Gates & Buffett: transformational gifts can change the world.

In the 20th century, it was Carnegie and Rockefeller. These days, it's Gates and Buffer who are leading the charge for philanthropy. Following on the heels of Bill Gates' announcement that he will be stepping away from day-to-day operations at Microsoft Corp. to devote more time to his foundation, Warren Buffett announced last month his plan to give 10 million shares of Berkshire Hathaway stock to the Bill and Melinda Gates Foundation.

The contribution is expected to be worth $1.5 billion annually but could increase if shares of Buffett's holding company increase as well. The current total value of the shares is approximately $30 billion. The plan is to distribute 5 percent each year.

"I think it's unusual, not just in terms of the size and the amount, but because of the fact that Buffett is giving to another philanthropist, rather than his own foundation and ramping up what he wants to do," said Dwight Burlingame, associate executive director of The Center on Philanthropy at Indiana University.

It could be a signal for the rest of the philanthropic community, said Burlingame, and indicative of what might be happening in the next generation of wealth transfer. Others who plan on making massive contributions "might ask themselves, 'Who else is doing what I want do?,' and I think that's a good sign," he said.

"It also speaks well for the generation that has made their money at the end of the 20th century," Burlingame added, "and gives hope to the future of philanthropy that we might actually spur others and push that percentage going to charity in terms of the 2 percent of national Income that goes to philanthropy."

Buffett's gift is contingent upon Bill and Melinda Gates remaining alive and active in running the foundation, and also requires that his donation be distributed in the year it's given.

"Warren Buffett's tremendous gift to the philanthropic sector represents a new milestone in charitable giving that will advance the common good for generations to come," Steve Gunderson, president and CEO of the Council on Foundations, said in a statement. "We will continue to see a dramatic growth in philanthropy. We are witnessing a new era of visionary leadership where the Gates Foundation and many others are providing philanthropic leadership as the architects of social change."

Diana Aviv, president and CEO of Independent Sector, said the Buffett contribution sends a very important message: that if you combine forces and share resources, without the expenses and overhead of creating another foundation, you can be more effective and give more over time to the group in which you invested in the first place, for a greater impact.

"It's a message to business leaders that they ought to be involved in the philanthropic world" Aviv said. She said that she expects the contribution to stimulate giving in a distinctive way, with the message from Buffett while he's still alive: that it's time to give back to society during his lifetime.

"It's unlike anything that's ever been done," said Doug Bauer, senior vice president at Rockefeller Philanthropy Advisors. In addition to spurring additional giving from the wealthy, he hopes it encourages donors to work together and more collaboratively. For two business juggernauts like Gates and Buffett to be able to work together through the Gates Foundation, "In a field not well known for collaboration that the two wealthiest men in country can do it I hope does send a signal."

Already the largest charitable foundation in the nation with some $30 billion in assets, the Bill and Melinda Gates Foundation focuses on improving health, reducing extreme poverty, and increasing access to technology in public libraries.

While the Gates Foundation is one of his favorite charities, Rick Cohen, executive director of the National Committee on Responsive Philanthropy, worries "about the concentration of so much philanthropic capital in one institution that's already bigger than the GDP of many countries. In a society where concentration of wealth is an issue, I don't think philanthropy is immune."

It raises real questions, said Cohen, "about what it means to control that much wealth in one institution. At a minimum it poses a challenge to the Gates Foundation to open the foundation to as much public input and as many diverse viewpoints as possible because with the doubling of its assets, given how big it already is, it's a quadrupling of questions and challenges of accountability to the public over the disposition of those assets."

The size of the gift and foundation, "certainly cause us to think about the issue of power and transparency," Burlingame said. "Is this size going to be so large that people will ask the question, if it should be, what is the accountability back to the public, is there adequate accountability," he said, the very question that congressional leaders have been asking.

Burlingame expects the issue of foundation oversight and regulation to come to the forefront, since it's been almost 40 years since the last time any major revision was made in that area. "There are some implications for sure that we can in fact keep the voluntary transparency and accountability within the systemcurrently there," he said.

Aviv countered that a charity does not have to be very small to be very good or very large to be bureaucratic and nontransparent. "The quality of a charity can be directly assessed by the quality of its leadership," she said, arguing that the charities set up by disgraced Washington lobbyist Jack Abramoff were not large.

"Over time, in the final analysis, if we solve the problem of AIDS and provide vaccines to the developing worlds and the developed world, if we're able to raise the standard of education in the schools then the work of the Bill & Melinda Gates Foundation will have been worth 'every bit its weight in gold," said Aviv.

Buffett's philanthropic strategy is not dissimilar from his business strategy: investing in high-value companies and letting those who operate them continue with their expertise, rather than trying to start his own. "I'm gettIng two people enormously successful at something, where I've had a chance to see what they've done, where I know they will keep doIng it," said Buffett.

Initially, Buffett's plan was to disburse his wealth to philanthropy after his death. "If I've found the right vehicle for my money, there's no reason to wait," he said at a town hall meting in New York.

"I came to realize there was a terrific foundation that was already scaled-up--that wouldn't have to go through the real grind of getting to a megasize like the Buffett Foundation would--and that could productively use my money now," Buffet told Fortune magazine.

"Over the years, I had gotten to know Bill and Melinda Gates well, spent a lot of time with them having fun and, way beyond that, had grown to admire what they were doing with their foundation," Buffett told Fortune. He said the timing of his announcement with Gates' to focus on his foundation "is just happen-stance. I would be disclosing my plans right now whether or not he had announced his move--and even, in fact, if he were indefinitely keeping on with all of his work at Microsoft."

In a statement, Bill and Melinda Gates said they were "awed" by Buffett's decision "to use his fortune to address the world's most challenging inequities, and we are humbled that he has chosen to direct a large portion of it to the Bill & Melinda Gates Foundation."

In all, Buffett plans to give away more than 12 million shares of his holding company's stock, the vast majority to the Gates Foundation but also to other foundations run by his children: one million shares to the Susan Thompson Buffett Foundation, named for his late wife; 350,000 shares to the Susan A. Buffett Foundation, chaired by his daughter; 350,000 shares to the Howard G. Buffett Foundation, set up by his son; and 350,000 shares to the NoVo Foundation, operated by Peter Buffett and his wife.

Asked how he would want to be portrayed in history books, Buffett said at the town hall meeting, "I hope it reinforces the model used more infrequently; where philanthropists think about not just where their wealth goes--but also in the most efficient manner. "That they seek out talent to distribute wealth the way they seek it out to accumulate it."