Universities Are Becoming Billion-Dollar Hedge Funds with Schools Attached
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Of course this ignores financial aid so Yale's operating costs are much less than $500 mil/year. If you're going to donate to a university your money will go much further at a small college that actually needs your money and will actually spend it rather than hoarding it. TMQ had some great articles about this topic back in the day. http://espn.go.com/nfl/story/_/page/TMQWeekFour140930/robert... Halfway down.
It's mainly a tax on rich people. Students from lower income households don't pay that tuition.
I'm all for soaking the rich, but how is that fair? I was apparently rich by association, and it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.
A private school deciding to charge for its valuable stamp of approbal has nothing to do with it being a fair price.
For actual public benefits, I'd much prefer to give all the benefits to all the people and raise taxes accordingly. This means that, as a CA resident, I think I should be permitted to deduct rent even if my AGI is $38,259, and I think I should get the full Affordable Care Act subsidy regardless of my income. The rules would be simpler and my taxes would be simpler. In exchange, I would gladly pay higher taxes to make up the deficit.
For public university, it's a bit messier because of state residency rules. And for private universities, this wouldn't work at all unless the government directly subsidized private education.
(But maybe the government should ditch all the complicated student aid and student loan benefits and offer a blanket subsidy for education at accredited universities.)
However I do agree your proposed solution is better. Have universalist public programs that everyone can take advantage of regardless of income (tuition-free public university, no-charge public healthcare, etc.), and then instead of mucking with means-tested benefits and aid phase-outs as a way of indirectly taxing the rich, just tax them through actual taxes, the old-fashioned way.
Which is still silly. Who has more to spend/better opportunity to save? Two parents that make $75k each in Mountain View or 1 parent who makes $64,500 in Nowhere, Indiana?
I appreciate your sentiment, but you realize all of the insurance companies will just raise their rates by the amount of the subsidy, right? More demand in the form of government money earmarked for a specific good, with the same supply of the good, means higher prices.
Gosh, I really dislike that turn of phrase.
Anyway, they can't do that, since the ACA has mandated that insurers spend at least 80 or 85% of premiums on health care costs since 2012.
The insurers ride that line as closely as possible, since their profit has to come out of the 15% allowed margin. This means an increase in total premiums without a commensurate increase in the cost of claims cannot happen. If an insurer's payouts don't exceed the mandated Medical Loss Ratio, they have to refund their insured customers for the difference by mailing out rebate checks. I've received two such checks myself.
That part of the law is particularly terrible. It directly incentivizes keeping costs high as the profit of the insurer is a fixed (says max but that means exactly 15%) percentage of the gross. It's in their interests to have the price of everything go up!
That's not the case, as the comment you replied to points out.
Let's say an insurer collects $1B in premiums some year. The ACA mandates that at least 85% of that is spent on healthcare costs. At most, the company gets to keep $150M, or 15% of the premiums. For every claim denied bringing the payouts below $850M, the number they keep 15% of goes down, so their profits go down. Denying claims costs them money, rather than letting them keep more.
If the insurer wants to make more than $150M the next year, there is only one way to do that: pay more than $850M in healthcare costs this time, and increase premiums by the same amount. That means encouraging and approving more claims, not fewer.
Unfortunately, this aspect of the MLR promotes, rather than punishes, increased healthcare costs as a byproduct. Competition is supposed to be the check on that -- if an insurer doesn't control costs so that it can raise premiums and keep 15% of a bigger number, you'll switch to a plan with another insurer that isn't doing that and offers lower premiums. Unfortunately, that's not doing the job very well for a variety of reasons.
> What actual good do they do? None, they just come between the patient and the caregiver.
Insurance protects the insured from catastrophic losses by pooling risk. When the caregiver wants to bill me several hundred thousand dollars in unavoidable expenses, I very much appreciate having a middleman I only pay $200 per month to instead.
For your point 2, you protect people from catastrophic losses by having a single payer: the government. Insurance is supposed to be a way of protecting people from catastrophic losses, which is why we have it for house fires, car accidents/thefts, etc. Healthcare is not about catastrophic losses in most cases, it's about ongoing care to maintain health. You getting your yearly checkup at the doctor is not a "catastrophic loss", nor is you getting an ultrasoound to check out something the doctor found to make sure it isn't something really bad. These are just ongoing care, and it isn't what insurance is designed to handle fundamentally.
As for $200/month, I wish. More like $800/month.
Point taken.
Maybe:
"I appreciate your sentiment, but won't that result in insurance companies raising their rates by the amount of the subsidy?"
I think that reads better. Makes the same point, less argumentative.
> The Finnish government, elected earlier this year, is planning to introduce a tax-free monthly payment of 800 euros ($865) to all adult Finns, regardless of income, wealth or employment status. The payment would replace most other state benefits.
[1] http://money.cnn.com/2015/12/07/news/economy/finland-basic-i...
How does it justify that? We want to punish them with debt because their parents might have provided them with some opportunities?
The current system of funding higher education penalizes children of parents who don't prioritize college. There is no point to this and it just helps perpetuate privilege. We should stop unfairly assuming that parents are willing and able to pay for college.
Now, my own personal situation is a deal of my own making -- I decided to sign on the dotted line. But in the aggregate, considering all the other students like me --- I'm actually shocked at the push back in this thread. The same group of people that bemoans the death of the middle class can't see how this is a part of the problem?
I feel lucky. I was in one of the last generations to get halfway-decent interest rates. My younger brother is paying through the nose (what is it now, 6-7%?).
MIT thinks it's okay to boil down someone's financial future into a single dominant number (parental income). What if your parents had a lot of debt because of a major illness or death? What if that supposedly high income is counter-balanced by living somewhere expensive because that's where the high-paying jobs are? The fact that none of that is taken into account means it's not about bad luck, it's about an unjust system.
MIT could afford to make tuition free, but the popular misconception that they're levying a tax on the rich means they won't. If you want to control how much one generation passes on to the next, there are far better mechanisms to do that than college tuition.
I have a few ideas 1) Replace tuition with taking x% of income for y years following graduation. I'm not sure how this would work in regards to low-income degrees / departments. For example, would the low return on investment for an arts department mean it would get less funding? I suppose this would cause universities to optimize their education for earning potential of graduates. Could have interesting effects. Not all beneficial.
2) Could they use their endowments to essentially provide interest free loans? I'm guessing their would be lots of problems with this that I can't see.
3) You pay nothing while in school, but you pay a straightforward fraction of the school's operating costs for the next x years. I like this concept. If you make x long enough, your graduates have an interest in ensuring future students are able to contribute to the cause. Of course, they also have an interest in keeping costs low. That could create poor dynamics. Improvements would have to come from donations, not be a part of the budget.
In 2015, tuition accounted for only 10% of MIT's yearly revenue (~$331M), so you have to cut the rest of the budget by 10% to give everyone free tuition.
One natural area to focus on is yearly administrative costs, which in 2015 were $763M.
If you gradually cut administrative costs by building fewer beautiful buildings for undergraduates to be indebted in or hiring fewer administrators, you can afford for every undergraduate to attend tuition free.
Once your debt is paid off you will have one less excuse to go do whatever it is you claim you really want to do. The only question is whether you will actually take advantage of that or whether you continue to whine about the world of opportunities that were somehow foisted upon you when you willingly chose to attend MIT.
(Or maybe they're better at filling in FAFSA? My father is a self-taught accountant who later went pro (incl. classes/tests etc), but may have been too honest.)
It's a difficult issue for Hillary, whose husband oversaw implementation of some of the policies that created this environment.
And all of the Republican voters seem to be more afraid of brown people possibly getting money from the government, than about whether or not they can get sick or go to school without going bankrupt.
But you're absolutely right about Bernie and Hillary. Hillary, to me, isn't much different from Ted Cruz, and even more like Rubio. They're right-wing war hawks in the pocket of Wall Street, and the only things they differ on are social wedge issues that they use to get people on each side to vote for them.
AFAIC, our best hope is Bernie. Cruz and Hillary will both be a disaster and lead us into another war, and Trump is a wild card and highly unpredictable, though I think he's a lot less likely to get us involved in another war than Hillary or Cruz (he royally pissed off the GOP by saying the Iraq war was stupid).
There's a word for that: populist. Policy by opinion poll.
As most European democracies have found out over the past decades, most voters aren't political idealists. Ideas from all over the political spectrum appeal to them. Many of them end up not voting because every major party comes with a package of political ideals that don't work for them.
From time to time, a politician appears who manages to tap that potential, and throws the traditional, ideals-oriented politics into disarray.
Go look at his website now. It's the same old tired Republican canards like selling insurance across state lines (aka gutting your state's insurance commission as all insurance companies relocate to states without meaningful regulation like South Dakota).
The world could do a lot more with lesser wars, no unwanted migration, and no terrorism. The vicious cycle of violence killing innocents and following hate attacks are unbearable. I can't take it any more, I don't think anyone can.
I'm just an average guy looking to live my life, all Muslims are like that except those that have been brainwashed and are used for political reasons.
Why discriminate against me for my faith? Isn't the U.S. a secular country?
There's simply no reason to bring in populations that require more money to support than they contribute.
If we have a great compression, growth and redistribution like in the 50s/60s expect racial/immigration tensions to decrease a lot.
I wonder what led to such environment then, can't be because of anything that happened in the 30s/40s…
I'm not sure that's true. College kids aren't producing anything today. What we're trying to do is to force them to fund our long (and I do mean long) cushy retirements with what they will produce later.
The whole system seems to be set up right now to extract a great deal of what they will produce in the future and pull it back to the older generations. It's a promise to make them pay in the future. Well, promises can be broken, and in this case I'm almost certain will. They can say no.
It is "Everything You've Got" for students, though. If you have any college savings in your own name (or earn any scholarships), it will simply cancel dollar for dollar with university grant aid. Unless you can save more than the total of your grant over 4 years, better to spend it before the first financial aid paperwork (or not save it at all).
Though this only comes into play at a school that offers substantial grant aid. At a state school your savings can actually help.
Socialism is only meant to be fair if you are poor. And as you say you are rich by association.
This happened to me around my senior year of college. It's a scary thought that once you're done with college you need to get a job or be homeless. It lead to a lot of stress in the fall semester of my senior year while I was job hunting. It also stands to reason that if you're from a wealthy family then you had access to a good education. I can't understate how unprepared I was for college being from a poor school district even through I was in the honor classes! Poor students play a lot of catch-up in college early on. This is really hard to do when you're also trying to work 20 hours a week to afford food.
I'm not saying it's fair that you have so much debt but if it's zero-sum for financial aid I can understand why you were not given any over poor students whose parents are equally not able to pay. You're not thinking about the external factors that statistically probably put you ahead over a lot of poor students. Unfortunately that is life all we can really do is make sure our kids don't have the same problems!
Perhaps this experience should make you rethink your support of "soaking the rich."
If schools didn't "soak the rich" then the potential of the student from a poor background would never be realised, and humanity would be the worse for it.
You make being a privileged middle class kid seem like such a chore.
There is always someone better then you, and there id always someone who got what you did for less. But on the flip side, you are also the someone to someone else.
Take out the room/board fees, and you're still looking at $14,000/year just for tuition.
So, even going to a top state university isn't going to keep you debt-free. Maybe not $100,000 in debt, but still a significant sum.
There is definitely a "donut hole" in terms of aid available to middle-class undergraduates[2]. If you're poor, chances are you can obtain grants or other aid. If you're rich, you can pay cash and not sweat it. If you're somewhere in the middle, that aid dries up fast, but you can't write a check.
[1] https://news.virginia.edu/content/board-visitors-sets-2015-1... [2]https://www.washingtonpost.com/news/get-there/wp/2015/01/29/...
It ends up being very good for lots of people, but the academic requirements, especially for your high school record, do introduce some socioeconomic and racial disparity with the awards.
[1] https://secure.gacollege411.org/Financial_Aid_Planning/HOPE_...
The Hope Scholarship looks REALLY nice - it appears available to any student who graduates with a very achievable GPA (3.0/4.0).
Having no monetary help from a family making 100K a year is still different from having no monetary help from a family making 20K. If we want fair, how is growing up in a family with poor parents fair compared to growing up in a family with rich parents? While you might be able to blame the parent for their own financial situation, you cannot blame the child.
>it was pretty upsetting to see kids who were ostensibly poorer than I was get a substantially easier start in life.
Considering that they already had an ~18 year start of life where they likely weren't having it easier...
So we should encourage people that earn decent money not to save adequately for their children's college education?
Most schools with that size of tuition don't. Stanford (http://thinkprogress.org/education/2015/04/02/3642085/stanfo...) is free is your household income is less than $120,000, and cheap from there on.
Harvard Undergraduates - 6,700. Yale - 5,500. Penn - 10,500. Cornell - 14,000.
Maybe it's because Cornell has less money and more students than the other schools you listed?
Spending 4% a year, that gives Cornell about 17k per student. It doesn't sound unreasonable to think that's just not enough to cover the tab.
I mean... I'm not sure if I'd consider 150k for a household middle class (probably upper middle) but in most places, again, with a few exceptions, you're basically required to pay the full tuition. In cash. After taxes. $50k a year. It's an astronomical sum for just about anyone. And these are not terrible schools, we're talking some of the top universities in the world here, sitting on tons of money.
I mean, I know the gutting of the middle class is hardly news but, phew. Education costs really take it to another level.
If a family of 4 cannot save for college on $150K a year their priorities are out of balance. My parents did it and they never made half that. Put my brother and I through college with no financial aid. In-state, but still....
I don't necessarily disagree but what time frame are we talking about? Because even 10 years ago state was massively cheaper than private, particularly the upper private schools.
If your parents made 70k and put you two through state, I'd assume they either saved an incredible amount or were paying somewhere around 10k/year. Perhaps I'm wrong, just guessing.
But I think you can do the math on 10k expense on 70k income versus 50k expense versus 150k income (as incomes haven't improved in a very long time).
The purpose of research universities is to engage in scientific research, not to educate people. Education is one of their activities but not their primary goal. For more about this, read "The Purpose of Harvard is Not to Educate People" [1]:
> But there is one misimpression that people seem to have[]: the purpose of Harvard is not to educate students. If anything, its primary purpose is to produce research and scholarly work. Nobody should be surprised that the gigantic endowment isn’t put to use in providing top-flight educational experiences for a much larger pool of students; it could be, for sure, but that’s not the goal. The endowment is there to help build new facilities, launch new research initiatives, and attract the best faculty.
The purpose of an endowment is to generate an income stream forever. It's typical for the organization with an endowment to spend only what they earn in interest at most, with some preferring to spend less so that the endowment grows over time.
It's possible that they're investing so well that they can afford to spend 2% every year, but that's just one cost among many costs that the university has - such as paying for its staff, its facilities (real estate, buildings, and so on) - and staff and buildings that help produce research.
[1] http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/...
Shouldn't Yale be kicking everyone's butt here, then? Yale engineering ranks a paltry number 38, with quite a few publics far ahead of it.
Turns out money can't buy everything. Especially when directed at the things that don't matter.
I take issue with a couple things in that sentence. That is the goal of a small number of private research universities. I don't know of any public research universities, even the highest ranking, that don't dedicate significant resources to undergraduate education.
The second thing is that the mission of Harvard et al is primarily scholarship (in any field) and graduate education, not just scientific research.
These are minor points relative to your comment but I don't want the public to believe all research universities exist to do only scientific research.
Actually, no. Despite what some physicist may have written in an op-ed in Discover magazine, The Charter of the President and Fellows of Harvard College says something quite different:
"Whereas, through the good hand of God, many well devoted persons have been, and daily are moved, and stirred up, to give and bestow, sundry gifts, legacies, lands, and revenues for the advancement of all good literature, arts, and sciences in Harvard College, in Cambridge in the County of Middlesex, and to the maintenance of the President and Fellows, and for all accommodations of buildings, and all other necessary provisions, that may conduce to the education of the English and Indian youth of this country, in knowledge and godliness: It is therefore ordered, and enacted by this Court, and the authority thereof, that for the furthering of so good a work and for the purposes aforesaid, from henceforth that the said College, in Cambridge in Middlesex, in New England, shall be a Corporation, consisting of seven persons, to wit, a President, five Fellows, and a Treasurer or Bursar. . . "
Also worth noting from the text, was that over 350 years ago, it was the growing endowment which led to the incorporation. . .
http://library.harvard.edu/university-archives/using-the-col...
In Bologna it was even more striking, as it was the (foreign) students that created the university and found, paid and lead the teachers. From what I understand in Paris it was more teacher-lead.
From what I read in this thread, Harvard has not a all deviated from this when it was founded (but might have been taken over by other interests now, of course).
The safe withdrawal rate is set at 4 percent. Earmarking half of that 4 percent for student aid is pretty severe on the budget.
Princeton (https://finance.princeton.edu/policy-library/endowment/endow...):
> The Trustees have endorsed a spending rate range of 4%-5.75% to achieve this balance. In order to enhance predictability and stability in endowment payout, the Trustees have established a standard spending rule that increases the spending distribution per unit by 5 percent per year, although the standard spending rule increase may change if necessary to maintain the spending rate within the prescribed policy band.
Yale (http://giving.yale.edu/ways-to-give/endowment-fund):
> Yale combines a long-term spending rate of 5.25 percent of the total endowment value with a smoothing rule that adjusts spending gradually in accordance with changes in the endowment market value. ... In January 2008, Yale announced that in the future, its endowment formula will be modified to place a floor of 4.5 percent on the expected payout rate and a ceiling of 6 percent.
I might not have called it 'safe withdrawal' rate, as it conflates the two spend rates. But it's in the same ballpark. 2 percent of the endowment would be 1/3 to 1/2 the annual spend.
And this all sets aside the concept of earmarks; money donated with an earmark cannot be used to offset the loss of income to the general fund.
Oddly enough, it's possible they can't. Endowment bequests frequently come with conditions, so they don't have complete flexibility in that respect.
Harvard is very interesting in this way - they have so much money in their endowment that they seek all kinds of investment. Real estate is one of their favorites. When they buy property, it can no longer be taxed. This is why the towns surround Cambridge hate when Harvard buys up property. Watertown, in particular, has really been furious at this trend. In Worcester, the colleges use up city resources and yet pay nothing in taxes in terms of city services.
[0] http://news.harvard.edu/gazette/story/2014/01/harvard-housin...
1 - They can hold onto it for a very long time. (Real Estate is best seen as a very long term investment)
2 - It can generate rental revenue in tough times, when their financial needs are higher.
3 - It's an asset tied to one of their future liabilities. Growing universities need to buy land, so investing in land effectively hedges some of that risk.
Now your point of their being non-profit - that's much bigger. I think most universities (and sport leagues, and many others) could be considered for-profit based on much of their behavior.
[1] http://finance.yale.edu/sites/default/files/2014-2015%20Annu...
Thus the fees aren't really fees, they're fees for rich people who can afford them. And then you may wonder why you'd give a rich person free education by paying it from an endowment that, among other things, pays for the poor people's education, when the rich person can afford it.
As for your note on donations, I fully agree. You really, really, don't need to donate to Harvard. But that's mostly a function of alumni networks/events of the university itself, not necessarily people going 'hey I want to donate to a university... ah well, guess I'll choose Harvard then'. So it's not a decision you'll change easily.
On a individual level 10.000$ per month of activity, not counting 2 months vacation per semester, would be enough for a good enough private instructor. Certainly, tuition, as in schooling, is completely covered by tuition, so it's not completely fair to throw it all in one bag.
That is, of course the billions can be taken into account in a mixed cost calculation, but that would delude the elitism, wouldn't it? I agree, subsidized gratis pro bono education should be possible, but it could never be costless.
Now, what about the private tutors: Wouldn't one on one instruction be a remarkable improvement over huge, passive lectures? There is the problem of quality control, but from what I can tell, this does exist too to a lesser degree in academia. It can sway into the opposite direction even, if a research professor is too far out there to be helpful, for lack of better words. A lot of undergrad classes are taught by mere grad students. There are a lot of them.
Wouldn't the dialog still far outdo the lesser quality content that is communicated, because the latter relies a lot on the students understanding anyway and the sooner that reaches a certain basic level of fundamental knowledge, the better? Edit: Meaning, fundamental knowledge that is enough to allow the student to judge the progress and to also study independently, knowledge that is fundamental enough, that less than world class understanding makes virtually no difference.
http://finance.yale.edu/sites/default/files/2014-2015%20Annu...
Rather, give to state schools or community colleges or really, any other school. Help them serve students of all economic backgrounds, not just the elite. The most important consideration for spending money is generally its marginal benefit (obviously equal amounts are worth more to poorer institutions) but we could also think about this in terms of marginal students - how many more students can attend/graduate with less debt because of our donation?
It's turtles all the way down
If I give $x to an organization that desperately needs it, it will be spent immediately. If I give $x to an endowment, it will sit there in perpetuity, providing investment income to the organization for decades or centuries.
Ben Franklin understood this and left a small amount of money (1,000 pounds) to the cities of Boston and Philadelphia in his will, instructing that the funds not be used for 200 years.
Of course invested money can be lost, but on average it grows. The expected value of investing is almost always positive.
Then there's the potentially bigger incentive for an Ivy Leaguer to donate: to help their kids get in.
Back in the day, Harvard didn't outsource to hedge funds but instead had the portfolio managers in-house. These folks were paid a small fraction of what they would make in the private hedge fund industry, but my understanding is that the Harvard community was up in arms at what they were making - so they quit/got pushed out and then Harvard started outsourcing to hedge funds. The result was worse performance and higher fees.
Of course, it's not all roses - Larry Summers famously made a terrible bet on interest rates that Harvard had to unwind at a large loss.
People can argue about his book's overall points, but few can argue that he's accumulated a lot of interesting data.
I've been trying to reconcile that data with the Buffet view of complex hedge funds not beating straight index funds for gain... and by some other data Buffet is correct.. but the risk profiles may differ (Though it often feels like "risk" is the financial industry equivalent of engineering fudge factors).
I think the answer may be that Harvard (and others) continue to see decent returns - the question is at what cost relative to managing it internally.
The pesky problem that keeps popping up is those darned students and their education...
Isn't that precisely why they pay other people to manage it?
> It's as if the purpose for which they were created has become an afterthought.
I sometimes wonder what that purpose is. What do you think?
For context, Yale's endowment produced an investment gain of $4 billion that year. Seems like the $480 million was money well spent.
[1] http://performance.morningstar.com/fund/performance-return.a...
Overall, it's true that managed investments don't do as well as index funds, but it's ignoring a lot of the risk management that goes into being actively managed.
For whatever strategy you want, find the corresponding index fund with that strategy, and it will probably have done better after expenses and will have more liquidity and less volatility.
Also, managing billions of dollars is hard as shit and requires a ton of expertise and talented managers. You can't just take a hedge fund with $50 million and hand them $4 billion and say "do the same thing, but with more money".
But the real issue is that there is no convincing proof that active managers can reliably out-perform passive investment strategies over long term.
I think they'd be okay.
It might seem like a distinction without a difference, but it's the single greatest reason their cost structure is so much more attractive.
Then the $4 billion in a good year is completely irrelevant. It's easy to say that investment managers would have done well in years where a chicken wasn't likely to do just as well.
I get your point but you can't really make that argument without considering volatility. Endowments in particular, need fixed income-like payment streams, as they're funding salaries and grants, after all.
A good comparison would be to another fund of a similar size. According to this Citi report [2] (most recent numbers I could find by AUM size), the average fund with >$10B in AUM in 2013 returned 13%. Note - there were only 18 hedge funds in the world that fell into that bracket. That average is lower in 2015 - how much? I'm not sure. But probably under the 11.5% net return reported by Yale in 2015.
[1] http://news.yale.edu/2015/09/24/investment-return-115-brings...
[2] https://www.citibank.com/mss/sa/conference/aslf/2015/docs/ci...
The Stanford Management Company also operates Stanford's substantial real estate holdings. Stanford owns about 12 square miles of Silicon Valley.
Considering long-term real rates of return on a diversified portfolio, a 4% annual withdrawal rate (the "4% rule") is advocated for most retirees- and they only have to make their nest egg last 30 years.
What sort of signal would that give to charitable givers to the university when it decides to start taking 8% per year, and seeing the money exponentially decay? I'm in no position to donate a large amount to a university, but if I were I would imagine that I would like to see it live on, not wither on the vine.
If people wanted to contribute directly to a university, they can. Instead they're contributing to the endowment. Respect that choice.
It's pathetic that universities have actually set up a sustainable source for funding scholarships etc indefinitely -- where spending caps are actually restricted -- and the vultures immediately descend to suck it dry and spend it off. And then in a few decades when it's gone: ???
For things like CS, sure - mostly. Excepting for slightly niche areas like embedded programming, you can achieve similar experience for $0.
But for most other [engineering] degrees, this isn't true. You can't tape out a custom integrated circuit (IC) for free, but this is something some EE undergrads get to do at brand-name universities. Even the licensing cost of the software used to design those ICs can reach six figures.
I imagine there are similar things with chemistry, material science students and especially medical students.
But yeah, even in those other engineering fields, the internet has reduced the cost of education.
You are talking about endowments? Ha.
It's not the cut and dry issue you seem to be implying.
respectfully, the article paints a much darker and more insidious picture than that.
Companies, institutions and even empires come and go. The most successful adhere to conservative governance and plan for the next century, not the next semester.
Harvard was founded in 1636. So far, it has survived 380 years. That's pretty impressive.
What's the point? Well, suppose you have $100. You could spend it all now. Or you could invest at a 7% profit rate, reinvest 2% for inflation, and then spend the remaining 5%. This lets you spend $5 a year, inflation-adjusted, for the foreseeable future -- so if your timeframe is longer than twenty years (20x5 = 100), it makes sense.
That's not to mention that having a lot of money in investments gives a school substantial practical/political power.
Tips welcome.
from 2006-2015 the SP500 had a geometric yearly mean return of 7.25%.
according to http://www.usinflationcalculator.com/inflation/current-infla...
The average inflation for that period is 1.9% so you get roughly 5%.
Still pretty decent.
For more about this, read: http://blogs.discovermagazine.com/cosmicvariance/2008/05/29/...
> [T]here is one misimpression that people seem to have, that might as well be corrected before any hasty actions are taken: the purpose of Harvard is not to educate students. If anything, its primary purpose is to produce research and scholarly work. Nobody should be surprised that the gigantic endowment isn’t put to use in providing top-flight educational experiences for a much larger pool of students; it could be, for sure, but that’s not the goal. The endowment is there to help build new facilities, launch new research initiatives, and attract the best faculty. [...]
> Don’t believe me? Here is the test: when was the last time Harvard made a senior tenure offer to someone because they were a world-class educator, rather than a world-class researcher? Not only is the answer “never,” the question itself is somewhat laughable.
> This is not a value judgment, nor is it a particular complaint about Harvard. It’s true of any top-ranked private research university, including Caltech. (Note that Caltech has over 1200 faculty members and fewer than 900 undergraduate students.) And it is not a statement about universities in general; many large public universities, and smaller liberal-arts schools, take education very seriously as a primary mission. This is by no means incompatible with being a top-notch research institution — the physics departments at places like Berkeley or UC Santa Barbara would be the envy of almost any private research university. But those places also take their educational mission very seriously, which Harvard, honestly, does not.
I do agree however that it is messed up.
And Ivy League universities pay their faculty quite well, especially in computer science. I don't know of any cases where a entry-level software engineer is paid even close to what a full computer science professor makes on even their 9-month salary.
This makes me ask, have you really "been at all the top schools and am now a professor"? I feel like any assistant professor would know these things.
* Entry-level software engineers have 0 months experience.
* Full professors in CS have 5 yrs of a Ph.D., and perhaps 2-4 years of postdoctoral experience, and 5-7 years of professorial work.
The main point remains, you cannot compare someone with 10-15 years post-college experience with a new hire. It's absurd.
The general point is true: the financial incentives in academia are blatantly terrible. The quality of what's produced isn't much better. So this whole thing about universities being all about their research missions? Sadly for all those hundreds of billions the hedge funds are generating, produces a depressingly small output.
What's more remarkable is that people voluntarily donate money to them. Why would you do that? These institutions are not in need of cash by any means. And if you are going to be charitable, there are organizations where that money can do far more good, like the top Givewell charities.
Besides, I doubt his pension is much more (if any) than is typical in his profession...
If I've missed it, do point me to it and I'll recant.
He objects to the present practices of the US military industrial complex, if he managed to make MIT not take their money someone else would and nothing would change.
Trying to do this via MIT's budget would be a pointless distraction to achieving his stated goals.
http://www.harvard.edu/president/news/2013/fossil-fuel-dives...
So practically speaking, no.
Doing things on principle can be irrational.
People should also do what they preach. And acknowledge their own bias and hypocrisy which Chomsky never does. He does like you, dismisses any criticism as "irrelevant" and that's why nobody can debate with Chomsky, there is no discussion.
Why? If one is issuing mandates from a position of authority, I agree that following what one imposes on others is essential, but in intellectual discussion one should be free to argue a position and its opposite the next minute. Anything less is downright dangerous for the group and society as a whole. We can't depend on the half-dozen cranks that actually live their lives swimming against the tide to argue for everything that is truly different, nor should we trust their arguments just because they turn their crackpot theories into practice.
1) Generally everyone is part of the system they criticize. The other choice is to go off the grid, in which case you would never hear their opinions. What was the last thing you read by one of those non-hypocritical people?
2) For that and many other reasons, including that we all are fallible humans, everyone is a hypocrite including you and including me.
The question I have is, what are the typical returns just on that 10–20% investment?
The endowment can do poorly (as bad as or worse than an index fund) as a whole, even if the investment into hedge funds is paying out well.
It's the same old story everywhere: Do you stick the money in a 0.2% fee index fund and ride the wave, or do you spend 20% of your returns on fees in the hope you're going to get lucky?
If you were investing for personal profit rather than to support a cause, would you even consider an investment that offered those terms? Even fixed rate investments return your principal eventually.
As of 2015 its endowment was valued at $2.37 Billion. That with ~4,100 Full Time Equivalent (FTE) students.
No surprise here. They've been built to do this for years, apparently.
"In 2012, Carlyle completed a $700 million initial public offering and began trading on the NASDAQ stock exchange on May 3, 2012."