"I'm not convinced that this outweighs the benefits of funding hundreds, or even thousands of students/scientists in less prominent schools who might go on to make such discoveries themselves"

While it's plausible anyone can discover anything, the only rule of thumb about finding great research is that great researchers generally train great researchers - or, to put another way, it's likeliest to end up doing nobel price worthy research by being trained by a nobel price winner.

The other thing is bad schools do not turn magically into good schools by pooling money into them. Improving education requires human intervention by experts - experienced teachers and so on. Money helps, but if you are sitting on a 140 million dollars, you can't just donate it to some struggling place and imagine it will transform it to a better institution. Or, pick random ten laboratories that have done unremarkable research and imagine a grant of a 10 million dollars will improve the quality of their output.

I think the only rational choices to well spend such a sum of money is to support established high performers, or, to proactively invest the money. If proactive involvement is not what the donor wanted then I can't really fault his decision to go with MIT. Or, well, if we follow the silly "nobel price winners beget nobel price winners" rule of thumb and use nobel prices as metric of research quality which itself is also silly, there would have been other options: https://en.wikipedia.org/wiki/List_of_Nobel_laureates_by_uni...