Bill Gates' Plan to Better the World

Move over, Robin Hood. Microsoft (Nasdaq: MSFT  ) Chairman Bill Gates has a new plan on how to ensure that some of the world's poorest people take part in global capitalism -- and it's much more than just writing checks.

Gates, who plans to retire from Microsoft in June to focus on the philanthropic foundation he and his wife run, gave further insight on how he plans to dole out his massive fortune in a speech at the World Economic Forum in Davos, Switzerland. He also let the rest of the world know what it can do to help fight some of the globe's toughest problems.

Gates highlighted some fundamental problems with capitalism, including how innovation and technological advancement create an ever-growing economic disparity between the bottom third and the rest of the world's population. When businesses earn more profits in regions that are already economically stable, innovation tends to bypass the world's poor.

The new way forward
In what he calls "creative capitalism," Gates hopes to banish some of this disconnect by encouraging a new system of business. This new system would promote economic incentives for global powers to have a bigger presence in areas of the world stricken by disease and poverty, particularly Africa. When doing business there would not present profitable opportunities, using a company's reputation to pull in money is one way to use the marketplace to help the poor.

Turn your red into green
In one of the first live ventures of this creative capital model, Microsoft, with Dell (Nasdaq: DELL  ) , Motorola (NYSE: MOT  ) , American Express (NYSE: AXP  ) , Gap (NYSE: GPS  ) , and Apple (Nasdaq: AAPL  ) have united with U2 front man Bono to take part in the Red Campaign. The campaign redirects profits from corporations into the Global Fund, which assists AIDS victims in Africa.

The idea behind the Red Campaign is fairly simple. Consumers purchase items branded in a fashionable dark red, and a portion of the profits is directed to buy life-saving drugs for AIDS patients in Africa. Buy a product, save a life -- it's easy.

For example, when you purchase a Dell XPS All-in-One computer, Dell and Microsoft will contribute $80 to the Red Campaign. Buy a notebook, and $50 goes to the campaign. Buy a special addition Motorola Bluetooth Headset, and $2.50 goes to Red. For participants in the United Kingdom, American Express offers a Red credit card that donates 1% of all purchases.

The hope is that consumers will be attracted to the Red-branded products not for the stylish colors but for the sense that they're taking part in making the world a better place. By associating a great product with a great cause, the thinking goes, consumers will step up to the plate.

The business of betterment
Gates reminded us of humanity's innate desire to look after the prosperity of others. He quoted the pioneering economist Adam Smith: "How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it."

The reason capitalism hasn't led to increased philanthropy, therefore, isn't that people don't have a desire to help others who are less fortunate. Rather, it's that the market doesn't provide enough economic incentives to do so. This is one of the challenges Gates intends to overcome. By creating a hybrid foundation of self-serving, profit-seeking behavior coupled with the desire to help others, Gates hopes to find answers and solve some of the world's toughest problems.

Gates gave an example of how creative capitalism can work. One Dutch company held the rights to produce a cholera vaccine. The company retained the rights to the vaccine for countries that could afford its cost and allowed manufacturers in developing countries to produce the vaccine without paying royalties. As a result, the vaccine was produced cheaply in countries like Vietnam, which might otherwise never have had access to it. Yet the company also profited from vaccine sales in prosperous countries.

More than a handout
You can see how Gates expresses his outlook on changing the world through philanthropy. Rather than handing out fistfulls of his vast wealth like Santa Claus, it's apparent Gates intends to solve problems and not just throw money at them.

By introducing a universal attraction -- profit -- into philanthropy, creative capitalism creates a system that will benefit society, rather than a simple donation to fund an existing program.

That, my Foolish friends, is saving the world the smart way.

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