Brad DeLong explains in a great posts that tours us from the contrasting course of the University of California and the Ivy League by way of a detour into the economics of working-owned firms in Communist Yugoslavia. Long story short if you, like me, are a graduate of a fancy college and the development people come around asking you for money don't do it save your money for institutions that (a) have less money and (b) do more to help people in need.
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Why You Shouldn't Donate Money to Harvard
11 May 2008 05:17 pm
Comments (52)
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Harvard Fund Hits a Record
WSJ (8/22/07)
Harvard University's endowment fund returned 23% for the fiscal year ended in June, boosting the size of the largest college endowment in the U.S. to a high of $34.9 billion.
The returns were led by large gains in emerging-market stocks, real estate and private equity. After factoring in the university's annual distributions and the new donations to the school, the endowment's size increased by $5.7 billion from the previous year.
One way to justify donating to Harvard would be to change the endowment rules to be more in line with the rules for charitable foundations: mandate that universities with large endowments spend some portion of their endowment every year. Then the money donated would seem more worthwhile, because you'd see that it was "going somewhere."
Regarding the likely "secret" of Harvard's investment success...
(1) Harvard mostly invests its endowment with lots of extremely big outside private fund-managers.
(2) Presumably the internal investment structure of most of those fund-managers is sufficiently complex and opaque that they have considerable discretion in annually allocating their overall investment gains and losses.
(3) Most of those big fund managers have children (or grandchildren) who will be applying to Harvard.
I'd guess the Harvard "secret" is similar to the "secret" of why the investment portfolios of members of Congress also exhibit such astonishingly annual high rates of return over the decades.
Harvard University's endowment fund returned 23% for the fiscal year ended in June, boosting the size of the largest college endowment in the U.S. to a high of $34.9 billion.
That's fucking obscene.
It was somewhat ridiculous to receive my first alumni solicitation about five weeks after graduation. And that my alma mater will house the Bush library and undoubtedly not do so in an objective manner guarantees they will never get a cent. I might even conspire to defraud them out of funds.
Five weeks? I've yet to graduate, and my school sent email solicitations last semester and started cold calling last week.
If you want to impact the most people, find a small state school for third tier private school that has a nursing school and donate to the scholarship fund at a nursing school. Most of the students are poor, no one every seems to want to help a nursing program, and it would benefit places that could probably use more nurses/healthcare workers.
Why You Shouldn't Donate Money to Harvard
Personally, I think "because I didn't go to Harvard" is a pretty good reason.
Christ, you are the poster boy for what is wrong with an elitist education. Not only are you a wreck at homonyms and you sport a distasteful neard, but you have the chutzpah to rape our language by coining the clause "tour us". People tour places; people tour areas. People do not tour people. They might take people on a tour.
George Orwell would rightfully have you drawn and quartered.
I'm going to get contrarian here. The Kennedy School of Gov't (OK, you Harvard College and Law School types don't need to remind me that KSG isn't REALLY Harvard...) solicits money for fellowships and debt forgiveness programs for people entering public service, and I am glad to make my fairly paltry annual contributions to that.
I heard somewhere that Matt Yglesias could start an entire network of colleges with his trust fund alone.
solicits money for fellowships and debt forgiveness programs for people entering public service
"Public service"?
Isn't that the rather euphemistic expression for the profession of members of Congress, Bush Administration staffers, and much of the rest of the gigantic DC parasite colony and its corrupt mirrors in the states and cities?
I'm not sure whether that's the best means of soliciting either psychological support or financial donations...
As a alumni of an other college, I have to say it doesn't bug me that Harvard is rich as hell, and I'm not sure that's a reason to avoid giving to them (if you're an alum).
Harvard was the first prestigious school in the country to do away early admission, a system that awarded wealthy families. They have raised the bar substantially on financial aid by replacing loans with grants and by expanding their qualifications on who can receive financial aid.
So they're using their money to try to make Harvard accessible to as many deserving students as they, regardless of income? I think that's worth $50.
dms writes that Matt sports a "distasteful neard". Typo, or no typo? "B" and "N" are right next to each other on the keyboard, so that might be the explanation, and yet "neard" still seems somehow fitting...
I don't.
The WSJ had an article recently about rich folks who were choosing to donate to lesser endowed local schools than to their alma maters.
"Is there a better return on investment in the galaxy?"
Sure. Yale's endowment has delivered higher average annual returns than Harvard's. Little old you could have lapped Harvard and Yale last year if you had invested in Ken Heebner's CGM Focus Fund, which was up almost 80%. Heebner got everything right last year: shorted Countrywide, went long on Ag and Energy, etc.
"what's their secret?"
Part of it is that, because they have essentially an infinite time horizon and little if any immediate need for cash, they can allocate their money to relatively asset classes that are relatively illiquid or usually have lock-up periods (e.g., venture capital). Part of it is choosing great investment managers.
If you think of Harvard and UC as merely educational institutions, Brad DeLong's post makes some sense but it ignores the fact that in this country, we thoroughly mix up education and research (in part on the basis that allowing undergrads and especially grad students to take part in cutting edge research is a great education). The UC clones aren't quite clones of UCB and UCLA as educational institutions but they aren't even close as research institutions.
The bulk of the endowment (and to respond to Tyro, universities spend slightly more (percentagewise) of their endowment each year than charitable institutions) on the research enterprise and if you give, you should be giving to support research.
I'm prejudiced having spent almost 40 years as a professor at one or another major reseach university.
"As a alumni of an other college"
Are you sure you didn't go to Harvard with Matt? Graduates of most other schools would have written,
"As an alumnus of another college"
With all deference to the cool things Harvard and the handful of other super-rich institutions do with their money to support research and so forth, none of this provides even remotely the social return on "investment" (donations) that you get from giving your money to less well-off institutions, whether public or private, that will put it towards actual education. In the end people can and should be able to give to whatever non-profit they choose, and it's up to the vast majority of institutions to get (frankly) a bit less collegial and start pointing out what they do with donations vs. what the super-well-endowed do.
The UC clones aren't quite clones of UCB and UCLA as educational institutions but they aren't even close as research institutions.
That's not completely fair, since UC Davis and UCSD have very good reputations as research institutions. They haven't managed to acquire the social cachet or the undergraduate quality that UCB and UCLA have, but they manage to attract good faculty and graduate students.
I regularly donate to the large research institution from which I am an alumnus, but I always donate to the specific program I feel provides a lot of value. Knowing what poor decisions the administrators make, I'm always very suspicious of just dropping money down into the black whole that is the general fund.
Ugh, I couldn't even read this post. Matt, could you use some more punctuation, please?
Wow, I got the plural wrong and bizarrely split up the word "another." My alma mater is probably thankful I didn't name them.
Graduates of most other schools would have written,
"As an alumnus of another college"
Sad to say, they probably wouldn't have. The use of "alumni" as a singular noun is so widespread as to be acceptable these days. It really drives me up the wall, almost as much as does seeing kudos used as if it were a plural. O Tempora! O Mores!
Wow... looking at your post, Matt, maybe you should ask for your money back.
Wow... looking at your post, Matt, maybe you should ask for your money back.
I'd make fun of Matt, too, but I just realized that I wrote "black whole" in my comment. On the other hand, I'm not paid for my comments.
Matt's prolificness relative to his fellow Atlantic bloggers (especially on weekends) makes me wonder if they feel toward him the way kids do toward the sort of student who raises his hand at the end of class to remind the teacher to give everyone the homework assignment.
RKU somewhat snarkily (make that really snarkily) wrote:
------
"Public service"?
Isn't that the rather euphemistic expression for the profession of members of Congress, Bush Administration staffers, and much of the rest of the gigantic DC parasite colony and its corrupt mirrors in the states and cities?
----
Well, no, RKU, it isn't. It means (or at least heavily leans to) people working for non-profits, NGO's, entry-level government jobs. The kind of people who do community development, affordable housing, and make the wheels of government run. I didn't think it was really necessary to defend public service, but I guess I forgot that this is the blogosphere.
I think Yglesias understates the case.
I wouldn't donate to any institution with a 100+ million endowment.
Kraz- Maybe he means that MY has a neck beard?
DRW,
"Public service" generally refers to those who work in government, and not just in entry level positions. Folks who work for NGOs or work as 'community organizers' are usually characterized as working in the not-for-profit or advocacy sectors, not public service. Government workers are called "public servants" because, ostensibly, their work is to serve the public. NGOs and community organizers usually work or advocate for far narrower groups.
If you wanted to get rid of money tax-free while producing as little value to society as possible, you couldn't do better than donating to Harvard.
The last time I declined to contribute to my alma mater, an Ivy League wannabe, I was told that contributing any amount at all would actually help, because the percentage of alumni who contribute is a factor that's considered in some college ranking systems. (But what if I think those rankings are stupid? Or if I don't really care what people think about my undergrad institution? Oh, well.)
Anybody who wants to donate to a university that needs the money can check out my college--Morehead State University in Morehead, KY. There are a lot of colleges and universities in the Appalachian region that do very fruitful work in tough circumstances. Morehead State is one of them.
Can't we stop talking about giving money to major universities' endowments as charitable giving? Every end of the year a bunch of publications make a list of the biggest philanthropists of the year, but a lot of the giving turns out to be donating to Ivy endowments. Then you have Soros and Gates giving to their foundations and a couple of people giving to UNICEF, but giving money to Harvard's endowment is like giving candy to Ted Turner.
A Prof,
UCSD is close to UCB and UCLA as a research institution, epecially to UCLA. UCSB also has some areas of excellence, like physics, for example. Are you talking about social sciences or the humanities? In the sciences, many of the clone colleges are quite good as research institutions.
I think Yglesias is unfair. When Bush was in serious financial trouble (with Harken I believe). It was the Harvard endowment fund with the "old-buddy" connections that bailed him out.
Hektor Bim,
UC Davis is also really good in research in the plant sciences.
Okay, then I won't. Anything for you Matt.
They've never gotten a penny of what little money I have and they never will. I remember a roommate of one of my college friends remarking that he'd give money to Harvard just as soon as he had more money than Harvard had. ;)
1) I thought it was kinda funny that Brad didn't discuss the merits of UC San Francisco. I noticed a while back that UCSF is getting a lot more money from the private sector for research than is UC Berkeley.
2) There are actually several sources on the ranking of US Universities as powerhouses of research.
The National Academy of Sciences does one every 15 years or so but it is obviously out of date (next one is due out in a year or so, I believe. maybe sooner)
3) University of Shanghai ranks Universities worldwide --although the US dominates many of the first 25 slots. Shanghai tries an objective approach -- e.g, looking at whose papers are cited by others (as opposed to who just grinds out papers that no one reads.)
http://ed.sjtu.edu.cn/ranking.htm
(One researcher has criticized this ranking as not being reproducible by others using the same data.)
4) The Lombardi reports also provides a lot of hard data on which universities received private and government research funding.
It breaks out the data into several categories (Medical, Engineering,other), which is helpful because (a) Medical research receives huge amounts from the federal government relative to other disciplines and (b) engineering research requires a lot of expensive equipment.
So its not reasonable to lump these expensive areas in with some professor whose research expenses are largely the time spent poring over old manuscripts.
See http://mup.asu.edu/staff.html
5) One caution: Some rankings go with a "Bigger is better" approach -- where a University get ranked high just because its size give a high volume of output. I think it is also useful to look at at measures on a PER PROFESSOR basis. For example, it is illuminating to divide the amount of competitive research dollars a university receives by the number of professors.
Carnegie Mellon, for example, receives a smaller amount of research dollars than some other schools because it is relatively small. However , the amount of money awarded per professor is quite high.
The unsettled issue, of course, is whether one should use the amount of research dollars a professor receives as a surrogate measure of the professor's quality. Even though the award of grants is a competitive process.
But what if they promised to spend it on remedial spelling?
1) What's funny is that the reputation of Harvard (and others) is based largely on its Professional Schools of Law, Medicine, and Business. Which are largely irrelevent if one is chosing a place for an undergraduate education. Indeed, there are reports that Harvard doesn't serve its undergraduates all that well.
2) If you look at Forbes list of US billionaires, you see relatively few produced by Harvard. Many in the top 10, of course, were computer entrepreneurs who were college dropouts. Three of the entries are heirs of Sam Walton -- who went to the University of Missouri.
3) Harvard seems to have decided that it will received more from the AGGREGATE donations of thousands of upper middle class professionals than it will from a few superrich superstars.
Even its Business School focuses on producing future CEOs --not entrepreneurs.
4) However, Warren Buffet just donated roughly $30+ BILLION to charity -- a donation equal to the endowment Harvard built in 200+ years. Warren was rejected by Harvard when he applied for admission many years ago.
heh heh heh
How about sending the cash to the University of Wisconsin?
In this entire thread, superdestroyer made the most useful comment. I don't know what to do with that.
tyro,
Nursing schools are the orphan children of academia. They are relatively expensive to set up, there is no natural track to create professors, and most nursing schools are at directional states. California has a nursing shortage but refuses to create new nursing programs. However, California has more than enough lawyers but is opening new public university law schools because law schools are cheap to start and operate.
Only one Ivy league has an undergraduate nursing degree (Penn). One of the reasons that top tier schools are uninterested in nursing (and fields like Pharmacy, optometry, and even dental schools) is that you do not get paid more for having an Ivy league degree. A nurse with a BSN from Penn gets the same pay at CHOP as any other nurse. The employer just needs the license to practice and everything after that depends on individual skills.
"However, Warren Buffet just donated roughly $30+ BILLION to charity -- a donation equal to the endowment Harvard built in 200+ years."
Yeah, and he donated that to a foundation started by a guy who went to Harvard (yes, Bill Gates dropped out, though his right hand man, Microsoft CEO Steve Ballmer, didn't).
Superdestroyer,
My sister is an R.N. who had a B.S. in another field before going to nursing school. She briefly flirted with the idea of getting a second bachelors in nursing, because some staff employers prefer that (this hasn't been an issue at all with her working as an agency nurse). After helping her on some of her papers for her B.S.N. classes, I wouldn't donate a dime to an academic nursing school. I have all the respect in the world for nurses, but actual nursing education is largely clinical; to make nursing conform to the typical academic model with tenured Ph.D. professors, nursing has to expand into the realm of complete bullsh*t. For example, consider this useless academic paper we had to cite, Perils of proximity: a spatiotemporal analysis of moral distress and moral ambiguity".
Re Fred's comment "(yes, Bill Gates dropped out, though his right hand man, Microsoft CEO Steve Ballmer, didn't). "
-----------
Bill Gates dropped out his first year.
And Steve Ballmer --like most Harvard people --came in after Microsoft was a success.
Bill Gates' REAL right hand man was another college dropout -- Paul Allen.
Don Williams,
"And Steve Ballmer --like most Harvard people --came in after Microsoft was a success."
Steve Ballmer joined Microsoft in 1980, when it had fewer than 40 employees. He helped build the company into what it is today.
Also, Don Williams,
Buffett went to Wharton and Columbia (in addition to the U. of Nebraska). Though had Ben Graham been teaching at City College instead of Columbia, Buffett would have probably gone there instead.
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Heads in the Sand
Or better yet - ask Harvard if you can invest your money in their fund. Is there a better return on investment in the galaxy? what's their secret?
Posted by Trevor | May 11, 2008 5:28 PM