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Jan 28, 2008

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preacherman[

Thank you for this very interesting post. It doesn't shock me at all. I hope you have a great week and keep up the great blogging!

Virgil

Michael, good post. I have been lately struggling with my own uncertainties regarding those issues. I am firsthand observing "top-dogs" making tens of millions every year while denying even the most basic cost of living payraises to the people helping them make that money.

Unlike Gates though, I try not to blame Capitalism for this, although I do tend to see that manifestation as the "dark side of Capitalism."

Perhaps you are right, and it's his guilt coming through. :)

Rob Decker

Michael:

I was much more encouraged reading the full article than you were. It says that Gates is reading both "Wealth of Nations" and "The Theory of Moral Sentiments." That's the first time I've read of a non-believer quoting the latter. He's also read "The Mystery of Capital" which addresses those concerns you mention about rule of law, etc.

Regarding Easterly, I bet he and Gates are closer than they think. Who knows what sort of well-poisoning may have occured before they met. Certainly a lot of that has happened against Paul Wolfowitz. But Gates has also criticised the lack of checks, balances, benchmarks and metrics on major international aid and charity.

Overall, considering his background and the circles in which he travels, Gates could be a significant influence.

The monkey-wrench in the works comes in impatience. The difficulty in philantropy, and the reason free markets work, is the same--the heart of man. Charity works when it happens not through institutions but through people who have hearts of compassion and character. Free Markets recognize that most people don't.

On a slightly different note, it's interesting that he notes Adam Smith. Smith said that a major thing that hinders free markets is the stifling of competion by monopolies. IMO, Gates often used the power of Microsoft in unfair business practices to stifle competition.

Michael W. Kruse

Virgil. Could be guilt. Maybe he is just figuring this stuff out.

"dark side of Capitalism" Bill Skywalker Gates. :)

Rob, I am encouraged. That he has read DeSoto is also a big plus.

Last year I read the "Origin of Wealth" by Eric Beinhocker, in which he described how Gates came out on top in the 1980s. He pursued multiple strategies simultaneously until he ferreted out which ones were working. A survival of the species approach toward technological development. That approach could render some big breakthroughs in the areas he is talking about.

Having watched this stuff for a quarter century, I’m deeply skeptical about “Big Push” approaches to solving developing nation poverty. All I’m saying is I hope he will turn a more attentive ear to the DeSotos and Easterlys of the world.

Rob Decker

Michael:

I agree. That was what I was trying to say about impatience. The frustration of not seeing societal transformation overnight is one of the factors motivating people to the "Big Push" approach. But just throwing money at a problem or, worse, legislating charity don't solve the issues.

It will be very interesting to watch, both for the impact on world developement and for the impact on Bill Gates.

An interesting model for this is what John Coors (yes, that Coors) is doing in providing propane fuel for lights and cooking in East Africa. Go to http://www.cbn.com/700club/guests/bios/Coors072106.aspx.
The model requires a participant buy in along with seed money from Cirle of Light, and a self-supporting energy coop is created. Very cool.

Steve A

Thanks for the post Michael and the thoughtful writing on economics recently.
A couple of observations--1) Gates is very, very smart. That is not an urban myth--I know him, he is truly the smartest person I have met (and I've been fortunate to meet a number of pretty smart people). 2) Consistent with that, he is intellectually curious and engaged with the issues on things important to him (like, oh, how to help the poor). 3) Don't worry much about him not appreciating the importance of the rule of law and property rights. Both of those are fundamental to Microsoft's business model and his approach to thinking about business. Bill Neukom, the current American Bar Association President, was BillG's lawyer for many, many years (General Counsel at MSFT until about 2002). He is currently championing the Rule of Law Project, which is consistent with BillN's views and passions for the last 20 or 30 years at least. BillG famously wrote a letter as a teenager about why it was wrong for people to steal other's code and give it away (in the software context)--then he built the first viable and by far most successful commercial software company when many thought there could never be a software company because IP should be/would be free. (today's current echos of that are interesting)
My reaction to the William Easterly comment was only that he is doing a bunch of big projects kind of like those that Easterly criticizes (although I would say that the Gates Foundation applies criteria, metrics and rigor to what it spends that is qualitatively different from any previous big project). If BillG were convinced that Easterly's "Burden" were correct and and applicable to the work the Foundation is doing, I expect the Foundation would be doing something different.

Michael W. Kruse

Thanks Steve. There is a long line of people who have underestimated Gates' adaptability and savvy. :)

I have no question that Gates understands property rights and rule of law. That is not the issue for me. The question is does he understand how much other people in many cultures don't get it? That is critical for economic growth to take root. This property stuff is so ubiquitous to us Westerners that we fail to grasp how unique it is to our heritage. I'm glad he has read DeSoto. The cultural factor has been the ice berg to the Titanic of a great many development efforts.

I applaud Gates and I will be excited to see what develops.

ZZMike

Bill Gates calling for a "Kinder Capitalism" is very much like the lifelong sinner who repents on his deathbed. (I notice that he acknowledges that, in the WSJ article.)

But he cites places like Soweto, and places where it is "... failing much of the world...". I would suggest that the places where it is failing, especially places like Soweto (and Darfur), are places where government and corruption are almost indistinguishable. It works here because we have the cultural mindset and the government (at least so far) to support it. If and when our government turns to socilaism, we can expect things to decline.

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