The Greatest Investor in the World Is...

by Carl Delfeld

Most of you probably think Warren Buffett is the best investor in the world.

Perhaps, like millions of investors worldwide, you wait expectantly for Warren Buffett's annual letter to Berkshire shareholders.

But the annual letter that I most look forward to is not from Buffett. Rather, it's from one of his closest friends.

His just-released letter is a gem with a simple theme that could make us all better investors. And this is true, despite the fact it's not directed at investing in stocks, currencies, or bonds. Rather, its focus is fighting poverty, hunger and disease.

The author of this letter is Bill Gates, the second-richest person on the planet behind Mexico's Carlos Slim. It discusses the issues and strategies around the Bill and Melinda Gates Foundation's efforts to make the world a better place.

The Importance of "Uncomfortable" Accountability

The letter's theme might at first glance seem self-evident - the importance of setting clear goals and carefully measuring performance.

But in the world of economic development and charitable giving, both setting goals and measuring performance is resisted. Why? Because both lead to uncomfortable accountability.

While representing America on the board of the Asian Development Bank, I participated in quite a few audit committee meetings. The aim was always to find out what projects, financed by $100 million-plus loans, actually accomplished their goals and what "lessons learned" might make future projects more successful. Project managers were very artful at avoiding getting pinned down and admitting any shortcomings.

But being a tough businessman, Bill Gates insists clear goals be set and performance carefully measured. And his foundation's goals in many ways dovetail nicely with an agreement in 2000 by the United Nations. The agreement focuses on eight goals aimed at improving the lives of the world's poorest people. The Millennium Development Goals (MDGs) listed below are supported by 189 nations, and the UN set 2015 as the deadline for achieving them.

The Two Faces to Emerging Markets

These goals underline the fact that there are two faces to emerging and frontier markets.

One face is the prosperity reflecting from gleaming downtown office towers. The other is the pain from grinding rural and urban poverty. So much still needs to be accomplished. In Laos, for example, 70% of homes do not have access to electricity. And 30% do not have running water.

The good news is, substantial progress can be made when capital is backed by performance and accountability. The MDG target of reducing extreme poverty by half was reached ahead of the deadline. So was the goal of reducing by 50% the number of people who lack access to safe drinking water.

Living conditions for more than 200 million slum dwellers have also improved - double the target.

Some goals, however, were set at such an ambitious level that they will be missed. For example, while we have reduced the number of mothers who die during childbirth by almost 50%... It's still short of the 75% goal.

We're also not on track to meet one of the most important goals - reducing the number of children that die under the age of five by two-thirds.

Still, substantial progress has been made. The number of children who die has declined from nearly 12 million in 1990 to 6.9 million in 2011. While this means that 14,000 fewer children around the world are now dying every day, we probably won't reach the two-thirds target by 2015. A great deal of this progress is due to much better immunization coverage. Polio is one disease that has been effectively targeted and eradicated. The number of polio cases worldwide dropped from 350,000 in 1988 to less than 1,000 in 2000. The last 1% was stubborn. But finally in 2011, India was polio-free and the goal seems complete.

Moving back to your investments... The best way to accomplish your financial goals is to first put them down on paper.

Then measure your progress every year, learn from your mistakes and make adjustments accordingly. And don't try to do all this on your own. Get some trusted advice and build a team that increases the chances you will meet your goals.

Good investing,

Carl

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