Economy Life and Personal

Bill Gates and Vaccine IP

Bill Gates, needless to say, has been a controversial figure for most of his adult life. From being reviled for his intellectual property stance against open source to his monopolistic and capitalistic approach to business, he’s seen it all. Contentiously, apart from his success in building Microsoft, he has been largely left longing for ground-breaking success.

There is an overworked machinery that ensures that the narrative around his newfound philanthropic endeavors is portrayed in the most positive light. If there’s one thing that the richest people on this planet can afford, it’s the best publicists and media personalities.

This post is not meant to be a funnel into the awfully copious amount of conspiracy material around Bill Gates’ global immunization efforts. It’s easy to get pulled into all of that, though, and the primary reasons are — people only read the headlines, and secondly, a lot of philanthropic work, especially by the ultra-rich, remains shrouded under a blanket of tax evasive and complicated hops of company structures, foundations, annual reports, confidential agreements, etc.

Take his recent interview with Sky News, where Bill Gates states that IP laws are important to make sure that everyone gets immunized against the coronavirus, and that the bottleneck isn’t availability of technology but the lack of infrastructure and ‘regulatory approvals’ to manufacture the vaccines. Jump to around the 3:00 minute mark for the rant about intellectual property.

It is noteworthy that in the same interview, Bill Gates points out how his investments are able to use factories in India to manufacture vaccines at scale for global consumption. He posits, though, that if these factories had access to the technology sans patents, they would be unable to do the same because of a lack of branding, trust, and regulatory approval. That sounds a little self-serving, and, possibly, insidious. Governments are paying up the nose for procuring these vaccines; most of them have been developed as a result of generous public funding and investment, often in the form of grants, research or post-development purchase guarantees. In investment terms, this would be a combination of ‘supply-push’ and ‘demand-pull’. The former provides a subsidy and funding for manufacturing, while the latter provides for a guaranteed market in order to be able to be financially viable. This was how the AstraZeneca and the BioNTech vaccines came about.

The Bill and Melinda Gates Foundation generally steps in when it’s time to create a market for these innovations. Their focus is in leapfrogging the development of innovations to under-developed and developing economies from the developed countries they would have developed in (link). The foundation is constantly under the limelight, and Gates does a good job of pushing a very great narrative. So much so that his services are actually quantified in dollar amounts in the foundation’s annual statement. The point is that the foundation exists to maximize impact, and thereby, prolong its own existence. The best way to achieve that is by forging agreements and deals that create value for itself.

How does this translate to real world dynamics? Even though the Serum Institute of India was ‘granted‘ millions of dollars by the foundation to provide low-cost vaccines to the globe, the same institute has sought additional grants from the Government of India to scale up production. As a result, the private company is now selling vaccines in India at a much higher price than it is to the GAVI alliance/Bill & Melinda Gates Foundation collaboration. The agreements and financial jugglery is extremely hard to decompress without access to journalistic tools, and very few professionals are willing to speculate or investigate for fear of losing access.

Had the technology been freely available, the government grants could have been used to manufacture at cost, or with a minimum profit outlay. Right now, it is not exactly clear how much of these costs fulfill the licensing obligations on the part of the SII.

Now, the foundation itself, is a very complicated beast. Apparently, it is a unison of two entities — the foundation that allocates equity and cash to achieve philanthropic objectives, and a trust that provides the foundation with the actual financial instrumentation. The foundation’s mandate is to dissolve 20 years after Bill/Melinda die, and in the process allocate 100% of its resources. The trust has no such mandate, and only provides finance upon request by the foundation. There is a lot of financial maneuvering.

Take, for example, the foundation’s use of ‘Program-Related Investments‘. These are complicated beasts that are engineered to provide both financial upside as well as progress towards a foundation’s mission and philanthropic goals. As a result, they enjoy a lot of tax benefits. Reading up on them is an adventure in itself, and in the context of the Bill & Melinda Gates Foundation, there is not much reading to do, as they’ve only been deployed more recently. There is, however, this excellent reading — ‘Investing for Impact with Program-Related Investments‘ (Archive).

In essence, philanthropy in itself is paid for by public money, and so when Bill Gates professes for tighter intellectual property restrictions even in a pandemic, he’s being disingenuous, and just doing his paid job for the foundation. Without IP rights, most of the foundation’s work, which is awesome and ground-breaking, no doubt, would be much more impactful for others, but come at a short-term cost to the foundation’s objectives and financial sustainability. After all, when the foundation provides a PIR/Strategic Investment Fund investment, it has to generate enough value to be able to re-invest in the short term. By indirectly obligating the Serum Institute of India to sell vaccines at a higher cost to India than to other countries, the foundation ensures that it remains financially solvent up until Gates’ time is up.

There is absolutely no justification for not making vaccine technology open and available to everyone today — people are needlessly suffering. There has been a golden age for pharmaceutical profits, and there would be more opportunities to make money, but now is not the time.

Economy Politics

Globalization, A Short Take

This might very well turn out to be a sequence of posts. The topic is curious in nature and one that has been generating headlines for at least the past year, ridden with the impact of the pandemic on global supply chains and incomes.

Yes, I am talking about ‘globalization’.

According to Wikipedia, globalization

is the process of interaction and integration among people, companies, and governments worldwide. Globalization has accelerated since the 18th century due to advances in transportation and communication technology. This increase in global interactions has caused a growth in international trade and the exchange of ideas and culture.

That globalization has made the world smaller and advanced trade so far is not a debate. In the recent months, though, globalization has been buffeted by strong pandemic level winds that have stopped all but essential travel and ‘integration among people’.

On top of that, there has been a race towards reopening the local economy, at the cost of borrowing from future generations, playing havoc with all kinds of monetary and fiscal best practices, and making arbitrary political decisions on what/who receives taxpayer support and what doesn’t.

Two things have played out — the pace of vaccine research has accelerated, and, demand for technology products that enable people to work remotely and do business has skyrocketed. The latter of these has also been exacerbated by geopolitical arguments about maintaining ‘technology lead’ that were born much before the pandemic struck, under the guise of advancing 5G networks and to curtail oppressive regimes by imposing international sanctions. Some of the world’s biggest economies had already begun a trade war by imposing tariffs on international trade in order to ‘level the playing field’.

Globalization also makes markets more dynamic; prices are more aligned with demand and value. At the same time, it’s capitalism at its best — you get what you pay for.

In theory.

When I read news about countries planning to impose barriers to vaccine exports or companies prioritizing semiconductor fabrication for industries that are more lucrative, it quickly becomes apparent that so much of our future has been held captive to the promise of a world that follows rules. No one does.

Countries are now realizing the value of having their supply chains more integrated within their geographical barriers. The vaccines, although researched by companies and individuals globally, are manufactured at specific locations, and if it’s unable to be exported because the country deems it more important to immunize their own population first, all contracts are rendered worthless. In the chip fabrication industry, there is such a shortage of microprocessors that companies have entirely stopped assembling some models of cars. This has a much bigger impact in countries like Germany that manufacture a lot of great cars but have no global leadership in semiconductor design and fabrication.

For the longest time, the mantra at schools was ‘think global, act local’. Perhaps it is now time to put it in action.