Ex-Nebraskan Jeff Raikes guides billions in search for global cures

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Posted: Sunday, June 23, 2013 12:00 am

SEATTLE — Jeff Raikes has a clear view of this city's iconic Space Needle from a hallway near his office at the Bill & Melinda Gates Foundation's headquarters.

After nearly five years as CEO of the world's biggest charitable foundation, the former Nebraska farm boy also has a clear view of its challenge: spending billions — including much of Warren Buffett's fortune — wisely toward solving the world's most intractable problems: erasing disease and poverty around the world and ending educational shortcomings in the United States.

Since he became CEO, Raikes said, the foundation and the programs that receive its money have closed in on eradicating polio, made progress on other diseases, begun seeking ways to help U.S. teachers succeed and expanded global economic development efforts.

The Bill & Melinda Gates Foundation

Headquarters: Seattle, shown above

Employment: 1,100, including 900 at the headquarters

Branch offices: London; Beijing; New Delhi; Addis Ababa, Ethiopia; Johannesburg; Abuja, Nigeria; and Washington, D.C.

Websites: gatesfoundation.org, impatientoptimists.org

Trustees: Co-chairmen Bill and Melinda Gates, William Gates Sr. and Warren Buffett.

Officers: Jeff Raikes, CEO; Christopher Elias, president, global development; Allan Golston, president, U.S. program; Geoffrey Lamb, president, global policy and advocacy; Trevor Mundel, president, global health

2012 financials

Assets: $37.18 billion

Grants: $2.67 billion

Management and general expenses: $212 million

Future grant commitments: $5.11 billion

Buffett contribution: $1.52 billion

Main areas of focus

Global development and health, $2.45 billion

>> Agricultural development; financial services for the poor; water, sanitation and hygiene; global libraries; innovative partnerships; enteric and diarrheal diseases; family planning; HIV; malaria; maternal, neonatal and child health; neglected and other infectious diseases; nutrition; pneumonia; polio; tobacco; tuberculosis; and vaccines

U.S. programs, $579 million

>> Education; U.S. libraries; Pacific Northwest anti-poverty

Source: Bill & Melinda Gates Foundation

Foundations won't last forever

Some foundations go on and on. Consider the Carnegie Foundation, which was formed in 1911, or the Rockefeller Foundation, formed in 1913, both with no end in sight.

Then there's the Bill & Melinda Gates Foundation and the foundations that will end up with 99 percent of Warren Buffett's fortune.

The Gates Foundation will spend all of its money within 50 years of the deaths of Bill and Melinda Gates, its founders and co-chairmen. He's 57 and she's 48.

Buffett's money, which he is donating in annual installments to the Gates Foundation and four Buffett family foundations, is to be spent within 10 years after his estate is settled, which would take place within about three years of his death.

The Gates Foundation explains why:

“The decision to use all of the foundation's resources in this century underscores our optimism for progress and determination to do as much as possible, as soon as possible, to address the comparatively narrow set of issues we've chosen to focus on.”

Buffett's explanation, in his 2006 annual letter to Berkshire Hathaway shareholders:

“I've set this schedule because I want the money to be spent relatively promptly by people I know to be capable, vigorous and motivated. These managerial attributes sometimes wane as institutions — particularly those that are exempt from market forces — age. Today, there are terrific people in charge at the five foundations. So at my death, why should they not move with dispatch to judiciously spend the money that remains?

“Those people favoring perpetual foundations argue that in the future there will most certainly be large and important societal problems that philanthropy will need to address. I agree. But there will then also be many super-rich individuals and families whose wealth will exceed that of today's Americans and to whom philanthropic organizations can make their case for funding.

“These funders can then judge firsthand which operations have both the vitality and the focus to best address the major societal problems that then exist. In this way, a market test of ideas and effectiveness can be applied. Some organizations will deserve major support while others will have outlived their usefulness.

“Even if the people above ground make their decisions imperfectly, they should be able to allocate funds more rationally than a decedent six feet under will have ordained decades earlier.”

— Steve Jordon

Under Raikes' leadership and the shepherding of its board of trustees, the foundation also is expanding its advocacy role to bring the resources of the world's governments to bear on the same problems.

Raikes has overseen changes designed to speed delivery of the foundation's innovations — a mosquito-repelling coil of incense and improved toilets, for example — to the people who need them most. And he emphasizes rapid feedback from the groups that receive Gates grants for their work, measuring success by lives saved, families lifted from poverty and students succeeding in school.

Some critics say the foundation's oversized spending can stifle other improvement efforts. And there have been some detours, when a plan doesn't work but shows another road to a solution.

“We only fail if we don't learn,” Raikes said. “We need to be risk-takers.”

Like a satellite-guided tractor on the family farm near Ashland, Neb., Raikes' 1,100-person, tech-savvy staff is aimed squarely at goals set by his bosses: Microsoft co-founder Gates, his wife, Melinda, and father, Bill Sr., and Buffett, who donates about $1.6 billion a year to the foundation.

Recently $100,000 of foundation money reached University of Nebraska Medical Center Professor Thomas McDonald, who tested whether a certain protein prevents the infectious diarrhea that kills millions of children around the world each year.

“It was kind of a shot in the dark,” McDonald said, but with promising science behind it. “You would never get this funded through the National Institutes of Health. It's kind of a springboard type of research to prove the concept.

“We got positive data. It stopped the bugs from causing pathology in the intestines. By God, it looks good.”

He said the Gates Foundation representatives were “incredibly great,” responding quickly to his questions and helping hustle his results to the next level like a baton in a relay race.

“They always talk about global, global, global,” McDonald said. “They're just super good to work with. They far exceeded anything I've ever worked with.”

Multiply McDonald's results by the thousands and you have an idea of the scope of the foundation's $3 billion a year in grant support.

When Raikes came aboard in 2008, the foundation had been working for a decade and had three years of contributions by Buffett, the chairman and CEO of Omaha-based Berkshire Hathaway Inc.

Now, Raikes said in a recent interview in his office, the Gates Foundation's voice is being heard worldwide, including by government leaders who command most of the world's human and financial resources. The foundation now lists advocacy as one of its major objectives.

“We can shine a spotlight on the issues that are most important,” Raikes said. “The voice of the foundation is a catalyst,” showing potential solutions to policy makers and engaging public and government support.

Last month, for example, Melinda Gates was a featured speaker at the “Women Deliver” conference in Kuala Lumpur, Malaysia. In December she and British Prime Minister David Cameron were speakers in a conference on family planning in London. In 2011, Bill Gates became one of few nonpolitical leaders to address heads of the Group of 20 nations in Cannes, France.

“Advocacy and awareness are crucial to any philanthropic effort,” Raikes said. “Inspiring people to get engaged and the power of collaboration among partners is what helps drive change.”

At his desk in Seattle, his twin computer monitors are reminders of his days as the No. 3 executive at Microsoft Corp., where he retired with a fortune estimated at $450 million. A few days later, he took the foundation job.

Now 55, Raikes has adjusted to the nonprofit world, where the relationship between the foundation and its “customers” is vastly different from the business-customer relationship.

In his first few months as the foundation's leader, Raikes outlined goals aimed at getting the best from its staff and partner groups that receive its grants. Since then, he said, he has seen progress.

The foundation's partners are mostly nonprofit agencies, scientific research teams and others that carry out such day-by-day work as vaccinating children in India, helping U.S. teachers reach their potential and improving agriculture in Africa.

Averaged over 15 years, grants make up 89 percent of the Gates Foundation's annual expenses, not counting other money, such as low-interest loans, to support programs. The foundation listed 2012 management and general expenses of $212 million, or 6.3 percent of its total $3.35 billion in expenses.

The Better Business Bureau recommends that less than 35 percent of a nonprofit group's expenses go for nonprogram spending. Most national charity rating groups don't list the Gates Foundation because it doesn't solicit donations from the public.

The foundation's headquarters, opened in 2011, was built with a separate $350 million gift from Bill and Melinda Gates. Its two main buildings have plenty of open areas where people can see one another and talk, reflecting one of the foundation's basic values: collaboration.

About 900 of the foundation's staff members work in the six-floor, 900,000-square-foot headquarters, built on 12 acres of former parking lots next door to the Space Needle and the Seattle Center. Plans call for adding a third building to house future growth. The buildings received a top environmental rating.

During a recent visit, a dozen people discussed youth development in a glass-walled meeting room. In a wide hallway, another group wearing name tags, finished with business, relaxed with glasses of wine and snacks. In the atrium, people in groups of two or three were deep in conversation or tapping on laptops.

The foundation has a challenging task but a simple motto: “Every person deserves the chance to live a healthy, productive life.”

Getting there is the difficult part, and every year Raikes holds 50 or so “strategy review sessions” with the people who supervise dozens of initiatives that move, bit by bit, toward that goal. “I'm rolling up my sleeves and trying to help the team,” Raikes said.

Success on one front is looming, partly because of the use of new technology.

In 2011, leaders of the foundation's anti-polio campaign were puzzled. Vaccination teams reported massive numbers of children being vaccinated, but the disease was still showing up in pockets of some countries, such as northern Nigeria. So the foundation equipped the vaccination teams with Global Positioning System trackers.

The tracking showed that the teams were missing at least 2,000 villages that were hidden in the remote area. “They were using cartoon maps,” that looked real but didn't show actual locations of the settlements, Raikes said. Now the teams have accurate maps and polio is disappearing in the region.

Raikes said it's possible that polio could be certified eradicated worldwide by 2016. The polio experience illustrates the “distorted power relationship” that can interfere with success in the nonprofit world, he said.

A business is constantly receiving true feedback from customers, who will buy a product or service only if it gives them value. But with the “customer” of a nonprofit foundation, the tendency is to keep doing and saying things that will keep the grants flowing, no matter what.

As a result, Raikes said, the Gates Foundation focuses on “actionable measurement” by its grantees to reveal the true outcome of each program. Sometimes measurements dictate changing a program to sharpen its focus or ending it altogether.

For example, several years ago the foundation advocated splitting large U.S. high schools into smaller high schools on the theory that students would thrive in smaller settings. But the key measurement of high school dropouts showed that “sometimes that worked, and sometimes it didn't,” Raikes said.

Instead, the common thread with successful schools, small or large, turned out to be having methods in place to help teachers be more effective and successful.

Yet the Seattle Times reported that many teachers view the foundation as unfairly blaming teachers for educational shortcomings. The foundation advocated policies that would make it easier to fire teachers and set their pay on performance according to student test scores.

A foundation-promoted film called “Waiting for Superman,” in which Gates appeared, put the blame for U.S. education problems on teachers unions.

Raikes said the foundation is but one voice among many on education issues. Recently, the foundation's education team leaders began to bring more teachers into the discussion about improving education, saying they want to support teachers, not criticize or fire them. The foundation's changes are starting to gain support from teacher groups, the Seattle Times reported.

In 2007, the chief of malaria for the World Health Organization, Dr. Arata Kochi, complained that the Gates Foundation's work on malaria risked stifling a diversity of views among scientists working to eradicate the disease. Because it spends so much money on areas of research it favors, he told the New York Times, other research proposals have trouble getting funds.

Dr. Tadataka Yamada, executive director of global health at the Gates Foundation, said at the time that the foundation encouraged external review of its research and does not “hold captive” its grant recipients or prevent other research.

Raikes said the foundation learns from its critics.

“In philanthropy, we don't have competitors, but we do have critics,” Raikes said. “Competition and critics are good. They help us make the right choices. They test our conviction. And so in this sense, they could be seen as part of the team we must engage and who will drive us forward to greater impact.”

Raikes said part of his job, and the jobs of other top-level staffers, is to keep connected so related efforts can work together. Much of his time is at the office in Seattle, but he also travels, this year planning trips to Africa and India. The foundation's annual reports show him on the scene with Gates-funded workers abroad.

Buffett's annual donations have expanded the foundation's work in the existing areas, rather than adding new programs. The Buffett money especially added to the foundation's global development program, which includes improvements in agriculture.

Buffett and Gates met in 1991 through Gates' parents and developed a close friendship and business relationship.

Gates said in an online commentary recently that he turned to Buffett for advice when he and Melinda started their foundation.

“We talked a lot about the idea that philanthropy could be just as impactful in its own way as software had been,” Gates said. “It turns out that Warren's brilliant way of looking at the world is just as useful in attacking poverty and disease as it is in building a business.”

Buffett has said that when he decided to delegate his philanthropic work to others, he picked the Gates Foundation because it was the most effective he could find and was run by energetic, dedicated people. When Raikes was appointed, Buffett praised him for his “extraordinary mind and an uncompromising commitment to getting the job done.”

Although Raikes has been in Seattle most of his working life, farming is still close to his heart, and he returns to Nebraska several times a year. He said he relays the values he learned growing up each month in talks with new employees.

Everyone on the foundation's staff wants to save the world, he says, but some jobs are more fun than others.

“Everyone wants to drive the tractor,” he tells new employees. “But sometimes everyone has to shovel pig manure. That's a real job, too.”

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