short-term. We can make this commitment because of the amazing people we meet whenever we travel for the foundation. I want to close this letter with a story about one person we met when we visited some schools in Texas last year. At Lee High School in Houston, we met a principal named Cesar Alvarez. Cesar told us about a student who had come to school as a freshman three years before and was in a gang. He was far behind in school, and he wouldn’t even talk in class. Cesar got very involved with this student and worked with him every day. Today the student is a senior, on course to graduate, and planning to go to college. When Cesar came to this part of the story, he broke down and cried, because he had worked so hard and practically worn himself out for that student.
I am impressed by individuals who continue to give generously even in these difficult times. I believe that the wealthy have a responsibility to invest in addressing inequity. This is especially true when the constraints on others are so great. Otherwise, we will come out of the economic downturn in a world that is even more unequal, with greater inequities in health and education, and fewer opportunities for people to improve their lives. There is no reason to accept that, when we know how to make huge gains over the long term.
In Closing
The commitment that Melinda and I have made to this work is not dependent on it being easy or short-term. We can make this commitment because of the amazing people we meet whenever we travel for the foundation. I want to close this letter with a story about one person we met when we visited some schools in Texas last year. At Lee High School in Houston, we met a principal named Cesar Alvarez. Cesar told us about a student who had come to school as a freshman three years before and was in a gang. He was far behind in school, and he wouldn’t even talk in class. Cesar got very involved with this student and worked with him every day. Today the student is a senior, on course to graduate, and planning to go to college. When Cesar came to this part of the story, he broke down and cried, because he had worked so hard and practically worn himself out for that student.
Melinda and I see this kind of dedication around the world and in every issue the foundation works on. It inspires us to help people do great work, and we feel very lucky to be able to support them. I know the foundation will have its share of setbacks. But I feel sure I will have lots of success stories to share in the years ahead.
Bill Gates
Co-chair, Bill & Melinda Gates Foundation
January 2009
Source: http://www.gatesfoundation.org
Bill Gates
Co-chair, Bill & Melinda Gates Foundation
January 2009
Source: http://www.gatesfoundation.org
