June 26, 2006 -- Warren Buffett, the world's second-richest man, is making an unprecedented donation to the foundation run by the world's richest man, Microsoft CEO Bill Gates.
Buffett, 75, the CEO of the Omaha, Neb.-based company Berkshire Hathaway, is worth $44 billion, according to Fortune magazine.
Fortune reports that Buffett will donate 85 percent of his fortune amassed from stock in the Berkshire Hathaway company to five foundations.
The donations, which will come from Buffett's Berkshire Hathaway shares, would amount to about $37 billion, based on current values.
Five-sixths of the money reportedly will go to The Bill & Melinda Gates Foundation, which specializes in finding cures for diseases that plague impoverished nations.
His first annual donation is expected to be about $1.5 billion. The only catch, according to Fortune, is that Buffett wants his money to be used by the foundation the same year he donates it.
The rest of the money will go to four other foundations headed by Buffett's three children, and to the foundation in his late wife's name.
Buffett is expected to discuss his donation and philanthropy in America with the Gateses today at the historic New York Public Library at 42nd Street.
Mellody Hobson, "Good Morning America's" financial contributor and president of Ariel Capital Management, said Buffett's act of generosity was a defining moment in the history of business and philanthropy.
"There are some really smart people in government, but business leaders are often in a better position to help because they are not encumbered by the status quo and can more easily think out of the box," Hobson said.
Private Sector Philanthropy
The private sector often has more money at its disposal as well.
For example, the Red Cross' budget is $3.4 billion, a little more than one-tenth of The Gates Foundation assets, $29.1 billion. According to the Financial Times, it's the world's largest charity.
"Once the Buffett donation is complete, there would be enough money to fund the Red Cross for 20 years," Hobson said. "It's the same story for United Way, which spends about $3.8 billion a year. It's just a drop in the bucket next to what The Gates Foundation now has."
Gates and Buffett have been friends for years.
"They have a lot of fun together," said Carol Loomis, the editor at large of Fortune magazine. "They play some bridge together. They've been on trips."
Gates and Buffett share the philosophy that giving your children too much money is a burden, not a gift, and is not a rational thing to do with all that wealth.
Seven years ago, Buffett told ABC News' "Nightline" that being born into wealth did not entitle his children to fortune.
You Can't Take It With You
"Buffett once told Fortune magazine: 'A very rich person would leave his kids enough to do anything, but not enough to do nothing,'" Hobson said.
"He says he and his wife talked about it and decided they shouldn't pass huge amounts of money along to their children. They believe their kids were born with the advantages of wealth, and grew up with great opportunities because of that. He says they had a gigantic head start, and that dynastic megawealth would further tilt the playing field in America, when we should be trying to make it more level."
Buffett is rich, observers say, but he has simple tastes and a simple philosophy.
"The money has never meant much to him," Loomis said. "He still lives in the same house he lived in 40 years ago. He just is not interested in spending a lot of money."
Buffett, often called "Oracle of Omaha" for his uncanny ability to understand financial markets, is the first person to make a donation large enough to rival the money that the Gateses have spent on the foundation.
An unsigned statement from The Gates Foundation said Bill and Melinda Gates were "awed" by Buffett's decision.
According to Fortune magazine, Buffett will join The Gates Foundation as a trustee once his donations begin.
Fortune magazine estimates Bill Gates' wealth at approximately $50 billion and has named him the world's richest person for 12 consecutive years. In 1999, toward the end of the dot-com boom, Gates' holdings briefly topped $100 billion.
Gates told the magazine that he and his wife were "thrilled" at the idea of having a new partner, and that Buffett's money would "both deepen and accelerate" what the foundation was trying to accomplish.
"The generosity and trust Warren has shown is incredible," Gates said.
Starting next month, Buffett will give a set of Berkshire B stock to the selected charities, Fortune said. Each year, the number of stocks he donates will decline by 5 percent.
Either Buffet or his estate will continue to give to The Gates Foundation as long as Bill or Melinda Gates remain part of it, according to Fortune.
A Tradition of Giving
Buffett and Gates are part of a long tradition of business moguls giving to charity.
In the last century, John D. Rockefeller and Andrew Carnegie each gave what would be about $7 billion each in today's dollars. The money founded libraries and preserved land.
Buffett says he and Gates may eventually have more than $60 billion and be able to "attack truly major problems."
Although many other wealthy people give money away, Hobson said that "Buffett's donations dwarf them all."
"He'll give The Gates Foundation about $1.5 billion in 2006 alone," Hobson said. "That's more than a billion dollars more than the top philanthropist in 2005, Cordelia Scaife May, and the next biggest, who happens to be Bill Gates himself."
ABC News' Dan Harris contributed to this report.